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{ "title": [ "", "Labor Market Conditions During theGreat Recession and Current Recovery", "Contraction and Recovery in the Labor Marketas Measured by Unemployment and Employment", "The Labor Force Participation Rate Has Continued to Fall During the Recovery", "The Labor Market Experience of Selected Groups", "Long-Term Unemployment", "Youth Employment and Unemployment", "Alternative Measurements of Labor Underutilization", "A Rising Natural Rate of Unemployment?", "Macroeconomic Policy Implications" ], "paragraphs": [ "The unemployment rate declined markedly in 2013, to 6.7% in December from 7.9% in January, seeming to signal that the labor market is approaching full employment. Other economic and labor market indicators paint a more pessimistic picture, however. For example, the decline in the unemployment rate was caused in part by workers dropping out of the labor force. The labor force participation rate has fallen to under 63% at the end of 2013 from 66% before the recession. Understanding this divergence is crucial for an accurate assessment of the current state of the economic recovery and of how close the economy is to full employment.\nThis report analyzes recent trends in labor market indicators during the current economic recovery, with a particular focus on the contrast between the unemployment rate and other labor market indicators. It reviews studies that have sought to determine how much of the decline in the labor force participation rate is caused by the recession and how much is caused by structural factors, such as the aging of the labor force. It then considers whether the economy might reach full employment at a higher rate of unemployment compared to recent expansions. It concludes by analyzing the implications of these developments for macroeconomic stabilization policy, as policy makers grapple with the transition from the expansionary fiscal and monetary policy put in place during the \"Great Recession.\" If the labor market has experienced structural changes, it would also have implications for labor market and other microeconomic policies (e.g., spending or tax provisions that increase the incentives to hire, seek work, delay retirement, or train), which are beyond the scope of this report.", "", "The most recent recession, often referred to as the Great Recession, caused the unemployment rate to rise to 10.0% in October 2009 from 4.4% in May 2007. That increase was the largest since the Great Depression, and only the second time that unemployment has reached double digits since the Great Depression. The recession caused the economy to move far below full employment. Full employment is the concept that all of the economy's labor and capital resources are in use—there is little idle capacity and unemployment is at its natural rate (defined in the text box below). At its peak, the unemployment rate was 4.3 percentage points above the Congressional Budget Office's (CBO's) estimate of the natural rate of unemployment, the second highest level reached since 1949. The number of workers employed fell by 8.7 million during and after the recession, from a peak of 138.4 million in January 2008 to a low of 129.7 million in February 2010.\nThe unusually deep recession has been followed by an unusually slow recovery. Although the recession officially ended in June 2009, the unemployment rate continued to rise until October 2009, and showed no marked decline until the second quarter of 2010. It has fallen in spurts since. Overall, the unemployment rate has fallen more gradually than in other recoveries since World War II. After 18 quarters of recovery and counting, the unemployment rate is still above what most economists believe to be the natural rate of unemployment. Only the 1980s recovery faced a comparably long return to full employment, nearing full employment after 19 quarters. And, because the unemployment rate was so high at its peak in the Great Recession and has fallen slowly, it has been at historically high levels for most of the recovery. In 2012, three years into the recovery, it averaged 8.1%, which was a higher unemployment rate than experienced during all except the two deepest recessions between 1948 and 2001.\nAnother method to gauge the pace of labor market improvement is to count the number of months until total employment returned to its pre-recession peak level. In every recession since World War II through the 1990s, employment surpassed its previous peak in less than a year and a half. After the 2001 recession, it took over three years. After six years, employment today has still not returned to its peak level in January 2008 of 138.4 million workers. Since the non-elderly adult population is expanding by over one million each year, in order to return to full employment, the number of people employed should not only return to its former peak, but surpass it. One study put the economy at 10 million jobs short of full employment in mid-2009. CBO estimated that the economy was still 6 million jobs short of full employment at the end of 2013.\nEmployment has not returned to its peak because the decline in employment during the recession was so great, and because the rate of employment growth during the recovery has been relatively tepid compared to other recoveries, particularly those that followed deep recessions. Figure 1 shows that the average monthly job loss was much greater from 2008 to 2010 than in the three preceding episodes (1982, 1991, 2002 to 2003), where recessions caused employment to fall. It also shows that average monthly job growth in this recovery was much lower than in the 1980s or 1990s expansions, and comparable to the 2000s expansion, even though far fewer jobs were lost in 2002 and 2003.\nThe unemployment rate fell relatively rapidly in 2013, to 6.7% in December from 7.9% in January. It has remained around that level in the first quarter of 2014. If the natural rate of unemployment is between 5.2% and 6.0%, then unemployment moved from well above the natural rate at the beginning of 2013 to within about a half of a percentage point of the high end of the estimated range by the end of 2013.\nThe relatively rapid decline in the unemployment rate in 2013 was not matched by consistently rapid job growth , however. (For an explanation of how these data are measured, see the following text box.) The number of unemployed workers declined by a monthly average of 160,000 per month in 2013. According to CPS data, job growth averaged 115,000 per month in 2013, lower than in 2011 or 2012. Unemployment declined faster than employment grew in 2013 because an average of 45,000 workers exited the labor force each month. In normal economic expansions, the labor force grows along with the population.\nAny interpretation of the current health of the economic recovery must explain why 45,000 workers left the labor force each month in 2013, and why over 3% of the population has left the labor force since 2008, as shown in Figure 2 —the topic of the next section.", "The labor force participation rate (LFPR) is the share of the population that is employed or unemployed. As can be seen in Figure 2 , the LFPR hovered around 59% from after World War II to the late 1960s. It then experienced a long upward trend primarily because of the increased participation of women in the labor force, peaking at 67% in the late 1990s. Following the 2001 recession, it fell to 66%, where it remained until the Great Recession began. Since 2008, it has continued to fall, and stood at 62.8% at the end of 2013.\nThis decline is unprecedented. Since World War II, the participation rate has never before fallen significantly in an expansion and has exhibited only modest cyclicality —it declined by less than one percentage point during the 1980, 1991-1992, and 2001 recessions, and did not decline in the others. (If all workers who lost their jobs in a recession became unemployed (according to the official definition), the labor force participation rate would not change, all else being equal.) According to one study: \"In the four years [2007-2011] since the start of the recent recession, the LFPR has declined faster than in any preceding four-year period on record.\"\nWhile the long-term upward trend in the LFPR until 2000 was dominated by the entry of women into the work force, the recent recession caused both male and female participation to decline. The female participation rate experienced a nearly uninterrupted ascent to 60.0% in 2000 from 32.7% in 1948. Since, it has fallen to 57.2% in 2013 from 59.5% in 2008. By contrast, the long-term trend in the male participation rate has been downward in the post-war period, falling to 73.0% in 2008 from 86.6% in 1948. The decline has been particularly rapid since 2008, however, falling to 69.7% in 2013—the lowest level ever recorded.\nViewed by age cohort, the LFPR decline has been concentrated among prime age adults (age 25 to 54) and particularly among youth (age 16 to 24), whose participation rate has fallen by more than ten percentage points since 2000. By contrast, the participation rate of older workers (age 55 and older) rose from the late 1990s through 2009, the last year of the recession; it has since levelled off. There are different theories as to why the participation rate of older workers would be higher than before the recession while it fell for other age cohorts. One hypothesis is that older workers have postponed retirement because of the decline in wealth caused by the housing and financial crises. Another hypothesis is that the LFPR of older workers has not fallen because the cohort of women recently turning age 55 has a much higher labor force participation rate than earlier cohorts of women when they turned age 55; however, the LFPR for older men has also risen.\nThe implications of the decline in the LFPR for an assessment of the health of the economic recovery depend on why workers are leaving the labor force. Workers can leave for various reasons, including retirement, injury or illness, family reasons, study or training, or because they have become discouraged and stopped looking for a job. As noted above, once workers stop looking for a job, they are no longer officially counted as unemployed.\nWhy did the LFPR fall so much during the recession and why is it still falling in the recovery? It could be cyclical, caused by the Great Recession, or it could be structural, caused by long-term forces unrelated to the recession. If the latter, these structural factors would reduce growth in the economy's potential output, rather than be a symptom of weak economic growth.\nSeveral recent studies (which are compared in Table 1 ) have attempted to identify the causes of the decline in the participation rate. All studies found that the decline has been caused by both structural and cyclical factors, although the relative importance of the two factors varied across studies. All of these studies agree that the aging of the population is a structural factor behind the recent decline—as more \"baby boomers\" move out of the prime working age cohorts, into older cohorts, they are retiring. Another cause of a declining LFPR has been an increase in workers claiming disability, who tend to be older workers. Some studies also identified higher rates of school enrollment as another cause of the decline in the participation rate. But the studies found that these factors cannot account for the entire drop in the participation rate, and the studies attribute the rest of the decline to cyclical factors. The increase in workers classified by BLS as discouraged or marginally attached to the labor force, from about 1% of the labor force before the recession to 1.5% of the labor force since, is further evidence that some of the recent decline in the participation rate is cyclical.\nWhile these studies have categorized reasons for leaving the labor force as either cyclical or structural, both reasons can cause a person to leave the labor force. Cyclical considerations are sometimes a contributing factor to an individual's decision to leave the labor force for reasons assumed to be structural (retirement, disability, or school enrollment)—when job prospects are poor, the alternatives to working become relatively more attractive. For example, if a worker returned to school to switch careers, this could be considered structural, but if a worker returned to school because there was temporarily no work available, this could be considered cyclical.\nAlthough the LFPR has not been cyclical in the past, that does not rule out a cyclical decline since 2007 due to the unusual severity of the recent recession and the weakness of the recovery. If some of the decline in the participation rate is cyclical, that portion would be expected to be reversed in the coming years. Counterintuitively, an improving recovery could potentially result in a higher unemployment rate if workers return to the labor force faster than positions are created or filled. This explains why the unemployment rate did not fall in the first quarter of 2014—more people entered the labor force than gained employment, leading to an increase in the number of people unemployed.\nWorkers who take early retirement or claim disability benefits are characterized across studies as likely to remain outside the labor force permanently. CBO attributes 0.5 percentage points of the decline to people who left the labor force because of the recession and are unlikely to return. A challenge for policy makers is to encourage and support the re-entry into the labor force of workers who left involuntarily (e.g., because they lost their job) as the job market strengthens.", "Recovery in the labor market has been uneven. Some groups have lower employment and higher unemployment rates than the overall labor force, and these groups have experienced a weaker rebound during the economic recovery than the overall labor force. Their experience points to areas of continued labor market weakness that are masked by the improvement in the overall unemployment rate.", "The percentage of workers who are unemployed long-term (defined by BLS as 27 weeks or more) rose to 4.3% of all workers in the second quarter of 2010 from 0.8% in 2007—the highest rate recorded since data were first collected in 1948. It then fell to 2.6% at the end of 2013; despite the decline, it remained higher than at any point from 1948 to 2008. In 2013, the percentage of unemployed workers who were unemployed long-term was 37.6%, up from 17.6% in 2007 and higher than at any time before 2008. The long-term unemployed are less likely to find work and more likely to leave the labor force than the short-term unemployed; this difference in outcomes is greater during an expansion.", "The Great Recession hit the young particularly hard. In 2010, employment rates were the lowest (45.0%) and unemployment rates were the highest (18.4%) on record for the 16 to 24 age group, with data going back to 1948. Since then, the youth employment rate has improved only modestly—in contrast to previous recoveries—to 47.4% at the end of 2013; it remains lower than in any year between 1948 and 2008. The youth unemployment rate declined significantly in 2013, to 13.5% at the end of 2013, before increasing to 14.4% in February 2014. It nevertheless remains at a historically high level.\nAs discussed above, the youth labor force participation rate has not increased since the recession ended. According to one study, the most frequent reason given by youth for leaving the labor force was education/training, but that reason did not increase in relative frequency during the recession. The only category of reason for leaving the labor force that increased during that period was the \"other\" category, that is, people who did not give one of the survey's pre-identified reasons for leaving. The authors believe that individuals who gave these two reasons for leaving the labor force were most likely to re-enter in the future.", "The Bureau of Labor Statistics compiles six measures of labor underutilization based on varying categories of work status, one of which is the official unemployment rate (technically, it is referred to as the U-3). Two of these measures include fewer workers than the official unemployment rate and three include more. The broadest BLS measure of labor underutilization is called the U-6 measure, and it includes the unemployed, persons marginally attached to the labor force, and those employed part-time for economic reasons. Workers employed part-time for economic reasons account for most of the difference between the U-6 and U-3 historically. All of these measures follow a similar pattern—a sharp increase during the recession, followed by a slow and modest decline during the recovery. For example, U-6 peaked at 17.1% in the fourth quarter of 2009, and then fell to 13.3% in fourth quarter of 2013, which is higher than at any point from 1994 to before the financial crisis. According to the president of the Boston Fed:\nWhile there is always a difference between U-3 and U-6, as there are always some marginally attached and part-time workers in the economy, the spread between the U-3 and U-6 measures of unemployment has increased dramatically since the start of the financial crisis.\nA high U-6 rate does not imply that the economy will not reach full employment until the U-6 declines to the natural rate. Conceptually, just as the actual U-6 is always higher than the actual U-3 (headline) unemployment rate, a natural rate for U-6 could be estimated that would be higher than the natural rate for U-3. The drawback to using U-6 data to measure the relative slack in the economy is that data go back only to 1994, so there is data covering only the last two recessions. This makes it difficult to ascertain whether the U-6 or U-3 is currently providing more accurate information on the state of the economy.", "The slow decline in the unemployment rate and continued lack of employment opportunities for youth and the long-term unemployed in the current recovery have raised concerns that the natural rate of unemployment may have risen recently. In other words, there is a concern that when the economy returns to full employment, it will be at a higher unemployment rate than that obtained in prior expansions.\nSince the natural rate is defined as the underlying rate of unemployment once cyclical factors are removed, conventional economic theory posits that changes in the natural rate would be driven only by structural factors unrelated to the business cycle, such as demographics. An alternative theory that economists are now considering is that the natural rate of unemployment has permanently increased as a result of the depth and duration of the Great Recession and subsequent jobless recovery, and not because of any long-term structural causes. Economists refer to this concept as \"hysteresis.\" One reason that hysteresis might occur is because workers' skills erode during bouts of long-term unemployment, making them less employable going forward.\nReaching a consensus on whether the protracted period of high unemployment was the result of temporarily inadequate aggregate demand, an upward shift in the natural rate of unemployment unrelated to the recession, or an upward shift caused by hysteresis will require more evidence—notably, how much further unemployment falls in the current expansion before inflation rises. In the past, there has been little evidence of hysteresis in the United States, but the phenomenon has been observed in parts of Europe. That does not preclude hysteresis in this case, however, given the unusual depth and duration of the Great Recession and subsequent tepid recovery.\nCBO has estimated that the natural rate of unemployment rose to 6% in 2013 from 5% in 2007. CBO attributed 0.5 percentage points of the increase to \"the stigma of long-term unemployment,\" 0.5 percentage points to \"a decrease in the efficiency with which employers filled vacancies,\" and 0.1 percentage points to \"the incentives generated in 2013 by extensions of unemployment insurance benefits.\" CBO attributed the decrease in the efficiency of filling vacancies at least in part to mismatches between skills and openings, and expects the increase in the natural rate attributable to it to be temporary.\nChanges in the natural rate are not uncommon historically. For example, economists believe that it rose in the 1970s and fell in the 1990s. Estimated variations in the natural rate over time are typically modest, however. CBO has estimated that it has ranged from 5.0% to 6.3% since 1949.\nEvidence for and against a rise in the natural rate is presented in CRS Report R41785, The Increase in Unemployment Since 2007: Is It Cyclical or Structural? If the natural rate has increased, it would mean that the economy is closer to full employment today than estimates based on the natural rate prevailing before the recession would suggest. If so, there are macroeconomic policy implications, which are discussed in the next section.", "Historically, the headline unemployment rate has been viewed as a simple, timely, and transparent indicator of the state of the economy. There are several other indicators of slack in the economy and the labor market, but, as long as those measures are relatively well correlated with the headline unemployment rate, as they typically are, the unemployment rate provides a simple rule-of-thumb gauge of how close the economy is to full employment.\nUntil recently, the economy was unambiguously operating far below full employment. By the end of 2013, the unemployment rate was coming within a percentage point of the mainstream range of the natural rate of unemployment. Were the recent pace of improvement in the unemployment rate to continue, unemployment could fall to the natural rate in the next year or two.\nAs this report has discussed, other indicators have diverged from the unemployment rate and suggest that significant slack remains in the economy. These include labor market indicators (e.g., modest employment growth and flat wages) and other indicators (e.g., the large output gap and the low inflation rate). While most measures show the economy modestly improving since the recession ended, the labor force participation rate has continued to deteriorate over the course of the recovery. Studies have concluded that the participation rate has fallen partly for cyclical reasons and partly for structural reasons.\nMost economists believe the primary goal of short-term macroeconomic stabilization policy is to bring the economy back to full employment in a timely fashion and keep it there, while maintaining price stability. They believe \"counter-cyclical\" policy, which boosts growth when the economy is distressed and reins in growth when it is overheating, can be used to blunt the extremes of the business cycle. While there is consensus that policy can hypothetically achieve this goal, there is disagreement on the likelihood that appropriate policies will be chosen in reality, and whether the policies that are likely to be chosen could make matters worse.\nPolicy makers have two macroeconomic stabilization tools, fiscal policy and monetary policy, at their disposal. Congress is directly responsible for fiscal policy through its control of federal revenue and spending provisions. Congress has delegated the operation of monetary policy to the Federal Reserve, but exercises oversight.\nIn the mainstream economic view, Congress can hasten economic recovery by increasing the budget deficit (fiscal stimulus). But borrowing has long-term economic costs and inter-generational equity implications, and the benefits of fiscal stimulus decline as the economy approaches full employment. Thus, in choosing the appropriate fiscal policy, policy makers balance short-term considerations related to macroeconomic stabilization with long-term considerations about the costs of debt. A common view among economists is that the government should run deficits when the economy is far below full employment and balanced budgets or surpluses when the economy is near full employment. The deficit has already declined markedly from historically high levels in fiscal years 2009 to 2011, but a structural deficit remains that is projected to grow over time under current policy. Thus, many economists advocate further deficit reduction (fiscal austerity) as the economy nears full employment. This view has often been expressed as a prescription of deficit-reduction in the medium term (i.e., when the economy is near full employment), but not the short term.\nLikewise, the Fed has followed a policy of monetary stimulus since the financial crisis—reducing the federal funds rate to near zero and engaging in large-scale asset purchases—in an attempt to hasten a return to full employment. The Fed has already scaled back its asset purchases and has stated: \"In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation.\" In other words, the Fed intends to raise interest rates only when it judges the economy to be closer to full employment.\nThe current unemployment rate would seemingly call for a near-term tightening of fiscal and monetary policy. For example, from December 2012 to January 2014, the Fed's announced policy was that it would keep interest rates \"exceptionally low\" at least until the unemployment rate reached 6.5%—which is close to current levels.\nThe preponderance of evidence suggests that the economy is not as close to full employment as the current unemployment rate might suggest. For that reason, the Fed decided in March 2014 to drop its threshold unemployment rate of 6.5% from its forward guidance of when it would raise interest rates. In a press conference following the decision, Fed Chair Janet Yellen provided this explanation of the Fed's decision:\nWe initially started with an unemployment rate as a threshold. That was easy enough for the Committee to say, \"With an unemployment rate above 6½ percent, we know we're not close to full employment, not close to an employment level consistent with our mandate, and unless inflation were a significant concern, we wouldn't dream of raising the federal funds rate target.\" Now, the Committee has never felt that the unemployment rate is a sufficient statistic for the labor market. I think if I had to choose one indicator of the labor market, the unemployment rate is probably as good a one as I could find. But in assessing the real state of slack in the labor market and ultimately of inflationary pressures that might—or deflationary pressures that could result from that—it's appropriate to look at many more things. And that's why the Committee now states we will look at a broad range of information.\nDivergence between the unemployment rate and other indicators complicates formulating and communicating a policy response. If there is still considerable slack in the economy, despite the decline in the unemployment rate, then tightening policy could be premature and there is less concern that continued stimulus would cause inflation to rise. That evaluation could be proven wrong, however, if there turns out to be less slack in the economy than most economists currently estimate. This would be the case if structural changes or the Great Recession (i.e., hysteresis) permanently reduced the potential capacity of output and labor markets, so that the economy is no longer capable of returning to the historical trend. In this scenario, microeconomic structural policy measures (e.g., spending or tax provisions that increase the incentives to hire, seek work, delay retirement, or train) are more likely to have positive results than fiscal or monetary stimulus. For example, if the natural rate of unemployment is now higher, fiscal or monetary stimulus to reduce unemployment to levels attained in previous expansions and maintain price stability would, by definition, not be successful. If the economy is getting close to full employment (because the economy's productive potential is lower than projected), then continued stimulus would in theory cause inflation to rise. If policy makers were to wait to tighten policy until inflation starts rising, it might be too late to achieve full employment and maintain price stability, due to lags in the effects of policy changes on the economy. As this example illustrates, some economists see the risks of choosing an unsuitable macroeconomic policy stance based on incomplete and contradictory data as an argument against pursuing activist macroeconomic policies." ], "depth": [ 0, 1, 2, 2, 2, 3, 3, 3, 1, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_title h2_title h1_title h3_title", "h0_full h2_full h1_full", "h3_full h1_full", "h2_title h1_title", "", "h2_full h1_full", "", "h3_full", "h4_full h1_full h2_full h0_full h3_full" ] }

{ "question": [ "What has characterized recent developments in the economy?", "What does the change in unemployment rates suggest?", "What does the current unemployment rate suggest?", "How useful is the unemployment rate as a proxy for the overall economy?", "How might we interpret the 2013 decline of the unemployment rate?", "How has the labor force participation rate changed?", "What is the reason for this decline?", "How may this trend change in the future?", "Ought we trust the headline unemployment rate?", "How have economic output and employment changed since the recession?", "How have the long-term unemployment rate and youth unemployment rate changed since the recession?", "How has inflation changed since the recession?", "What could cause the economic indicators to be misleading?", "Why is cyclical deterioration usually considered temporary?", "Why is this recession a potential exception from conventional wisdom?", "What is an example of a cyclical labor market problem becoming structural?", "How does Congress oversee the economy?", "How are policy makers responding to the Great Recession?", "What is considered best practice regarding budget deficit reduction?", "What is considered best practice regarding raising interest rates?", "What happens if the economy does not approach full employment?", "What would need to happen if the economy approaches full employment sooner than expected?", "What is the use of structural policies in improving market labor conditions?" ], "summary": [ "Until recently, the economy and labor market were experiencing an unusually slow recovery from the longest and deepest recession since the Great Depression compared to other expansions since World War II.", "The rapid decline in the unemployment rate from 7.9% in January to 6.7% in December 2013 (where it remained in the first quarter of 2014) would seem to indicate that the labor market is returning to normal.", "The current unemployment rate is only 0.5 to 1.5 percentage points higher than the consensus range of full employment.", "Unusually, the unemployment rate may not currently be a good proxy for the overall state of the labor market or economy.", "Some of the decline in the unemployment rate in 2013 is attributable to a recovery in employment, but some is attributable to workers dropping out of the labor force.", "The labor force participation rate has continued to fall during the recovery and is at its lowest level since the 1970s. In fact, it has fallen more in the past five years than at any time since data have been collected.", "Studies have identified multiple reasons for the decline. Some workers have left the labor force because they have become discouraged and given up on seeking employment. Others have left for reasons stemming from long-term trends that are unrelated to the recession, such as age or enrollment in school or training.", "This trend could reverse—for example, more workers returned to the labor force than found jobs in the first quarter of 2014, which prevented the unemployment rate from falling.", "Other evidence also points to more slack in the economy than the headline unemployment rate suggests.", "Economic output and employment have grown since mid-2009 and 2010, respectively, but at relatively sluggish rates.", "The long-term unemployment rate and youth unemployment rates have fallen only modestly since the recession ended and are still at historically high levels.", "Inflation has remained slightly lower than the Federal Reserve's (Fed's) goal of 2%.", "These other economic indicators could be sending a misleading signal about significant slack in the economy, however, if the economy's potential capacity has been eroded by structural changes or by the length and depth of the Great Recession.", "Cyclical deterioration in the U.S. labor market is usually considered temporary—recessions are thought to have no lasting effect on overall employment and unemployment rates.", "This recession could cause a departure from conventional wisdom if labor market problems that started as cyclical persisted so long that they became structural.", "For example, long-term unemployment could have caused workers' skills to erode, which would then prevent them from finding a job when the economy recovered.", "Congress conducts fiscal policy and oversees the Fed's implementation of monetary policy, the two tools of macroeconomic stabilization.", "Policy makers are grappling with the transition from the highly expansionary monetary and fiscal policy put in place during the Great Recession.", "Many economists advocate reducing the budget deficit only when the economy is at or near full employment.", "Likewise, the Fed has stated that it would begin to raise interest rates once the economy is near full employment.", "If the economy remains far from full employment, then declining unemployment would not yet call for a tightening of monetary and fiscal policy.", "Alternatively, if lower unemployment is being driven by a cyclical upswing and the economy is now closer to full employment than historical experience would predict, policy would likely need to be tightened sooner in order to avoid rising inflation.", "It would also suggest that structural policies (e.g., those that increase the incentives to hire, seek work, delay retirement, or train) would be more effective at improving labor market conditions than counter-cyclical monetary and fiscal policies." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, 2, 3, -1, 0, 0, 0, -1, -1, -1, 2, -1, 0, -1, -1, 3, 3, -1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 4 ] }

{ "title": [ "Background", "Modes of Transportation, Program Eligibility, and other Key NEMT Features Are Different under Medicare and Medicaid", "Medicaid Key Features", "CMS Oversight of NEMT Varies by Program, with CMS Using a Range of Activities to Oversee Medicaid NEMT", "CMS Uses Regular Oversight Activities to Monitor NEMT", "Medicare NEMT", "Medicaid NEMT", "CMS Issues Guidance on Medicaid NEMT, but Some Guidance Is Outdated or May Be Otherwise Limited", "Selected States Have Taken Steps to Address Some Medicaid NEMT Challenges, and Information on State NEMT Practices Is Available", "Containing Costs", "Maintaining Program Integrity", "Contracting with and Overseeing Vendors", "Accessing NEMT", "Information on Leading Practices", "Conclusions", "Recommendations", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Health and Human Services", "Appendix III: GAO Contacts and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Medicare and Medicaid are the federal government’s two largest healthcare programs as measured by expenditures.\nMedicare is a healthcare insurance program for seniors, certain individuals with disabilities, and those with end-stage renal disease (ESRD), with Medicare expenditures totaling $613.3 billion for 53.8 million beneficiaries in 2014. Under federal law, Medicare insurance includes hospital, medical, and prescription drug coverage. CMS administers the program, including safeguarding the program from loss due to fraud, waste, and abuse. Medicare is paid for through two trust funds held by the U.S. Treasury.\nMedicaid is a joint federal-state health-financing program for low- income and medically needy individuals. For 2014, estimated Medicaid spending totaled $499 billion for more than 65 million beneficiaries. Medicaid operates within broad federal parameters, with states having flexibility in how they operate their programs and with CMS overseeing the design and operation of states’ Medicaid programs. Medicaid is jointly financed by the federal government and the states, with the federal government matching most state Medicaid expenditures using a statutory formula—the Federal Medical Assistance Percentage rate—generally based on each state’s per capita income relative to the national average.\nMedicare and Medicaid, and their NEMT programs, are provided under both fee-for-service and managed care payment systems:\nUnder fee-for-service, either CMS (for Medicare) or the state Medicaid agency enrolls NEMT providers. Providers are paid on a per-service basis.\nUnder managed care, either CMS (for Medicare) or the state Medicaid agency contracts with health plans to provide covered health care services—which can include NEMT—in return for a fixed monthly payment per enrollee. Under Medicare managed care, private organizations offer health plans through the Medicare Advantage program.\nGAO has designated both the Medicare and Medicaid programs as high risk because of concerns about the Medicare program’s size, complexity, and susceptibility to mismanagement and improper payments, and because of our concerns about inadequate federal oversight over state Medicaid programs. We have also reported concerns about program integrity in Medicaid managed care, specifically with regard to vulnerabilities in protecting against improper payments.", "Although Medicare and Medicaid both offer NEMT services to their beneficiaries, based on the individual program requirements, certain key features of NEMT operate differently under the two programs, as described below (see table 1). These differences reflect fundamental differences between the two programs, Medicare being a healthcare insurance program administered at the federal level and Medicaid being a joint federal-state health financing program.\nUnder Medicare, NEMT services are allowed to be delivered via ambulance transport to scheduled nonemergency medical services for some beneficiaries. For example, Medicare NEMT may cover ambulance transportation for a beneficiary with ESRD for scheduled, repeated, and nonemergency transports to and from dialysis treatments, if transportation by ambulance is medically necessary. Similarly, Medicare may cover ambulance transportation upon discharge from an inpatient hospital for transport to a skilled nursing facility or to a beneficiary’s home, when medically necessary. The beneficiary must have a written order from a doctor stating that ambulance transportation is necessary due to the beneficiary’s medical condition, and the trip must be to or from the nearest medical facility. Ambulance providers may be compensated on a fee-for-service basis or under a managed care arrangement.", "Under Medicaid, states must ensure NEMT for beneficiaries who have no other means of transportation to needed medical services—such as doctors’ appointments and various types of therapies—and can provide NEMT in a variety of ways. States have discretion, consistent with federal requirements, in how they deliver NEMT, including the mode of transportation used and the model used to provide NEMT. For instance, state Medicaid officials we interviewed reported covering a variety of modes of transportation for NEMT trips, including buses, taxi cabs, and vans. States also reported paying beneficiaries and their family members or friends’ mileage for using their personal vehicles to provide transportation to needed medical care. While the modes of transportation used for NEMT across states were similar, state officials reported using a variety of models to administer NEMT, including paying for NEMT on a fee-for-service basis; contracting with managed care health plans to provide health care services, including NEMT, for a per- member, per-month fee; and contracting with transportation brokers to manage all or some aspects of NEMT on states’ behalf. Further, some of our 15 selected states use a mix of models for administering NEMT. See table 2 for examples of states’ models for administering NEMT.", "CMS oversight of NEMT under Medicare and Medicaid varies. CMS oversees Medicare NEMT using its regular oversights activities—such as claim reviews. Under Medicaid, CMS uses a range of regular oversight activities to oversee states’ operations of their NEMT programs, including reviewing and approving state Medicaid plans and amendments; issuing guidance; conducting a range of program integrity activities, such as claims and state program integrity reviews; and offering technical assistance upon request. While CMS periodically issues NEMT guidance, some of this guidance is outdated or may be otherwise limited.", "", "CMS oversees Medicare NEMT through CMS’s regular program integrity activities. These include conducting pre- and post-payment claim reviews by Medicare Administrative Contractors and calculating the Medicare improper payment rate through the Comprehensive Error Rate Testing program. CMS initiated a 3-year Medicare prior authorization demonstration program in December 2014. This program is intended to help reduce improper payments for NEMT services. The program requires prior authorization of scheduled, repetitive nonemergency ambulance transports to test whether prior authorization helps reduce expenditures while maintaining or improving quality of care. New Jersey, Pennsylvania, and South Carolina were selected to initially implement this program because of their high utilization of nonemergency ambulance transports under Medicare and improper payment rates. Subsequently, CMS plans to expand the demonstration program to include Delaware, the District of Columbia, Maryland, North Carolina, West Virginia, and Virginia on January 1, 2016, as required by the Medicare Access and CHIP Reauthorization Act of 2015 and plans to expand the program to all states beginning January 1, 2017, if the Secretary of HHS and Chief Actuary determine certain conditions will occur under the expansion.", "Under Medicaid, states are responsible for the daily oversight of their NEMT programs and CMS oversees states’ operations using a range of regular oversight activities. Within broad federal parameters, states determine their own processes for overseeing their Medicaid NEMT programs, including verifying beneficiary eligibility, establishing provider requirements, and preventing improper payments. To oversee states’ operations of their NEMT programs, CMS conducts a range of oversight activities, including:\nCMS reviews and approves Medicaid plans and state plan amendments, which outline how states administer their Medicaid programs, including their NEMT programs.\nCMS periodically issues guidance on NEMT requirements. CMS has issued several pieces of guidance, including a guidebook, letters to state Medicaid Directors, and a toolkit, on different aspects of NEMT.\nCMS conducts a range of program integrity activities. First, CMS calculates a national-level improper payment error rate through the Payment Error Rate Measurement program. Second, CMS also contracts with entities to, among other things, audit claims, identify overpayments, and educate providers and others on Medicaid program integrity issues. Third, CMS conducts state program integrity reviews. For example, CMS conducts program integrity reviews of state Medicaid agencies—which are done to identify vulnerabilities in state operations that warrant improvements or corrections—and has provided assistance to states to address those vulnerabilities. Agency officials reported that these reviews have included an assessment of states’ oversight of NEMT providers since fiscal year 2011. Further, CMS’s ongoing program integrity reviews in three states include an assessment of risks and vulnerabilities in NEMT services. CMS also conducts special audits and investigations of traditionally high-risk areas, including NEMT. For example, CMS reported collaborating with one state, New York, to conduct a special investigation of the state’s NEMT program.\nCMS provides technical assistance and clarifying guidance upon request. For example, officials from one selected state reported working with CMS to identify options for redesigning their NEMT program that would be consistent with regulations.", "Although CMS periodically issues NEMT guidance, some guidance is outdated or may be otherwise limited because legislative and other changes have affected Medicaid and states’ NEMT programs. For example:\nCMS issued a guidebook in 1998 on designing and operating a cost- effective Medicaid NEMT program. This guidebook included information on factors and challenges that could be considered when designing and operating an NEMT program—describing the advantages and disadvantages of providing NEMT under a brokerage system, operating NEMT in a managed care environment, and strategies to identify and prevent NEMT fraud and abuse—and suggestions to address these concerns. However, this guidebook contains outdated information. For example, the guidebook describes limited cases when state Medicaid programs can use brokerages. However, the Deficit Reduction Act of 2005 changed the conditions under which states could use NEMT brokerages, which expanded the number of states that utilize NEMT brokers. The guidebook does not address these conditions as discussed further below.\nAfter the Deficit Reduction Act of 2005 was passed, CMS issued a letter to State Medicaid Directors in 2006 describing changes in the law, and final rules in 2009 for establishing NEMT brokerage programs under states Medicaid plans. However, CMS has not assessed NEMT guidance to determine if updates are needed in light of recent changes. For example, since 2009, there have been changes to the Medicaid program such as expanding Medicaid as allowed under the Patient Protection and Affordable Care Act (PPACA), and states have made changes to their Medicaid programs. These changes have increased Medicaid enrollment in some states resulting in more NEMT trips.\nMore recently, CMS issued a NEMT program integrity tool kit in June 2014. This toolkit includes educational materials summarizing the general scope of Medicaid-covered NEMT and key principles applicable to such coverage, such as trip eligibility and NEMT fraud and abuse definitions. However, these materials are targeted for patients and providers rather than state Medicaid programs. However, state Medicaid programs may also benefit from updated information on strategies to implement a program integrity program that could help to prevent NEMT fraud and abuse.\nUpdated guidance is important because it is a way to communicate an entity’s objectives to help ensure its objectives are carried out. State Medicaid agencies rely on it when designing and administering their NEMT programs to help ensure compliance with federal requirements while incorporating current practices to meet beneficiaries’ needs. According to CMS officials, some states do not always understand the NEMT benefit, in part, because NEMT guidance is not specific to the benefit. For example, states must generally follow overarching federal Medicaid requirements in providing NEMT under their state plans, such as requirements on granting beneficiaries the freedom to choose to obtain Medicaid services from any provider that is qualified and willing to provide services, unless states establish an NEMT transportation brokerage program. Officials from two states reported that clarifying NEMT requirements would be helpful and three stakeholders (one transportation broker and two industry groups) reported that additional NEMT guidance would be helpful. For example, a transportation broker reported that additional guidance would help prevent states from implementing unnecessarily stringent requirements, which could restrict the supply of providers and limit access to NEMT. Standards for Internal Control in the Federal Government states that management should ensure that there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency’s ability to achieve its goals. Effective communication can take many forms such as through guidance, training, or publication of best practices. CMS officials reported that the agency is considering assessing whether additional NEMT guidance is needed, but has not established time frames for doing so.", "Through our work, we identified a range of challenges related to providing NEMT and steps taken by some states to address these challenges. Challenges and steps identified were related to maintaining program integrity, contracting with and overseeing vendors, and accessing NEMT.\nState officials reported that information on the approaches other states take for administering NEMT and strategies to address challenges could help them address ongoing challenges. CMS and other organizations, such as TCRP, have collected or are in the process of collecting such information.", "Officials from selected states and stakeholders reported challenges containing Medicaid NEMT costs due to increased utilization and certain trip factors. Officials from nine of our selected states reported that NEMT utilization increased from 2012 to 2014 and reported varying reasons for the increase in trips. Reported reasons for increased NEMT utilization included: increased Medicaid enrollment caused by expanding Medicaid as allowed under the PPACA and by the economic downturn; program changes, such as covering NEMT to more types of health care services, such as dental or mental health care; and greater awareness of the benefit among beneficiaries.\nOfficials from nine states and three stakeholders (two counties and a transportation broker) reported that certain trip factors—such as traveling long distances, needing specialized vehicles, and reaching rural locations—made it difficult to contain costs. Further, officials from three states reported that these types of trips are sometimes more costly, because officials may negotiate higher provider reimbursement rates, thus making containing costs more difficult.\nOfficials from selected states reported implementing varying practices to contain NEMT costs, including using payment mechanisms, coordinating with stakeholders, and implementing policies. See table 3 for examples of selected state practices that could address challenges containing NEMT costs.", "Officials from CMS and selected states identified program integrity challenges related to improper payments for trips, including paid trips that did not meet program requirements. According to CMS officials, state Medicaid officials reported that Medicaid claim reviews revealed that NEMT providers overbilled and documented trips poorly and that overpayments tended to occur more frequently in states that delegate NEMT responsibility to counties where officials may not be familiar with documentation requirements. Officials from six states also reported improper payments for NEMT, and three of these states attributed improper payments to challenges documenting trips. For example, in its Single Audit Act audit report for the year ending on June 30, 2015, the Louisiana Legislative Auditor identified payments totaling more than $850,000 for trips that did not meet established policies, including requirements for accurately documenting services. Studies have also identified improper payments for Medicaid NEMT trips. For example, HHS-OIG conducted reviews of samples of Medicaid claims over a 1 or 2 year period from 2005 through 2011 in five states—California, Hawaii, Nebraska, New York, and Texas—and found that some paid NEMT trips did not meet federal and state requirements. HHS-OIG subsequently recommended that collectively, these states should refund the federal government about $63 million.\nCMS and state auditor reports, officials from selected states, and stakeholders also identified other program integrity challenges that could make NEMT vulnerable for fraud, waste, and abuse, including:\nEnrolling providers: In annual summary reports of comprehensive program integrity reviews, CMS identified one state that did not require and collect key information needed for effective oversight, such as criminal conviction information from NEMT providers, making the state vulnerable to enrolling problem providers in its NEMT program. Further, officials from six states cited challenges obtaining certain information on NEMT providers that could reduce program risks. For example, officials from one state reported they cannot access information on criminal convictions in other states, making it harder to conduct thorough background checks that could reduce program risks.\nProgram inefficiencies: State auditors in six states identified problems with states’ implementation of NEMT programs that could lead to program inefficiencies. For example, in 2012 the Washington State Auditor identified program risks in the state’s Medicaid NEMT program, such as that the Medicaid agency did not require brokers to maintain consistent trip data and that the agency lacked written policies and procedures to ensure clear management and consistent processes. As a result, the state’s six brokers reported inconsistent practices, which could lead to overbilling for trips. To address identified program risks, the state auditor recommended that the state, among other things, improve oversight, monitoring, and data analysis.\nVerifying eligibility: Officials from selected states reported several challenges verifying that trips fall within the scope of Medicaid- covered NEMT. First, officials from two states reported challenges verifying beneficiary eligibility for Medicaid or the need for NEMT services. For example, the Medicaid agency, broker, and county officials from one state reported challenges verifying Medicaid enrollment because the state updates its Medicaid enrollment database daily; thus, beneficiaries who were enrolled in Medicaid when trips were requested may not be enrolled on the days trips were provided. Second, officials from another state reported that it had challenges verifying that the beneficiary did not have other means of transportation. Third, officials from seven states reported challenges verifying that NEMT trips were to needed medical services. For instance, officials from two states reported challenges verifying the purpose of NEMT trips to certain pharmacies, including Target and Walmart, which carry non-medical products, such as food and clothing, in addition to drugs and medical supplies. In these cases, it was hard to determine whether NEMT was used appropriately, particularly when beneficiaries requested multiple NEMT trips to the pharmacy to pick up prescriptions that could potentially have been picked-up in a single trip.\nOfficials from all selected states reported taking at least one step to address these NEMT program integrity challenges. See table 4 for examples of selected state practices that could address challenges to maintaining NEMT program integrity.", "Officials from four states cited challenges contracting with and overseeing vendors, such as health plans and transportation brokers, and officials from two of these states reported that challenges arose during periods of transition. For example, officials from one state reported that in the first year of contracting with multiple brokers, challenges with one broker’s compliance with contractual requirements arose because the broker underestimated the resources needed to administer NEMT. State officials explained that under their prior method for delivering NEMT, they did not have complete information on trip volume or mode, making it difficult to determine the appropriate level of resources needed when requesting and evaluating vendors’ contract proposals. Further, these state officials reported challenges developing metrics to monitor all brokers’ compliance with certain contract requirements. For instance, brokers are required to furnish NEMT for all eligible trip requests, but officials in one state reported that about 1 percent of eligible trips requested by Medicaid beneficiaries are not provided. Without collecting complete information on NEMT trips under the state’s previous system, identifying a reasonable proportion of missed trips under the state’s new system to assess compliance with contract requirements has been difficult.\nOfficials from all selected states that contract with health plans or transportation brokers to provide NEMT reported conducting monitoring activities, such as performing annual audits and site visits, to address challenges with contracting and overseeing vendors. See table 5 for examples of selected state practices that could address challenges contracting with and overseeing vendors.", "State officials and stakeholders reported challenges ensuring access to NEMT when the demand for trips exceeded the supply of NEMT providers. Officials generally identified four factors that affected the supply of NEMT providers—geographic location, specialty providers, provider requirements, and beneficiary and provider no-shows. Specifically, officials from seven states and nine stakeholders reported a low supply of NEMT providers in rural areas, and officials from seven states and four stakeholders reported a low supply of specialty vehicles, such as stretcher or wheelchair vans. Officials from two states and three stakeholders reported that state transportation provider requirements may limit the number of or deter providers from entering the Medicaid provider pool. Lastly, officials from seven states and five stakeholders reported that beneficiaries or providers sometimes did not show-up or were late for trips, thus tying-up NEMT resources.\nOfficials from selected states reported taking steps to address access challenges, including broadening the provider networks and reviewing state provider requirements. See table 6 for examples of selected state practices that could address NEMT access challenges.", "Officials from seven selected states and six stakeholders reported that having information on how other states administer NEMT and address challenges could help them address ongoing challenges. For example, officials from one state reported that they plan to make changes to the state’s NEMT program to address ongoing challenges and that they have spoken to officials from other states to learn about how they administer NEMT. In spite of these efforts, officials from this state reported that they could not identify any state NEMT programs that could accommodate all beneficiaries well and that information on current leading practices for developing a robust NEMT program would be helpful. An official from another state reported that having information on leading practices would help to identify approaches for improving NEMT program integrity.\nSome information on approaches for administering NEMT and leading practices is available. CMS reported that it collects information on state approaches for administering NEMT through state Medicaid plans and state plan amendments and maintains this information on Medicaid.gov. Further, CMS collects information on Medicaid programs and noteworthy program integrity practices, including those related to NEMT, as part of its program integrity reviews. Other organizations have or are in the process of collecting information on states’ approaches to administer their Medicaid NEMT programs. For example, TCRP is conducting a study evaluating the effects of different options for providing Medicaid NEMT on access and coordination. As part of this work, TCRP officials reported collecting information from all 50 states and the District of Columbia on their approaches for administering NEMT.", "For some Medicaid beneficiaries, NEMT is a critical service to ensure that they are able to travel to medical appointments. Although a small proportion of total Medicaid spending, increases in the number of Medicaid beneficiaries and other factors have led to increased demand and spending on Medicaid NEMT. States take different approaches to administering Medicaid NEMT and rely on CMS guidance when designing their NEMT programs to ensure compliance with federal requirements. While CMS periodically issues guidance on NEMT, current guidance may be out of date or otherwise limited. For example, CMS issued a NEMT guidebook in 1998, but this guidebook does not include current guidance on implementing a transportation brokerage program under a state Medicaid plan. Some selected states and stakeholders told us that clarifying NEMT guidance would be helpful. As described in Standards for Internal Control in the Federal Government, management should ensure adequate means of communicating with, and obtaining information from, external stakeholders. CMS officials reported that the agency is considering assessing whether additional NEMT guidance is needed, but has not set any timeframes for conducting that assessment.", "To ensure states have appropriate and current guidance to assist them in designing and administering Medicaid NEMT, we recommend the Secretary of HHS direct CMS to assess current Medicaid NEMT guidance and update that guidance as needed.", "We provided a copy of the draft to HHS. HHS concurred with our recommendation and provided technical comments, which we incorporated as appropriate. HHS’s comments are reprinted in appendix II.\nAs agreed with you offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of this report until 30 days from the report date. At that time we will send copies of this report to interested congressional committees and the Secretary of Health and Human Services. We will also make copies available to others upon request. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Carolyn L. Yocom at (202) 512-7114 or [email protected] or Mark Goldstein at (202) 512-2834 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "This report addresses non-emergency medical transportation (NEMT) under Medicare and Medicaid and examines: 1) the key features of NEMT services under Medicare and Medicaid and how services are administered; 2) steps that the Centers for Medicare & Medicaid (CMS) have taken to oversee NEMT under Medicare as well as Medicaid; and 3) the challenges that exist in providing NEMT under Medicaid and steps that selected state Medicaid agencies have taken to address those challenges.\nTo determine the key features of NEMT under Medicare and Medicaid and how services are administered, as well as to determine steps that CMS has taken to oversee NEMT under Medicare and Medicaid, we reviewed applicable laws, regulations, and CMS guidance. We also reviewed key reports, such as Medicare Payment Advisory Commission, Department of Health and Human Services-Office of Inspector General (HHS-OIG), and Transit Cooperative Research Program (TCRP) reports, and prior GAO reports. Additionally, we conducted searches in bibliographic databases—including Medline, National Technical Information Service, WorldCat PAIS International, and Social Services Abstracts—to identify additional literature on NEMT under Medicare and Medicaid. We screened search results and identified studies for relevance to our research objectives and selected those that focused on delivery of NEMT services under Medicaid and Medicare. We interviewed CMS and HHS-OIG officials, as well as two patient advocates and a transportation industry group involved in coordinating transportation. In addition, for Medicaid, we interviewed officials from 15 selected state Medicaid agencies. We selected a non-probability sample of states based on a mix of considerations, including Medicaid enrollment and spending, the approaches states use to deliver NEMT, geographic distribution, and whether or not states have expanded Medicaid under the Patient Protection and Affordable Care Act (PPACA). The selected states were: Arizona, California, Colorado, Connecticut, District of Columbia, Georgia, Illinois, Louisiana, Maine, Michigan, Missouri, New York, Ohio, Tennessee, Washington, and Wyoming. We also reviewed documents from states, such as contracts with health plans and organizations providing NEMT, and utilization and spending data.\nTo determine the challenges that exist in providing NEMT and steps that state Medicaid agencies are taking, we screened and identified studies from the sources identified above, and selected and reviewed studies that focused on challenges in providing NEMT under Medicaid, as well as HHS-OIG and state auditor reports. We also interviewed CMS and HHS- OIG officials, two patient advocates, and a transportation industry group that are involved in coordinating transportation, two healthcare industry associations that are knowledgeable about providing NEMT under Medicaid, including Medicaid managed care, and officials from the 15 selected state Medicaid agencies. In order to obtain more in-depth information about challenges, we visited two states—Louisiana and Colorado—to interview officials involved in providing NEMT. We selected these two states because they use more than one model to provide NEMT, including using at least one broker, and have both rural and urban populations. In Louisiana, we interviewed officials from two health plans that had contracts with the state for more than 1 year and serve more than 50 percent of the Medicaid beneficiaries enrolled in managed care, as well as the two transportation brokers that provide NEMT. In Colorado, we interviewed the transportation broker Colorado uses for the Denver metropolitan area, a health care plan that serves Medicaid beneficiaries in Colorado and officials in two counties outside of the Denver metropolitan area that are responsible for providing NEMT to their residents.", "", "", "", "In addition to the individuals named above, other key contributors to this report were Heather MacLeod, Assistant Director; Kristin Ekelund, Lynn Filla-Clark, Julie Flowers, Jacquelyn Hamilton, Bonnie Pignatiello Leer, Amy Rosewarne, and Betsey Ward-Jenks." ], "depth": [ 1, 1, 2, 1, 2, 3, 3, 2, 1, 2, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full h2_full", "h0_full h3_full", "h0_full", "h3_full h0_title h1_full", "h0_title h1_title", "h1_full", "h0_full h1_full", "h1_full", "h2_full h3_title", "h3_full h2_full", "", "", "", "h2_full", "", "", "", "h0_full h2_full", "", "", "", "" ] }

{ "question": [ "What NEMT benefits do Medicare and Medicaid offer?", "When does Medicare provide NEMT via ambulance?", "When does Medicaid provide NEMT via ambulance?", "What authority do states have regarding NEMT?", "What different models are used?", "What do the Centers for Medicare & Medicaid Services oversee?", "How does CMS conduct its oversight of Medicare?", "How does CMS conduct its oversight of Medicaid?", "What are the limits to CMS's guidance?", "What is an example?", "Why else is CMS's guidance limited?", "Why do these programs benefit from guidance?", "Why is guidance for state Medicaid programs particularly important?", "What is CMS currently assessing?", "What does Standards for Internal Control in the Federal Government state?", "What is one example of effective communication?", "What did GAO identify in its report?", "What challenges were reported?", "What is an example of challenges related to containing costs?", "What is one response to cost containment challenges?", "What did interviewed officials report?", "Where is such information available?", "To whom do Medicare and Medicaid provide NEMT services?", "How much did these programs spend on NEMT?", "What agency administers Medicare NEMT benefits?", "How have states responded to increased demand for NEMT?" ], "summary": [ "The nonemergency medical transportation (NEMT) benefits offered by Medicare and Medicaid differ.", "Medicare provides NEMT via ambulance only when other means of transportation, such as a taxi or wheelchair van, would jeopardize the health of the beneficiary.", "Medicaid NEMT is generally available for beneficiaries who have no other means of transportation to medical services.", "States are responsible for the daily operations of their Medicaid programs and have discretion in how they deliver NEMT.", "Officials from 15 selected states reported using a variety of models to administer NEMT, including transportation brokers, which are entities that contract with states to administer NEMT services.", "The Centers for Medicare & Medicaid Services (CMS), within the Department of Health and Human Services (HHS), oversees Medicare and Medicaid at the federal level, but this oversight varies by program.", "CMS generally uses regular program integrity activities—such as claims reviews—to oversee Medicare NEMT.", "Under Medicaid, CMS also uses regular oversight activities, and these include overseeing states' program integrity activities and periodically issuing guidance.", "However, some of CMS's guidance is outdated or may be of limited use because of legislative and other changes that affect Medicaid and states' NEMT programs.", "For example, a 1998 guidebook on NEMT contains outdated information on implementing NEMT transportation broker programs.", "Other more recent guidance is targeted for patients and providers rather than state Medicaid programs.", "However, these programs also benefit from updated guidance on strategies to ensure compliance with federal requirements while incorporating current practices to meet beneficiaries' needs.", "Guidance for state Medicaid programs is particularly important because NEMT is at high risk for fraud and abuse; some selected states and stakeholders GAO interviewed reported that updated guidance could be helpful.", "CMS officials reported that the agency is considering assessing whether additional NEMT guidance is needed, but has not set time frames for conducting this assessment.", "Standards for Internal Control in the Federal Government states that management should ensure adequate means of communicating with stakeholders.", "Effective communications can take many forms, including guidance.", "GAO identified four types of challenges related to Medicaid NEMT and several steps taken by states to address some of these challenges.", "Challenges reported related to containing costs, maintaining program integrity, contracting with and overseeing vendors, and accessing NEMT.", "For example, states reported challenges containing NEMT costs due to increased NEMT utilization and reported implementing practices to help address these challenges.", "Such practices include setting fixed provider reimbursement fees that remained relatively constant in recent years.", "Officials from 7 of the 15 selected states and 6 stakeholders GAO interviewed reported that having information on how states administer NEMT and ways to address challenges could be helpful to states.", "Some of this information is available; for example, CMS reported collecting information on states' approaches through state Medicaid plans and posting this information on CMS's website. Other organizations, such as the Transit Cooperative Research Program, have or are in the process of collecting such information.", "Medicare and Medicaid provide NEMT services to eligible beneficiaries who need transportation to scheduled nonemergency care.", "Spending on NEMT under these programs was $2.7 billion in 2013—$1.2 billion for Medicare and $1.5 billion for Medicaid.", "CMS administers Medicare NEMT benefits and is responsible for overseeing Medicaid at the federal level.", "Increased demand for NEMT because of increased Medicaid enrollment has led states to seek ways to more efficiently operate NEMT." ], "parent_pair_index": [ -1, 0, 0, -1, 3, -1, 0, 0, 0, 3, 0, 5, 6, 0, -1, 9, -1, 0, 1, 2, 0, 4, -1, 0, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 4, 4, 4, 4, 4, 5, 5, 5, 5, 5, 5, 0, 0, 0, 0 ] }

{ "title": [ "", "Overview", "Background", "1863 Enrollment Act and Civil War Conscription", "Selective Service Act of 1917 and World War I Conscription", "The Selective Training and Service Act and World War II", "Consideration of Universal Compulsory Service", "Post-World War II, the Selective Service Act of 1948", "Korean War and the Universal Military Training and Service Act of 1951", "The Vietnam War and Proposals for Draft Reform", "The Gates Commission", "All-Volunteer Force (AVF) and a Standby SSS", "New Penalties for Registration Noncompliance", "Other Legislative Proposals in the Modern Era", "National Commission on Military, National, and Public Service", "Selective Service Registration", "Processes for Registration", "Selective Service System", "Workforce and Organization", "Funding", "Data-Sharing and Data Management", "What are Some Options for the Future of the Selective Service System?", "Arguments For and Against Repeal of MSSA", "Options for Amending MSSA", "Repealing the Peacetime Registration Requirement", "Transferring SSS Functions to an Existing Federal Agency", "Amending or Repealing the Penalties for Failing to Register", "Changing Registration Requirements to Include Women", "Enhanced SSS Data Collection", "" ], "paragraphs": [ "", "Congress appropriates approximately $23 million annually to maintain the Selective Service agency. The United States has not used conscription to fill manpower requirements for over four decades; however, the Selective Service System and the requirement for young men to register for the draft remain today. Men who fail to register are subject to penalties in the form of lost benefits and criminal action. Some have questioned the need to maintain this agency and the registration requirements. Others have questioned whether the current requirements for registration are fair and equitable.\nThis report is intended to provide Congress with information about how the Military Selective Service Act (MSSA), the Selective Service System (SSS), and associated requirements for registration have evolved over time. It explains why the United States developed the SSS, what the system looks like today, how constituents are affected by the MSSA requirements, and what the options and considerations may be for the future of the Selective Service.\nThe first section of the report provides background and history on the Military Selective Service Act, the Selective Service System, and the implementation of the draft in the United States. The second section discusses statutory registration requirements, processes for registering, and penalties for failing to register. The third section discusses the current organization, roles, and resourcing of the Selective Service System. The final section discusses policy options and consideration for Congress for the future of the MSSA and the Selective Service System.\nThis report does not discuss the state of the all-volunteer force or whether it is adequate to meet our nation's current or future manpower needs. In addition, it will not provide an analysis of other options for military manpower resourcing such as universal military service or universal military training. It also does not discuss the history of the draft and draft planning for health service workers. Finally, this report does not evaluate whether the SSS, as currently structured, is adequately resourced and organized to perform its statutory mission. These questions and others will be reviewed by the National Commission on Military, National, and Public Service established by the National Defense Authorization Act (NDAA) for Fiscal Year 2017 ( P.L. 114-328 ).", "The United States has used federal conscription at various times since the Civil War era, primarily in times of war, but also during peacetime in the aftermath of World War II. When first adopted in 1863, national conscription was a marked departure from the traditional military policy of the United States, which from the founding era had relied on a small standing force that could be augmented by state militias in times of conflict. Conscription into the Armed Forces of the United States was used just prior to, during, and immediately after World War II (WWII). Reinstated on June 24, 1948, it remained in force until June 30, 1973.\nFollowing the adoption of the all-volunteer force (AVF) in 1973, authority to induct new draftees under the Military Selective Service Act ceased. Nevertheless, a standby draft mechanism still exists to furnish manpower above and beyond that provided by the active and reserve components of the Armed Forces in the case of a major military contingency. If the federal government were to reinstate the draft, draftees would likely be required to fill all authorized positions to include casualty replacements, billets in understrength units, and new military units activated to expand the wartime force.", "During the Civil War, due to high demand for military manpower, weaknesses in the system for calling up state militia units, and an insufficient number of volunteers for active federal service, President Abraham Lincoln signed the 1863 Enrollment Act. This marked the first instance of the federal government calling individuals into compulsory federal service through conscription. All male citizens between the ages of 20 and 45 who were capable of bearing arms were liable to be drafted. The law allowed exemptions for dependency and employment in official positions. The Enrollment Act also established a national Provost Marshal Bureau, led by a provost marshal general and was responsible for enforcing the draft. Under the act, the President had authority to establish enrollment districts and to appoint a provost marshal to each district to serve under the direction of the Secretary of War in a separate bureau under the War Department. The provost marshal general was responsible for establishing a district board for processing enrollments and was given authority under the law to make rules and regulations for the operation of the boards and to arrest draft dodgers and deserters. Government agents went door-to-door to enroll individuals, followed by a lottery in each congressional district based on district quotas.\nSome observers criticized the Enrollment Act as favoring the wealthiest citizens because it allowed for either the purchase of a substitute who would serve in the draftee's place or payment by the draftee of a fee up to $300. In addition, volunteers were offered bounties by both the federal government and some local communities. Under this system, fraud and desertions were common. Enforcement of the draft also incited rioting and violence in many cities across the United States, most famously in New York City. On July 13, 1863, the intended date of the second draft drawing in New York City, an angry mob attacked the assistant Ninth District provost marshal's office, smashing the lottery selection wheel and setting the building on fire. Several days of rioting and violence ensued until federal troops were called in to restore order. The draft call was suspended in New York City during the rioting and was not resumed until August 19, 1863.\nThe total number of men that served in the Union forces during the course of the war was 2,690,401. The number drafted was 255,373. Of the total draftees, 86,724 avoided military service by the payment of commutation, and 117,986 furnished substitutes. Volunteerism during this war was likely driven in part by the bounty system.", "After the Civil War, the federal government did not use conscription again until World War I (WWI). By then a new concept for a draft system termed \"Selective Service\" had been developed that would apportion requirements for manpower to the states and through the states to individual counties. By 1915, Europe was in all-out war; however, the United States only had a small volunteer Army of approximately 100,000 men. On April 2, 1917, President Woodrow Wilson asked Congress for a declaration of war, and on May 18, 1917, he signed an act commonly known as the Selective Service Act of 1917 into law. This new law allowed the President to draft the National Guard into federal service and made all male citizens between the ages of 21 and 31 liable for the draft. On July 15, 1917, Congress enacted a provision that all conscripted persons would be released from compulsory service within four months of a presidential proclamation of peace. In 1918, Congress extended the eligible draft age to include all males between the ages of 18 and 45. World War I was the first instance of conscription of United States citizens for overseas service.\nA key aspect of the Selective Service Act of 1917 was that it allowed the federal government to select individuals from a pool of registrants for federal service. Unlike the Civil War, a shortage of volunteers was not the primary concern in enacting this leg islation. The selective aspects of the WWI draft law were driven by concerns that indiscriminate volunteerism could adversely affect the domestic economy and industrial base. In support of the selective service law, Senator William M. Calder of New York said, \"under a volunteer system, there is no way of preventing men from leaving industries and crippling resources that are just as important as the army itself.\"\nIn contrast to the Civil War draft, the Selective Service Act of 1917 did not allow for the furnishing of substitutes or bounties for enlistment. It also provided for decentralized administration through local and district draft boards that were responsible for registering and classifying men, and calling registrants into service. The law specified that the President would appoint boards consisting of civilian members \"not connected with the Military Establishment.\" Over 4,600 such boards were established to hear and decide on claims for exemptions. The provost marshal general, at the time Major General Enoch Crowder, oversaw the operation of these boards.\nThe first draft lottery was held on July 20, 1917. Out of the 24.2 million that registered for the draft in WWI, 2.8 million were eventually inducted. While the law did not prohibit volunteers, the implementation of the selective service system alongside a volunteer system became too complex and the Army discontinued accepting volunteer enlistees by December 15, 1917. By 1919, at the end of the war, the provost marshal general was relieved from his duties, all registration activities were terminated, and all local and district boards were closed. In 1936, the Secretaries of War and the Navy created the Joint Army-Navy Selective Service Committee (JANSSC) to manage emergency mobilization planning. The committee was headed by Army Major Lewis B. Hershey.\nBetween WWI and WWII, the Armed Forces shrank in numbers due to both treaty commitments and public attitudes toward a large standing force. In the interwar period, two opposing movements emerged. Some were in support of legislative provisions that would empower the President to conscript men for military service upon a declaration of war, and some called for a universal draft, universal military training, or broader authorities to conscript civilian labor in times of both war and peace. Others proposed provisions that would require a national referendum on any future use of conscription, or would forbid conscripts from serving outside the territorial borders of the United States.", "In 1940, Europe was already at war, and despite the neutrality of the United States at the time, some in Congress argued that the United States could not continue with a peacetime force while other nations were mobilizing on a massive scale. In June of 1940, President Franklin D. Roosevelt announced that he would recommend a program of universal compulsory government service for American youth (men and women). A few days later a conscription bill, modeled on the Selective Service Act of 1917, was sponsored by Senator Edward Burke and Representative James Wadsworth in their respective chambers. The bill garnered support by senior Army leaders, who expressed concerns about the ability to recruit a sufficient number of volunteers necessary to fight a major war. Some in Congress opposed to the bill argued the following:\nRegimentation of American life as provided for by the Burke-Wadsworth bill in peacetime is abhorrent to the ideals of patriotic Americans and is utterly repugnant to American democracy and American traditions ... no proof or evidence was offered to indicate that the personnel needs of the Army and Navy cannot be obtained on a voluntary basis.\nThe conscription bill became the Selective Training and Service Act, and was signed into law on September 16, 1940, by Franklin D. Roosevelt. The act was the first instance of peacetime conscription in the United States and required men between aged 21 through 35 to register with local draft boards. The law required a 12-month training period for those inducted, at which time the inductees would be transferred to a reserve component of the Armed Forces for 10 years. Criminal penalties for failing to comply with registration or other duties under this act included \"imprisonment of not more than five years or a fine of not more than $10,000, or by both such fine and imprisonment.\"\nThe act also gave the President the authority to establish a Selective Service System, and to appoint a Director of the Selective Service with oversight of local civilian boards. Because the image of civilian leadership was deemed important during a time of peace, in 1940 the President initially appointed Dr. Clarence Dykstra as Director of the Selective Service while also retaining his position as president of the University of Wisconsin. Due to poor health Dykstra never took up his position as Director of Selective Service. In July of 1941, the JANSSC that had been established in the interwar period became the new Selective Service headquarters and Colonel Lewis B. Hershey was appointed as the Director, a position he held until 1970, retiring with the rank of Lieutenant General.\nIn terms of the implementation of the Selective Service System, there was an emphasis on establishing an equitable lottery system administered by decentralized local draft boards as was deemed a successful approach during WWI:\nThe Selective Training and Service Act of 1940 is based on the principle that the obligation and privileges of military training and service should be shared generally in accordance with a fair and just system of compulsory military training and service.... The public expected that the lottery under the new law would be conducted as the lottery of 1917-1918 was conducted, and those charged with the administration of the Selective Service felt likewise.\nThe 6,442 district boards assigned a number from 1 to 7,836 to each registrant in their district. On October 29, 1940, the first draft lottery was held in a similar manner to the WWI draft lottery and draft inductions into the Army began on November 18, 1940. The lottery system was used for three groups of registrants, then abandoned in 1942 and not used again for the draft until 1969 during the Vietnam conflict. In the interim, draftees were inducted by local boards based on required quotas, classification, age (oldest first), and order of precedence as determined by contemporary policy.\nAlthough some complaints arose over inequalities and inconsistencies in the draft administration, a Gallup poll conducted in 1941 found that 93% of those polled thought the draft had been handled fairly in their community. Volunteers were allowed to serve; however, approximately 10 million of the 16 million servicemembers who served during WWII were draftees.", "Although the Selective Training and Service Act was set to expire in 1945, at the time of drafting, some felt that the emergency conscription program should evolve into a permanent system of universal military training. In testimony before the House Appropriations Committee on June 5, 1941, General Marshall stated\nI believe that Selective Service provides the only practical and economical method of maintaining the military force that we inevitably are going to be required to have in the future, and I think, with all my heart, that Selective Service is a necessity to the maintenance of a true democracy.\nThese sentiments continued at the end of the WWII, and there was a push by some to maintain compulsory military training or another program of postwar conscription. In 1945, the congressional Committee on Postwar Military Policy held a series of open hearings on compulsory military training. Those in favor of maintaining some form of conscription argued that it would provide a deterrent to future \"Hitlers and Hirohitos\" as well as build the health and character of American youth. Those opposed contended that conscription was antithetical to democratic ideals, was an inefficient mechanism for building force structure, and led to war, international distrust, and profiteering.", "Congress extended the Selective Training and Service Act in 1945 and 1946. In 1947, Congress repealed the act and all functions and responsibilities of the Selective Service System were transferred to the Office of Selective Service Records. This office, by law, had a limited mandate for knowledge preservation, and maintenance and storage of individual records. This restructuring essentially put the Selective Service System into a deep standby mode.\nBy 1948, the military had shrunk in size to less than 1.5 million from a peak of 12 million in 1945. Concerned about lagging recruiting efforts and the rising power of the Soviet Union, Congress authorized reinstatement of the draft in the Selective Service Act of 1948, which was signed into law by President Truman on June 24, 1948. The act was similar to previous acts authorizing the Selective Service System. It established registration requirements for males ages 19 to 26, and the same criminal penalties for fraudulent registration or evasion. It also dissolved the Office of Selective Service Records and transferred its responsibilities back to the newly established Selective Service System as an independent agency of the federal government. Under this act, the President had authority to appoint state directors of the Selective Service System. It also provided the authority to call National Guard and Reserve personnel into active duty to support the administration of state and national headquarters.", "The Selective Service Act of 1948 was set to expire on June 24, 1950. Due to budget constraints and absence of an immediate threat to national security, between 1948 and 1949 conscription was only used to fill recruiting shortfalls. On June 25, 1950, war broke out between North and South Korea. Although a bill to extend the Selective Service Act of 1948 was already in conference, the Senate rushed to approve the bill on June 28 and it was signed by the President on June 30, 1950. The following year, Congress renamed the act the Universal Military Training and Service Act of 1951. The act extended the draft until July 1, 1955, and also lowered the registration age to 18. As the new name suggested, the law also contained a clause that would have obligated all eligible males to perform 12 months of military service and training within a National Security Training Corps if amended by future legislation (it was never amended).\nThe act did not alter the structure or functions of the SSS; however, it did require the Director to submit an annual report to Congress on\nthe number of persons registered, the number of persons inducted, and the number of deferments granted and the basis for them.\nThe United States inducted approximately 1.5 million men into the military (one-quarter of the total uniformed servicemembers) under this act in support of the Korean conflict. A draft lottery was not used in this era, rather, the Department of Defense issued draft calls, and quotas were issued to local boards. The local boards would then fill their quotas with those classified as \"1-A\", or \"eligible for military service\" by precedence as determined by policy. Public concerns with the draft at this time were equitable implementation of the draft due to the broad availability of deferments for what some saw as privileged groups. Others expressed concerns about the potential disruption of citizens' lives.\nBetween 1950 and 1964 Congress repeatedly extended the Universal Military Training and Service Act in four-year periods with minor amendments. During this time, volunteers made up approximately two-thirds of the total military force with the remainder supplemented through inductions—with some limited exceptions, the Navy, Air Force, and Marines relied on volunteers almost entirely. For example, monthly draft calls in 1959 were for approximately 9,000 men out of an eligible population of about 2.2 million.", "In 1964, when America became involved militarily in Vietnam, conscription was again used to mobilize manpower and augment the volunteer force. Among the criticisms of the draft system during this period were that it was inequitable and discriminatory since the chance of being drafted varied by state, by local community, and by one's economic status. In the late 1960s, public acceptance of the draft began to erode for the following reasons, inter alia :\nOpposition to the war in Vietnam. The U.S. Army's desire for change due to discipline problems among some Vietnam draftees. Belief that the state did not have a right to impose military service on young men without consent. Belief that the draft was an unfair \"tax\" being imposed only on young men in their late teens and twenties. Perception of some observers that the draft placed an unfair burden on underprivileged members of society. Demographic change increasing the size of the eligible population for military service relative to the needs of the military. Estimations that an all-volunteer force could be fielded within acceptable budget levels.\nIn response to some of these concerns and associated political pressures, President Lyndon B. Johnson issued Executive Order 11289 on July 2, 1966, establishing the National Advisory Commission on Selective Service headed by Burke Marshall. President Johnson instructed the commission to consider past, present, and prospective functioning of the Selective Service System and other systems of national service, taking into account the following factors:\nFairness to all citizens, Military manpower requirements, Minimizing uncertainty and interference with individuals' careers and educations, National social, economic, and employment goals, and Budgetary and administrative considerations.\nThe commission examined a number of potential options from requiring everyone to serve to elimination of all compulsory service. The commission's final report, In Pursuit of Equity: Who Serves When not all Serve? , was delivered to the President in February of 1967 at the time when the Selective Service law was up for renewal. The commission recommended continuing conscription but making significant changes to the Selective Service System to \"assure equal treatment for those in like circumstances.\" Among these recommended changes were (1) adopting an impartial and random selection process and order of call, (2) consolidating the local boards under centralized administration with uniform policies for classification, deferment, and exemptions, and (3) ensuring that composition of local boards was representative of the population that they served.\nIn parallel with the Presidential Commission's review, the House Armed Services Committee chartered their own review with a civilian advisory panel chaired by retired Army General Mark Clark. The Clark panel also recommended against shifting to an all-volunteer force but disagreed on the establishment of a lottery.\nIn 1967, Congress extended the SSS through July 1, 1971, under the renamed Military Selective Service Act of 1967 (henceforth MSSA). While the Administration had pushed for comprehensive draft reform based on the commission's recommendations, the bill contained few of President Lyndon Johnson's proposals. In particular, the bill, as enacted, prohibited the President from establishing a random system of selection (draft lottery) without congressional approval.\nIn 1969, President Richard M. Nixon called on Congress to provide the authority to institute the draft lottery system. In response, Congress amended the 1967 law, repealing the prohibition on the President's authority. On the same day, President Nixon signed Executive Order 11497 establishing the order of call for the draft lottery for men aged 19 through 25 at the end of calendar year 1969. While the draft remained contentious, in 1971 the induction authority under the MSSA was again extended through 1973. In response to concerns regarding the composition of local boards, the bill stated,\nThe President is requested to appoint the membership of each local board so that to the maximum extent practicable it is proportionately representative of the race and national origin of those registrants within its district.\nThe bill also included a significant pay raise for military members as a first step toward building an all-volunteer force (AVF).", "Two months into President Nixon's first term, he launched the President's Commission on an All-Volunteer Force, which came to be known as the Gates Commission. In its 1970 report, the commission unanimously recommended that \"the nation's best interests will be better served by an all-volunteer force, supported by an effective standby draft, than by a mixed force of volunteers and conscripts.\" The Gates Commission also recommended maintaining a Selective Service System that would be responsible for\na register of all males who might be conscripted when essential for national security, a system for selection of inductees, specific procedures for the notification, examination, and induction of those to be conscripted, an organization to maintain the register and administer the procedures for induction, and the provision that a standby draft system may be invoked only by resolution of Congress at the request of the President.\nThe last draft calls were issued in December 1972 and the statutory authority to induct expired on June 30, 1973. On January 27, 1973, Secretary of Defense Melvin R. Laird announced the end of conscription. The last man to be inducted through the draft entered the Army on June 30, 1973.\nTable 1 shows the number of inductees and total participants for each major conflict in which the United S tates used the draft and for which data are available. More than half of the participants in WWI and nearly two-thirds of the WWII participants were draftees. About one-quarter of the participants in the Korean and Vietnam conflicts were draftees, however , it should be noted that the possibility of being drafted may have induced higher rates of volunteerism during these later conflicts.", "President Gerald Ford temporarily suspended the registration requirement through Proclamation 4360 (89 Stat. 1255) in April 1975. The MSSA was not repealed, however, and the requirement for the SSS to be ready to provide untrained manpower in a military emergency remained. This proclamation essentially put the SSS into deep standby mode. At the time there were approximately 98 full-time staff operating a pared-down field structure with a national headquarters and nine regional headquarters. In the late 1970s, some were concerned that this \"standby\" system did not have the resources or infrastructure to register, select, classify, and deliver the first inductees within 30 days from the start of an emergency mobilization.\nThese concerns became even more salient when, in December 1979, the Soviet Union invaded Afghanistan. In his January 1980 State of the Union address, President Jimmy Carter announced his intention to resume draft registration requirements in the coming year. A Gallup Poll conducted in March 1980 found that 76% were in favor of a registration requirement for young men. Congress responded by providing $13.3 million in appropriations for the Selective Service System on June 25, 1980. President Carter signed Proclamation 4771 on July 2, 1980, reestablishing the requirement for all 18- to 25-year-old males to register for the Selective Service and setting out guidelines for registration. Penalties for failing to register were the same as those first established in the 1940 Selective Training and Service Act (a fine of up to $10,000 and/or a prison term of up to five years). However, unlike in previous draft registration regulations, there was no requirement for men to undergo evaluation and classification for fitness to serve.\nThe new standby SSS had five key components that are still largely in place today:\nA registration process that is reliable and efficient. An automated data processing system that could handle pre- and postmobilization requirements. A system for promulgation and distribution of orders for induction. A claims process that can quickly insure all registrants' rights to due process are protected. A field structure that can support the claims process.\nSupporters of reestablishing the registration requirement for men argued that it would send a message to the Soviet Union that the United States was prepared to act to defend its interests and also that it would cut down the mobilization time in the event of a national emergency. Some argued that registration was not enough, and advocated for a return of peacetime conscription, universal military training, or compulsory national service.\nOrganizations opposed to the reinstatement of registration requirements argued that registration forms were illegal because they required registrants to disclose their Social Security numbers. Others argued that the exemption of women in the draft law was unconstitutional. Carter's proposal to Congress included legislative language that would have given the President the authority to register women. As justification for this proposal, he stated,\nMy decision to register women is a recognition of the reality that both women and men are working members of our society. It confirms what is already obvious throughout our society – that women are now providing all types of skills in every profession. The military should be no exception. […] There is no distinction possible, on the basis of ability or performance, that would allow me to exclude women from an obligation to register.\nCongress rejected the President's proposal to include women with an explanation under Title VIII of S. Rept. 96-826,\n[T]he starting point for any discussion of the appropriateness of registering women for the draft is the question of the proper role of women in combat. The principle that women should not intentionally and routinely engage in combat is fundamental, and enjoys wide support among our people. It is universally supported by military leaders who have testified before the committee, and forms the linchpin for any analysis of this problem. […] Current law and policy exclude women from being assigned to combat in our military forces, and the committee reaffirms this policy. The policy precluding the use of women in combat is, in the committee's view, the most important reason for not including women in a registration system.\nIn 1981, the Supreme Court heard a challenge to the exception for women to register for Selective Service. In the Rostker v. Goldberg case, the Court held that the practice of only registering men for the draft was constitutional. In the majority opinion, Justice William Rehnquist wrote\n[t]he existence of the combat restrictions clearly indicates the basis for Congress' decision to exempt women from registration. The purpose of registration was to prepare for a draft of combat troops. Since women are excluded from combat, Congress concluded that they would not be needed in the event of a draft, and therefore decided not to register them.", "The first national registration after the reinstatement of the requirement was held in 1980 through registration at local U.S. Post Offices. The registration rate for the 1980 registration was 87% within the two-week registration period and 95% through the fourth month of registrations. In 1973, the registration rates were 77% within 30 days of one's 18 th birthday as required by statute, and 90% through the fourth month. The Government Accountability Office (GAO) estimated that, of the registrations submitted, there was a final accuracy level of 98%.\nDespite initial successes in registration, there was a push by many in Congress and the Administration to maintain public awareness of the requirements and to maintain high compliance rates. On January 21, 1982, President Ronald Reagan authorized a grace period until February 28, 1982, allowing those who had not registered to do so. In 1982, the Department of Justice began prosecution of those men who willfully refused to register for selective service. In the June 1983 SSS semiannual report to Congress, the agency reported that it had referred 341 persons to the Department of Justice for investigation. At the time of the report, there were 11 indictments and 2 convictions.\nIn the same year, there was a movement in Congress to tie eligibility for federal benefits to registration requirements. National Defense Authorization bills for Fiscal Year 1983 were reported to the House and Senate floor without any proposed amendments to the MSSA. However, on May 12, 1982, the bill was amended by Senators Hayakawa and Mattingly on the Senate floor to prohibit young male adults from receiving any federal student assistance under Title IV of the Higher Education Act if they cannot certify they had registered with Selective Service. The Senate passed amendment as drafted by voice vote. Representative Jerry Solom introduced a similar amendment on the House floor. In conference committee, Members added language to direct the Secretary of Education and the Director of Selective Service to jointly develop methods for certifying registration. This provision amending the MSSA was signed into law as part of the FY1983 National Defense Authorization Act with an effective date of July 1, 1983.\nRepresentative Solomon also led the effort to attach similar language to the Job Training Partnership Act of 1982, which was passed on October 13, 1982. This law prohibited those who failed to register from receiving certain federal job training assistance. Congress repealed the Job Training and Partnership Act and replaced it with the Workforce Investment Act of 1998; however, the statutory language enforcing the MSSA was maintained in the new law.\nIn 1985, Congress added a provision to the National Defense Authorization Act for Fiscal Year 1986 that made an individual ineligible for federal civil service appointments if he \"is not registered and knowingly and willfully did not so register before the requirement terminated or became inapplicable to the individual.\" Congress also expressed support for the peacetime registration program as a \"contribution to national security by reducing the time required for full defense mobilization,\" and as sending \"an important signal to our allies and to our potential adversaries of the United States defense commitment.\"\nOn November 6, 1986, President Reagan signed into law the Immigration Reform and Control Act. This law required males between the ages of 18 and 26 who are applying for legalization under the act to register for the Selective Service if they have not already done so. In response, the Immigration and Naturalization Service (INS) and the SSS established procedures for registering young men as part of the immigration application process.", "Between 1980 and 2019, several Members of Congress proposed a number of legislative changes to the MSSA; however, none have been enacted. Typically, such proposed changes to the MSSA have included one or more of the following options:\nRepeal the entire MSSA. Terminate the registration requirement. Reinstate draft induction authority. Defund the Selective Service System. Require women to register for the draft.\nOther proposed changes would seek to modify SSS record management or registration processes. These options are discussed in more detail later in this report.", "In the FY2017 NDAA ( P.L. 114-328 ), Congress established a National Commission on Military, National, and Public Service to help consider some of the options for the future of the MSSA. The commission is tasked not only with a review of the military selective service process, but also with proposing \"methods to increase participation in military, national, and other public service, in order to address national security and other public service needs of the Nation.\" The statutory scope of the commission is to review\n(1) The need for a military selective service process, including the continuing need for a mechanism to draft large numbers of replacement combat troops;\n(2) means by which to foster a greater attitude and ethos of service among United States youth, including an increased propensity for military service;\n(3) the feasibility and advisability of modifying the military selective service process in order to obtain for military, national, and public service individuals with skills (such as medical, dental, and nursing skills, language skills, cyber skills, and science, technology, engineering, and mathematics (STEM) skills) for which the Nation has a critical need, without regard to age or sex; and\n(4) the feasibility and advisability of including in the military selective service process, as so modified, an eligibility or entitlement for the receipt of one or more Federal benefits (such as educational benefits, subsidized or secured student loans, grants or hiring preferences) specified by the Commission for purposes of the review.\nSection 552 of the FY2017 NDAA also required DOD to prepare a preliminary report on the purpose and utility of the SSS to support the commission's work, to include\n(1) A detailed analysis of the current benefits derived, both directly and indirectly, from the Military Selective Service System, including— (A) the extent to which mandatory registration benefits military recruiting; (B) the extent to which a national registration capability serves as a deterrent to potential enemies of the United States; and (C) the extent to which expanding registration to include women would impact these benefits.\n(2) An analysis of the functions currently performed by the Selective Service System that would be assumed by the Department of Defense in the absence of a national registration capability.\n(3) An analysis of the systems, manpower, and facilities that would be needed by the Department to physically mobilize inductees in the absence of the Selective Service System.\n(4) An analysis of the feasibility and utility of eliminating the current focus on mass mobilization of primarily combat troops in favor of a system that focuses on mobilization of all military occupational specialties, and the extent to which such a change would impact the need for both male and female inductees.\n(5) A detailed analysis of the Department's personnel needs in the event of an emergency requiring mass mobilization, including— (A) a detailed timeline, along with the factors considered in arriving at this timeline, of when the Department would require— (i) the first inductees to report for service; (ii) the first 100,000 inductees to report for service; and (iii) the first medical personnel to report for service; and (B) an analysis of any additional critical skills that would be needed in the event of a national emergency, and a timeline for when the Department would require the first inductees to report for service.\n(6) A list of the assumptions used by the Department when conducting its analysis in preparing the report.\nDOD submitted its congressionally mandated report in July 2017. The report noted that the department \"currently has no operational plans that envision mobilization at a level that would require conscription.\" Nevertheless, it acknowledges that, \"the readiness of the underlying systems, infrastructure, and processes to effect [a draft] – serve as a quiet but important hedge against an unknowable future.\"\nThe GAO's report, released in January 2018, noted that DOD's requirements and timeline for mobilization of forces remain unchanged since 1994, despite changes to force structure, capability needs, national security environment, and strategic objectives. In particular, the report authors stated the following:\nDOD provided the personnel requirements and a timeline that was developed in 1994 and that have not been updated since. These requirements state that, in the event of a draft, the first inductees are to report to a Military Entrance Processing Station in 193 days and the first 100,000 inductees would report for service in 210 days. DOD's report states that the all-volunteer force is of adequate size and composition to meet DOD's personnel needs and it has no operational plans that envision mobilization at a level that would require a draft. Officials stated that the personnel requirements and timeline developed in 1994 are still considered realistic. Thus, they did not conduct any additional analysis to update the plans, personnel requirements, or timelines for responding to an emergency requiring mass mobilization.\nThe authors stated that the GAO's 2012 recommendation that DOD \"establish a process of periodically reevaluating DOD's requirements for the Selective Service System in light of changing operating environments, threats, and strategic guidance\" remains valid.\nThe National Commission on Military, National and Public Service released an interim report on their research findings on January 23, 2019. The report summarizes preliminary findings. With respect to the SSS, the commission is considering options that could\nexpand the registration requirement to include women; identify individuals who possess critical skills the nation might need; call for volunteers during times of emergency using the existing system; and, incorporate reasonable changes to identify, evaluate, and protect those who object to military service, but are otherwise willing to serve.\nThe commission is scheduled to continue its work through March 2020.", "Today, nearly all males residing in the United States—U.S. citizens and documented or undocumented immigrant men—are required to register with the Selective Service if they are at least 18 years old and are not yet 26 years old. Those who are required to register must do so within 30 days of their 18 th birthday unless exemptions apply as listed in Table 2 . Men born from March 29, 1957, to December 31, 1959, were never required to register because the registration program was not in effect at the time they turned 18. Individuals are not allowed to register beyond their 26 th birthday. Women are currently not required to register for the Selective Service. Federal regulations state, \" No person who is not required by selective service law or the Proclamation of the President to register shall be registered.\" All of those required to register would be considered \"available for service\" in the case of an emergency mobilization unless they were reclassified by the SSS.", "Almost all Selective Service registrations are completed electronically; however, registration can also be done at U.S. Post Offices and by submission of paper registrations. Most states, four territories, and the District of Columbia (D.C.) have driver's license legislation that provides for automatic Selective Service registration when obtaining a driver's license, driver's permit, or other form of identification from the Department of Motor Vehicles. In FY2017, 42% of all registrations, representing nearly 1 million young men, were conducted electronically through driver's license legislation (see Figure 1 ).\nThe SSS also has interagency agreements for registration. In cooperation with U.S. Citizenship and Immigration Services, immigrant men ages 18 through 25 who are accepted for permanent U.S. residence are registered automatically. In addition, men of registration age who apply for an immigrant visa through the Department of State are also registered. The application form for federal student aid includes a \"register me\" checkbox for those who have not yet registered for the Selective Service, which authorizes the SSS to automatically register those individuals. The SSS reports that approximately 25% of their electronic registrant data come from the Department of Education as part of the student aid application process. The SSS also has existing data-sharing relationships with the DOD and the Department of Labor.\nIn FY2017, the SSS reported a 73% compliance rate for the 18-year-old year of birth (YOB) group. Registration compliance rate for the 20 through 25 YOB group was 92% in calendar year 2016, a decrease of 2% from the previous year, but above the SSS goal of 90%. Reasons for noncompliance may include lack of awareness of requirements, or purposeful avoidance. Knowingly failing to register comes with certain penalties including the following:\nIf indicted, imprisonment of not more than five years and/or fine of not more than $10,000 (increased to $250,000 in 1987 by 18 U.S.C. §3571(b)(3)). Ineligibility for federal student aid. Ineligibility for appointment to a position in an executive agency. Ineligibility for federal job training benefits. Potential ineligibility for citizenship (for certain immigrants to the United States). Possible inability to obtain a security clearance.\nIn addition, a large number of state legislatures as well as county and city jurisdictions have conditioned eligibility for certain government programs and benefits on SSS registration.\nFailing to register for the Selective Service, or knowingly counseling, aiding, or abetting another to fail to comply with the MSSA, is considered a felony. Those who fail to register may have their names forwarded to the Department of Justice (DOJ). In FY2017, 184,051 names and addresses of suspected violators were provided to DOJ. In practice, there have been no criminal prosecutions for failing to register since January 1986. At that time the SSS reported a total of 20 indictments with 14 convictions.\nOther penalties adversely affect the population required to register. For example, California estimated that between 2007 and 2014, young men in that state who failed to register were denied access to more than $99 million in federal and state financial aid and job training benefits.\nThere is some relief from penalties for those who fail to register. The MSSA establishes a statute of limitations on criminal prosecutions for evading registration to five years after a fraudulent registration or failure to register, whichever is first. Also, individuals may not be denied federal benefits for failing to register if\nthe requirement to register has terminated or become inapplicable to the person; and the person shows by a preponderance of the evidence that the failure of the person to register was not a knowing and willful failure to register.\nIndividuals who unknowingly fail to register may ask for reconsideration from the official handling their case and may be required to submit evidence that they were unaware of their requirement to register.", "The Selective Service System is an independent federal agency within the executive branch with headquarters located in Arlington, VA. The agency is currently maintained as an active standby organization. The statutory missions of the SSS are to maintain\na complete registration and classification structure capable of immediate operation in the event of a national emergency (including a structure for registration and classification of persons qualified for practice or employment in a health care occupation essential to the maintenance of the Armed Forces), and personnel adequate to reinstitute immediately the full operation of the System, including military reservists who are trained to operate such System and who can be ordered to active duty for such purpose in the event of a national emergency.\nIf the SSS were activated with the authority to induct individuals, the agency would be responsible for (1) holding a national draft lottery, (2) contacting registrants who are selected via the lottery, (3) arranging transportation for selectees to Military Entrance Processing Stations (MEPS) for testing and evaluation of fitness to serve, and (4) activating a classification structure that would include area offices, local offices, and appeal boards. Local boards would also evaluate claims for exemption, postponement, or deferments. Those classified as conscientious objectors would be required to serve in a noncombatant or nonmilitary capacity. For those permitted to serve in a nonmilitary capacity, the SSS would be responsible for placing these \"alternative service workers\" with alternate employers and tracking completion of 24 months of their required service.", "The agency's workforce is comprised of full-time career employees, part-time military and civilian personnel, and approximately 11,000 part-time civilian volunteers. In FY2017, the agency had 124 full-time equivalent civilian positions for administration and operations across agency headquarters, the Data Management Center, and three regional headquarters offices. Part-time employees include 56 State Directors representing the 50 states, four territories, the District of Columbia, and New York City. The median GS grade for the agency is GS-11.\nThe SSS maintains a list of unpaid volunteers who serve as local, district, and national appeal board members who could be activated to help decide the classification status of men seeking exemptions or deferments in the case of a draft. The Selective Service System also has positions for 175 part-time Reserve Forces Officers (RFOs) representing all branches of the Armed Forces. RFO duties include interviewing Selective Service board member candidates, training board members, participating in readiness exercises, supporting the registration public awareness effort, and maintaining space, equipment, and supplies.", "Congress appropriates funds for the SSS through the Financial Services and General Government Appropriations Act. For FY2018, Congress appropriated $22.9 million, the same as the FY2017 appropriation. The budget request for FY2019 was $26.4 million, an increase of $3.5 million over the FY2018 appropriation. Funding decreased by 10% from FY2012 to FY2013, from just under $25 million to $22 million in FY2013. Since FY2013, funding has remained fairly stable in terms of current dollars, but has decreased in terms of inflation-adjusted (real) dollars. In current dollars, funding for the SSS has been about $25 million since 1980, when the requirement to register was reinstated. In FY1977-FY1979, while the SSS was in \"deep standby\" mode, funding for the agency was between $6 million and $8 million.\nAbout two-thirds of the agency's annual budget goes to personnel compensation and benefits, 11% of which is Reserve Force Officer training pay and allowances. Government and commercial agency contracts and services accounted for 11% ($42.4 million) of total spending. The SSS allocated approximately $1.4 million to postage and express courier services in FY2017, and spent nearly $2 million on software and data processing systems (see Figure 2 ).", "The agency maintains data for registrants until their 85 th birthday at the Data Management Center in Palatine, IL; the center is authorized 48 full-time employees. The purpose of retaining the data for this length of time is to enable SSS to verify eligibility for registered males who apply for certain government employment or benefits. The number of records in the database is approximately 78 million. According to the SSS, this database grows by 2 million to 2.5 million records per year. The information held in this database includes registrants' full name, date of birth, street address, city, state, zip code, and Social Security number. The SSS also maintains a \"Suspected Violator Inventory System,\" which includes data on nonregistrants that the SSS has received through data-sharing agreements. The SSS uses information on this list to reach out to individuals and remind them of their obligation to register.\nMost of the registration and data-sharing is automated. The SSS both provides data to and receives data from other government agencies, including the Department of Labor, the Department of Education, the Department of State, the United States Citizenship and Immigration Services, the Department of Defense, and the Alaska Permanent Fund. Information received from these agencies by the SSS is matched with existing data and if no record exists, one is created.\nOn a monthly basis, SSS provides the Joint Advertising and Market Research Studies (JAMRS, part of DOD) new registrant names, addresses, and date of birth, and a file of individuals identified as deceased. These data are kept for three years by JAMRS and are used by DOD for recruiting purposes. Yearly, SSS provides the names, addresses, and Social Security numbers of individuals ages 18 through 25 to the U.S. Census Bureau for its intercensus estimate program. The Census Bureau keeps these data for two years. Annually, the SSS also sends the Department of Justice a list of individuals who are required to register, but have failed to do so.\nMen are required to update the Selective Service within 10 days when their address changes until January 1 of the year that they turn 26 years old. Those who register at 18 years old are likely to move at least once, if not a number of times, before their 26 th birthday. For example, a college-bound 18-year-old may move away from their parents' home to university housing, then into an off-campus apartment, and into a new home after graduation. The SSS updates addresses in its database using information from other agencies and self-reported information from individuals.", "Although Congress has amended the MSSA a number of times, some of its main tenets—the preservation of a peacetime selective service agency and a registration requirement—have remained much the same since the mid-20 th century. The future of the Selective Service System is a concern for many in Congress. The registration requirements and associated penalties affect young men in every congressional district. At the same time, some see the preservation of the SSS as an important component of national security and emergency preparedness. Others have suggested that the MSSA is no longer necessary and should be repealed. Still others have suggested amendments to the MSSA to address issues of equity, efficiency, and cost.", "Some form of selective service legislation has been in effect almost continuously since 1940. Repealing the MSSA and associated statute would dismantle the SSS agency infrastructure and would remove the registration requirement with its associated penalties. Efforts to repeal the Selective Service Act have been repeatedly introduced in Congress, and repeal is popular among many advocacy groups and defense scholars.\nThose who would like to disband the SSS question whether the agency is still necessary in the modern-day context. A return to the draft is unpopular with a majority of the American public. Some argue that there is a low likelihood of the draft ever being reinstated. Even in the face of nearly a decade of conflict in Iraq and Afghanistan, DOD has maintained its ability to recruit and retain a professional volunteer force without resorting to conscription. The nature of warfare has shifted in such a way that the United States would not likely need to mobilize manpower at the rates seen in the 20 th century. Even if such high mobilization rates were needed, some question whether the Armed Forces would have the capacity and infrastructure to rapidly absorb the large numbers of untrained personnel that a draft would provide. DOD has reported that the Military Entry Processing Command (MEPCOM) can process approximately 18,000 registrants per day. These new accessions would then be sent to training centers/duty stations as identified by the Office of the Secretary of Defense.\nSome analysts have suggested that a draft, if implemented, would be an inefficient use of labor, as it would \"indiscriminately compel employment in the military regardless of an individual's skills where that individual could have much greater value to our society elsewhere.\" In addition, when conscription has been used, it has generally provided a lower-quality force in comparison with today's all-volunteer force. Others, including civil rights advocacy groups, contend that the registration requirement and conscription are an invasion of civil liberty.\nThose who advocate for suspension of all SSS activity contend that the SSS infrastructure and registrant databases could be reconstructed in due time if the need arose. In the short term, additional manpower needs might be augmented by Delayed Entry Program (DEP) participants, nonprior reservists awaiting training, and other inactive reserve manpower. A reauthorization of the draft might also encourage volunteerism, as choosing a branch of service and occupational specialty might be more preferable to the possibility of being drafted into a less favorable branch and occupation.\nProponents of maintaining the SSS and registration requirement often cite a few key arguments. First, at approximately $23 million per year, it provides a relatively low-cost \"insurance policy\" against potential future threats that may require national mobilization beyond what could be supported by the all-volunteer force. Second, adversaries of the United States could see the disbanding of the SSS as a potential weakness, thus emboldening existing or potential enemies. Third, the registration requirement is important to maintain connections between the all-volunteer force and civil society by creating an awareness of the military and duty to serve among the nation's youth. Finally, maintaining an all-volunteer force is costly, particularly in times of conflict. Sustaining the AVF over the past decade has stretched DOD's resources. If the United States were to become involved in a sustained large-scale conflict, the compensation and benefits required to incentivize voluntary military participation by a larger segment of the population could be substantial.", "Some of the options for amending the MSSA include the following:\nRepealing the registration requirement. Dissolving the SSS agency and transferring certain functions to an existing federal agency. Removing or modifying penalties for failure to register. Requiring women to register. Enhancing SSS data collection.", "Congress could repeal the registration requirement and terminate the existing penalties for failing to register. Removing the registration requirement and the need to verify registration would reduce the activities of the SSS. In this instance, the agency's functions would likely be limited to historical record preservation and maintenance of standby plans and volunteer rolls.\nSome have proposed that if registrant data were needed for a future draft, they might be acquired through existing federal or state government databases. The current SSS database relies heavily on information collected by other federal and state entities for initial inputs, updates, and verification of registrants' address information. However, this data sharing is enabled by existing statutes and agency agreements that if repealed or allowed to lapse might require time and effort to reconstitute. The use of existing government or even commercial databases to develop a list of draft-eligible youth also raises concerns about a fair and equitable draft, as these lists might also exclude some draft-eligible individuals.\nIn the case of a national emergency, Congress could enact a new statutory requirement for draft registration, and reconstitute the SSS (if it had been dissolved). A 1997 GAO study found that the time needed to raise the necessary infrastructure might be insufficient to respond to urgent DOD requirements. There may be other challenges in enforcing a new registration requirement in a time of national need. Currently, compliance rates for registration are relatively high, but the probability of implementing a draft is considered to be very low. If the government tried to reintroduce a registration requirement during a time when conscription were more likely, compliance rates could fall and it might be more difficult to build up a database of eligible individuals. On the other hand, some point to the SSS experience in 1980, when the the SSS reported 95% compliance rates within four months of reinstatement of the registration requirement.", "Current law states, \"the Selective Service System should remain administratively independent of any other agency, including the Department of Defense.\" Nevertheless, Congress could amend the MSSA to transfer its functions to an existing federal agency. Such a transfer might take into account not only the SSS's value as a unique data center, but also the staff who comprise the agency at many levels, who would be needed in case of an actual draft.\nAs described previously, this staffing includes regional directors and a pool of civilian volunteers that would serve on local draft boards. This responsibility for maintaining volunteer rolls and training could also be transferred to an existing federal agency, potentially the Department of Defense, and the capability could be augmented with military reserve manpower (as is currently done). The statutory independence of the SSS with respect to DOD and the presence of local civilian boards have historically been viewed as important to the public's perception of a fair and equitable draft. To address this concern, some have proposed that administrative responsibilities could be transferred to DOD while the draft is inactive with the option of transferring all functions back to an independent agency if draft authority were reinstated.\nAnother option might be to transfer the agency and/or its functions to the Department of Homeland Security. There are potential synergies between the SSS and other DHS agencies that would play an active role in a time of national emergency. At least one agency under DHS (the U.S. Citizenship and Immigration Service) already has a role in data sharing with the SSS.\nSome suggest that suspension or transfer of SSS operations could deliver some federal budget savings. In 2012, as mandated by the National Defense Authorization Act for Fiscal Year 2012, the GAO compared the potential costs and savings of operating in a \"deep standby\" mode versus active registration. According to the report, the SSS estimated that operating in a deep standby mode would provide approximately $5 million in savings in the first year with recurring savings of $6.6 million annually. This would be a reduction of about 25% of the current budget. The transfer of SSS functions to an existing agency might have some initial implementation costs but could potentially reduce some of the overhead costs of maintaining an independent agency.", "Finally, some argue that Congress should amend the MSSA and associated statute to remove penalties for failing to register, particularly since only men are subject to the requirements. They argue that ineligibility for federal benefits is most harmful to those with fewer financial resources who also might be least aware of their obligation to register. Nevertheless, weakening or removing penalties could affect registration compliance rates.\nAlternatively, Congress could amend the penalties to limit the amount of time that one is ineligible for federal benefits following failure to register. For example, under current law, the statute of limitations for criminal penalties is five years following the individual's 26 th birthday or fraudulent registration. The MSSA could be amended to sunset ineligibility after a certain time period, or to reinstate eligibility for federal benefits through some other form of public service.", "Women in the United States have never been required to register for the draft; however, recent DOD policy changes that have opened all military occupational specialties (MOSs) including ground combat positions to women have called into question the Selective Service exemption for women. Although the Trump Administration has not announced a formal position, in 2016, several senior DOD leaders made personal statements in favor of registering women for the draft. Some military leaders have argued that in the case of national need, it would be unwise to exclude 50% of the population from draft eligibility.\nIn a February 2019 decision, the U.S. District Court for the Southern District of Texas granted a summary judgement declaring the male-only registration requirement was unconstitutional; however, the court did not grant injunctive relief blocking the government's current male-only registration policy because the plaintiffs' summary judgment motion seeking declaratory relief failed to request it. As such, the male-only registration policy remains in place. The plaintiffs in this case, the National Coalition for Men and two men of registration age, argue that requiring only men to register constitutes sex discrimination in violation of the Fifth Amendment's equal protection clause.\nSome women have also pushed for female registration, arguing that women cannot be equal in society as long as they are barred from full participation in all levels of the national security system and thus should be allowed to register for Selective Service. Others believe that equal access to combat jobs should oblige women to take equal responsibility for registering for Selective Service and potential assignments to combat roles should the draft be reinstated. Still others suggest that women should be obliged to enroll in the selective service system but should not be forced into combat roles in the occasion of a draft. Any exemptions for women would raise fairness concerns for men, who would not have the same opportunities to opt out of combat assignments. Making the choice not to serve in combat available to both men and women might make it difficult for the services to function, especially in the event of war or national emergency.\nThose who are opposed to a requirement for women to register suggest that it is not fair and equitable for women to be placed in the same roles as men. They argue that the average woman does not have the same physical capabilities as the average man and thus would have higher rates of injury and a lower probability of survival if forced to serve in direct ground combat roles. Some have countered that the physical standards for assignment to these roles are unlikely to be lowered on the instance of draft mobilization, ensuring that the cadre of men and women would be assigned to those roles at rates proportional to their ability to meet those standards. This approach would prevent both women and men who were unable to meet physical standards for direct ground combat occupations from those assignments. Moreover, opponents of drafting women point out that it would be militarily inefficient to draft thousands of women when only a small percentage would be physically qualified to serve in direct ground combat roles. At the same time, future wars may have requirements for other skills in noncombat fields where the percentage of individuals qualified would not be as variable by gender.\nA requirement for young women to register may have some benefits for DOD in terms of military recruiting. The address data collected by the Selective Service System and shared with DOD currently enhances recruiters' ability to identify potential enlistees and distribute marketing materials to registered young men by mail. DOD estimates that marketing materials included with SSS registration confirmation mailing—or joint leads—generate between 75,000-80,000 male recruiting prospects annually. DOD, through JAMRS, purchases similar databases for information about enlistment-eligible women. Although most registrations are now completed automatically through other interactions with the federal or state government, some contend that the very act of registering would make young women more aware of their citizenship duties, thus broadening the percentage of qualified women considering a career in the military.\nFrom certain theological or moral perspectives, some say that it is wrong for women to serve in combat roles, and since a draft would most likely be used to fill positions for combat operations, women should be exempt from registering. These arguments resonate with a segment of the U.S. population, and polling data suggest that if women were required to register for the draft, it would significantly increase public opposition to reinstating the draft and could affect public support for engaging in any conflict that has the potential to escalate beyond the capability of the all-volunteer force.\nIncluding women in the registration process may require some additional budget resources for the SSS due to increased administrative processing and public awareness needs. Currently there are about 11 million women ages 18-26 who would be eligible to register under the statutory age requirement. In January of 2016, the SSS reported to the White House Office of Management and Budget that it would need about $8.5 million more for the first year of registering women and slightly less in the following several years.", "As previously discussed, some have suggested that the future threats that the United States may face may require rapid mobilization of those with specialized skills and experience (e.g., engineers, coders, truck drivers). Congress could expand the current SSS registration system to collect data on degrees, licenses, or other certifications. It could also be extended to include these types of experts outside of the 18- to 26-year-old age range.\nFor example, Norway operates a peacetime conscription registration system in this fashion. All Norwegian citizens in a conscription cohort (men and women, age 17) are required to fill out an online questionnaire that helps to determine their relevant skills, eligibility for, and interest in military service. Based on the results of this questionnaire, the armed forces calls in about 22,000 individuals to \"Session Part 2\" to determine fitness for service through physical and psychological tests. Selection boards choose individuals for a mandatory 12-month service obligation based on the armed forces' needs for various skills.\nDOD has also pointed to the Health Care Professional Delivery System (HCPDS), currently a congressionally mandated standby plan , as a potential model for a registration/draft system by specialty. The HCPDS, if activated, would require registration of all health care workers between the ages of 20 and 45.\nDOD's 2017 report to Congress considered what a \"mobilization by military occupational specialty (MOS)\" might require. The benefit of establishing an enhanced registration system would be to allow rapid acquisition of personnel with necessary expertise through a targeted draft. This type of data collection could also support targeted recruiting. Should a draft ever be reinstated, available information on individual qualifications could also shorten the timeline needed to train personnel in certain specialties and could support more efficient alternative service matching with employers for those who are conscientious objectors. The challenges with pursuing this option for the SSS would be increased administration costs to maintain, update, and enforce reporting for such a database. In addition, some may oppose such a proposal due to privacy or civil liberty concerns.", "" ], "depth": [ 0, 1, 1, 2, 2, 2, 3, 2, 2, 2, 3, 2, 2, 2, 2, 1, 2, 1, 2, 2, 2, 1, 2, 2, 3, 3, 3, 3, 3, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "", "h2_full h3_title", "", "", "", "", "", "", "", "", "", "", "", "h3_full", "h1_full", "h1_full", "h0_title", "h0_full", "h0_full", "h0_full", "h0_title h2_title h1_title h3_title", "h2_full", "h0_title h2_title h1_title h3_title", "h2_full", "h0_full", "h3_full", "h3_full h1_full", "", "" ] }

{ "question": [ "What is the Military Selective Service Act?", "What is the budget of SSA?", "What is the main function of SSS?", "What does this database contain?", "What is the SSS personnel situation?", "What does MSSA require of young males?", "What is the penalty for men who fail to register?", "What is the penalty for immigrants who fail to register?", "What is the registration compliance rate?", "What is the reason for this high rate?", "How does MSSA impact women?", "Is a draft currently authorized?", "What is the public response to draft implementation?", "What is the effect of such resistance?", "What are other responses to the draft?", "What is the pro-SSS position?", "What are some equity concerns about the registration requirements?", "What are concerns about the penalties?", "What have been some proposals for amending MSSA?", "What are the risks of removing penalties?", "How has Congress responded to these issues?" ], "summary": [ "The Military Selective Service Act (MSSA), first enacted as the Selective Service Act of 1948, provides the statutory authority for the federal government to maintain a Selective Service System (SSS) as an independent federal agency responsible for delivering appropriately qualified civilian men for induction into the Armed Forces of the United States as authorized by Congress.", "The annual budget for the agency is just under $23 million.", "One of the SSS's main functions is to maintain a database of registrants in case of a draft.", "The agency stores approximately 78 million records in order to verify registration status and eligibility for certain benefits that require certification of registration for eligibility.", "The SSS has a staff of about 124 full-time employees, complemented by a corps of volunteers and military reservists.", "The MSSA requires most males between the ages of 18 and 26 who are citizens or residents of the United States to register with Selective Service.", "Men who fail to register may be subject to criminal penalties, loss of eligibility for certain federal or state employment opportunities and education benefits, and denial of security clearances.", "Documented or undocumented immigrants who fail to register may not be able to obtain United States citizenship.", "Registration compliance rates were 92% in calendar year 2016.", "While individuals may still register at U.S. post offices, the SSS attributes high compliance rates to a system of automatic electronic registration supported by state legislation and interagency cooperation.", "Women in the United States have never been required to register for the draft.", "The MSSA does not currently authorize the use of a draft for induction into the Armed Forces.", "When the draft has been implemented, it has met some public resistance.", "Such resistance to the draft drives much of the opposition toward maintaining the SSS and the registration requirement.", "Even some who are not opposed to the government's use of conscription in a time of national need are opposed to maintaining the current SSS agency infrastructure. They argue that a stand-alone agency is unnecessary and expensive and that there are a number of alternatives that could more effectively and efficiently enable the country to reestablish conscription, if necessary.", "Others counter that, at the cost of $23 million annually, maintaining the SSS is a relatively inexpensive insurance policy should the draft need to be quickly reinstated. They also argue that maintaining the SSS sends a signal to potential adversaries that the United States is willing to draw on its full national resources for armed conflict if necessary.", "Some are concerned that the registration requirements are inequitable, arguing that it is unfair to men that women can voluntarily serve in all military occupations but are exempt from the registration requirement and the prospect of being drafted.", "In addition, some have raised concerns about the statutory penalties for failing to register and whether these penalties are more likely to be levied on vulnerable groups.", "Some contend that Congress should amend MSSA and associated statute to remove penalties for failing to register.", "Others argue that weakening or removing penalties would cause registration compliance rates to fall to unacceptably low levels.", "In response to these issues, Congress has established a National Commission on Military, National, and Public Service to provide research support and recommendations on the future of the SSS." ], "parent_pair_index": [ -1, 0, 0, 2, 2, -1, 0, 0, 0, 3, -1, -1, 0, 1, 0, 0, -1, 0, 0, 2, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3 ] }

{ "title": [ "Background", "OMB’s Roles and Responsibilities for Overseeing IT Investments, Including Operations and Maintenance", "GAO Has Previously Reported on IT Investments in O&M", "The 10 O&M IT Investments with the Largest Budgets Support Agencies in a Variety of Ways and Represent a Significant Part of Overall Federal IT O&M Funding", "Most of the Largest O&M IT Investments Did Not Undergo Operational Analyses", "Majority of Agencies’ Investments Were Mixed Life Cycle and Use of O&M Funds for Development Activities Was Limited", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, Methodology", "Appendix II: Comments from the Department of Homeland Security", "Appendix III: Comments from the National Aeronautics and Space Administration", "Appendix IV: Comments from the Social Security Administration", "Appendix V: Comments from the Department of Veterans Affairs", "Appendix VI: Comments from the Department of Defense", "Appendix VII: Comments from the Department of Energy", "Appendix VIII: Comments from the Department of the Treasury", "Appendix IX: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The President’s fiscal year 2014 budget request included plans for the federal government to spend over $82 billion on IT. The stated goal of the President’s IT budget request is to support making federal agencies more efficient and effective for the American people; it also states that the strategic use of IT is critical to success in achieving this goal. Of the $82 billion budgeted for IT, the budget provides that 26 key agencies plan to spend the bulk of it, approximately $76 billion. Further, of the $76 billion, over $59 billion is to be spent on O&M investments with the remainder ($17 billion) being budgeted for development of new capabilities. As shown in figure 1, the $59 billion represents a significant majority (i.e., 77 percent) of total budgeted spending for these agencies ($76 billion).\nAlthough O&M spending by these agencies is about 77 percent of total IT spending, the amount spent by each agency varies from a high of 98 percent to a low of 46 percent (as shown in the following table).\nDevelopment spending, which is intended for the inclusion of new capabilities, accounts for approximately 23 percent of the total amount to be spent on IT in fiscal year 2014 by these agencies. However, the investments in development vary greatly, from 54 percent by the Department of Transportation to a low of 2 percent by the National Aeronautics and Space Administration.\nFurther, in addition to including amounts to be spent on IT development and O&M, the budget also further specifies how the total $76 billion budgeted for IT is to be spent on agency IT investments by the following three categories: those solely under development ($6 billion), those involving activities and systems that are in both development and O&M—known as mixed life cycle ($40 billion), and those existing operational systems—commonly referred to by OMB as steady state investments—that are solely in O&M ($30 billion).", "To assist agencies in managing their investments, Congress enacted the Clinger-Cohen Act of 1996, which requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by federal agencies and report to Congress on the net program performance benefits achieved as a Further, the act places responsibility for result of these investments.managing investments with the heads of agencies and establishes chief information officers to advise and assist agency heads in carrying out this responsibility.\nIn carrying out its responsibilities, OMB uses several data collection mechanisms to oversee federal IT spending during the annual budget formulation process. Specifically, OMB requires federal departments and agencies to provide information to it related to their IT investments (called exhibit 53s) and capital asset plans and business cases (called exhibit 300s).\nExhibit 53. The purpose of the exhibit 53 is to identify all IT investments—both major and nonmajor within a federal organization. Information included on agency exhibit 53s is designed, in part, to help OMB better understand what agencies are spending on IT investments. The information also supports cost analyses prescribed by the Clinger-Cohen Act. As part of the annual budget, OMB publishes a report on IT spending for the federal government representing a compilation of exhibit 53 data submitted by agencies.\nAccording to OMB guidance, a major IT investment requires special management attention because of its importance to the mission or function to the government; significant program or policy implications; high executive visibility; high development, operating, or maintenance costs; unusual funding mechanism; or definition as major by the agency’s capital planning and investment control process.\nExhibit 300. The purpose of the exhibit 300 is to provide a business case for each major IT investment and to allow OMB to monitor IT investments once they are funded. Agencies are required to provide information on each major investment’s cost, schedule, and performance.\nIn addition, in June 2009, to further improve the transparency into and oversight of agencies’ IT investments, OMB publicly deployed a website, known as the Federal IT Dashboard (Dashboard), which replaced its Management Watch List and High-Risk List. As part of this effort, OMB issued guidance directing federal agencies to report, via the Dashboard, the performance of their IT investments. Currently, the Dashboard publicly displays information on the cost, schedule, and performance of major federal IT investments at key federal agencies. In addition, the Dashboard allows users to download exhibit 53 data, which include information on both major and nonmajor investments. According to OMB, these data are intended to provide a near real-time perspective of the performance of these investments, as well as a historical perspective. Further, the public display of these data is intended to allow OMB, other oversight bodies, and the general public to hold the government agencies accountable for results and progress. Since the Dashboard has been implemented, we have reported and made recommendations to improve the data accuracy and reliability. In 2010, 2011, and 2012, we reported on the progress of the Dashboard and made recommendations to further improve how it rates investments relative to current performance. OMB concurred with our recommendations and has actions planned and underway to address them.\nFurther, OMB has developed guidance that calls for agencies to develop an OA policy for examining the ongoing performance of existing legacy IT investments to measure, among other things, that the investment is continuing to meet business and customer needs and is contributing to meeting the agency’s strategic goals.provide for an annual OA of each investment that addresses the following: cost, schedule, customer satisfaction, strategic and business results, financial goals, and innovation. To address these areas, the guidance specifies the following 17 key factors that are to be addressed: This guidance calls for the policy to assessment of current costs against life-cycle costs; a structured schedule assessment (i.e., measuring the performance of the investment against its established schedule); a structured assessment of performance goals (i.e., measuring the performance of the investment against established goals); identification of whether the investment supports customer processes as designed and is delivering goods and services it was designed to deliver; a measure of the effect the investment has on the performing a measure of how well the investment contributes to achieving the organization’s business needs and strategic goals; a comparison of current performance with a pre-established cost areas for innovation in the areas of customer satisfaction, strategic and business results, and financial performance; indication if the agency revisited alternative methods for achieving the same mission needs and strategic goals; consideration of issues, such as greater utilization of technology or consolidation of investments to better meet organizational goals; an ongoing review of the status of the risks identified in the investment’s planning and acquisition phases; identification of whether there is a need to redesign, modify, or terminate the investment; an analysis on the need for improved methodology (i.e., better ways for the investment to meet cost and performance goals); lessons learned; cost or schedule variances; recommendations to redesign or modify an asset in advance of potential problems; and overlap with other investments.\nWith regard to overseeing the agencies’ development of policies and annual performance, OMB officials responsible for governmentwide OA policy stated that they expect agencies to perform all the steps specified in the guidance and to be prepared to show documentation as evidence of compliance with the guidance.", "In October 2012 we reported on five agencies’ use of OAs (during fiscal year 2011) and how they varied significantly. Specifically, of the five agencies, we found that three—namely, DOD, Treasury, and VA—did not perform analyses on their 23 major steady state investments with annual budgets totaling $2.1 billion. The other two agencies—DHS and HHS— performed analyses but did not do so for all investments. For example, DHS analyzed 16 of its 44 steady state investments, meaning 28 investments with annual budgets totaling $1 billion were not analyzed; HHS analyzed 7 of its 8 steady state investments, thus omitting a single investment totaling $77 million from being assessed. We also found that of those OAs performed by these two agencies, none fully addressed all the key factors. Specifically, our analysis showed that only about half of the key factors were addressed in these assessments.\nConsequently, we recommended, among other things, that the agencies conduct annual OAs and in doing, ensure they are performed for all investments and that all factors are fully assessed. To ensure this is done and to provide transparency into the results of these analyses, we also recommended that OMB revise its guidance to include directing agencies to post the results on the Dashboard. OMB and the five agencies agreed with our recommendations and have efforts planned and underway to address them. In particular, OMB issued guidance (dated August 2012) to the agencies directing them to report OA results along with their fiscal year 2014 budget submission documentation (e.g., exhibit 300) to OMB. According to OMB officials, they are currently establishing a process on how agencies are to provide the information to OMB which they plan to have in place over the next 6 months. As part of this, OMB is defining a process for what they plan to do with the information once they receive it.", "The 10 federal IT O&M investments with the largest budgets, identified during our review, support agencies in a variety of ways such as providing worldwide telecommunications infrastructure and information transport for DOD operations; enabling HHS to conduct research, award grants, and disseminate biomedical research and health information to the public and National Institutes of Health stakeholders; and providing SSA the capability to maintain demographic, wage, and benefit information on all American citizens. Including ensuring the availability, changeability, stability, and security of SSA’s IT operations for the entire agency.\nThese investments are operated by eight agencies, such as the Department of Energy (DOE), the National Aeronautics and Space Administration (NASA), and Social Security Administration (SSA). In total, the investments accounted for about $7.9 billion in O&M spending for fiscal year 2012, which was approximately 14 percent of all such spending for federal IT O&M. The following table identifies the 10 investments and describes the agency responsible for each investment, the amount budgeted for O&M and development for fiscal year 2012, investment type, and how each investment supports the organization’s mission.", "Although required to do so, seven of the eight agencies did not conduct OAs on their largest O&M investments. Specifically, of the 10 O&M IT investments (with the largest budgets) we reviewed, only one agency— DHS—conducted an analysis on its investment. In doing so, the department addressed most of the required OMB factors. However, the other seven agencies—DOD, DOE, HHS, Treasury, VA, NASA, and SSA—did not conduct OAs on their O&M investments, which have combined annual O&M budgets of $7.4 billion.\nThe following table lists the 10 investments and whether an analysis was completed for fiscal year 2012. Further, it provides the total O&M amount for the investment that had an OA and for the investments that did not have one—$529 million and $7.4 billion, respectively.\nWith regard to the OA DHS performed on its investment (the Customs and Border Protection Infrastructure), the department addressed 14 of the 17 OMB factors. For example, in addressing the factor on assessing performance goals, DHS made efforts to consolidate software licenses and maintenance in order to eliminate redundancy and reduce costs associated with software licenses and maintenance. Although DHS addressed these factors, it excluded 3 factors. Specifically, the department did not (1) assess current costs against life-cycle costs, (2) perform a structured schedule assessment, and (3) compare current performance against cost baseline and estimates developed when the investment was being planned. These factors are important because, among other things, they provide information to agency decision makers on whether an investment’s actual annual O&M costs are as they were planned to be and whether there is a need to examine more cost effective approaches to meeting agency mission objectives. Table 5 shows our analysis of DHS’s assessment of its Customs and Border Protection Infrastructure investment.\nWith regard to why DHS’s analyses did not address all OMB factors, officials from the DHS Office of the Chief Information Officer (who are responsible for overseeing the performance of OAs departmentwide) attributed this to the department still being in the process of updating their Management Directive 102-01 and its related guidance, which will provide additional instructions for completing OAs. As part of this update, department officials told us they plan to provide additional guidance on conducting OAs for programs once they have achieved full operational capability. The department expects the guidance to be completed in calendar year 2014. Further, according to DHS, once completed, this guidance will complement existing program review processes—referred to by DHS as program health assessments—that requires all major IT investments, in support or mixed lifecycle phases, to complete an OA every 12 months.\nThe other seven agencies attributed not performing OAs on these investments to several factors, including relying on other management and performance reviews—such as those used as part of developing their annual exhibit 300 submissions to OMB—although OMB has stated that these reviews are not to be a substitute for conducting annual analyses. The specific reasons cited by each agency are as follows:\nDOD: Officials from DOD’s Defense Information Systems Agency stated that they did not conduct an OA for the Defense Information Systems Network due to the fact that the investment undergoes constant oversight through weekly meetings to review issues such as the project status and accomplishments. Further, they said that the program manager exercises cost, schedule, and performance oversight using earned value management techniques. In addition, they stated that monthly reviews of actual versus planned spending are collected to flag any discrepancies from expected cost and schedule objectives. While these reviews are important steps to monitoring performance management, OMB states such ongoing efforts to manage investment performance are not a substitute for conducting an annual OA. According to the OMB guidance, OAs are to be conducted for all existing IT investments to ensure that, among other things, an investment is continuing to meet business and customer needs and is contributing to meeting the agency’s strategic goals.\nWith regard to the Next Generation Enterprise Network, officials from the Navy who manage and oversee this investment stated an OA was not performed due to it going through a transition from a mature fielded system to a new service delivery model, which will become operational in 2014. Nonetheless, OMB guidance calls for agencies to also conduct annual analyses on all existing IT investments as part of ensuring that such investments continue to deliver value and support mission needs.\nDOE: Officials from the Office of the Chief Information Officer stated that an OA was not conducted on its Consolidated Infrastructure, Office Automation, and Telecommunications Program investment because in the summer of 2012 they began to separate it into smaller, more manageable pieces—referred to by these agency officials as deconsolidation— to better provide insight into the departmentwide infrastructure. In addition, to gain further insight into the infrastructure spending, the DOE Chief Information Officer led an in-depth analysis in collaboration with senior IT executives, which included a commodity IT TechStat review in the fall of 2011, and a commodity IT PortfolioStat review in the fall of 2012. While these latter reviews are helpful in monitoring performance, our analysis shows that they do not fully address all 17 OMB factors. Specifically, the reviews do not address, among other things, factors in the areas of customer satisfaction, strategic and business results, and financial performance. Addressing these factors is important because it provides information to agency decision makers on whether the investment supports customer processes and is delivering the goods and services it was designed to deliver.\nHHS: According to officials from the department’s National Institutes of Health, the National Institutes of Health IT Infrastructure investment, which had an annual budget of $371 million for fiscal year 2012, did not undergo an OA because this investment is an aggregation of all the components’ infrastructure and not a particular system or set of systems suited for this kind of macro analysis. In addition, they noted that National Institutes of Health does monitor the operational performance of its IT infrastructure and conducts a more strategic analysis of services within its IT infrastructure to evaluate the operational effectiveness at a strategic level. While these types of performance monitoring efforts are important, OMB guidance nonetheless calls for agencies to also conduct annual analyses on all existing IT investments as part of ensuring that such investments continue to deliver value and support mission needs.\nTreasury: Officials from the department’s IT Capital Planning and Investment Control branch (within the office of Treasury’s Chief Information Officer) noted that its Internal Revenue Service Main Frames and Servers Services and Support investment, which had a budget of $482 million for fiscal year 2012, was deconsolidated in fiscal year 2011 to allow for greater visibility into the infrastructure and that it is currently undergoing an OA but were not able to provide documentation at the time of our work.\nVA: Officials from VA’s Office of Information and Technology said an OA was not conducted on its Medical IT Support or Enterprise IT Support investments because performance is currently being reported monthly via the Federal IT Dashboard and internally through monthly performance reviews. The officials added that the department plans to develop a policy and begin conducting OAs on investments. However, VA has not yet determined when these analyses will be completed.\nNASA: Officials from NASA’s Office of the Chief Information Officer stated while they did not conduct a formal OA on the NASA IT Infrastructure investment, they did review the performance of the investment using monthly performance status reviews and bimonthly service delivery transition status updates. The officials noted that these reviews address financial performance, schedule, transformation initiatives, risks, customer satisfaction, performance metrics, and business results. According to officials, the investment underwent a service delivery transition status update and a performance status review in May 2012. While these NASA reviews are essential IT management tools, they do not incorporate all 17 OMB factors. For example, the reviews do not address, among other things, innovation and whether the investment overlapped with other systems. Fully addressing the OMB factors is essential to ensuring investments continue to deliver value and do not unnecessarily duplicate or overlap with other investments.\nSSA: According to officials from SSA’s Office of the Chief Information Officer, SSA’s Infrastructure Data Center investment did not undergo an analysis because it has significant development content and therefore an earned value analysis was conducted, which is called for by SSA guidance for mixed life-cycle investments. Officials stated they generally perform either an earned value analysis or OA, as applicable to the investment. While earned value management analyses are important to evaluating investment performance, OMB guidance nonetheless calls for agencies to also conduct annual OAs on all existing IT investments as part of ensuring that such investments continue to deliver value and support mission needs.\nUntil the agencies address these shortcomings and ensure all their O&M investments are fully assessed, there is increased risk that these agencies will not know whether these multibillion dollar investments fully meet intended objectives, including whether there are more efficient ways to deliver their intended purpose, therefore increasing the potential for waste and duplication.", "For the eight selected agencies, the majority of their 401 major IT investments—totaling $29 billion— were in the mixed life-cycle phase in both spending and number of investments. Specifically, of the $29 billion, our analysis, as shown in figure 2, found that mixed life-cycle investments accounted for approximately $18 billion, or 61 percent; steady state investments accounted for approximately $8 billion, or 27 percent; and development investments accounted for approximately $3 billion, or 12 percent.\nWith regard to the number of investments by phase, our analysis, as shown in figure 3, found that of the total 401 investments\n193, or 48 percent, were in the mixed life-cycle phase,\n139, or 35 percent, were in the steady state phase, and\n69 or 17 percent, were in the development phase.\nOn an individual agency basis, table 6 provides the total amount each agency reportedly spent on IT. It also shows of how each agency allocates this total by development, mixed life cycle, or steady state investments. Further for the mixed investments, it shows the amounts for O&M and development.\nFurther, the following table provides for each of the eight agencies, their total number of investments and of that total, the number of investments in development, mixed life cycle, and steady state.\nThe implications of the above analyses—especially the results in table 6 that show mixed investments having significant amounts of funding for both development and O&M activities—are noteworthy, particularly as it relates to the oversight of such investments. More specifically, overseeing these investments will involve a set of IT management capabilities for those portions of the investment that are operational and a different set of IT management capabilities for those portions that are still under development. In the case of those portions that are operational, this will include agencies having the capability to perform thorough OAs, the importance of which is discussed earlier in this report.\nFor those portions still under development, OMB guidance and our best practices research and experience at federal agencies show such effective oversight will involve agencies having structures and processes—commonly referred to as IT governance and program management disciplines—that include instituting an investment review board to define and establish the management structure and processes for selecting, controlling, and evaluating IT investments; ensuring that a well-defined and disciplined process is used to select new IT proposals; and overseeing the progress of IT investments—using predefined criteria and checkpoints—in meeting cost, schedule, risk, and benefit expectations and to take corrective action when these expectations are not being met.\nHaving these disciplines are important because they help agencies, among other things, ensure such investments are supporting strategic mission needs and meeting cost, schedule, and performance expectations.\nHowever, our experience at federal agencies has shown that agencies have not yet fully established effective governance and program management capabilities essential to managing IT investments. For example, we reported in April 2011 that many agencies did not have the mechanisms in place for investment review boards to effectively control their investments. More specifically, we reported that while these agencies largely had established IT investment management boards, these boards did not have key policies and procedures in place for ensuring that projects are meeting cost, schedule, and performance expectations.\nIn addition, our experience at federal agencies, along with the results from this audit, has found that agencies do not consistently conduct OAs. Specifically, as noted in the background, we reported in 2012 on five agencies’ use of them and how they varied significantly. Of the five agencies, we found that three—namely, DOD, Treasury, and VA—did not perform analyses on 23 major steady state investments with annual budgets totaling $2.1 billion. The other two agencies—DHS and HHS— performed them but did not do so for all investments. Accordingly, we have made recommendations to these agencies to improve their use of OAs and fully implement effective governance and program management capabilities. They have in large part agreed to our recommendations and have efforts underway and planned to implement them.\nGAO-13-87. reprogram IT O&M funds to be used on development activities and we identified no evidence to the contrary; two agencies—Treasury and VA— reported they did so in two instances. With regard to Treasury, the department—on its CADE 2 investment which has a total O&M budget of $40 million—reallocated a total of $10,000 to fund development activities planned for the investment. According to Treasury documentation, the cost of the investment’s operations and maintenance came in under budget by $10,000 so the department reallocated the funds to be used on new CADE 2 development efforts. Treasury reported this reallocation was discussed and approved by the Internal Revenue Service’s investment review board (the Internal Revenue Service is responsible for overseeing CADE 2) during its monthly executive steering meetings held during fiscal year 2012.\nWith regard to VA, it reprogrammed a total of $13.3 million from O&M to development on investments within an investment category which VA referred to as a portfolio. Specifically, during fiscal year 2012, the department reprogrammed $13.3 million from an O&M investment within its Medical Portfolio to investments under development within the portfolio requiring additional funding. This reprogramming of funds was approved by the Secretary of Veterans Affairs in June 2012.", "The 10 largest federal O&M IT investments represent a significant part of the federal government’s multibillion dollar commitment to operating and maintaining its IT investments. Although OMB has established that agencies are to use OAs to evaluate the performance of such investments, their use by the agencies on these investments was very limited. DHS was the only agency to perform such an assessment and in doing so largely addressed the required OMB factors. While Treasury and VA had planned to perform analyses, they had not done so. Further, DOD, DOE, HHS, NASA, and SSA had not intended to perform these analyses on their large O&M investments. This limited use of OAs is due in part to a number of factors, including agencies relying on other types of performance oversight reviews that can be helpful but are not intended to be a substitute for these assessments. Until these agencies address these shortcomings and ensure all their large O&M investments are fully assessed, there is increased risk that these agencies will not know whether these multibillion dollar investments fully meet intended objectives, including whether there are more efficient ways to deliver their intended purpose.", "To ensure that the largest IT O&M investments are being adequately analyzed, we recommend that the\nSecretary of Defense direct appropriate officials to perform OAs on the two investments identified in this report, including ensuring the analyses include all OMB factors;\nSecretary of Energy direct appropriate officials to perform an OA on the investment identified in this report, including ensuring the analysis includes all OMB factors;\nSecretary of Health and Human Services direct appropriate officials to perform an OA on the investment identified in this report, including ensuring the analysis includes all OMB factors;\nSecretary of Treasury direct appropriate officials to perform an OA on the investment identified in this report, including ensuring the analysis include all OMB factors;\nSecretary of Veterans Affairs direct appropriate officials to perform OAs on the two investments identified in this report, including ensuring the analyses include all OMB factors;\nNASA Administrator direct appropriate officials to perform an OA on the investment identified in this report, including ensuring the analysis includes all OMB factors; and\nCommissioner of Social Security direct appropriate officials to perform an OA on the investment identified in this report, including ensuring the analysis includes all OMB factors.\nIn addition, we recommend that the Secretary of Homeland Security direct appropriate officials to ensure the department’s OA for the Customs and Border Protection Infrastructure is complete and assesses missing OMB factors identified in this report.", "In commenting on a draft of this report, four agencies—DHS, NASA, SSA, and VA—agreed with our recommendations; two agencies—DOD and DOE—partially agreed; and two agencies—HHS and Treasury—had no comments. The specific comments from the four agencies that agreed are as follows:\nDHS in its written comments, which are reprinted in appendix II, stated that it concurred with our findings and recommendation. It also commented that DHS’s Office of the Chief Information Officer and the Office of Information Technology within Customs and Border Protection (the DHS component agency responsible for the Customs and Border Protection Infrastructure investment) are to work closely to ensure future OAs conducted on the investment fully address the OMB assessment factors.\nNASA, in its written comments—which are reprinted in appendix III—stated it concurred with our recommendation. NASA also stated that it planned to conduct an OA on its NASA IT Infrastructure investment in April 2014 that is to include all OMB factors.\nIn its written comments, SSA stated it agreed with our recommendation. It also stated that since 2008, SSA has had a process to perform OAs on investments that were solely in O&M and that it recently expanded the process to include mixed life cycle IT investments that have significant systems in O&M. SSA further commented that it was in the process of performing OAs on the SSA mixed life cycle investment identified in our report and other similar agency investments, with the goal of completing these analyses by September 30, 2013. SSA’s comments are reprinted in appendix IV.\nVA, in its written comments, stated it agreed with our conclusions and concurred with our recommendation. It also said that it had scheduled OAs for the two investments identified in our report to begin in the second half of fiscal year 2014. VA’s comments are reprinted in appendix V.\nThe specific comments of the two agencies that partially agreed are as follows:\nDOD, in its written comments, stated that it partially concurred with our recommendation. Specifically, DOD said it agreed with our recommendation that its OAs should address all OMB assessment factors and said it is establishing an OA policy in coordination with OMB. The department further agreed with our recommendation that it perform an OA on its Defense Information System Network investment.\nThe department disagreed with our recommendation to perform an OA on its Next Generation Enterprise Network investment stating the investment is no longer in O&M and such investments, per OMB policy, do not require an OA. More specifically, as noted earlier in this report, DOD is transitioning the investment from a mature fielded system to a new service delivery model, which will become operational in 2014, and has moved the entire investment back into planning and acquisition. Nonetheless, consistent with our recommendation and as required by OMB policy, DOD plans to conduct an OA on this investment once the department begins to make it operational in 2014. DOD’s comments are reprinted in appendix VI.\nIn its written comments—which are reprinted in appendix VII— DOE commented that it partially concurred with our recommendation. DOE stated it was not required to perform an OA on the Consolidated Infrastructure, Office Automation, and Telecommunications Program because the investment no longer exists. Specifically, DOE said it decided in 2012 to separate this large investment into smaller, more manageable pieces—referred to by DOE as deconsolidation—to better provide insight into its departmentwide infrastructure, and that since the investment no longer exists, there is no reason to perform an OA on it.\nNonetheless, consistent with our recommendation, DOE added that it will ensure that OAs are conducted on the O&M components of all current major IT investments in DOE’s IT portfolio. DOE stated that it had already performed OAs on applicable operational components that used to comprise the Consolidated Infrastructure, Office Automation, and Telecommunications Program. For example, DOE commented that one of the investments created during deconsolidation— called Consolidated Infrastructure—had already undergone an OA most recently in August 2013.\nWhile DOE reported this progress in its comments to us, it did not provide us with documentation to support that this OA had been performed and whether it addressed all the OMB assessment factors. Consequently, we are revising our recommendation to DOE that it ensure OAs are performed on the applicable operational components that used to comprise the Consolidated Infrastructure, Office Automation, and Telecommunications Program, including the newly created Consolidated Infrastructure investment.\nWith regard to HHS and Treasury,\nHHS, in comments provided via e-mail from its GAO Intake Coordinator within the Office of the Assistant Secretary for Legislation, stated that it did not have any general comments on this report, and\nTreasury in its written response said it had no comments on our report; the department’s comments are reprinted in appendix VIII.\nDHS and HHS also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to interested congressional committees; the Secretaries of the Departments of Defense, Energy, Health and Human Services, Homeland Security, Treasury, and Veterans Affairs; the Administrator of the National Aeronautics and Space Administration; and the Commissioner of the Social Security Administration. This report will also be available at no charge on our website at http://www.gao.gov.\nIf you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-9286 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IX.", "Our objectives were to (1) identify the federal IT O&M investments with the largest budgets, including their responsible agencies and how each investment supports its agency’s mission; (2) determine the extent to which these investments have undergone OAs; and (3) assess whether the responsible agency’s major IT investments are in development, mixed life cycle, or steady state, and the extent to which funding for investments in O&M have been used to finance investments in development.\nTo identify those federal IT O&M investments with the largest budgets, we used data reported to the Office of Management and Budget (OMB) as part of the budget process, and focused on the 10 largest reported budgets in O&M and the responsible eight agencies (the Departments of Defense, Energy, Homeland Security, Health and Human Services, the Treasury, and Veteran Affairs; and the National Aeronautics and Space Administration and Social Security Administration) that operate these investments. In addition, to determine how these 10 investments support their agencies’ missions, we reviewed OMB and agency documentation (e.g., exhibit 300s, exhibit 53s) and interviewed agency officials.\nTo determine the extent to which OAs were conducted to manage these investments in accordance with OMB guidance, we analyzed agency documentation and interviewed responsible agency officials to determine whether any operational analyses had been performed on these 10 investments during fiscal year 2012 because it was the last full year for completing OAs. In those cases where an OA had been performed, we compared it against OMB guidance on conducting them, including the 17 factors that are to be addressed as part of such assessments, to identify any variances. Where there were variances, we reviewed agency documentation and interviewed agency officials responsible for the OA to identify the cause of their occurrence. In those instances where an analysis was not performed, we reviewed documentation and interviewed agency officials to identify why it was not done.\nTo assess whether each of the eight agency’s major IT investments are in development, mixed life cycle, or steady state, we analyzed agencies’ reported spending data provided to OMB as part of the budget process to determine what phase the majority of the investments were in and where the majority of funds were invested (i.e., development, mixed, or steady state). To assess the reliability of the data we analyzed, we corroborated them by interviewing investment and other agency officials to determine whether the OMB information we used was consistent with that reported by the agencies; based on this assessment, we determined the data were reliable for the purposes of this report. Further, to assess the extent to which these and other agency IT O&M investments involve development activities, we analyzed agency data and evaluated whether the eight agencies were using their O&M funds for development activities (i.e., through the reprogramming or reallocation of funds). Specifically, we compared what agencies planned to spend on development and O&M with what was reported to have been spent to identify any variances that indicated O&M funds were reprogrammed and used for development activities. In addition, we reviewed agencies’ documentation to determine if agencies had any processes in place to manage investments transitioning from development to O&M. Lastly, we reviewed agency documentation and interviewed agency IT budget and investment officials to verify whether any reprogramming occurred, its causes, and the extent of which any reprogramming was subject to management oversight.\nWe conducted this performance audit from December 2012 to October 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "", "", "", "", "", "In addition to the contact name above, individuals making contributions to this report included Gary Mountjoy (Assistant Director), Gerard Aflague, Camille Chaires, Rebecca Eyler, and Lori Martinez." ], "depth": [ 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "h0_full", "h1_full", "", "", "", "h0_full h2_full", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "Which investment underwent an operational analysis?", "What did DHS's OA address?", "What is the reason for not addressing some factors?", "What did the remaining agencies do?", "Why did they not assess their investments?", "What is the risk of not assessing operational investments?", "What are the major IT investments for the agencies in this review?", "How many were mixed investments?", "What is the implication for oversight of these investments?", "What has GAO identified regarding IT investments?", "What was GAO asked to review?", "What were the objectives of the report?", "What else did GAO evaluate?", "How did GAO conduct this report?" ], "summary": [ "Of the 10 investments, only the Department of Homeland Security (DHS) investment underwent an operational analysis (OA)—a key performance evaluation and oversight mechanism required by the Office of Management and Budget (OMB) to ensure O&M investments continue to meet agency needs.", "DHS’s OA addressed most factors that OMB calls for; it did not address three factors (e.g., comparing current cost and schedule against original estimates).", "DHS officials attributed these factors not being addressed to the department still being in the process of implementing its new OA policy.", "The remaining agencies did not assess their investments, which accounted for $7.4 billion in reported O&M spending.", "Agency officials cited several reasons for not doing so, including relying on budget submission and related management reviews that measure performance; however, OMB has noted that these are not a substitute for OAs.", "Until the agencies ensure their operational investments are assessed, there is a risk that they will not know whether these multibillion dollar investments fully meet intended objectives.", "For the eight agencies in this review, the majority of their 401 major IT investments were mixed life cycle (i.e., having activities and systems that are in both development and O&M) with regard to total spending and number of investments.", "Specifically, 193 (48 percent) of the investments were mixed investments, accounting for about $18 billion (61 percent) of planned spending.", "As such, successful oversight of such investments should involve a combination of conducting OAs to address operational portions of an investment and establishing IT governance and program management disciplines to manage those portions under development.", "GAO’s experience at the agencies and this report have identified agency inconsistencies in conducting OAs and establishing the capabilities that are key to effectively managing IT investments; accordingly, GAO has made prior recommendations to strengthen agency efforts in these areas.", "GAO was asked to review IT O&M investments and agency use of OAs.", "The objectives of this report were to among other things (1) identify the federal IT O&M investments with the largest budgets, including their responsible agencies and how each investment supports its agency’s mission; (2) determine the extent to which these investments have undergone OAs; and (3) assess whether the responsible agency’s major IT investments are in development, mixed life cycle, or steady state.", "In addition, GAO evaluated what agencies spent on mixed, development, and O&M investments and whether agencies were using O&M funds for development activities.", "To do so, GAO focused on the 10 IT investments with the largest budgets in O&M and their responsible eight agencies, and assessed whether OAs were conducted on the investments." ], "parent_pair_index": [ -1, 0, 1, -1, 3, 3, -1, 0, 0, 0, -1, 0, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 1, 1, 1, 1 ] }

{ "title": [ "Background", "NNSA and Its M&O Contractors Use Multifaceted Strategies to Recruit, Develop, and Retain Their Workforces", "NNSA Focuses on Attracting Early Career Federal Workforce Hires with Competitive Pay, Flexible Schedules, and Development Opportunities", "M&O Contractors’ Recruitment, Development, and Retention Strategies Vary but Generally Focus on Competitive Compensation Packages", "NNSA Monitors Key Human Capital Metrics to Assess the Effectiveness of Strategies to Maintain Critically Skilled Workforces", "NNSA Monitors Key Human Capital Metrics for Its Staff", "NNSA Monitors M&O Contractors’ Human Capital Data, but Some Metrics Do Not Have Standardized Definitions", "NNSA and Its M&O Contractors Face Challenges in Recruiting, Retaining, and Developing Their Workforces", "NNSA and Its M&O Contractor Work Environments, Site Locations, and High Costs of Living Pose Recruiting Challenges", "NNSA and Its M&O Contractors Face Shortages of Qualified Candidates, an Aging Workforce, and Variable Funding", "NNSA and Its M&O Contractors Are Addressing Their Current Human Capital Challenges, Where Possible", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the National Nuclear Security Administration", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "To ensure the safety, security, and reliability of the nation’s nuclear weapons stockpile, NNSA relies on contractors who manage and operate government-owned laboratories, production plants, and a test site. NNSA’s eight enterprise sites each perform a different function, all collectively working toward fulfilling NNSA’s nuclear weapons-related mission. Figure 1 shows the locations of the sites and describes their functions.\nTo provide support and oversight, NNSA locates between about 30 and 110 NNSA staff in a site office at each facility, and also draws on the resources of NNSA staff in headquarters and the Albuquerque complex. According to NNSA officials, this support and oversight requires that some NNSA staff have critical skills comparable to the contractors they support and oversee. For example, NNSA staff may need technical knowledge and expertise to accept and review deliverables from M&O contracts and, when presented with options, be able to determine how best to proceed to meet contract goals, mission, and objectives. They may also need skills related to the safe operation of sensitive defense nuclear facilities such as expertise in occupational safety and fire safety. For example, according to NNSA officials at the Livermore Site Office, most of the staff in critical skills positions there are focused on ensuring safety at the laboratory’s nuclear facilities.\nMaintaining critical skills within its workforce is not a challenge unique to NNSA. Every 2 years, we provide Congress with an update on GAO’s high-risk program, under which GAO designates certain government operations as high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement, or their need for transformation to address economy, efficiency, or effectiveness challenges. In 2001, GAO designated strategic human capital management across the entire federal government as a high-risk area, in part because critical skill gaps could undermine agencies’ abilities to accomplish their missions. We have also reported in the past that NNSA and its predecessor organizations’ record of inadequate management and oversight of contractors has left the government vulnerable to fraud, waste, abuse, and mismanagement. Contract management at DOE has been on GAO’s high risk list since 1990, the first year our high-risk list was published. Progress has been made, but NNSA and DOE’s Office of Environmental Management remain on our high-risk list.\nAs of 2011, our most recent update of the high-risk list, significant steps had been taken to address some of the federal government’s strategic human capital challenges. Strategic human capital management was designated a high-risk area 10 years earlier governmentwide and remains on the high-risk list because of a need for all federal agencies to address current and emerging critical skills gaps that are or could undermine agencies’ abilities to meet their vital missions. Specifically, across the federal government, we reported that resolving remaining high-risk human capital challenges will require three categories of actions:\nPlanning. Agencies’ workforce plans must define the root causes of skills gaps, identify effective solutions to skills shortages, and provide the steps necessary to implement solutions.\nImplementation. Agencies’ recruitment, hiring, and development strategies must be responsive to changing applicant and workforce needs and expectations and also show the capacity to define and implement corrective measures to narrow skill shortages.\nMeasurement and evaluation. Agencies need to measure the effects of key initiatives to address critical skills gaps, evaluate the performance of those initiatives, and make appropriate adjustments.", "NNSA and its M&O contractors have developed and implemented multifaceted strategies to recruit, develop, and retain both the federal and contractor workforces needed to preserve critical capabilities in the enterprise. NNSA focuses on attracting early career hires with competitive pay and development opportunities, and the agency is reassessing future enterprisewide workforce needs. M&O contractors’ strategies vary from site to site, but each site focuses on maintaining competitive compensation packages.", "NNSA takes various steps to recruit, develop, and retain a federal workforce with the necessary critical skills. NNSA’s recruitment strategies are focused primarily on students and recent graduates in science and engineering programs. NNSA generally relies on two key programs to develop its critically skilled workforce––one that identifies needs and another that identifies the qualifications necessary to meet them. Its retention efforts focus on competitive pay, flexible schedules, and development opportunities. NNSA is also undertaking a comprehensive reassessment to ascertain future federal workforce requirements.\nNNSA has several programs targeted toward recruiting students and recent graduates, primarily in science and engineering fields. NNSA began these programs within the past 7 years as a means of succession NNSA’s programs focused on recruiting students include the planning.following:\nThe Student Temporary Employment Program is a summer internship program for high school through graduate students of any discipline. Students participating in this program receive a salary while working at NNSA.\nThe Student Career Experience Program is a program for graduate students in science, engineering, and other fields. This program aims to persuade skilled graduates to pursue careers in NNSA. Participants work for NNSA full-time during school breaks and part-time the rest of the year. These positions can be converted to full-time competitive appointments when participants receive their degrees.\nThe Minority Serving Institutions Program aims to strengthen the diversity of the applicant pool by exposing younger minority students to technical fields and NNSA work early in their educational careers. This program focuses on students beginning in junior high school and continues through college entry and has cooperative agreements to enhance science, technology, engineering, and mathematics curricula at all levels at 29 minority-serving institutions. Since the program’s inception in 2007, 167 minority students have participated in hands-on research at NNSA site offices and laboratories.\nNNSA’s key program for recruitment of recent graduates is its Future Leaders Program. NNSA established the program in 2005 to recruit recent U.S. citizen graduates of bachelor’s and master’s programs, primarily in engineering and science. The Future Leaders Program is a 2- year development program that requires participants to complete classroom and on-the-job training, in addition to developmental assignments outside their home office. NNSA hires about 30 recent graduates into this program each year. Applicants are hired into the program offices where they will be permanently placed and are selected based on each program office’s skills needs. According to NNSA officials, approximately two-thirds of the 175 program participants hired from 2005 through 2010 have engineering and science backgrounds that enable them to develop the technical critical skills NNSA needs to provide support and oversight of contractors. As their careers advance, some program participants are expected to become more focused on developing deep expertise in a particular technical area, and others will gravitate toward more senior management and leadership positions. NNSA officials told us they consider the program very successful because nearly 90 percent of all those hired into the program since 2005 remained at NNSA.\nNNSA relies primarily on two programs to develop a federal workforce with the requisite critical skills––the Federal Technical Capability Program and the Technical Qualification Program (TQP). NNSA employees’ critical skills generally fall into two broad categories: (1) technical skills related to managing the safe operation of nuclear facilities, and (2) technical knowledge and expertise necessary to accept and review contract deliverables. To ensure that it has sufficient numbers of federal employees with critical skills to manage the safe operation of nuclear facilities, NNSA relies on the Federal Technical Capability Program––a DOE-wide effort to define requirements and responsibilities for meeting the department’s commitment for recruiting, developing, and retaining the technically competent workforce necessary to achieve this mission. To implement the goals of the Federal Technical Capability Program at the site level, NNSA senior managers conduct annual workforce analyses and develop staffing plans that identify critical technical capabilities and positions that ensure the safe operation of nuclear facilities. For example, NNSA relies on senior managers to identify the fire safety needs for the National Ignition Facility, a stadium size research facility at Lawrence Livermore National Laboratory and to identify how many fire protection engineers are required to meet these needs. To help meet these goals, DOE established the TQP, which sets technical qualification requirements for NNSA positions related to the safe operation of nuclear facilities and tracks federal employees’ progress in meeting these qualifications. More specifically, the TQP documents how NNSA: tailors qualification standards for them, establishes time and duty limitations for qualification, describes the process to identify learning activities to achieve competency for the specific job duties, and establishes methods for evaluating qualification.\nNNSA officials told us that only federal employees in positions related to managing the safe operation of nuclear facilities are required to participate in the TQP. However, NNSA managers may also subject employees who accept and review contract deliverables to TQP requirements to help ensure that they have the skills necessary to evaluate technical criteria of contract deliverables.\nBeyond the TQP, according to NNSA officials, human capital managers rely on annual human capital needs assessments to inform subsequent recruitment and hiring efforts to ensure the requisite mix of skills is present in the federal workforce. These assessments consider attrition and other demographic data, succession planning, and education and experience requirements. For example, NNSA officials told us that in 2011 its Office of Human Capital Management surveyed NNSA programs to identify needs for the Future Leaders Program. As part of this survey, they analyzed attrition in the federal workforce and used the information to assist in decisions about how many engineers to hire across the enterprise through the Future Leaders Program. Recruitment efforts in 2012 will focus on finding replacements for these engineers.\nNNSA’s retention strategies focus on offering new staff competitive pay, flexible schedules, and career development opportunities.\nCompetitive pay. According to NNSA officials, NNSA’s retention efforts place a high priority on preserving the agency’s capacity to offer competitive compensation. For example, for relatively new hires, such as those hired through the Future Leaders Program, NNSA can sometimes offer as much as $6,000 in lump sum hiring bonuses and up to $10,000 in student loan repayment in return for signing a service agreement. In some cases, NNSA is also able to offer retention bonuses of up to 25 percent of annual salary to employees that might otherwise leave federal service. In addition, NNSA has the flexibility to offer particularly desirable applicants higher starting salaries and reward top performers with higher pay.\nFor more senior employees, according to NNSA officials, DOE and NNSA sought, and were granted, authorities by Congress to offer higher pay to staff primarily in certain engineering and science fields. Specifically, to help it retain more experienced competitive service employees with critical skills––that is, employees in regular civil service positions— Congress granted exceptions to normal hiring regulations, including salary caps, under three excepted service authorities. First, under the Department of Energy Organization Act, the Secretary of Energy is granted special excepted service hiring authorities to hire up to 200 highly skilled scientific, engineering, professional, and administrative individuals to upgrade the department’s technical and professional capabilities. NNSA can use this authority in some cases to hire senior-level employees from outside the government or difficult-to-hire administrative staff. According to NNSA officials, there are presently 50 such individuals employed by NNSA. Second, under the National Defense Authorization Act, the Secretary of Energy is also granted special excepted service hiring authorities to hire up to 200 highly skilled individuals––typically scientists, technicians and engineers with skills related to and necessary for the operation of nuclear facilities. According to NNSA officials, there are currently about 100 such individuals currently employed by NNSA. Third, under the National Nuclear Security Administration Act, NNSA may hire up to 300 highly qualified scientists, engineers, and other technically skilled workers needed to support the missions of NNSA under similar excepted service hiring authorities. According to NNSA officials, NNSA has used this authority to hire and employ about 280 highly skilled NNSA officials told us that all of these flexibilities are useful individuals.and help NNSA compete with the Nuclear Regulatory Commission and national laboratories.\nFlexible schedules. NNSA’s retention efforts also include a flexible schedule program that gives employees the opportunity to work a nontraditional schedule or vary their work hours from day to day. For example, employees with school-aged children may opt to work more than 8 hours some days and fewer hours other days in order to accommodate school early release days.\nDevelopment opportunities. NNSA offers some employees the opportunity to undertake career development opportunities such as rotational assignments and details. Integral parts of the Future Leaders Program are 30-day local rotational assignments and 60-day headquarters or field assignments away from their home locations. For example, a Future Leaders Program participant based in NNSA’s Washington headquarters who is interested in a program run by Sandia National Laboratories in Albuquerque might be assigned for 60 days to related work at NNSA’s Sandia Site Office or Albuquerque complex. In addition, NNSA has implemented a program called the In-Teach Program, which focuses on knowledge preservation and transfer by providing funding to train highly skilled senior employees to become more adept at transferring knowledge and skills to less skilled more junior employees.\nNNSA is currently undertaking a comprehensive reassessment and analysis of the staffing requirements for its federal workforce through 2016 in headquarters and field locations. NNSA officials told us that the reassessment is needed for strategic planning purposes and will improve NNSA’s efforts to ensure that its federal workforce has the skills necessary to carry out its missions, including technical, support, and oversight capabilities. The reassessment includes the following four phases:\nDescribing and identifying organizational core competencies, and the workforce required for NNSA’s future\nAnalyzing the current workforce and gaps related to requirements for\nDeveloping a plan to close gaps between future requirements and the\nDeveloping and implementing a workforce management system which is integrated with legacy Department of Energy human capital information technology systems NNSA officials told us they expect the reassessment and resulting report to be complete in fiscal year 2013.", "M&O contractors’ recruitment, development, and retention strategies are site-specific. Generally, their recruitment efforts vary by the type of employee needed––particularly, whether the position requires an advanced degree. Their development efforts vary in approach but are also site specific and face some challenges––particularly in preserving underground nuclear testing skills. Their retention efforts focus on maintaining competitive total compensation packages––salaries and benefits––but their strategies to mitigate attrition vary from site to site.\nNNSA’s M&O contractors have developed and implemented site-specific strategies to recruit, develop, and retain the workforces needed to preserve critical capabilities throughout the enterprise and accomplish NNSA’s mission. Accordingly, contractors have typically developed site- specific workforce planning systems that enable them to identify the kinds of candidates they need to recruit, develop, and retain in order to align projected nuclear weapons-related work and budget resources. Using these workforce planning systems, site managers can anticipate the nuclear weapons-related work NNSA has contracted for, how it will be funded, how many staff are required, and what skills will be needed, and can avoid potential shortages in staff or skills. For example, in the course of their 2- and 5-year planning processes, managers at Sandia National Laboratories use a four-step workforce planning tool, the Workforce Acquisition Project, to anticipate critical skills hiring needs based on the expected lab-wide business outlook and attrition. This early assessment of critical skills requirements ensures that the contractor has sufficient time to identify and recruit new staff as necessary and give new staff time––generally 2 to 5 or more years––to develop their skills.\nM&O contractors’ strategies for recruitment vary according to the kinds of employees they need to hire—in particular, whether the position requires an advanced degree. For example, the weapons laboratories, which include Sandia, Los Alamos, and Lawrence Livermore National Laboratories, typically require highly skilled candidates with advanced degrees to replace physicists, engineers, and other experts who retire or leave for other jobs. M&O contractors at weapons laboratories thus focus their recruitment efforts on students and recent graduates of the nation’s leading graduate schools in science, engineering, and mathematics. Efforts to attract candidates begin with summer internship programs and continue with support for post-doctoral fellowships and direct offers of employment. Officials at the Lawrence Livermore National Laboratory told us that, in addition to these efforts to recruit students and recent graduates, they also recruit at the midcareer or higher level at professional meetings in science and technology fields and through the cooperative relationships with American universities and industries to broaden the prospective employee pool and enhance the intellectual vitality of its existing workforce.\nAccording to M&O contractor officials, the critical skills needs at other enterprise production plants, such as the Y-12 National Security Complex and Pantex Plant, differ from those at the weapons laboratories, and their recruiting strategies reflect these differences. Unlike the weapons laboratories, production plants generally do not require candidates with advanced degrees; rather candidates typically need a bachelor’s degree or, in the case of manufacturing and skilled craft positions, an associate’s degree or skills in advanced manufacturing techniques. As such, M&O contractors at production plants can generally recruit regionally for the staff they need and have less need to recruit nationally. For example, M&O contractor officials at Y-12 told us that they recruit predominately bachelor’s level candidates––predominately engineers––from universities within a 300-mile radius of Oak Ridge, particularly from the University of Tennessee in nearby Knoxville. Production plants are also generally well- established within their communities and focus most of their recruitment efforts for skilled manufacturing positions on the local area. For example, M&O contractor officials at the Pantex Plant told us that they have developed strong ties with local community colleges over the years and typically look for high school graduates and community college students and graduates with some specialized, skilled training or work experience. Nevertheless, according to Pantex officials, they have also taken advantage of opportunities to recruit from outside the local areas, seizing opportunities to recruit automotive workers with machine tool experience and highly skilled plant workers from another nuclear security enterprise production facility, the Savannah River Site, in the wake a reduction in force.\nM&O contractors told us their strategies for development are often linked to recruitment because appealing development opportunities can encourage candidates to accept job offers. As with strategies for recruitment, those for development are tailored to the specific needs of each site’s workforce, but many of the M&O contracting officials we spoke with cited continuing educational opportunities and the option to move within the organization as appealing development opportunities. For example, M&O contractor officials at Sandia National Laboratories told us that offering continuous training opportunities and the opportunity to move to different jobs within different components of the laboratory was very appealing to entry-level hires. Accordingly, Sandia’s Corporate Learning and Professional Development Programs offer various training opportunities. Sandia officials told us that these opportunities help employees keep skills current, provide additional educational opportunities, and help laboratory management anticipate critical skills needs in the workforce. As part of these programs employees can also take training offered by Sandia’s technical and compliance training group, which is focused on skills currently in demand at Sandia, or participate in university graduate degree programs, which Sandia will pay for. The Lawrence Livermore National Laboratory’s Education Assistance Program provides up to $50,000 in tuition assistance for coursework toward a higher degree.\nProduction plants also offer continuous learning and development opportunities. For example, the M&O contractor officials at the Kansas City Plant told us employees are encouraged to pursue higher education in areas where the plant has a skills gap. In such cases, the contractor will pay tuition and, if the employee attends school full-time, continue to pay 70 percent of the employee’s base salary. Kansas City Plant employees may also participate in developmental programs at the entry or midcareer levels that allow participants to undertake three rotational assignments to support their targeted and tailored personal development plans. In addition, the Pantex plant offers employees support for technical training opportunities with local colleges. The Nevada National Security Site also offers a number of developmental opportunities to its staff, including a voluntary mentoring program for all employees, assistance with career planning, various training and certification programs, and attendance at seminars and conferences. M&O contractor employees also have access to online courses and books as well as CD-based training sessions on a wide variety of topics, including supervision, management and leadership; computer skills and certifications; communication; and mentoring.\nM&O contractors told us that, in their development efforts, they rely on knowledge preservation and transfer programs, including recording the performance of high-skill critical tasks, formal classroom training, on-the- job training, and mentoring programs to preserve critical capabilities in the nuclear security enterprise. Knowledge preservation programs are focused on the physical preservation or recording of critical information and knowledge––typically in paper records, microfilm and microfiche, and in various audio and video media. Knowledge transfer programs seek to ensure that experienced laboratory or production plant employees successfully pass on the knowledge to replicate critical tasks to newer employees.\nKnowledge preservation. All M&O contractors at nuclear security enterprise sites have taken steps to record critical knowledge. These knowledge preservation programs are broadly similar from site to site, whether laboratory or production plant. For example, Los Alamos National Laboratory officials report that their archives house information on weapons designs and experiments dating to the inception of the laboratory. This information is contained in documents and other media such as film, audio and videotape, drawings, and photographs. The information housed in the archives is still relevant and is used by researchers across the enterprise. It may also be used outside the enterprise by, for example, documentary filmmakers and occupational health researchers. More recently, in the 2000s, Los Alamos gathered and developed critical information in the course of the Reliable Replacement Warhead Program—a program that explored the possibility of developing new nuclear weapons designs. Los Alamos engineers and scientists documented all decisions in the Reliable Replacement Warhead design process through written and video documentation. The other weapons laboratories have also invested in electronic records and videos to preserve critical knowledge. According to Lawrence Livermore National Laboratory officials, Livermore maintains an extensive electronic archive of papers and reports, as well as tutorial lectures by experienced weaponeers on key areas of weapons knowledge. Sandia National Laboratories also has its Knowledge Management Streaming Assets Library program, which has recorded about 1,500 hours of classified exit interviews with retiring weaponeers and made them available to current staff.\nM&O contractors at the weapons production plants report broadly similar efforts to preserve critical knowledge at their sites. For example, the Y-12 National Security Complex has the Knowledge Preservation Program (KPP). Similar to Sandia National Laboratories’ knowledge preservation efforts, the KPP films retiring employees as they do their work and interviews them on how they do it, then archives the videos in an electronically searchable format. As employees approach retirement, a KPP video and interview is part of the retirement checklist. These videos are evaluated for accuracy by an expert before they are entered into the KPP system. Y-12 officials told us that other NNSA sites have created videos or archives for knowledge preservation but they are not as easily accessible. M&O contractors at the Pantex Plant have undertaken similar efforts, including creating and maintaining what Pantex officials call “picture books” on weapons assembly, and interviewing experienced Pantex workers to capture their knowledge in areas such as high explosives and making these interviews available as a training tool.\nAccording to M&O contractor officials at the Nevada National Security Site, however, efforts to preserve critical knowledge regarding underground nuclear testing have faced challenges, as they have been limited and sporadic. These efforts have been complicated by two factors: (1) the need to protect vital national security information against unauthorized disclosure led to a practice of not keeping written documentation about the specifics of critical tasks; and (2) significant numbers of employees were laid off in the mid-1990s after U.S. underground nuclear testing ended. Until 2007, NNSA maintained a program that undertook substantial efforts to capture and record critical knowledge possessed by these workers, but NNSA and M&O contractor officials said these efforts were not comprehensive or systematic, and funding was discontinued.\nKnowledge transfer. M&O contractors at the weapons laboratories rely on a range of approaches to transfer knowledge, while there is more similarity among the knowledge transfer programs of M&O contractors at production plants. Specifically, each of the three weapons laboratories uses a combination of classroom training, on-the-job training, and mentoring relationships to transfer critical nuclear weapons design information, but with varying reliance on each of these three components. For example, at one end of the spectrum, Sandia National Laboratories relies most heavily on a classroom-focused curriculum––its highly regarded Weapons Intern Program. According to Sandia officials, the 11- month Weapons Intern Program succeeds in transferring such knowledge and experience through a blended learning environment, consisting of live and multimedia-based classroom instruction, individual and team research projects, hands-on activities, and off-site facility and operations tours and briefings. The live instruction is provided through a large contingent of subject matter experts in the various weapon technology, design, evaluation, production, operations, policy, and management areas.\nLawrence Livermore National Laboratory is at the other end of the spectrum, relying mostly on mentoring programs and on-the-job-training opportunities to transfer advanced nuclear weapon design skills to new staff. According to Lawrence Livermore officials, their approach to developing critical skills expertise is to embed new employees into work groups directly engaged in important work, with an experienced employee acting as a mentor. As new employees gain skills and experience and demonstrate their readiness, they are assigned tasks of increasing levels of complexity and responsibility. Laboratory officials stated that, in their experience, employees supporting the weapons program must be exposed to years of work in the field to acquire the needed knowledge and judgment to be a fully qualified weaponeer. An extensive electronic archive of papers and reports is available, as well as tutorial lectures on key areas of weapons knowledge, but Livermore officials told us there is no substitute for hands-on experience with weapons.\nLos Alamos National Laboratory’s approach is not as classroom-focused as Sandia’s program, nor is it as dependent on mentoring relationships and on-the-job training as Lawrence Livermore’s. Specifically, Los Alamos officials told us that critical skills are being transferred through a combination of formal training opportunities, mentoring, and archiving programs. For example, the TITANS program, referred to informally as “nuclear design university” is a 3-year, credential-granting program with 2 years of coursework and 1 year of thesis research and writing under the direction of a mentor. Thesis projects can either be focused on learning new modeling techniques or on mastering the simulation of above-ground experiments. For example, one knowledge transfer technique is to reanalyze old data from actual experiments to teach newer employees to use modern simulation techniques to estimate the results of real testing. The results of the student’s analysis are then compared to actual testing data. Los Alamos officials told us this practice is a very effective method for examining how well the student has mastered the use of computer simulation techniques—a very critical skill when live nuclear testing is not an option.\nKnowledge transfer at weapons production facilities is focused more on having employees demonstrate that they can replicate specific tasks. For example, M&O contractor officials at the Pantex Plant told us that they are very aggressively taking steps to ensure that younger workers can carry on performing some of the same tasks after older workers retire. The centerpiece of the Pantex effort is the Retiree Corps. Through this program, recent retirees are brought back on a part-time basis—for a maximum of 800 hours a year, an average of a little less than 2 days a week—specifically to teach current Pantex employees how to do their high-skill critical task. Retirees host talks and seminars, provide a narrative to schematics of detailed procedures and photos, and are recorded and/or videotaped explaining their tasks. Pantex officials told us they verify the knowledge transfer by requiring the trainee to demonstrate that he or she can replicate the task.\nAgain, however, the M&O contractor at the Nevada National Security Site faces some challenges. The site has an active on-the-job training program and specialized training on specific diagnostic and recording techniques relevant to underground nuclear testing. However, according to M&O contractors, funding for this program has been minimal for several years. In addition, according to Nevada National Security Site M&O contractor officials, it is challenging to preserve some of the critical skills necessary for underground nuclear testing when there is no opportunity to provide any direct experience with such testing.\nNNSA officials and M&O contractors told us that maintaining competitive total compensation packages—that is, combined salary and benefits—is crucial for achieving their strategies for recruiting, developing, and retaining the workforce with the skills necessary to sustain critical capabilities in the nuclear security enterprise, but that other factors are also useful in both attracting desirable candidates and mitigating attrition. For example, M&O contractor officials at Sandia National Laboratories told us that offering the highest salary is not required to attract top talent, but offering pay comparable to peer institutions is a necessity. Accordingly, NNSA officials work very closely with M&O contractors to ensure that contractor compensation remains comparable to other enterprise laboratories and plants, private laboratories, companies, and other government entities that recruit and try to retain similar talent. M&O contractors undertake compensation studies every year and comprehensive benefits evaluation surveys every 2 years. This compensation study is done using survey data from recognized regional, national, and international surveys as needed. Based on these data, M&O contractors may seek permission from NNSA to pay certain employees more by submitting a special request in the Compensation Increase Plan. If the plan is accepted by NNSA, salaries will be increased. In addition to raising salaries for M&O contractors to keep them competitive, NNSA will also authorize and pay for sign-on and retention bonuses, significant monetary recognition and awards programs, and special compensation packages for especially difficult-to-recruit and retain critical skills specialties. The biennial benefits evaluation compares the value of M&O contractor workforce benefits to 15 peer competitors for the same talent.\nAccording to DOE policy,percent of the value of peer institutions’ benefits.\nM&O contractors may offer benefits up to 105 NNSA officials and M&O contractors told us that other factors are useful in both attracting desirable candidates and mitigating attrition. For example, the weapons laboratories in particular can offer scientists and engineers access to state-of-the-art equipment—such as the National Ignition Facility at Lawrence Livermore National Laboratory—and the opportunity to do cutting edge research that cannot be done outside the enterprise due to national security restrictions. Similarly, for the three production plants located in relatively remote, nonmetropolitan locations—particularly Pantex, Y-12, and the Savannah River Site— attrition rates are lower among candidates with ties to the local area. For example, M&O contractor officials at Y-12 told us that they recruit locally to the extent possible, because, historically, employees from nearby communities have been less likely to seek opportunities that would require them to relocate. These officials added that the local community is familiar with Y-12, and that about 35 percent of new applicants are employee referrals.\nM&O contractors have broadly similar retention initiatives. While M&O officials at all sites in the enterprise told us that competitive total compensation packages—that is, salary and benefits—are ultimately the most important factors in employee retention, sites also typically offer a similar mix of other programs designed to encourage retention, such as work/life balance programs, flexible work schedules, and some form of continuous education and learning programs. In addition, some of the M&O contractors we spoke with told us that, to the extent they are able, they try to accommodate the desires and expectations of more recently hired employees for opportunities for faster advancement, meaningful and challenging assignments, and recognition of high performance.", "To assess the effectiveness of its strategies for recruiting, developing, and retaining the NNSA staff and M&O contractors needed to preserve critical skills in the nuclear security enterprise, NNSA monitors key human capital metrics, including the length of time to hire employees and attrition. To assess the effectiveness of its M&O contractors’ strategies, NNSA uses M&O contractors’ data to monitor key human capital metrics, but these metrics do not have standardized definitions.", "To assess the effectiveness of its strategies for recruiting, developing, and retaining the federal workforce with the requisite critical skills to support and oversee M&O contractors, NNSA focuses on monitoring two key metrics—the length of time it takes them to hire an employee and its attrition rates—and tracks employees’ progress toward completing the required training and certifications through the TQP. NNSA officials told us the length of time it takes them to hire an employee is a useful metric because it is an indicator of the efficiency of their human capital management processes. Attrition rates, especially for those leaving NNSA for reasons other than retirement are a valid indicator of the relative attractiveness of NNSA employment. Increases in the time it takes to hire employees and increases in the attrition rate would indicate a potential problem that would eventually make it more difficult for NNSA to attract and retain the workforce it needs to achieve its mission.\nOverall responsibility for maintaining a federal workforce with the necessary critical skills to carry out NNSA’s mission resides in NNSA’s Office of Human Capital Management, located at NNSA headquarters, and its site offices are also responsible for closely monitoring changes in their workforces and keeping NNSA headquarters informed of any changes. They also have direct responsibility for making sure that site office employees are maintaining the technical certifications required to perform their duties. NNSA’s Office of Human Capital Management Services, located at the Albuquerque complex, may also assist both headquarters and site office staff in monitoring these issues.", "To assess the effectiveness of its M&O contractors’ strategies for recruiting, developing, and retaining their workforces, NNSA monitors key human capital metrics using data the contractors collect. M&O contractors assess key human capital metrics, but these metrics do not have standardized definitions.\nNNSA generally gives M&O contractors the primary responsibility for identifying their workforce needs and taking the necessary steps to ensure they maintain workforces with the skills to meet the responsibilities outlined in their M&O contracts with NNSA. Accordingly, NNSA officials told us that, in 2005, they discontinued a requirement for M&O contractors to report on efforts to recruit and retain staff with critical skills, as well as more formal reporting requirements for workforce and succession planning. More specifically, according to NNSA officials, M&O contractors expect NNSA to instruct them on what they are required to do and what the contract deliverable and timeline is, but expect to be able to determine on their own how to meet their contractual obligations, including how to recruit, develop, and retain staff with the requisite critical skills.\nNonetheless, M&O contractors collect data on key human capital metrics for their workforces and provide these data to NNSA directly from their own human resource data systems. All contractors also undertake some level of workforce and succession planning, although there are no formal or specific requirements directing how they do so. According to NNSA officials, these metrics vary from site to site, but generally provide the same key information, including acceptance rates for offers of employment, which are benchmarked on a site-specific basis but are typically around 80 percent; attrition rates, both for retirement and non-retirement reasons, which are also benchmarked on a site-specific basis; pay comparability—whether salaries are competitive with peer benefits comparability––whether benefits are competitive with peer ability to fill a critical skills position within a certain number of days–– usually 48 to 90 days.\nAccording to NNSA officials, these five metrics are tracked very closely by M&O contractors at all sites, and attrition, employment acceptance rates, and pay and benefits comparability data are systematically collected at regular intervals enterprisewide. If any of these metrics indicate a problem in retention, for example, NNSA officials told us, action would be taken to address it. For example, these metrics were monitored very closely by NNSA and the M&O contractors at Los Alamos National Laboratory and Lawrence Livermore National Laboratory during their 2006 transition to a new M&O contract with less generous retirement and medical benefits. There were concerns that this change could lead to a spike in attrition among highly skilled staff that could in turn lead to difficulties in the laboratories meeting deadlines on project deliverables. Similarly, NNSA is now carefully watching the same metrics at Sandia National Laboratories because the M&O contractor substantially cut future retirement benefits that took effect for those employees who remained at the lab beyond the end of 2011. If the metrics indicate greater attrition than expected, the laboratory could adjust its recruiting strategies to hire more staff.\nNNSA also maintains close, cooperative working relationships between its federal and contractor workforces. Much of NNSA’s expertise in M&O contractor human capital issues resides in its Contractor Human Resources Division (CHRD) at its Albuquerque complex. According to NNSA officials, the work of CHRD is both critical and central to how NNSA manages human capital issues with the M&O contractors. CHRD staff are in day-to-day contact with the M&O contractors on a wide range of human capital issues, including those related to recruitment, development, and retention of employees with critical skills. For example, if an M&O contractor is having difficulty recruiting staff with particular critical skills, it can submit a supplementary Compensation Increase Plan to the NNSA site office for authorization to offer candidates higher salaries. When this occurs, NNSA headquarters and the relevant site office largely rely on CHRD to review, analyze, and make recommendations to senior management on whether to accept, amend, or reject such a request. Because most sites do not have full-time human capital subject matter expertise in residence, NNSA site office officials in particular rely heavily on CHRD both for such expertise and to monitor M&O contractors’ human capital performance metrics at all nuclear security enterprise sites. For example, officials at the Sandia Site Office told us that there is no full-time subject matter expert on human capital issues at the site office, so the office relies heavily on a CHRD staff member to inform the office’s oversight of Sandia National Laboratories on this issue. According to NNSA officials, if NNSA had concerns about what a contractor was doing or had doubts that the contractor was going to be able to continue meeting its contractual obligations because of weaknesses in its recruitment, development, and retention strategies for critically skilled workers, NNSA would raise such concerns and require that corrective actions be undertaken.\nHowever, as we noted in our February 2011 report,comprehensive information on the status of its M&O contractor workforce. Specifically, the agency does not have an enterprisewide workforce baseline of critical human capital skills and levels for the M&O contractor workforce to effectively maintain the capabilities needed to achieve its mission. NNSA officials said this is primarily because NNSA relies on its contractors to track these critical skills. As a result, we recommended that NNSA establish a plan with time frames and milestones for the development of a comprehensive contractor workforce baseline that includes the identification of critical human capital skills, competencies, and levels needed to maintain the nation’s nuclear weapons strategy. NNSA stated that it understood all of our recommendations in that report and believed that it could implement them. NNSA has taken some actions toward this recommendation. As of March 2012, NNSA had completed a draft plan and was incorporating stakeholders’ comments. NNSA officials said that they expect to complete the final contractor workforce baseline plan by May 2012. While contractor efforts may be effective at a specific site, these efforts neither ensure long-term survival of these skills across the enterprise nor provide NNSA with the information needed to make enterprisewide decisions that have implications on human capital. NNSA officials told us that they have determined that, as the responsible federal oversight agency for its M&O contractors, they recognize that they need a comprehensive and enterprisewide outlook regarding M&O contractor workforce data, particularly the identification of the critical skills needed to maintain and sustain future capabilities, and to verify that strategies are, indeed, in place to meet future requirements.\nAccordingly, NNSA officials told us that they are developing the Enterprise Modeling Consortium––an initiative to, among other things, develop the needed skills data and models necessary to help NNSA manage its contractor workforces in a more proactive manner. The consortium is designed to help NNSA undertake more integrated, enterprisewide M&O contractor workforce reporting and analysis and identify the skills and competencies needed by the workforce, as well as the necessary staffing levels, based on the known and projected integrated program requirements needed to implement the Stockpile Stewardship Management Plan and associated budgeted programs for NNSA, DOE, and other federal agencies. NNSA officials told us that NNSA provided $400,000 to the Enterprise Modeling Consortium in fiscal year 2012 to fund further research and development on modeling. However, according to these officials, there is significant work left to do on the Consortium and they cannot provide an estimate for when the Consortium will be completed.\nEach M&O contractor collects key human capital performance data; however, we found that there are no specific, enterprisewide definitions of these data. NNSA officials told us that they have not asked M&O contractors to standardize these definitions because they believe their current system is effective. We previously reported that the lack of standard definitions for performance measurement data can significantly hinder agencies’ ability to use such data in planning and reporting. NNSA officials also told us that they believe M&O contractors have effectively used the flexibilities provided in their contracts and have demonstrated that they can identify specific critical skills needed and take the steps needed to, by and large, sustain them. However, NNSA is now considering developing a more comprehensive enterprisewide system, the Enterprise Modeling Consortium, to track M&O contractor human capital performance metrics and other workforce data and common definitions of performance metrics may become more important. Specifically, without common enterprisewide definitions of human capital performance metrics, NNSA may not be able to collect consistent and comparable data across all eight sites in the enterprise. For example, one of the M&O contractors’ key metrics—acceptance rates for offers of employment—may not be consistently measured across the enterprise. Human capital staff at one national laboratory told us they participated in a program they compared to “speed dating,” whereby candidates at a career fair may be interviewed for multiple positions and given offers of employment on the spot. However, job applicants may receive multiple offers of employment in a single day and may accept more than one offer to negotiate for a better salary or to have more time to consider their options. In such a situation, the employment offer to a candidate could be counted as an acceptance even if that candidate never became a laboratory employee. When asked about this scenario, NNSA officials stated that it was their understanding that M&O contractors were only counting as accepted offers those who ultimately reported for work, but acknowledged there was no NNSA standard definition and that they did not know for certain how such offers were counted.\nSuccessful human capital management and workforce planning depend on valid and reliable data. These data can help an agency determine: performance objectives, goals, and the appropriate number of employees, and can help develop strategies to address gaps in the number, deployment, and alignment of employees. However, NNSA has not identified or considered the potential inconsistencies in these human capital metrics; therefore, decision makers are relying on information that may not be consistently reported.", "NNSA and its M&O contractors face challenges in recruiting, retaining, and developing their workforces and are using several tools to address these challenges. NNSA and its M&O contractor work environments, site locations, and high costs of living pose recruiting challenges. NNSA and its M&O contractors also face shortages of qualified candidates, an aging workforce, and variable funding. NNSA and its M&O contractors are taking actions to address their current human capital challenges, where possible.", "Officials from NNSA site offices and M&O contractor work sites reported that their secure work environment and location make recruitment of advanced science and technology candidates more challenging. Due to the sensitive nature of nuclear weapons work, NNSA and M&O contractor sites must be more secure than most private sector laboratories or commercial plants. To meet this security requirement, laboratories and plants in the enterprise tend to be restrictive environments, isolated from security threats by geography and classification protocols. In addition to these potentially undesirable traits, in the view of some candidates, some sites are further constrained by a high cost of living.\nRestrictive environment. Officials from most M&O contractors reported that the restrictive environment required for nuclear weapons research and maintenance is a disadvantage in recruiting new staff with the potential to become weapons experts. Staff typically need to acquire and maintain high-level clearances and must often work in secure areas that prohibit the use of personal cell phones, personal e-mail, and social media. In particular, they told us younger candidates typically expect to stay continuously connected to their peers via cell phone and social media. Furthermore, any research completed in classified work can only be seen within the classified community; for researchers who desire broader recognition of their work and opportunities for wider collaboration, academia or private industry may be more attractive. Because of these restrictions, most M&O contractor human resources staff told us that it was more difficult to recruit younger scientists and engineers.\nIsolation. An isolated location may be desirable for building or maintaining nuclear weapons, but it may not appeal to some desirable candidates with advanced degrees in science, technology, and engineering. For example, Los Alamos National Laboratory officials told us that the laboratory’s relative isolation––nearly 100 miles from Albuquerque, New Mexico–– may make it less appealing to some candidates. In addition, the relative lack of other types of employment opportunities nearby may pose challenges for candidates with spouses in careers outside of science, technology and engineering. Officials at two of the three weapons laboratories told us they focus on recruiting top candidates nationwide to gain a wide breadth of thought and opinion among their staff. The laboratories track the proportion of job offers accepted but cannot always ascertain or be sure of the reason a candidate rejects an offer because, according to officials at Lawrence Livermore, candidates may simply state they declined an offer for “personal reasons.”\nIn addition, some of the production plants and the test site are also in isolated locations and face some of the same challenges as the laboratories. However, these sites require fewer candidates with advanced degrees and can generally rely on the local workforce to fill other types of critical skills positions. For example, Savannah River Site and Pantex are also both located far from other large cities. However, because of their relative isolation, they are among the biggest employers in these areas, and many local candidates are qualified and eager to accept positions in weapons manufacturing and maintenance. Pantex officials reported that they do not have difficulty finding most workers to perform weapons maintenance, which requires a shorter amount of on- the-job training than weapons design but nonetheless requires a set of critical skills. However, site staff have had to develop strategies to attract candidates to fill those positions that require advanced degrees. Unlike the laboratories, officials at all of the production plants told us that they focus their recruiting efforts for these positions at local and regional colleges and universities. Officials at Y-12, for example, have identified competitive science and engineering programs at universities within 300 miles of their plant in Oak Ridge, Tennessee. Y-12 officials reported that they have better results in both recruiting and retaining critically skilled workers when those workers have personal ties to the area. In contrast, M&O contractor officials from the laboratories told us that they needed to recruit from the top academic programs across the country.\nHigh cost and competition. Two enterprise sites are located in areas with high costs of living, which can deter qualified candidates—Los Alamos and Lawrence Livermore. NNSA and its M&O contractors have flexibility to offer higher compensation for some critical skills, but some candidates are unwilling to live in high cost areas. For example, housing in Los Alamos is expensive and scarce. According to Los Alamos National Laboratory staff, some employees commute nearly 100 miles each way from Albuquerque every day partly due to cost of living constraints. Los Alamos Human Resources managers reported that high housing costs are a concern among current and prospective employees. Lawrence Livermore National Laboratory, located in the San Francisco Bay Area, is also a high cost area. NNSA has authorized higher salaries for some critically skilled M&O contractor employees but delays during the hiring process can give private sector recruiters an advantage with critically skilled candidates. Lawrence Livermore uses the flexibilities it has to negotiate competitive compensation, but a candidate interested in weapons work may be drawn to another site with a lower cost of living, such as Sandia National Laboratories in Albuquerque or one of the production plants.\nFurther complicating NNSA’s recruiting efforts is the demand for qualified candidates in the private sector as well, and private sector jobs may offer a work environment that many candidates may find more desirable. The same pool of candidates who can excel in engineering, modeling, and simulation tasks is also attractive to high technology firms. For example, according to M&O contractor officials at Lawrence Livermore National Laboratory, a web-based provider of DVD rentals and streaming media uses computational scientists to predict consumers’ preferences for films, which is the same skill set the weapons laboratories would use for modeling and simulation. However, this company does not have the constraints that a federal contractor has with compensation limits and a restrictive work environment.", "NNSA and its M&O contractors are making workforce plans, but face shortages in qualified critically skilled candidates and an aging workforce. In addition, uncertainty about future funding makes long-term workforce development initiatives challenging to execute.\nThe laboratories have not yet experienced any critical shortages of critically skilled workers, but they all reported that finding candidates with the appropriate qualifications is a growing recruitment challenge and that a more mobile and aging workforce is a retention challenge.\nShortages of qualified candidates. NNSA officials told us that qualified candidates are in short supply and that competition from science and technology-related companies in the private sector poses additional challenges. Candidates for most critical skills positions at national laboratories must meet certain criteria, including (1) an advanced degree (master’s or doctorate) in a scientific, technical, or engineering field; (2) the ability to obtain a high-level security clearance, which requires U.S. citizenship; and (3) an interest in and willingness to learn weapons design work. The requirement for U.S. citizenship in particular is becoming an increasingly difficult criterion to satisfy in the recruitment process. National laboratory officials told us that a large percentage of students graduating from top science, technology, and engineering programs are foreign nationals. M&O contractors can hire foreign nationals to work outside of weapons-related areas, but the citizenship requirement for working on programs supporting U.S. nuclear weapons is not negotiable.\nIn addition, national laboratory recruiting staff noted hurdles finding candidates with an interest in and willingness to learn weapons design work. For example, officials at Sandia National Laboratories told us younger candidates with the necessary qualifications are often more interested in fields that contribute to improving the environment. In addition, because of the sensitive nature of weapons work, civilian graduate programs cannot teach weapons-specific skills, so would-be weaponeers may not know whether the work suits them until after they have invested significant time working in the enterprise. Even if candidates accept a position, they do not actually have the authorization to design nuclear weapons; current policy allows them to refurbish components within the existing stockpile, and then only when funding is appropriated for that specific activity.\nA more mobile workforce. NNSA and M&O contractor officials noted that a general shift from defined benefit retirement systems offering pensions to a defined contribution retirement system has made employees much more mobile and, therefore, harder to retain. A defined contribution retirement system makes employees much more mobile because, once the employee is vested––typically after a few years––their contributions to their retirement accounts are portable, therefore they no longer depend on tenure with a single employer. According to NNSA officials, M&O contractors no longer expect newly hired employees to spend their entire careers in the enterprise; rather, they expect them to work for a national laboratory or production plant for an average of 5 to 10 years.\nAging workforce. Many of the critically skilled employees currently filling these positions, both at the national laboratories and other NNSA sites, are at or near retirement age, which adds additional uncertainty to the projected human capital needs of the enterprise. NNSA officials told us that they are aware that many critically skilled employees are at or near retirement age, and they are tracking those retirements closely. Human capital staff from NNSA and its M&O contractors told us that it is difficult to anticipate retirement trends, especially during an economic recession. M&O contractor human resources staff said that they have found fewer staff retiring than they would have projected, due to uncertainties about their financial investments. These economic factors may have helped to preserve some critical skills within the enterprise, but officials are concerned that when the economy rebounds, eligible staff may retire at higher-than-projected levels. Such levels of attrition could leave a skills gap that would take years to replenish.\nKnowledge transfer activities in the nuclear security enterprise tend to require multiple years to complete, but contractors have been challenged to plan and maintain these development efforts because funding varies from year to year. NNSA officials typically do not dictate whether or how much funding goes toward knowledge transfer within contractor workforces, except for specific programs at Sandia, because NNSA prefers not to fence funding for particular contractor activities. Contractors use what NNSA calls science campaigns—which, among other things, fund research to improve the ability to assess warhead performance without nuclear testing and help to maintain the scientific infrastructure of the nuclear weapons laboratories—and life extension programs—which ensure weapons’ readiness and extend the life of existing warheads through design, certification, manufacture, and replacement of components—as a means for knowledge transfer, where more experienced weaponeers can train newer staff on weapons design and maintenance. Both science campaigns and life extension programs require long-term planning to ensure that the necessary resources are available.\nAccording to NNSA and M&O contractor officials, funding for science campaigns and life extension programs has varied over the years. M&O contractor officials at both plants and laboratories told us their knowledge transfer plans have been adversely affected in years when funding has been reduced. In recent years, plans for certain life extension programs and science campaigns have been scaled back after plans have been made and contractor resources allocated. According to M&O contractors at the laboratories, reduced funding for life extension programs diminishes their opportunities to give their newer weaponeers hands-on experience. For example, weapons staff at Lawrence Livermore National Laboratory told us that they made knowledge transfer plans based on their approved warhead life extension projects, and that when those projects were sidelined; newer weaponeers were denied significant training opportunities. However, because funding decisions are beyond the M&O contractors’ purview, M&O contractor officials told us there is little they can do to prepare for or mitigate this challenge.", "NNSA and its M&O contractors reported that they are taking actions to address their human capital challenges where possible. Specifically, NNSA and M&O contractor officials told us they engaged in workforce planning to avoid potential critical skill gaps in the enterprise. NNSA-wide workforce plans are not expected to be completed until 2013 according to NNSA officials, but certain components are already in practice at various sites, such as streamlined hiring and security clearance practices and “pipeline” building for critically skilled employees.\nStreamlined hiring and security clearance processes. NNSA and its M&O contractors have streamlined human capital processes to attract and hire new critically skilled workers. In the past, federal hiring processes have caused longer waits, both for candidates awaiting a decision and for human capital officials awaiting security clearances for new hires. M&O contractor staff reported that delays had previously allowed strong candidates to find other opportunities, or if candidates were hired and waiting for a clearance, they could lose interest in the position before they started. M&O contractor staff told us that finding work for hired-but- uncleared staff to complete was frustrating for both the new staff and their supervisors. NNSA has made reducing cycle time a priority, and officials from several sites reported that they have been able to hire and obtain clearances for employees more quickly in recent years.\nBuilding a pipeline of critically skilled employees. Both NNSA and its M&O contractor officials acknowledge that, due to the long period required for developing some critical skills employees, they need to anticipate their critical skills needs for multiple years in the future. All sites have recruiting and development plans to preserve critical skills in their workforce, which they refer to as a pipeline. Sites use pipelines in two ways to avoid critical skills gaps. First, they use training and project assignments to ensure that critical skills are being developed and preserved in newer employees. For example, Lawrence Livermore has assessed its employees’ skill sets and experience, so it knows which are currently performing essential operations more than 25 percent of the time––called core employees–– and which are being prepared to perform those operations––called pipe employees. They can augment a pipe employee’s expertise in an area if management sees a shortage of core employees in that skill set. Second, in recruiting activities, human resources staff may maintain information about potential future candidates for weapons programs, either with contacts made in internship, fellowship, and coop programs or by keeping records of interested candidates who were not hired. For example, Sandia is building a database of potential candidates, so that in the future it is not relying exclusively on that year’s graduating class from the top science and engineering programs.\nSuccession planning can also inform pipeline decisions. M&O contractor officials at some sites said that they have begun to analyze potential skills gaps if a specific retirement or separation were to occur. Those M&O contractors who are undertaking these analyses can rely on managers’ assessments of their employees or software packages designed to facilitate succession planning. M&O contractors told us that this kind of planning is currently used in management or leadership capacities, but in the future it could be applied to other areas such as critical skills capacities. Each M&O contractor has a unique way of implementing its pipeline, but M&O contractor officials from all sites told us they all realize the need to consider future retirements and mission requirements in their current hiring and development plans. For example, a senior M&O contractor manager at Sandia National Laboratories responsible for building the laboratories’ talent pipeline told us that Sandia is facing unprecedented hiring needs due in part to expected increases in retirements. He expects to experience 33 to 50 percent attrition in the next 4 to 5 years, while the total number of Sandia employees will need to remain about the same. Accordingly, Sandia officials told us they expect to have hired approximately 3,100 new employees in the 3 years ending in 2012—about 800 in 2010, 1,100 in 2011, and 1,200 in 2012.\nSome of the human capital challenges facing the enterprise are beyond the control of NNSA and its M&O contractors, and in these cases, NNSA has authorized increased compensation to help the sites acquire or retain the personnel they require. The site locations are fixed, and site staff cannot change the number of U.S. citizens completing graduate science and technology programs. Similarly, NNSA and its contractors have no choice but to adapt to the increased mobility of their staff resulting from the shift to a defined contribution retirement systems. To mitigate these challenges, NNSA and its contractors continue to offer financial incentives to recruit and retain critically skilled employees, with competitive starting salaries. The scale of these financial incentives can vary by location and position, but NNSA reported that this strategy has thus far been adequate for recruiting and retaining the talent they need.", "NNSA and its M&O contractors have taken a number of useful steps to sustain critical skills in the enterprise in the face of several challenges. NNSA has begun to implement the recommendation we made in our February 2011 report to establish a plan with time frames and milestones for the development of a comprehensive contractor workforce baseline that includes the identification of critical human capital skills, competencies, and levels needed to maintain the nation’s nuclear weapons strategy. However, while contractor efforts may be effective at a specific site, they do not provide NNSA with the information needed to make enterprisewide decisions that have implications on human capital. Without this information, NNSA’s ability to monitor the effectiveness of its and its M&O contractors’ strategies to recruit, develop, and retain the workforces needed to preserve critical skills may be hindered. In particular, without common enterprisewide definitions of human capital performance metrics, NNSA may not be able to collect consistent and comparable M&O contractor human capital data across all eight sites in the enterprise. Since NNSA is now considering developing a more comprehensive enterprisewide system to track data on critical skills through its Enterprise Modeling Consortium, this may be an opportune time to explore establishing common, uniform definitions for the human capital metrics used in this system.", "To improve NNSA’s ability to monitor the effectiveness of its strategies–– and its M&O contractors’ strategies––to recruit, develop, and retain the workforces needed to preserve critical skills in the enterprise, we recommend that the Administrator of NNSA take the following action: As it develops its Enterprise Modeling Consortium and other enterprisewide systems for tracking M&O contractor human capital performance metrics, NNSA should consider developing standardized definitions across the enterprise, especially across M&O contractors, to ensure they gather consistent data using human capital metrics with consistent, uniform definitions.", "We provided NNSA with a draft of this report for their review and comment. NNSA provided written comments, which are reproduced in appendix I. NNSA stated that it appreciated GAO’s recognition of the significant challenges NNSA faces in sustaining critical skills in its workforce and the efforts NNSA is taking to identify critical human capital skills, competencies, and levels needed to maintain the nation’s nuclear weapons strategy. In addition, NNSA stated that it agreed with the GAO’s recommendation that NNSA should consider developing standardized definitions for human capital metrics across the enterprise to help ensure consistent and comparable data. NNSA also provided other additional technical information, which we incorporated where appropriate.\nWe are sending copies of this report to the Secretary of Energy, the Administrator of NNSA, the appropriate congressional committees, and other interested parties. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.", "", "", "", "In addition to the contact named above, Ned Woodward, Assistant Director; Dr. Timothy Persons, Chief Scientist; Don Cowan; Hayley Landes; and Kevin Tarmann made key contributions to this report. Yvonne Jones, Alison O’Neill, Cheryl Peterson, Rebecca Shea, Kiki Theodoropoulos, and Greg Wilmoth provided technical assistance." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "", "", "", "h0_title h2_title", "h0_full", "h0_full h2_full", "h2_title h1_full", "h1_full", "h1_full", "h2_full h1_full", "h0_full", "", "", "", "", "", "" ] }

{ "question": [ "Why does the NNSA monitor key human capital metrics?", "What metrics are being focused on?", "How does the NNSA assess the effectiveness of its contractors’ strategies?", "What issues are there is assessing key human capital metrics?", "What is an example of this inconsistency?", "Why might the missing information hinder the NNSA?", "What is a specific issue likely to occur?", "What challenges does the work environments and locations pose?", "How does disconnection play a role in recruitment?", "How does isolation play a role in recruitment?", "How does citizenship play a role in recruitment?", "What often happens due to the undesirable conditions?", "How is the NNSA addressing the challenges regarding recruitment?", "What are some of the NNSA's primary responsibilities?", "How does the NNSA carry out these responsibilities?", "How are the NNSA's sites managed?", "What qualification does the workforce need to develop?" ], "summary": [ "To assess the effectiveness of its own––and its M&O contractors’––strategies for recruiting, developing, and retaining the workforces needed to preserve critical skills, NNSA monitors key human capital metrics.", "NNSA focuses on two key metrics in assessing its own strategies—the time it takes to hire a new employee and its attrition rates.", "To assess the effectiveness of its contractors’ strategies, NNSA monitors key human capital metrics using data that M&O contractors collect, including acceptance rates, attrition rates, comparability of pay and benefits with peer institutions, and the ability to fill a critical skills position within a certain number of days.", "M&O contractors assess key human capital performance measures, but these metrics do not have standardized definitions.", "For example, one of the M&O contractors’ key metrics—acceptance rates for offers of employment—may not be consistently measured across the enterprise.", "Without this information, NNSA’s ability to monitor the effectiveness of its and its M&O contractors’ strategies to recruit, develop, and retain the workforces needed to preserve critical skills may be hindered.", "In particular, without common enterprisewide definitions of human capital performance metrics, NNSA may not be able to collect consistent and comparable data across all eight sites in the enterprise.", "The enterprise’s work environments and site locations pose recruiting challenges, and NNSA and its M&O contractors face shortages of qualified candidates, among other challenges.", "For example, staff must often work in secure areas that prohibit the use of personal cell phones, e-mail, and social media, which is a disadvantage in attracting younger skilled candidates.", "In addition, many sites are geographically isolated and may offer limited career opportunities for candidates’ spouses.", "Critically skilled positions also require security clearances—and therefore U.S. citizenship—and a large percentage of students graduating from top science, technology, and engineering programs are foreign nationals.", "The pool of qualified candidates is also attractive to high technology firms in the private sector, which may offer more desirable work environments.", "NNSA and its M&O contractors are taking actions to address these challenges where possible, including streamlining hiring and security clearance processes and taking actions to proactively identify new scientists and engineers to build a pipeline of critically skilled candidates.", "NNSA has primary responsibility for ensuring the safety, security, and reliability of the nation’s nuclear weapons stockpile.", "NNSA carries out these activities at three national labs, four production sites, and one test site—collectively known as the nuclear security enterprise.", "Contractors operate these sites under management and operations (M&O) contracts.", "The enterprise workforces often possess certain critical skills that can only be developed through a minimum of 3 years of experience working in a secure, classified environment." ], "parent_pair_index": [ -1, 0, -1, -1, 3, -1, 5, -1, 0, 0, 0, -1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 0, 0, 0, 0 ] }

{ "title": [ "Background", "Refugee Eligibility Requirements and Admissions", "Screening Process for Refugees Seeking to Resettle in the United States", "USRAP Applicant Characteristics Vary; About One-third of Applicants from Fiscal Year 2011 through June 2016 Have Been Admitted to the United States, as of June 2016", "USRAP Applicant Characteristics Vary by Country of Nationality, Processing Location, and Case Size", "United States Admitted 35 Percent of Applicants from Fiscal Year 2011 to June 2016, and the Remaining Applications Were Closed or In Process, as of June 2016", "A Small Percentage of USRAP Applicants Were Not Admitted to the United States as a Result of Biographic and Biometric Checks", "USRAP Process Took 1 Year or Longer to Complete from Case Creation through Arrival in the United States for About Three Quarters of Applicants Whom USCIS Approved", "State and RSCs Have Policies and Procedures for Processing Refugees, but State Could Improve Efforts to Monitor RSC Performance", "State and RSCs Have Policies and Procedures on Refugee Case Processing and Prescreening", "State Has Controls in Place to Monitor RSCs, but Does Not Have Outcome-based Indicators to Assess RSC Performance across Key Activities", "USCIS Has Policies and Procedures for Adjudicating Refugee Applications, but Could Improve Training and Quality Assurance", "USCIS Has Policies and Procedures to Assign Officers and Adjudicate Refugee Applications", "Staffing USCIS Circuit Rides", "Adjudication Policies and Procedures", "USCIS Provides Specialized Training to All Officers Who Adjudicate Refugee Applications, but Could Improve Training for Temporary Officers", "USCIS Has Resources to Help Officers Identify Applicants with National Security Concerns, but Has Not Documented Plans for Deploying Officers with National Security Expertise on Circuit Rides", "USCIS Has Not Conducted Quality Assurance Assessments of Refugee Adjudications since Fiscal Year 2015 Despite Significant Changes to the Program Since That Time", "State and USCIS Have Mechanisms to Help Detect and Prevent Applicant Fraud, but Could Jointly Assess Applicant Fraud Risks", "State, RSCs, and USCIS Have Implemented Mechanisms to Help Detect and Prevent Fraud Committed by USRAP Applicants", "State and USCIS Have Not Jointly Assessed Applicant Fraud Risks Across USRAP", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Central American Minors Program", "Requirements for Program Access", "Application, Interview, and Screening Process", "Outcomes for CAM Program Applications Submitted from December 2014 through March 2017", "Appendix II: Summary of United States Refugee Admissions Program Priority Categories", "Appendix III: Comments from the Department of State", "Appendix IV: Comments from the Department of Homeland Security", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The United States has a long history of refugee resettlement, but there was no formal program for the resettlement and admission of refugees until the Refugee Act of 1980 (Refugee Act) amended the Immigration and Nationality Act (INA) to, among other purposes, establish a more uniform basis for the provision of assistance to refugees. Under the INA, as amended, an applicant seeking admission to the United States as a refugee must (1) not be firmly resettled in any foreign country, (2) be determined by the President to be of special humanitarian concern to the United States, (3) meet the definition of refugee established in U.S. immigration law, and (4) be otherwise admissible to the United States as an immigrant under U.S. immigration law. Under USRAP, USCIS officers determine an applicant’s eligibility for refugee status by assessing whether the applicant has, among other things, credibly established that he or she suffered past persecution, or has a well-founded fear of future persecution, and that he or she is not otherwise statutorily barred from being granted refugee status or admission to the United States. Among other things, USCIS officers may not classify an applicant as a refugee or approve an applicant for refugee resettlement in the United States if he or she: has participated in the persecution of any person on account of race, religion, nationality, membership in a particular social group or political opinion; is inadmissible for having engaged in terrorist activity or associating with terrorist organizations; is inadmissible on certain non- waivable criminal or security grounds; or is firmly resettled in a foreign country. Under USRAP, cases may be presented for USCIS adjudication with a single applicant or may include a principle applicant with certain family members. All applicants on a case must be deemed admissible, but only the principal applicant must prove his or her past persecution or fear of future persecution.\nBefore the beginning of each fiscal year and after consultation with Congress, the President is to establish the number of refugees who may be admitted to the United States in the ensuing fiscal year (i.e., a “ceiling”), with such admissions allocated among refugees of special humanitarian concern to the United States (e.g., by region or country of nationality). For example, for fiscal year 2016, the administration proposed and met a ceiling of 85,000 refugees in fiscal year 2016 (including a goal of admitting 10,000 Syrian refugees) and established a ceiling of 110,000 for fiscal year 2017. Since 2001, annual ceilings for refugee admission have generally been between 70,000 and 80,000 admissions; in the early 1990s, the ceilings were at more than 100,000 admissions. Actual admissions of refugees into the country have been at or below the ceiling in recent years. For example, the combined ceiling for fiscal years 2011 through 2016 was 451,000, during which the United States admitted about 410,000 refugees. Figure 1 shows refugee admissions by region during this time period.", "There are a number of steps in the USRAP screening process for applicants. Figure 2 provides an overview of the refugee screening process.\nProgram access. First, State and USCIS make initial determinations about whether an individual will be accepted into or excluded from USRAP (referred to as program access) for subsequent screening and interview by USCIS officers. There are multiple mechanisms by which State and its partners receive USRAP applications. For example, most applicants are referred to USRAP by UNHCR, but applicants who meet certain criteria can apply directly. State has identified three categories of individuals who are of special humanitarian concern and, therefore, can qualify for access to USRAP:\nPriority 1 (P1), or individuals specifically referred to USRAP generally because they have a compelling need for protection;\nPriority 2 (P2), or specific groups, often within certain nationalities or ethnic groups in specified locations, whose members State and its partners have identified as being in need of resettlement; and\nPriority 3 (P3), or individuals from designated nationalities who have immediate family members in the United States who initially entered as refugees or who were granted asylum.\nAccess: Determination by the Department of State and its U.S. Refugee Admissions Program (USRAP) partners of whether the applicant qualifies for the U.S. Citizenship and Immigration Services (USCIS) adjudication based on if he/she is of special humanitarian concern (i.e., if he/she is within a Priority 1, Priority 2, or Priority 3 category), among other things.\nAdjudication: USCIS’s process for deciding whether to approve or deny an applicant for refugee status. The adjudication process includes, among other things, at least one in- person interview; security checks; and, in some instances, additional review of the applicant’s case to address national security concerns.\nApproved application: Determination by USCIS officer that the applicant meets the refugee definition and is otherwise eligible for resettlement in the United States, and will subsequently be processed for travel to the United States. partners conduct biographic checks of certain applicants who are members of groups or nationalities designated by the U.S. government as requiring more thorough vetting.\nInteragency Check. Partners, including NCTC and elements of the intelligence community, screen biographic data of all refugee applicants within a designated age range against intelligence and law enforcement information within their databases and security holdings. Specifically, all refugee applicants within certain ages are required to undergo an Interagency Check. Further, security vetting partners are to continuously check interagency refugee applicant data against their security holdings through a refugee’s admission to the United States and, in some instances, after an applicant’s arrival and admission to the United States.\nThrough these checks, applications are screened for indicators that they might pose a national security or fraud concern or have immigration or criminal violations, among other things. USCIS and FBI officials have testified at congressional hearings that security checks are limited to the records available in U.S. government databases (which may include information provided by foreign governments and other information on foreign nationals). According to State SOPs, security check responses are communicated through WRAPS, and RSC staff include them in the case file provided to the USCIS officer adjudicating the application. If at any time an applicant is identified as having a match for the Security Advisory Opinion or Interagency Check, the case is to be placed on hold. For Security Advisory Opinion results that are completed before the USCIS interview, State officers are to review any matches to determine if they relate to the applicant and should preclude the applicant from access to the USRAP. USCIS is responsible for reviewing security check results that are completed after the USCIS interview. Further, the CLASS check may require a Security Advisory Opinion or additional DHS review. Once prescreening is complete and RSC staff have received the results of certain security checks, they are to notify State and USCIS that the applicant is ready for interview and adjudication. DHS is to, based on policy, conduct an additional review of Syrian and certain other applicants prior to adjudication as part of prescreening.\nUSCIS Adjudication. Third, USCIS adjudicates applications. USCIS coordinates with State to develop a schedule for refugee interviews each quarter of the fiscal year. USCIS officers conduct individual, in-person interviews overseas with applicants to help determine their eligibility for refugee status. RAD and IO—within USCIS’s Refugee, Asylum, and International Operations (RAIO) Directorate—share responsibility for adjudicating USRAP cases. In 2005, USCIS created the Refugee Corps, a cadre of USCIS officers within RAD who, according to USCIS officials, are to adjudicate the majority of applications for refugee status. These officers are based in Washington, D.C., but they travel to multiple locations for 6 to 8 weeks at a time (called circuit rides), generally making four trips per year, according to RAD officials. In addition, IO officers posted at U.S. embassies overseas can conduct circuit rides and interviews in embassies to adjudicate refugee applications, among other responsibilities. Before or during the circuit ride, USCIS officials are to take the applicants’ fingerprints, which are screened against DHS, Department of Defense, and FBI biometric databases, and if new information from the biometric check raises questions, USCIS officers may ask additional questions at the interview, require additional interviews, or deny the case. In addition, if USCIS officers identify new biographic information during the interview, such as an alias that was previously unknown or not disclosed to RSC staff, that information is vetted through the biographic security checks described above, per State and DHS policy. The officers are to place these applications on hold, pending the outcome of these checks. Further, consistent with USCIS policy, officers are required to place a case on hold to do additional research or investigation if, for example, the officer determines during the interview that the applicant may pose a national security concern. Based on the interviews and security checks conducted, USCIS officers will either approve or deny an applicant’s case. USCIS supervisory officers are to review 100 percent of officers’ adjudications, according to USCIS policy.\nFinal processing and travel to the United States. If USCIS approves an applicant’s refugee application, RSCs are to generally provide the applicant with cultural orientation classes on adjusting to life in the United States, facilitate medical checks, and prepare the applicant to travel. Prior to admission to the United States, applicants are subject to the standard CBP and Transportation Security Administration vetting and screening processes applied to all travelers destined for the United States by air. CBP is to inspect all refugees upon their arrival at one of seven U.S. airports designated for refugee arrivals and make the final determination about whether to admit the individual as a refugee to the United States.", "", "From fiscal year 2011 through June 2016, WRAPS data indicate that USRAP received about 655,000 referrals and applications, associated with about 288,000 cases. As figure 3 indicates, during this time frame, more than 75 percent of applications were from refugees fleeing 6 countries—Iraq, Burma, Syria, Somalia, the Democratic Republic of Congo, and Bhutan—and the number of applicants from certain countries has changed over time. For example, the number of Bhutanese and Burmese applications decreased, but the number of Syrian and Congolese applications increased. State officials said that UNHCR submitted a large number of P1 Syrian referrals to USRAP in fiscal year 2016 because more people were fleeing that country due to conflict and the goal of admitting 10,000 Syrian refugees. From October 2015 through June 2016, WRAPS data indicate that more than one-third of USRAP applicants were Syrian.\nIn addition to nationality, USRAP applicants’ characteristics varied in other ways. For example, as shown in figure 4, applications to USRAP from fiscal year 2011 through June 2016 were largely split between the P1 or P2 categories and about two-thirds were processed in one of three RSCs (Middle East and North Africa, Africa, and East Asia). Further, 75 percent of applicants were associated with cases that included immediate family members (which includes a spouse and unmarried children under the age of 21), while 25 percent of cases included only 1 individual.", "At any given time, there are a number of applicants at different stages of the USRAP process. According to State and RSC officials, State and USCIS process applications in the general order they were received. For example, table 1 shows that, of the applications received in fiscal year 2011, 56 percent were approved and admitted to the United States as of June 2016, 13 percent were still in process (pending access to USRAP, actively being processed, or on hold), and 31 percent of applications were closed before the applicant completed the USRAP process, as of June 2016. By comparison, as of June 2016, almost 70 percent of applications received in fiscal year 2015 were in process.\nProgram Access. Of the total number of applications received from fiscal years 2011 through June 2016 (about 655,000), State and its USRAP partners made access determinations for about 590,000 of that amount— 569,000 (or 96 percent) of which they accepted, as of June 2016. As described earlier, State and its USRAP partners makes the initial determination on whether to grant an applicant access (accept) to USRAP for subsequent screening and interview by USCIS officers. According to State officials, one reason the acceptance rate is high is because State Refugee Coordinators stationed overseas provide feedback to UNHCR on the types of P1 applications that are not likely to be accepted or ultimately approved by USCIS officers. Further, according to State officials, State coordinates with UNHCR and USCIS to develop predefined eligibility criteria for certain P2 groups and applicants meeting those criteria may access USRAP once UNHCR submits the application to State. For example, State and UNHCR created a new P2 group in 2015 for Congolese who fled to Tanzania. To be part of the P2 group, applicants must have registered with UNHCR and verified their residence in the Nyaragusu refugee camp.\nFrom fiscal year 2011 through June 2016, acceptance of applications to USRAP for adjudication varied by nationality of the applicants. For example, excluding pending applications, USRAP partners did not accept 8 percent of Iraqi applicants. USRAP partners also did not accept 4 percent of Syrian applicants, and did not accept less than 1 percent of Burmese and Somali applicants. According to State officials, the most common reason why applicants are not accepted is that they fail to meet criteria to access USRAP. For example, according to State officials, acceptance rates were lower for Iraqi applicants because some Iraqis could not prove their association with the United States—a requirement under various P2 programs. As part of the adjudication process, USCIS officers are to confirm that applicants were appropriately granted access to USRAP. WRAPS data from fiscal year 2011 through June 2016 show that USCIS officers confirmed that over 99 percent (all but about 1,000 out of 351,000) of the applicants interviewed were appropriately granted access to USRAP (i.e., qualify for adjudication by USCIS), as of June 2016.\nUSCIS Adjudications. According to WRAPS data, as of June 2016, USCIS officers interviewed about 62 percent (351,000) of the applicants who were granted access to USRAP from fiscal year 2011 through June 2016. USCIS officers approved 89 percent (314,000 of 351,000) and denied 7 percent (24,000) of these applications. Approval rates varied by RSC (see fig. 5).\nApplications may also be put on hold for a number of reasons. For example, holds may occur because of security check results, a USCIS officer did not have sufficient information at the time of the interview to approve or deny the applications associated with the case, or as a result of new information that came to light after the interview. For applications in our time period of analysis, WRAPS data indicate that 12 percent (about 81,000) were on hold as of June 2016. USCIS officials stated that they would make a final decision on these cases after receiving additional information, which could include outstanding or additional security checks results, information from family members’ cases, and conducting additional interviews.\nAbout 24 percent (138,000) of the applicants who were granted access to USRAP from fiscal year 2011 through June 2016 were awaiting interviews with USCIS (i.e., the applicant had an active case or a case that was on hold but had not received an interview), as of June 2016. RSC Middle East and North Africa (58,000) and RSC Africa (40,000) had the largest number of applications awaiting interviews. Some applicants have waited years to receive a USCIS interview. For example, according to WRAPS data, about 9,000 applications submitted in fiscal years 2011 or 2012 were active in June 2016 and the applicants had not yet received a USCIS interview. About 87 percent of these applications were applicants from Iraq or Somalia. In addition, there were about 6,000 applications received in fiscal years 2011 and 2012 that were on hold and had not received a USCIS interview, 93 percent of whom were from Iraq, Somalia, or Burma. According to State officials, the security situations in Iraq and a refugee camp on the border of Kenya and Somalia where many Somali applicants are located have made it difficult to schedule USCIS interviews at certain times in these locations, among other reasons.", "For applications received from fiscal year 2011 through June 2016 with security check results noted in WRAPS, the Interagency Check was the one that most often resulted in a result of “not clear” based on thresholds set by an interagency process including the intelligence community and law enforcement agencies. However, “not clear” results—meaning, the checks identified security or fraud concerns—represented a small percentage of all results for each of the three biographic checks and the fingerprint check, as of June 2016. Further, of the applicants who were admitted to the United States or had closed applications as of June 2016, the median number of days from initiation of the biographic security checks (at the time of the RSC prescreening interview) through the last completed Interagency Check (which is often the last check prior to departure for the United States) was 247 days.\nAccording to WRAPS data, the overwhelming majority of the about 227,000 applicants from fiscal year 2011 through June 2016 who were admitted to the United States as refugees had “clear” security check results, as of June 2016. However, one applicant who was admitted to the United States in 2012 had his security check status change from “clear” to “not clear” days before his planned travel. The security vetting process at that time did not account for responses from a vetting agency that had not been specifically requested and, therefore, an additional check of security vetting responses after receipt of a final response of “clear” had not been conducted. According to State officials, when the RSC realized the applicant had a “not clear” response, it notified local USCIS officials immediately. USCIS data show that the refugee has since adjusted to legal permanent resident status. According to a USCIS branch chief, at the time of the individual’s adjustment application, the derogatory information (which predicated the “not clear”) had been resolved and there was no basis for USCIS to deny the individual’s adjustment application. State has since updated security SOPs to require RSCs to run daily reports to check if any applicants with imminent travel plans have received an unsolicited Interagency Check “not clear.”", "The length of time to process a USRAP application varies. For example, of the applicants who applied from fiscal year 2011 through June 2016 and had been admitted to the United States, as of June 2016, 27 percent were processed in less than 1 year, 47 percent between 1 and 2 years, and 26 percent in more than 2 years. Figure 6 shows the cumulative length of time (median number of days) of key phases in the USRAP process. The lengthiest phase was from the time USCIS approved the applicant through arrival in the United States (a median of 189 days).", "", "State and RSCs have various policies and SOPs, trainings, and quality checks related to refugee case processing and prescreening.\nPolicies and SOPs for USRAP. State’s USRAP Overseas Processing Manual provides an outline of the policies and procedures involved in overseas processing for USRAP, including instructions for using WRAPS, requirements for what information RSCs should collect during prescreening, and instructions and requirements for initiating certain national security checks, among other things. In addition, State developed SOPs for processing and prescreening refugee applications at RSCs, which State officials indicated provide baseline standards for RSC operations. Further, all four of the RSCs we visited provided us with their own local SOPs that incorporated the topics covered in State’s SOPs. Directors at the remaining five RSCs also told us that they had developed local SOPs that covered the overarching USRAP requirements.\nWe observed how RSC staff implemented State’s case processing and prescreening policies and procedures during our site visits to four RSCs from June 2016 to September 2016. Specifically, we observed 27 prescreening interviews conducted by RSC caseworkers at the four RSCs we visited and found that these caseworkers generally adhered to State requirements during these interviews. For example, RSC caseworkers we observed reviewed applicants’ identification documents (e.g. passport, birth certificate, or marriage certificate) and recorded name variations (e.g. alternate spellings to confirm identity and for use in security checks); recorded “family tree” information (for security checks and to confirm family relationships for subsequent applicants); and recorded the applicants’ flight paths and persecution stories (to be used by USCIS officers in their interviews and to determine if the applicant qualifies as a refugee). In one location, we observed that RSC caseworkers were not consistently asking applicants during the prescreening interviews if they had any other aliases or nicknames. Further, USCIS officers identified the same issue in three separate RSCs, during circuit rides in fiscal years 2014, 2015, and 2016, according to RAD trip reports. Asking about aliases and nicknames is an expected practice for all RSC staff conducting prescreening interviews, according to State and RSC officials, because the information could be useful and important during an applicant’s biographic national security checks. Further, State officials said that if aliases are not identified prior to USCIS interview, it may delay processing because when USCIS officers identify additional names the RSCs must resubmit security checks. We brought the issue to the attention of RSC and State management, and, in response to our observations, the RSC revised its local SOPs to more clearly instruct RSC caseworkers to ask applicants if they had any aliases or nicknames, and State revised its prescreening SOPs and informed all other RSCs of the change.\nIn addition, we observed how RSC staff in all four locations implemented additional required procedures during our site visits, such as initiating required security checks through WRAPS and compiling case file information for USCIS interviewing officers, and found that these RSC staff were complying with SOPs. Further, all nine RSC directors we interviewed stated that they were familiar with State’s requirements for their location and reported implementing them.\nTraining on USRAP requirements. On the basis of our analysis of State’s cooperative agreements, RSC monitoring documents submitted to State, and interviews with State headquarters’ officials and all nine RSC directors, we found that these RSCs reported having various trainings for their staff. According to State officials, they have not developed specific training requirements for all RSCs because each RSC has different needs and conditions requiring individualized training programs. All nine RSC directors with whom we spoke said they have training programs ranging from technical trainings (e.g., WRAPS or interview training) to shadowing programs in which newly-hired staff observe more experienced RSC employees performing their duties. During our September 2016 site visit to RSC Africa, for example, we observed new-hire training for RSC caseworkers, as well as more experienced caseworkers mentoring and coaching the newer staff. At RSC Latin America, according to the director, new staff receive 1 week of WRAPS training and observe more experienced caseworkers conduct prescreening interviews until the new staff member is able to conduct the interviews alone.\nQuality control checks. On the basis of our analysis of RSC monitoring documents submitted to State, cooperative agreements, observations at the four RSCs we visited, and interviews with State headquarters’ officials and all nine RSC directors, RSCs have quality control checks to oversee case processing and prescreening to help ensure that RSC staff collect accurate and reliable information. For example, at all four RSCs we visited, we observed staff conducting both electronic and manual quality control checks of case information. Specifically, after the prescreening interview, RSC staff in all four locations reviewed the hard copy case file and ran checks in WRAPS for errors or omissions. Further, all four RSCs we visited had a dedicated quality control unit that is to monitor data quality and review regular data monitoring reports. Moreover, RSC directors in the other five locations stated that they have similar quality control checks in place, and all nine RSC directors stated that there are quality control checks at every stage of the USRAP process from case creation in WRAPS to when refugees are about to depart for the United States.\nAccording to USCIS officials we interviewed at headquarters and in the field, RSCs generally provide the information that USCIS officers needed to adjudicate applications, but they also identified areas for improvement during some circuit rides. For example, all 10 USCIS officers that we interviewed who participated in the circuit rides associated with our site visits stated that the information gathered by RSCs during the prescreening process was generally accurate, complete, and useful. However, 4 of these officers stated that they have encountered some errors when RSCs provided case files with missing documents or information. In addition, 70 out of the 107 RAD trip reports we analyzed contained feedback on RSC activities. Of these 70 reports, 10 reports stated that RSCs generally prepared the cases well, but 45 reports identified concerns with the quality of certain case files, including missing documentation. According to USCIS officials, missing documentation can lead to delays during the circuit ride while RSC staff obtain and provide copies of the missing documents or USCIS officers obtain the missing information during the interview. In addition, USCIS officers may need to place the application on hold until the missing documentation can be obtained. USCIS officers and State officials we interviewed stated that some of the missing information could only have been obtained during the USCIS interviews with applicants, while others stated that applicants can forget or neglect to give RSC staff all of their documentation despite repeated reminders from RSC staff. Further, five of the nine RSC managers stated that they request USCIS officers submit feedback at the end of circuit rides on the quality of the case file content and interpreters, and three of these RSC managers stated that they take action based on USCIS’s feedback. For example, RSC managers in two locations stated that they have excluded certain interpreters—who are hired on daily contracts—from subsequent circuit rides based on the feedback from USCIS officers. Additionally, USCIS officials stated that their supervisory officers often meet with RSC staff throughout and at the conclusion of a circuit ride to offer feedback on case preparation, among other things. USCIS headquarters officials also offer feedback to State headquarters officials on RSC operations after circuit ride teams return to Washington, D.C.", "State has control activities in place to monitor how RSCs implement policies and procedures for USRAP, but it does not have outcome-based performance indicators to assess whether RSCs are meeting their objectives under USRAP. Consistent with State’s January 2016 Federal Assistance Policy Directive, and according to State officials, State is required to monitor the RSCs it funds, whether through cooperative agreements or voluntary contributions. State funds four RSCs through cooperative agreements, four through a voluntary contribution to the International Organization for Migration (IOM), and self-operates the final RSC (RSC Cuba). On the basis of our interviews with State officials and as reflected in documentation from all nine RSCs, including quarterly reports to State, all RSCs have generally undergone the same monitoring regime regardless of funding mechanism. The four cooperative agreements and MOU with IOM establish objectives for the RSCs, which include interviewing applicants to obtain relevant information for the adjudication and ensuring the accuracy of information in WRAPS and the case files. State also establishes annual targets for the number of refugees who depart for the United States from each RSC.\nIn addition, the cooperative agreements between the RSCs and State specify that State will periodically visit and evaluate the general performance of RSC operations. They also require RSCs to provide State with regular written reports on whether performance is in compliance with all the terms and conditions of the agreement. Consistent with funding requirements, the four RSCs with cooperative agreements submitted quarterly reports to State in fiscal year 2015, for example, that included information on how each RSC is addressing USRAP objectives. The reports included the number of applicants prescreened each quarter, the number of approved applicants who received cultural orientation training, and how RSCs compile applicant information. In addition, the four RSCs operated by IOM submitted quarterly reports using the same template.\nFurther, according to State officials, the department has dedicated Program Officers located in Washington, D.C., and Refugee Coordinators based in U.S. embassies worldwide, who are responsible for providing support to RSCs and monitoring their activities. State headquarters officials and Refugee Coordinators we met with at the four RSC locations we visited told us that they have daily, informal interaction—via telephone, e-mail, or in-person—with the RSCs. State’s Program Officers also stated that they coordinate regularly with RSCs and conduct annual monitoring visits at RSCs to assess RSCs’ performance and complete monitoring reports based on their visits. We reviewed monitoring reports from eight State site visits to RSCs completed between 2015 and 2016 and found that some included narrative discussions of RSC case processing and timeframes, records management, coordination with other USRAP partners, and other topics. However, not all monitoring reports included consistent information on the same topics. For example, four of the eight monitoring reports we analyzed did not contain information on RSC case processing, prescreening interviews, and security check activities. Further, Program Officers are to complete separate monitoring reports for RSCs funded through cooperative agreements that assess the degree to which RSCs are making progress towards objectives based on project indicators. The indicators for RSCs, according to two fiscal year 2016 reports we reviewed, include the number of individuals prescreened and presented to USCIS for interview, the number of individuals who received cultural orientation training, the number of refugees that departed from those RSCs to the United States, and whether the RSCs ran security checks on all applicants. According to State officials, they also conduct daily monitoring of RSC activities through WRAPS data, which may be useful for monitoring RSC workload or data quality issues.\nAlthough State has established objectives and monitors several quantitative goals for RSCs—including the number of refugees that depart each year for the United States and the number of applicants who receive cultural orientation training—it has not established outcome- based performance indicators for key RSC activities such as prescreening applicants or accurate case file preparation, or monitored RSC performance consistently across such indicators. Specifically, neither the quarterly reports nor other monitoring reports we examined have or use consistent outcome-based performance indicators from which State Program Officers could evaluate whether RSCs were consistently and effectively prescreening applicants and preparing case files—key RSC activities that have important implications for timely and effective USCIS interviews and security checks. RSCs collect performance information from USCIS officers through surveys or in- person feedback sessions at the end of circuit rides, which could help inform the development of outcome-based performance indicators. For example, the survey asks USCIS officers to rate the quality of the RSC staff’s documentation of the applicants’ persecution claim. State could develop an indicator from this information and measure progress against it.\nAccording to State’s January 2016 policy directive, all assistance awards made by bureaus, offices, and posts—both domestic and overseas— within the department with assistance-awarding authority should have a monitoring plan that includes goals, objectives, and indicators that are outcome-oriented and capable of measuring the recipient’s progress in meeting these goals. In addition, according to State’s Performance Management Guidebook, a program requires a systematic process for monitoring the achievement of program activities; analyzing performance to track progress toward planned results; and using performance information and evaluations to influence program implementation and results. The guidebook states that each bureau, program, or project should establish goals; have specific measurable, outcome-oriented objectives; and develop and monitor performance indicators that focus on the results or effects caused. Moreover, in accordance with GPRA, as updated by GPRAMA, performance measurement is the ongoing monitoring and reporting of program accomplishments, particularly towards pre-established goals, and agencies are to establish performance measures to assess progress towards goals. These measures should link program efforts to desired outcomes. While GPRAMA is applicable to the department or agency level, performance goals and measures are important management tools to all levels of an agency.\nState officials said that in September 2016 they began to staff a new policy section within State’s Office of Admissions, and staff within this section are to begin standardizing the reporting of monitoring efforts, among other things. In addition, as of March 2017, according to State officials, the department and IOM were in the process of revising the MOU to include, among other things, new monitoring and reporting requirements that includes performance indicators. These officials also stated that, in future cooperative agreements, they plan to build on performance indicators developed by IOM while ensuring outcome-based results. However, as of March 2017, State did not have documentation or timelines for its plans to develop outcome-based performance indicators. Developing outcome-based performance indicators, as required by State policy and performance management guidance, and monitoring RSC performance against such indicators on a regular basis, would better position State to determine whether all RSCs are processing refugee applications in accordance with their responsibilities under USRAP.", "", "", "USCIS has policies and procedures to determine how to assign officers— RAD, IO, and temporary duty officers from other USCIS divisions—on circuit rides to adjudicate USRAP applications. According to USCIS officials, each fiscal year, based on State’s determination of the estimated number of cases that will be ready for USCIS interviews, RAD and IO divide responsibility for the anticipated workload. In general, RAD officers adjudicate refugee applications in locations where the caseload is large, such as Jordan and Kenya. According to USCIS officials, IO officers generally adjudicate refugee applications in locations where the refugee caseload is small, such as Pakistan, or where IO has a permanent office presence, such as Moscow, Russia. In fiscal year 2016, USCIS interviewed 43,705 refugee cases comprising 120,919 individuals. RAD interviewed 36,706 and, IO interviewed 6,999 of these cases.\nUSCIS solicits a pool of temporary duty (temporary) officers from offices throughout USCIS who have volunteered to adjudicate refugee applications on circuit rides, contingent upon receiving additional training, when RAD or IO do not have sufficient staff capacity to meet the workload demands. According to RAD headquarters officials, there are no restrictions on assigning temporary officers to particular circuit rides. RAD officials stated that they generally assign RAD and temporary officers based on officers’ availability and interview experience. Additionally, temporary officers may commit to doing one or more circuit rides over one or more fiscal years. USCIS headquarters officials acknowledged that applications in some locations are more difficult to adjudicate than others and some temporary officers may not be as proficient or experienced at adjudicating applications as permanent RAD and IO officers. As a result, as resources permit, RAD and IO officials stated that they try to place temporary officers on circuit rides with caseloads that are best suited for their experience level. RAD headquarters officials also stated that, historically, they have planned for temporary officers to conduct approximately 15 to 25 percent of RAD’s refugee interviews and expect temporary officers to continue to be part of their workforce plan. When the refugee ceiling increased to 85,000 in fiscal year 2016, RAD increased the number of temporary officers on circuit rides to meet immediate mission needs while also working to hire additional refugee officers. RAD officials stated that, in fiscal year 2016, temporary staff completed 41 percent of RAD’s interviews. As of March 2017, RAD officials stated that they have undertaken significant hiring efforts in the past year, reducing the need for temporary officers. In addition, IO officials stated that fewer than 25 percent of the officers who participated in IO circuit rides in fiscal year 2016 were temporary officers. As of March 2017, IO officials stated that they do not plan to use temporary officers to adjudicate refugee applications for the remainder of fiscal year 2017.", "USCIS has developed policies and procedures for adjudicating refugee applications. These policies and procedures apply to RAD, IO, and temporary officers and include policies and procedures for how officers are to review the case file before the interview and conduct the interview as well as how supervisors are to review applications to ensure they are legally sufficient. For example, USCIS has developed a refugee application assessment tool that all officers are to use when interviewing the applicant to determine if the applicant was appropriately granted access to USRAP, had past persecution or a well-founded fear of persecution, is credible, is not a persecutor, and is admissible to the United States—including whether the applicant might be inadmissible due to national security or terrorism-related concerns. According to the assessment tool, at the time of interview, the USCIS officer is responsible for ensuring that appropriate security checks have been completed before making a decision on the application. Further, after receiving a completed refugee case file, supervisors are to review all forms and documents in the file that are relevant to establishing eligibility for refugee resettlement, including any documents provided by UNHCR or the RSC and those completed by the interviewing officer. Supervisors are to review the case file completed by the interviewing officer to ensure that the officer’s decision is legally sufficient, that the officer has reviewed security check results, and that all sections of the refugee application assessment are accurate and complete. In addition, USCIS has developed policies and procedures for determining when to place applications on hold. Specifically, officers may place an application on hold when the officer cannot make a final decision at the time of the interview—for example, if the outcomes of all required security checks are not yet available or if national security indicators requiring additional research become known to the officer at any point during the interview.\nWe observed 29 USCIS RAD refugee interviews (including interviews by RAD officers and temporary officers) at four RSCs that we visited from June 2016 to September 2016 and found that the interviewing officers completed all parts of the assessment tool and placed cases that had pending security checks on hold, as required. We also observed that the USCIS officers documented the questions they asked and the answers the applicants provided. We also observed RAD supervisors while they reviewed officers’ initial decisions, interview transcripts, and case file documentation, consistent with RAD policy, at two of the sites we visited. Further, all six of the USCIS officers that we met with stated that supervisors conducted the required supervisory case file review during their circuit rides and the four supervisory officers we met with were aware of the requirements and stated that they conducted the supervisory reviews.", "According to USCIS policy, all USCIS officers who adjudicate refugee applications must complete specialized training, and the training varies based on the USCIS division of the officer (for example, Asylum or Refugee Affairs). However, temporary officers receive a condensed (or shortened) version of the trainings received by full time refugee officers and do not receive infield training. Figure 7 shows the training USCIS officers receive depending on whether they are in RAD, IO, or another USCIS division (i.e., a temporary officer).\nProtection Training. RAD training requirements for refugee officers state that officers are to attend a 4 week, in-person training (referred to as refugee basic training) that is specific to the refugee adjudication process, including classroom sessions, a written exam, and at least three mock interviews. IO headquarters officials stated that IO officers are to attend refugee basic training before adjudicating refugee applications. To adjudicate refugee applications, temporary officers are to have received “protection training,” the content of which varies based on the experience and qualifications of the temporary officer. Specifically, RAD’s training requirements for temporary officers state that officers who have not interviewed refugees in the past year are to receive an abbreviated in- person training that is either 3 days (if the temporary officer has recent interviewing experience for RAIO directorates, such as an asylum officer) or 20 days (if the temporary officer does not have recent interviewing experience for RAIO directorates). On the basis of our review of training syllabi, topics in refugee basic training, and temporary officer trainings include, at a minimum, applicable refugee and other immigration laws, refugee case file review, national security concerns, bars to refugee admission to the United States, and credibility assessment.\nMiddle East Refugee Processing Training. Further, since October 2014, all officers (including temporary officers) who adjudicate applications that include applicants from Iraq and Syria are required to take the week-long Middle East Refugee Processing training. This training provides information to officers on the region’s history, specific country conditions, and additional training on indicators of potential national security concerns—such as military service history—for refugee applicants from Iran, Iraq, and Syria. This training includes briefings from law enforcement and the intelligence community.\nPredeparture briefings. In addition, prior to each RAD circuit ride, all officers, including temporary officers, who will adjudicate applications on that circuit ride are to receive a predeparture briefing that includes, among other things, any updated information on national security concerns and caseload trends for the particular circuit ride population. IO officials stated that their circuit rides are smaller and they do not always have formal predeparture briefings. However, IO officials told us their officers spend time before circuit rides reviewing case files and researching any country conditions or policy updates that officers deem relevant to their cases. All 10 RAD or temporary officers we interviewed who adjudicated applications or reviewed cases on the RAD circuit rides we observed stated that the USCIS trainings—particularly the predeparture briefings—were valuable and helpful.\nIn-field training. RAD officers receive 10 days of “in-field training” from a dedicated trainer on their first circuit ride. According to RAD training requirements and circuit ride trip reports, during the in-field training period, new officers are to observe experienced interviewers, conduct interviews on a reduced schedule, receive individual guidance and performance feedback, and discuss case-specific issues with the trainers. In particular, 3 of the 107 trip reports we analyzed covered circuit rides with in-field training and noted that the in-field training period was valuable for new officers. For example, one report stated that new refugee officers benefited greatly from the in-field trainer’s knowledge and ability to be fully available for training and development. IO officials stated that they do not require formal in-field training for all new officers. Some new IO officers receive formal in-field training on RAD circuit rides, while others on smaller circuit rides may be paired with a more experienced officer and receive in-field mentoring on their first circuit ride. However, temporary officers do not receive in-field training.\nAlthough temporary officers receive training prior to participating in circuit rides, we found that they sometimes face challenges adjudicating refugee applications. For example, we analyzed the 44 available trip reports completed from July 2014 through June 2016 from RAD circuit rides that included temporary officers. In 15 of the 44 reports (about one-third), the RAD circuit ride supervisors noted that temporary officers faced challenges adjudicating refugee applications on the circuit ride. For example, one report indicated that although temporary officers completed the required training and predeparture briefing, they seemed not to have retained much information. Other reports indicated that temporary officers stated that they did not feel prepared to conduct some aspects of administrative and interview processes or that most temporary staff on the circuit ride only began to grasp the full range of law, policy, and procedures after 4 to 5 weeks on the circuit ride. One report also noted that temporary officers required de-facto mentoring on a daily basis. Further, USCIS headquarters officials and two interviewing officers we spoke with told us that some temporary officers make more errors than experienced officers, which contributes to inefficiencies, such as extra hours worked by supervisors. In addition, one temporary officer we observed stated that, despite the training she received, she felt unprepared to adjudicate cases on the first few days of her circuit ride. According to USCIS officials, all adjudications that are finalized have been determined by a supervisor to be legally sufficient. Consistent with USCIS policy, a supervisor is to review each case file and determine that the officer’s decision on the application is legally sufficient, among other things, before the decision is finalized. The supervisor may agree with the officer’s decision, request a reinterview for more information, or overturn the officer’s decision.\nOn the basis of their review of trip reports, USCIS headquarters officials stated that in 2016, they revised the Refugee Processing Overview training (which is required for temporary officers with recent RAIO interviewing experience, such as asylum officers) and the predeparture briefing content (up to 8 days) to include mock interviews and more practical exercises about the refugee adjudication process. We reviewed syllabi for the Refugee Processing Overview training and found that the training increased from 1 day, without mock interviews, in April 2015 to 3 days, with two mock interviews and additional practical exercises about national security and terrorism-related concerns, in March 2016. However, unlike RAD officers and IO officers, USCIS has not offered in- field training for temporary officers.\nStandards for Internal Control in the Federal Government states that management should demonstrate a commitment to recruit, develop, and retain competent individuals. The standards also note that competence is the qualification to carry out assigned responsibilities, and requires relevant knowledge, skills, and abilities, which are gained largely from professional experience, training, and certifications. USCIS officials told us that temporary officers receive a number of accommodations to help them adjudicate applications—including a reduced ramp-up schedule on their first days of interviewing and a compilation of frequently used adjudication tools and guidance—but that USCIS is unable to offer in-field training to temporary officers due to resource constraints.\nIn March 2017, RAD officials also stated that they have undertaken significant hiring efforts in the past year, reducing the need for temporary officers. IO officials also said IO does not plan to use temporary officers for the remainder of fiscal year 2017. Nevertheless, interviewing officers, including temporary officers, play a critical role in the refugee adjudication process, and USCIS may use temporary officers to meet workload demands in the future. Some temporary officers have committed to working on three circuit rides in a 2-year period, and may interview hundreds of refugee cases over that time frame. Further, while enhancing training for temporary officers may require additional resources, the lack of experience and preparation among temporary officers has led to inefficiencies, as described by some USCIS supervisors. To the extent that USCIS uses temporary officers on future circuit rides, providing them with additional training, such as in-field training, would help better prepare them to interview refugees and adjudicate their applications, increase the quality and efficiency of their work, and potentially reduce the supervisory burden on those who oversee temporary officers.", "In addition to training, USCIS has developed guidance documents and tools to help officers identify USRAP applicants with potential national security concerns. However, USCIS could strengthen its efforts by developing and implementing a plan for deploying officers with national security expertise on selected circuit rides. USCIS provides a number of resources to officers to help them identify and address potential national security-related concerns in USRAP applications. Further, security check results (provided by interagency vetting partners) may help officers identify security concerns before the refugee interview. In addition, USCIS’s national security policies and operating procedures require that cases with national security concerns be placed on hold by interviewing officers. These cases are then reviewed by USCIS headquarters staff who have additional specialized training and expertise in vetting national security issues. These headquarters staff can clear the hold, deny the case, or refer the case back to USCIS officers for reinterview with suggested lines of questioning. Further, RAD maintains training lesson plans, guidance on particular issues (such as terrorism-related inadmissibilities), and country conditions information that is accessible to interviewing officers overseas. As discussed above, USCIS provides the most up-to-date guidance to interviewing officers during its predeparture briefings.\nWhile USCIS has training and guidance to adjudicate cases with national security-related concerns, USCIS trip reports and officers we interviewed indicated that it can be challenging to adjudicate such applications. About half of the trip reports we analyzed (52 of 107) identified national security concerns as a training need for future circuit rides or made policy or guidance requests regarding national security concerns. Of these 52 reports, 33 were from circuit rides with no temporary officers and 19 were from circuit rides with a mix of temporary officers and refugee officers. For example, some trip reports generally noted that officers had difficulty identifying what applicant characteristics would be considered potential national security concerns among certain populations being interviewed. In addition, one trip report stated that officers required repeated reminders to elicit all of the necessary details that headquarters reviewers would need to determine whether an applicant posed a national security concern. Further, one supervisor we spoke with during a site visit stated that guidance about identifying cases with national security indicators is ambiguous and, at times, contradictory. Moreover, both RAD and IO headquarters officials we met with stated that interviewing officers are hesitant to make decisions regarding cases with national security concerns, and, as a result, often place cases on hold that are ultimately determined not to have national security concerns. USCIS officials identified several reasons why it is challenging to provide training and guidance on how to adjudicate cases with potential national security concerns. For example, according to RAD and IO headquarters officials, indicators of national security concerns and the country conditions that give rise to them evolve and change; as a result, USCIS guidance on how to address those concerns also changes over time.\nTo further help interviewing officers adjudicate cases with national security concerns, RAD initiated a pilot program in the second and third quarters of fiscal year 2016, through which it sent headquarters USCIS Security, Vetting, and Program Integrity (SVPI) unit officers with national security-related expertise to support interviewing officers on select circuit rides. During these circuit rides, according to RAD and SVPI officials, SVPI officers’ tasks included prescreening case files and applications for national security concerns, flagging those concerns, and recommending lines of questions for USCIS interviewing officers. During our August 2016 visit to Amman, Jordan, we observed 16 interviews of applicants whose case files the SVPI officer had prescreened for potential national security- related issues; interviewing officers used notes that the SVPI officer provided to inform the questions they asked applicants. In some instances, the SVPI officer stated that he met with the interviewing officer before the interview to discuss potential questions on issues of national security concern that the SVPI officer anticipated might arise. Further, during the interview, the SVPI officer was available for real-time webchats to answer officers’ questions as they arose.\nThe SVPI officer, circuit ride supervisor, and interviewing officers we spoke with in Amman all stated that having SVPI present on the circuit ride was valuable. For example, one temporary officer, who was on her first circuit ride, stated that she could not imagine resolving cases with national security concerns without the in-field help of SVPI. USCIS headquarters officials stated sending an SVPI officer resulted in a decrease in cases requiring headquarters review, although other factors also played a role in this decrease. For example, the on-site SVPI officer was able to resolve some cases with potential national security concerns in the field and was also able to prioritize cases requiring headquarters’ review due to potential national security concerns.\nIn December 2016, RAIO and SVPI officials said they had determined that the SVPI in-field pilot was successful and that they plan to make it a formal part of select circuit rides in the future. These officials stated that they plan to continue to send SVPI officers on select circuit rides with caseloads high in potential national security-related issues, as resources permit. The officials stated that RAD selects which circuit rides will have on-site SVPI support based on several factors, including the number of cases placed on hold for national security-related concerns during previous circuit rides to certain locations and the availability of SVPI staff.\nTo increase SVPI’s ability to support circuit rides, in December 2016, USCIS posted an SVPI job announcement with eight potential vacancies. The announcement stated that the job may require travel of up to 180 days per year on overseas circuit rides. The USCIS officials told us that, as of March 2017, they continue to work to fill these positions and are drafting an SOP that will have guidance about roles and responsibilities for SVPI officers providing on-site support to RAD circuit rides, which they intend to finalize later in 2017. As of April 2017, USCIS reported having filled five of the eight positions. Further, according to USCIS officials, SVPI initiated a test of the operational aspects of the draft SOP by deploying a supervisory SVPI officer on a RAD circuit ride in March 2017. USCIS officials reported in March 2017 that the draft SOP had not yet undergone a legal review. According to these officials, they expect to issue the SOP by July 2017. However, USCIS did not provide documentation or timelines for its plans to expand the use of SVPI officers on selected circuit rides.\nWe have previously reported that, in developing new initiatives, agencies can benefit from following leading practices for strategic planning. Congress enacted GPRAMA to improve the efficiency and accountability of federal programs and, among other things, to update the requirement that federal agencies develop long-term strategic plans that include agencywide goals and strategies for achieving those goals. The Office of Management and Budget (OMB) has provided guidance in Circular A- 11 to agencies on how to prepare these plans in accordance with GPRAMA requirements. We have reported in the past that, taken together, the strategic planning elements established under GPRA, as updated by GPRAMA, and associated OMB guidance, along with practices we have identified, provide a framework of leading practices that can be used for strategic planning at lower levels within federal agencies, such as planning for individual divisions, programs, or initiatives. One of these leading practices is to define strategies and identify resources needed to achieve goals. Strategies should be designed to align activities, core processes, and resources to support the mission. Further, strategies should include milestones as well as a description of the resources needed to meet established goals.\nRAIO officials stated that they plan to deploy SVPI officers on additional circuit rides in the future. While these plans are a positive step for helping officers address potential national security concerns on circuit rides, USCIS has not yet documented these plans or completed an SOP. Given SVPI’s lack of documentation for future plans and challenges identified by USCIS staff in adjudicating cases with potential national security concerns, it is unclear how or when RAIO will fulfill its plans to send national security experts on circuit rides to support interviewing officers. In light of the evolving and significant nature of national security concerns, developing and implementing a plan to deploy additional SVPI officers with national security expertise on circuit rides—including timeframes for deployment and how USCIS will select circuit rides for SVPI deployment—would better ensure that USCIS provides interviewing officers with the resources needed to efficiently and effectively adjudicate cases with national security concerns.", "USCIS has not conducted quality assurance assessments of refugee adjudications since fiscal year 2015 and has not developed plans for subsequent assessments, which help ensure that case files are completed accurately and that decisions by RAD, IO, and temporary officers are well-documented and legally sufficient. The RAIO Directorate conducted a quality assurance review of refugee adjudications in fiscal year 2015. The RAIO Directorate’s 2015 review included a sample of applications adjudicated by RAD and IO during one quarter of the fiscal year, which was not representative of all RAD and IO applications for the fiscal year. The 2015 quality assurance review found that most cases in the sample were legally sufficient. However, the review indicated that there were differences between RAD and IO adjudications. Specifically, the review rated 69 of 80 RAD case files (86 percent) as good or excellent, and rated 36 of 73 IO case files (49 percent) as good or excellent. Two of 80 RAD case files (less than 3 percent) in the review and 17 of 73 IO case files (23 percent) were rated as not legally sufficient. According to the assessment, USCIS placed these cases on hold or requested that RSCs schedule the applicants for reinterview. Among cases rated not legally sufficient, the most common deficiency identified was that interviewing officers did not fully develop the interview record with respect to possible inadmissibilities. Other deficiencies reported included interview records not being fully developed with respect to well-founded fear of persecution, improper documentation and analysis of terrorism-related inadmissibility concerns, incorrect hold determination, and required sections of the assessment leading to the adjudication decision that were incomplete. RAIO identified issues related to training and guidance for IO officers as well as supervisory review that may have led to these deficiencies.\nRAIO developed six high-priority action items to address the identified deficiencies in the quality assurance review and, as of November 2016, RAD and IO officials have made progress toward implementing them. For example, in 2016, IO issued a memorandum with required qualifications for IO officers who conduct supervisory review of refugee applications and provided additional guidance on which questions officers must ask during the interview in specific locations to ensure legal sufficiency. RAD and IO officials stated that they have taken steps to implement other action items identified in the 2015 review, such as incorporating more national security-related research, as appropriate, into the case file reviews that IO officers complete as part of their circuit ride predeparture preparation.\nRAIO officials stated that they have not completed a quality assurance review since fiscal year 2015, and, as of March 2017, do not know whether they will do so in fiscal year 2017. USCIS officials stated that they did not conduct a review in fiscal year 2016 for two reasons. First, in fiscal year 2016, RAIO officials stated that they faced resource constraints because they were focused on hiring and training new staff, and training and quality assurance are handled by the same team within RAIO. Second, the officials stated that there was value in allowing time for the action steps identified after the 2015 review to be implemented before conducting another review to identify if the action steps addressed the deficiencies noted in the prior review. RAIO officials also stated that even though they do not yet know whether they will conduct a quality assessment in fiscal year 2017, supervisors continue to review each refugee case file for legal sufficiency and completeness at the time of the interview. While supervisory review is an important quality control step, it does not position USCIS to identify systematic quality concerns, such as those identified in the fiscal year 2015 quality assessment results.\nUSCIS’s January 2015 RAD and IO Roles and Responsibilities with Respect to Refugee Processing memorandum states that RAD is to establish quality assurance criteria and design the quality assurance program for refugee adjudications, in consultation with IO. The 2015 memorandum further states that RAD will conduct quality assurance reviews of refugee cases adjudicated by temporary officers, IO staff, and permanent RAD staff. Further, Standards for Internal Control in the Federal Government states that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. The scope and frequency of evaluations are to depend on the assessment of risks, effectiveness of ongoing monitoring, and rate of change within the entity and its environment. In addition, standard practices for program management state that program quality should be monitored on a regular basis to provide confidence that the program will comply with the relevant quality policies and standards.\nAlthough there have been significant changes in the refugee caseload in the past 2 years (such as the increase in Syrian refugees), an increased use of temporary staff to conduct refugee adjudications in fiscal year 2016, and the difference in quality between RAD and IO adjudications noted in the 2015 quality assurance review, USCIS did not conduct quality reviews in 2016 and has no plans to conduct them in 2017. Regular quality assurance reviews could help provide USCIS reasonable assurance that RAD officers, IO officers, and temporary officers are consistently, accurately, and sufficiently documenting their adjudication decisions. Conducting regular quality assurance assessments of refugee adjudications would also provide USCIS officials with key information about the quality of USCIS refugee adjudications and allow them to identify any areas where officers face challenges, allowing RAD and IO to target training or guidance to areas where it may be most needed.", "", "Fraud can occur in the refugee process in a number of ways, and State, RSCs, and USCIS have implemented certain mechanisms to help detect and prevent fraud by USRAP applicants. In general, immigration benefit fraud often involves the willful misrepresentation of material fact for the purpose of obtaining an immigration benefit, such as refugee status. Immigration benefit fraud is often facilitated by document and identity fraud. Document fraud includes forging, counterfeiting, altering, or falsely making any document, or using, possessing, obtaining, accepting, or receiving such falsified documents in order to satisfy any requirement of, or to obtain a benefit under, U.S. law. Identity fraud refers to the fraudulent use of others’ valid documents. In the context of USRAP, applicants may attempt to apply for refugee status after having been denied refugee status or another immigration benefit, such as a visa, using another identity. Or, applicants may falsely present themselves as a national of a country eligible for resettlement to gain access to USRAP. Further, applicants may present false marriage claims or attempt to include unrelated children on their case. USCIS officers can encounter indicators of fraud while adjudicating refugee applications, and State has suspended USRAP programs in the past because of fraud. Examples include the following:\nOf the 107 RAD circuit ride trip reports we analyzed, 30 reports identified instances in which officers denied applications for fraud or misrepresentation. According to an SVPI official, applications with indicators of fraud may also be denied on other grounds, such as ineligibility, inadmissibility, and security check results, among others.\nIn 2008, State suspended the P3 program, a family reunification program between a family member in the United States and the refugee applicant, because of widespread fraud, as discussed below.\nIn 2015, State suspended a P2 program after discovering that two individuals who had been approved as refugees and admitted to the United States had submitted fraudulent documents gain access to USRAP. During the suspension period from March to December 2015, State and RSC officials reviewed all cases that they were processing for this P2 program. According to State officials, this review found additional applicants with fraudulent documents.\nState, RSCs, and USCIS have put mechanisms in place to help detect and prevent fraud by USRAP applicants.\nState. State has guidance intended to help RSC staff identify fraudulent refugee applicants, and State has strengthened access controls for some refugee applicants. For example, State SOPs require that, when entering a new case into WRAPS for prescreening, RSC staff verify that a duplicate record does not already exist in WRAPS for the applicants. According to State SOPs, one of the purposes of this step is to identify individuals who attempt to fraudulently access USRAP. RSC officials at all four locations we visited stated that they complete this procedure and our analysis of WRAPS data showed that RSCs have identified duplicate applicant records. State has also strengthened its controls for granting access to USRAP for some groups of refugee applicants. For example, after suspending the P3 program due to fraud in 2008, State restarted the P3 program in 2012 with additional controls in place, including a requirement for DNA testing for all claimed parent and child biological relationships. In addition, when State initiated the P2 Central American Minors program in 2014—which, like the P3 program, requires a familial relationship between someone residing in the United States and the refugee applicant—State instituted a requirement for DNA testing of all claimed biological relationships between the qualifying child and the qualifying parent. Further, after finding fraud in 2015 in a P2 program, as discussed above, State strengthened the mechanism for verifying access to USRAP.\nRSCs. RSCs have also implemented a variety of controls to help detect and prevent fraud among refugee applicants to USRAP. For example, according to all nine RSC directors, each RSC has a designated anti- fraud official or entity, consistent with GAO’s Fraud Risk Framework. Officials at all nine RSCs stated that they provide staff with training or information on applicant fraud trends. Further, RSC officials in two RSCs stated that they conduct their own research to detect potential applicant fraud. In addition, two of the four RSCs we visited conduct two prescreening interviews for each applicant rather than one. According to RSC officials, conducting more than one interview serves as a fraud deterrent because it allows the RSC staff to check for consistency across interviews and identify false information. Further, these RSCs require, where possible, that different interpreters participate in each interview to decrease the likelihood that applicants collude with interpreters.\nUSCIS. Within USCIS, SVPI and adjudicators are responsible for antifraud activities related to the adjudication of the refugee application. USCIS has implemented a number of control activities to detect and prevent refugee applicant fraud. Through biometric checks, USCIS may identify that a USRAP applicant has multiple identities. According to SVPI officials, SVPI analyzes the results of the checks, identifies fraud indicators, and may complete a fraud referral so that the applicant can be interviewed or re-interviewed by an officer overseas to address the fraud concern. SVPI also receives fraud referrals from other sources, such as refugee officers and the RSCs, although SVPI officials stated that the number of such referrals is small. USCIS officials stated that, in many instances, interviewing officers deny an application with indicators of fraud on other grounds, which does not require the involvement of SVPI or a fraud referral. Interviewing officers may also place a case with indicators of fraud on hold for additional SVPI research. According to USCIS officials and training materials that we reviewed, USCIS officers who adjudicate refugee applications receive training in identifying fraud and processing cases with fraud indicators during basic training and predeparture briefings. We observed discussions about fraud trends at three of the four predeparture briefings that we attended.\nAdditionally, the RAD trip report guide states that supervisors are to document any suspected fraud trends from the circuit ride, including how the fraud trend was identified, any actions taken in response to the trend, whether the trend was expected to continue, and examples of any suspected fraud. Of the 107 trip reports we analyzed, 72 contained information about applicant fraud or fraud trends. The information varied, ranging from detailed descriptions of individual cases denied due to misrepresentation or fraud to a more general description of potential fraud trends in certain populations, such as a lack of reliable marriage documentation. The remaining 35 reports stated that there were no fraud trends or left the section of the report about fraud trends blank, which indicates that the author of the trip report did not identify fraud trends on the circuit ride.", "State and USCIS have not jointly assessed applicant fraud risks across USRAP. Our Fraud Risk Framework calls for program managers to plan and conduct regular fraud risk assessments. According to our Fraud Risk Framework, there is no universally accepted approach for conducting fraud risk assessments, since circumstances among programs vary; however, assessing fraud risks generally involves five actions: (1) identifying inherent fraud risks affecting the program, (2) assessing the likelihood and impact of those fraud risks, (3) determining fraud risk tolerance, (4) examining the suitability of existing fraud controls and prioritizing residual fraud risks, and (5) documenting the program’s fraud risk profile. The framework provides managers with flexibility in deciding whether to carry out this and other aspects of fraud risk management at the program or agency level. In addition, Standards for Internal Control in the Federal Government states that management should consider the potential for fraud when identifying, analyzing, and responding to risks, and analyze and respond to identified fraud risks, through a risk analysis process, so that they are effectively mitigated.\nAlthough State and USCIS perform a number of fraud risk management activities and have responded to individual instances of applicant fraud, these efforts do not position State and USCIS to assess fraud risks program-wide for USRAP or know if their controls are appropriately targeted to the areas of highest risk in the program. State and USCIS officials told us that each agency has discrete areas of responsibility in the refugee admissions process, and each agency’s antifraud activities are largely directed at their portions of the process. State is responsible for managing USRAP at a programmatic level and, according to State officials, State has responded to instances of fraud in USRAP. State officials said that they have not conducted an assessment of the risks associated with applications to USRAP because, according to these officials, such an assessment is USCIS’s responsibility. However, USCIS officials told us that SVPI—USCIS’s antifraud entity for refugee applicant fraud—only has authority over antifraud activities related to the adjudication of the refugee application, including security checks. USCIS officials stated that they are not responsible for, and do not have the authority to respond to, applicant fraud program-wide in USRAP, although they coordinate with State when fraud is brought to the attention of SVPI. As of March 2017, SVPI has a draft Fraud Process SOP, which identifies three main types of applicant fraud in USRAP—individuals who are using multiple identities; individuals who are claiming false family composition, such as marriage fraud; and individuals who are claiming a false country of nationality. In addition, the draft SOP identifies the main sources by which USCIS detects fraud in the USRAP application process—results from biometric checks and testimony and evidence from the USRAP applicant. However, USCIS and State have not jointly conducted a fraud risk assessment of the risks associated with applications to USRAP or determined a fraud risk tolerance for the program.\nBecause the management of USRAP involves several agencies, without jointly and regularly assessing applicant fraud risks and determining the fraud risk tolerance of the entirety of USRAP, in accordance with leading practices, State and USCIS do not have comprehensive information on the inherent fraud risks that may affect the integrity of the refugee application process and therefore do not have reasonable assurance that State, USCIS, and other program partners have implemented controls to mitigate those risks. Moreover, regularly assessing applicant fraud risks program-wide could help State and USCIS ensure that fraud prevention and detection efforts across USRAP are targeted to those areas that are of highest risk, in accordance with the program’s fraud risk tolerance.", "Screening and adjudicating refugee applicants and applications are challenging tasks that involve entities across the U.S. government. RSCs have an important role in the refugee admissions process because they collect applicants’ information and conduct in-person prescreening interviews that USCIS officers use to help determine applicants’ eligibility and credibility. Developing outcome-based performance indicators, as required by State policy and performance management guidance, and monitoring RSC performance against such indicators on a regular basis, would better position State to determine whether RSCs are processing refugee applications in accordance with their responsibilities under USRAP.\nIn addition, adjudicating refugee applications can be challenging. During a face-to-face interview, USCIS officers must, among other things, determine if the applicant meets the definition of a refugee; is inadmissible because of, for example, national security concerns or criminal activities; and is credible. Further, indicators of national security concerns (and the country conditions that give rise to them) evolve and change. To the extent that USCIS uses temporary officers on future circuit rides, providing them with additional training, such as in-field training, would help better prepare them to interview refugees and adjudicate their applications, increase the quality and efficiency of their work, and potentially reduce the supervisory burden on those who oversee temporary officers. Moreover, developing and implementing a plan to deploy additional USCIS SVPI officers with national security expertise on select circuit rides would better ensure that USCIS provides interviewing officers with the resources needed to efficiently and effectively adjudicate cases with national security concerns. In addition, conducting regular quality assurance assessments of refugee adjudications would also provide USCIS officials with key information about the quality of USCIS refugee adjudications and allow them to identify any areas where officers face challenges, allowing RAD and IO to target training or guidance to areas where it may be most needed.\nGiven that USCIS officers encounter indicators of fraud while adjudicating refugee applications and fraud has occurred in USRAP programs in the past, it is important that USCIS and State implement leading practices to combat fraud. Without jointly and regularly assessing applicant fraud risks and determining the fraud risk tolerance of USRAP, in accordance with leading practices, State and USCIS do not have comprehensive information on the inherent fraud risks that may affect the integrity of the refugee application process. Moreover, regularly assessing applicant fraud risks program-wide could help State and USCIS ensure that fraud prevention and detection efforts across USRAP are targeted to those areas that are of highest risk.", "To better assess whether RSCs are meeting USRAP objectives, the Assistant Secretary of State for Population, Refugees, and Migration should take the following two actions: develop outcome-based indicators, as required by State policy; and monitor RSC performance against such indicators on a regular basis.\nTo better ensure that USCIS officers effectively adjudicate applications for refugee status, the Director of USCIS should take the following three actions: provide additional training, such as infield training, for any temporary officers who adjudicate refugee applications on future circuit rides; develop and implement a plan to deploy officers with national security expertise on circuit rides; and conduct regular quality assurance assessments of refugee application adjudications across RAD and IO.\nTo provide reasonable assurance that USRAP applicant fraud prevention and detection controls are adequate and effectively implemented, we recommend that the Secretaries of Homeland Security and State conduct regular joint assessments of applicant fraud risk across USRAP.", "We provided a draft of the sensitive version of this report to the Departments of Homeland Security, State, Defense, and Justice, as well as the Office of Director of National Intelligence, for their review and comment. State and DHS provided written comments stating that they concurred with our recommendations, which are reproduced in full in appendixes III and IV, respectively. In emails, a Director in the Office of the Under Secretary of Defense for Policy at the Departments of Defense and the Legislative Liaison Officer at the Office of Director of National Intelligence stated that these agencies did not have any written comments on our draft report. State, DHS, the Department of Justice, and the FBI provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to interested congressional committees; the Secretaries of Homeland Security, State, and Defense; the Attorney General of the United States; and, the Director for National Intelligence. In addition, the report is available at no charge on the GAO website at http://gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8777 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V.", "The Central American Minors (CAM) Program was established in November 2014 to promote safe, legal, and orderly migration of certain vulnerable children to the United States and began accepting applications on December 1, 2014. This family reunification program aims to deter children from El Salvador, Guatemala, and Honduras from undertaking a risky journey in an attempt to be reunited with a parent residing in the United States. CAM allows certain parents to request access to the U.S. Refugee Admissions Program (USRAP) for their children who are nationals of one of these three countries and are outside of the United States. Children who are found ineligible for admission as a refugee under USRAP but still at risk of harm may be considered for parole—in general a mechanism by which an individual not otherwise admitted to the United States may be permitted entry into the country on a temporary basis. CAM is jointly run by the Department of State’s (State) Bureau of Population, Refugees, and Migration and the Department of Homeland Security’s (DHS) U.S. Citizenship and Immigration Services (USCIS).", "To participate in CAM, both parent and child must meet certain qualifying criteria. Among other criteria, a qualifying parent must be 18 years of age and lawfully present within the United States at the time of application and at the time of admission or parole of the beneficiary (e.g., a qualifying child) to the United States. The qualifying child must be a biological, step, or legally adopted child of the qualifying parent; unmarried; under the age of 21 at the time the qualifying parent initiates the process; and a national of El Salvador, Guatemala, or Honduras. Other family members of the child who meet certain criteria are also eligible to be part of the qualifying child’s application. For example, an accompanying parent who is the legal spouse of the U.S.-based qualifying parent may be eligible to travel with the qualifying child. However, the accompanying parent cannot derive his or her refugee status from the qualifying child and therefore must independently establish that he or she qualifies as a refugee. In July 2016 State and DHS announced that CAM would expand to include additional eligible family members, when accompanied by a qualifying child—(1) the children, regardless of age or marital status, of a U.S.- based qualifying parent; (2) the biological parent of a qualifying child who is not legally married to the U.S.-based lawfully present parent; and (3) the caregiver of a qualifying child who is related to either the U.S.-based lawfully present parent or the qualifying child. State began accepting applications that included these additional family members in November 2016.", "As shown in figure 8, a qualifying parent initiates the CAM application process in the United States by completing a form (DS-7699, or “Affidavit of Relationship” (AOR)) with the help of a resettlement agency—a State- funded entity that provides support services to refugees once they arrive within the United States.\nThe qualifying parent files an AOR with the assistance of a designated resettlement agency, which forwards the AOR to State. State is to conduct a preliminary review of the AOR for completeness, including a check that the qualifying parent has provided proof of his or her lawful status, and then provide the case to Resettlement Support Center (RSC) staff. RSC staff are to prescreen the qualifying children according to the standard operating procedures for all USRAP applicants. Shortly after prescreening, RSCs are to collect the child’s DNA to confirm biological relationships between the parent and the qualifying child. State has established policies and procedures specifically for the collection and processing of DNA samples from the qualifying child. We observed RSC staff taking 5 separate DNA samples at the RSC Latin America San Salvador office, during which staff adhered to the established standard operating procedures for DNA collection. Separately, within the United States, State is to notify the parent in the United States to provide DNA samples to a U.S.-based, accredited lab to confirm the biological relationship with his or her claimed child or children. The parent must also cover the costs associated with the DNA testing, but State is to reimburse the costs of the tests if all the claimed biological relationships are supported by the DNA evidence, even if the beneficiary is not ultimately admitted as a refugee or paroled to the United States. The U.S.-based lab reports the results of DNA testing for all cases to State, which then uploads the results into the Worldwide Refugee Admissions Processing System for viewing by USCIS. Although USCIS does not require DNA testing for other eligible family members included on applications (e.g., the children of the qualifying child or the siblings of the qualifying child who are not biologically related to the U.S.-based parent)—citing, among other factors, concerns over the reliability of such testing between, for example, siblings—USCIS officials stated that additional DNA testing will occur for new CAM categories announced in July 2016.\nAfter prescreening, but before USCIS interviews the child, USCIS’s Refugee Access Verification Unit (RAVU) is to, among other things, take steps to confirm the parent’s lawful status and to review the results of DNA testing, if available. According to USCIS procedures, if RAVU cannot confirm the parent’s status or DNA testing results do not confirm the relationship, USCIS will generally reject the application. According to State data, USCIS rejected or disqualified about 600 (5 percent) of the approximate 12,000 CAM AORs submitted from December 2014 through March 2017. USCIS generally adjudicates CAM applicants as they do all other USRAP applicants. However, according to USCIS policy, and consistent with characteristics of the targeted populations and stated objectives of the program, USCIS officials stated that CAM applicants undergo additional vetting for potential gang affiliations in cases with such indicators. If USCIS concludes that such an applicant is not eligible for admission as a refugee, the applicant may be considered for parole.\nVetting CAM applicants for potential gang affiliation. USCIS policy requires that officers place CAM applications on hold if gang affiliation indicators exist. As with all USRAP applicants, CAM program applicants are inadmissible to the United States as refugees if USCIS officers find them to be persecutors of others, have committed certain crimes, or be a threat to the security of the United States, among other things. Consistent with USCIS policy, USCIS officers may place a case on hold to do additional research or investigation if the officer determines that the applicant or other case members may be inadmissible due to information provided during the interview (e.g., the applicant has a known or suspected gang affiliation). For example, to further review CAM applications from Salvadoran applicants identified by USCIS interviewers as having indicators of possible gang affiliation during the USCIS interview, USCIS staff are to contact the Federal Bureau of Investigation (FBI). For CAM applicants in El Salvador, FBI agents stationed in San Salvador are to coordinate with the government of El Salvador in sharing investigative information on gangs. According to FBI officials, if the FBI has any information on the CAM program applicant and potential gang affiliations, they are to forward the information to USCIS officials, who determine whether the information renders the applicant ineligible for the program. FBI officials in San Salvador said that they receive 6 to 10 requests per month from USCIS for any available information related to CAM program applicants. From December 2014 through March 2017, USCIS officers had placed about 14 percent of CAM applicants they interviewed on hold, and in most cases, according to State data, the hold was for USCIS’s headquarters’ review of possible gang affiliations.\nParole. CAM program applicants found by USCIS to be ineligible for refugee status in the United States are to be considered on a case-by- case basis for parole, which is a mechanism to allow someone who is otherwise inadmissible to enter the United States on a temporary basis for urgent humanitarian reasons or significant public benefit. USCIS procedures require that, to support an authorization of parole, the qualifying child must assert to the USCIS officer during the interview that he or she has a fear of being harmed, and the objective evidence must demonstrate that the child would face a reasonable possibility of harm if he or she remains in their home country. The interviewing officer has discretion to conditionally approve parole, after consideration of the entire record, and several factors—such as the outcome of the security checks or derogatory information (which may include involvement in gangs or other criminal activity)—could lead to a denial of parole. The final decision regarding parole is made by a USCIS officer after review of medical exam results and an additional review of security checks. Once in the United States a parolee, unlike a refugee, is not considered to have been admitted into the country, has not been conferred a lawful immigration status, and does not have the benefit of a pathway to U.S. citizenship. Parole under CAM may be authorized for a period of up to 2 years and parolees are to file their request for re-parole no later than 90 days before the expiration of their authorized parole. Parolees may also apply for employment authorization but the extent to which they may be eligible for other public benefits is determined in accordance with U.S. law.", "Parole has been the most common outcome of CAM program applications, but a lower percentage of parolees have arrived in the United States than those granted refugee status through the program. From December 2014, when the program began accepting AORs, through March 2017, USCIS received AORs for about 12,100 individuals. Most of the AORs submitted were for applicants from El Salvador (86 percent). USCIS had made final decisions on half (6,300) of these applicants, approving 70 percent for parole and granting 29 percent refugee status. According to USCIS officials, more CAM cases receive parole because the generalized violence that applicants experience does not rise to the level of persecution or is not on account of a protected characteristic required to support a refugee determination. However, the officials noted that the conditions in El Salvador, Guatemala, and Honduras, and the fact that the children are living without at least one parent in their country of origin are generally sufficient to demonstrate the fear of harm required to support a parole determination. USCIS officers determined that the remaining 1 percent of applicants did not qualify for refugee status or parole and denied the associated cases. However, a higher percentage of CAM applicants who had received refugee status had arrived in the United States, as of March 2017. Program data on applications submitted from December 2014 through March 2017 show that 63 percent (about 1,100) of all CAM-approved refugees and 33 percent (about 1,500) of CAM approved parolees had traveled to the United States. Parolees must finance their travel to the United States and do not receive benefits upon arrival, circumstances that, according to State officials, most likely account for the difference in CAM refugee and parolee arrivals. Refugees have access to travel loans, and must sign a promissory note to assume responsibility for repaying the cost of travel to the United States. Parolees are also responsible for paying for the costs of medical exams.", "The U.S. Refugee Admissions Program (USRAP) provides refugees who are of special humanitarian concern from around the world with opportunities for resettlement in the United States. The Departments of State (State) and Homeland Security (DHS) have joint responsibility for the admission of refugees to the United States. Specifically, State’s Bureau of Population, Refugees, and Migration coordinates and manages USRAP and makes decisions, along with DHS’s U.S. Citizenship and Immigration Services (USCIS), on which individuals around the world are eligible to apply for refugee status in the United States. Nine State-funded Resettlement Support Centers (RSCs) with distinct geographic areas of responsibility communicate directly with applicants to process their applications, collect their information, conduct a prescreening interview, and prepare applications for adjudication by USCIS. State and its partners—including USCIS—make initial determinations about whether an individual will be accepted into or excluded from USRAP (referred to as program “access”) for subsequent screening and interview by USCIS officers. State has identified three categories of individuals who are of special humanitarian concern and, therefore, can qualify for access to USRAP—Priority 1, Priority 2, and Priority 3. Table 2 describes these priority categories—including the multiple programs that comprise the Priority 2 category—and how State applicants within these priorities gain access to USRAP.", "", "", "", "", "In addition to the contact named above, Kathryn Bernet (Assistant Director), David Alexander, Mona Nichols Blake, Eric Erdman, Cynthia Grant, Brian Hackney, Paul Hobart, Eric Hauswirth, Susan Hsu, Thomas Lombardi, Mike McKemey, Erin McLaughlin, Thomas Melito, Clair Peachey, Mary Pitts, Elizabeth Repko, Judith Williams, and Su Jin Yon made significant contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 2, 3, 3, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 2, 2, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "", "h0_full", "h0_title", "h0_full", "", "", "", "h0_title h1_title", "h1_full", "h0_full h1_full", "h2_title", "h2_title", "", "h2_full", "h2_full", "h2_full", "h2_full", "h3_title", "h3_full", "h3_full", "h3_full h2_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What refugees were admitted to the US from FY2011-2016?", "What countries were the majority of refugees fleeing from?", "What were the Resettlement Support Centers (RSC) funded for?", "What is this information used for?", "What measures exist for processing refugees?", "What requirements does the State's USRAP Overseas Processing Manual include?", "How does the RSC adhere to these requirements?", "How does State monitor RSCs?", "What does State's monitoring lack?", "Why would better performance indicators be better?", "What USCIS policies and procedures for adjudicating applications exist?", "What did USCIS provide for their process?", "How did officers perform their interviews by GAO review?", "How could the USCIS improve their officer training?", "How does USCIS assist officers with nation security concerns?", "What pilot was performed to assist this?", "How did the USCIS rate their performance?", "How should the USCIS advance this pilot?", "What federal internal control standards does the USCIS violate?", "How would meeting these standards assist the USCIS?", "How do the State and USCIS prevent fraud?", "What is included as fraud?", "When is fraud encountered?", "How could assessment of applicant fraud risks program-wide be useful?" ], "summary": [ "From fiscal year 2011 through June 2016, the U.S. Refugee Admission Program (USRAP) received about 655,000 applications and referrals—with most referrals coming from the United Nations High Commissioner for Refugees—and approximately 227,000 applicants were admitted to the United States (see figure).", "More than 75 percent of the applications and referrals were from refugees fleeing six countries—Iraq, Burma, Syria, Somalia, the Democratic Republic of Congo, and Bhutan.", "Nine Department of State- (State) funded Resettlement Support Centers (RSC) located abroad process applications by conducting prescreening interviews and initiating security checks, among other activities.", "Such information is subsequently used by the Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS), which conducts in-person interviews with applicants and assesses eligibility for refugee status to determine whether to approve or deny them for resettlement.", "State and RSCs have policies and procedures for processing refugee applications, but State has not established outcome based-performance measures.", "For example, State's USRAP Overseas Processing Manual includes requirements for information RSCs should collect when prescreening applicants and initiating national security checks, among other things.", "GAO observed 27 prescreening interviews conducted by RSC caseworkers in four countries and found that they generally adhered to State requirements.", "Further, State has control activities in place to monitor how RSCs implement policies and procedures.", "However, State has not established outcome-based performance indicators for key activities—such as prescreening applicants and accurate case file preparation—or monitored RSC performance consistently across such indicators.", "Developing outcome-based performance indicators, and monitoring RSC performance against such indicators on a regular basis, would better position State to determine whether RSCs are processing refugee applications in accordance with their responsibilities.", "USCIS has policies and procedures for adjudicating applications—including how its officers are to conduct interviews, review case files, and make decisions on refugee applications—but could improve training, the process for adjudicating applicants with national security concerns, and quality assurance assessments.", "For example, USCIS has developed an assessment tool that officers are to use when interviewing applicants.", "GAO observed 29 USCIS interviews and found that officers completed all parts of the assessment.", "USCIS also provides specialized training to all officers who adjudicate applications abroad, but could provide additional training for officers who work on a temporary basis, which would better prepare them to adjudicate applications.", "In addition, USCIS provides guidance to help officers identify national security concerns in applications and has taken steps to address challenges with adjudicating such cases.", "For example, in 2016, USCIS completed a pilot that included sending officers with national security expertise overseas to support interviewing officers in some locations.", "USCIS determined the pilot was successful and has taken steps to formalize it.", "However, USCIS has not developed and implemented a plan for deploying these additional officers, whose expertise could help improve the efficiency and effectiveness of the adjudication process.", "Further, USCIS does not conduct regular quality assurance assessments of refugee adjudications, consistent with federal internal control standards.", "Conducting regular assessments of refugee adjudications would allow USCIS to target training or guidance to areas of most need.", "State and USCIS have mechanisms in place to detect and prevent applicant fraud in USRAP, such as requiring DNA testing for certain applicants, but have not jointly assessed applicant fraud risks program-wide.", "Applicant fraud may include document and identity fraud, among other things.", "USCIS officers can encounter indicators of fraud while adjudicating refugee applications, and fraud has occurred in USRAP programs in the past.", "Because the management of USRAP involves several agencies, jointly and regularly assessing fraud risks program-wide, consistent with leading fraud risk management practices and federal internal control standards, could help State and USCIS ensure that fraud detection and prevention efforts across USRAP are targeted to those areas that are of highest risk." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 1, -1, 3, -1, -1, 0, -1, -1, -1, 4, 5, 5, -1, 8, -1, 0, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 5, 5, 5, 5, 5, 5, 6, 6, 6, 6, 6, 6, 6, 6, 6, 6, 8, 8, 8, 8 ] }

{ "title": [ "Background", "Custody Rule Requirements and Compliance Costs Vary across Advisers", "Custody Rule Requirements Are Intended to Safeguard Client Assets", "Compliance Requirements and Costs Vary", "SEC Views Advisers Using Related but Operationally Independent Custodians as Posing Relatively Low Risk", "SEC Excepted Advisers from Surprise Examination Requirement for Several Reasons", "A Limited Number of Advisers Do Not Undergo Surprise Examinations Because They Use Related but Operationally Independent Custodians", "Views on the Surprise Examination’s Exception and Effectiveness", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Investment advisers provide a wide range of investment advisory services and help individuals and institutions make financial decisions. From individuals and families seeking to plan for retirement or save for college to large institutions managing billions of dollars, clients seek the services of investment advisers to help them evaluate their investment needs, plan for their future, and develop and implement investment strategies. Advisers can include money managers, investment consultants, and financial planners. They commonly manage the investment portfolios of individuals, businesses, and pooled investment vehicles, such as mutual funds, pension funds, and hedge and other private funds. Many investment advisers also engage in other businesses, such as insurance broker or broker-dealer services. Many investment advisers charge clients fees for investment advisory services based on the percentage of assets under management, but others may charge hourly or fixed rates and, in certain circumstances, performance fees.\n15 U.S.C. § 80b-2(a)(11).\nAdvisers Act’s registration requirement.broad fiduciary duty on advisers to act in the best interest of their clients.\nThe Advisers Act imposes a Most small- and mid-sized advisers are regulated by the states and prohibited from registering with SEC.an exemption from registration must register with SEC. To register, applicants file a Form ADV with SEC. Once registered, an adviser must update the form at least annually. SEC-registered advisers are subject to five types of requirements: (1) fiduciary duties to clients; (2) substantive prohibitions and requirements, including that advisers with custody of client assets take steps designed to safeguard those client assets; (3) contractual requirements; (4) record-keeping requirements; and (5) oversight by SEC.\nLarge advisers who do not meet SEC oversees registered investment advisers primarily through its Office of Compliance Inspections and Examinations, Division of Investment Management, and Division of Enforcement. Specifically, the Office of Compliance Inspections and Examinations examines investment advisers to evaluate their compliance with federal securities laws, determines whether these firms are fulfilling their fiduciary duty to clients and operating in accordance with disclosures made to investors and contractual obligations, and assesses the effectiveness of their compliance-control systems. The Division of Investment Management administers the securities laws affecting investment advisers and engages in rule making for consideration by SEC and other policy initiatives that are intended, among other things, to strengthen SEC’s oversight of investment advisers. The Division of Enforcement investigates and prosecutes certain violations of securities laws and regulations.\nNearly 10,000 advisers were registered with SEC as of April 1, 2013.Collectively, these advisers managed nearly $54 trillion in assets for about 24 million clients. The majority of these SEC-registered advisers each managed less than $1 billion in assets, and a majority had 100 or fewer clients. Specifically, as shown in figure 1, about 71 percent of the registered advisers (around 7,133 advisers) managed less than $1 billion in assets. Furthermore, the largest 94 registered advisers (about 1 percent of all SEC-registered advisers) managed about 50 percent of the total regulatory assets under management.\nIn addition, as shown in figure 2, about 6,000 registered advisers (nearly 60 percent of all registered advisers) reported having 100 or fewer clients, while approximately 1,200 advisers (around 12 percent of all registered advisers) reported having more than 500 clients.", "An adviser indirectly, client funds or securities or has any authority to obtain possession of them, in connection with advisory services provided by the adviser to the client. Custody includes: possession of client funds or securities; any capacity that gives the adviser legal ownership or access to client assets, for example, as a general partner of a limited partnership, managing member of a limited liability company, or a comparable position for another pooled investment vehicle (e.g., hedge fund); or any arrangement, including a general power of attorney, under which the adviser is authorized or permitted to withdraw client funds or securities maintained with a custodian upon its instruction to the custodian.", "SEC’s custody rule regulates the custody practices of investment advisers and contains a number of investor protections. The rule requires advisers that have custody to maintain client assets with a “qualified custodian,” which includes banks and savings associations, registered broker-dealers, registered futures commission merchants, and certain foreign financial institutions. This requirement, along with other parts of the rule, helps prevent client assets from being lost or stolen. Furthermore, qualified custodians are subject to regulation and oversight by federal financial regulators and self-regulatory organizations. Some registered advisers also engage in other businesses, such as broker- dealers that provide custodial services to themselves or related advisers.\nThe rule requires advisers that have custody of client assets to have a reasonable basis, after due inquiry, for believing that the custodian sends periodic statements directly to the clients. An adviser can satisfy the due-inquiry requirement in a number of ways, such as by receiving a copy of the account statements sent to the clients or written confirmation from the custodian that account statements were sent to the adviser’s clients. This requirement serves to help assure the integrity of account statements and permit clients to identify any erroneous or unauthorized transactions or withdrawals by an adviser. If an adviser also elects to send its own clients account statements, it must include a note urging its clients to compare the custodian’s and adviser’s account statements.\nThe SEC custody rule requires advisers with custody of client assets to hire an independent public accountant to conduct an annual surprise examination, unless the advisers qualify for an exception. A surprise examination is intended to help deter and detect fraudulent activity by having an independent accountant verify that client assets—of which an adviser has custody—are held by a qualified custodian in an appropriate account and in the correct amount. The accountant determines the time of the examination without prior notice to the adviser, and the accountant is to vary the timing of the examination from year to year. SEC initially required all advisers to undergo surprise examinations when it adopted the custody rule in 1962. Over the following decades of administering the custody rule, SEC staff provided no-action relief from the surprise examination requirement where other substitute client safeguards were implemented. In 2003, SEC amended the custody rule by generally requiring an adviser to maintain client assets with qualified custodians and relieving the adviser from the examination requirement if its qualified custodian sent account statements directly to the adviser’s clients. In its proposed rule at that time, SEC noted that the examination was performed only annually, and many months could pass before the accountant had an opportunity to detect a fraud. In its 2009 proposed amendments, SEC revisited the 2003 rule making in light of its significant enforcement actions alleging misappropriation of client assets. In expanding the surprise examination requirement, SEC noted that an independent public accountant may identify misuse that clients have not, which would result in the earlier detection of fraudulent activities and reduce resulting client losses.\nWhile SEC expanded the reach of the surprise examination requirement in its final 2009 rule amendments, it provided several exceptions to the requirement. As shown in figure 3, advisers meeting the following conditions may not be required to undergo a surprise examination: an adviser that is deemed to have custody of client assets solely because of its authority to deduct fees from client accounts; an adviser that is deemed to have custody because a related person has custody, and the adviser is “operationally independent” of the related person serving as the custodian; or an adviser to a pooled investment vehicle (e.g., hedge fund) that is subject to an annual financial statement audit by an independent public accountant registered with and subject to regular inspection by the Public Company Accounting Oversight Board (PCAOB) and distributes the audited financial statements prepared in accordance with generally accepted accounting principles to its clients is deemed to have satisfied the surprise examination requirement.\nAdvisers that maintain client assets as the qualified custodian or use a related person qualified custodian rather than maintaining client assets with an independent qualified custodian may present higher risk to clients. In recognition of such risk, SEC also imposed in its 2009 rule amendments a new internal control reporting requirement on advisers that maintain client assets or use related person qualified custodians (see fig. 3 above). The internal control report must include an opinion of an independent public accountant as to whether suitable controls are in place and operating effectively to meet control objectives relating to custodial services. This includes the safeguarding of assets held by the adviser or related person. An adviser that directly maintains client assets as a qualified custodian or maintains client assets with a related person qualified custodian must obtain or receive from its related person an internal control report annually from an accountant that is registered with and subject to regular inspection by PCAOB. Advisers qualifying for a surprise examination exception because of their use of a related person but operationally independent custodian still must obtain an internal control report from their related person.\nIn conjunction with the amendments to the custody rule, SEC also amended its record-keeping rule. The revised rule requires advisers to maintain a copy of any internal control report obtained or received pursuant to the SEC custody rule. The rule also requires advisers, if applicable, to maintain a memorandum describing the basis upon which they determined that the presumption that any related person is not operationally independent under the custody rule has been overcome. According to SEC, requiring an adviser to retain a copy of these items provides SEC examiners with important information about the safeguards in place and assists SEC examiners in assessing custody-related risks.", "Around 4,400 advisers, about 45 percent of all SEC-registered advisers, reported having custody (for reasons other than their authority to deduct In addition, fees) of over $14 trillion in client assets as of April 1, 2013.around 500 advisers, about 11 percent of the 4,400 advisers with custody, reported serving as the qualified custodian or having a related person qualified custodian of client assets. As discussed, the SEC custody rule imposes certain minimum requirements generally on all advisers with custody, but not all of the rule’s requirements apply to all advisers. Instead, the rule generally imposes more stringent requirements on advisers whose custodial arrangements, in SEC’s view, pose greater risk of misappropriation or other misuse of client assets.\nAccording to representatives from industry associations and advisers that we interviewed, advisers can incur an array of direct and indirect costs to comply with the SEC custody rule. Direct costs, such as accounting and legal fees paid by advisers, tend to be more easily measured than indirect costs, such as staff hours spent by an adviser to comply with the rule. The representatives told us that compliance costs include the following: Initial costs: After the SEC custody rule was amended in 2009, advisers initially incurred indirect costs (largely management and staff hours) and, in some cases, direct costs (largely consulting or legal fees) to interpret the amendments and comply with the rule’s new or amended requirements. For example, one adviser told us that his firm hired a law firm to help it interpret the amended rule, hired a part-time person for 6 months to review and determine over which accounts the adviser had custody, and utilized staff to reprogram the firm’s information system to code accounts under custody. Another adviser told us that his firm had the necessary in-house expertise to interpret the amended rule but nevertheless expended considerable internal resources for training staff about the surprise examination requirements and searching for and hiring an accountant to conduct the examinations.\nRecurring costs: On an ongoing basis, advisers incur indirect and, in some cases, direct costs to comply with the custody rule. Advisers expend internal staff hours to maintain records and prepare required statements and disclosures, including Form ADV (the form that advisers use to register with SEC and must update annually). Advisers subject to the surprise examination or internal control report requirement expend staff hours to prepare for and facilitate such reviews. For example, an official from an adviser told us that the firm expends considerable staff hours each year educating the accountant about the firm’s operations, generating reports for and providing other support to the accountant, and answering questions from clients related to the examination. In addition, these advisers may incur the direct cost of the examination or audit, and the amount of these fees varies from adviser to adviser (as discussed later in the report).\nAlthough advisers to pooled investment vehicles often undergo an annual financial statement audit in lieu of a surprise examination, they incur the indirect and direct costs associated with the audit.\nAccording to SEC staff and representatives from three industry associations that we spoke with, surprise examinations and internal control reporting, if applicable, tended to be two of the more costly requirements associated with SEC’s custody rule. In contrast, record- keeping costs were not significant, according to officials from three associations, two securities law attorneys, and seven of the advisers with whom we spoke.\nAccording to representatives we interviewed from four accounting firms, their surprise examination fee is based on the amount of hours required to conduct the examinations, which is a function of a number of factors. One of the most important factors is the number of client accounts under custody, which influences the number of accounts that accountants will need to review to verify custody. Other factors affecting examination cost include the amount of client assets under custody, types of securities under custody, and number and location of the custodians. Over 1,300 advisers with custody of client assets, about 30 percent of the 4,400 advisers with custody, reported being subject to the surprise examination requirement as of April 1, 2013. Importantly, these advisers vary widely in terms of the number of their clients under custody—reported by advisers as ranging from 1 client to over 1 million clients—and other factors that affect the cost of surprise examinations. Consequently, the cost of surprise examinations varies widely across the advisers.\nAlthough no comprehensive data exist on surprise examination costs, several industry associations and SEC have provided estimates. In response to SEC’s 2009 proposed amendments to the custody rule, industry associations provided SEC with cost estimates. For example, the Investment Advisers Association, representing SEC-registered advisers, estimated that surprise examinations would likely cost each of its members between $20,000 and $300,000. The Securities Industry and Financial Markets Association, representing major asset management firms and custodians, estimated that surprise examination costs would range from $8,000 to $275,000 for each of its members. However, these estimates were based on the then-current SEC guidance to accountants that required verification of 100 percent of client assets under custody. In conjunction with its 2009 final rule amendment, SEC issued a companion release that revised the guidance to allow accountants to verify a sample of client assets. In its 2009 final amendments to the custody rule, SEC estimated the cost of surprise examinations for large, medium, and small advisers in consideration of revisions to its guidance that allowed accountants to verify a sample of client assets. In particular, SEC estimated that the average cost of a surprise examination for large, medium, and small advisers would be $125,000, $20,000, and $10,000, respectively.\nTo help determine the range of potential costs of surprise examinations for selected subgroups of advisers, we obtained data on the examination fees for 12 advisers. As shown in figure 4, the fees that the 12 advisers paid to their independent public accountants for recent surprise examinations ranged from $3,500 to $31,000. Figure 4 also shows that fees varied among advisers we selected within each of the subgroups. For example, fees in subgroup 2 ranged from $3,500 to $16,000 for the three advisers we selected.\nFewer than 500 advisers, about 11 percent of advisers with custody, reported obtaining internal control reports as of April 1, 2013. Similar to surprise examination costs, the cost of internal control reports varies based on a number of factors, such as the size of and services offered by the qualified custodian. In its final 2009 rule, SEC estimated that an internal control report relating to custody would cost, on average, $250,000. According to officials from four accounting firms we spoke with, internal control reporting costs for their clients may range from $25,000 to $500,000. Unlike with surprise examinations and associated costs, some advisers and their related person qualified custodians may obtain internal control reports for reasons other than the custody rule. For example, representatives from two industry associations told us that institutional investors commonly require their custodians that are related persons to their advisers to obtain internal control reports.", "SEC provided certain investment advisers with an exception from the surprise examination requirement because their custodial practices pose relatively lower risk or they adopted other controls to protect client assets, such as annual financial statement audits. The broad range of industry, regulatory, and other parties that we interviewed generally supported or did not have a view on the surprise examination exception provided to advisers using related but operationally independent custodians to hold client assets.", "Although SEC’s 2009 proposed amendments to the custody rule would have required all registered advisers with custody of client assets to undergo a surprise examination, SEC provided exceptions from the requirement to certain advisers in the final 2009 rule amendments. In the 2009 amendments, SEC expressed that the surprise examination requirement should help deter fraud because advisers will know their client assets are subject to verification at any time and, thus, may be less likely to engage in misconduct. SEC noted that if fraud does occur, the examination will increase the likelihood that the fraud will be detected earlier.\nAs discussed earlier, advisers deemed to have custody solely because of their authority to deduct fees from client accounts are excluded from the surprise examination requirement. In SEC’s view, the magnitude of the risks of client losses from overcharging advisory fees did not warrant the costs of obtaining a surprise examination. Also excluded from the requirement are advisers to a pooled investment vehicle that undergo annual audits of their financial statements by an independent public accountant and distribute the audited statements to investors. According to SEC, procedures performed by accountants during the course of a financial statement audit provide meaningful protections to investors, and the surprise examination would not significantly add to these protections.\n75 Fed. Reg. at 1464. advisory personnel and personnel of the related person who have access to advisory client assets are not under common supervision; and advisory personnel do not hold any position with the related person or share premises with the related person.\nAlthough an adviser that meets these conditions would not be required to undergo a surprise examination, the adviser still would be required to comply with the rule’s other applicable provisions, including obtaining an internal control report from its related person. SEC emphasized that an adviser that has custody due to reasons in addition to a related person having custody cannot rely on the exception because it is only applicable if an adviser has custody solely because its related person has custody. For example, an adviser that has custody because he or she serves as a trustee with respect to client assets held in an account at a broker-dealer that is a related person could not rely on the exception from the surprise examination on the grounds that the broker-dealer was operationally independent, because the adviser has custody for reasons other than through its operationally independent related person.", "As of April 1, 2013, 169 registered advisers reported having custody of client assets and using related but operationally independent custodians and not undergoing an annual surprise examination for certain clients.These advisers account for around 2 percent of all SEC-registered advisers and about 42 percent of the approximately 400 SEC-registered advisers that have a related person holding client assets. These advisers collectively have over $6 trillion in regulatory assets under management and custody of over $1 trillion of client assets. The structure of large institutions with functionally independent subsidiaries tends to lend itself to meet the operationally independent conditions. More specifically, we identified some advisers using related but operationally independent custodians that are part of large financial institutions with numerous subsidiaries, such as Deutsche Bank, JPMorgan Chase, Morgan Stanley, and Wells Fargo. According to SEC staff, this outcome is to be expected given that the adviser and custodian staff cannot be considered operationally independent while under common supervision and sharing the same premises.\nIf advisers currently qualifying for an exception from the surprise examination requirement were required to undergo such examinations, the costs of the examinations would likely vary considerably across the advisers. Like advisers currently subject to the surprise examination requirement, advisers excepted from the requirement vary considerably in terms of the factors that affect the cost of the examinations. For example, the number of clients these advisers had under custody ranged from 1 client to over 500,000 clients, as of April 1, 2013. Similarly, the amount of client assets under their custody ranged from $680,000 to $320 billion.", "The broad range of industry, accounting firms, and other parties we interviewed largely told us that they either support or do not have a view on the surprise examination exception. However, several of these representatives said that the exception’s operationally independent None of the investment conditions were too stringent or difficult to meet.advisers we interviewed use a related custodian to hold client assets, and most did not have a view on the exception or SEC’s rationale. The North American Securities Administrators Association (NASAA) staff told us that when a custodian is a related person of the adviser, ensuring that the adviser meets and complies with the operationally independent conditions would require the firm to conduct a thorough analysis of its operations and any changes that may affect the custodian’s operational independence. The staff further noted that NASAA’s custody model rule for use by state securities regulators, unlike the SEC custody rule, does not include an exception from the surprise examination requirement based on the concept of operational independence between an investment adviser and a custodian that is a related person.advocacy representative told us that he generally opposes allowing advisers to use related custodians, but if that were allowed, he said that, in his opinion, the surprise examination exception would be appropriate for only large, complex entities subject to existing regulation, such as banks and broker-dealers.\nMany of the industry, regulatory, and other parties we interviewed agreed with SEC’s view that surprise examinations can help to deter fraud. However, some told us that one of the examination’s weaknesses is that accountants must rely on advisers to provide them with a complete list of the client assets under custody to verify. According to some of these representatives, an adviser defrauding a client could omit that client’s account from the list provided to the accountant to avoid detection. Officials from an accounting firm told us that no infallible procedure exists to test the completeness of the client list, given that the list must come from the adviser. According to SEC staff, an adviser with custody and intent on defrauding its clients also may not register with SEC or, if it does, may not report that it has custody of client assets or hire an accountant to conduct a surprise examination. SEC staff also noted that the surprise examination requirement, like any regulation, cannot prevent fraud 100 percent of the time but that it helps deter such misconduct.\nSEC data indicate that surprise examinations have identified compliance issues and helped target higher-risk advisers for examination. SEC staff told us that since the 2009 custody rule amendments became effective in March 2010, auditors conducting surprise examinations have found around 100 advisers with one or more instances of material noncompliance with the rule, such as failing to maintain client securities at a qualified custodian. According to SEC staff, the results of surprise examinations serve as an early warning of potential risks and are used by staff to help assess the risk level of advisers and, in turn, select advisers for SEC examination. For example, in March 2013, SEC’s Office of Compliance Inspections and Examinations issued a “Risk Alert” that noted that about 33 percent (over 140 examinations) of recent SEC examinations found custody-related deficiencies.included failures to comply with the rule’s surprise examination requirement and qualified custodian requirements and resulted in actions ranging from immediate remediation to enforcement referrals and subsequent litigation.", "We requested comments from SEC, but none were provided. SEC provided technical comments, which we incorporated, as appropriate.\nWe are sending copies of this report to SEC, interested congressional committees and members, and others. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.", "This report describes (1) the requirements of and costs associated with the Securities and Exchange Commission (SEC) custody rule, including any related record-keeping requirements, for registered investment advisers, and (2) SEC’s rationale for not requiring advisers using related but operationally independent custodians to undergo surprise examinations, and the number and characteristics of such advisers.\nTo address both objectives, we analyzed SEC’s record-keeping and custody rules under the Investment Advisers Act of 1940 to document compliance requirements (e.g., surprise examinations and internal control reports) for SEC-registered investment advisers. Furthermore, we reviewed proposed and final SEC amendments to the custody rule, comment letters, and other information, such as GAO and other studies, to analyze how and why the custody rule requirements have changed, particularly the surprise examination requirement and exceptions, and obtain information on compliance costs. We analyzed publicly available data in the Investment Adviser Registration Depository (IARD) to identify the number of SEC-registered investment advisers and information advisers reported about their compliance with the SEC custody rule’s requirements. IARD data are submitted by advisers in Form ADV, which is used by advisers to register with SEC and must be updated annually by advisers. We assessed the reliability of Form ADV data by interviewing SEC staff and testing the data for errors, and we determined the data were sufficiently reliable for our purposes. Specifically, we interviewed SEC staff about the IARD database and Form ADV to understand how the data are collected, what types of edit checks are incorporated into the system, and the staff’s overall views of the system’s data reliability with respect to our purposes. We also performed electronic testing to identify potential errors, and we discussed analysis methodology considerations, such as excluding particular records, with SEC staff for any inconsistencies that we identified. For the purposes of our final analysis, we excluded records for advisers that reported zero as the regulatory assets under management or total clients and any record with the latest Form ADV filing date older than January 2012.\nTo obtain data on the costs of complying with the SEC custody rule, particularly its surprise examination and internal control report requirements, and other information, we interviewed a limited number of investment advisers and accounting firms. Based on Form ADV data as of December 3, 2012, we identified approximately 1,300 advisers that reported undergoing surprise examinations. To systematically target advisers and firms, we first divided the total group of advisers that reported undergoing surprise examinations into four subgroups based on whether the amount of their client assets under custody were above or below the group’s median value of approximately $101 million and whether their number of clients under custody were above or below the median of 19 clients, as shown in figure 5. Thus, at one end of the spectrum, subgroup 1 includes advisers whose number of clients and amount of client assets under custody were both below the group’s median values. At the other end of the spectrum, subgroup 3 includes advisers whose number of clients and amount of client assets were both above the group’s median values. Within each subgroup, we then selected advisers whose client assets were around the subgroup’s median value. For the 12 selected advisers, we interviewed eight of the advisers and interviewed four accountants who conducted the surprise examinations for the other four advisers.\nTo obtain information on the cost of complying with the custody rule and other information, we also interviewed regulators, including SEC staff, officials from the North American Securities Administrators Association, and a representative from a state securities authority, and representatives from investment adviser, accountant, investor advocacy, and other associations, including the American Institute of Certified Public Accountants, American Bankers Association, Financial Services Institute, Fund Democracy, Investment Advisers Association, Managed Futures Association, Private Equity Growth and Capital Council, and Securities Industry and Financial Markets Association. In addition, we interviewed two securities law attorneys.\nWe conducted this performance audit from September 2012 through July 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "In addition to the individual named above, Richard Tsuhara, Assistant Director; Carl Barden; William Chatlos; F. Chase Cook; Kristen Kociolek; Risto Laboski; Grant Mallie; Patricia Moye; Jennifer Schwartz; Jena Sinkfield; and Verginie Tarpinian made major contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "h0_title h2_full h1_title", "h0_full h2_full h1_full", "h0_full", "h2_title h1_full", "h2_full h1_full", "h1_full", "h2_full", "", "h2_full", "", "", "" ] }

{ "question": [ "What does the rule require advisors with custody to do?", "What is the cost of an advisor?", "How does the level of clients vary?", "When does the rule require advisors to make a report?", "How much do these reports cost?", "Why do advisors often have custody?", "What risk does an adviser and custodian under common ownership have?", "When is an adviser and custodian under considered operationally independent?", "How often does this occur?", "How would eliminating the cost of the surprise examination change things?", "What do investment advisers provide?", "How do investment advisers differ from banks and broker-dealers?", "When might this difference not apply?", "Why has advisors having custody been viewed as risky?", "How has SEC addressed this risk?", "What accessions did SEC provide?", "What was investigated about the custody rule?", "What does this report address?" ], "summary": [ "The rule also requires advisers with custody, unless they qualify for an exception, to hire an independent public accountant to conduct annually a surprise examination to verify custody of client assets.", "According to accountants that GAO interviewed, examination cost depends on an adviser's number of clients under custody and other factors.", "These factors vary widely across advisers that currently report undergoing surprise examinations: for example, their reported number of clients under custody ranged from 1 client to over 1 million clients as of April 2013. Thus, the cost of the examinations varies widely across the advisers.", "The rule also requires advisers maintaining client assets or using a qualified custodian that is a related person to obtain an internal control report to assess the suitability and effectiveness of controls in place.", "The cost of these reports varies across custodians based on their size and services.", "SEC provided an exception from the surprise examination requirement to, among others, advisers deemed to have custody solely because of their use of related but \"operationally independent\" custodians.", "According to SEC, an adviser and custodian under common ownership but having operationally independent management pose relatively lower client custodial risks, because the misuse of client assets would tend to require collusion between the firms' employees.", "To be considered operationally independent, an adviser and its related custodian must not be under common supervision, not share premises, and meet other conditions.", "About 2 percent of the SEC-registered advisers qualify for this exception for at least some of their clients.", "If the exception were eliminated, the cost of the surprise examination would vary across the advisers because the factors that affect examination cost vary widely across the advisers.", "Investment advisers provide a wide range of services and collectively manage around $54 trillion in assets for around 24 million clients.", "Unlike banks and broker-dealers, investment advisers typically do not maintain physical custody of client assets.", "However, under federal securities regulations, advisers may be deemed to have custody because of their authority to access client assets, for example, by deducting advisory fees from a client account.", "High-profile fraud cases in recent years highlighted the risks faced by investors when an adviser has custody of their assets.", "In response, SEC amended its custody rule in 2009 to require a broader range of advisers to undergo annual surprise examinations by independent accountants.", "At the same time, SEC provided relief from this requirement to certain advisers, including those deemed to have custody solely because of their use of related but \"operationally independent\" custodians.", "The Dodd-Frank Wall Street Reform and Consumer Protection Act mandates GAO to study the costs associated with the custody rule.", "This report describes (1) the requirements of and costs associated with the custody rule and (2) SEC's rationale for not requiring advisers using related but operationally independent custodians to undergo surprise examinations." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, -1, 1, 2, -1, -1, -1, 1, -1, 3, 4, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 0, 0, 0, 0, 0, 0, 0, 0 ] }

{ "title": [ "", "Introduction", "Country Background", "Historical Overview", "Government, Politics, and Society", "Overview", "Political and Societal Evolution", "Current Government", "Corruption Allegations Involving Netanyahu", "Major Domestic Issues", "Economy", "Israeli Security and Challenges", "Strategic and Military Profile", "Military Superiority and Homeland Security Measures", "Undeclared Nuclear Weapons Capability", "U.S. Cooperation", "Iran and the Region", "Iranian Nuclear Agreement and the U.S. Withdrawal", "Iran in Syria: Cross-Border Attacks with Israel45", "Russia51", "Hezbollah in Lebanon", "Hamas and Gaza", "Key U.S. Policy Issues", "Security Cooperation74", "Background", "Preserving Israel's Qualitative Military Edge (QME)", "U.S. Aid and Arms Sales to Israel", "Aid", "Arms Sales", "End-Use Monitoring and Leahy Law Vetting", "Missile Defense Cooperation", "Pending Security Cooperation Legislation", "Sensitive Technology and Intelligence", "Bilateral Trade", "Israeli-Palestinian Issues", "Peace Process and International Involvement", "Jerusalem", "Settlements", "Overview", "U.S. Policy" ], "paragraphs": [ "", "U.S.-Israel defense, diplomatic, and economic cooperation has been close for decades, based on common democratic values, religious affinities, and security interests. On May 14, 1948, the United States was the first country to extend de facto recognition to the state of Israel. Subsequently, relations have evolved through legislation, bilateral agreements, and trade.\nU.S. officials and lawmakers often consider Israel's security as they make policy choices in the Middle East. Congress provides military assistance to Israel and has enacted other legislation in explicit support of its security. Such support is part of a regional security order—largely based on U.S. arms sales to Israel and Arab countries—that has avoided major Arab-Israeli interstate conflict for about 45 years. Some Members of Congress have occasionally authorized and appropriated funding for programs benefitting Israel at a level exceeding that requested by the executive branch. Other Members have sought greater scrutiny of some of Israel's actions.\nIran continues to be a top Israeli security concern. Israel has sought to influence U.S. policy on Iran, and supported the Trump Administration's May 2018 withdrawal from the Iranian nuclear agreement. In recent years, Israel and Arab Gulf states have discreetly cultivated closer relations with one another in efforts to counter Iran. As Iran-backed groups have been successful in helping Syria's government regain effective control of the country, Israel has conducted a number of airstrikes targeting these groups. Israeli officials consider an indefinite Iranian presence in Syria to be a serious security threat exacerbating the threat already posed by Hezbollah in Lebanon, and have vowed to prevent it. As a result, Israel's relationship with Russia, which cooperates with Iran in Syria and hosts advanced air defense systems there, has become more important. Israel also remains threatened by Hamas and other terrorist groups in the Gaza Strip while considering ways to work on Gaza's difficult humanitarian and security situation with neighboring Egypt and a wide range of actors.\nIn the Israeli-Palestinian conflict, political disputes persist over key issues including security parameters, Israel-West Bank borders, Jewish settlements, Palestinian refugees, and the status of Jerusalem. Polls suggest wide skepticism among the Israeli public about prospects for a negotiated end to the conflict. Contentious domestic politics for both Israelis and Palestinians make it difficult for them to make diplomatic concessions, particularly in a climate where questions surround the continued leadership of Prime Minister Netanyahu (see \" Corruption Allegations Involving Netanyahu \" below) and Palestine Liberation Organization (PLO) Chairman and Palestinian Authority (PA) President Abbas. Possibly complicating the situation further, President Trump recognized Jerusalem as Israel's capital in December 2017 and the Administration moved the U.S. embassy from Tel Aviv to Jerusalem in May 2018. The Trump Administration may be contemplating a diplomatic proposal aimed at restarting Israeli-Palestinian negotiations with the support of the Arab states that Israel has been discreetly cooperating with against Iran. Israelis debate how their leaders should prioritize options such as participating in diplomatic initiatives, preserving the current facts on the ground, and acting unilaterally to influence outcomes.\nIsraeli leaders and significant segments of Israeli civil society regularly emphasize the importance of closeness with the United States. Yet, a number of geopolitical factors distinguish Israel from other developed countries, including the regional threats it faces, its unique historical experience, and its population's relatively higher level of direct military service.", "", "The quest for a modern Jewish homeland can be traced to the publication of Theodor Herzl's The Jewish State in 1896. Herzl was inspired by the concept of nationalism that had become popular among various European peoples in the 19 th century, and was also motivated by European anti-Semitism. The following year, Herzl described his vision at the first Zionist Congress, which encouraged Jewish settlement in Palestine, the territory that had included the Biblical home of the Jews and was then part of the Ottoman Empire.\nDuring World War I, the British government issued the Balfour Declaration, supporting the \"establishment in Palestine of a national home for the Jewish people.\" Palestine became a British Mandate after the war and British officials simultaneously encouraged the national aspirations of the Arab majority in Palestine, insisting that its promises to Jews and Arabs did not conflict. Jews immigrated to Palestine in ever greater numbers during the Mandate period, and tension between Arabs and Jews and between each group and the British increased, leading to periodic clashes. Following World War II, the plight of Jewish survivors of the Holocaust gave the demand for a Jewish home added urgency, while Arabs across the Middle East concurrently demanded self-determination and independence from European colonial powers.\nIn 1947, the United Nations General Assembly developed a partition plan (Resolution 181) to divide Palestine into Jewish and Arab states, proposing U.N. trusteeship for Jerusalem and some surrounding areas. The leadership of the Jewish Yishuv (or polity) welcomed the plan because it appeared to confer legitimacy on the Jews' claims in Palestine despite their small numbers. The Palestinian Arab leadership and the League of Arab States (Arab League) rejected the plan, insisting both that the specific partition proposed and the entire concept of partition were unfair given Palestine's Arab majority. Debate on this question prefigured current debate about whether it is possible to have a state that both provides a secure Jewish homeland and is governed in accordance with democratic values and the principle of self-determination.\nAfter several months of civil conflict between Jews and Arabs, Britain officially ended its Mandate on May 14, 1948, at which point the state of Israel proclaimed its independence and was immediately invaded by Arab armies. During and after the conflict, roughly 700,000 Palestinians were driven or fled from their homes, an occurrence Palestinians call the nakba (\"catastrophe\"). Many became internationally designated refugees after ending up in areas of Mandate-era Palestine controlled by Jordan (the West Bank) or Egypt (the Gaza Strip), or in nearby Arab states. Palestinians who remained in Israel became Israeli citizens.\nThe conflict ended with armistice agreements between Israel and its neighboring Arab states: Egypt, Jordan, Lebanon, and Syria. The territory controlled by Israel within these 1949-1950 armistice lines is roughly the size of New Jersey. Israel has engaged in further armed conflict with neighbors on a number of occasions since then—most notably in 1956, 1967, 1973, and 1982. Since the 1950s, Israel also has dealt with the threat of Palestinian guerrilla or terrorist attacks. In 1979, Israel concluded a peace treaty with Egypt, followed in 1994 by a peace treaty with Jordan, thus making another multi-front war less likely. Nevertheless, as discussed throughout the report, security challenges persist from Iran and groups allied with it, and from other developments in the Arab world.", "", "Israel is a parliamentary democracy in which the prime minister is head of government (see textbox below for more information) and the president is a largely ceremonial head of state. The unicameral parliament (the Knesset) elects a president for a seven-year term. The current president, Reuven Rivlin, took office in July 2014. Israel does not have a written constitution. Instead, Basic Laws lay down the rules of government and enumerate fundamental rights. Israel has an independent judiciary, with a system of magistrates' courts and district courts headed by a Supreme Court.\nThe political spectrum is highly fragmented, with small parties exercising disproportionate power due to the relatively low vote threshold for entry into the Knesset (3.25%), and larger parties needing small-party support to form and maintain coalition governments. Since Israel's founding, the average lifespan of an Israeli government has been about 23 months. In 2014, however, the Knesset somewhat tightened the conditions for bringing down a government.", "Israeli society and politics have evolved. In the first decades following its founding, Israeli society was dominated by secular Ashkenazi (Eastern European) Jews who constituted the large majority of 19 th - and early 20 th -century Zionist immigrants. Many leaders from these immigrant communities sought to build a country dedicated to Western liberal and communitarian values. From 1948 to 1977, the social democratic Mapai/Labor movement led Israeli governing coalitions.\nThe 1977 electoral victory of Menachem Begin's more nationalistic Likud party helped boost the influence of previously marginalized groups, particularly Mizrahi (Eastern) Jews who had immigrated to Israel from Arab countries and Iran. This electoral result came at a time when debate in Israel was intensifying over settlement in the territories occupied during the 1967 Arab-Israeli War. Begin and his successor in Likud, Yitzhak Shamir, helped drive the political agenda over the following 15 years. Although Labor under Yitzhak Rabin later initiated the Oslo peace process with the Palestinians, its political momentum slowed and reversed after Rabin's assassination in 1995.\nDespite Labor's setbacks, its warnings that high Arab birth rates could eventually make it difficult for Israel to remain both a Jewish and a democratic state while ruling over the Palestinians gained traction among many Israelis. In this context, Prime Minister Ariel Sharon, a longtime champion of the Israeli right and the settlement movement, split from Likud and established Kadima as a more centrist alternative in 2005. He was succeeded as Kadima's leader and prime minister by Ehud Olmert in 2006. Likud returned to power in 2009 with Netanyahu as prime minister (he had previously served in the position from 1996 to 1999). Since then Netanyahu has led two additional coalitions following elections in 2013 and 2015.\nThe enduring appeal of Netanyahu and right-of-center parties to Israeli voters in recent years may stem from a number of factors, including\nArguments by some that Palestinians have rejected peace and that Israeli military withdrawals from southern Lebanon (in 2000) and the Gaza Strip (in 2005) emboldened Hezbollah and Hamas and contributed to subsequent conflict. The influence of distinct religious, ethnic, or ideological groups, such as Russian speakers who emigrated from the former Soviet Union in the 1990s, and citizens aligned with the \"national religious\" (modern Orthodox) movement. Both groups skew toward the political right and include many of the biggest supporters of settlements.\nGiven the fragmentation of Israeli political parties under its electoral system, compromise among diverse groups is a necessity for forming and maintaining a governing coalition. As mentioned above, the system generally gives smaller parties disproportionate influence on key positions they espouse. For example, Netanyahu relies on support from two Haredi (ultra-Orthodox Jewish) parties that are generally aligned with the other right-of-center parties on national security issues, but make specific demands (i.e., subsidies and military exemptions to support traditional lifestyles) in exchange for their backing. Such support is largely anathema to secular Israeli middle class voters, many of whom would prefer that government resources be used to benefit a broader cross-section of Israelis.\nAlso, many Arab Israelis, who make up nearly 20% of the population, are largely separate from Jewish Israeli citizens in where and how they live, are educated, and otherwise socialize. Arab Israeli citizens generally identify more closely with left-of-center parties. However, left-of-center parties face increased difficulty in forming governing coalitions because no Arab party has ever been part of a one.", "Israeli Prime Minister Binyamin Netanyahu presides over a coalition government that includes six parties generally characterized as right of center (see Appendix A ). The varying interests of the coalition's members and some intra-party rifts contribute to difficulties in building consensus on several issues, including\nHow to strengthen Israel's security and protect its Jewish character while preserving rule of law and freedom of expression for all citizens. How to promote general economic strength while addressing popular concerns regarding economic inequality and cost of living.", "The Israeli police recommended in February 2018 that Attorney General Avichai Mandelblit indict Prime Minister Netanyahu for bribery, fraud, and breach of trust. Mandelblit may decide in 2019 whether to press charges. In response to the police recommendations, Netanyahu—who has consistently denied the allegations—said that the recommendations \"will end with nothing\" and that he will stay in office to pursue Israel's well-being. However, they could threaten Netanyahu's position as prime minister.\nThe recommendations cover two specific cases. One Israeli media source has summarized them as follows:\nIn Case 1000, Netanyahu and his wife are alleged to have received illicit gifts from billionaire benefactors, most notably the Israeli-born Hollywood producer Arnon Milchan, totaling NIS 1 million ($282,000). In return, Netanyahu is alleged by police to have intervened on Milchan's behalf in matters relating to legislation, business dealings, and visa arrangements.\nCase 2000 involves a suspected illicit quid pro quo deal between Netanyahu and Yedioth Ahronoth publisher Arnon Mozes that would have seen the prime minister weaken a rival daily, the Sheldon Adelson-backed Israel Hayom, in return for more favorable coverage from Yedioth.\nLater in February, developments in ongoing investigations appeared to implicate Netanyahu or his close associates in additional instances of alleged corruption. One case deals with possible overtures made to a judge about quashing an investigation of Netanyahu's wife Sara in exchange for the judge's appointment as attorney general, and another deals with possible actions to enrich a telecom magnate in expectation of favorable media coverage. In June 2018, Sara Netanyahu was indicted, along with a former staffer from Netanyahu's office, for the fraudulent use of state funds.\nLegally, Netanyahu could continue in office if indicted, but he could face public pressure to resign, and his coalition partners could face public pressure to withdraw their support for the government. Israel's previous prime minister, Ehud Olmert, announced his decision to resign in July 2008 amid corruption-related allegations, two months before the police recommended charges against him.", "The Knesset has recently passed some notable legislation. In July 2018, it passed a Basic Law defining Israel as the national homeland of the Jewish people. Also in July, the Knesset voted to withhold funds from the Palestinian Authority to \"penalize it for paying stipends to Palestinian prisoners in Israel, their families and the families of Palestinians killed or wounded in confrontations with Israelis.\" Another bill passed in July permits single women to be surrogate parents, but does not extend the same permission to single men or same-sex couples.\nAdditionally, controversial legislation has passed to apply some aspects of Israeli law to settlements in the West Bank, and is pending to limit the Supreme Court's power of judicial review over legislation. Several of the government's opponents and critics have voiced warnings that these and other initiatives may stifle dissent or undermine the independence of key Israeli institutions such as the media, the judiciary, and the military.\nSome government policies in the domestic sphere are the subject of contention. For example, in 2017, the government suspended a decision it had previously made to allow for a mixed-gender prayer space in the Western Wall plaza in Jerusalem's Old City. According to Netanyahu, the government is reviewing the issue and plans to suggest another approach. Another issue has been Israeli government policy regarding African migrants who have reached Israel. The policy has fluctuated, partly based on rulings from Israel's Supreme Court. Considerable international criticism had centered on government proposals—which have since been scrapped—to forcibly deport some migrants to third countries (Rwanda and Uganda).\nEarly elections could happen (legally, elections are required in the second half of 2019) if the governing coalition splits over the cases against Prime Minister Netanyahu or some other issue. If early elections take place, Netanyahu (if he runs) could face challenges from figures on the right of the political spectrum (including Education Minister Naftali Bennett and Defense Minister Avigdor Lieberman), or nearer the center or left (former finance minister Yair Lapid, Labor Party leader Avi Gabbay, and retired generals Gabi Ashkenazi and Benny Gantz). Reportedly, Netanyahu may call for elections before the attorney general decides on whether to bring criminal charges against him, in hopes of claiming a popular mandate to continue in office even if he is indicted.", "Israel has an advanced industrial, market economy in which the government plays a substantial role. Despite limited natural resources, the agricultural and industrial sectors are well developed. The engine of the economy is an advanced high-tech sector, including aviation, communications, computer-aided design and manufactures, medical electronics, and fiber optics. Israel still benefits from loans, contributions, and capital investments from the Jewish diaspora, but economic strength has lessened its dependence on external financing.\nIsrael's economy is experiencing a period of moderate growth (between 2.5% and 4% annually since 2014). While International Monetary Fund (IMF) growth projections for Israel remain close to 3% over the next five years, the Economist Intelligence Unit projects average growth of 3.8% through 2022 over much of that time due to expectations of greater domestic consumption and exports. For information on prospective natural gas exports, see CRS Report R44591, Natural Gas Discoveries in the Eastern Mediterranean , by [author name scrubbed].\nAlthough Israel's overall macroeconomic profile and fiscal position appears positive, the country has the highest relative poverty level and the sixth-highest income inequality level within the 37-country Organisation of Economic Cooperation and Development (OECD). Poverty and inequality particularly disadvantage Arab Israelis and Israeli Haredim (ultra-Orthodox Jews).", "", "Israel relies on a number of strengths, along with discreet coordination with Arab states, to manage potential threats to its security and existence.", "Israel maintains conventional military superiority relative to its neighbors and the Palestinians. Shifts in regional order and evolving asymmetric threats have led Israel to update its efforts to project military strength, deter attack, and defend its population and borders. Israel appears to have reduced some unconventional threats via missile defense systems, reported cyber defense and warfare capabilities, and heightened security measures vis-à-vis Palestinians.\nAccording to estimates from IHS Jane's , Israel's military features total active duty manpower across the army, navy, and air force of approximately 180,000, plus 445,000 in reserve—numbers aided by mandatory conscription for most young Jewish Israeli men and women, followed by extended reserve duty. Israel's overall annual defense budget is approximately $16.4 billion, constituting about 4.6% of its total gross domestic product (GDP).\nIsrael has a robust homeland security system featuring sophisticated early warning practices, thorough border and airport security controls, and reinforced rooms or shelters that are engineered to withstand explosions in most of the country's buildings. Israel also has proposed and partially constructed a national border fence network of steel barricades (accompanied at various points by watch towers, patrol roads, intelligence centers, and military brigades) designed to minimize militant infiltration, illegal immigration, and smuggling from Egypt, Syria, Lebanon, Jordan, and the Gaza Strip.", "Israel is not a party to the Nuclear Nonproliferation Treaty (NPT) and maintains a policy of \"nuclear opacity\" or amimut . A 2017 report estimated that Israel possesses a nuclear arsenal of around 80-85 warheads. The United States has countenanced Israel's nuclear ambiguity since 1969, when Israeli Prime Minister Golda Meir and U.S. President Richard Nixon reportedly reached an accord whereby both sides agreed never to acknowledge Israel's nuclear arsenal in public. Israel might have nuclear weapons deployable via aircraft, submarine, and ground-based missiles. No other Middle Eastern country is generally thought to possess nuclear weapons.", "Israeli officials closely consult with U.S. counterparts in an effort to influence U.S. decisionmaking on key regional issues. Israel's leaders and supporters routinely make the case to U.S. officials that Israel's security and the broader stability of the region remain critically important for U.S. interests. They also argue that Israel has multifaceted worth as a U.S. ally and that the Israeli and American peoples share core values. See Appendix B for selected U.S.-based interest groups relating to Israel. The United States and Israel do not have a mutual defense treaty or agreement that provides formal U.S. security guarantees.", "Iran remains of primary concern to Israeli officials largely because of (1) Iran's antipathy toward Israel, (2) Iran's broad regional influence, and (3) the possibility that Iran will be free of nuclear program constraints in the future. As mentioned above, in recent years Israel and Arab Gulf states have discreetly cultivated closer relations with one another in efforts to counter Iran.", "Prime Minister Netanyahu has sought to influence U.S. decisions on the international agreement on Iran's nuclear program (known as the Joint Comprehensive Plan of Action, or JCPOA). He argued against the JCPOA when it was negotiated in 2015, and welcomed President Trump's May 2018 withdrawal of the United States from the JCPOA and accompanying reimposition of U.S. sanctions on Iran's oil and central bank transactions. In a September 2017 speech before the U.N. General Assembly, Netanyahu had called on the signatories of the JCPOA to \"fix it or nix it.\" Then, a few days before President Trump's May announcement, Netanyahu presented information that Israeli intelligence operatives apparently seized in early 2018 from an Iranian archive. Netanyahu used the information, which purportedly describes past work by Iran on a nuclear weapons program, to express concerns about Iran's credibility and its potential to parlay existing know-how into nuclear-weapons breakthroughs after the JCPOA expires.\nAlthough concern about Iran and its nuclear program is widespread among Israelis, their views on the JCPOA vary. Netanyahu and his supporters in government have routinely complained that the JCPOA fails to address matters not directly connected to Iran's nuclear program, such as Iran's development of ballistic missiles and its sponsorship of terrorist groups. Media reports suggest that a number of current and former Israeli officials have favored preserving the JCPOA because of the limits it placed on Iranian nuclear activities for some time or these officials' doubts about achieving international consensus for anything stricter.\nCommentators speculate on the possibility that Israel might act militarily against Iranian nuclear facilities if Iran resumes certain activities currently stopped under the JCPOA. According to one analyst, one group of Israeli officials have preferred to keep the nuclear deal in place while focusing on pressing challenges in Syria, while another group (including Netanyahu) have favored seizing the opportunity to make common cause with the Trump Administration to pressure Iran economically and militarily. However, shortly after Netanyahu publicly presented the Iranian nuclear archive, he said in an interview that he was not seeking a military confrontation with Iran.", "A \"shadow war\" has developed between Israel and Iran over Iran's presence in Syria. In the early years of the Syria conflict, Israel primarily employed airstrikes to prevent Iranian weapons shipments destined for Hezbollah in Lebanon. Since 2017, with the government of Bashar al Asad increasingly in control of large portions of Syria's territory, Israeli leaders have expressed intentions to prevent Iran from constructing and operating bases or advanced weapons manufacturing facilities in Syria. The focus of Israeli military operations in Syria has expanded in line with an increasing number of Iran-related concerns there. Further exacerbating Israeli sensitivities, Iran-backed forces (particularly Hezbollah) have moved closer to the Israeli-occupied Golan Heights since late 2017 via actions against Syrian opposition groups.\nOn February 10, 2018, Iranian personnel based at Tiyas air base in central Syria apparently sent an armed drone into Israeli airspace. A senior Israeli military source was quoted as saying, \"This is the first time we saw Iran do something against Israel—not by proxy. This opened a new period.\"\nIn May 2018, Prime Minister Netanyahu asserted that Iran had transferred advanced weaponry to Syria (weaponized drones, ground-to-ground missiles, anti-aircraft batteries) in recent months. He stated that Israel was \"determined to block Iran's aggression\" and that \"we do not want escalation, but we are prepared for any scenario.\"\nSince the February 10 incident, Israel has reportedly struck Iranian targets on multiple occasions. The resulting exchanges of fire (including the downing of an Israeli F-16 during the February incident) and subsequent official statements from Israel, Iran, Syria, and Russia have highlighted the possibility that limited Israeli strikes to enforce \"redlines\" against Iran-backed forces could expand into wider conflict, particularly in cases of miscalculation by one or both sides.\nOn May 10, according to the Israeli military, Iran's Islamic Revolutionary Guard Corps-Quds Force fired rockets at Israeli military positions in the Golan Heights, as retaliation against earlier Israeli strikes against Iranian targets in Syria. This triggered Israeli strikes in Syria on a larger scale than any Israeli operations there since the 1973 Yom Kippur War. Reportedly, Israel has since conducted some additional airstrikes in Syria, and on two separate occasions in July its military claimed that it shot down a Syrian drone and a fighter jet over the Golan Heights using Patriot missiles.", "Russia's advanced air defense systems in Syria could affect Israeli operations. To date, Russia does not appear to have acted militarily to thwart Israeli airstrikes against Iranian or Syrian targets. However, Russian officials' statements in response to Israeli actions in Syria since February have fueled speculation about Russia's position vis-à-vis Israel and Iran, given that Russia's military presence in Syria is protected by Iran-backed ground forces.\nIsraeli officials reportedly continue to consult with Russian officials about deconflicting Israeli military operations in Syria and discussing ways to limit Iran's presence there. In May 2018, Russian Foreign Minister Sergei Lavrov called for the withdrawal of all non-Syrian forces from the southern border area \"on a reciprocal basis.\" However, as of July, Hezbollah reportedly has been helping lead an offensive against rebels in southern Syria. In a press conference following his July 16 summit with President Trump, Russian President Vladimir Putin stated a desire to have the situation between Israel and Syria in the Golan Heights return to what it had been before Syria's civil war.", "Hezbollah has challenged Israel's security near the Lebanese border for decades—with the antagonism at times contained near the border, and at times escalating into broader conflict. Speculation persists about the potential for wider conflict and its regional implications. In recent years, Israeli officials have sought to draw attention to Hezbollah's weapons buildup—including reported upgrades to the range, precision, and power of its projectiles—and its alleged use of Lebanese civilian areas as strongholds. Previously during Syria's civil war, Israel reportedly provided various means of support to rebel groups in the vicinity of the Syria-Israel border in order to prevent Hezbollah or other Iran-linked groups from controlling the area.\nIncreased conflict between Israel and Iran over Iran's presence in Syria raises questions about the potential for Hezbollah's Lebanon-based forces to open another front against Israel. In April 2018, Hezbollah leader Hassan Nasrallah said that an Israeli strike on Iranian targets at Tiyas air base was a \"pivotal incident in the history of the region that can't be ignored\" and a \"historic mistake.\" Earlier that same day, Hezbollah's deputy leader Naim Qassem said that Hezbollah would not open a front against Israel from Lebanon, but that it was ready for \"surprises.\" One May analysis expressed doubt that either Israel or Iran would seek to expand the scope of their emerging conflict in Syria to Lebanon. However, the same analysis and some others speculated that if Israel-Iran conflict in Syria worsens and Iran feels cornered, it could look to gain leverage over Israel by having Hezbollah launch attacks from Lebanon.", "Israel faces a threat from the Gaza Strip (via Hamas and other militant groups). Although Palestinian militants maintain rocket and mortar arsenals, the threat from projectiles has reportedly been diminished by Israel's Iron Dome defense system. Tunnels that Palestinian militants used somewhat effectively in a 2014 conflict with Israel have been largely neutralized by systematic Israeli efforts, with some financial and technological assistance from the United States. Under President Abdel Fattah al Sisi, Egyptian military efforts have significantly reduced smuggling over land into Gaza.\nIn 2018, protests and violence along security fences dividing Gaza from Israel have attracted international attention. Israel's use of live fire and the death of more than 120 Palestinians in the spring (including several deaths on May 14, the day that the U.S. embassy opened in Jerusalem) led the U.N. Human Rights Council to call in May for an \"independent, international commission of inquiry\" to produce a report. A June U.N. General Assembly resolution condemned both Israeli actions against Palestinian civilians and the firing of rockets from Gaza against Israeli civilians. Subsequently, some Israel-Gaza violence has ensued over Palestinians' use of incendiary kites or balloons to set fires in southern Israel and a sniper's killing of an Israeli soldier in July, fueling speculation about possible escalation.\nU.S. and PA funding reductions have added to questions about humanitarian assistance for Gaza's population, who remain largely dependent on external donor funding and face chronic economic difficulties and shortages of electricity and safe drinking water. Since 2007, as part of a larger regime of Israeli-Egyptian control over access to and from Gaza, Israel has limited the shipment of building materials into Gaza because of concerns that Hamas might divert materials for reconstruction toward military infrastructure. The possibility that humanitarian crisis could destabilize Gaza has prompted discussions among U.S., Israeli, and Arab leaders aimed at improving living conditions and reducing spillover threats. These discussions have sparked public debate about how closely humanitarian concerns should be linked with political outcomes involving Israel, Hamas, and the PA, or with an anticipated U.S. diplomatic initiative (see \" Peace Process and International Involvement \").", "", "", "Strong bilateral relations have reinforced significant U.S.-Israel cooperation on defense, including military aid, arms sales, joint exercises, and information sharing. It also has included periodic U.S.-Israel cooperation in developing military technology.\nU.S. military aid has helped transform Israel's armed forces into one of the most technologically sophisticated militaries in the world. This aid for Israel has been designed to maintain Israel's \"qualitative military edge\" (QME) over neighboring militaries, since Israel must rely on better equipment and training to compensate for a manpower deficit in a conflict against one or more regional states. U.S. military aid, a portion of which may be spent on procurement from Israeli defense companies, also has helped Israel build a domestic defense industry, and Israel in turn is one of the top exporters of arms worldwide.\nOn November 30, 1981, the United States and Israel signed a memorandum of understanding (MOU) establishing a framework for consultation and cooperation to enhance the national security of both countries. In 1983, the two sides formed a Joint Political Military Group to implement provisions of the MOU. Joint air and sea military exercises began in 1984, and the United States has constructed facilities to stockpile military equipment in Israel. In 1986, Israel and the United States signed an MOU—the contents of which are classified—for Israeli participation in the Strategic Defense Initiative (SDI/\"Star Wars\"), under which U.S.-Israel co-development of the Arrow ballistic missile defense system has proceeded. In 1987, Israel was designated a \"major non-NATO ally\" by the Reagan Administration, and in 1996, under the terms of Section 517 of the Foreign Assistance Act of 1961, as amended, Congress codified this status, affording Israel preferential treatment in bidding for U.S. defense contracts and expanding its access to weapons systems at lower prices. In 2001, an annual interagency strategic dialogue, including representatives of diplomatic, defense, and intelligence establishments, was created to discuss long-term issues.\nThe U.S.-Israel Enhanced Security Cooperation Act ( P.L. 112-150 ) of 2012 and U.S.-Israel Strategic Partnership Act ( P.L. 113-296 ) of 2014 encouraged continued and expanded U.S.-Israel cooperation in a number of areas, including defense, homeland security, cyber issues, energy, and trade. The latter act designated Israel as a \"major strategic partner\" of the United States—a designation whose meaning has not been further defined in U.S. law or by the executive branch.", "Since the late 1970s, successive Administrations have argued that U.S. arms sales are an important mechanism for addressing the security concerns of Israel and other regional countries. During this period, some Members of Congress have argued that sales of sophisticated weaponry to Arab countries may erode Israel's QME over its neighbors. However, successive Administrations have maintained that Arab countries are too dependent on U.S. training, spare parts, and support to be in a position to use sophisticated U.S.-made arms against the United States, Israel, or any other U.S. ally in a sustained campaign. Arab critics routinely charge that Israeli officials exaggerate the threat they pose. The threat of a nuclear-armed or regionally bolstered Iran, though it has partially aligned Israeli and Sunni Arab interests in deterring a shared rival, may be exacerbating Israeli fears of a deteriorated QME, as Saudi Arabia and other Gulf states dramatically increase defense procurements from U.S. and other foreign suppliers.\nIn 2008, Congress enacted legislation requiring that any proposed U.S. arms sale to \"any country in the Middle East other than Israel\" must include a notification to Congress with a \"determination that the sale or export of such would not adversely affect Israel's qualitative military edge over military threats to Israel.\" In parallel with this legal requirement, U.S. and Israeli officials frequently signal their shared understanding of the U.S. commitment to maintaining Israel's QME. However, the codified definition focuses on preventing arms sales to potential regional Israeli adversaries based on a calculation of conventional military threats, raising questions about the definition's applicability to evolving unconventional threats to Israel's security.\nWhat might constitute a legally defined adverse effect to QME is not clarified in U.S. legislation. After the passage of the 2008 legislation, a bilateral QME working group was created allowing Israel to argue its case against proposed U.S. arms sales in the region. For example, former Secretary of Defense Robert Gates wrote that, in 2010, the Obama Administration addressed concerns that Israel's leaders had about the possible effect on QME of a large U.S. sale of F-15 aircraft to Saudi Arabia by agreeing to sell Israel additional F-35 aircraft.\nThe U.S.-Israel Strategic Partnership Act ( P.L. 113-296 ) enacted in December 2014 requires more frequent QME assessments and executive-legislative consultations. It also requires that QME determinations include evaluations of how potential arms sales would change the regional balance, while identifying measures Israel may need to take in response to the potential sales, and assurances or possible assurances from the United States to Israel as a result of the potential sales.", "Specific figures and comprehensive detail regarding various aspects of U.S. aid and arms sales to Israel are discussed in CRS Report RL33222, U.S. Foreign Aid to Israel , by [author name scrubbed]. That report includes information on conditions that, in each fiscal year, generally allow Israel to use its military aid earlier and more flexibly than other countries.", "Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. Since 1976, Israel has generally been the largest annual recipient of U.S. foreign assistance, with occasional exception of Iraq and Afghanistan after 2004. Since 1985, the United States has provided approximately $3 billion in grants annually to Israel. In the past, Israel received significant economic assistance, but now almost all U.S. bilateral aid to Israel is in the form of Foreign Military Financing (FMF). U.S. FMF to Israel represents approximately one-half of total FMF and between 15-20% of Israel's defense budget. The new 10-year bilateral military aid MOU commits the United States to $3.3 billion annually from FY2019 to FY2028, subject to congressional appropriations. The United States also generally provides some annual American Schools and Hospitals Abroad (ASHA) funding and funding to Israel for migration assistance.", "Israel uses approximately 74% of its FMF to purchase arms from the United States, in addition to receiving U.S. Excess Defense Articles (EDA). Given the new MOU's phase-out of Israeli use of FMF for domestic arms producers, by FY2028 all of Israel's FMF will go toward U.S.-origin arms.\nIsrael's procurement of the F-35 Joint Strike Fighter from the United States has been underway since 2016. To date, Israel has received 12 F-35s, and it is under contract to receive a total of 50 by 2024. In late 2017, Israel was the first non-U.S. country to declare operational capability for the F-35, and it has reportedly used the aircraft in combat over Israel's northern border. Under the terms of its arrangements with the United States, Israel has had domestic contractors install customized equipment and weaponry, and it is the only F-35 recipient to date with the right to perform depot-level aircraft maintenance within its own borders.", "Sales of U.S. defense articles and services to Israel are made subject to the terms of both the Arms Export Control Act (AECA) and the July 23, 1952, Mutual Defense Assistance Agreement between the United States and Israel (TIAS 2675). The 1952 agreement states:\nThe Government of Israel assures the United States Government that such equipment, materials, or services as may be acquired from the United States ... are required for and will be used solely to maintain its internal security, its legitimate self-defense ... and that it will not undertake any act of aggression against any other state.\nPast Administrations have acknowledged that some Israeli uses of U.S. defense articles may have failed to meet the requirements under the AECA and the 1952 agreement that Israel only use such articles for self-defense and internal security purposes. These past Administrations have transmitted reports to Congress stating that \"substantial violations\" of agreements between the United States and Israel regarding arms sales \"may have occurred.\" The most recent report of this type was transmitted in January 2007 in relation to concerns about Israel's use of U.S.-supplied cluster munitions during military operations against Hezbollah in Lebanon during 2006. Other examples include findings issued in 1978, 1979, and 1982 with regard to Israel's military operations in Lebanon and Israel's air strike on Iraq's nuclear reactor complex at Osirak in 1981.\nAdditionally, Section 620M of the Foreign Assistance Act of 1961 (FAA), as amended (commonly known as the Leahy Law), prohibits the furnishing of assistance authorized by the FAA and the AECA to any foreign security force unit where there is credible information that the unit has committed a gross violation of human rights. The State Department implements Leahy vetting to determine which foreign security force units (and individuals within the units) are eligible to receive U.S. assistance or training.\nIn 2016, Senator Patrick Leahy and 10 other Members of Congress corresponded with the State Department on the application of the Leahy Law to some specifically alleged instances of possible extrajudicial killings or torture by Israeli personnel. The State Department assured the Members of Congress that it was properly conducting Leahy vetting and monitoring the instances that were mentioned in their letter. In November 2017, Representative Betty McCollum introduced the Promoting Human Rights by Ending Israeli Military Detention of Palestinian Children Act ( H.R. 4391 ), which would prohibit the use of aid for Israel in support of various types of ill-treatment of Palestinian children.", "Congress provides hundreds of millions of dollars in annual assistance beyond Administration-requested amounts for Israel's Iron Dome anti-rocket system and joint U.S.-Israel missile defense programs such as Arrow and David's Sling. The new MOU provides for $500 million in annual funding from FY2019 to FY2028, with possibly more in exceptional circumstances. In July 2016, the United States and Israel announced that they had successfully conducted a special trial—the first of its kind in eight years—to test the connectivity of U.S.- and Israeli-controlled missile defense systems that are based in and around Israel.\nSome countries have sought to acquire elements used in Israeli missile defense systems. In April 2018, 40 Members of Congress sent a letter to the Chair and Ranking Member of the House Appropriations Subcommittee on Defense asking the Subcommittee to \"carefully study\" whether the U.S. Army might immediately acquire Iron Dome. A 2018 report stated that Rafael Advanced Defense Systems Ltd.—the primary Israeli contractor for Iron Dome—has entered into a cooperation agreement with Romania that would be the first to involve the export of Iron Dome's interception system. Israel Aerospace Industries reportedly has sold the radar used in the Iron Dome and David's Sling systems to a number of countries, including Canada and India.", "U.S.-Israel Security Assistance Authoriz ation Act of 2018 ( S. 2497 and H.R. 5141 ) . This bill includes the following provisions:\nFMF authorization. Would authorize FMF of at least $3.3 billion per year from FY2019 to FY2028 (the duration of the new MOU). Extension of war reserves stockpile authority and access to loan guarantees . Would extend this authority and access through FY2023. Precision guided munitions (PGMs). Would (1) authorize a joint U.S.-Israel assessment of how the United States can help provide PGMs to help with potential conflicts with Hezbollah and Hamas; (2) authorize the President to utilize the Special Defense Acquisition Fund to transfer PGMs to reserve stocks for Israel; and (3) authorize the modification of rapid acquisition and deployment procedures to aid U.S. production of PGMs under circumstances of urgent need. Report on Israel's eligibility for strategic trade authorization exception. Would require the President to report to Congress on Israel's status regarding this exception. Cybersecurity cooperation ( H.R. 5141 only). Would direct the Homeland Security Department to establish a grant program to support cybersecurity research, development, demonstration, and commercialization in accordance with a 2008 bilateral agreement. W orldwide foreign assistance , space exploration , and countering drone aircraft . Would encourage and authorize cooperative U.S.-Israel efforts on these issues. Additional reporting on Israel's QME and security posture. Would require the periodic reports on Israel's QME that are already legally mandated to include additional information about threats to Israel and countermeasures available to it.\n201 9 National Defense Authorization Act (NDAA , H.R. 5515 ). The conference version of H.R. 5515 (found in H.Rept. 115-874 ) includes the following provisions:\nSection 127 2 . Would authorize the funding currently authorized for anti-tunneling efforts to also be used for countering drone aircraft (unmanned aerial systems). Section 1273 . Provisions from S. 2497 / H.R. 5141 on the extension of war reserves stockpile authority and the joint U.S.-Israel assessment on PGMs.", "Arms sales, information sharing, and technical collaboration between the United States and Israel raise questions about what Israel might do with capabilities or information it acquires. The United States and Israel have regularly discussed Israel's dealings on sensitive security equipment and technology with various countries, especially China. Sources have reported that the United States has established de facto veto power over Israeli third-party arms sales. And s ince the 1980s there have been at least three cases in which U.S. government employees were convicted of disclosing classified information to Israel or of conspiracy to act as an Israeli agent.", "The United States is Israel's largest single-country trading partner, and—according to data from the U.S. International Trade Commission—Israel is the United States's 24 th -largest trading partner. The two countries concluded a Free Trade Agreement (FTA) in 1985, and all customs duties between the two trading partners have since been eliminated. The FTA includes provisions that protect both countries' more sensitive agricultural sub-sectors with nontariff barriers, including import bans, quotas, and fees. Israeli exports to the United States have grown since the FTA became effective. Qualified Industrial Zones (QIZs) in Jordan and Egypt are considered part of the U.S.-Israel free trade area. In 2017, Israel imported approximately $12.6 billion in goods from and exported $21.9 billion in goods to the United States. The United States and Israel have launched several programs to stimulate Israeli industrial and scientific research, for which Congress has authorized and appropriated funds on several occasions.", "For historical background on these issues, see CRS Report RL34074, The Palestinians: Background and U.S. Relations , by [author name scrubbed].", "The prospects for an Israeli-Palestinian peace process are complicated by many factors. Since President Trump took office, he and officials from his Administration have expressed interest in brokering a final-status Israeli-Palestinian agreement. Many of their statements and policies, however, have raised questions about the timing and viability of any new U.S.-backed diplomatic initiative. The change in U.S. policy on Jerusalem in December 2017 has complicated the U.S. role (see \" Jerusalem ,\" below). Israeli leaders generally celebrated the change, but PLO Chairman Abbas strongly objected. Many other countries opposed President Trump's statements on Jerusalem. This opposition was reflected in December action at the United Nations.\nCiting alleged U.S. bias favoring Israel, Palestinian leaders have broken off high-level political contacts with the United States and have sought support from other international actors and organizations to improve their negotiating position with Israel. However, the PA continues security coordination with Israel. Tensions over Jerusalem appear to have influenced Administration decisions to reduce or delay certain types of aid to the Palestinians, and have made prospects for restarting Israeli-Palestinian talks in 2018 less certain.\nReports suggest that the Administration is preparing a detailed document on the peace process that it may share in an attempt to overcome obstacles to progress. At the end of a June 2018 trip to meet with various Middle Eastern leaders, senior White House advisor Jared Kushner (the President's son-in-law) said that the Administration's plan was almost done. Kushner also said, \"If President Abbas is willing to come back to the table, we are ready to engage; if he is not, we will likely air the plan publicly.\" Some former U.S. officials have cautioned against presenting a plan given current Palestinian opposition. In May, Abbas characterized the possible removal of core issues of the Israeli-Palestinian conflict—namely, Jerusalem's status and Palestinian refugee claims—from the negotiating table as \"an American slap.\"\nThe Administration seeks support from some Arab states, including Saudi Arabia, the United Arab Emirates, Jordan, and Egypt, for the anticipated U.S. initiative. While these Arab states have criticized the U.S. stance on Jerusalem, there are also signs that the shared goal of countering Iranian influence in the region is leading some of them to interact more overtly with Israeli counterparts and to dissuade the Palestinians from abandoning U.S.-backed diplomacy. The 2002 Arab Peace Initiative remains a key reference point for Arab positions on issues of Israeli-Palestinian dispute.\nSpeculation surrounds the particulars of the possible Trump Administration proposal. Dating back to unconfirmed reports from late 2017, some observers anticipate that a proposal could favor Israeli positions that call for limited Palestinian sovereignty, maintaining most West Bank settlements, locating a Palestinian capital on the outer fringes of Jerusalem, and dismissing refugee claims to a right of return. Palestinian officials have complained that the United States is trying to undermine Abbas and dictate a solution. In June, Abbas's spokesperson accused the Administration and Israel of seeking to separate Gaza from the West Bank under the guise of humanitarian aid.", "In December 2017, President Trump recognized Jerusalem as Israel's capital and pledged to move the U.S. embassy from Tel Aviv to Jerusalem. These actions represented a departure from the decades-long U.S. executive branch practice of not recognizing Israeli sovereignty over Jerusalem or any part of it. The President pointed to the Jerusalem Embassy Act of 1995 ( P.L. 104-45 ) as a significant factor in the policy change. The western part of Jerusalem that Israel has controlled since 1948 has served as the official seat of its government since shortly after its founding as a state. Israel officially considers Jerusalem (including the eastern part it unilaterally annexed after the 1967 Arab-Israeli war, while also expanding the city's municipal boundaries) to be its capital (see Figure 2 below).\nIn his December remarks, President Trump stated that he was not taking a position on \"specific boundaries of the Israeli sovereignty in Jerusalem,\" and would continue to consider the city's final status to be subject to Israeli-Palestinian negotiations. However, he did not explicitly mention Palestinian aspirations regarding Jerusalem; Palestinians envisage East Jerusalem as the capital of their future state. In a February 2018 interview, the President said that he would support specific boundaries as agreed upon by both sides. He also has called on all parties to maintain the \"status quo\" arrangement at Jerusalem's holy sites (see textbox below).\nOn February 23, the State Department spokesperson issued the following press statement announcing that the embassy would open in May 2018, to coincide with Israel's 70 th anniversary:\nThe Embassy will initially be located in the Arnona neighborhood, in a modern building that now houses consular operations of U.S. Consulate General Jerusalem. Those consular operations, including American citizen and visa services, will continue at the Arnona facility without interruption, as part of the Embassy. Consulate General Jerusalem will continue to operate as an independent mission with an unchanged mandate, from its historic Agron Road location. Initially, the interim Embassy in Arnona will contain office space for the Ambassador and a small staff. By the end of next year, we intend to open a new Embassy Jerusalem annex on the Arnona compound that will provide the Ambassador and his team with expanded interim office space. In parallel, we have started the search for a site for our permanent Embassy to Israel, the planning and construction of which will be a longer-term undertaking.\nThe embassy opened on May 14 at the Arnona facility (see Figure 3 below) amid criticism from several international actors and violence on the same day at the Gaza-Israel frontier (see \" Hamas and Gaza \" above). According to the State Department spokesperson, the site is located \"partly in West Jerusalem and partly in what's considered no man's land,\" as it lies \"between the 1949 armistice lines\" in a zone that was demilitarized between 1949 and 1967. The White House stated that it cost $400,000 to modify the facility to function as an embassy. The ambassador's official residence is to transition to Jerusalem at a later date.\nCongress could consider a number of legislative and oversight options with regard to the plans mentioned above to expand the embassy at the Arnona site, and later to plan and construct a permanent embassy. These options could focus on funding, timeframe and logistics, progress reports, and security for embassy facilities and staff. A State Department official said in February that a new embassy building would take 7 to 10 years to construct, and a former official estimated that building a new embassy in Jerusalem may cost about $500 million.", "", "Israel has approximately 130 official residential communities (known internationally and by significant segments of Israeli society as \"settlements\") in the West Bank, and approximately 100 additional settlement outposts unauthorized under Israeli law. It also maintains other military and civilian land-use sites in the West Bank. In addition, Israeli authorities and Jewish Israeli citizens have established roughly 14 main residential areas (referred to variously as \"settlements\" or \"neighborhoods\") in East Jerusalem. All of these residential communities are located beyond the 1949-1967 armistice line (the \"Green Line\") in areas that Palestinians assert are rightfully part of their envisioned future state.\nThe first West Bank settlements were constructed following the 1967 war, and were initially justified as residential areas connected to personnel involved with Israel's military occupation. Major West Bank residential settlement building began in the late 1970s with the advent of the pro-settler Gush Emunim (\"Bloc of the Faithful\") movement and the 1977 electoral victory of Menachem Begin and the Likud Party. Subsequently, Israelis have expanded existing settlements and established new ones. Israelis who defend the settlements' legitimacy generally use some combination of legal, historical, strategic, nationalistic, or religious justifications.\nThe international community generally considers Israeli construction on territory beyond the Green Line to be illegal. In 2015, an Israeli anti-settlement advocacy group said that a two-tier planning system exists in Area C of the West Bank: \"a civil and representative planning system for Jewish settlers, and a military system without representation for Palestinians.\"\nIsrael retains military control over the West Bank and has largely completed a separation barrier that roughly tracks the Green Line, but departs from it in a number of areas that include significant settlement populations. Israeli officials state that the barrier's purpose is to separate Israelis and Palestinians and prevent terrorists from entering Israel. Palestinians object to the barrier being built on their territory because it cuts Palestinians off from East Jerusalem and, in some places, bisects their landholdings and communities. It also is seen by many as an Israeli device to unilaterally determine borders between Israel and a future Palestinian state. Not counting East Jerusalem, one source states that 77% of Israeli settlers live within the barrier's perimeter. Counting East Jerusalem, the figure grows to 85%.\nSettlers affect the political and diplomatic calculus in various ways. They influence key voting blocs in Israel's coalition-based parliamentary system (although they do not all share the same background or interests, settlers constitute about 6% of the Israeli population). Additionally, some initiate public protest and even violent resistance against government efforts to limit or regulate their actions. Also, they have a significant symbolic role in a country whose initial survival depended on pioneering spirit in the face of adversity.\nSome Israelis caution that the demand to provide security to settlers and their transportation links to Israel could perpetuate Israeli military control in the West Bank even if other rationales for maintaining such control eventually recede. Protecting settlers is made more difficult by altercations between some settlers and Palestinian West Bank residents, and some settlers' defiance of Israeli military authorities.\nWhen ordered by Israel's court system to dismantle outposts, the government has complied. In some cases, the government placated settlers by relocating displaced outpost residents within the boundaries of settlements permitted under Israeli law.", "U.S. policy on settlements has varied since 1967. Until the 1980s, multiple Administrations either stated or implied that settlements were \"contrary to international law,\" with President Carter's Secretary of State Cyrus Vance stating explicitly that settlements were \"illegal\" in 1980. President Reagan later stated that settlements were \"not illegal,\" but \"ill-advised\" and \"unnecessarily provocative.\" Since then, the executive branch has generally refrained from pronouncements on the settlements' legality. Rather, a common U.S. stance has been that settlements are an \"obstacle to peace.\" Additionally, loan guarantees to Israel currently authorized by U.S. law are subject to possible reduction by an amount equal to the amount Israel spends on settlements in the occupied territories.\nA former U.S. official wrote in 2014 that U.S. Administrations are \"not entirely sure what to do with the fact that Israeli prime ministers of all political stripes have continued Israeli settlement building on the West Bank and construction in parts of east Jerusalem that we'd like to see become the capital of a Palestinian state.\" An April 2004 letter from President George W. Bush to then Israeli Prime Minister Ariel Sharon explicitly acknowledged that \"in light of new realities on the ground, including already existing major Israeli populations (sic) centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949.\"\nThe Obama Administration generally opposed Israeli settlement activity, but took differing approaches at various points. During the Administration's first term, it sought to freeze all settlement activity, including in East Jerusalem. Israel responded with a partial 10-month moratorium. In February 2011, the United States vetoed a draft U.N. Security Council resolution that would have characterized Israeli settlements in the West Bank and East Jerusalem as illegal. During President Obama's second term, he signed trade and customs legislation ( P.L. 114-26 and P.L. 114-125 ) opposing punitive economic measures against Israel (such as measures advocated by a non-governmental boycott, divestment, and sanctions [BDS] movement). However, he asserted in a presidential signing statement for P.L. 114-125 that certain provisions treating \"Israeli-controlled territories\" (i.e., West Bank settlements) beyond the Green Line in the same manner as Israel itself were not in line with U.S. policy. Finally, in December 2016, the Obama Administration decided to abstain from (rather than veto) a U.N. Security Council resolution (Resolution 2334) similar to the one it vetoed in 2011.\nTo date, the Trump Administration has been less critical than the Obama Administration of Israeli settlement-related announcements and construction activity. In February 2017, the White House press secretary released a statement with the following passage:\nWhile we don't believe the existence of settlements is an impediment to peace, the construction of new settlements or the expansion of existing settlements beyond their current borders may not be helpful in achieving that goal. As the President has expressed many times, he hopes to achieve peace throughout the Middle East region.\nSome reports suggest that Israel at some point coordinated settlement construction plans with Trump Administration officials. However, in February 2018 a White House spokesperson denied reports that U.S. officials may have discussed the possible annexation of some settlements with Prime Minister Netanyahu.\nAppendix A. Israeli Knesset Parties and Their Leaders\nAppendix B. Selected U.S.-Based Interest Groups Relating to Israel\nSelected groups actively interested in Israel are noted below with links to their websites for information on their policy positions.\nAmerican Israel Public Affairs Committee: http://www.aipac.org\nAmerican-Israeli Cooperative Enterprise/Jewish Virtual Library: http://www.jewishvirtuallibrary.org\nAmerican Jewish Committee: http://www.ajc.org\nAmerican Jewish Congress: http://www.ajcongress.org\nAmericans for Peace Now: http://www.peacenow.org\nAnti-Defamation League: http://www.adl.org\nConference of Presidents of Major Jewish Organizations: http://www.conferenceofpresidents.org\nFoundation for Middle East Peace: http://www.fmep.org\nHadassah (The Women's Zionist Organization of America, Inc.): http://www.hadassah.org\nIsrael Bonds: http://www.israelbonds.com\nIsrael Institute: http://www.israelinstitute.org\nThe Israel Project: http://www.theisraelproject.org\nIsrael Policy Forum: http://www.israelpolicyforum.org\nJ Street: http://jstreet.org\nJewish Federations of North America: http://www.jewishfederations.org\nJewish National Fund: http://www.jnf.org\nJewish Policy Center: http://www.jewishpolicycenter.org\nNew Israel Fund: http://www.nif.org\nS. Daniel Abraham Center for Middle East Peace: http://www.centerpeace.org\nZionist Organization of America: http://www.zoa.org" ], "depth": [ 0, 1, 1, 2, 2, 3, 3, 3, 3, 3, 2, 1, 2, 3, 3, 3, 2, 3, 3, 4, 4, 2, 1, 2, 3, 3, 3, 4, 4, 4, 3, 3, 3, 2, 2, 3, 3, 3, 4, 4 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h3_full h1_full", "h4_title", "", "h4_title", "", "h4_full", "h4_full", "", "h4_full", "h4_full", "h2_title h1_title", "", "", "", "", "h1_title", "h1_full", "h1_full", "", "", "h2_full", "h0_title h1_title h3_title", "h0_title h1_title", "", "h0_full", "h0_title h1_title", "h0_full", "h1_full", "", "", "", "", "h0_full", "h3_title", "h3_full", "h3_full", "h3_title", "h3_full", "h3_full" ] }

{ "question": [ "What history exists between Israel and the US?", "How do these ties between the US and Israel affect US policy?", "What aid does the US give Israel?", "How is US aid restricted?", "How does US aid fall into trade?", "What is a large concern for Israel's defense strategy?", "How has the US affected Israel's decisions?", "What conflicts existed in 2018 Israel?", "What other large threat accompanied these conflicts?", "What risk might militant groups pose to Israel?", "What has occurred in spite of the risk assessment?", "What risks exist in improving Palestinians in Gaza's living situation?", "How long has the Israel military occupied the West Bank?", "How was the US action regarding Jerusalem accepted by the surrounding areas?", "How likely will the acceptance of US action happen?", "What issues lie with Israel settlement in Jerusalem?", "How is Israel economy and government run?", "What does the government coalition include?", "What is a concern about the government?", "What is a concern regarding citizens?", "What allegations is Netanyahu facing?" ], "summary": [ "Since Israel's founding in 1948, successive U.S. Presidents and many Members of Congress have demonstrated a commitment to Israel's security and to close U.S.-Israel cooperation.", "Strong bilateral ties influence U.S. policy in the Middle East, and Congress provides active oversight of the executive branch's actions.", "Israel is a leading recipient of U.S. foreign aid and a frequent purchaser of major U.S. weapons systems.", "By law, U.S. arms sales cannot adversely affect Israel's \"qualitative military edge\" over other countries in its region.", "The two countries signed a free trade agreement in 1985, and the United States is Israel's largest trading partner.", "Concerns about Iran dominate Israel's strategic calculations.", "Prime Minister Binyamin Netanyahu influenced President Trump's May 2018 decision to withdraw from the 2015 Iranian nuclear agreement and to reimpose sanctions on Iran, and Israel has made common cause with several Arab states to counter Iran's regional activities.", "During 2018, Israel and Iran have clashed over Iran's presence in Syria, fueling speculation about the possibility of broader conflict between the two countries and how Russia's presence in Syria might affect the situation.", "A serious threat persists from Hezbollah's rocket arsenal in Lebanon, adding to the uncertainty along Israel's northern border.", "Hamas and other militant groups in Gaza may present less of an immediate threat to Israeli population centers.", "Nevertheless, various forms of conflict have taken place around the Gaza-Israel frontier in 2018.", "Improving difficult living conditions for Palestinians in Gaza while also ensuring Israel's security presents a challenge, given: Hamas' control of Gaza, Israeli and Egyptian control of its access points, and recent reductions in U.S. and Palestinian Authority (PA) funding.", "Israel's political impasse with the Palestinians continues. Israel has militarily occupied the West Bank since the 1967 Arab-Israeli war, with the PA exercising limited self-rule in some areas since the mid-1990s.", "The Trump Administration's recognition of Jerusalem as Israel's capital in December 2017 and its relocation of the U.S. embassy there in May 2018 were greeted warmly by Israel but rejected by Palestinians and many other international actors.", "The success of an anticipated U.S. diplomatic proposal may depend on a number of factors, including whether Israel embraces it and can persuade Palestinians or Arab state leaders to do so.", "Approximately 590,000 Israelis live in residential neighborhoods or \"settlements\" in the West Bank and East Jerusalem. These settlements are of disputed legality under international law.", "Israel has a robust economy and an active democracy.", "Prime Minister Netanyahu's governing coalition includes various right-of-center and religious parties.", "Domestic debates continue about the government's commitment to rule of law and freedom of expression, and how to balance market-friendly economic policies with individuals' concerns about cost of living.", "The role and status of Arab citizens presents challenges for the state and society.", "Netanyahu is facing a number of corruption allegations, and some political commentators anticipate that Netanyahu will call national elections ahead of the attorney general's decision on whether to indict him." ], "parent_pair_index": [ -1, 0, -1, 2, 2, -1, -1, -1, 2, -1, 0, -1, -1, -1, 1, -1, -1, 0, -1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5, 5 ] }

{ "title": [ "Background", "HHS Oversight Responsibilities", "National Trends in TANF Expenditures", "States Use Flexible Federal TANF Funds to Emphasize Job Preparation and Work Supports for Low- Income Families and Services for At-Risk Children", "States Focus Federal Funds for Non-Cash Services in Common Areas but Can Differ in Target Populations and Service Delivery", "State Decisions for Non- Cash Services are Influenced by TANF’s Funding Structure and State Priorities", "TANF’S Accountability Framework Provides Incomplete Information on States’ Use of TANF Funds", "Current Reporting Provides Limited Information on State’s Use of Funds for Non-Cash Services", "A Key Performance Measure Focuses on Cash Assistance Recipients", "Selected States Are Developing Some Performance Measures for Non-Cash Services", "Improving Performance Information to Include TANF Non-Cash Services Is Challenging", "Conclusions", "Matter for Congressional Consideration", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: HHS Categories of Expenditures for Cash Assistance and Non-Cash Services on the Form ACF-196", "Appendix II: TANF Spending Areas for Non- Cash Services", "Appendix III: Selected State Profiles", "Max monthly benefit: $204", "Average Number Receiving Cash Assistance per Month All people", "Department of Education", "Max monthly benefit: $714", "Average Number Receiving Cash Assistance per Month All people", "Agencies Involved in Providing Non-cash Services State TANF Office: Department of Social Services (supervises funds provided to 58 counties)", "Other Agencies: Department of Child Support Services", "Department of Education", "Department of Public Health", "Employment Development Department", "Max monthly benefit: $462", "Average Number Receiving Cash Assistance per Month All people", "Agencies Involved in Providing Non-cash Services State TANF Office: Department of Human Services (supervises funds provided to 64 counties)", "Other Agencies: Department of Health Care Policy and Finance", "Department of Public Health and Education", "Housing and Finance Authority", "Max monthly benefit: $428", "Average Number Receiving Cash Assistance per Month All people", "Other Agencies: Addiction, Prevention and Recovery Services Agency", "Rehabilitation Services Administration", "Max monthly benefit: $303", "Average Number Receiving Cash Assistance per Month All people", "Department of Economic Opportunity", "Department of Health", "Max monthly benefit: $432", "Average Number Receiving Cash Assistance per Month All people", "Other Agencies: Department of Children and Family Services", "Department of Healthcare and Family Services", "State Board of Education", "Max monthly benefit: $240", "Average Number Receiving Cash Assistance per Month All people", "Other Agencies: Department of Education", "Department of Safety/Corrections", "Louisiana Workforce Commission", "Max monthly benefit: $788", "Average Number Receiving Cash Assistance per Month All people", "Agencies Involved in Providing Non-Cash Services State TANF Office: Office of Temporary and Disability Assistance (supervises funds provided to 58 local social service districts)", "Department of Health", "Max monthly benefit: $498", "Average Number Receiving Cash Assistance per Month All people", "Other Agencies: Department of Health", "Max monthly benefit: $478", "Average Number Receiving Cash Assistance per Month All people", "Department of Commerce", "Department of Early Learning", "Appendix IV: Comments from the Department of Health and Human Services", "Appendix V: GAO Contacts and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgements", "Related GAO Products", "Temporary Assistance for Needy Families", "Accountability" ], "paragraphs": [ "PRWORA ended AFDC, which provided states with federal funds to share states’ costs for monthly cash assistance to eligible low-income families, and created TANF. Congress has provided states with $16.5 billion per year in fixed federal TANF funding to cover cash benefits, administrative expenses, and services primarily targeted to needy families; the amount does not vary according to the number of cash assistance recipients, referred to as the TANF caseload. Under TANF, states are given flexibility in setting various welfare program policies. For example, states generally determine cash assistance benefit levels and eligibility requirements. States are also generally allowed to spend TANF funds on other services as long as these services meet TANF purposes, which are: (1) to provide assistance to needy families so that children may be cared for in their own homes or homes of relatives; (2) to end dependence of needy parents on government benefits by promoting job preparation, work, and marriage; (3) to prevent and reduce out-of- wedlock pregnancies; and (4) to encourage two-parent families.\nFederal law sets some conditions for states receiving federal funds for TANF. For example, states are required to maintain a specified level of their own past spending on certain welfare programs to receive all of their TANF funds, referred to as state maintenance of effort (MOE). In addition, states must ensure that a minimum percentage of families receiving cash assistance meet work participation requirements set in law, referred to as the work participation rate. Activities creditable towards meeting work participation rates are defined in federal law and are generally focused on participants gaining employment, work-related skills, and vocational education. States that do not meet minimum work participation rates may be penalized by a reduction in their block grant. States can use various policy options to help them meet their work participation rates, such as by reducing cash assistance caseloads and spending state funds for TANF purposes above the required MOE amount. In addition, states are limited in the amount of time they can provide federal cash assistance to families. In general, states may not use federal TANF funds to provide cash assistance to a family that includes an adult who has received cash assistance for 5 years or more. Such time limits do not apply to other TANF-funded services.\nThe Deficit Reduction Act of 2005 reauthorized the TANF block grantand included changes expected to strengthen the work participation rate requirement for states, among other changes. TANF is authorized through March 27, 2013.", "Federal law sets forth the basic TANF reporting requirements for states. For example, states are required to provide information and report on their use of TANF funds to HHS through quarterly reports on demographic and economic circumstances and work activities of families receiving cash assistance, state TANF plans outlining how each state intends to run its TANF program, and quarterly financial reports providing data on federal TANF and state MOE expenditures, among other things. HHS reviews state information and reports to ensure that states meet the conditions outlined in federal law. For example, HHS uses information on demographic and economic circumstances and work activities of families receiving cash assistance to determine whether states are meeting work participation rates.\nFor quarterly financial reports, HHS collects information on two types of state expenditures. 1. Assistance, which we refer to throughout the report as cash assistance, primarily includes monthly cash payments directed at ongoing, basic needs. 2. Nonassistance, which we refer to throughout the report as non-cash services, can include any other services meeting TANF purposes. These include services such as job preparation activities, child care and transportation assistance for parents who are employed, family formation efforts, and child welfare services, as well as some cash benefits such as non-recurring short-term benefits and refundable tax credits to low-income working families.\nThe distinction between cash assistance and non-cash services is important because only families that receive cash assistance are included in the work participation rate calculation and are subject to time limits on receiving federally-funded cash assistance. Such conditions do not apply to families who receive non-cash services.\nAmid concerns regarding limited information on TANF expenditures, Congress included additional reporting requirements in the Claims Resolution Act of 2010, which extended TANF authorization through September 2011. The act required states to submit additional information to HHS on nonassistance (or non-cash services) broadly categorized on HHS’s expenditure reporting form as either “other” or “authorized solely under prior law” for March 2011 and April through June 2011. The act only required these reports in 2011, and did not require on-going reporting for following years. Expenditures in these categories made up nearly 28 percent of all federal TANF and state MOE spending for non- cash services nationwide in fiscal year 2011, and the resulting reports indicated that over half of them were for child welfare services.", "The major contrasts between the funding structure of the TANF block grant and its predecessor became apparent in the early years of TANF. When TANF was first implemented in fiscal year 1997, on average over 3.9 million families were receiving cash assistance every month. This number declined by over half within the first 5 years of TANF, and averaged about 1.9 million families in fiscal year 2011. The composition of the overall TANF caseload also changed, with the percentage of “child- only” cases increasing from about 23 percent from July through September 1997 to over 40 percent in fiscal year 2010. These cases consist of families receiving cash assistance on behalf of children only, in contrast to other cases in which adults in the families also receive benefits on their own behalf. Generally, in child-only cases, the parent or adult caregiver is not eligible for benefits for one or more of a variety of reasons, such as receipt of other federal benefits or immigration status.\nWith the financial structure of the block grant, states have generally maintained access to their full TANF block grant allocation each year and have still been required to meet minimum MOE requirements, even as cash assistance caseloads declined. We examined issues related to the federal-state fiscal partnership under TANF in 2001 amid concerns that states would replace their own spending with federal TANF funds— thereby freeing up state funds for other purposes, including tax relief. Although we have not updated this work, we found at that time that the MOE requirement, in many cases, limited the extent to which states used their federal funds to replace state funds. Declining cash assistance caseloads also freed up federal TANF funds that states could save under a “rainy day fund” for use in future years, providing states additional flexibility in their budget decisions. In fact, we reported in 2010 that many states had some TANF reserves that they drew down to meet increasing needs in the recent economic downturn.\nOver time, states also used TANF flexibility to shift spending to non-cash services. In fiscal year 1997, nationwide, states spent about 23 percent of federal TANF and state MOE funds on non-cash services. In contrast, states spent almost 64 percent of federal TANF and state MOE funds for these purposes in fiscal year 2011 (see fig. 1).\nThe shift in combined federal TANF and MOE spending over time is also reflected in federal and state spending when considered separately. In fiscal year 1997, nationwide, states spent about 23 percent of federal TANF funds for non-cash services, compared to about 58 percent in fiscal year 2011 (see fig. 2). An even greater shift occurred in MOE spending patterns over time. While in fiscal year 1997, nationwide, states spent about 23 percent of state MOE funds for non-cash services, this rose to about 70 percent in fiscal year 2011.\nThe increased emphasis on non-cash services is widespread among the states. Thirty-four states spent half or more of their federal TANF funds for non-cash services in fiscal year 2011. Fifteen of these states spent three-quarters or more of their federal TANF funds in this way (see fig. 3).\nThe move away from traditional cash assistance toward non-cash services by states is not necessarily driven by reduced need for cash assistance among low-income families. Several factors have affected the early decline and continued low levels of cash assistance since states implemented TANF. The initial decline occurred during a strong economy where federal support for work supports like child care increased and TANF provided new program emphasis on work. Many former welfare recipients increased their income through employment, and employment rates among single parents increased. At the same time that some families worked more and had higher incomes, others had incomes that left them still eligible for cash assistance. However, many of these eligible families were not participating in the program. According to our estimates in a 2010 report, the vast majority—87 percent—of the caseload decline through 2005 can be explained by the decline in eligible families participating in the program, in part because of changes to state welfare programs. These changes included mandatory work requirements; changes to application procedures; lower benefits; policies such as lifetime limits on assistance; diversion strategies such as providing one- time, non-recurring benefits instead of monthly cash assistance to families facing temporary hardships; and sanctions for non-compliance, according to a review of the research. Among eligible families who did not receive cash assistance, 11 percent did not work, did not receive means- tested disability benefits, and had very low incomes. While we have not updated this analysis, some recent research shows that this potentially vulnerable group may be growing.number of families in poverty and those receiving cash assistance through TANF is not as strong as it has been in the past (see fig. 4).", "In fiscal year 2011, nationwide, the top areas of state spending of federal TANF funds for non-cash services were child welfare, emergency aid, and other services; job preparation and work activities; and work supports including child care.populations for services and delivery methods differed within and across these three spending areas. State decisions on how to allocate funding for non-cash services were influenced by state priorities and TANF’s funding structure, according to officials we interviewed.", "In fiscal year 2011, nationwide, states spent federal TANF funds for non- cash services in common areas including child welfare, emergency aid, and other services; job preparation and work activities; and work supports including child care. These spending areas accounted for 70 percent of over $8.7 billion in federal TANF funds spent on non-cash services nationwide that year (see fig. 5).\nAs shown in figure 6, based on each state’s spending for non-cash services, these areas—child welfare, emergency aid, and other services; job preparation and work activities; and work supports—also represented the three areas most frequently emphasized by states. For example, 18 states spent the largest percentage of their federal TANF funds for non- cash services for child welfare, emergency aid, and other services and 17 states spent the largest percentage for job preparation and work activities.\nThe spending area referred to as child welfare, emergency aid, and other services includes a range of services categorized as “authorized solely under prior law” and “other,” which were primarily child welfare services. According to expenditures reported by states in HHS’s report to Congress required by the Claims Resolution Act of 2010 for April through June 2011, states spent over 54 percent of federal funds categorized as “authorized solely under prior law” and “other” combined on child welfare services.\nStates spent an average of 29 percent of their federal TANF funds for non-cash services in this area, ranging from under 5 percent in 12 states to over 85 percent in 2 states.\nTANF requires each state to engage a specified percentage of families receiving cash assistance in work or work-related activities, and combined, states had spending on job preparation and work activities totaling over $1.9 billion in fiscal year 2011. Nationwide, 17 states had these services as a top spending area for federal TANF funds for non- cash services that same year. Overall, states spent an average of about 25 percent of their federal TANF funds for non-cash services in this area, ranging from under 5 percent in eight states to 79 percent in one state.Expenditures are not reported in a way to determine what portion of spending in this area is spent on those receiving cash assistance versus other eligible low-income individuals.\nEight states had work supports as a top spending area for federal TANF funds for non-cash services in fiscal year 2011. We reported in 2006 that growth in TANF spending for work supports, particularly for child care, reflected state efforts to support employment as these supports helped many families formerly receiving cash assistance maintain jobs. States spent an average of about 13 percent of their federal TANF funds for non- cash services in this area, ranging from under 5 percent in 25 states to 67 percent in 1 state.\nWhile states spent a large portion of their federal TANF funds in these areas, we found in our interviews with selected states that target populations for services and delivery methods can differ. The following provides examples of these differences in our selected states for child welfare, emergency aid, and other services; job preparation and work activities; and work supports.\nAmong our selected states, federal TANF funds were used to support child welfare services, such as child abuse hotlines, investigative and legal services, child protection, and preventive services as well as emergency aid, such as clothing and shelter. Child welfare services are generally provided to children and their families to prevent the occurrence of child abuse or neglect, to help stabilize the family and prevent the need to remove the child from the home if abuse has occurred, and to improve the home and enable the child to reunite with his or her family if the child has been removed from the home. Officials in several of our ten selected states said that TANF funds helped expand existing child welfare programs that were also funded with other federal sources, such as Title IV-E of the Social Security Act for foster care payments and adoption assistance, Medicaid for health care coverage for low-income individuals including children, Title IV-B of the Social Security Act for child and family services to promote the welfare of children, and Social Services Block Grant (SSBG) funds for states to provide social services to meet certain needs of individuals residing within each state. The officials noted that TANF’s flexibility allowed them to meet budgetary needs in this area. One study shows that states rely on federal TANF funds to help support children and families served by state child welfare agencies (see fig. 7).\nIn addition to child welfare services, selected states used funds in this spending area to provide a variety of other services. For example, the District of Columbia used federal TANF funds to support homeless shelters, provide case management, and conduct home visits to families formerly receiving cash assistance.\nAmong our selected states, job preparation and work activities included job readiness training related to resume-writing and interview preparation, help with the job search process, skills training, and subsidized employment. These activities provided work-related assistance that typically counts toward the state’s work participation requirement, and that the state must track for reporting and compliance purposes. Officials in one selected state noted that they also provided activities such as English as a Second Language courses that do not count toward meeting work participation requirements. Officials in 5 of our 10 selected states said they provide services like resume and interview assistance through contractors or directly through the state.\nWhile selected states provided similar services, the populations served and delivery methods often differed. For example, California targets its non-cash services to families receiving cash assistance, with the exception of those receiving short-term aid in an effort to divert them from the caseload. Its TANF-funded services promote job preparation and work activities directed at this population. Other states we reviewed said they provide certain non-cash services to low-income families regardless of whether they receive cash assistance. For example, Arkansas and Washington use federal funds from TANF to partner with local colleges and businesses to provide tailored education and training opportunities designed to meet the needs of local industries. Arkansas officials said that the state’s Career Pathways program provides eligible individuals who have children, such as cash assistance recipients and those with with education incomes up to 250 percent of the federal poverty line,and career training at participating community colleges for high demand jobs. Arkansas officials noted that the program was originally going to be supported using federal funds under the Workforce Investment Act, but these funds were not available, so TANF funds were used instead. Meanwhile, Florida and Utah coordinate work-related services with those provided through the Workforce Investment Act one-stop center system, through which job seekers can access most federally-funded employment and training programs and services.\nAmong our selected states, work supports primarily included child care subsidies or vouchers for low-income families that are working, which may include those receiving cash assistance. Selected states provided child care services similarly through statewide child care systems, counties, or contract vendors. Officials in several selected states said they use TANF funds to provide child care services in combination with federal funds from the Child Care and Development Fund (CCDF), which helps states provide child care subsidies for low-income families. This practice of using both TANF and CCDF funds for child care services was also noted in our previous work, which indicated that states use a combination of TANF, CCDF, TANF funds transferred to CCDF, SSBG, and state funds to provide child care subsidies to low-income families. Officials in several of our selected states said that TANF funds helped them address unmet needs and expand services provided through CCDF to larger populations. However, they also noted that even with these combined funding sources, they have had waitlists for child care subsidies in their state. Our prior work shows that waitlists are not always an accurate indicator of need. For example, in our 2005 and 2010 reports on the decline of the number of children served by CCDF, we noted that states have made changes since 2001 that could decrease the number of families that can access child care but could also provide larger subsidies to those who receive services. These included eligibility and enrollment changes, increased provider payment amounts, and increased co- payment amounts for families (see fig. 8). An official we spoke with in one state said that they do not use waitlists, and instead adjust key features of their child care subsidy program, such as eligibility criteria, to match the resources they have available. These adjustments allow them to avoid waitlists but also make some families that could potentially benefit from the program unable to participate.\nFor additional information on selected states’ TANF programs and spending for non-cash services, see appendix III.", "TANF’s funding structure has given states flexibility in making decisions regarding non-cash services. As mentioned earlier, the dramatic caseload declines during the first few years of TANF’s implementation allowed states to spend federal funds not used on cash assistance for new or existing non-cash services. For example, Louisiana officials said their state’s caseload declines freed up federal TANF funds for new programs to encourage marriage, provide pre-kindergarten services, and help prevent out-of-wedlock pregnancies. In fiscal year 2010, Louisiana spent 71 percent of its federal TANF funds for non-cash services on these efforts. Further, they noted that caseloads continued to decline or stayed the same, since many families that would have been eligible for cash assistance left the state following Hurricane Katrina.\nOfficials in several other selected states also said that federal TANF funds were spent on existing or new programs according to state legislative priorities, and, as a result, funds are often allocated to and administered through multiple state and local agencies. This is in contrast to TANF’s predecessor program, AFDC, which was typically administered through state welfare agencies. More specifically, in 2 of our 10 selected states, officials said that federal TANF funds were allocated directly to a lead agency, usually the state TANF office, which may have allowed it to focus funds in specific areas. For example in Utah, federal TANF funds were generally provided first to its Department of Workforce Services. While the department had agreements with other state agencies to provide services, 63 percent of its federal TANF funds for non-cash services in fiscal year 2010 were used for job preparation and work activities. Similarly, in Louisiana, federal TANF funds were generally provided to the state Department of Child and Family Services, which used interagency agreements to support its emphasis on the family formation and out-of-wedlock pregnancy prevention efforts mentioned above. In contrast, federal TANF funds can be allocated to multiple agencies through a state’s annual legislative budget process. For example in Florida, federal TANF funds went to several agencies that provided a variety of services to low-income families as well as those receiving cash assistance (see fig. 9). Florida officials said legislative priorities can shift from year to year, and recent emphasis has been on out-of-wedlock pregnancy prevention programs and child welfare initiatives, such as protective investigations and adoption subsidies.\nStates’ use of federal TANF funds for a broad array of non-cash services beyond traditional cash assistance can create tensions and trade-offs in state funding decisions, particularly in times of severe fiscal constraints. Officials in three of our selected states cited tensions between the need to provide cash assistance and the need to provide other state services. They noted that this has become more apparent as the number of families needing cash assistance increased during the recent economic downturn. Officials in five selected states cited recent spending reductions in non-cash areas including job preparation and work activities, and officials in one state noted the need to reduce family formation efforts, particularly after American Recovery and Reinvestment Act of 2009 funds were no longer available.\nTo help manage costs, states may make changes to key elements of their cash assistance programs, such as adjusting eligibility criteria, benefit levels, and other features. For example, officials in one selected state said that instead of reducing spending for non-cash services to meet increased need for cash assistance during the recession, the state recently enacted more stringent eligibility criteria and reduced benefit amounts for cash assistance. They explained that their state legislature allocates TANF funds to the cash assistance program just like any other program for non-cash services and thus, funding is not shifted between programs to accommodate increased need. Almost no federal requirements or benchmarks exist as to eligibility criteria or benefit amounts or on the percentage of low-income families who are to be covered by a state’s cash assistance program. Officials in 9 of our 10 selected states said that the state allocates funds for cash assistance based on caseload projections using data from previous years. Remaining funds are then available for non-cash services.", "", "Although the TANF block grant has evolved into a flexible funding stream that states use to support a broad range of allowable services while also serving as the nation’s major cash assistance program for low-income families with children, the accountability framework currently in place in federal law and regulations has not kept pace with this evolution. As a result, there is incomplete information available for assessing TANF performance.\nUnder federal law and regulations, states are required to submit several reports to HHS related to TANF. These generally include: quarterly reports on demographic and economic circumstances and work activities of families receiving cash assistance; state TANF plans outlining how each state intends to run its TANF program, generally filed every two years; quarterly financial reports providing data on federal TANF and state quarterly state MOE reports providing data on families receiving cash benefits under separate state programs, which are funded entirely with state MOE funds and are not subject to certain federal requirements; and annual single audit reports resulting from required audits of nonfederal entities that expend federal funds.\nTaken together, this set of reports and the information provided serves as the accountability framework in place to help HHS and Congress ensure that states use TANF funds in keeping with the block grant’s purposes and identify any program improvements that may be warranted. Yet, these numerous requirements provide limited information on state strategies for using their TANF funds for non-cash services. Our past work has shown that a sound accountability framework includes (1) defining desired outcomes, (2) measuring performance to gauge progress, and (3) using performance information as a basis for decision- making. This requires complete, accurate, and reliable data. However, this type of performance information is not available for a majority of TANF funds nationwide. There are no reporting requirements mandating performance information specifically on families receiving non-cash services or their outcomes, or information related to TANF’s role in filling needs in other areas like child welfare, even though this has become a more prominent spending area for TANF funds in many states.reporting gaps limit the information available for oversight of TANF block grant funds by HHS and Congress.\nState TANF plans serve as a potential source of useful program information. However, they currently provide limited descriptions of a state’s goals and strategies for its TANF block grant, including how non- cash services fit into these goals and strategies, and the amount of information in each plan can vary by state. Federal law includes general language on what should be included in the state TANF plan. For example, the law states that plans are to outline how a state will “conduct a program…that provides assistance to needy families with (or expecting) children and provides parents with job preparation, work, and support services to enable them to leave the program and become self-sufficient.” Federal law does not require states to include descriptions in their state plans of how they intend to use TANF funds beyond the cash assistance population for non-cash services, and states have used their discretion in For example, a state determining how much detail to put in their plans. plan prepared by one of the selected states outlined its cash assistance program and provided descriptions of a variety of non-cash services it intends to provide. In contrast, the state plan of another selected state described its intentions to provide supportive services, particularly to families who have exhausted cash assistance benefits, but did not describe what those services would be.\nHHS officials also noted that they do not have the authority to require states to include basic information about their cash assistance programs, including state TANF eligibility criteria, benefits levels, and other program features.\nThe financial reports on federal TANF and state MOE expenditures also provide some information on the types of non-cash services provided by states, but recent HHS studies and officials in most selected states we spoke to have noted some weaknesses in the information collected from states. Specifically, an HHS study from 2009 reviewed most states’ expenditures and noted incomplete and inconsistent information related to HHS’s current TANF expenditure reporting form for states. HHS identified similar issues in its reports to Congress required under the Claims Resolution Act of 2010, which examined more detailed information from states on TANF expenditures reported on the form. For example, the reports show that spending for child welfare services is often reported in the “other” category for non-cash services as well as the “authorized solely under prior law” categories for cash assistance and non-cash services. In addition, the reports noted inconsistencies between states with the activities counted under the form’s reporting categories. Officials in 7 of the 10 selected states said that the form does not fully capture the purposes of their TANF spending. For example, one state official described how their state’s use of TANF funds for child welfare services is not identifiable in the form’s reporting categories. Also, current expenditure reporting does not provide data in a way that allows distinctions between expenditures made on behalf of cash assistance recipients to help them find employment and leave welfare, and expenditures provided to other individuals and families not directly related to welfare-to-work purposes.\nWhile state plans and expenditure reports individually provide some information on non-cash services, even when considered together, they do not provide a complete picture on state goals and strategies for uses of TANF funds. This is because the state plan is not required to be written in a way that connects to HHS’s financial reporting categories. This makes it difficult to determine how and whether spending areas fit into each state’s stated goals and strategies. One state official we interviewed said that with the current reporting requirements, it was hard for them to know how much TANF funding each of their state programs were using and what benefit the state was getting from each program. As a result, the state developed an additional internal report that presents the costs of performing activities by program, which provides it with better information for assessing the return on investment for each program. Officials from another state also said that it might be helpful to have the state plan more closely tied to the TANF expenditure reporting form, but they would want very specific instructions for how this should be done.\nHHS officials noted the department’s recent efforts to improve TANF expenditure reporting and acknowledged that reporting could be improved in certain other areas as well. HHS officials said they are revising the TANF expenditure reporting form to the extent permitted by law to include additional reporting categories, such as those related to child welfare services. They said they are also revising reporting instructions for states to improve consistency across states. Officials noted the importance of considering the implications for states of any changes or additions to current reporting requirements. For example, some state officials we interviewed described how new or revised reporting requirements can require costly and time-consuming changes to automated and other systems and practices in states and localities, and need to be carefully considered in terms of burden and appropriate timing for states. HHS officials were unable to provide a detailed plan with specific timeframes for the reporting revisions, but said that they are working on them, that they will seek input from relevant parties, and that when the revisions are finalized, they will be shared with Congress to assist in potential TANF reauthorization. In commenting on a draft of this report, HHS stated that it intends to publish draft revisions and instructions for comment in early 2013, with a goal of implementing the revisions for fiscal year 2014.", "The work participation rate for states, established in law and focused on families receiving cash assistance, serves as a key performance measure for state TANF programs. This focus remains, even though the cash assistance component of TANF no longer reflects how most TANF funds are spent. Our 2010 report shows that the emphasis on the work participation rate as a measure of program performance has helped change the culture of state welfare programs so that they focus on moving families off cash assistance and into employment.held accountable for ensuring that a specified percentage of all families receiving TANF cash assistance, and considered work-eligible, participate States are in one or more of the federally-defined allowable activities for the required number of hours each week. We noted in our 2010 report that while the rate specified in law is 50 percent, states have used various policy options, such as credits for caseload reductions and spending above required MOE amounts, to reduce their required rates below 50 percent, as permitted by law. TANF also provides states some flexibility regarding which families to include or exclude in calculating their rates. Our 2010 report noted that over the years, states have typically engaged about one- third of work-eligible families in allowable work activities nationwide and generally met their reduced rates. State participation rates have remained essentially the same since TANF’s implementation, despite legislative changes in 2005 that were generally expected to strengthen the work requirements, as we also reported in 2010 and again in 2011. We also noted in 2012 that the TANF work participation rate requirements, as enacted, in combination with the allowable credits and flexibility provided to states, may not serve as an incentive for states to engage more families in work.\nOur previous work and our work in selected states also shows that the work participation rate measure may not capture aid and services that states believe are important and that it may also serve as a disincentive to work with families with complex needs. All 10 selected states were using federal TANF funds to offer a range of non-cash services that could, for example, help remove barriers to work and/or keep families off the cash assistance caseload. A few of these states provided emergency aid to help meet low-income families’ immediate needs, including housing, child care, and transportation. These efforts are not captured in the key performance measure, the work participation rate. Also, some officials in several selected states also said that the pressure to meet TANF work participation rate requirements causes them to focus on the “ready to work” cash assistance population, which can leave the “harder- to-serve” population without services.", "In our interviews with state officials in the 10 selected states, we found that eight said their states had developed or are developing performance measures of their own that include at least some TANF non-cash services. Officials from seven of these eight states said that their states had tracked information that included the number of people served by some state programs that used federal TANF funds for non-cash services. In addition, of these eight states, officials in Washington and the District of Columbia said they are going through a “re-design process” for their cash assistance program. For example, they are more closely aligning services across multiple state agencies to provide comprehensive services to meet the individual needs of families receiving cash assistance and to help them attain self-sufficiency. Washington officials said they are developing alternative measures of family well- being to measure the effectiveness of TANF as a whole for these families under the re-designed TANF program. Examples of measures Washington officials are considering for families receiving cash assistance include examining whether parents are attaining higher levels of education, training, and financial literacy; whether children have increased access to early childhood and preschool programs; and whether families have increased access to health care, stable housing, and supports for family conflict and domestic violence.", "Several features of TANF pose challenges to designing performance measures, as indicated by our previous work. In our 2006 report on improving performance accountability in grant programs, we noted that some grant features in particular affect the difficulties of designing accountability mechanisms. These features include the extent to which a grant: operates as a funding stream rather than a distinct program, and supports a limited or diverse array of objectives.\nWe also said in our 2012 guidance on designing evaluations that a block grant, with loosely defined objectives that simply adds to a stream of funds supporting on-going state programs, presents a significant challenge to efforts to portray the results of the federal program. Moreover, we noted in 1995 that accountability for block grants can be difficult since accountability provisions need to strike a balance between the potentially conflicting objectives of increasing state flexibility while attaining certain national objectives—a balance that inevitably involves philosophical questions about the proper roles and relationships among the levels of government in our federal system. The four stated TANF purposes in the law that generally define allowable use of funds for states are broad, so the ways in which states use TANF funds can often be complex and varied across states. Also, as discussed previously, as allowed under TANF, states have used TANF funds to expand existing state programs that may be funded with other federal sources, such as Workforce Investment Act funds for employment and training services; CCDF funds for child care; and SSBG and Title IV-B and E funds of the Social Security Act for child welfare services.\nWhile accountability for the TANF block grant can be challenging, general principles of performance measurement can help guide the development of improved performance information. As we cited earlier, our previous work noted that an essential first step in any system of performance information and measurement is to establish goals to be achieved through the relevant program or funding stream. This work also identified characteristics of successful performance measurement systems. These include ensuring that performance measures are tied to program goals, demonstrate the degree to which the desired results were achieved, and take into account stakeholder concerns. In addition, real world considerations, such as the cost and effort involved in gathering and analyzing data, must be taken into account while striving to collect sufficiently complete, accurate, and consistent data to be useful for decision makers. Moreover, other key decisions in establishing performance measures relate to whether to link penalties or rewards to any such measures. Although in many situations HHS can revise its reporting form to make adjustments to the reporting categories, generally HHS has limited authority to impose new TANF reporting requirements on states unless directed by Congress, so many changes to the types of performance information that states are required to report would require congressional action.", "Over the years, TANF has clearly evolved beyond a traditional cash assistance program and now also serves as a source of funding for a broad range of services states provide to other eligible families. States still spend some portion of TANF funds on welfare-to-work programs for the cash assistance population, but their new and varied uses of TANF funds for non-cash services over time beyond this population raise questions about how state efforts are contributing to TANF purposes. Yet, without an accountability framework that encompasses the full breadth of states’ uses of TANF funds, Congress will not be able to fully assess how funds are being used, including who is receiving services or what is being achieved. We acknowledge HHS’s steps toward improving TANF expenditure reporting and its concerns about reporting revisions for states. Any efforts to require more information or make changes to existing reporting and performance measures must consider this potential reporting burden for states. At the same time, gaps in TANF reporting and performance information make it difficult for policymakers to fully assess the workings of TANF. If Congress determines that TANF, as currently structured, continues to address its vision for the program, improved reporting and performance information will be important to enhance Congress’ decision making and oversight of TANF in the future.", "To provide better information for making decisions regarding the TANF block grant and better ensure accountability for TANF funds, Congress should consider ways to improve reporting and performance information so that it encompasses the full breadth of states’ uses of TANF funds.", "As HHS takes steps to revise expenditure reporting for TANF to better understand how states use TANF funds, it should develop a detailed plan with specific timelines to assist in monitoring its progress for revising its financial reporting categories for expenditures of federal TANF and state MOE funds.", "We provided a draft of our report to HHS for review and comment. HHS indicated in its general comments (see appendix IV) that it agrees that current reporting on TANF expenditures provides limited information on the range of ways in which states use federal TANF and state MOE funds. HHS noted that it intends to publish draft revisions to its reporting categories for TANF expenditures and instructions for states for comment in early 2013, with a goal of implementing the revisions in fiscal year 2014. We have added this information to the report. We commend HHS’s efforts to improve TANF expenditure reporting, and maintain that a detailed plan with timelines for revising the reporting categories will facilitate monitoring of its progress and help ensure that the revisions are implemented in a timely fashion. We also agree with HHS that as it works to improve financial reporting, it will be helpful to develop more refined categories of spending than the current categories in existing federal reporting, and to look at overall usage of funds, including transfers and MOE spending.\nIn addition, HHS said that it lacks the authority to require states to provide certain types of information in their state plans, such as plans for using TANF funds or meeting MOE requirements as well as strategic goals or performance targets or measures. HHS noted that absent a statutory change, it cannot add additional categories of required information to the state plan, and any decision to establish such new requirements is one for Congress to consider.\nHHS also noted that the report underscores that a large share of TANF spending now goes to categories of spending other than cash assistance, and that improved information can assist in considering both appropriate allowable expenditure categories and the potential for performance measurements for these other categories of TANF and MOE spending. In addition to these general comments, HHS also provided us with technical comments that we incorporated, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions concerning this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "Appendix I: HHS Categories of Expenditures for Cash Assistance and Non-Cash Services on the Form ACF-196 expenditures on non-recurrent short-term benefits or subsidized employment. It also includes TANF Contingency funds provided to states when certain triggers indicate increased needs.", "HHS’s TANF expenditure reporting form, the Form ACF-196, includes 13 categories for states to report spending for non-cash services. We combined HHS TANF expenditure reporting categories under the following “spending areas” for the purposes of our report.", "This appendix provides selected TANF-related information—such as TANF caseload and spending data—as well as data on numbers of families and children in poverty for each of the 10 states we reviewed in this report: Arkansas, California, Colorado, the District of Columbia, Florida, Illinois, Louisiana, New York, Utah, and Washington.\nStates were judgmentally selected to capture a variety of state characteristics including the proportion of federal and state funds states spent on TANF non-cash services; the proportion spent for specific non- cash services including child welfare, emergency aid, and other services, job preparation and work activities, and work supports such as child care; the total amount of federal and state expenditures for non-cash services; and organizational, geographic, and other considerations. These 10 states accounted for nearly half of all federal and state spending for TANF non-cash services in fiscal year 2010.", "", "", "Examples of programs and services provided Education, training, and job search services for TANF caseload families as well as incentive bonuses for families no longer receiving cash assistance to continue finding employment. Career Pathways initiative to increase access to education credentials to help TANF caseload and other low-income families attain higher paying jobs through partnerships with local colleges and businesses. Subsidized child care services primarily for TANF caseload families through the state’s child care system.\nAdministration costs for the Departments of Workforce Services and Human Services.", "", "", "", "Examples of programs and services provided Education and training for TANF caseload families only. Wage subsidies for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration costs for both the counties and the state, in addition to some related costs for contractors.", "", "Domestic violence services for TANF caseload families only. Temporary transitional services such as child protection, family preservation, and case management to meet a specific crisis situation.", "", "", "", "", "Examples of programs and services provided Child welfare services for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Homeless Prevention and Rapid Re-housing Program, in partnership with the Colorado Housing and Finance Authority, for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administrative costs for both the counties and the state.", "Child care tax credits for TANF caseload families as well as other eligible low-income families not on the TANF caseload.", "", "", "", "", "Examples of programs and services provided Child care vouchers for TANF caseload families as well as other eligible low-income families not on the TANF caseload, delivered through the Office of the State Superintendent for Education. Child welfare services for TANF caseload families only, with case management services provided through the Department of Child and Family Services. Emergency aid such as shelter, food, and clothing for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Home visits to TANF caseload families to identify barriers to employment and link these families to needed services. Teen pregnancy prevention program through the Department of Health, which provides sex education to young women.", "", "", "", "Examples of programs and services provided Child welfare services including protective investigations, abuse hotlines, case management, and other family safety activities for TANF caseload families as well as other eligible low-income families not on the TANF caseload. School readiness child care program for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Education, training and work subsidies for TANF caseload families as well as other eligible low-income families not on the TANF caseload.", "", "Examples of programs and services provided Child welfare screening, assessments, and investigations for TANF caseload families. Home visits and parent training for child welfare cases.", "", "Employment and training programs provided to TANF caseload families through contractors administered by the state. Child care certificate and voucher program for TANF caseload families as well as other eligible low-income families not on the TANF caseload.", "", "", "", "Examples of programs and services provided Pre-kindergarten program to reduce out-of-wedlock pregnancies and encourage two-parent families by increasing literacy and responsible behavior for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration costs associated with multiple programs.", "Work-related activities, education, and skills training for TANF caseload families.", "", "", "", "Examples of programs and services provided Child protective and preventive services and maintenance of a child welfare hotline for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration costs including TANF eligibility determination. Work programs for TANF caseload families as well as other eligible low-income families not on the TANF caseload.", "", "", "", "Examples of programs and services provided Employment, education, and job training services for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Subsidized employment for TANF caseload families. Administration and systems costs for the state.\nHealthy marriage promotion programs through education and training. After-school youth development programs to help prevent out-of-wedlock pregnancy.", "", "", "Examples of programs and services provided Vocational education and GED support generally through community colleges as well as job preparation and job search assistance for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Subsidized employment for TANF caseload families only. Child care assistance for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration and systems costs for the state.", "Washington officials noted discrepancies between their fiscal year-end 2010 TANF expenditure data with the data HHS published for that year. Officials said further that discrepancies are likely due to differences in reporting time frames between the state and HHS.", "", "", "", "In addition to the contact named above, Robert Campbell, Gale Harris, Kristy Kennedy, Nhi Nguyen, Michael Pahr, and Michelle Loutoo Wilson made significant contributions to all aspects of this report. Also contributing to this report were James Bennett, Elizabeth Curda, Rachel Frisk, Alexander Galuten, Kathleen van Gelder, Thomas James, Edward Leslie, Jennifer McDonald, Ellen Phelps Ranen, Almeta Spencer, and Walter Vance.", "", "Temporary Assistance for Needy Families: Update on Program Performance. GAO-12-812T. Washington, D.C.: June 5, 2012.\nTemporary Assistance for Needy Families: State Maintenance of Effort Requirements and Trends. GAO-12-713T. Washington, D.C.: May 17, 2012.\nTemporary Assistance for Needy Families: Update on Families Served and Work Participation. GAO-11-880T. Washington, D.C.: September 8, 2011.\nTemporary Assistance for Needy Families: Implications of Recent Legislative and Economic Changes for State Programs and Work Participation Rates. GAO-10-525. Washington, D.C.: May 28, 2010.\nTemporary Assistance for Needy Families: Fewer Eligible Families Have Received Cash Assistance Since the 1990s, and the Recession’s Impact on Caseloads Varies by State. GAO-10-164. Washington, D.C.: February 23, 2010.\nWelfare Reform: Better Information Needed to Understand Trends in States’ Uses of the TANF Block. GAO-06-414. Washington, D.C.: March 3, 2006.\nWelfare Reform: States Provide TANF-Funded Work Support Services to Many Low-Income Families Who Do Not Receive Cash Assistance. GAO-02-564. Washington, D.C.: April 5, 2002.\nWelfare Reform: Challenges in Maintaining a Federal-State Fiscal Partnership. GAO-01-828. Washington, D.C.: August 10, 2001.", "Designing Evaluations: 2012 Revision. GAO-12-208G. Washington, D.C.: January 2012.\nGrants Management: Enhancing Performance Accountability Provisions Could Lead to Better Results. GAO-06-1046. Washington, D.C.: September 29, 2006.\nBlock Grants: Issues in Designing Accountability Provisions. GAO/AIMD-95-226. Washington, D.C.: September 1, 1995." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 2, 2, 1, 2, 2 ], "alignment": [ "", "", "", "h0_title", "h0_full", "h0_full", "h1_title", "h1_full", "", "", "h1_full", "h1_full", "h2_full", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "Why are Temporary Assistance for Needy Families (TANF) block grant funds used?", "For the GAO's analysis, what defined job preparation and work activities?", "How do the 10 chosen states provide cash assistance?", "How do Florida and Utah provide their services?", "How do these states use work support?", "What are services for at-risk children?", "How does TANF allow state funding themselves?", "Why might this be a poor decision?", "How is TANF's accountability framework incomplete?", "How have plans for TANF programs shown this incompleteness?", "What other wetness for TANF has been identified?", "What is an example of HHS reporting issues?", "How is HHS addressing their weakness?", "What lack of requirements exist?", "How do these gaps cause limitations?", "What HHS to TANF authority limits exist?", "What does GAO's work address?", "Why might Congress want to improve reporting and performance information?", "How does the GAO recommend HHS assist TANF reporting?", "How did HHS respond to this suggestion?" ], "summary": [ "Nationwide, states have used Temporary Assistance for Needy Families (TANF) block grant funds not only to provide cash assistance, but also to provide noncash services, such as job preparation and work supports for low-income families and aid for at-risk children.", "Among our 10 selected states, job preparation and work activities included help with the job search process, skills training, and subsidized employment.", "California generally provides such services to families receiving cash assistance while the other nine states extend some of them to other low-income families.", "Florida and Utah provide such services in coordination with the Workforce Investment Act one-stop center system.", "Work supports among these states mainly include child care subsidies for low-income working families.", "Services for at-risk children include child welfare activities, such as child abuse hotlines, investigative and legal services, child protection, and preventive services.", "TANF has allowed states to make funding decisions based on state priorities, particularly as cash assistance caseload declines freed up funds for non-cash services.", "However, according to officials in three states GAO reviewed, state decisions to fund a broad array of services can create tensions and tradeoffs between meeting cash assistance and other service needs.", "TANF's accountability framework provides incomplete information on how states' non-cash services are contributing to TANF purposes.", "Plans that states submit to the Department of Health and Human Services (HHS) outlining how they intend to run their TANF programs provide limited information on goals and strategies for non-cash services.", "In addition, past HHS reports and selected states identified some weaknesses in TANF expenditure reporting.", "For example, officials in one selected state noted that the use of TANF funds for child welfare services is not clearly identifiable in HHS's reporting categories for TANF expenditures.", "HHS is working to revise reporting categories, with a goal of implementing them for fiscal year 2014.", "No reporting requirements currently mandate performance information specifically on families receiving non-cash services or TANF's role in filling needs in prominent spending areas for TANF funds, like child welfare.", "These reporting gaps limit the information available for oversight of TANF block grant funds by HHS and Congress.", "Generally, HHS has limited authority to impose new TANF reporting requirements on states unless directed by Congress.", "While GAO's previous work on grant design highlights several features of grants, such as broad and varied purposes, that pose challenges to the development of performance information and measures, it also lays out accountability principles that can help address these issues for TANF.", "Congress may wish to consider ways to improve reporting and performance information so that it encompasses the full breadth of states' uses of TANF funds.", "GAO recommends that HHS develop a detailed plan with timelines to revise reporting categories for TANF expenditures.", "In its response, HHS provided some timeframes that we added to the report, although we maintain a more detailed plan will help HHS monitor its progress in completing this effort." ], "parent_pair_index": [ -1, -1, -1, -1, 3, -1, -1, 6, -1, 0, -1, 2, 2, -1, 5, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3 ] }

{ "title": [ "Background", "Collection and Use of Recreational Fisheries Data", "National Research Council Findings and NMFS’ Implementation of MRIP", "Several Challenges with NMFS’ Fisheries Data Collection Efforts Have Been Identified", "NMFS Has Taken Steps Aimed at Improving Data Collection, but Some Challenges Persist and NMFS Does Not Have a Comprehensive Strategy to Guide Improvement Efforts", "NMFS Has Taken Steps Aimed at Improving Recreational Fisheries Data Collection, but Some Challenges Persist", "Addressing Challenges in Collecting Quality Data", "Addressing Data Timeliness Challenges", "Addressing Challenges in Communication", "NMFS Does Not Have a Comprehensive Strategy to Guide Its Data Collection Improvement Efforts", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Commerce", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "NMFS’ mission is to act as a steward of the nation’s ocean resources and their habitats. This includes responsibility for managing recreational fisheries in federal waters. These waters generally include the United States Exclusive Economic Zone, which typically begins approximately 3 geographical miles from land and extends 200 nautical miles from land. Coastal states generally maintain responsibility for managing fisheries in waters that extend approximately 3 geographical miles from their coastlines. The extent of recreational fishing varies by region, with the greatest amount of marine recreational fishing taking place in the Gulf of Mexico, followed by the South Atlantic and Mid-Atlantic, according to NMFS statistics. Figure 1 shows NMFS statistics about the extent of marine recreational fishing activity overall and the locations of the highest levels of marine recreational fishing activity. overfished fisheries, protect essential fish habitat, and reduce bycatch, among other things. The 1996 act included requirements for NMFS and the councils to develop fisheries management plans for fish stocks and to establish required time frames for rebuilding fish stocks that are overfished. A reauthorization of the act was passed in 2006 and established further legal requirements to guide fisheries data collection and management, including mandates on the use of science-based annual catch limits. Under NMFS guidelines, plans should include accountability measures to prevent catch from exceeding the annual catch limit. These measures can include fishing season closures, closures of specific areas, changes in bag limits, or other appropriate management controls.\nPrivate recreational anglers use private boats and sites on shore, such as public docks or private boat clubs, to access marine recreational fisheries.\nThe marine recreational fishing sector is divided between private anglers and the for-hire sector. Private anglers primarily access marine recreational fisheries by using private boats or by fishing from sites on shore. The for-hire sector includes both charter boats and “head boats.” Charter boats are chartered or contracted by anglers for a fishing trip for a flat fee regardless of the number of anglers on the boat. “Head boats” are usually large capacity multipassenger vessels that charge each angler a per person fee for a fishing trip.\nPrivate recreational anglers also rely on the for-hire sector, which consists of charter boats and “head boats.” Charter boats commonly carry six or fewer passengers who purchase the services of a boat and crew. “Head boats” carry more than six passengers, with each individual angler paying a fee to go fishing.\nNMFS has overall responsibility for collecting data to manage federal fisheries. It has several offices involved in fisheries data collection and management, including the Office of Science and Technology, six regional Fisheries Science Centers, and five regional offices. NMFS has numerous partners for collecting data to manage recreational fisheries, including coastal states and three interstate marine fisheries commissions. In addition, NMFS and these partners collaborate with regional fisheries information networks, such as the Gulf Fisheries Information Network and the Atlantic Coastal Cooperative Statistics Program, to collect and manage fisheries data. NMFS also collaborates with eight Regional Fishery Management Councils that are responsible for fisheries conservation and management in specific geographic regions of the country. In addition, NMFS collaborates with numerous other stakeholders, such as private anglers, charter boat operators, seafood dealers, nongovernmental organizations, and recreational fisheries associations, to gather input about fisheries data collection programs and management. Figure 2 shows key stakeholders involved in recreational fisheries data collection.", "NMFS and its stakeholders collect several types of data for use in recreational fisheries management. For example, information is collected on recreational fishing effort and catch rates. Effort measures the number of angler trips, while catch rates measure the average number and size of fish, by species, that are brought to shore, caught and used as bait, or discarded (i.e., caught but then released alive or dead). These data are used to estimate the total recreational fishing catch to determine the impact of recreational fishing activity on fish stock mortality and the changes that are occurring to the fish stock over time. Figure 3 shows how these data are used to estimate total catch.\nAccording to NMFS documentation, data on catch and discards are generally collected through shoreside interviews of anglers at public access fishing sites, primarily through NMFS’ MRIP Access Point Angler Intercept Survey, which covers the Atlantic and Gulf coasts from Louisiana to Maine, or through state survey programs. These data may also be collected through the use of onboard observers, typically on charter boats or head boats. Data on fishing effort are collected through MRIP or state programs, using methods such as phone or mail surveys, shoreside interviews, onboard observers, logbooks, boat and boat trailer counts, and electronic monitoring or electronic reporting tools. Given the involvement of the interstate fisheries commissions and states in data collection efforts, methods for collecting data on recreational fishing vary among states and regions.\nIn addition, according to NMFS documentation, biological samples of fish specimens are collected for scientific analysis to provide information on the health and biology of fish stocks. For example, data are collected on the lengths, weights, and ages of fish samples. These samples are often collected during NMFS’ shoreside interviews of recreational anglers or by tagging fish to track after they are caught and released. Academic programs and cooperative research with the fishing industry are other sources of biological sampling data.\nIn addition to collecting data on marine recreational fisheries, NMFS and its stakeholders, such as states, collect other types of data including data on commercial fisheries. Unlike recreational fisheries data, however, commercial fisheries data are collected through a census of the weight and value of all fish species sold to seafood dealers using a network of cooperative agreements with states. According to NMFS documentation, in some regions, state fishery agencies are the primary collectors of commercial fisheries data that they receive from seafood dealers who submit periodic reports on the amount and value of the various fish species they purchase. In addition, independently from recreational or commercial fishing data collection efforts, NMFS and its stakeholders also collect information on the abundance of fish stocks and environmental conditions in fish habitats, such as seafloors, open ocean water, and natural and artificial reefs. These data are used to determine the size, age composition, and distribution of fish stocks, and allow NMFS to track the total abundance of fish stocks over time. NMFS officials told us NMFS relies on its own research vessels or contracted commercial fishing vessels to collect abundance data.\nNMFS uses these various types of data to conduct fish stock assessments that estimate, among other things, the population of fish stocks, fish stock productivity, and biological reference points for sustainable fisheries. NMFS and the Regional Fishery Management Councils in turn use the fish stock assessments to examine the effects of fishing activities on the fish stocks and make determinations such as whether stocks are overfished and whether overfishing is occurring. According to NMFS documentation, the data are also used to support management decisions, such as setting limits on how many fish can be caught annually or determining the need to close a recreational fishery for a particular fish stock during an open fishing season, called an in-season closure, when annual catch limits are anticipated to be exceeded.", "In 2006, the National Research Council issued a report that reviewed NMFS’ marine recreational fisheries data collection programs and made numerous general and specific recommendations to address weaknesses. Among other things, the council recommended the redesign of all marine recreational fishing surveys funded by NMFS. In addition, the council recommended that NMFS improve its survey coverage by either developing a national registration of all saltwater anglers or by using new or existing state saltwater license programs that would provide appropriate contact information for all anglers fishing in all marine waters, both state and federal. The 2007 reauthorization of the Magnuson- Stevens Act included requirements for NMFS to take into consideration and, to the extent feasible, implement the recommendations in the National Research Council report.\nSubsequently, in October 2008, NMFS began implementing MRIP, managed in NMFS’ Office of Science and Technology, to collect recreational fisheries effort and catch data and develop estimates for use in fisheries management. MRIP was intended to coordinate collaborative efforts among NMFS and its various stakeholders to develop and implement an improved recreational fisheries statistics program. MRIP consists of a system of regional surveys that provide effort and catch statistics for use in the assessment and management of federal recreational fisheries. According to NMFS officials, because counting every recreational angler or observing every fishing trip is not possible, NMFS relies upon statistical sampling to estimate the number of fishing trips recreational anglers take and what they catch. The data gathered from the regional surveys are compiled to provide regional and national estimates. Under MRIP, certain states, including California, Oregon, and Washington, have implemented recreational fisheries data collection programs funded, in part, by NMFS; these data are also used to inform fisheries management. Also, some states have developed and implemented other recreational fisheries data collection programs funded, in part, through mechanisms such as fee-based fishery programs in those states. Figure 4 provides a timeline of key legislative and other events related to marine recreational fisheries data collection and management.", "Since the 2006 National Research Council report, NMFS and some state officials have identified several challenges related to collecting data to manage marine recreational fisheries, such as obtaining quality recreational fishing data to inform scientific analyses and produce credible effort and catch estimates. NMFS and some state officials also identified challenges with collecting recreational fisheries data in a timely manner to support certain recreational fisheries management decisions. In addition, NMFS and some state officials, as well as some other stakeholders such as private recreational anglers, identified challenges regarding how NMFS communicates with stakeholders about its marine recreational fisheries data collection efforts.\nExamples of NMFS’ challenges in obtaining quality recreational fishing data through MRIP to inform scientific analyses and produce credible effort and catch estimates include: Identifying the universe of recreational anglers. NMFS faces a challenge in obtaining complete information on the universe of recreational anglers. According to NMFS officials, MRIP created a national saltwater angler registry to obtain more complete information about recreational anglers. However, this registry does not include anglers if they are registered in states bordering the Atlantic Ocean and Gulf of Mexico because NMFS granted those states exemptions from the national registry. According to NMFS officials, NMFS relies on state angler registries to identify the universe of recreational anglers in those exempted states. However, some state angler registries offer exemptions from fishing permit requirements, such as for individuals under or over certain ages, and NMFS officials noted that not all anglers comply with state licensing and registration requirements. Therefore, these anglers do not appear on state angler registries. As a result, NMFS does not have a complete list of recreational anglers.\nObtaining sufficient coverage in effort surveys. According to some state officials, NMFS faces challenges in ensuring that it covers the full range of anglers among the participants it selects to participate in fishing effort surveys so that they are representative of the overall angler population. For example, NMFS has relied on its Coastal Household Telephone Survey, which randomly selects participants from all potential household telephone numbers in coastal counties, to obtain information about shoreside and private boat fishing effort in the Gulf of Mexico and the Atlantic coast. As a result, the survey does not capture recreational anglers from noncoastal states that travel to fish in the Gulf of Mexico or Atlantic coast, or coastal resident anglers in households that do not have a landline phone. NMFS officials acknowledged this limitation with the Coastal Household Telephone Survey.\nTargeting a representative sample in shoreside surveys.\nAccording to NMFS officials, NMFS faces challenges in collecting data on a portion of the recreational fishing sector since it generally does not collect data on private property or at private-access fishing sites. According to NMFS officials and other governmental stakeholders, this is an issue in states that have many private-access sites, such as California and Florida, because there may be a significant portion of the recreational fishing sector that is not being surveyed. As a result of this limitation, according to NMFS officials and some state officials, NMFS relies on untested assumptions about, for example, catch and discard rates for anglers that use private- access fishing sites to develop recreational catch estimates. However, NMFS officials noted that survey data on fishing effort are collected from anglers regardless of whether they fish from public or private- access fishing sites. In addition, according to one state official, NMFS’ standard protocols for determining when and where to assign shoreside observers to conduct interviews may not take into account local fishing patterns and, therefore, observers may not be located in the right places at the right times to collect the most representative data. For example, according to this official, NMFS’ protocols for assigning shoreside observers do not account for the length of time anglers would typically take to reach federal waters and return from their trip. As a result, observers may not be at the shoreside when anglers return.\nObtaining a sufficient number of survey responses and biological samples. According to NMFS and some state officials, NMFS faces the challenge of collecting a sufficient number of survey responses and samples in its effort and catch surveys. For example, some NMFS and state officials told us Coastal Household Telephone Survey response rates have been declining, and a 2014 report prepared for NMFS noted that response rates to the survey had “declined considerably” in the previous decade, which could increase the potential for bias in the data collected on recreational angler fishing effort. Also, one state official told us he does not believe NMFS assigns enough shoreside observers to collect the recreational angler catch and discard data needed to develop precise recreational catch estimates. In addition, another state official told us that the lack of shoreside observers has contributed to an insufficient amount of biological samples collected to adequately address scientific needs. Consistent with these views, in 2013 NMFS’ Southeast Fisheries Science Center identified a need for more fish tissue samples in its region to aid in assessing fish stock reproduction.\nObtaining valid survey responses. According to some state and NMFS officials, obtaining valid survey responses can be challenging because they depend on anglers’ recollections of prior fishing events. NMFS officials told us that the accuracy of self-reported data (i.e., data that rely on participants providing responses based on personal observations) depends on the angler’s ability to recall events or to distinguish between different fish species. However, anglers may not be able to accurately recall details about fish they caught and then discarded, especially as time elapses or because of limited knowledge about fish species, and without independent validation or verification, that data may be inaccurate. According to NMFS officials, these challenges affect the Coastal Household Telephone Survey because the survey asks anglers how many saltwater fishing trips were taken in the previous 2 months, but it does not use observers or other mechanisms to independently validate and verify this self-reported data.\nObtaining key recreational fisheries data. According to NMFS and some state officials, NMFS faces a challenge in collecting complete data on discards—that is, fish that are caught but then released— because of the difficulty of validating and verifying self-reported data as previously discussed. In light of this difficulty, Louisiana does not collect recreational angler discard data as part of its own recreational fisheries data collection program because of concerns about the quality of angler self-reported data, according to a state official. Even given the uncertainty in identifying the exact amount of discards, the number of discards can be substantial—for example, according to NMFS statistics, the majority of fish caught by marine recreational fishermen in 2013 were discarded. NMFS officials told us that discarded fish that have to return to great depths often experience high mortality rates due to barotrauma. As a result of limited information about the number of discarded fish and their mortality rates, according to NMFS officials, NMFS relies on assumptions about the mortality rates of discarded fish to produce or adjust recreational catch estimates.\nNMFS also faces challenges in collecting timely marine recreational fishing data to support certain fisheries management decisions, according to NMFS and some state officials we interviewed. According to NMFS officials, the Magnuson-Stevens Reauthorization Act of 2006 implemented new requirements that have greatly expanded the pressures on fisheries managers to rely on timely data to make decisions. However, according to NMFS and some state officials, NMFS’ data collection systems have not evolved quickly enough to support management decision making. For example, it takes 2 months to conduct the Coastal Household Telephone Survey, which collects data on recreational fishing effort in the Gulf of Mexico and the Atlantic coast, and about 45 days to analyze the data and produce recreational fishing estimates. According to NMFS and some state officials, as a result of these timing issues, NMFS managers do not have enough information to make informed decisions about whether to initiate in-season closures for certain fish stocks with annual catch limits in order to prevent anglers from exceeding those limits. State officials frequently highlighted this as a concern in managing the Gulf of Mexico red snapper, which is susceptible to in-season closures because of concerns about overfishing. According to NMFS documentation, this fishery has been subject to shortened federal fishing seasons over the last few years—including seasons of 9 days in 2014 and 10 days in 2015, compared with 75 days in 2009 and 42 days in 2013.\nNMFS, some state officials, and some other stakeholders, such as private recreational anglers, have also identified challenges in how NMFS communicates with stakeholders about its fisheries data collection efforts. For example, a fisheries official from Texas said that, although Texas provides NMFS with marine recreational fisheries data, NMFS does not clearly communicate how or if it uses those data. Some private recreational anglers also told us that NMFS has not always sufficiently communicated with the public about its activities, creating concerns about a lack of transparency regarding NMFS’ fisheries management decisions. For example, some private anglers told us they are confused because NMFS has not explained why it continues to shorten the Gulf of Mexico red snapper fishing season even though the red snapper population has increased. NMFS officials acknowledged that NMFS has not always clearly communicated with regional stakeholders to explain its decision- making processes, stating that this has contributed to the public’s misperceptions.\nAs a result of the challenges that have been identified with collecting fisheries data, NMFS officials told us they face a lack of public confidence and trust in their ability to provide the data needed for managing recreational fisheries. For example, according to a Texas fisheries official, Texas withdrew from NMFS’ recreational data collection program and implemented its own data collection program in the late 1970s because it did not believe that NMFS’ data collection methods suited Texas’ needs for managing recreational fisheries. Similarly, in 2014, Louisiana withdrew from MRIP and implemented its own recreational fisheries data collection program, called LA Creel, because of concerns about MRIP data being able to support Louisiana’s needs for managing recreational fisheries, according to a Louisiana fisheries official. Similarly, according to state officials, Mississippi and Alabama have also independently initiated efforts to collect data on the abundance of certain fish, including red snapper, in artificial reefs off the coasts of these states because of concerns that NMFS’ current data collection methods underestimate the abundance of these fish stocks. Citing dissatisfaction with NMFS’ management of the Gulf of Mexico red snapper fishery, the states bordering the Gulf of Mexico released a proposal in March 2015 to transfer the responsibility for managing Gulf of Mexico red snapper from NMFS to these states.", "NMFS has taken several steps aimed at improving data collection to manage marine recreational fisheries and addressing challenges related to communicating with stakeholders. However, some data collection challenges persist, and NMFS does not have a comprehensive strategy to guide its efforts to improve recreational fisheries data collection.", "NMFS has taken steps to address some of the challenges it faces in collecting data for managing marine recreational fisheries, including steps aimed at collecting quality data to support scientific analyses and producing credible effort and catch estimates, improving the timeliness of data collection, and improving communication with stakeholders. However, even with the various steps NMFS has taken, agency officials said that some challenges persist. In April 2015, NMFS requested that the National Research Council review MRIP to determine the extent to which NMFS has addressed the recommendations in the 2006 National Research Council report. A NMFS official told us the National Research Council has initiated the review process, and NMFS expects the review to be completed in 2017.", "NMFS has taken several steps to address the challenges it faces in collecting quality data. To address the challenge of identifying the universe of recreational anglers, NMFS documents indicate that by October 2011 NMFS had entered into memoranda of agreement with states and United States territories that were exempt from the national registry requirements, whereby these states and territories agreed to submit their data on marine recreational fishing participants to NMFS for inclusion into the national registry. In 2011 and 2012, NMFS provided approximately 20 grants to states through the interstate marine fisheries commissions to support initial data quality improvement projects. Subsequently, in 2012 and 2013, NMFS received state angler registry data from each of the exempted Atlantic and Gulf Coast states and entered the data into the national registry database. During this same period, NMFS made recommendations to the states on improving their recreational angler databases. NMFS also continued to provide funds to the states through the commissions to support the initial data quality improvement projects, according to NMFS documents.\nTo address both regional and national needs for effort and catch data, NMFS has supported the redesign of state and federally managed surveys in all regions. For example, in 2009, NMFS initiated a series of pilot studies to address declining participation rates in telephone recreational fishing effort surveys and potential gaps in the data that could skew survey results due to limitations in reaching coastal residences. NMFS conducted these pilot studies to determine whether mail survey methods for collecting recreational fishing effort data would improve estimates. In a July 2014 report, NMFS stated that the findings from the study indicated that mail survey response rates were nearly three times higher than the telephone survey response rates. Given these results, in May 2015, NMFS issued a plan for transitioning from the current Coastal Household Telephone Survey to a newly designed mail-based survey, referred to as the Fishing Effort Survey. According to NMFS documentation, NMFS expects the Fishing Effort Survey to be fully implemented by January 2018, as shown in figure 5.\nIn 2013, NMFS also issued new protocols for the Access Point Angler Intercept Survey. Under these new protocols, NMFS assigns shoreside observers to specific locations at precise times to address potential data gaps related to where and when the data are collected. According to NMFS officials, the new peer-reviewed survey design is intended to provide complete coverage of fishing trips ending at public access sites with representative sampling of trips ending at different times of day.\nAlso in 2013, NMFS initiated a science program review to help provide a systematic peer review of its fisheries data collection programs at its six regional Fisheries Science Centers and Office of Science and Technology. As part of this effort, peer review panels evaluated NMFS’ data collection and management programs in 2013, subsequently issuing a report identifying a number of crosscutting national challenges and making several recommendations to address them. For example, the report recommended that NMFS develop a plan for providing the data necessary for conducting fish stock assessments.\nNMFS has also initiated efforts to evaluate the potential of electronic monitoring and reporting to address quality of data challenges. For example, according to NMFS officials, as of October 2015, NMFS was working with stakeholders in Florida to test the use of a smartphone- and Internet-based electronic reporting tool called iAngler to collect and report data on recreational effort and catch. NMFS is also working with Texas on an electronic reporting tool called iSnapper to test the collection of self- reported catch data, according to NMFS officials. In addition, NMFS issued a policy directive in May 2013 to provide guidance on the adoption of electronic technologies to complement or improve existing fishery data collection programs. In 2013, NMFS began working with its regional Fisheries Science Centers to develop regional plans to identify, evaluate, and prioritize the implementation of electronic monitoring and reporting technologies. According to NMFS documents, each of NMFS’ regional offices, in consultation with the Fisheries Science Centers, issued implementation plans in January and February 2015 that include a focus on using electronic technologies to improve the quality of recreational fishing data and data timeliness. Figure 6 shows examples of electronic monitoring and reporting technologies.\nHowever, even with the various steps NMFS has taken, agency officials said that some challenges persist. For example, according to NMFS officials we interviewed, NMFS uses independent checks to either validate self-reported data or estimate a reporting error that can be used to produce unbiased estimates, but the agency faces challenges in independently validating and verifying self-reported angler data. In addition, NMFS officials told us the 2006 National Research Council report contains recommendations that the agency has not yet addressed, including developing methods for improving the accuracy of estimates for the number of discarded fish and addressing the potential bias resulting from the exclusion of private access sites from shoreside surveys. NMFS officials agreed that additional effort should be undertaken through MRIP to evaluate alternative methods for obtaining and verifying discard data. According to NMFS officials, they initiated a process in October 2015 for developing strategies to address these challenges.", "NMFS has begun taking steps to improve the timeliness of its recreational fisheries data to support certain fisheries management decisions but, according to NMFS officials and stakeholders, this data timeliness challenge has not been fully addressed. For example, according to NMFS documentation, in fiscal year 2015, NMFS began studying the feasibility of moving from a 2-month survey period to a 1-month survey period—that is, conducting the survey each month to collect data on the previous month’s fishing activity—in its new mail-based Fishing Effort Survey as a way to help reduce recall errors and improve the precision and timeliness of recreational fishing effort estimates. However, some stakeholders told us that NMFS’ new mail-based Fishing Effort Survey will still not provide enough timely data to inform in-season closure decisions for federal Gulf of Mexico red snapper seasons. NMFS officials acknowledged limitations with its approach, noting that in-season closure decisions are based on the previous year’s recreational fishing catch estimates. According to NMFS officials, beginning in 2013, NMFS coordinated a series of MRIP workshops with fisheries officials from Alabama, Florida, Louisiana, Mississippi, and Texas to discuss options for improving the timeliness of data to support Gulf of Mexico red snapper in-season closure decisions. NMFS officials told us that they will continue to collaborate with their Gulf state partners to develop supplemental surveys focused on red snapper that can be integrated with the more general MRIP survey approach. According to NMFS officials, NMFS and the Gulf of Mexico Fisheries Information Network recently developed a timeline that describes the process and timing for making key decisions about future red snapper specialized survey methods, as shown in figure 7. NMFS officials told us as of October 2015 the states concurred with the timeline.\nAccording to NMFS and a state official, addressing some of the data collection challenges related to quality and timeliness entails making trade-offs. For example, according to NMFS officials, NMFS also held a workshop in March 2011 with several recreational fishing stakeholders, such as states and councils, to address the need for more timely and precise updates in a short-season fishery. NMFS officials told us the workshop identified several ways in which improvements could be made, but they concluded that more resources beyond what MRIP could afford would be needed to implement those improvements. NMFS’ new Fishing Effort Survey collects data on recreational fishing effort that targets many fish stocks, including some that do not need timely data necessary to make fishery management decisions within a shortened federal fishing season. However, according to NMFS officials and a state official, to implement a separate survey that specifically targets Gulf of Mexico red snapper would likely entail adding additional resources to this effort that would need to be taken from other surveys, such as the Fishing Effort Survey. According to NMFS officials, trade-offs also are often necessary to balance the competing needs of state and federal fisheries management and, as a result, NMFS prioritizes among competing demands for data. NMFS has attempted to address the need to understand the trade-offs involved in data collection; according to NMFS documentation, tools intended to help evaluate possible resource allocation trade-offs were expected to be available for use in 2014. However, according to NMFS officials, the tools were not in place as of October 2015, and NMFS has not determined when the tools will be available. The officials said that the tools were being developed in collaboration with academia, but the project stalled because the project leader left the academic institution, and the institution has not yet found a replacement.", "NMFS has also taken steps to improve communication with recreational fisheries stakeholders about recreational data collection. NMFS has worked with its MRIP Executive Steering Committee to address priority communication initiatives through various MRIP teams. For example, the MRIP communications and education team plans to implement a communications strategy—entailing various communication activities such as webinars—to support the transition from the Coastal Household Telephone Survey to MRIP’s new mail-based Fishing Effort Survey. According to NMFS officials, the agency is developing an MRIP strategic communications plan to guide its transition to the Fishing Effort Survey that was expected to be finalized by the end of October 2015. To further enhance MRIP communications, in 2014, the MRIP communications and education team began restructuring its communications network by developing MRIP communication teams at the regional level.\nSome of NMFS’ steps to improve communication have resulted in increased collaboration with recreational fisheries stakeholders, according to NMFS and state officials. For example, according to a state fisheries official, NMFS coordinated with the state to provide state officials greater input in determining observer assignment schedules and locations as part of the new protocols for the Access Point Angler Intercept Survey. NMFS officials told us that they are also working collaboratively with Louisiana to perform a side-by-side comparison of MRIP data with data collected under Louisiana’s LA Creel data collection program, to determine whether LA Creel can be used as an alternative to MRIP surveys. According to NMFS officials, in early 2016, NMFS and Louisiana plan to evaluate the results of the side-by-side comparison to determine next steps. Regarding stakeholder concerns about NMFS’ lack of data on fish stock abundance in reef habitats, NMFS officials told us that NMFS plans to use data collected by academic partners on red snapper abundance on artificial reefs in its Gulf of Mexico red snapper fish stock assessment. NMFS also has worked with the Atlantic States Marine Fisheries Commission and the Atlantic Coastal Cooperative Statistics Program to transition from a NMFS-led data collection system to a state-led data collection approach. In 2016, according to a NMFS official, the Atlantic Coast states will assume responsibility for conducting the Access Point Angler Intercept Survey shoreside interviews to collect marine recreational fishing data from anglers, and NMFS’ role will be to review, certify, and provide funds to support these data collection efforts.\nNMFS is also placing renewed emphasis on collaborating with its regional partners to determine future data collection needs and priorities for improving recreational fisheries effort and catch surveys, according to NMFS documents. For example, NMFS’ 2013-2014 MRIP implementation plan recommended establishing a hybrid approach to MRIP data collection. Under this approach, NMFS is to maintain a central role in developing and certifying survey methods and establishing national standards and best practices for data collection, while regions—through the regional fishery information networks or their equivalent—are to be responsible for selecting survey methods and managing data collection. According to NMFS officials and NMFS documentation, NMFS staff participated in a workshop in July 2013 to discuss the initial planning stages for developing this new regional approach to recreational fisheries data collection. According to NMFS officials, NMFS is developing MRIP Regional Implementation Plans to address regional data collection needs and priorities. The NMFS officials said that the West Coast region is scheduled to have a Regional Implementation Plan in early 2016. The officials said the Atlantic and Gulf Coast regions support the new approach to data collection and plan to complete their respective MRIP Regional Implementation Plans in 2016. As part of the new hybrid MRIP data collection approach, NMFS is in the process of identifying regional recreational fisheries data collection funding priorities.\nChallenges related to how NMFS communicates with stakeholders, however, persist. For example, some Gulf Coast state fisheries officials expressed concerns that NMFS has not provided sufficient information to improve communication regarding its recreational fisheries data collection activities. One state fisheries official said that NMFS has made some progress working with stakeholders to identify MRIP initiatives to improve recreational fisheries data collection, but it has not adequately communicated how it intends to coordinate and collaborate with its stakeholders to implement MRIP initiatives. Some stakeholders continue to express concerns that NMFS is not adequately communicating its process for developing Gulf of Mexico red snapper catch and effort estimates. For example, some stakeholders cited the presence of larger and more numerous red snapper in the Gulf of Mexico and do not understand the need for continued catch limits and fishing restrictions. NMFS officials told us that, although the Gulf red snapper population is rebounding, and the average weight of red snapper that are caught by anglers has increased, NMFS’ most recent stock assessment confirms that Gulf red snapper continue to be overfished. Therefore, as required by the Magnuson-Stevens Act, red snapper continue to be managed under a stock rebuilding plan. According to these officials, annual catch limits for red snapper are being reached more quickly due to several factors, including higher catch rates and more fishing effort being directed at the more abundant rebuilding stock. This has required even shorter fishing seasons despite increasing stock abundance, as well as corresponding increases to annual catch limits. NMFS officials stated that, in response to a history of exceedance of annual red snapper catch limits and litigation, NMFS is now setting the length of the red snapper fishing season based on a recommendation by the Gulf of Mexico Fishery Management Council to use a buffer of 20 percent of the annual catch limit. This buffer is intended to account for uncertainty resulting from the difficulty of obtaining timely and precise catch estimates, as well as uncertainty stemming from state regulations that provide for longer seasons in state waters. NMFS officials acknowledged that achieving stakeholder understanding of this complex process is an ongoing concern, but they told us they plan to continue communicating with stakeholders to help convey the rationale behind NMFS’ fisheries management decisions.", "NMFS has taken steps aimed at addressing several data collection challenges, but it does not have a comprehensive strategy to guide its efforts to improve recreational fisheries data collection. The Government Performance and Results Act Modernization Act of 2010 requires, among other things, that federal agencies develop long-term strategic plans that include agency-wide goals and strategies for achieving those goals. Our body of work has shown that these requirements also can serve as leading practices at lower levels within federal agencies, such as at NMFS, to assist with planning for individual programs or initiatives that are particularly challenging. Taken together, the strategic planning elements established under the act and associated Office of Management and Budget guidance, and practices we have identified, provide a framework of leading practices in federal strategic planning and characteristics of good performance measures. These practices include defining a program’s or initiative’s goals, defining strategies and identifying the resources needed to achieve the goals, and developing time frames and using performance measures to track progress in achieving them and inform management decision making. Furthermore, key practices related to communication call for communicating information early and often and developing a clear and consistent communications strategy to help develop an understanding about the purpose of planned changes, build trust among stakeholders and the public, cultivate strong relationships, and enhance ownership for transition or transformation.\nAccording to a NMFS official, the initial 2008 MRIP implementation plan and the subsequent updates are the key documents used to guide NMFS’ recreational fisheries data collection efforts. However, based on our review, NMFS’ MRIP implementation plans do not constitute a comprehensive strategy for improving recreational fisheries data collection consistent with the framework previously discussed. For example, the implementation plans do not consistently and clearly define NMFS’ goals, identify the resources needed to achieve the goals, or develop time frames or performance measures to track progress in achieving them.\nBased on our analysis, NMFS does not have a comprehensive strategy because it has been focused primarily on implementing the recommendations of the 2006 National Research Council report. A NMFS official confirmed that MRIP initially focused on implementing the recommendations in the 2006 National Research Council report and meeting the requirements to improve recreational fisheries data collection as described in the Magnuson-Stevens Reauthorization Act that was passed in 2006. According to NMFS officials, the agency’s first priority was to address the recreational fisheries survey design issues identified in the 2006 National Research Council report. Specifically, NMFS determined that it would first design, test, review, certify, and implement new survey designs, such as the new mail-based Fishing Effort Survey. As previously discussed, NMFS intends to transition to a regional data collection approach whereby the agency will collaborate with regional stakeholders, such as states, to identify regional data collection needs. NMFS officials told us that, in hindsight, NMFS could have benefited from a more robust strategic planning approach to MRIP implementation and stated that NMFS recognizes the need to enhance its strategic planning as it begins to transition to a regional data collection approach. NMFS officials told us that NMFS intends to develop strategic planning documents to guide future individual initiatives, using NMFS’ experiences with the transition to the new mail-based Fishing Effort Survey as a template, but they did not provide information about how, or whether, they planned to integrate these documents into a comprehensive strategy or how they would communicate such a strategy to NMFS’ stakeholders. Without a comprehensive strategy, NMFS may have difficulty ensuring that the variety of steps it is taking to improve data collection are prioritized so that the most important steps are undertaken first and may find it difficult to determine the extent to which these steps will help address challenges. Further, without communicating the strategy and NMFS’ progress in implementing it, NMFS may have difficulty building trust among its stakeholders, and these stakeholders may have difficulty tracking the agency’s efforts.", "Recognizing the importance of collecting quality and timely data at an acceptable cost to guide recreational fisheries management and conduct fish stock assessments, NMFS has taken many steps to improve its data collection, such as funding several pilot programs to test alternative data collection methods. NMFS has also initiated a fundamental shift in its data collection approach, envisioning a standard-setting and oversight role for NMFS rather than actual data collection, which is to be carried out by partners. However, NMFS does not have a comprehensive strategy to guide the implementation of its various efforts. Without a comprehensive strategy and associated performance measures to assess progress, NMFS may have difficulty ensuring that the variety of steps it is taking to help address the challenges it faces are prioritized so that the most important steps are undertaken first. Likewise, NMFS may have difficulty determining the extent to which these steps will help address challenges or if a different approach may be needed. Moreover, without clearly communicating the strategy to its stakeholders, NMFS may find it difficult to build trust, potentially limiting its ability to effectively implement MRIP improvement initiatives that rely on data collection partners.", "To improve NMFS’ ability to capitalize on its efforts to improve fisheries data collection for managing marine recreational fisheries, we recommend that the Secretary of Commerce direct NOAA’s Assistant Administrator for Fisheries to develop a comprehensive strategy to guide NMFS’ implementation of its marine recreational fisheries data collection program efforts, including a means to measure progress in implementing this strategy and to communicate information to stakeholders. As part of this strategy, NMFS should clearly identify and communicate programmatic goals, determine the program activities and resources needed to accomplish the goals, and establish time frames and performance measures to track progress in implementing the strategy and accomplishing goals.", "We provided a draft of this report to the Department of Commerce for comment. In its written comments (reproduced in app. II), NOAA, providing comments on behalf of Commerce, agreed with our recommendation that NMFS develop a comprehensive strategy to guide the implementation of its marine recreational fisheries data collection program efforts. NOAA stated that it agrees that transitioning from a primarily research and development focused program to one that is more focused on implementing improvements to recreational fisheries data collection presents an opportunity to engage in strategic planning. Specifically, NOAA stated it will work with its regional stakeholders over the next year to develop MRIP implementation plans that include milestones, timelines, performance metrics, and resource needs. In addition, NOAA stated that a new National Research Council review of its recreational fisheries data collection program will help to inform its strategic planning effort.\nNOAA also provided three general comments. First, NOAA stated that our report disproportionally included interviewees from the Gulf Coast, which may weigh the report’s conclusions differently than if other regions were more fully represented. As noted in our scope and methodology appendix (app. I), we selected federal and state agencies and regional organizations to interview based on such factors as geographic representation and locations of large volumes of recreational fishing. According to NMFS statistics, the largest volumes of recreational fishing are in the Gulf of Mexico. As a result, we believe that our selection of agencies and organizations, while not nationally representative, nevertheless provides an appropriate set of perspectives on recreational fisheries management. Second, NOAA stated that it interpreted our statement that we did not conduct a technical evaluation to mean that we are suggesting that a technical evaluation is needed to determine whether NMFS has appropriately prioritized its recreational fisheries data collection challenges. We did not conduct a technical evaluation because it was not within the scope of our review, and it was not our intent to suggest that a technical evaluation is needed. Third, NOAA stated that, while the report identifies several unaddressed recreational fisheries data collection challenges, it does not mention that the challenges require funding levels above the current MRIP budget. Addressing whether NMFS funding levels are sufficient to address the data collection challenges it faces was not within the scope of our review. We do, however, note in our report the importance of making trade-offs in addressing challenges and allocating resources. NOAA also provided technical comments, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Commerce, the NOAA Assistant Administrator for Fisheries, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III.", "Our objectives were to examine (1) the challenges that have been identified with the National Marine Fisheries Service’s (NMFS) data collection efforts for managing marine recreational fisheries and (2) the steps NMFS has taken to improve data collection and challenges that remain.\nTo conduct our work, we reviewed and analyzed relevant laws, agency policies, guidance, and other documentation related to fisheries data collection, including documentation related to specific federal and state marine recreational fisheries data collection projects. We also reviewed previous GAO work related to fisheries management. To determine the challenges that have been identified with NMFS’ data collection efforts, we first reviewed reports and evaluations of NMFS’ data collection programs issued since 2006 from the National Research Council, the Department of Commerce Inspector General, NMFS, states, and independent consultants and assessed the extent to which they discussed data collection challenges. Of these reports, we relied primarily on the findings of the National Research Council and NMFS to identify data collection challenges. To obtain insights into the challenges identified in these documents, as well as to obtain information on any additional challenges, we interviewed officials from NMFS headquarters and three of NMFS’ six regional Fisheries Science Centers (Northeast, Northwest, and Southeast); representatives of three of the eight Regional Fishery Management Councils (Gulf of Mexico, Pacific, and South Atlantic) and all three interstate Marine Fisheries Commissions (Atlantic, Gulf, and Pacific States); and officials from state fisheries agencies in Alabama, Florida, Louisiana, Mississippi, North Carolina, Rhode Island, Texas, and Washington. We selected federal and state agencies and regional organizations to interview based on such factors as geographic representation, locations of large volumes of recreational fishing, and representation from key data collection and management stakeholders. The views of representatives from the agencies and organizations we contacted are not generalizable to other agencies and organizations, but they provided various perspectives on recreational fisheries management. In addition, to obtain additional information about data collected by the recreational fishing sector and challenges associated with data collection, as well as to obtain views on recreational fisheries data collection generally, we interviewed 22 nongovernmental marine recreational fisheries stakeholders. Of these stakeholders, 17 had expressed interest in, or concerns about, NMFS’ recreational fisheries data collection to congressional staff. These stakeholders added to the geographic variation and the recreational fishing sectors represented in our review, but their views do not represent the views of NMFS stakeholders generally. To supplement views on recreational fisheries data collection, we interviewed 5 additional stakeholders, including 4 stakeholders identified by NMFS and 1 stakeholder we identified through our previous work on fisheries management. The 22 stakeholders we interviewed included charter boat owners, private recreational anglers, members of academia, and advocacy groups, among others, and represented various geographic locations and different recreational fishing sectors. The NMFS statistical surveys used to collect data for managing recreational fisheries cover a wide range of methods, apply to a wide diversity of locations and often entail in-depth technical knowledge about fisheries data collection. For these reasons, we did not conduct a technical evaluation of these challenges or assess their technical validity.\nTo determine the steps NMFS has taken to improve data collection and challenges that remain, we conducted interviews as described above and reviewed NMFS’ reports and other documents. Specifically, we reviewed NMFS’ strategic plans, recreational fisheries planning documents, and recreational fisheries data collection program documents. We compared this information with the framework of leading practices in federal strategic planning contained in the Government Performance and Results Act of 1993, the Government Performance and Results Act Modernization Act of 2010, and Office of Management and Budget guidance. We also compared this information to key practices related to communication we identified in previous reports. Consistent with our approach to the previous objective, we did not conduct a technical evaluation of NMFS’ steps to improve data collection or assess the appropriateness of those steps in light of the challenges NMFS faces.\nWe conducted this performance audit from July 2014 to December 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the individual named above, Steve Gaty (Assistant Director), Steve Secrist (Assistant Director), Leo Acosta (Analyst-in- Charge), Mark Braza, Joseph Capuano, Elizabeth Curda, John Delicath, Richard Johnson, Jerry Leverich, Jeanette Soares, and Sara Sullivan made contributions to this report." ], "depth": [ 1, 2, 2, 1, 1, 2, 3, 3, 3, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "", "", "h0_full h2_full", "h0_title h2_title h1_full", "h0_title h2_title h1_title", "h0_full h2_full h1_full", "", "h1_full", "h1_full", "h1_full", "", "", "h0_full h3_full", "", "", "", "" ] }

{ "question": [ "What challenges is the National Marine Fisheries Service (NMFS) facing?", "What specific data collection issues are being faced?", "What is and example of data quality issues being faced?", "Why doesn't NMFS not hold a complete list of recreational anglers?", "What issues in data collection lie with stakeholders?", "What did the GAO find from their interaction with stakeholders?", "How did transparency challenges cause the loss of Louisiana to the NMFS?", "How has AMFS addressed data collection and other current challenges?", "What recommendations has NMFS made on improving data quality?", "How has NMFS addressed the action of Louisiana?", "What challenges continue to exist?", "What is the major communication error to exist?", "How would this strategy fall in place with other leading strategy planning?", "Why has NMFS not developed a comprehensive strategy?", "What did NMFS indicate about the future of their comprehensive strategy?", "Why should NMFS take the action to create a comprehensive strategy?", "What fishing trips were made in 2013?", "What fish data is increasingly demanded?", "What makes data collection so difficult?", "What was the GAO asked to review?", "What does their report examine?", "What did the GAO analyze for the report?" ], "summary": [ "The National Marine Fisheries Service (NMFS) within the Department of Commerce faces several challenges related to fisheries data collection, according to reports GAO reviewed and NMFS officials and stakeholders GAO interviewed.", "These challenges include collecting quality recreational fishing data that are timely for managing marine recreational fisheries and communicating with stakeholders.", "Regarding the collection of quality data, for example, NMFS faces a challenge identifying the universe of anglers from which to collect information about their marine recreational fishing activity.", "NMFS relies in part on state registries to identify anglers, but some states exempt certain anglers from registering, and therefore NMFS does not have a complete list of recreational anglers.", "NMFS officials and other stakeholders have also identified challenges in communicating with stakeholders in collecting recreational fisheries data.", "For example, several stakeholders told GAO that NMFS has not always communicated with the public about its activities, creating concerns about a lack of transparency regarding NMFS' fisheries management decisions.", "Reflecting this challenge, in 2014, Louisiana withdrew from the federal fisheries data collection program and implemented its own program because of concerns about federal recreational fisheries data, according to a Louisiana fisheries official.", "NMFS has taken several steps aimed at improving data collection to manage marine recreational fisheries and addressing challenges related to communicating with stakeholders.", "For example, to help improve the quality of the state data it relies on to identify the universe of anglers, NMFS made recommendations to states on improving their recreational angler databases and provided funds to the states to support data quality improvement projects, according to NMFS documents.", "NMFS has also taken steps to improve communication, including working with Louisiana to perform a side-by-side comparison of federal data with Louisiana's data to determine whether Louisiana's data can be used as an alternative to federal data.", "However, some challenges persist, including challenges in validating data the NMFS collects and communicating about upcoming NMFS initiatives.", "More broadly, the agency does not have a comprehensive strategy to guide its efforts to improve recreational fisheries data collection.", "Such a strategy is consistent with the framework of leading practices in federal strategic planning, as described in the Government Performance and Results Act Modernization Act of 2010, Office of Management and Budget guidance, and practices GAO has identified.", "Based on GAO's discussions with NMFS officials and review of NMFS documents, the agency has not developed a comprehensive strategy because it has been focused on other priorities such as improving its data collection methods.", "NMFS officials told GAO that NMFS recognizes the need to enhance its strategic planning but did not provide information about how, or whether, they plan to develop a comprehensive strategy.", "Without a comprehensive strategy that articulates NMFS' goals to improve data collection and methods for measuring progress toward the goals, NMFS may have difficulty ensuring that the various steps it is taking to improve data collection are prioritized so that the most important steps are undertaken first, and it may find it difficult to determine the extent to which these steps will help it address the challenges it faces.", "Almost 11 million anglers made nearly 71 million marine recreational fishing trips in the continental United States in 2013.", "Pressure on many fish stocks from fishing has increased demand for quality and timely data that can be used to assess the status of various fish stocks as part of managing marine recreational fisheries.", "The many modes of marine recreational fishing—in which anglers fish from private boats or boats with guides, the shoreline, private property, and public docks—make collecting the data needed to effectively manage recreational fisheries both complex and challenging.", "GAO was asked to review NMFS' marine recreational fisheries data collection program.", "This report examines (1) challenges that have been identified with the agency's data collection efforts for managing marine recreational fisheries and (2) steps the agency has taken to improve data collection and challenges that remain.", "GAO reviewed laws, policies, and guidance related to federal and state recreational fisheries data collection methods; reviewed NMFS and other documents on recreational fisheries data collection; and interviewed a nongeneralizable sample of federal and state recreational fisheries officials and other stakeholders, selected to provide geographic representation, among other things, to obtain their views on NMFS' data collection efforts." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 4, 4, -1, -1, -1, -1, 3, 4, -1, 6, 6, -1, -1, 1, -1, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "", "Introduction: What To Do With All the Natural Gas?", "Background: The Market Has Changed", "Shale Gas: The Game Changer", "Projected Future Growth", "Natural Gas Prices: A Competitive Advantage", "Contributing Factors", "Natural Gas Liquids: A Production Driver", "Flaring: A Value Issue", "Factors Affecting Production", "Historical Natural Gas Use", "Natural Gas Markets: The Possibilities", "Demand Response: Direct Beneficiaries", "Electric Power Generation: First Mover15", "Petrochemicals: A Possible Rejuvenation", "The Fertilizer Industry Could Help Farmers", "Steel Production: Two-Fold Winner", "Transportation: Key to Energy Independence?", "Residential and Commercial Consumption: A Regional Opportunity", "Imports and Exports: A Reversal of Roles", "Other Sectors That Could Gain", "Natural Gas Markets: The Limitations", "The Global Market: A Role for the United States", "Environmental Considerations47", "Price Levels and Volatility: Not a Certainty", "Demand Competition", "Other Factors", "Conclusions" ], "paragraphs": [ "", "The relatively rapid expansion of U.S. natural gas resources over the last five years, particularly from shale gas, has been coupled with slower demand growth by natural gas consumers. The result has been low prices not seen for over a decade and, equally important, prices that are projected to stay low for decades. U.S. natural gas prices have also been comparatively lower than those observed in international markets.\nThe projected persistence of rising supply and low prices has raised the question of how the United States will take advantage of its natural gas resources. Because of low prices, there have been requests by some producers to export natural gas in liquefied form (LNG), hoping to sell at higher world prices. Some consumer groups argue that exports will raise domestic prices, which will hurt businesses and households. Some businesses believe the low prices can spur a resurgence in U.S. manufacturing, particularly petrochemicals and other industries using large amounts of natural gas. Some environmentalists view natural gas as a key component for decreasing carbon dioxide (CO 2 ) emissions and other greenhouse gases, while other environmentalists believe that it is as polluting as coal, especially when derived from shale formations. Some analysts believe natural gas can enhance U.S. energy security if it can be used in transportation to replace gasoline. All these questions highlight the tremendous changes that have taken place in the U.S. energy landscape over the last few years and portend future changes.\nThere have been over 150 bills introduced in the 112 th Congress that would affect both supply of natural gas ( H.R. 840 , S. 302 , S. 706 , and S. 1007 , among others) and demand, with some targeting specific sectors such as LNG exports ( H.R. 3913 and H.R. 4024 , among others) and transportation ( S. 734 and H.R. 970 , among others). Legislation has also been introduced that would affect environmental issues associated with natural gas ( H.R. 1084 , H.R. 4322 , and H.R. 6235 , among others). This report examines what has changed in the natural gas industry and focuses on the demand side and ancillary benefits to the U.S. economy. This report does not address negative consequences to other economic sectors due to a shift to natural gas.", "", "Without the development of shale gas, much of the discussion about integrating more natural gas into the economy would not be occurring. Over the last decade U.S. natural gas reserves have climbed tremendously, 72% since 2000 and 49% since 2005 (see Figure 1 ). These data allow for reductions for natural gas produced during the period and so are \"net\" increases. In recent years, the increase in reserves is mostly attributed to development of shale gas, which has grown from 10% of U.S. natural gas reserves in 2007 to 32% in 2010. By comparison conventional U.S. natural gas reserves declined between 2007 and 2008, and fell again in 2010. Though the decline was marginal, it highlights the importance of shale gas to future U.S. natural gas production. Many industry analysts expect shale gas reserves to continue to rise and make up a greater portion of U.S. natural gas reserves unless new restrictions are placed on the industry, such as related to hydraulic fracturing, power plant emissions, etc.\nIn 2011, the United States produced and consumed more natural gas than it ever has—23 trillion cubic feet (tcf) and 24 tcf, respectively—while paying some of the lowest market prices for natural gas in the world. The production figure of 23 tcf is of dry gas, which has been processed for consumption purposes, but the United States actually produced 28.5 tcf of raw natural gas in 2011. The United States is the world's leading producer of natural gas, surpassing Russia in 2009, and the world's leading consumer. After declining for the first half of the last decade, U.S. natural gas production rose 18% in the latter half, with shale gas accounting for 25% of production by 2010.\nReserves and production data do not tell the whole story when looking at the U.S. transformation regarding natural gas supply. The term reserves has a specific industry definition that includes a technological component, an economic factor, and a probability of success among other criteria. To more fully understand the changes to the U.S. natural gas sector it is more appropriate to look at reserves and estimates for undiscovered, technically recoverable resources (UTRR) (see Figure 2 ). UTRR is an estimate of what can be extracted using current technology regardless of price. Using UTRR plus reserves, the United States has a natural gas resource base of 1,809 tcf or enough gas for approximately 79 years of production at 2011 levels. Compared with data from 2006, U.S. UTRR for natural gas has jumped almost 25%. Even this measure may not accurately reflect what will be extracted from the ground as technology is constantly changing. Just over the last few years, industry has been able to improve its shale gas extraction rate from about 5% to about 15%, thereby tripling what is recoverable.", "In 2011, natural gas was the most produced fuel, on a tonne of oil equivalent basis, in the United States, surpassing coal for the first time. This change was driven by the success of shale gas development. The U.S. Energy Information Administration (EIA), which makes projections based on current policy and information, estimated in its 2012 Annual Energy Outlook that overall U.S. natural gas production will grow 28% between 2010 and 2035 (see Table 1 ). Shale gas will comprise almost 49% of that production, up from 23% in 2010. During the time period the United States is expected to go from a net importer of natural gas by pipeline and LNG to a net exporter by 2022, which is a change from EIA's 2011 Annual Energy Outlook when there was no time period in which the United States was forecast to be a net exporter of natural gas. The United States is forecast to be a net LNG exporter by 2016, according to EIA.\nThe only portion of U.S. production to significantly rise over the time period examined by EIA is shale gas. It grows both as a percent of overall production as well as in absolute terms. As a whole, conventional natural gas is estimated to make up a much smaller percent of the overall production mix, declining from 41.5% in 2010 to 22.7% in 2035. The decline of conventional natural gas sources demonstrates that natural gas is a finite resource, but how much may exist is still unknown.", "A consequence of the rapid increase in natural gas supply is downward pressure on prices. U.S. spot natural gas prices, also known as the Henry Hub price or the NYMEX (New York Mercantile Exchange) price, are relatively low compared with domestic prices over the last decade as well as international prices over the last few years (see Figure 3 and Figure 5 ).\nHistorically, natural gas prices in the United States have been volatile. From 1995 to 1999 the spot price of natural gas averaged $2.23 per MBtu, but increased to an average price of $4.68/MBtu during the 2000 to 2004 period, an almost 110% rise. From 2005 to 2009 the spot price averaged $7.23/MBtu hitting a peak of $15.38/MBtu in December 2005. Prices again spiked in July 2008. High prices, based on an assumption of a declining reserve base and production, seemed to indicate that the future would be characterized by much higher natural gas prices and domestic exposure to high-priced, imported LNG. However, prices started to decline in the latter half of 2008 because of the recession. As demand picked up in the 2010 to 2011 period, along with a warm winter, the average spot price of natural gas did not, declining to $4.20/MBtu. In the first eight months of 2012 spot prices averaged $2.55/MBtu. These lower recent prices and optimistic expectations concerning domestic supply have led to a view that the United States will have plentiful supplies of natural gas available at low cost well into the future. Nevertheless, some industry participants have experienced price trends that reversed in the past and not all are ready to make financial commitments despite current low prices. As mentioned previously, shale gas production began coming to the market in 2007 and has been increasing ever since.\nThe price of natural gas, as with other commodities, is driven by supply and demand. Demand for natural gas is affected by the economy, the weather, seasonality, product storage, and electrical use, among other factors (see Figure 4 ). The winter months in the United States are when demand for natural gas peaks, as it is used in residential and commercial buildings for heating. The United States also has a second, more modest peak, in the summer as more natural gas is consumed for electricity generation for air conditioning. This aspect of the demand cycle will vary depending upon the region of the country. During the months of approximately April through June, natural gas is normally produced and stored for the winter peak demand starting in November. As a consequence, storage plays a critical role in balancing the U.S. natural gas market and can greatly affect prices.\nAs an example, in Spring 2011 large underground storage facilities were being filled as typically happens, but the winter months later in the year were warmer than expected and storage levels remained high as less natural gas was used for heating. In the Spring of 2012, the high storage levels added additional downward pressure on prices, which dropped to about $2.00/MBtu for the first time since the 1990s. Producers of natural gas tend not to stop production from a well, unless prices are below their operating costs and they believe they will stay at that level for a long time, and even then companies may be hesitant to stop production. There are costs and technical issues involved with halting production, maintaining a well, and restarting production.\nThe advent of shale gas and the decline of U.S. natural gas prices has attracted global attention and prompted countries to try to emulate the U.S. success in developing their unconventional gas resources. Although other countries have touted their unconventional natural gas resources, no country has achieved the level of development of the United States, except Australia, in developing their coal seam gas. Canada is moving ahead with its shale gas development, but lags behind the United States. As can be seen in Figure 5 , U.S. and other regional natural gas prices around the world moved in sync for most of the last decade even though there is not a global market for natural gas as there is with oil. From 2008 to 2009, natural gas prices dropped worldwide because of the decrease in demand from the decline in economic activity. U.S. shale gas was beginning to come to market in 2007/2008 and by 2010/2011 it changed the trajectory of U.S. natural gas prices from those of the rest of the world. In 2011, the rest of world faced higher prices than in 2010 for natural gas, but the United States saw its natural gas price decline by 9%. U.S. natural gas prices have continued to trend lower ever since, and many analysts forecast U.S. natural gas prices to remain relatively low at least through the end of this decade and possibly for longer.\nThe differential between the U.S. spot price and the average for the other major natural gas markets has been growing each year since 2007. Although there are many factors that can affect natural gas prices in a particular market for a certain period, such as the nuclear accident in Japan, the growing differential highlights how the U.S. natural gas market has been insulated from external events and the impact of the expanding U.S. natural gas resource base.", "As natural gas prices in the United States have declined other market factors have begun to alter the industry and affect market fundamentals. In order to improve their revenues, many natural gas-oriented companies have added more oil-rich areas to their portfolios, particularly tight-oil formations, which have contributed to growing U.S. oil production. However, with oil becoming the focus of production, natural gas infrastructure is not keeping pace and consequently natural gas is being flared in some areas of the United States in large quantities. Natural gas use displacing coal in electric generation has already shown the potential for decreasing emissions, as natural gas power generation releases about half the CO 2 of coal-fired generation. Additionally, companies are seeking further markets for natural gas and have applied for permits to export natural gas as LNG. As highlighted in Figure 5 , the price for natural gas in the United States is lower than other major markets.", "Natural gas liquids (NGLs) have taken on a new prominence as shale gas production has increased and prices have fallen. NGL is a general term for all liquid products separated from natural gas at a gas processing plant and includes ethane, propane, butane, and pentanes. When NGLs are present with methane, which is the primary component of natural gas, the natural gas is referred to as either \"hot\" or \"wet\" gas. Once the NGLs are removed from the methane the natural gas is referred to as \"dry\" gas, which is what most consumers use. Each NGL has its own market and its own value. As the price for dry gas has dropped because of the increase in supply and other reasons such as the warm winter of 2011, the natural gas industry has turned its attention to producing more wet gas in order to bolster the value they receive. Some companies have shifted their production portfolios to tight oil formations, such as the Bakken in North Dakota, to capitalize on the experience they gained in shale gas development. Historically, the individual NGL products have been priced against oil, and as oil prices have remained higher since 2005 relative to natural gas, it has driven an increase of wet gas production, thereby maintaining the amount of dry gas as a production \"byproduct\" despite its low price.\nAs can be seen in Figure 6 , the price of natural gas at the end of August 2012 was approximately $3.20/MBtu, while the value of NGLs was almost $10.00/MBtu. The additional value that can be extracted above the price of natural gas is a driver of current production. Drilling rigs are being moved from dry gas fields to wet gas and predominantly oil fields, like the Bakken, that produce natural gas in association with oil production. The proportion and composition of NGLs varies by gas field and therefore the price differential will vary as well. The price differential between oil and NGLs is also diverging over the last year because the prices of ethane and propane, two main components of NGLs, are delinking from their historic connection to oil prices. As ethane and propane production has risen the last couple of years their prices have been driven more by their own market fundamentals of supply and demand.", "As natural gas production began to increase in 2005, so did the amount of natural gas that was vented (released into the atmosphere) and flared (burned at the production site). Natural gas is either flared, which is preferred, or vented usually for safety or health reasons prior to connecting a well to a pipeline. This issue has grown in prominence as development of tight oil resources has increased because of the horizontal drilling and hydraulic fracturing techniques developed for shale gas has shifted to that sector. The Bakken formation has had the most notoriety because as its oil production has increased, so has the amount of natural gas that is being flared (over 20% of gross production in 2010). Oil production in tight formations is expanding rapidly and the natural gas infrastructure to move the associated gas to market has lagged. The low price of natural gas has compounded the issue, particularly in jurisdictions that have relatively lax regulations when it comes to flaring.", "The location of shale formations (see Figure A -1 ) has altered the movement of natural gas supplies to consuming markets in the United States. As an example, traditionally gas flowed from the Gulf Coast to the Northeast via large diameter, long-haul transmission pipelines. The discovery and production from the Marcellus Shale formation, which underlies much of West Virginia and Pennsylvania, southern New York, eastern Ohio, western Maryland, and western Virginia, has changed the need for gas from the Gulf Coast as the Marcellus is much closer to Northeast markets. The reconfiguration of supply centers and consuming markets requires new infrastructure to be put in place, including gathering pipelines (small diameter pipelines that bring gas from the field to processing facilities), transmission pipelines, and processing facilities (plants that remove other hydrocarbons, i.e., NGLs, carbon dioxide, water, and nitrogen among other things before transmission and consumption). Additionally, other transmission pipelines will be reversed in order to bring the natural gas to different locations. This reconfiguration is an ongoing process that may cost the industry billions of dollars to achieve greater efficiencies.\nWater is a key component of energy production, particularly for shale gas development that requires significant quantities for hydraulic fracturing. Unfortunately, there are significant data gaps in this area that make evaluating the water needs of the energy sector difficult. A fracture treatment for a single zone may use more than 500,000 gallons of water. Wells that need multiple treatments usually require between 3 million to 5 million gallons or more. For comparison, an Olympic-size swimming pool holds over 660,000 gallons of water and the average daily per capita consumption of fresh water (roughly 1,430 gallons per day) works out to 522,000 gallons over one year.", "The transition to using more natural gas in the economy is already underway. Natural gas comprised 28% of the U.S. primary energy mix in 2011 and is on the upswing, while oil and coal have both declined in absolute terms and as a percent of consumption over the last decade. Historically, natural gas is well below its primary energy market share high of 34% in 1971, but just above its 20-year average of 26% (see Figure 7 ).\nNatural gas consumption, which is in part tied to economic activity, is on the rise in the United States after declining in 2009 because of the recession. Unlike oil, which is mostly consumed in transportation, and coal, which is mostly consumed in electricity generation, natural gas has more diversity to its consumption. Almost a third each of natural gas consumption is from electricity generation, industrial, and residential/commercial, which tends to use it similarly (see Figure 8 ). EIA divides consumption into five economic categories—residential, commercial, industrial, electric power, and transportation (vehicle fuel)—and two operational categories, lease and plant fuel (gas used for production and at processing plants) and pipeline and distribution use (gas used for compressors and to move gas to consumers). The two operational categories are usually not included when discussing U.S. gas consumption.\nAll sectors increased in 2011 over 2010 figures, except residential consumption, which decreased, mainly due to warmer weather. There is limited additional residential and commercial use of natural gas unless new regional markets can be opened, which will require investment and infrastructure. Electric power generation makes up the biggest component of U.S. natural gas consumption followed by industrial use. (See sections \" Electric Power Generation: First Mover \" and \" Petrochemicals: A Possible Rejuvenation .\") However, the two sectors have essentially reversed position over the last decade, with electric power growing by about 10% since 2001 and industrial consumption declining by almost the same amount.\nThe reversal of the electric power and industrial sectors can be attributed to rising prices early in the decade that decreased industrial use and prompted much of the sector to move overseas. Electric generation from natural gas also decreased during the early part of the decade, but when prices started to decline because of the lower demand and then increased supply, natural gas-fired generation was the beneficiary. Some of the industrial sector is poised to return to the United States from overseas because of projected low natural gas prices, although in many cases companies are waiting to determine if low U.S. natural gas prices are sustainable.\nIn April 2012, for the first time in history, the amount of electricity generation from natural gas equaled that of coal, according to EIA statistics, each with about 32% of the market. As mentioned above, natural gas use in electric generation has been growing over the previous decade, and will likely continue to grow, particularly if natural gas prices remain low. In addition, concerns about more stringent environmental regulations have in some cases contributed to the increase in retirement of coal-fired electricity generation, which largely is base-load capacity and is being replaced by natural gas generation.\nAn apparent consequence of the shift to more natural gas-fired electric power generation in the first quarter of 2012 has been a decrease of U.S. carbon dioxide emissions by almost 8% to their lowest levels since 1992. Besides more natural gas-fired electric power, EIA attributes the decline in emissions to reduced household heating because of the mild winter and reduced gasoline demand.\nFigure 9 also highlights the relative price variability of each commodity, with natural gas showing a much wider range than coal during the time period, as well as a significant decrease in the spread between natural gas and coal prices.\nIf large parts of the U.S. economy are to shift to natural gas, sufficiently low long-term prices that maintain the advantage of gas over other fuels are likely to be required. However, the increases in demand associated with these sectoral shifts in favor of gas use could result in prices also increasing, perhaps bringing into question the economic advantages available to potential users of natural gas. Further, if prices were to remain low in the long-term, industry might not be able to sustain production. If wellhead prices are too low for developers to make sufficient profits, exploration and development activities might slow and production might be capped. Market forces will likely establish a workable balance between the demand and supply sides of the market.", "If natural gas were able to replace oil and coal in the fuel mix, it would require almost 77 tcf of natural gas per year; approximately tripling current U.S. consumption and production (see Figure 10 ). At that rate, even the current estimated resource base of 1,809 tcf would be exhausted in about 23 years. The amount of investment that would be required to undertake this change would be enormous, probably in the trillions of dollars, and new technologies and infrastructure would be needed to make the changes economical and practical, particularly in the transportation sector for natural gas vehicles.\nAlmost 24 tcf of natural gas would be required in the transportation sector alone, which is approximately the amount the United States consumed in total in 2011. Less than 1% of U.S. natural gas was consumed in the transportation sector in 2011. Although this scenario is beyond what could be achieved realistically, it highlights the central questions of this report as to how much natural gas the United States can produce and what sectors of the economy can use it.", "Expanded supply, coupled with low natural gas prices, has the potential to contribute to a transformation of important sectors of the U.S. economy. Increased output and employment, expanded investment, income growth, improved competitiveness, and a reduction in the foreign trade deficit are likely outcomes. These conditions in the natural gas markets are likely to benefit certain key industries directly, while many other industries could experience indirect benefits. Direct beneficiaries are those industries that use natural gas as a raw material or as an important input in a production process. Industries whose output is directly related to the expansion of natural gas exploration, development and production are also direct beneficiaries. Examples of industries that use natural gas directly are petrochemicals and fertilizers. The steel industry is an example of an industry whose output is linked to the pace of natural gas resource development. Industries experiencing indirect benefits might include construction and capital goods producers that contribute to the supply chain for the investment projects undertaken by expanding natural gas consumers. In addition, more spending by workers in all of these industries could increase the growth of a wide variety of consumer goods and retail firms. The economic benefits of shale gas development and production will also open areas not recently accustomed to natural gas production, for example, the Marcellus field in parts of Pennsylvania, Ohio, West Virginia, Maryland, Virginia, and New York.\nIn the international economy, those U.S. industries directly affected by expanded supply and low natural gas prices are likely to experience a competitive advantage over the producers of similar goods in other countries, resulting in increased exports from, and decreased imports to the United States. These effects would likely improve the U.S. trade deficit position. This advantage is likely to be maintained over time if the U.S. price of natural gas remains below those observed in other world regional markets (see Figure 5 ). U.S. industry's advantage could be reduced through a process of world natural gas price convergence, especially in the three leading regional markets. However, for this to occur, traditional long-run contract terms, specifically linking natural gas prices to oil prices, would need to be changed to a more market-oriented method.\nWhile low natural gas prices are likely to benefit many consuming industries, they have a depressing effect on the natural gas industry itself. If prices fall, and remain below critical levels, the industry could respond by reducing exploration and development activity, and/or capping existing wells. Although some of this has occurred, overall natural gas production continues to trend upwards, in part because of cost-reducing efficiency gains, and in part because of contract provisions. Actions that reduce current and future supplies tend to cause the price of gas to rise. One mitigating factor to this price process is the extraction of natural gas liquids (NGLs) from wells (see \" Natural Gas Liquids: A Production Driver \"). These liquids are typically of high value and may validate the production of natural gas even in a low price environment for the natural gas itself, which assumes oil prices remain high. Also, for some industries, the ratio of the price of oil to the price of natural gas is more important to U.S. competitiveness than the absolute price of domestic natural gas. An example is petrochemicals, where U.S. producers use natural gas liquids as a feedstock for ethylene production while European producers tend to use naphtha, derived from crude oil. Increased production of ethane from shale gas development has given the U.S. petrochemicals industry a price advantage.", "As discussed earlier in this report, natural gas is expected to increase its share of electricity generating capacity. The broad reasons for this increase begin with the expected increases in natural gas supply, along with low prices. Also important are the relatively lower carbon emissions of gas-fired plants relative to coal-fired power plants, and the relatively high capital investment costs of coal-fired plants compared to natural gas-fired plants. An additional benefit for the power-generating industry related to natural gas-fired plants is flexibility. Natural gas facilities can increase or decrease generation much more efficiently and cheaply than coal-fired plants. Much of the increase in natural gas-fired generation has been from facilities that have been operating below capacity. Lower fuel costs have given these facilities an advantage over other generators.\nAs a result of these advantages natural gas-fired plants are expected to account for about 60% of new generating capacity in the United States between 2011 and 2035. Job creation as a result of this shift to natural gas is likely to be small. Although construction and capital equipment jobs will be created as natural gas-fired power plants are constructed, these jobs are not permanent. The net number of jobs in electric power generating facilities is likely to be low because jobs in coal fired-plants may be lost as new gas-fueled plants begin operating. In addition, a reduced demand for coal from the electric power generating sector may result in mining jobs shrinking, while gas drilling jobs go up.\nCoal will, however, retain an important share of the electric power market. Some large facilities have scrubbing equipment in place to reduce emissions and many large producers are located near coal mines, which insures low transportation costs. In contrast, in many cases new natural gas pipelines would have to be constructed to allow switching from coal to natural gas. Additionally, should natural gas prices rise because of increased demand in electricity or other sectors, coal-fired generation will become more competitive again.\nThe expansion of natural gas as a fuel for electricity generation is expected to have important macroeconomic effects, even though direct job creation is not likely to be great. The reason for this is based on the cost structure of electric power generation, where fuel costs account for approximately 40% of total production costs. If the cost savings relative to natural gas use materialize, and if they are passed on to consumers in the form of lower electricity rates, household disposable income would increase. This increase could be used by households to finance the purchase of a wide variety of consumer goods. Commercial natural gas consumers could reap higher profits, or contain growth in the cost of goods sold, due to lower electricity costs. Industrial demand could experience similar benefits; however, the effects are likely to be less important as the percentage of total costs accounted for by electricity costs falls. The exception is the petrochemicals industry, where natural gas costs are a large part of total costs.", "Natural gas is used in the chemicals industry both as a fuel and as a raw material. As stated previously, when natural gas is produced it is mainly methane, but also may include NGLs. One NGL is ethane, which is used to produce ethylene. Ethylene, a key component in plastics, in turn, is used to produce a wide variety of consumer goods, ranging from food packaging to home siding and window frames, automotive anti-freeze, clothing, tires, and bottles.\nIn 2012, a number of chemical companies announced plans to invest in new plant capacity, expand existing facilities, or re-open plants near shale gas supplies. In April 2012, Dow Chemical announced $4 billion in expansions and new investment in Texas. Shell Chemical announced plans for an ethane cracking unit costing between $2 billion and $4 billion, to be constructed in Pennsylvania near Marcellus Shale natural gas supplies. Chevron announced plans for a $1 billion investment at its Baytown facility in Texas. In addition, Phillips Chemical, Westlake Chemical, and others announced investment plans related to low-cost shale gas availability.\nMany of these investment plans, if they ultimately come to fruition, will result in new production capacity becoming available over the next five years. Multi-billion dollar investments with time lags of up to five years before they generate cash flow suggest that the companies believe that the United States is entering a period of sustained low natural gas prices and growing supply. Without supply growth, the increase in demand from these facilities would likely push prices up. The history of natural gas prices in the United States, as shown in Figure 3 demonstrates that neither high, nor low, gas price stability has been evident in the market for long periods of time.\nThe American Chemistry Council conducted a study of the effects on the U.S. economy of a one-time $16.2 billion investment program, over several years, in petrochemical plant and equipment related to low-cost natural gas availability. Their assumption was that this level of investment would increase ethane capacity in the United States by 25%. Their analyses determined that 17,000 new, relatively high paying jobs would be created in the chemical industry, along with 395,000 jobs outside the chemical industry. Tax revenues generated as a result of the investment program would be about $4.4 billion annually for federal, state and local governments. Output of the U.S. chemicals industry could increase by $32.8 billion and a total of $132.4 billion in output would be generated by the economy as a whole. Studies of this type assume various economic and other conditions which, if they should change, would also change the result. While the specific forecast values of studies estimating economic effects are unlikely to be precisely correct over time, they may indicate potential and order of magnitude.\nIt has been reported that the global ethylene production balance between oil-based naphtha and natural gas-based ethane has been about 80:20 in favor of naphtha. However, the balance has tipped to 50:50, even before the large U.S. investments in ethane capacity have come on stream. This shift in input utilization has had negative effects on the international naphtha market, both for the U.S. and foreign markets. U.S. refiners report an excess of naphtha, much of which is appearing in the European market, causing a supply glut and falling prices. European refiners, experiencing poor economics due to the euro crisis and the onset of recession, are suffering further losses due to the new competition from the United States. The normally high price of naphtha, comparable to that of gasoline, makes the competition more economically damaging for European refiners.", "Natural gas is the primary raw material in nitrogen-based fertilizer production. From 70% to 90% of the estimated cost of producing nitrogen-based fertilizers is related to the cost of natural gas. In the 2000s, when natural gas prices for industrial consumers more than doubled, closure of ammonia plants, which supply the raw material for fertilizers, followed suit, rising from 13 in 2002 to 26 in 2007. While some of this capacity moved overseas, some was permanently closed. It would take time and investment to reinstate U.S. capacity. If U.S. fertilizer production could recover and pass on lower costs to farmers, this could lower the cost of food and ethanol for use in transportation, and have employment benefits in the fertilizer industry as well as those industries whose costs had decreased.\nIn the short-run few of these economic benefits can be observed. The fertilizer industry appears to be taking a wait-and-see attitude with respect to natural gas prices before major investment decisions in capacity expansion are undertaken. The industry, which suffered from high and volatile natural gas prices in the U.S. market, is likely to need compelling evidence that gas supplies will remain abundant and prices low in the future. For now, U.S. fertilizer cost savings due to low natural gas prices are balanced in favor of increased profits for producers compared to cost savings for consumers. This condition is encouraged by the rapidly increasing demand for corn which is keeping the demand for fertilizers high. For the period 2000 to 2006, the average acreage of planted corn in the United States was 79 million. In 2011 the total increased to 92 million, an increase of 16%, and the total is expected to continue rising.", "The expansion of shale gas and tight oil exploration and development has had an expansionary effect on the U.S. steel industry. Product demand has increased, while operating costs have declined. Natural gas exploration generates demand for tubular goods used for pipes, tubes, and joints in gas drilling equipment. In addition, natural gas is being substituted for coal as an input in the steel industry's blast furnaces, driving down costs per ton.\nSteel facilities located in, or near, areas of shale gas development are experiencing growth. For example, the steel industry in Ohio has been reported to be in the process of adding some 2 million feet of production space, costing $1.5 billion. A number of companies, including Timken, United States Steel, Vallourec & Mannesmann, and a United States Steel-Kobe Steel joint venture project are located in Ohio in Canton, Youngstown, Lorain, and Leipsic. Because steel is a capital intensive, mechanized industry these plants are expected to produce about 630 jobs. Many more construction jobs have been created in conjunction with these investment projects. As shale gas development expands overseas, these companies plan to expand their exports of energy industry related steel components.\nThe steel demand tied to shale gas expansion is mostly associated with drilling and infrastructure development. These activities are primarily front-loaded, taking place early in the development of the resource base. The industry must balance meeting these relatively short-run demands against long-run capacity expansion requirements to avoid excess capacity in the future.\nWhile shale gas driven increases in demand have been important to the steel industry, the large supplies of low cost natural gas have been of less direct importance to the industry. The primary cost category in steel production that is likely to be affected by cheap natural gas is electricity; however, electricity costs account for only about 10% of total production costs. As a result, the cost reductions experienced by the steel industry are likely to be small. The primary cost in steel production is scrap steel which is unaffected by the cost of natural gas.", "Concerns about U.S. energy security and energy independence revolve around the use of imported oil as the country is basically independent in all other forms of energy. The Obama Administration targeted a one-third reduction in oil imports from when the President took office or a 3.6 million barrel per day cut by the end of the decade. While oil based products, gasoline and diesel fuel are the major fuels used in transportation, natural gas does not play a big role. Although natural gas consumption by vehicles has grown by 38% from 2006 through 2011, it still represents less than 1% of U.S. natural gas consumption. However, the low current and projected price of natural gas has the commercial truck industry, in particular, planning for ways to incorporate more natural gas into the transportation fuel mix. Even in EIA's most aggressive case for heavy duty vehicles running on natural gas, in 2035 natural gas comprises less than 9% of the highway vehicle fuel mix.\nNatural gas can become a greater part of the transportation fuel mix in a variety of ways: compressed natural gas (CNG), LNG, methanol, gas-to-liquids, fuel cells, and electricity. However, the primary near-term opportunities for natural gas in long-distance trucking are LNG and CNG. The use of natural gas as a transportation fuel in any form will require changes in the sector from consumers and suppliers. New vehicles will need to be developed on a large scale, in some cases requiring new technologies; new infrastructure will need to be deployed; and investments will need to be made by both consumers and industry.\nSome inroads are being made in the transportation sector and additional efforts are being undertaken. Fleet trucks, including Waste Management, United Parcel Service, and AT&T among others, appear to be trying to take advantage of low natural gas prices. Trucks can either be purchased new that run on natural gas, or conversion kits can be used to allow trucks that currently run on diesel fuel to use natural gas. Some retrofit conversions allow trucks to run on either LNG or diesel, allowing owners to take advantage of changing prices. The market for fuels for trucking is large. Approximately 3.2 million big-rig trucks use about 25 billion gallons or 1.7 million barrels per day, about 9% of U.S. oil consumption, of diesel fuel annually.\nAmong the key factors in natural gas as a transportation fuel is the price spread between diesel fuel and natural gas. The cost of diesel fuel largely depends on the cost of crude oil. Historically, a barrel of oil cost about six times the cost of a unit of natural gas. As the price of oil has increased and the price of natural gas has fallen, a barrel of oil might cost over 30 times the cost of a unit of natural gas. This price spread has resulted in a price of diesel fuel twice as high as CNG on a diesel-gallon-equivalent basis. The importance of the price spread between crude oil and natural gas demonstrates that natural gas can lose its competitive advantage because of a price rise, but it can also be lost if the price of crude oil falls. If a switch to natural gas-powered trucks increased the demand for new trucks many industries would expand production including the steel, tire, electronic, and vehicle manufacturing industries.\nLong-haul trucking has made some progress to use natural gas, but concerns over the availability of refueling stations remain a hurdle. Shell announced a plan to add LNG pumps at 100 locations owned by Travel Centers of America for truck refueling. The goal would be for LNG trucks to be able to travel across the entire country. Currently, city buses and local delivery trucks that return to a central facility where re-fueling is available are the primary consumers of natural gas in transportation. In addition, these users of natural gas tend to have short, or predicable, routes so that refueling can be reliably planned.", "Overall residential use of natural gas is not projected to increase as significantly as other sectors of the economy, and according to EIA estimates, may decline by 2035. New infrastructure, both for consumers and industry, would be required to open new market areas to natural gas, and the increase in demand would have to warrant the investment. Nevertheless, there are some parts of the country where it may make sense.\nAs an example, in April 2011, New York City passed regulations to phase out the use of certain heating oils by 2030, and to replace them by cleaner-burning fuels, including natural gas. However, new infrastructure will be required to bring additional volumes of natural gas, which will require local and federal approval. In 2010, New York State consumed almost 30 million barrels of distillate, which is one type of heating oil used for residential and commercial heating—almost half of the state's total distillate use. Additionally, the states in New England consumed almost 50 million barrels of distillate in residential and commercial use. Expanding the natural gas infrastructure in these areas could help consumers take advantage of low natural gas prices, particularly given the region's proximity to the Marcellus Shale formation. Connecticut is an example of a state whose natural gas use is constrained by a lack of natural gas infrastructure. The state is developing a plan to increase its natural gas consumption.\nIncreased sales of natural gas appliances, although a relatively small consumer group, could foster a change in perception of natural gas use. Besides the traditional appliances of stoves and hot water heaters, other household items like air conditioners could run on natural gas instead of electricity. Greater use of natural gas in this area could better integrate natural gas in the economy. Programs, like the Energy Star ratings on appliances, may need to be examined for how natural gas appliances are evaluated compared to other fuels.", "Exports of natural gas have been on the rise, while imports have been declining. Increased exports, particularly as LNG, could provide a new demand center for U.S. supplies. Heading into the last decade, the United States was expected to be a growing importer of natural gas because domestic production was declining and demand was rising. EIA, in its 1999 Annual Energy Outlook, projected that net natural gas imports would grow between 1997 and 2020 from 12.9% of consumption to 15.5%, based on consumption growing faster than production. To accommodate the potential increase in imports, five new LNG import terminals were built by industry in the latter half of the 2000s and some existing facilities were re-commissioned and expanded. The United States currently has LNG import capacity of almost 14 billion cubic feet per day (bcf/d) or over five trillion cubic feet (tcf) per year. However, higher domestic production—mainly from shale gas development—has made imports less necessary and they have been trending down over the last five years (see Figure 11 ). Import terminals are operating well below capacity. In its 2012 Annual Energy Outlook, EIA forecasts the United States becoming an overall net exporter of natural gas in 2022 and a net LNG exporter by 2016.\nThe abundance of new domestic natural gas supplies is shifting industry interest from building LNG import terminals to constructing LNG export terminals. As of September 2012, 18 companies had applied for permits to construct liquefaction facilities at existing LNG import terminals or build new facilities, with a capacity of 27.4 bcf/d or 10.0 tcf per year. Increased pipeline exports to Canada and Mexico may also rise if those countries' domestic production continues to decline and their demand continues to increase. It is unclear if, when, and how much LNG exports will be allowed, but the effect on domestic prices is at the crux of the debate. Any exports would be an additional source of demand and would likely put upward pressure on prices.", "How natural gas ultimately filters through the economy and what other sectors may benefit is not clear at this point in time and there are many other industries that stand to benefit that have not been addressed in this report. The oil industry has probably been the biggest indirect beneficiary of shale gas development and low natural gas prices. Production companies have used the same techniques—directional drilling and hydraulic fracturing—to unlock tight oil formations and increase U.S. oil production. Also, the petroleum refining sector should gain as natural gas is used as a fuel and feedstock. The airline industry has tested synthetic aviation fuels derived from natural gas. In 2009, Qatar Airways flew the first commercial flight using a natural gas-based jet fuel. The shipping industry is analyzing whether natural gas can be used as a bunker fuel. The paper and aluminum industries, which use large quantities of natural gas, may benefit. The aluminum industry has announced a couple of expansions and greenfield projects.", "Market forces in conjunction with a dynamic regulatory environment have the potential to raise the role natural gas contributes to the U.S. economy. Optimistic outlooks for rising supply and low prices have sparked interest in expanding the role of natural gas even further. Congress has expressed interest in a variety of the issues of this debate. Members and committees have introduced legislation, held hearings, and offered opinions and inquiries with government agencies.\nMany producers and consumers of natural gas seem confident that abundant supplies of natural gas will be produced regardless of the risks still outstanding. Some companies on both the supply and demand side of natural gas have made, or have announced plans for large investments to confirm their positions. Other companies are waiting to see how various dimensions of the debate unfold. A key component of this discussion is how domestic prices will react under different market conditions. As demand rises so does the pressure on prices to rise, which signals more production is needed, or that consumption should be curtailed. The beneficial economic effects of expanded natural gas supplies are not pre-ordained. Market and regulatory factors could come into play, having the effect of reducing positive economic benefits for the United States.", "The prospect of increasing U.S. LNG exports has become encumbered by concerns of higher domestic prices and increased volatility of prices. As required by the Energy Policy Act of 2005, the Department of Energy (DOE) must issue a permit to export natural gas to countries with which the United States does not have a free trade agreement (FTA). DOE must also determine that export to non-FTA countries is in the public interest. As part of that determination DOE has undertaken a two-part study to examine the impact of LNG exports on domestic prices, which is expected to be completed in early 2013. It is not anticipated that any additional permits for export to non-FTA countries will be approved before part two is completed, and outside of South Korea, the FTA countries do not import a significant amount of LNG.\nExports of energy-related resources have not been a big part of U.S. trade so increasing them would likely improve the overall U.S. trade balance. Nevertheless, the rise in U.S. natural gas production has already benefitted the U.S. trade position by dramatically decreasing imports, the other component of the trade balance. Increasing U.S. LNG exports would also expand the role of the United States in international natural gas markets. Asian countries, in particular, and some European countries have called for more U.S. LNG exports.\nIf all the proposed LNG exports came to fruition, which is unlikely, the United States could become the world's largest LNG exporter. The United States is already the largest producer and consumer of natural gas and has the most storage capacity of any country in the world. These factors, coupled with proposed construction of LNG export terminals on the East Coast, Gulf Coast, and West Coast, could propel the United States into the center of the global natural gas trade, benefiting the U.S. balance of trade.\nUnlike some other countries, where the government controls natural resources, the private sector controls U.S. natural gas resources and is driven mostly by market forces. However, becoming a significant global supplier could enhance certain U.S. national security priorities, such as contributing to European natural gas supply diversification from Russia and providing a counter to the nascent gas cartel, the Gas Exporting Countries Forum, which includes Russia and Iran. Other effects beyond national security could include market and price reforms, technology transfers, greater transparency, and environmental benefits.\nThe domestic situation may also have an effect on the rest of the world as major U.S. companies with large international portfolios, in particular, continue to buy into shale gas assets. These companies are becoming more natural gas oriented. Many have already started looking for opportunities to use the experience they have gained in the United States in other countries. Additionally, many foreign companies have bought into U.S. shale gas areas to gain experience in producing these formations and eventually bring the technology back to their respective countries.\nBefore the expansion of U.S. LNG exports occurs, a decision is likely to be made concerning whether energy security means relying primarily on captive domestic, or regional, supplies, or whether it means participating in a well-supplied, open world market. A large expansion of LNG exports means that the domestic demand for natural gas will increase. If that extra demand is not met with additional supply increases, prices are likely to rise. If prices rise, the economic advantage of U.S. LNG will diminish somewhat. Additionally, the natural gas consuming industries that forecasted low prices and, as a result, increased their capital investment will likely not experience returns that meet expectations. Consumers in all categories will likely face higher costs. If exports of LNG are not permitted, or permitted at a low rate, most of the potential foreign trade benefits outlined in this report may not materialize. Prices could, nevertheless, rise if production is curbed.", "With the advent of shale gas development, natural gas has been touted as a bridge fuel to a low carbon, renewable energy-based economy. Natural gas is cleaner burning than its hydrocarbon rivals—emitting less CO 2 , particulate matter, sulfur dioxide, and nitrogen oxides, on average, than either coal or oil (see Table 2 ). But the use of new technologies and drilling practices, as well as the gas drilling boom they have engendered, has led to other environmental concerns and controversies. These concerns centered initially on water quality issues, including the substantial use of water during hydraulic fracturing activities as well as the potential contamination of water by hydraulic fracturing chemicals and wastewater disposal. Concerns have since incorporated other issues, such as land use changes, potential for induced seismicity from produced water injection, infrastructure requirements, and emissions of air pollutants from extraction operations and transport. The spectrum of concerns over hydraulic fracturing in unconventional reservoirs has led, in part, to various grassroots movements, some political opposition, and calls for regulatory actions and moratoria at the local, state, and federal levels.\nMajor oil and gas producing states have been reviewing and revising their oil and gas rules in response to technological changes in the industry, and specifically to advances in hydraulic fracturing and directional drilling. Although oil and gas exploration and production is regulated primarily at the state level, several regulatory developments are occurring at the federal level as well.\nThe Environmental Protection Agency (EPA) has pursued initiatives related to hydraulic fracturing under three federal environmental statutes. In August 2012, EPA promulgated regulations under the authority of the Clean Air Act (CAA) that establish new air emissions standards for hydraulically fractured gas wells and other oil and gas production activities. The new rules entered into effect on October 15, 2012. Under the Safe Drinking Water Act (SDWA), EPA has issued draft Underground Injection Control (UIC) Program Guidance for Permitting Hydraulic Fracturing with Diesel Fuels. This guidance is being developed in response to a provision of the Energy Policy Act of 2005 which revised the SDWA definition of underground injection to explicitly exclude the underground injection of fluids (other than diesel fuels) used in hydraulic fracturing operations. Final guidance is expected in Spring 2013. Under the Clean Water Act (CWA), EPA is developing regulations governing the discharge of wastewater produced in natural gas extraction from shale formations and coal beds. The regulations will be established under EPA's effluent guidelines program, which sets national standards for the discharge of pollutants from industrial activities directly to surface waters and municipal wastewater treatment facilities. EPA plans to propose regulations for the coalbed methane effluents in 2013, and for the shale gas extraction regarding wastewater pollutants in 2014.\nIn May 2012, the Bureau of Land Management (BLM), Department of the Interior, proposed revisions to its oil and gas development rules in response to the increased use of hydraulic fracturing on federal and Indian lands. The proposal would require public disclosure of chemicals used during hydraulic fracturing, tighten requirements related to well-bore integrity, and add requirements for managing water used and produced in hydraulic fracturing operations. The public comment period closed September 10, 2012, and the BLM is now reviewing comments.\nA tighter regulatory environment for natural gas exploration and production, if it raises costs significantly, would likely result in slower supply growth, and in the extreme could reduce some of the economic benefits described in this report. If demand increases as the result of expectations of rising supply and low prices, but then regulation slows supply growth, a price spike is the likely result. A price spike could reduce market confidence and set back the use of natural gas, especially in the industrial sector. Some companies in the industrial demand sector, as mentioned earlier, have made significant investments predicated on the supply being available and prices remaining low. However, in the past several years, a number of states have adopted stricter production regulations, yet production has continued to grow in those states (e.g., Colorado, North Dakota, Ohio, Pennsylvania, and Wyoming). In contrast, New York State essentially has a moratorium on high-volume hydraulic fracturing while regulations are revised. Overall, it is difficult to generalize regarding the potential effect of regulations. For example, EPA projects that the capture of natural gas required under its new air rules could have a net positive benefit for natural gas producers because of the value of the gas that could be saved and sold.", "The ability of U.S. industry to be positively affected by the evolving position of the United States with respect to natural gas supply depends not only on the low current price, but the expectation that prices will remain low into the future. The expectation of low and non-volatile prices for natural gas is not easy to relate to the historical price data shown in Figure 3 . In the recent era of high prices, the assumption of many analysts was that prices were likely to remain high and increasing well into the future. This pessimistic conclusion was reached by considering the upward trend of consumption coupled with a declining resource base. Earlier, it was believed that natural gas was so abundant it could be treated as essentially a good with little value. These earlier failed expectations suggest that what appears to be a clear future path for natural gas markets can quickly reverse itself.\nConsiderable uncertainty exists regarding the size of the economically recoverable U.S. shale gas resource base and the cost of producing those resources. Across four shale gas resource scenarios from the Annual Energy Outlook 2012 ( AEO2012 ), natural gas prices vary by about $4 per million British thermal units (MMBtu) in 2035, demonstrating the significant impact that shale gas resource uncertainty has in determining future natural gas prices. This uncertainty exists primarily because shale gas wells exhibit a wide variation in their initial production rate, rate of decline, and estimated ultimate recovery per well (or EUR , which is the expected cumulative production over the life of a well).\nNatural gas demand has not exhibited dramatic changes to correspond with its price volatility. For many of the final consuming sectors, households, commercial uses, and electric power generation the demand has been relatively price inelastic, insensitive to changes in price. This is because of the nature of natural gas use, primarily heating in households and commercial uses. Only in the industrial demand sector is there significant price elasticity as shown by the reductions in demand and plant closures associated with the last period of high prices. The inelasticity of natural gas demand also means that relatively small variations in the quantity available can have surprisingly large effects on price. This is because, with inelastic demand, any shortage or surplus of supply requires a disproportionate variation in price to ration people out of or bring consumers into the market.\nPrice is also important to the potential expansion of the supply of natural gas. If prices fall, and remain, too low to provide an adequate return for producers, exploration and development will stagnate and future supply projections will prove to be optimistic. However, if the price of natural gas rises, and returns to producers rise, demand might be discouraged. The market must price natural gas in such a way that consumers are drawn to use more natural gas and that producers are encouraged to produce more natural gas. Consumers must also be incentivized to undertake the expense of changing fuels. Maintaining the status quo is a powerful force and overcoming it requires motivation beyond short-term gains because of prices. The market has not generated such razor-edged prices in the past.\nNot only the price of natural gas will determine the state of the market. The price of oil and coal are also likely to play an important role. If the price gap between crude oil narrows, natural gas will become a less attractive source of energy than oil. The reason is likely to be habit and infrastructure. Consumers are used to using oil-based products and the infrastructure to supply them is well established. If the incentive of cost savings disappears, it is likely that the mass of consumers will continue using established products. Similarly, the cost of a new supply infrastructure is likely to be avoided if the anticipated demand growth of natural gas becomes more uncertain. For coal, electric power plants may be idled for some time while fuel prices give natural gas an advantage. But, if natural gas prices rise because of increased demand, coal may regain market share.", "Enthusiasm over the state of natural gas markets has led to plans of increased consumption in all demand categories. However, demand expansion differs among the EIA's demand segments. One characteristic that is common is that expanded demand only occurs after a lag. Low prices increase interest in expanding consumption, but then investments must take place before growth in consumption is realized. Once the investments are in place, which can take years, in many parts of the market it is hard to reverse them and go back to previously used fuels.\nExpansion of household and commercial demand usually means natural gas for use in space heating. Conversion from other fuels is minimal, because of inadequate supply infrastructure, so the main source of new demand is new construction. Once a heating system in new construction is in place it is unlikely to be replaced by a different fuel. As a result, demand increases from these sectors are likely to be incremental and long-term.\nSimilarly, while the demand for natural gas in transportation is likely to exhibit sharp percentage increases relative to its small base, its overall effect on demand is likely to be incremental and permanent. Once vehicle conversions or vehicles with dedicated power plants are on the road and the natural gas supply infrastructure is in place, demand growth is likely to continue. After buying a home, a car is probably the next largest investment for most households and not likely to be changed because of short-term price changes.\nElectric power generation and industrial use of natural gas are different. Much more rapid demand expansion can occur in these segments. Each consumer uses large quantities of gas and total demand can increase sharply. If the export of LNG expands, it would exhibit similar characteristics. Industrial demand is also likely to be price sensitive. Industrial demand has contracted in periods of high prices.\nThe combination of trend growth generated by household and commercial demand coupled with periodic large increases in demand associated with investment by power generators and industrial users could, if all planned expansions come to fruition, lead to a demand level which is too large relative to supply growth after the period of low prices. The result would likely be upward price volatility which could destabilize the market and reduce expected economic benefits.", "Other legislative or regulatory policies could impact the natural gas market. For example, if legislation or regulation required tight carbon emission limits for electric power generators and the price of natural gas was low, a large increase in demand might be expected. Increases in demand from any source tend to raise prices. However, the price increases would tend to lead to increased development of natural gas resources and increased supply.\nIf offshore drilling opportunities were expanded, as oil and natural gas were discovered, domestic supplies would increase, causing the price of natural gas to fall. Falling prices would benefit consumers in the short-term, but would likely reduce the development of on-shore shale resources in the longer term, depending upon which sources had lower costs.\nThese two examples show that unintended consequences of policy decisions could affect natural gas markets. The results could upset the calculation of net economic benefits that the United States might expect to experience from development of the expanded shale gas resource base.", "Given existing data, most indications point to the changes in the natural gas industry as positive to the overall U.S. economy. Industries that use natural gas as an input have seen prices fall. Producers have expanded the U.S. resource base tremendously, including for oil. Low prices have forced producers to be innovative and drive down production costs. Similarly, environmental concerns are prompting companies to be more proactive in addressing these issues. Also responding to environmental concerns, a number of major natural gas and oil producing states have revised their rules, which has not appeared to have inhibited production in those states.\nThe next five years will be telling as proposed projects will either come to fruition, be postponed, or be cancelled. Investment decisions are being made given existing realities and future perceptions of the market. Many of the environmental concerns may be addressed by industry, federal, state, and local governments, and the market. Production efficiencies and extraction improvements, particularly in regards to water use, are likely to be made in this time period.\nCongress may act on a variety of issues that would affect natural gas. Legislation has been introduced that could increase the supply of natural gas by opening up more federal lands and offshore areas to exploration, by providing direct incentives for natural gas production, and by limiting federal regulations on federal lands. Other legislation may inhibit natural gas production by eliminating incentives, increasing regulatory requirements on companies, or limiting access to potential areas of development. Legislation has also been introduced that could increase demand for natural gas by vehicles and in aviation. Although some Members have expressed support for LNG exports, legislation has been introduced that would delay LNG exports, thereby limiting a potential source of demand. Still other legislation has been introduced that would promote natural gas infrastructure in some areas and other legislation has been introduced to limit the environmental effects of natural gas production. Similarly, rules and regulations are being proposed at different federal agencies, for example the Departments of Energy and Interior, and the Environmental Protection Agency, which may require or elicit congressional input.\nAppendix A.\nAppendix B.\nAppendix C." ], "depth": [ 0, 1, 1, 2, 3, 2, 2, 3, 3, 3, 2, 1, 2, 3, 3, 3, 3, 3, 3, 3, 2, 1, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full", "h0_title h1_title", "", "", "", "h0_full h1_full", "", "", "", "h1_full", "h0_title h2_title h1_title", "h0_title h2_title h1_full", "h1_full", "h2_full", "", "", "h1_full", "", "h0_full", "", "h0_full h3_full h2_title h1_title", "h0_full", "h2_full", "h0_full", "", "h1_full", "h3_full h2_full" ] }

{ "question": [ "How does the US regard natural gas?", "How have suppliers suffered?", "What change in supplier products has this caused?", "What change in smaller companies has this caused?", "Why have natural gas prices remain low?", "What have larger companies requested?", "What concerns does this raise for consumers?", "How has the proposition been handled?", "How have industries regarded the drop of natural gas prices?", "How are some companies taking action on this?", "What are more cautious companies doing?", "How is the electric power sector regarding natural gas?", "What other industries is the low cost putting pressure on?", "What will potentially put pressure of natural gas prices?", "What has the change in natural gas taken place in spite of?", "What pollution concerns does natural gas pose?", "What specific component of natural gas is a pollutant?", "What byproduct concerns for pollution exist with natural gas?", "How might natural gas issues progress?", "How might the progression be influenced by Congress?", "What legislation concerns demands?", "What other legislation exists concerning natural gas?" ], "summary": [ "Different segments of the U.S. economy have different perspectives on the role natural gas can play.", "Suppliers, which have become the victims of their own production success, are facing low prices that are forecast to remain low.", "Some companies that have traditionally produced only natural gas have even turned their attention to oil in order to improve their financial situation.", "Smaller companies are having a difficult time continuing operations and larger companies, including international companies, have bought into many shale gas assets.", "Prices have remained low even as consumption has increased, in part, because producers have raised production to meet the demand and because companies have improved efficiency and extraction techniques.", "Some companies, many with large production operations, have applied for permits to export natural gas.", "This has raised concerns from consumers of natural gas that domestic prices will rise.", "The debate regarding exports is ongoing.", "Industries that consume natural gas have seen input costs drop, and some have heralded low natural gas prices as the impetus for a manufacturing revolution in the United States.", "Some companies have begun to make major investments to take advantage of the low natural gas prices, particularly in petrochemicals.", "Other companies are waiting to see if prices will remain low long enough to warrant major investments in new facilities.", "Meanwhile, the electric power sector has already seen a transition from coal-fired generation to natural gas.", "Low natural gas prices are also putting pressure on renewable sources of power generation.", "However, increases in demand will put upward pressure on natural gas prices.", "All of the change that has taken place so far has occurred despite environmental concerns and regulatory developments at the state and federal level that might curtail production.", "Natural gas is a fossil fuel that produces various pollutants, some more than other fossil fuels and some less.", "Methane, the major component of natural gas, is also a potent greenhouse gas when released without burning.", "Other environmental concerns focus on water use and disposal in hydraulic fracturing to extract natural gas from shale formations.", "Over the next five years, many of the issues being debated now may be decided. The industry and market are adapting to the newly found supplies and the concerns associated with them, as well as integrating more natural gas into the economy.", "There are many evolving issues some of which Congress can influence directly because of statutes and some indirectly.", "On the demand side, legislation has been introduced regarding exports of liquefied natural gas and alternative fuels for vehicles.", "There has been other legislation related to environmental regulations of natural gas." ], "parent_pair_index": [ -1, -1, 1, 1, -1, -1, 5, 5, -1, 0, 0, -1, -1, -1, -1, -1, 1, -1, -1, -1, 1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 4, 4, 4, 4, 5, 5, 5, 5 ] }

{ "title": [ "", "Overview: Key Current Issues and Developments", "The Obama Administration Strategy", "Notable Developments in Obama Administration Engagement", "Appointment of a U.S. Special Representative (SRAP)", "Policy Reviews, Trilateral Summitry, and Ensuing Diplomacy in 2009", "Afghanistan-Pakistan Policy Review I", "May 2009 Trilateral Summit and Ensuing Diplomacy", "Afghanistan-Pakistan Policy Review II", "Regional Stabilization Strategy, Strategic Dialogue Sessions, Report to Congress, and Policy Review III in 2010", "January 2010 Regional Stabilization Strategy", "March 2010 Strategic Dialogue Session", "The Administration's September 2010 Report to Congress", "October 2010 Strategic Dialogue Session", "Afghanistan-Pakistan Policy Review II", "The Passing of SRAP Richard Holbrooke", "Assessment of Current U.S.-Pakistan Relations", "Major Recent Developments", "Mid-2010 Floods62", "Leaked Diplomatic Cables", "The Assassination of Salman Taseer", "An Increasing Pakistani Turn to China?", "Other Notable Recent Developments", "Increasing Islamist Militancy", "Official U.S. Designation of Pakistan-Based Terrorists", "Al Qaeda in Pakistan93", "Threats to Punjab and Sindh", "Lahore and Southern Punjab", "Karachi", "The Swat Valley", "The 2009 Swat Accord and Reactions", "Accord Fails, Army Moves In", "Pakistan and the Afghan Insurgency136", "Pakistani Views on U.S. Strategy in Afghanistan", "The January 2010 London Conference", "Pakistani Moves Against the Afghan Taliban and Potential Role in Negotiations", "U.S./NATO Supply Routes", "Improvised Explosive Devices (IEDs) in Afghanistan", "Other Recent Developments in Pakistan-Afghanistan Relations", "Pro-Taliban Militants in the Tribal Agencies", "The Pakistani Taliban", "The Demise of Baitullah Mehsud", "Pakistani Military Operations in the Tribal Agencies", "Bajaur", "South Waziristan", "North Waziristan", "Other Agencies", "Analysis of Pakistani Military Operations", "Internally Displaced Persons (IDPs)", "Questions About Pakistan's Main Intelligence Agency", "Shifts in Pakistani Public Attitudes", "Pakistan, Terrorism, and U.S. Nationals266", "Attempted Times Square Bombing", "David Headley and Other Notable Cases", "U.S. Government Response", "U.S.-Pakistan Counterterrorism Cooperation", "Joint Security Initiatives/Programs", "2008 Frontier Corps Deaths and U.S. Special Forces Raid", "2010 Cross-Border NATO Raids and Frontier Corps Deaths", "Unmanned Aerial Vehicle (UAV) Attacks", "U.S. Policy", "Pakistani Protest and Debate Over the Tactic", "Rivalry and Conflict With India", "The \"Composite Dialogue\" Process", "Mumbai Terrorist Attacks and the LeT339", "The Kashmir Dispute", "Competition in Afghanistan", "Nuclear Weapons, Power, and Security", "Deteriorated Economic Circumstances", "Power Supplies", "Taxation", "Corruption", "Textile Manufacturing and Overseas Market Access", "Domestic Political Upheaval", "President Zardari and the National Reconciliation Ordinance", "The 18th Amendment to the Pakistani Constitution", "Tensions Between the Executive and the Judiciary", "Parliamentary Coalition Weakness", "Recent Human Rights Issues", "Press Freedom", "\"Disappearances\" and Extrajudicial Killings by Security Services", "Blasphemy Laws", "U.S. Foreign Assistance and Congressional Action", "The Friends of Democratic Pakistan (FODP)", "U.S. Economic, Development, and Humanitarian Assistance", "U.S. Security Assistance", "Defense Supplies", "Training and Law Enforcement", "Selected Pakistan-Related Legislation in the 111th Congress" ], "paragraphs": [ "", "A stable, democratic, prosperous Pakistan actively working to counter Islamist militancy is considered vital to U.S. interests. Current top-tier U.S. concerns regarding Pakistan include regional and global terrorism; stability in neighboring Afghanistan; domestic political stability and democratization; nuclear weapons proliferation and security; human rights protection; and economic development. Pakistan remains a vital U.S. ally in U.S.-led anti-terrorism efforts. Yet the outcomes of U.S. policies toward Pakistan since 9/11, while not devoid of meaningful successes, have seen a failure to neutralize anti-Western militants and reduce religious extremism in that country, and a failure to contribute sufficiently to stabilizing Afghanistan.\nDomestic terrorist bombings and other militant attacks became a near-daily scourge in 2008 and continue at a high rate to date, with Islamist extremism spreading beyond western tribal areas and threatening major Pakistani cities. In the assessment of a former senior U.S. government official, \"Pakistan is the most dangerous country in the world today. All of the nightmares of the twenty-first century come together in Pakistan: nuclear proliferation, drug smuggling, military dictatorship, and above all, international terrorism.\" When asked in early 2010 what worried him the most of all foreign policy issues, Vice President Joseph Biden answered \"Pakistan,\" which he said has deployable nuclear weapons, \"a real significant minority of radicalized population,\" and \"is not a completely functional democracy.\" A long-time U.S.-based observer sees the fundamentals of the Pakistani state in 2011 \"either failing or questionable,\" and proffers that, with all current U.S. policies proving ineffective, Pakistan is moving in a direction of \"comprehensive failure,\" perhaps in as few as four years. The U.S. State Department issues stern warnings on the risks of travel to Pakistan, and many independent country indices rank the Pakistani state as a failed or failing one.\nThe Pakistani state and people are paying a steep price for their participation in the fight against Islamist militancy and extremism. Foreign Minister Shah Mehmood Qureshi claims that, in the post-9/11 period, Pakistan has incurred some 31,000 casualties and has \"arrested, apprehended, and eliminated 17,000 terrorists.\" Socioeconomic costs have been high, as well, and include massive human displacement; increased funding for security and law enforcement institutions, and reconstruction; sharply reduced investment and capital flight; and all manner of less tangible infrastructural and cultural costs. Pakistani government officials estimate financial losses of up to $40 billion since 2001. The severe psychological toll on the Pakistani people has led to an upsurge in reports of depression, anxiety, paranoia, and post-traumatic stress disorders.\nPakistan's troubled economic conditions, fluid political setting, and perilous security circumstances present serious challenges to U.S. decision makers. On the economic front, the Islamabad government faces crises that erode their options and elicit significant public resentment. On the political front, a weak civilian leadership, ongoing power struggles between the executive and judiciary, and discord in federal-provincial relations all serve to hamper effective governance. On the security front, Pakistan is the setting for multiple armed Islamist insurgencies, some of which span the border with Afghanistan and contribute to the destabilization of that country. Al Qaeda forces and their allies remain active on Pakistani territory. The compounded difficulties faced by Pakistan and those countries seeking to work with it, along with the troubling anti-American sentiments held by much of the Pakistani public, thus present U.S. policy makers with a daunting task.\nDespite some positive signs, the progress of U.S.-Pakistan relations in the post-2001 era has produced few of the main outcomes sought in both capitals. Religious, ethnic, and political violence in Pakistan has only increased, as has an already intense anti-Americanism. While a reasonably free and fair election did seat a civilian government in 2008, that government remains weak and saddled with immense economic and other domestic problems. Meanwhile, the security institutions maintain a hold on the formulation of foreign and national security policies, and some elements appear to have lingering sympathies for the Afghan Taliban and other Islamist militant groups. From the U.S. perspective, Pakistan's status as a hotbed of religious extremism has only become more secure in recent years, Al Qaeda continues to operate in the tribal areas, and Afghanistan remains unstable more than nine years after the U.S.-led intervention there. More recently, there are disturbing signs that Pakistan serves as a site for the recruiting and training of American nationals intent on carrying out terrorist attacks on the U.S. homeland. In late 2010, an unnamed senior Pakistani military official, widely believed to be Pakistani Army Chief General Ashfaq Pervez Kayani himself, described Pakistan as having \"transited from most sanctioned ally to most bullied ally.\" He located Pakistani resentment in the perception that the United States continues to pursue a \"transactional relationship\" with Pakistan, that it seeks \"controlled chaos\" inside Pakistan, and that its true strategy is to \"denuclearize\" Pakistan. Kayani has thus far resisted U.S. efforts at persuasion and has shown other flashes of defiance in recent months, including issuing a reportedly personal order to close the Torkham border crossing after two Pakistani solders were killed by a NATO helicopter in September.\nNotwithstanding Pakistan's ongoing and serious problems—including rampant domestic militancy, political and economic crises, and deep-seated resentments toward the United States and neighboring India—Obama Administration decision makers appear to see no viable alternative but to continue supporting the country and are ready to \"double down\" with additional military and economic support. This reportedly was the message Vice President Biden carried with him during a January 2011 visit to Islamabad. While there, the U.S. Vice President reiterated his and President Obama's view that Pakistan is \"absolutely vital\" to U.S. interests, and he took the opportunity to correct some key misconceptions held among Pakistanis, including that the United States represents a threat to their sovereignty (\"I would respectfully suggest that it's the extremists who violate Pakistan's sovereignty and corrupt its good name\"), that America disrespects or is an enemy of Islam, that U.S. policies favor India in ways that could lead to Pakistan's weakening, and that the U.S. will \"abandon\" Pakistan.", "A key aspect of the Obama Administration's approach to Pakistan has been development of a more coherent policy to include a tripling annual nonmilitary aid to improve the lives of the Pakistani people, with a particular focus on conflict-affected regions, and on focusing increased U.S. military aid to Islamabad on counterinsurgency goals while conditioning such aid on that government's progress in combating militancy. President Obama, Vice President Biden, and Secretary of State Hillary Clinton all supported the Enhanced Partnership With Pakistan Act of 2008 in the 110 th Congress (which was never passed), and they strongly encouraged the 111 th Congress to pass a newer version of that legislation. This Pakistan Enduring Assistance and Cooperation Enhancement Act of 2009 ( H.R. 1886 ) was passed by the full House in June 2009, then reconciled with the Senate bill passed that September. President Obama signed the resulting Enhanced Partnership with Pakistan Act (EPPA) of 2009 into P.L. 111-73 on October 15, 2009. The legislation is commonly referred to as the \"Kerry-Lugar-Berman bill.\"\nEven as President-elect, Obama asserted that Afghanistan cannot be \"solved\" without \"solving Pakistan\" and working more effectively with that country, saying he believed Pakistan's democratically-elected government understands the threat and would participate in establishing \"the kind of close, effective, working relationship that makes both countries safer.\" Pakistani President Asif Ali Zardari said his country looked forward to a \"new beginning\" in bilateral relations, but repeated his admonition that Pakistan \"needs no lectures on our commitment [to fighting terrorism]. This is our war.\" His government repeatedly has asked the Obama Administration to strengthen Pakistan's democracy and economic development in the interest of fighting extremism. Despite Pakistani hopes that President Obama would more energetically engage diplomatic efforts to resolve the Kashmir problem, the Administration has offered no public expressions of support for such a shift. Secretary of State Clinton has recognized the dangers of rising tensions in Kashmir while also deferring calls for greater U.S. involvement there, saying during her confirmation hearing that the U.S. role will continue to be as it was under the previous Administration: settlement facilitation, but no mediation.\nIn what many observers considered to be a bracing U.S. government wake-up call to Islamabad, Secretary Clinton told a House panel in April 2009 that \"the Pakistani government is basically abdicating to the Taliban and to the extremists.\" Secretary of Defense Robert Gates followed with his own warning that U.S.-Pakistan relations could suffer if Islamabad did not \"take appropriate actions\" to deal with the militant threat. Days later, President Obama himself expressed \"grave concern\" about the situation in Pakistan, offering that the \"very fragile\" civilian government there did not appear to have the capacity to deliver basic services to the Pakistani people. He did, however, acknowledge that the Pakistani military was showing more seriousness in addressing the threat posed by militants. The Administration's tone shifted considerably after Pakistani forces launched major offensive operations against Taliban militants in the Swat Valley.\nSenior U.S. officials—including President Obama in his December 1, 2009, speech—laud Pakistan's military operations against indigenous Taliban militants. Yet these officials also want Islamabad to enlarge the scope of such operations to include action against a broader array of extremist threats, including those of the greatest concern to India and Western countries. As articulated by Joint Chiefs Chairman Admiral Mike Mullen, \"We must help Pakistan widen its aperture in seeking out and eliminating all forms of extremism and terrorism—those who threaten not only Pakistan, but also Afghanistan, the wider South Asia region, and the globe.\" Secretary Gates paid an unannounced visit to Pakistan in early 2010 with a central wish to \"relinquish the grievances of the past ... and instead focus on the promise of the future.\" In speaking to an audience of Pakistani military officers, he sought to push back against the rumors fuelling anti-Americanism there, stating unequivocally that the United States \"does not covet a single inch of Pakistani soil [nor] military bases,\" nor does it \"desire to control Pakistan's nuclear weapons.\"\nMore intensive diplomacy and U.S. assurances that Pakistan will play a major role in the political future of Afghanistan may have contributed to persuading Pakistani leaders—especially military officers—that they need no longer rely on extremist groups to maintain influence. The U.S. Special Representative for Afghanistan and Pakistan, Richard Holbrooke, who died in December 2010, attributed Pakistan's early 2010 moves against the Afghan Taliban to the \"cumulative effect\" of hard work and multiple visits to Pakistan by numerous senior U.S. officials. Yet some in Congress express continuing skepticism about Islamabad's commitment to resolving the Afghan insurgency and to a genuine partnership with the United States. Meanwhile, many observers in Pakistan complain that U.S. diplomacy remains too skewed toward security issues and overly reliant on military-to-military relations, at some cost to public diplomacy. Reports suggest that even those Pakistanis with traditionally strong ties to the United States have begun seeking alternative destinations for work, education, and travel, a sign of troubled U.S.-Pakistan relations in the new decade.", "", "Two days after taking office, President Obama announced the appointment of former Clinton Administration diplomat Richard Holbrooke to be Special Representative to Afghanistan and Pakistan (SRAP). The SRAP's central task is to coordinate across the entire U.S. government to achieve U.S. strategic goals in the region. In accepting the job, Holbrooke called the Pakistan situation \"infinitely complex\" and noted the need to coordinate what he called a \"clearly chaotic foreign assistance program.\" Prior to the announcement, there was speculation that the new U.S. President would appoint a special envoy to the region with a wider brief, perhaps to include India and even Kashmir. The State Department insisted that Holbrooke's mandate is strictly limited to dealing with \"the Pakistan-Afghanistan situation.\" Given Holbrooke's reputation as a \"bulldozer\" with strong and sometimes negative views about South Asia's circumstances, his appointment caused some consternation in the region. Before his untimely death, Holbrooke made numerous trips to the region and, despite setbacks, contended that U.S.-Pakistan relations were improving.", "", "In February 2009, President Obama ordered a policy review bringing together various U.S. government strategy proposals for Afghanistan and Pakistan. A month later, he announced a new strategy conceiving of the two countries as part of \"one theater of operations for U.S. diplomacy and one challenge for our overall policy.\" The strategy is rooted in the assumption that, \"The United States has a vital national security interest in addressing the current and potential security threats posed by extremists in Afghanistan and Pakistan.\" All elements of U.S. national power—including diplomatic, informational, military, and economic—are to be brought to bear in attaining the \"core goal\" of disrupting, dismantling, and defeating Al Qaeda and its safe havens in Pakistan, and in preventing their re-emergence in Pakistan or Afghanistan. To this end, the Administration seeks to overcome the \"trust deficit\" the United States faces in the region and to \"engage the Pakistani people based on our long-term commitment to helping them build a stable economy, a stronger democracy, and a vibrant civil society.\"\nEarly in his tenure, Ambassador Holbrooke asserted that, of the many challenges faced by the Administration in formulating its policy, the most daunting was dealing with western Pakistan and the \"red lines\" set by Islamabad barring foreign troops from operating there. Holbrooke believed the new approach differed from that of the previous Administration in its aim of better integrating \"stove-piped\" policies, in its greater resource endowment, and in its proposed effort to more directly counter the propaganda of Islamist radicals in the region. Senate Foreign Relations Committee Chairman Senator John Kerry welcomed the new strategy as \"realistic and bold.\" Then-House Foreign Affairs Committee Chairman Representative Howard Berman also voiced strong support for the President's plan to boost civilian assistance efforts in Pakistan and Afghanistan. President Zardari called the strategy \"positive change\" and welcomed increased U.S. aid as the best way to combat militancy. Even well before the U.S. President announced the new regional strategy, Islamabad had expressed support for a regional approach and warned that a past overemphasis on the military dimension had not proven fruitful.", "Following a February 2009 trilateral meeting of top diplomats from the United Sates, Pakistan, and Afghanistan, Secretary of State Clinton announced that the format had proved valuable enough to continue on a regular basis. In May 2009, President Obama hosted the Pakistani and Afghan presidents in Washington, DC, where he characterized their meeting as one of \"three sovereign nations joined by a common goal\": to permanently defeat Al Qaeda and its extremist allies in Pakistan and Afghanistan. The U.S. President expressed being pleased that his counterparts were serious in addressing the threat posed by such extremists and he stated that such trilateral meetings would continue on a regular basis.\nIn October 2009, following energetic Pakistani counterinsurgency efforts in the Khyber Pakhtunkhwa province (KPk, formerly the North West Frontier Province or NWFP) and the launching of a ground offensive in South Waziristan, Secretary Clinton paid a visit to Pakistan, where she had meetings with senior political and military leaders, as well as frank and open interactions with civil society members. The lead U.S. diplomat impressed many Pakistanis with her willingness to hear and respond to criticisms of American policy; the three-day visit may have done much to repair still extensive damage in bilateral relations. A former Pakistani Ambassador to the United States lauded the Secretary's \"striking and impressive display of public diplomacy,\" contrasting it with what she called the \"patronizing style\" of Ambassador Holbrooke.\nWhen then-National Security Advisor General James Jones, met with President Zardari in Islamabad in late 2009, he reportedly delivered to the Pakistani leader a personal letter written by President Obama which conveyed an \"expectation\" that Zardari rally his country's political and national security institutions in a united campaign against regional extremism. By some accounts, Jones and White House counterterrorism chief John Brennan told their interlocutors that the United States was prepared to take unilateral action in the absence of rapid Pakistani movement. Such action could include expanding drone strikes to Baluchistan and resuming Special Operations missions across the Durand Line. Shortly after, Pakistan's foreign minister told reporters, \"We will not do anything, more or less, at the prodding of others.\" Zardari later delivered his own letter to the U.S. President indicating that Pakistan recognized the common threat, but was intent on following its own timeline and operational needs.", "The Obama Administration completed a second Afghanistan-Pakistan policy review in late 2009. In apparent recognition that recent U.S. policy toward Pakistan had failed to achieve Washington's main objectives, President Obama announced on December 1, 2009, that he would seek to shift the nature of the bilateral relationship:\nIn the past, we too often defined our relationship with Pakistan narrowly. Those days are over. Moving forward, we are committed to a partnership with Pakistan that is built on a foundation of mutual interest, mutual respect, and mutual trust. We will strengthen Pakistan's capacity to target those groups that threaten our countries, and have made it clear that we cannot tolerate a safe haven for terrorists whose location is known and whose intentions are clear.\nThe latter clause on safe havens was perhaps the most categorical high-visibility official statement to date, and the President continued encouraging Pakistan's leaders to sustain their fight against extremists and to eliminate terrorist safe havens in their country. Some in Congress were critical of President Obama's continued dependency on a Pakistani ally they view as unreliable and perhaps insufficiently determined to combat the extremist elements seen as most threatening to the United States.", "", "In January 2010, the SRAP's office released its Afghanistan and Pakistan Regional Stabilization Strategy . Maintaining a primary focus on disrupting, dismantling, and defeating Al Qaeda forces in the region, the document acknowledges that,\nThere remains mistrust between our two countries, but we see a critical window of opportunity created by the recent transition to democratic, civilian rule and the broad, sustained political support across Pakistan for military operations against extremists. We seek to lead the international community in helping Pakistan overcome the political, economic, and security challenges that threaten its stability, and in turn undermine regional stability.\nThe strategy has sought to further mobilize the international community and improve coordination among the 60 countries and international organizations providing assistance to Pakistan, as well as among the 40-odd Special Representatives for Afghanistan and Pakistan.\nDespite this document and rhetoric, Pakistani officials continued to express dissatisfaction with the bilateral relationship, especially with regard to U.S. recognition of the perceived threat to Pakistan represented by India. After meeting with Ambassador Holbrooke in January 2010, Foreign Minister Qureshi noted, \"A very strong perception in Pakistan that, despite our very good relations, the United States has not paid sufficient attention to Pakistan's concerns, security concerns vis-à-vis India.\"", "President George W. Bush had launched a \"Strategic Dialogue\" process with Pakistan that included high-level meetings in 2007 and 2008. The Obama Administration revived this forum in March 2010, when a large delegation of senior Pakistani leaders visited Washington, DC. Although the delegation was officially led by Foreign Minister Qureshi, many observers saw the Army Chief, General Kayani, as being the dominant figure in planning the Islamabad government's agenda and the dominant participant in ensuing bilateral talks, in some ways overshadowing the foreign minister. In the lead-up to the dialogue, Qureshi issued categorical statements about the need for Washington to \"do more\" in its relations with Islamabad: \"We have already done too much.... Pakistan has done its bit, we have delivered. Now it's your turn.\" Islamabad's unusual step of presenting a 56-page document containing requests for expanded military and economic aid was seen by some as a signal that Pakistan was willing to more openly align itself with U.S. interests, but with a possible price. Rumors circulated that Pakistan had agreed to roll back its indigenous militant networks in return for guarantees from the United States and other major governments that it would get special consideration in regional political and economic affairs, perhaps even to include civil nuclear cooperation deals.\nObama Administration officials were uniformly positive in their characterizations of the Pakistanis' visit. A joint statement issued at the close of the two-day Strategic Dialogue session noted the elevation of engagement to the Ministerial level, as well as the creation of a Policy Steering Group \"to intensify and expand the sectoral dialogue process.\" Secretary Clinton paid tribute \"to the courage and resolve of the people of Pakistan to eliminate terrorism and militancy,\" and the United States \"reaffirmed its resolve to assist Pakistan to overcome socioeconomic challenges.\" Pakistan, for its part, expressed its appreciation for U.S. security assistance. Some Pakistani analysts were unhappy with the outcome of the talks, arguing that, beyond the pageantry, little of substance was gained by Islamabad on its key priorities—preferential trade, access to civil nuclear technology, and U.S. assistance in resolving dispute with India.", "Section 1117 of the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ) requires the President to issue biannual reports to Congress on progress toward U.S. policy objectives in Pakistan and Afghanistan. The Administration's delivered a September 30, 2010, report covering the first eight months of 2010, and its unclassified sections contained extensive discussion of three of the five \"supporting objectives\" directly relevant to Pakistan. The overall tone of the report was considered by most readers to be sober and realistic, pointing out areas of progress while not shying from recognition of significant ongoing obstacles to same.\nDiscussion on one key objective—efforts to enhance Pakistan's civilian government capacity and stability—found that government remaining stable for the reporting period while also coming under persistent broad-based challenges, especially those posed by a \"fragile\" economic situation badly exacerbated by the floods, and by continuing battles between the executive and judiciary. The reported offered that, \"President Zardari's declining popularity and low support among Pakistani political stakeholders stood out as the most obvious factor impacting\" the civilian government's circumstances.\nOn another key U.S. objective—developing Pakistan's counterinsurgency capabilities—the report noted Pakistan's successful military operations in several FATA and KPk regions and the general ability of security forces to hold these areas. Yet it also contended that Pakistan's army had \"stopped short of the kind of large-scale operations that would permanently eject extremist groups\" from their western Pakistani havens and identified a \"fundamental problem\" in that organization's \"inability to transition to effective hold and build efforts in cleared areas.\" Perhaps most alarmingly for a Washington audience, the Pakistani military was seen to be continuing to \"avoid military engagements that would put it in direct conflict with the Afghan Taliban or Al Qaeda forces in North Waziristan,\" and the report concluded this avoidance was \"as much a political choice as it is a reflection of an under-resourced military prioritizing its targets.\"", "The October 2010 Strategic Dialogue session was the unprecedented third of the year and was intended to examine progress in the implementation of agreements related mostly to assistance that had been made during the summer. In the lead-up to the event, the Obama Administration announced its intention to further boost military assistance to Pakistan, at least in part as a means of encouraging more rapid and robust Pakistani military operations in the FATA. In a joint appearance with her Pakistani counterpart, Secretary Clinton lauded progress on the \"action plans\" created by each of the Dialogue's 13 working groups, formally announced a new Multi-Year Security Assistance Commitment to Pakistan (involving an intention to request from Congress $400 million in annual foreign Military Financing Funds for FY2012-FY2016, a boost of $100 million per year from current levels), and again reiterated her contention that reform of Pakistan's tax system was a primary need. President Obama met personally with Pakistani delegates, underlining the importance of the Dialogue in \"moving the relationship toward a true partnership based on mutual respect and common interests.\" The resulting Joint Statement expressed mutual satisfaction with progress made since the March and July sessions, noted that the Obama Administration would \"redouble its efforts\" to win congressional support for ROZ and enterprise fund legislation, and announced President Obama's plans to visit Pakistan in 2011. Press reports indicated that, in private, U.S. officials warned their Pakistani counterparts that continued inaction against certain militant groups in western Pakistan could jeopardize future U.S. financial largesse, perhaps even to include a cut in coalition support fund reimbursements.", "The Administration's annual Afghanistan-Pakistan policy review was not released in unclassified form but for a five-page summary. This December 16, 2010, document conveyed an unchanged overarching goal (disrupting, dismantling, and defeating Al Qaeda in the region) and claimed notable gains, most especially what it called unprecedented pressure on Al Qaeda in Pakistan, resulting in their weakening. Recognizing that sustained denial of extremist safe havens is necessary for ultimate success, the Administration remains \"relentlessly focused on Pakistan-based Al Qaeda.\" It calls for \"greater cooperation with Pakistan along the border with Afghanistan\" and acknowledges that effective development strategies are required to complement military means.\nThe December strategy review was described by the Acting SRAP as being a \"clear-eyed and realistic\" assessment of a \"tough foreign policy challenge.\" While recognizing ongoing problems, it noted \"significant progress\" on combating Al Qaeda in Pakistan and \"significant activity\" by the Pakistani military to shut down sanctuaries used by Islamist militants in the border region. In commenting on the review, senior Pentagon officials lauded what they called substantial improvement in the U.S.-Pakistan relationship during 2010, and a daily and measureable improvement in coordination of counterterrorism efforts.", "Ambassador Holbrooke's sudden December 14, 2010, death was costly for U.S. diplomacy and could prove to be a lasting setback for efforts to stabilize and realize other U.S. policy goals in the region. Holbrooke was seen to be a champion of increased economic assistance to Pakistan and a bulwark against those in the U.S. government who focus on militarized approaches to the region. His deputy and now Acting Special Representative, Frank Ruggerio, is characterized as a highly competent diplomat, but one without extensive knowledge of Pakistan and, more importantly, without the personal clout that Holbrooke wielded. In this respect, there are concerns among some observers that the influence of U.S. military leaders on U.S. policy in the region could further increase. Secretary Clinton dispatched the Acting SRAP to Islamabad and Kabul in January to reassure leaders in both capitals that U.S. policy toward the region would not change with Holbrooke's passing.", "The outlook for progress in Pakistan's political, economic, and security circumstances in 2011 is fairly poor. Because of this, progress toward attainment of U.S. goals in its engagement with Pakistan is likely to remain difficult, and serious mutual distrust persists in the relationship. Pakistani officials often complain that the United States is insufficiently concerned with Islamabad's regional security perspective, and they offer criticism that Washington is not moving to provide greater market access for Pakistani exports. Moreover, Pakistan continues to push for a civil nuclear cooperation deal with the United States. To date, the Obama Administration has flatly rejected any discussions with Pakistan on this issue.\nMeanwhile, with the Islamabad government coming under the immense dual pressures of natural disaster and widespread armed insurgency in the autumn of 2010, and concurrent negative developments in U.S.-Pakistan relations, U.S. officials became all the more concerned about political instability in Pakistan. Observers in Washington see in Pakistan an unstable ally that may not have the determination, much less the capacity, to deliver what the United States is seeking. In late September, Ambassador-Designate Cameron Munter conveyed to the Senate Foreign Relations Committee a belief that Pakistan requires a strong civilian government and that common U.S.-Pakistan successes can be achieved only \"with a strong partner in Pakistan's democratically-elected government.\" He vowed to continue to work aggressively to improve the U.S. image in Pakistan.\nSome analysts, alarmed by signs that mutual disconnect are increasing, call for urgent reparative action from both Islamabad and Washington. Major tasks facing Pakistan include reforming its political system (especially by completing the transition from a presidential to parliamentary system, and by further improving both interprovincial and center-province relations) and reordering its economic priorities in order to foster greater domestic and foreign investment. The United States, for its part, can move more quickly to reduce tariffs on Pakistani textile exports, relax what some see as overly stringent visa restrictions, speed the flow to Pakistan of military equipment needed for counterinsurgency operations, and, in the longer term, channel its foreign assistance into high-visibility, high-impact infrastructure projects, especially those related to energy and water resources. It may be that the most useful near-term \"deliverable\" for Pakistan would be increasing U.S. market access for Pakistani exports.\nMany American analysts make explicit calls for a tougher U.S. line toward Pakistan by \"demanding\" more counterterrorism operations, and perhaps offering Islamabad a stark choice between positive incentives and negative consequences. Some call for the creation of more explicit counterterrorism benchmarks, as well as for the United States to shift more emphasis on alternative supply lines into Afghanistan and so remove Pakistan's ability to \"hold the [Western] coalition ransom\" by disrupting the supply line that runs from Karachi.\nPresident Obama's decision to travel to India without any stops in Pakistan created anxiety among Pakistani officials who see signs of Washington's \"pro-India\" tilt as destabilizing for the region. By refraining from direct engagement in the Kashmir dispute, moving forward U.S.-India civil nuclear cooperation, and seeming to sympathize with New Delhi's perspective on the root sources of regional terrorism, the Obama Administration's policies may continue to make difficult any effective winning of hearts and minds in Pakistan. Islamabad reacted angrily to President Obama's November endorsement, delivered in New Delhi, of a permanent U.N. Security Council seat for India, calling the position \"incomprehensible.\"", "", "Pakistan in mid-2010 experienced a catastrophic natural disaster that precipitated a humanitarian crisis of major proportions. Widespread flooding affected about 20 million Pakistanis and inundated about one-fifth of the country's total land area. A joint Asian Development Bank-World Bank needs assessment estimated that Pakistan had suffered $9.7 billion in direct and indirect costs, roughly double the amount of damage caused by Pakistan's 2005 earthquake. Flood-induced devastation was so extensive that it could take decades to rebuild lost infrastructure.\nThe floods stemmed from abnormally heavy rains during the monsoon season in July and August. This led to flooding in the Indus River Basin which traverses Pakistan from north to south. Excess water led the Indus River and its tributaries to breach their levees and inundate adjacent and downstream floodplains. Some 2,000 people were killed by the flooding and an estimated eight million Pakistanis were displaced from their homes. The number of people affected was significantly greater than seen in several major disasters around the world since 2000. Little clean drinking water was available for many of those affected and remains a problem to date. Many of those affected, particularly children, have faced potential disease outbreaks, particularly diarrhea and cholera. The catastrophic loss of livestock and crop lands and extensive damage to the country's infrastructure are projected to have long-term negative effects on Pakistan's food security and economic performance.\nPakistani officials organized their emergency response at the federal, provincial and district levels. The Pakistan National Disaster Management Agency (NDMA) is responsible for overall coordination of disaster response efforts by both the government and the international community. The NDMA works closely with federal ministries, government departments, the armed forces, U.N. agencies, and donors to mobilize, receive, and deploy relief goods. Relief activities have also been coordinated by provincial-level and district-level governments. The Pakistani military took the lead in providing emergency relief to affected areas, eventually diverting about 70,000 regular and paramilitary troops to such efforts. As with the 2005 earthquake, the disaster illuminated the extremely limited capacity of Pakistan's government institutions to effectively address crises situations. This is especially so with regard to the country's civilian administration.\nThe United States has been the leading international contributor to the relief effort, and by November had devoted more than $571 million in FY2010 and FY2011 funds to this cause. The U.S. military also provide in-kind support, including transport aircraft, helicopters, and crews, distributing some 25 million tons of relief supplies in an effort that formally ended December 1. In September, the full House passed H.Res. 1613 , which expressed condolences to and solidarity with the Pakistani people in the aftermath of the floods. The resolution also supported the use of \"Kerry-Lugar-Berman\" funds for long-term rehabilitation and recovery while urging a \"re-examination\" of spending priorities for such funds with a view toward ensuring appropriate address of the Pakistani people's needs.", "In July and again in November 2010, the WikiLeaks website posted thousands of sensitive U.S. diplomatic cables, many of them with content relevant to U.S. foreign relations in South Asia. The cables reportedly illuminated what may be deep fissures in the strategic goals of the United States and Pakistan, especially in the area of Pakistan's support for Taliban-linked groups. They also reportedly revealed efforts by U.S. diplomats to support Islamabad's weak civilian government while at the same time recognizing that the true locus of power on national security and foreign policy is at the military's headquarters in Rawalpindi.\nIslamabad's official response in July was to call the cables \"misplaced, skewed and contrary to the factual position on the ground.\" In November, Islamabad stated that, \"We are not in a position to comment on the veracity of U.S. internal documents. We consider the extremely negative reports carried on Pakistan-Saudi relations attributed to WikiLeaks as misleading and contrary to the facts.\" On a report that the U.S. government had sought to reacquire highly enriched uranium provided to Pakistan decades earlier, the Foreign Ministry commented: \"Pakistan is an advanced nuclear technology state. No one can touch Pakistan's nuclear facilities or assets.… The U.S. suggestion to have the [nuclear] fuel transferred was plainly refused by Pakistan. The suggestion that the reactor is producing HEU is completely incorrect.\" U.S. officials contended that the mid-2010 release of classified documents by WikiLeaks presented an overly simplified and inaccurately negative perspective on U.S.-Pakistan relations, saying they did not reflect a significant deepening of military and civilian ties in recent months and years. The United States later expressed to Islamabad \"deep regrets\" at the disclosure of communications meant to be confidential and \"condemned\" it. Senior U.S. officials subsequently sought to play down the importance of \"out of context\" documents.\nThere have been concerns that leaked diplomatic cables could further undermine U.S. efforts to build trust with Pakistan. A roundtable of Washington-based experts found the episode could have two concrete effects: (1) The airing of private statements made by Gulf State leaders critical of Pakistan's civilian government could make those leaders more reticent in future meetings with U.S. officials and (2) by exposing both U.S. efforts to reclaim enriched uranium from Pakistan and the (limited) presence of U.S. Special Forces soldiers operating inside Pakistan, the revelations have fueled virulent Pakistani national suspicions that the United States has a covert agenda that fundamentally violates the country's sovereignty. Other observers saw in the cables evidence of Pakistani instability and unreliability as a U.S. ally, with an ineffectual government and security institutions that continued to selectively support Islamist extremist groups there, perhaps including the Al Qaeda-linked Haqqani network. Moreover, suggestions found in some cables that no amount of U.S. assistance to Pakistan would alter that country's strategic orientation reveal the depth of U.S. uncertainty about the alliance. In contrast, some commentators saw in the cables positive news beyond the obvious Pakistani weaknesses: officials from both sides working with determination to increase trust and cooperation in difficult circumstances. With Pakistani news outlets focused solely on the sensational aspects of the cables, \"media hysteria\" is identified as a negative exacerbating factor.", "On January 4, Salman Taseer, the governor of the Punjab province, was assassinated when one of his own security team shot him 26 times in broad daylight while other bodyguards looked on. A senior figure in the PPP, Taseer was among the country's most liberal politicians, and he had incurred the wrath of Islamists and other conservatives with his vocal criticisms of the country's blasphemy laws. His killer, Malik Mumtaz Qadri, had apparently told other police officers of his plans, but was assigned to guard Taseer anyway. Qadri may have had links with one of the radical Islamist groups leading public resistance to changes in the blasphemy laws. The assassination, strongly condemned by Secretary Clinton, was widely viewed as a major blow to liberal forces in Pakistan. At least one unnamed Obama Administration official says it is \"a reminder of how we're still losing ground in Pakistan.\"", "Pakistan and China have enjoyed a generally close and mutually beneficial relationship over several decades. Pakistan served as a link between Beijing and Washington in 1971, as well as a bridge to the Muslim world for China during the 1980s. China's continuing role as a primary arms supplier for Pakistan began in the 1960s and included helping to build a number of arms factories in Pakistan, as well as supplying complete weapons systems. Chinese companies and workers are now pervasive in the Pakistani economy. Most recently, China intends to build two new civilian nuclear reactors in Pakistan in what would be an apparent violation of international guidelines (see the \"Nuclear Weapons, Power, and Security\" section below).\nAs U.S.-India ties deepen, many observers see Islamabad becoming more reliant than ever on its friendship with Beijing. President Zardari undertook his fifth trip to China as the head of his government in July 2010, and Islamabad seeks full membership in the Shanghai Cooperation Organization, in which it currently holds observer status. During Chinese Premier Wen Jiabao's December 2010 visit to Islamabad, the two governments signed 12 Memoranda of Understanding (MoUs) covering a broad range of cooperative efforts and designated 2011 as the \"Year of China-Pakistan Friendship.\" Also during the visit, Pakistani and Chinese businesses signed contracts covering cooperation in oil and gas, mining, space technology, heavy machinery, manufacturing, and other areas worth some $15 billion. This added to the nearly $20 billion worth of government-to-government agreements reached. Some cynical observers reject claims that China can in any way \"replace\" the West as a source of significant foreign investment for Pakistan; one leading commentator deemed the MoUs worthless and noted that Beijing has produced only nominal flood relief aid.", "In August 2010, a delegation of Pakistani military officers in the United States for a conference departed the country early and in protest after saying they had been unjustly removed from a flight to Florida, then interrogated and rudely treated by security officials at Dulles International Airport in Virginia. The Pakistani Army called the treatment \"unwarranted\" and canceled the visit. A State department spokesman attributed the incident to misunderstanding and miscommunication between the delegation and flight crew, and the Department expressed regret to Islamabad. Yet the events fit well into a Pakistani narrative in which its citizens and even ranking officials meet with discriminatory treatment in the United States. When, in December 2010, the identity of the CIA's Pakistan station chief became public and that figure quickly left the country, some U.S. officials were reportedly convinced that his cover had been intentionally blown by Pakistan's military intelligence agency, possibly in retaliation for civil lawsuit that had recently been filed in a New York court. The suit, brought by relatives of some of the victims of the 11/08 Mumbai terrorist attack, implicated the ISI chief and summoned his testimony. An ISI official angrily denied any Pakistani involvement in the revelation, and Islamabad announced that the summons would not be obeyed.", "Islamist extremism and militancy has been a menace to Pakistani society throughout the post-2001 period, becoming especially prevalent since 2007, but the rate of attacks and number of victims may have peaked in 2009. The U.S. National Counterterrorism Center reports a major decline in terrorist incidents in 2010 as compared to the previous year, with 687 terrorist incidents in Pakistan in 2010 (down from 1,915 in 2009) resulting in 1,051 fatalities (down from 2,670). Despite the declined rate, the figures again placed the country third in the world on both measures, after Afghanistan and Iraq. Suicide bombing is a relatively new scourge in Pakistan. Only two such bombings were recorded there in 2002; that number grew to 59 in 2008 and 84 in 2009, before dropping to 29 in 2010 (the lowest level since 2005). Still, Pakistan was last year the site of far more deaths caused by suicide bombing (556) than any other country and accounted for about one-quarter of all the world's such bombings.\nA particularly alarming development in recent years is the significantly increased incidence of militants making direct attacks on Pakistani security institutions. There have also been more attacks on foreign-based charitable organizations, such as the March assault of the KPk offices of the American Christian group World Vision by about a dozen masked gunmen, which left six Pakistani employees dead.\nAccording to the State Department's most recent Country Reports on Terrorism (August 2010),\nForeign terrorist organizations, including Al Qaeda and its affiliates, continued to operate and carry out attacks in Pakistan. Violence stemming from Sunni-Shia sectarian strife and ethnic tensions, limited to certain geographical areas, claimed civilian lives. Similar to last year, attacks occurred with greatest frequency in the regions bordering Afghanistan, including Baluchistan, the Federally Administered Tribal Areas (FATA), and the North-West Frontier Province (NWFP). Attacks targeting the country's major urban centers, including Lahore, Islamabad, Peshawar, Karachi, and Rawalpindi, continued to increase. The coordination, sophistication, and frequency of suicide bombings continued to climb in 2009.\nThe myriad and sometimes disparate Islamist militant groups operating in Pakistan, many of which have displayed mutual animosity in the past, appear to have become more intermingled and mutually supportive since 2009 (see \"Islamist Militant Groups in Pakistan,\" below). According to U.S. Joint Chiefs Chairman Admiral Mullen, speaking in December 2009,\nIt's very clear to me, over the last 12 to 24 months, that these organizations are all much closer than they used to be, whether it's Pakistan Taliban and Al Qaida, or Al Qaida/Afghan Taliban, [Lashkar-e-Taiba, Jamaat-ud-Dawa, Jaish-e-Mohammed]—they're all working much more closely together. So I think it doesn't accurately reflect the need or the strategy to single out one group or another. They're very much all in this in ways, together, that they weren't as recently as 12 months ago.\nThis developing \"syndicate\" of armed Islamist extremist in Pakistan even incorporates the apparently tactical joining of TTP and LeT forces.\nAn extensive 2010 study found that Pakistan-based militant groups continue to present a significant threat to Pakistan, the United States, and other countries. This threat persists, according to the report, due mainly to Islamabad's lack of an effective \"population-centric\" strategy, the government's refusal to make a systematic break with all militant groups, and the inability of Pakistan's army and paramilitary forces to clear and meaningfully hold territory. The study determined that Pakistan will continue to be unsuccessful in addressing its indigenous militant threat over the long term unless its government undertakes two major changes. First, Islamabad is urged to take a \"population-centric\" approach to counterinsurgency that makes civilian security the central goal. Reforming and strengthening local police forces would be central to this effort. Second, Pakistan must conclusively relinquish militancy as a policy tool. This process could be facilitated by a U.S. policy that focuses on altering Pakistan's strategic calculus. For its part, Washington is urged to reduce its reliance on Pakistan, especially through development of alternative supply lines to Afghanistan, and to be more willing to use foreign policy \"sticks\" such as withholding of aid in the absence of measureable progress, while also seeking means of offering the strategic \"carrots\" most valued by Islamabad.", "In 2010, the U.S. government accelerated its official designation of terrorists and terrorist groups, as well as their financial support networks operating in Pakistan. In June, five U.S. Senators sponsored legislation to instruct the Secretary of State to designate the TTP as a Foreign Terrorist Organization (FTO). This \"Combating the Pakistani Taliban Act of 2010 ( S. 3560 ) did not move out of committee. However, during a July nomination hearing for the newly named Commander of U.S. Central Command, the Chairman of the Senate Armed Services Committee and Gen. James Mattias both agreed that the Haqqani network and Quetta Shura should be designated as FTOs. In August, Secretary Clinton ordered that, under Executive Order 13224, the TTP be named an FTO, and that TTP leaders Hakimullah Mehsud and Wali ur Rehman be named a Specially Designated Global Terrorist. The announcement was made in September, when the Justice Department unsealed criminal charges against Mehsud, accusing him of conspiring in the deadly suicide bomb attack on the CIA outpost in Khost, Afghanistan, and senior counterterrorism official Daniel Benjamin also noted that the U.S. government was offering $5 million reward for information leading to the arrest of either of the two militant leaders. In November, the State Department also designated Jundallah, an Iran-oriented militant group operating in Baluchistan near the Iranian border, as an FTO. The Treasury Department is continuing its efforts to isolate terrorist figures and curtail terrorist financing in the region. In November, it targeted the financial support networks of both the LeT and JeM.", "U.S. leaders remain concerned that Al Qaeda terrorists operate with impunity on Pakistani territory, and that the group appears to have increased its influence among the myriad Islamist militant groups operating along the Pakistan-Afghanistan border, as well as in the densely populated Punjab province and in the megacity of Karachi. In early 2009, the Obama Administration declared that the \"core goal\" of the United States should be to \"disrupt, dismantle, and defeat Al Qaeda and its safe havens in Pakistan, and to prevent their return to Pakistan or Afghanistan.\" The President continues to assert that Al Qaeda represents the top-most threat to U.S. security, and the State Department's most recent Country Reports on Terrorism flatly stated that \"In 2009, Al Qaeda's core in Pakistan remained the most formidable terrorist organization targeting the U.S. homeland.\" Recent unclassified assessments place more than 300 Al Qaeda operatives in Pakistan's tribal areas.\nWhile taking questions from senior Pakistani journalists during an October 2009 visit to Pakistan, Secretary of State Clinton offered a pointed expression of U.S. concerns that some elements of official Pakistan maintain sympathy for most-wanted Islamist terrorists:\nAl Qaeda has had safe haven in Pakistan since 2002. I find it hard to believe that nobody in [the Pakistani] government knows where they are and couldn't get them if they really wanted to. And maybe that's the case. Maybe they're not gettable.... I don't know what the reasons are that Al Qaeda has safe haven in your country, but let's explore it and let's try to be honest about it and figure out what we can do.\nPakistani officials are resentful of such suggestions, and the Islamabad government claims that Al Qaeda chief bin Laden is not in Pakistan.\nA 2010 analysis calculated that more than one-third of all \"serious terrorist plots\" in the West since 2004 were operationally linked to Al Qaeda or its allies inside Pakistan. Evidence suggests that some of the 9/11 hijackers were themselves based in western Pakistan in early 2001, and a former British Prime Minister has estimated that three-quarters of the most serious terrorism plots investigated in Britain had links to Al Qaeda in Pakistan. Moreover, as tensions between Pakistan and India remain tense more than two years after the November 2008 terrorist attack on Mumbai, Secretary Gates warned that groups under Al Qaeda's Pakistan \"syndicate\" are actively seeking to destabilize the entire South Asia region, perhaps through another successful major terrorist attack in India that could provoke all-out war between the region's two largest and nuclear-armed states.\nAl Qaeda apparently was weakened in Pakistan in 2009 and 2010 through the loss of key leaders and experienced operatives. Drone strikes, Pakistani military operations, and internal rifts all combine to degrade the group's capabilities. Pakistan's late 2009 offensive in South Waziristan appears to have pushed Al Qaeda operatives from that region, and some reporting suggests that Taliban fighters in western Pakistan have become wary of assisting Al Qaeda elements. The CIA Director claims that improved coordination with the Pakistani government and \"the most aggressive operation that CIA has been involved in in our history\" have forced top Al Qaeda figures even deeper into hiding while disrupting their ability to plan future attacks. Yet some U.S. officials saw the group and its allies rebuilding their damaged infrastructure in 2010. Moreover, while the strategic goals of Al Qaeda and the Quetta Shura Taliban diverged following the former's relocation into the FATA after 2001, Al Qaeda continues to function as a \"force multiplier\" for myriad militant groups in western Pakistan, providing manpower, specialized knowledge, propaganda, and general advice.", "", "Lahore—the provincial capital of Punjab and so-called cultural heart of Pakistan—was for many years mostly unaffected by spiraling violence elsewhere in the country. This conclusively ended with three major terrorist attacks in less than three months in early 2009. Militants from western Pakistan have appeared intent on attacking Lahore to demonstrate the extent of their capabilities and to threaten the government's writ throughout the country. More bomb attacks on Sufi shrines, including some notable ones in Punjab, have demonstrated that militants are specifically targeting more moderate Pakistani Muslims.\nIslamist militants have in recent years been increasing their influence in southern Punjab, where most anti-India groups have originated and where a number of Taliban cells have already been discovered. A 2009 report from the Brussels-based International Crisis Group urged Islamabad to end its effort to differentiate between militant networks and instead move toward a \"zero-tolerance\" policy, especially with regard to Punjab-based Sunni extremist organizations. The somewhat misnamed \"Punjabi Taliban,\" a loose conglomeration of banned militant groups in the Pakistani heartland, are comparatively better educated and better equipped than their Pashtun countrymen to the west, and are notable for having in many cases enjoyed state patronage in the recent past.\nIn June 2010, Interior Minister Malik offered a rare public admission that extremist groups were well-entrenched in southern Punjab. He also conceded that Punjabi groups such as the LeJ, SSP, and JeM were close allies of both the Taliban and Al Qaeda. According to several Pakistani experts, Punjab has become a major recruiting ground and planning hub for terrorists, and also provides a source of many militants fighting in Afghanistan. Some analysts hold the provincial ruling (Pakistan Muslim League – Nawaz) party responsible for fostering extremism there by taking religiously conservative and strongly right-wing positions while failing to openly criticize militancy. There has even been evidence that officials from the Sharif brothers' PML-N use militant groups to drum up political support, even to the extent of funding institutions linked to the Jamaat-u-Dawa, a front group for the LeT.", "The megacity of Karachi is among the world's largest, and is also Pakistan's leading business and finance hub. The Sindh provincial capital generates two-thirds of all government revenue and one-quarter of the country's GDP. Extremists also appear to be moving from the FATA to the Sindhi capital of Karachi in large numbers in recent months and years, exacerbating preexisting ethnic tensions and perhaps forming a new Taliban safe haven in Pakistan's largest city. Taliban fighters are increasingly present in Karachi, and reports indicate that the megacity has become a favored destination for numerous international jihadis. Militants fleeing from battles in Swat and the FATA have sought refuge in Karachi, where some 2,800 have been arrested in government anti-terrorism sweeps. Hundreds of thousands of flood refugees only added to ethnic tensions in the summer of 2010. Under threat of expanded U.S. drone strikes on Quetta, senior Afghan Taliban leadership, including Mullah Omar himself, may have moved to Karachi, perhaps even with the support of ISI elements. The megacity's sprawling ethnic Pashtun neighborhoods provide ideal hideouts for both Afghan and Pakistani Taliban fighters. The disproportionate political representation enjoyed by the city's Muhajir community engenders ethnic grudges among Pashtuns. These Pashtun militants are said to have established \"mafia-like\" criminal syndicates in Karachi to raise millions of dollars to sustain their insurgencies through kidnaping, bank robberies, and extortion.", "Pakistan has since 2007 faced a \"neo-Taliban\" insurgency in the scenic Swat Valley of the KPk's Malakand district, just 100 miles northwest of the capital, where radical Islamic cleric Maulana Fazlullah and some 5,000 of his armed followers sought to impose Sharia law. This rebellion against the state was notable as the only with geographic reach beyond the \"tribal belt\" and in part of Pakistan's \"settled areas\" nearer the Indus river plains. Fazlullah, also known as \"Maulana Radio\" for his fiery (and unlicensed) FM broadcasts, moved to create a parallel government like that established by pro-Taliban commanders in South Waziristan. Some 2,500 Frontier Corps soldiers were deployed to the valley, and the army soon took charge of the counterinsurgency effort at the request of the provincial governor, massing about 15,000 regular troops. By the close of 2007, militant elements in the area were reported to be in retreat, and the Pakistani government claimed victory. Yet, in 2008, with militants still active in Swat, government officials reportedly struck a peace deal. That deal collapsed by mid-year, with sporadic and sometimes heavy fighting in Swat continuing throughout the year. By all accounts, Islamist insurgents greatly expanded their influence in Swat in 2008, and many observers asserted that, by 2009, the state's writ had completely vanished from the valley.", "By early 2009, the KPk chief minister was calling the Swat problem a full-blown rebellion against the state, and President Zardari himself conceded that militant forces had established a \"huge\" presence in his country. Shortly after, Zardari reportedly agreed in principle to restore Sharia law in the Swat region in a bid to undercut any popular support for the uprising there. In addition to bringing Islamic law to the entire Malakand division of the KPk (including Swat), the accord, announced in February of that year, included requirements that the Taliban recognize the writ of the state, give up their heavy weapons and refrain from displaying personal weapons in public, denounce suicide attacks, and cooperate with local police forces. In return for such gestures, the government agreed to gradually withdraw the army from the region. Pakistanis appeared to strongly support the government's move. In April, Zardari signed a regulation imposing Islamic law after Parliament passed a resolution recommending such a move.\nA White House official was critical of the Sharia deal in Swat, saying that solutions to Pakistan's security problems \"don't include less democracy and less human rights.\" A State Department spokesman emphasized that the United States was \"very concerned\" and maintained a view that \"violent extremists need to be confronted.\" Pakistan's lead diplomat in Washington sought to assure a skeptical American audience that his government was not offering any concessions or ceding any ground to the Taliban, but rather was \"attempting to drive a wedge\" between Al Qaeda and Taliban militants on the one hand, and an indigenous Swati movement on the other, as part of a \"pragmatic\" strategy \"to turn our native populations against the terrorists.\"\nStill, most observers saw the deal as a blatant capitulation and unprecedented surrender of territory to a militant minority beyond the FATA, and as part of a disturbing broader trend. The Human Rights Commission of Pakistan marked it as a day of \"humiliating submission\" by the government. A senior independent Pakistani analyst and former army general said the government \"has yielded under compulsion at a time when Talibanization is sweeping the country and overwhelming the state.\" Even a senior Pakistani Islamist politician, told Parliament that the Taliban were threatening the Pakistani capital. The peace deal was particularly alarming for India, where officials feared it would further exacerbate the existing Islamist militant threat they face.", "As with past iterations of truce deals in the nearby FATA, the Swat accord was seen to give militants breathing space and an ability to consolidate their gains. Reports immediately arose that Taliban forces were moving into the valley by the thousands to establish training camps in the forests around Mingora, Swat's largest town. Fears that, rather than being placated by the truce, militants would use their Swat positions as a springboard from which to launch further forays were quickly confirmed. In April 2009, Taliban forces moved into the neighboring Buner district, now only 60 miles from the Pakistani capital. Local tribal militias put up resistance, but were quickly overwhelmed, and the Pakistani army had no local presence. Within two weeks Taliban forces were said to have taken full control of Buner.\nIn response, Pakistani paramilitary troops supported by helicopter gunships engaged militants in Buner and Lower Dir. At the same time, the army accused the militants of \"gross violations\" of the accord. Pakistani commandos were airdropped into Buner's main town and regained control, but heavy fighting forced many hundreds of civilians to flee. The fighting pitted about 15,000 government troops against an estimated 4,000-5,000 militants.\nAs militants appeared to consolidate their hold on large swaths of the KPk, alarm grew in Washington that the Pakistani government may have lacked the will to sustain the fight. Joint Chiefs Chairman Admiral Mullen expressed being \"gravely concerned\" about the progress made by militants, and he indentified Pakistan's simultaneous pursuit of peace deals and military operations as \"strategic moves\" that were, from an American perspective, \"at cross purposes.\" Secretary of Defense Gates concluded that the Swat agreement's \"failure,\" followed by militant movements into neighboring Buner, was a \"real wakeup call for the Pakistani government.\"\nHeavy combat raged in May 2009, with militants putting up strong resistance. When Taliban forces returned in large numbers to Mingora, Swat's main city, army leaders reportedly resolved to finally abandon negotiations and press ahead with a larger offensive, this time with greater support from the Pakistani public. By the close of June 2009, the army was claiming to have cleared the last remaining Taliban stronghold in Swat. By November, police patrols were a common sight in Mingora, signaling a return of relative normality to the Valley, and TSNM leader Maulana Fazlullah reportedly fled to Afghanistan.\nA senior Pakistani official reportedly claimed the two-month-long Swat offensive left more than 3,500 militants dead, but Islamabad's official body count stood at roughly half that number. No top Taliban commanders are known to have been killed or captured and, by many accounts, the military succeeded only in establishing control of Malakand's urban centers and main roadways. Particularly skeptical observers suspect that the Pakistani military has vastly over-reported Taliban casualties in a possible effort to impress an American audience and so continue to receive large assistance packages. Swat residents apparently continue to rely on the military to maintain order and continue to feel insecure in the face of a lingering threat from pro-Taliban militants that the still struggling police forces have found difficult to neutralize. Moreover, efforts to repair the shattered regional economy have yielded limited results and cold require at least $1 billion in state funding. As of late 2010, more than one year after most displaced citizens returned home, government services remain almost entirely absent.", "An ongoing Taliban insurgency in Afghanistan and its connection to developments in Pakistan remain matters of serious concern to U.S. policy makers. It is widely held that success in Afghanistan cannot come without the close engagement and cooperation of Pakistan, and that the key to stabilizing Afghanistan is to improve the longstanding animosity between Islamabad and Kabul. In late 2008, Joint Chiefs Chairman Admiral Mullen said he viewed Pakistan and Afghanistan as \"inextricably linked in a common insurgency\" and had directed that maps of the Afghan \"battle space\" be redrawn to include the tribal areas of western Pakistan. As President-elect, Barack Obama asserted that Afghanistan cannot be \"solved\" without \"solving Pakistan\" and working more effectively with that country. Numerous other senior U.S. officials—both civilian and military—share the view that Pakistan and Afghanistan are best considered as a single \"problem set\" in the context of U.S. interests. This conceptual mating of the two countries was not well received in Pakistan; President Zardari was himself openly critical of a strategy linking \"AfPak,\" saying the two countries were too distinct from one another to be \"lumped together for any reason.\" Pakistani military officials echoed the sentiment.\nStill, most independent analysts agree that, so long as Taliban forces enjoy \"sanctuary\" in Pakistan, their Afghan insurgency will persist (see Figure 2 ). Obama Administration intelligence officials continue to inform Congress of a crucial Pakistani link to the Afghan insurgency. According to former U.S. Director of National Intelligence Dennis Blair, testifying before a House panel in early 2010, \"The safe haven that Afghanistan insurgents have in Pakistan is the group's most important outside support. Disrupting that safe haven won't be sufficient by itself to defeat the insurgency, but disrupting insurgent presence in Pakistan is a necessary condition for making substantial progress.\nNational Intelligence Estimates on Pakistan and Afghanistan issued in early December 2010 reportedly took a bleak view of the situation and suggested that U.S. success in Afghanistan was not possible so long as insurgents continued to find safe haven in western Pakistan. As recently as January 2011, Joint Chiefs Chairman Admiral Mullen said, \"It is absolutely critical that the safe havens in Pakistan get shut down. We cannot succeed in Afghanistan without that.\" Some independent analysts echo the claim that targeting Afghan Taliban leaders in Baluchistan is a requirement for curbing the Afghan insurgency.\nAfghan officials openly accuse Pakistani officials of aiding and abetting terrorism inside Afghanistan. Pakistan's mixed record on battling Islamist extremism includes an ongoing apparent tolerance of Afghan Taliban elements operating from its territory. The \"Kandahari clique\" reportedly operates not from Pakistan's tribal areas, but from populated areas in and around the Baluchistan provincial capital of Quetta. Many analysts believe that Pakistan's intelligence services have long known the whereabouts of these Afghan Taliban leadership elements and likely even maintain active contacts with them at some level as part of a hedge strategy in the region. Some reports indicate that elements of Pakistan's major intelligence agency and military forces aid the Taliban and other extremists forces as a matter of policy. Such support may even include providing training and fire support for Taliban offensives (see also \"Questions About Pakistan's Main Intelligence Agency\" below).\nPakistani leaders insist that Afghan stability is a vital Pakistani interest. They ask interested partners to enhance their own efforts to control the border region by undertaking an expansion of military deployments and checkposts on the Afghan side of the border, by engaging more robust intelligence sharing, and by continuing to supply the counterinsurgency equipment requested by Pakistan. Yet, despite efforts by both the Islamabad and Kabul governments to secure it, the shared border remains highly porous, with corrupt border guards allowing more-or-less free movement of militants and smugglers. Pakistan has contributed about $330 million to Afghan development and reconstruction since 2001.", "Given Pakistan's pivotal role in attaining U.S. regional goals, President Obama's December 1, 2009, policy announcement on Afghanistan had major ramifications for Pakistan. The extent to which the Pakistani government was consulted on this issue is not clear, but the key concern in both Washington and Islamabad appears to have been that any new strategy in Afghanistan does nothing to further destabilize Pakistan. In a cautious response to President Obama's speech, Pakistan's Foreign Ministry reaffirmed Islamabad's commitment to uproot regional terrorism and further stabilize Afghanistan, and also expressed a desire to ensure that the new U.S. strategy would cause \"no adverse fallout on Pakistan.\" The Pakistani Army Chief did welcome the mis-2010 appointment of General David Petraeus to lead the U.S. military effort in Afghanistan, calling him a known quantity who \"has a full understanding of Pakistan's perspective and [who] is acutely appreciative of Pakistan's sacrifices.\"\nMany independent analysts identify problems with the U.S. Afghanistan strategy. Primary among these has been a perception that, with the announcement of a July 2011 starting date for U.S. withdrawal, the United States was confounding its allies in the region and perhaps preparing to leave them to their own devices. Pakistanis are also concerned that any expansion of the war to include more operations inside Pakistan could further destabilize an already shaky political and economic climate, and even undermine already thin public support for Pakistan's role. The U.S. government maintains pressure on Pakistan to expand its military efforts against Islamist militants in western Pakistan on the assumption that such action is needed to ensure the strategy's effectiveness. Islamabad has consistently rejected such external prodding, while also undertaking more energetic military operations. The Pakistani government has been deeply skeptical about the expansion of U.S. combat operations in Afghanistan, fearing that these would push militants across the border into Pakistan's Baluchistan province and put untenable pressure on its already taxed security forces. There is little persuasive evidence that this has occurred. Nevertheless, fears of a spillover of conflict, a possible shift of U.S.-launched drone attacks to include Pakistan's southwestern regions, and other signs of expanded U.S. operations in Pakistan leave many Pakistani observers deeply wary of U.S. policy.\nAt the same time, Islamabad is discomfited by signs that the U.S. presence in Afghanistan is not long-term and that the international community may \"abandon\" the region in ways damaging to Pakistani interests, as was seen to be the case during the 1990s. Many analysts see President Obama's explicit call for U.S. troop withdrawals to begin in July 2011 as a signal to the Pakistani (and Afghan) government and Taliban elements, alike, that the United States was most concerned with an exit strategy and may not make a long-term commitment to stabilizing the region. This could even allow the Afghan Taliban to retreat into Pakistan and wait out the American \"surge.\" According to the Pakistani foreign minister himself, \"The Administration's withdrawal date was music to the ears of the militants and terrorists.\"\nThe Obama Administration at least partially addressed these concerns by offering an \"expanded strategic partnership\" with Pakistan to include additional military, economic, and intelligence cooperation, along with assurances that the United States would remain engaged in Afghanistan and was planning no early withdrawal from that country. The Administration vows to assist Pakistan in the political, economic, and security realms, with the latter to include helping Pakistan to shift its military from a conventional posture to one oriented toward counterinsurgency.\nFor Islamabad, another key issue is the role the Washington plays in triangular relations between Pakistan, India, and the United States. India's presence in Afghanistan exacerbates Pakistani fears of encirclement. Some analysts insist that resolution of outstanding Pakistan-India disputes, especially that over Kashmir, is a prerequisite for gaining Pakistan's full cooperation in efforts to stabilize Afghanistan. Islamabad remains wary of India's diplomatic and reconstruction presence in Afghanistan, viewing it as a strategic threat to Pakistan, and is concerned that progress in the U.S.-India \"strategic partnership\" may come at serious geostrategic cost for Pakistan. President Obama did not mention India in his December 2009 speech, but the next day the U.S. Ambassador to India issued a statement saying that the core U.S. goal in Afghanistan and Pakistan is an \"aspiration we share with India,\" and declared that the United States values \"the positive role India continues to play in the region, including its significant humanitarian aid to Afghanistan.\" According to many Indian analysts, official Pakistan's unstated aims with regard to Afghanistan are to maintain a Taliban sanctuary in western Pakistan, keep Afghanistan's security forces small in size, and curtail \"natural\" India-Afghanistan links.", "When leaders from 60 countries met in London in late January 2010 to discuss Afghanistan stabilization efforts, Pakistani officials expressed a keen and largely unexpected interest in promoting Afghan peace through a mediator role in any anticipated negotiations. In fact, Islamabad had for some time been pressing the U.S. government to seek negotiation with Taliban figures. Pakistani leaders believe they could serve as effective brokers in such potential contacts. Even some Pakistani analysts contend that, until the United States develops a strategy that recognizes Pakistan's \"preeminent role\" in Afghanistan, tensions between Washington and Islamabad will persist. The Pakistani offer to mediate is controversial, given Afghans' longstanding mistrust of their eastern neighbors, yet could also prove fruitful due to Islamabad's historical links with the Taliban. Some analysts attributed the Pakistani shift to \"a combination of self-interest and fear,\" with Islamabad hoping that a future power-sharing arrangement in Kabul that includes the Taliban would be friendlier to Pakistani interests. Still, some U.S. officials responded favorably, with then-Central Command chief General Petraeus welcoming Pakistan's \"constructive involvement\" in reaching out to Afghan Taliban elements open to reconciliation.", "Many independent analysts believe that no sustainable political settlement can be reached in Afghanistan without the participation of Pakistan. The Islamabad government considers itself to be indispensible to successful peace talks in Afghanistan. In the opening months of 2010, the Afghan Taliban's top military commander and key aide to Mullah Omar, Mullah Abdul Ghani Baradar, was captured in a joint ISI-CIA operation in Karachi. Baradar's arrest, which at first appears to have been the result of happenstance rather than design, may have signaled a change in Pakistani strategy, a new willingness to pursue Afghan Taliban leaders long believed to find sanctuary on Pakistani soil, and newly intensive bilateral intelligence collaboration between the United States and Pakistan. Within days, two other Taliban \"shadow governors\" of northern Afghan provinces were captured in Pakistani cities, and a fourth senior Taliban figure arrested in the NWFP, bolstering the perception that a new Pakistani strategy was at hand. By one accounting, Pakistani authorities arrested seven of the Afghan Taliban's top fifteen leaders during the month of February. The developments served to confirm the Afghan Taliban's presence in Karachi, where a fifth notable figure—the finance minister under Taliban rule—was reported captured in March, and the new pressure may be forcing other Taliban leaders to spread out into cities across Pakistan in an effort to evade capture.\nSkeptical observers have contended that U.S. officials should not view the ISI's new moves against Afghan Taliban elements as indicative of a major strategic shift in Pakistan; they consider Pakistan's geopolitical incentives to preserve the Taliban remaining unaltered. By some accounts, Pakistani elements \"orchestrated\" the Baradar arrest to facilitate talks with \"willing\" Taliban commanders so as to pave the way for reconciliation negotiations. Cynics contend that the ISI's motives may simply have been to thwart any anticipated negotiations. Unnamed Pakistani officials even later changed their story, saying that Baradar's capture had been intentional as a means of shutting down secret peace talks he had been conducting with Kabul, talks that excluded Pakistan. Analysts also point to continuing Pakistani inaction against the Haqqani group, the LeT, and other militant anti-India elements as evidence that Pakistan's security services are continuing to manipulate and make use of Islamist extremists as part of their regional strategy. There are conflicting reports on whether or not direct access to and interrogations of Baradar have produced useful intelligence for U.S. officials.\nIn June 2010, Pakistan launched an effort to broker a reconciliation between the Kabul government and the Haqqanis, perhaps the most active and dangerous of Afghan insurgent groups. This initiative sparked concerns that Islamabad will seek to exploit the political situation—both in the region and in Washington—to create a political settlement giving Pakistan maximal influence in a post-conflict Kabul. Warming relations between Pakistan and Afghanistan are seen by some to heighten the risk that the United States will be largely omitted from a settlement arranged by Islamabad and Kabul. Senior U.S. officials have expressed skepticism about pursuit of any settlement that included a future role for Taliban elements. The British government more clearly sees Pakistan having a key role to play in brokering talks between Afghan militants and the Kabul government.\nIn October, NATO facilitated the secret travel of at least three Quetta Shura Taliban figures and a representative of the Haqqani network from Pakistan to Kabul for meetings with senior Afghan government officials. It is unclear whether Pakistani officials were included in this process; some reports indicated they were not, but others described ISI officials participating directly. Yet, in a sign that Pakistan's \"double game\" was continuing, there also were reports that the ISI was simultaneously pressuring Taliban field commanders to step up their fight against NATO forces. A State Department spokesman acknowledged that talks were taking place as part of an Afghan-led process and asserted that Pakistan \"does have a legitimate role to play in supporting this process.\"", "With roughly three-quarters of supplies for U.S. troops in Afghanistan moving either through or over Pakistan, insurgents in 2008 began more focused attempts to interdict NATO supply lines, especially near the historic Khyber Pass connecting Peshawar with Jalalabad, Afghanistan, but also to include the route from Karachi to Kandahar, which runs through Quetta and the Chaman border crossing. Such efforts have left thousands of transport and fuel trucks destroyed, and numerous Pakistani drivers dead. Near the end of 2008, the Pakistani military reported launching a major offensive in the Khyber agency aimed at securing the supply route, which was temporarily closed during the height of the fighting. Despite the Pakistani effort to secure the gateway to the Khyber Pass, sporadic interdiction attacks continue to date.\nU.S. military officials claim that attacks on supply routes have had a negligible effect on combat operations in Afghanistan, with less than 2% of the cargo moving from the Karachi port into Afghanistan being lost to \"pilferage,\" and with stockpiled supplies that could last 60-90 days in the event of a severing of the supply chain. Nevertheless, in the latter half of 2008 the U.S. military began testing alternative routes, concentrating especially on lines from Central Asia and Russia. Moscow at first would allow only non-lethal NATO supplies to Afghanistan to cross Russian territory, and later agreed to allow U.S. troops and weapons to fly into Afghanistan through Russian airspace as sought by NATO. By mid-2010, this \"northern distribution network\" was carrying well over half of NATO's total supplies (not including all military equipment). Attacks on NATO trucks have caused transportation fee rates to more than double since 2006, but using the northern distribution network is still said to cost 2.5 times as much as the Pakistan route.\nCorruption is a major factor in moving cargo through Pakistan. A June 2010 report from a House subcommittee's majority staff found extensive evidence of extortion and corruption along the supply line, especially with regard to the Chaman crossing near Quetta, where a \"Colonel Abdul Razziq,\" a local tribal chief, is said to wield \"near total control\" and demand a major share of all cargo that transits the border. Moreover, there have been suspicions that corrupt trucking contractors have actually destroyed their own vehicles.", "Ammonium nitrate (AN) is widely-used fertilizer that also has commercial uses as an explosives precursor. The great majority of improvised explosive devices (IEDs) used by Islamist insurgents fighting in Afghanistan employ AN and, since the Kabul government's January 2010 ban on the substance, nearly all AN in Afghanistan is believed to arrive through illicit transshipments from neighboring Pakistan. The U.S. government is urging Islamabad to adjust Pakistani national laws to restrict access to AN there or, short of that, to encourage Pakistani law enforcement and border security agencies to be more active and effective in efforts to prevent its movement into Afghanistan. The U.S. government's efforts to counter the growing threat of IEDs in Afghanistan fall into three main categories: (1) diplomatic initiatives; (2) law enforcement initiatives; and (3) science and technology efforts. Washington's efforts are led by the Pentagon's Joint Improvised Explosive Device Defeat Organization (JIEDDO), staff of the State Department's Special Representative for Afghanistan and Pakistan (SRAP), and staff of the Department of Homeland Security's Immigration and Customs Enforcement office.", "Over the course of 2010, Pakistan-Afghanistan relations showed multiple signs of improvement. In a public show of friendship, Prime Minister Gilani hosted Afghan President Karzai in Islamabad in March, but it is not clear if Karzai's widely suspected mission—to solicit Pakistani help in pursuing conciliatory gestures toward the Taliban—was successful, and serious policy differences appeared to remain. Bilateral relations appeared to improve following a series of mid-2010 discussions on ending the Afghan insurgency that included Pakistan's ISI chief making an unprecedented visit to Kabul. General Kayani himself also met with President Karzai in the Afghan capital. In July, the two countries inked a cross-border trade agreement after decades of on-and-off negotiations. A concrete and unprecedented sign of a changed bilateral dynamic came with news that Karzai had agreed to send a small group of Afghan military officers to train in Pakistan. By opening numerous new border crossings and providing Afghans with access to major Pakistani ports, the pact could boost bilateral trade and facilitate regional peace. Yet it does not allow Afghan truckers to transit through Pakistan to India. Still, it was warmly welcomed by Washington, where a State Department spokesman called it \"one of the most important, concrete achievements between the two countries in 45 years.\"\nIn September, President Karzai again visited Islamabad, where he and President Zardari agreed to strengthen the bilateral \"partnership\" through increased institutional engagement; greater security cooperation; expanded transit, trade and investment; and mutual infrastructure and energy development, among others. Prime Minister Gilani was in Kabul in December, at which time he and the Afghan leader reiterated their mutual intentions to further accelerate bilateral initiatives in a range of issue-areas. A resulting Joint Statement included agreement to further increase counterterrorism economic cooperation. In January 2011, the Karzai government sent a high-level \"peace delegation\" to Islamabad led by former Afghan President Burahuddin Rabbani, reportedly in an effort to reassure Pakistani leaders, including General Kayani, that the current Kabul government is friendly toward Pakistan and is ready to negotiate with the Taliban. Warming Pakistan-Afghanistan ties tend to elicit anxiety in other regional capitals, especially New Delhi and Tehran, where there are significant fears of a future Afghanistan heavily influenced by Islamabad and with Taliban elements in possession of a governance role.", "Fighting between Pakistani government security forces and religious militants intensified in 2008. Shortly after former Prime Minister Benazir Bhutto's December 2007 assassination, the Pakistan army undertook a major operation against militants in the South Waziristan agency assumed loyal to Baitullah Mehsud, who was named as a suspect in that killing. Occasionally fierce fighting continued in that area throughout 2008 and into 2009, when a full-blown ground operation was launched to take control of the region. The apparent impunity with which Mehsud was able to act caused serious alarm in Washington, where officials worried that the power and influence of his loyalists were only growing. Mehsud was killed in a mid-2009 drone attack, but his \"Pakistani Taliban\" has fought on under new leadership, while also threatening to take their fight to American shores. Analysts also continue to view Pakistan's tribal areas as being a crucial safe haven for continued Al Qaeda plotting and training. An April 2009 assessment by the FATA Secretariat calculated that conflict in the tribal areas alone has cost the Pakistani government more than $2 billion.", "The Tehrik-i-Taliban Pakistan (TTP) emerged as a coherent grouping in late 2007 under Baitullah Mehsud's leadership. This \"Pakistani Taliban\" is said to have representatives from each of Pakistan's seven tribal agencies, as well as from many of the \"settled\" districts abutting the FATA. There appears to be no reliable evidence that the TTP receives funding from external states. The group's principal aims are threefold: (1) to unite disparate pro-Taliban groups active in the FATA and KPk; (2) to assist the Afghan Taliban in its conflict across the Durand Line; and (3) to establish a Taliban-style Islamic state in Pakistan and perhaps beyond. As an umbrella group, the TTP is home to tribes and sub-tribes, some with long-held mutual antagonism. It thus suffers from factionalism. In 2008, the Islamabad government formally banned the TTP due to its involvement in a series of suicide attacks in Pakistan. After the August 2009 death of Baitullah, leadership passed to Hakimullah Mehsud (no relation). Upon the October 2009 launch of major Pakistani military operation against the TTP's South Waziristan bases, this new Mehsud was believed to directly command 5,000-10,000 militants, with the total TTP force comprised of up to 35,000 armed militants.\nMilitancy in western Pakistan is not coherent, and Taliban forces there are riven by deep-seated tribal rivalries that may prevent the TTP from ever becoming a truly unified force. Some analysts believe that, by pursuing sometimes contradictory military strategies in the region, the United States and Pakistan have missed a chance to exploit such divisions. According to this argument, U.S.-launched missile strikes have a unifying effect on the militants and so undermine the Pakistani strategy of driving a wedge between various Islamist factions. In 2009, U.S. intelligence agencies reportedly launched a major effort to examine potential fault lines within the Islamist militant groups of western Pakistan with an eye toward exploiting rifts with diplomatic and economic initiatives, a strategy associated with General Petraeus that realized successes in Iraq. Some scholars argue, however, that the Taliban is not nearly as fragmented as many believe, but rather is a decentralized organization, and that distinctions between Pakistani and Afghan networks are largely arbitrary.", "Founding TTP chief Baitullah Mehsud was apparently killed in a U.S.-launched missile strike on August 5, 2009. Later that month, militants declared that Hakimullah Mehsud, a 28-year-old with a reputation for brutality and risk-taking, would be the new TTP chief. Baitullah's elimination was seen as a major victory for both Pakistani and U.S. interests, and a psychological blow to the Pakistani Taliban. Yet it did not lead to any reduction of militancy in Pakistan, given that leading operational commanders remained active and attacks on government and civilian targets became even more common.\nBy successfully targeting the primarily anti-Pakistani government Baitullah, U.S. officials may have sought greater Pakistani action against Pakistan-based, Afghan-oriented militants such as Mullah Omar and Sirajuddin Haqqani. Baitullah's death was seen by some as presenting an opportune time to apply maximum pressure on TTP militants, but Pakistani military officials continued to defer, saying they suffered from serious equipment shortages and needed \"months\" to create the right conditions for a FATA offensive. Some U.S. officials became concerned that vital momentum was lost in the interim.", "The Pakistan army has deployed up to 150,000 regular and paramilitary troops to western Pakistan in response to the surge in militancy there. Their militant foes have employed heavy weapons in more aggressive tactics, making frontal attacks on army outposts instead of the hit-and-run skirmishes of the past. Pakistan has sent major regular army units to replace Frontier Corps soldiers in some areas near the Afghan border and has deployed elite, U.S.-trained and equipped commandos to the tribal areas.\nMajor battles with militants have concentrated on three fronts: the Swat valley (see above), and the Bajaur and South Waziristan tribal agencies. Yet all seven tribal agencies and adjacent regions have been affected by conflict. By early 2009, Taliban forces had spread their activities into the relatively peaceful Orakzai agency, the only in the FATA that does not border Afghanistan. Moreover, an unprecedented January 2009 attack on a Frontier Corps outpost in the Mohmand agency by some 600 Taliban militants represented an unusual reversal in that the militants had crossed into Pakistan from Afghanistan, signaling increased coordination by Taliban units spanning the border.\nSporadic, but sometimes major military operations in the FATA have been ongoing since 2008, with Pakistani authorities sometimes reporting significant militant casualties, although these claims cannot be corroborated. Civilians are often killed in the fighting, and millions have been forced from their homes. Nevertheless, the Pakistani military reports that many FATA tribal leaders are fully supportive of the army's efforts there. Analysts warned that the FATA would present a battlefield very different from that found in the Swat Valley. The oftentimes treacherous mountain terrain replete with caves was seen to favor the Taliban's guerilla tactics over a conventional force such as the Pakistan military.\nSome counterinsurgency experts cast doubt on the Pakistan army's ability to hold ground seized in offensive operations and predicted that militants would quickly re-infiltrate into \"cleared\" areas of the FATA. Such warnings have since appeared prescient: By mid-2010, it was apparent that Pakistani forces were facing further combat on nearly all fronts previously thought secured, as an absence of effective civilian political authority had precluded a consolidation of military gains. Pakistani military operations appear to have succeeded only in pushing militants from one agency to another while their leadership remains intact. Some American observers contend that, if Pakistan is genuinely unable to eradicate the militant safe havens there, the United States and its allies should not be prevented from doing so.", "\"Operation Sher Dil,\" launched in Bajaur in September 2008, reportedly caused the deaths of more than 1,500 militants and some 100 soldiers before Pakistani officials declared it successfully completed five months later. Still, pessimistic analysts viewed the gains from such operations as temporary and predicted that widespread militant presence in Bajaur and neighboring regions was apt to continue in the future. On this account, the pessimists were proven right.\nA new peace agreement was signed with Bajaur's tribal elders, but it appears that the bulk of militant forces repositioned themselves, and the army's heavy bombardments may have alienated large segments of the local population. Some 8,000 Pakistani troops were backed in Bajaur by helicopter gunships and ground attack jets. The Frontier Corps' top officer estimated that militant forces in the agency numbered about 2,000, including foreigners. The fighting apparently attracted militants from neighboring regions and these reinforced insurgents were able to put up surprisingly strong resistance, complete with sophisticated tactics, weapons, and communications systems, and reportedly made use of an elaborate network of tunnels in which they stockpiled weapons and ammunition. Although sporadic fighting continues in Bajaur to date, there are indications that most militant strongholds in the agency have fallen into government hands, with the strategic town of Damadola reclaimed in February 2010 and official Pakistani claims of victory in the agency a month later. Still, mid-2010 saw the TTP has issued warnings to local security forces in Bajaur to halt operation or face further attacks.", "In May 2009, President Zardari told an interviewer \"We're going to go into Waziristan ... with army operations.\" Weeks later, Pakistani security forces apparently opened a new front for offensive operations in the northwest. In mid-month, some 800 militants reportedly moved into the Bannu region abutting the two Waziristan tribal agencies, only 90 miles southwest of Peshawar. The army responded with artillery and helicopter gunship assaults on Taliban positions. Operations were then expanded into South Waziristan with multiple strikes by fixed-wing aircraft in direct response to Taliban-launched suicide attacks in Pakistani cities.\nThe KPk governor announced that the federal government was preparing to begin military operations targeting Baitullah Mehsud and his loyalists in South Waziristan, with army troops massing in surrounding areas. Within days, the troops were reported to have virtually surrounded Mehsud-controlled areas (on the Pakistani side of the international border). Islamabad ramped up pressure by posting large monetary rewards for information leading to the death or capture of Mehsud and his deputies. A military blockade of Mehsud's strongholds and weeks of near-constant airstrikes against his fighters' positions weakened Taliban forces in South Waziristan, yet the assassination of a key pro-government tribal leader there demonstrated that Mehsud remained a potent enemy able to violently suppress local opposition.\nStill, more than four months after Zardari's vow, no offensive ground operation was underway. Islamabad officials pointed to the unexpectedly large internally displaced person (IDP) problem in the region as causing the delay, but independent observers again began to doubt Pakistani determination. At the same time, the interim months also saw the Pakistan air force increasing its combat missions over the FATA, employing better surveillance to more effectively target militants while avoiding excessive civilian casualties. America-supplied F-16 aircraft figured prominently in this campaign. By early October, Pakistani officials issued statements that sufficient troops and equipment were in place for a now imminent offensive operation.\nOn October 16, 2009, after being briefed by top military officials, Pakistan's civilian leadership gave the go-ahead for about 30,000-40,000 security forces to launch their long-awaited ground offensive—code-named \"Operation Rah-e-Nijat\" or \"Path of Salvation\"—on three fronts in South Waziristan. The early days of fighting saw Pakistani forces facing heavy resistance and even some reversals. After one week, less than 100 militants were reported to have been killed. By early November, however, Pakistani troops took control of Kaniguram, a town believed to be a stronghold of Uzbek militants, as well as the Ladha Fort that had been captured by TTP forces in August 2008. About one month after the operation's start, officials were reporting that all major militant bases in South Waziristan had been cleared, although they acknowledged that thousands of militants had been able to escape into the remote surrounding terrain. Indeed, only 548 militants were said to have been killed, and another 17 captured, only a small percentage of the 8,000 or more in the region at the battle's onset. Moreover, all notable Taliban commanders appear to have escaped.\nThese militant leaders vowed to sustain a long-term guerrilla war and responded with new attacks on Pakistani cities, thus significantly eroding perceived gains by the government and military. Nevertheless, by January 2010's end, Pakistani military leaders were declaring that their forces had \"broken the back of terrorists in South Waziristan.\" While the Waziristan offensive reportedly left numerous militants and Pakistani soldiers dead, and the army in control of all of the region's main towns, the bulk of the insurgent forces appear to have retreated into other havens unscathed. Indeed, reports indicate that the Pakistani victory is not so clear cut as portrayed by military spokesmen, and that most of the militants are likely to have escaped to North Waziristan. Pakistan's army denies reports that Taliban forces have reentered previously cleared areas of South Waziristan.", "By many accounts the North Waziristan tribal agency—home to the Al Qaeda- and Taliban-allied Haqqani network and the TTP forces of Hafiz Gul Bahadar, among others—is currently the most important haven for both Afghan- and Pakistan-oriented militants. It may also represent a more threatening haven for global jihadists than did pre-2001 Afghanistan. U.S. pressure on Pakistan to clear the region of militants has been fairly consistent for at least one year. In October 2010, Joint Chiefs Chairman Admiral Mullen told an interviewer that General Kayani had \"committed to me to go into North Waziristan and to root out these terrorists.\" Days later, Secretary Clinton told an interviewer that the U.S. government was \"pressing very hard that [Pakistan] do more with their military forces, their intelligence forces\" to go after Taliban forces linked with Al Qaeda and that it is \"going to keep pressing because we think there's no way to divide this threat.\" This pressure again became evident during Admiral Mullen's December visit to Pakistan, where he expressed what he called a strong sense of \"strategic impatience\" with the Pakistani leadership.\nPakistani officials have continued to demur on requests that their military move into what many consider the \"final\" militant haven of North Waziristan, saying they need to consolidate the areas newly under their control. Pakistani military officials say a ground assault on militant positions in North Waziristan will come only after other tribal areas are secured, a process that they say will not be completed until May 2011, at the earliest. They report having some 34,000 troops in North Waziristan and suffering more than 500 combat deaths in this area alone.\nThe Pakistani army is seen by the Pentagon as unlikely to launch the kind of \"steamroller\" operation there as was undertaken in South Waziristan. In the spring of 2010, Secretary Gates described the situation as analogous to the United States being in the passenger seat and Pakistan being \"behind the wheel\"; Pakistani officials are the ones who will \"determine the direction and the speed of their operations.\" Some reports suggest that a \"clear\" operation has been underway since March. It is widely assumed that any eventual ground offensive into North Waziristan will be of limited scope, involving occasional forays from heavily fortified Pakistani army positions in the main town of Miranshah. There are concerns that a major push could again scatter militants across Pakistan and cause another backlash in the form of increased terrorism in Pakistani cities.\nIn late 2010, reports indicated that the Haqqani network was relocating to the neighboring Kurram agency, perhaps with active Pakistani government support. This movement was apparently facilitated by a deal struck with Shiite militias, who granted access to Haqqani fighters in return for their help in making peace with local Sunni tribes. Some tribal leaders in Kurram are actively resisting Haqqani group incursions into their region.", "As noted above, Islamist militant groups are active in all seven of the FATA agencies, and notable Pakistani ground operations have been undertaken against them in six (all but North Waziristan). Government forces have engaged a sporadic, but sometimes deadly campaign against Khyber agency militants; the Frontier Corp's September 2009 effort to secure the area near the strategic Khyber Pass reportedly left more than 100 militants dead. In mid-April, at least 73 civilians were killed when a Pakistani jet targeting insurgents bombed their village in a remote regional of the Khyber agency; the army issued a formal apology. Moreover, heavy militants losses have been reported in Orakzai, where pitched battles and government air strikes continue. Government troops reportedly took control of Lower Orakzai in April 2010. In June, Pakistan's army declared a \"successful conclusions of operations\" in Orakzai, where more than 700 pro-Taliban militants were reported killed in battle in May alone. Yet it appears that the army successfully cleared only limited parts of the agency, and reports indicated that the \"victory\" was a fleeting one, at best. Other areas previously declared cleared, including parts of the Mohmand agency, likewise have seen a quiet return of Taliban insurgents.", "The Pakistani military's large-scale domestic air and ground operations are unprecedented in the country's history and, for many observers, reflect a new recognition among Islamabad's civilian and military leaders, alike, that pro-Taliban militants had become a dire threat to Pakistan's security and stability. With the military successes in Malakand and Swat, a meaningful shift in public opinion supporting government counterinsurgency efforts, and the killing of Baitullah Mehsud and several other Taliban leaders, some saw reason for cautious optimism about trends in Pakistan in 2009 and 2010. Indeed, the ground offensives launched that year garnered much praise from U.S. and other Western observers; U.S. Central Command chief General David Petraeus called the counterinsurgency operations in Swat and South Waziristan \"quite impressive\" and said the tactics used would be studied for years to come. More recently, General Petraeus called Pakistan's 2010 counterinsurgency operations \"impressive\" and said he hopes to see more \"hammer and anvil\" coordination on the border.\nPakistan's security services have made tremendous sacrifices in post-2001 efforts to combat Islamist extremism. According to Pakistani military sources, the country has lost more soldiers fighting militants since 2004 (more than 2,400) than has the entire U.S.-led coalition fighting in Afghanistan since 2001. Pakistan also has deployed more troops to these operations (about 150,000) than has that coalition. Western Pakistan presents an extremely daunting landscape in which to conduct offensive military operations. Mountain warfare gives huge advantages to the defense, constraining attack and mobility options, limiting the role of artillery and air power, and obstructing resupply and reinforcement, among many other challenges. Along with this treacherous geography, the constantly morphing stew of militant groups in the region cannot be tackled without a large body of government-friendly informants, a cadre badly diminished by a relentless militant campaign to root out and execute \"spies.\"\nConcerns about the capacity of Pakistani institutions and authorities to sustain and consolidate gains persist and are centered on questions about military effectiveness and political reform. Moreover, from a U.S. perspective, there remain reasons to be skeptical about the regional strategy being pursued by Pakistani leaders. With regard to military capacity, observers note that, from the perspective of \"textbook counterinsurgency doctrine,\" Pakistan may not be able to bring to bear sufficient security forces to secure the FATA and KPk in the long term. One assessment finds a shortfall of perhaps 400,000 troops to meet the minimum force-to-population ratio called for by the doctrine. Even in the most optimistic scenario, with a major redeployment of some 250,000 troops away from the Indian border, this assessment concludes that Pakistan still has insufficient manpower to meet the standard of 20-25 troops for every 1,000 inhabitants.\nPakistan's security forces appear to remain heavily reliant on overwhelming conventional force to fight insurgents and have yet to demonstrate a meaningful ability to administer cleared areas long enough to restore normal civil governance. The Swat Valley offers an important test case of Islamabad's counterinsurgency strategy in this regard, and many experts fear that in the absence of a comprehensive, \"population-centered\" approach, the army's tactical gains in 2009 may realize little long-term benefit. There are, however, signs that the army's efforts in the Bajaur tribal agency have employed \"smarter\" counterinsurgency (COIN) strategies.\nSome analysts remain convinced that, in the absence of meaningful political reforms in conflict-affected areas, the spread of Islamist militancy in the FATA will not be halted, with one report contending that, \"the military's resort to indiscriminate force, economic blockade, and appeasement deals is only helping the Taliban cause.\" In August 2009, President Zardari announced that his government would lift a long-standing ban on political party activity in the FATA with the intention of normalizing the region's administrative structures and integrating them into Pakistan's mainstream. It would also amend the controversial Frontier Crimes Regulation. Yet, more than one year later, no meaningful action had been taken; Zardari's spokesman has said that announced reforms would only come \"when the situation improves.\" In January 2010, Islamabad announced a relief package for conflict-affected areas of the FATA, including tax concessions, rebates on duties, and utility bill waivers. The package also called for a 1% boost in the share of federal funds allocated for the KPk. The Pakistani army has attempted to undertake its own development projects in the FATA, including major road- and dam-building projects. Meanwhile, the central government announced that it would transfer administrative responsibility in South Waziristan to a group of more than 500 Mehsud tribe elders who unanimously agreed with a government proposal.\nPerhaps most importantly for U.S. interests, Pakistan's regional strategy may not yet be fully compatible with that of the U.S. or neighboring governments. As the Pakistani military continued its summer-long build-up in South Waziristan, some analysts became concerned that its commanders were setting what were, in Washington's view, overly narrow objectives in targeting Baitullah while leaving untouched other Taliban groups operating in the FATA. The army's strategy appeared to seek isolation of the Mehsud faction of the TTP by keeping other regional militant commanders on the sidelines of the battle. These primarily are Wazir tribesmen, traditional South Waziristan rivals of the Mehsuds, led by Maulvi Wazir, the North Waziristan faction under Hafiz Gul Bahadar, and the Haqqani group, also in North Waziristan, and are in some accounts considered to be \"pro-government Taliban.\" Indeed, to the extent that the Pakistani military's motives were limited to ending the Mehsud faction's ability to launch attacks inside Pakistan, they may not have sufficiently coincided with the U.S. aim of ending the region's status as an Al Qaeda safe haven from which attacks inside Afghanistan and potentially on Western/U.S. targets can be plotted and launched. Because Pakistani forces were targeting domestically-focused militants, analysts did not foresee see the offensive as being likely to benefit the U.S.-led effort in Afghanistan.", "Violence between Pakistani security forces and religious militants in northwestern Pakistan beginning in the first half of 2008 and continuing to date has driven millions of civilians from their homes and caused a humanitarian crisis of major proportions. Estimates of the total number of Internally Displaced Persons (IDPs) ranged from 1.9 million to 3.5 million at the May 2009 peak, a significant discrepancy that in part reflects the difficulty of identifying and reaching a population that is scattered in villages, remote areas, and urban environments. A U.N. report showed Pakistan having the highest number of IDPs in the world in 2009 at nearly 3.5 million, three times as many as second-place Congo. About half of the displaced have been children.\nLess than 10% of the IDPs were reported to be staying in U.N.-run camps; the remainder found haven with friends, relatives, or in \"spontaneous shelters.\" Those in camps faced extremely difficult conditions. In mid-2009, Islamabad announced that safe return to the Malakand district was possible and that the military would remain in the area to provide security until local police forces could reassemble. Some aid officials argued that returning the displaced while the security situation remained fluid could present new problems. Despite such warnings, by the end of August 2009 up to 1.6 million IDPs were reported to have returned home in the region.\nThe U.S. emergency response to Pakistan's IDP crisis was significant. In May 2009, Secretary of State Clinton announced that some $110 million in urgent U.S. humanitarian aid would flow into Pakistan, to include relief kits, tents, radios, and generators to provide light and water, along with many thousands of tons of wheat and other basic foodstuffs. Ambassador Holbrooke later vowed an additional $200 million in urgent assistance to address the problem. As of April 2010, USAID had provided about $430 million in related humanitarian relief funds in FY2008-FY2010 to date, much of this in the form of emergency food aid channeled through the World Food Program. Despite this American largesse, the United Nations has warned that a severe lack of funds is hampering regional relief programs.\nPakistan's IDP refugee crisis provided the U.S. government with an opportunity to demonstrate its professed humanitarian concerns for the Pakistani people and so perhaps reverse widespread public hostility toward the United States. Yet Islamist charities have been active in the relief effort and by some accounts are using the opportunity to forward an anti-Western agenda, potentially turning public sentiment against Islamabad's cooperation with the United States. Such a tack is facilitated by the near-total absence of an overt U.S. \"footprint\" due to still-pervasive anti-American sentiments, despite America's status as the leading contributor of international relief funds. Sensitive to being too closely associated with an unpopular ally, Pakistani authorities reportedly have not allowed American aid workers or aircraft to distribute humanitarian aid at IDP camps, thus denying potential public diplomacy gains and leaving open a space in which extremist groups such as the banned Jamaat-ud-Dawa (JuD, now operating as Falah-i-Insaniat) could influence opinion without \"competition.\"\nJoint Chiefs Chairman Admiral Mullen lauded the Pakistani army for learning from previous failed campaigns against the Taliban and for dealing effectively with the problem of IDPs. Yet poor civil-military coordination appears to have hindered humanitarian relief efforts. Numerous independent analysts strongly urged the Islamabad government and the international community to ensure that relief and reconstruction efforts are overseen by civilian authorities so as to best empower displaced communities in determining their own needs and priorities.", "The Inter-Services Intelligence Directorate (ISI) is Pakistan's main intelligence agency. Close U.S. links with the ISI date back at least to the 1980s, when American and Pakistani intelligence officers oversaw cooperative efforts to train and supply Afghan \"freedom fighters\" who were battling the Soviet Army. Yet mutual mistrust has been ever-present and, in 2008, long-standing doubts about the activities and aims of the ISI compounded. Some analysts label the ISI a \"rogue\" agency driven by Islamist ideology that can and does act beyond the operational control of its nominal administrators. Yet most conclude that the ISI, while sometimes willing to \"push the envelope\" in pursuing Pakistan's perceived regional interests, is a disciplined organization that obeys the orders of its commanders in the Pakistani military.\nU.S. officials repeatedly have fingered the ISI for actively supporting the Afghan Taliban with money, supplies, and planning guidance. There appears to be an ongoing conviction among U.S. officials that the Afghan Taliban's sanctuaries in Pakistan have allowed them to sustain their insurgency and that elements of the ISI have continued to support them. Accusations of ongoing ISI links with and potentially active support of Islamist militant groups are abundant and include the following:\nA 2002 statement by the then-British foreign secretary noted the British government's acceptance of \"a clear link\" between the ISI and Pakistan-based terrorist groups including the LeT, JeM, and Harakat Mujahideen. A former French counterterrorism judge has claimed that the Pakistani government once ran training camps for the LeT with the CIA's knowledge. He contends the two intelligence agencies had an agreement that Pakistan would not allow foreign militants to train at an LeT camp \"run by the Pakistani military.\" The Afghan government claims to have evidence of ISI complicity in both an April 2008 assassination attempt on President Karzai and in the July 2008 bombing of India's Kabul Embassy. New Delhi joined Kabul in accusing the ISI of involvement in the latter attack. The top Afghan intelligence official reported to his government in 2009 that the ISI provides material support to Taliban commanders based in Quetta. A book by a senior New York Times reporter cited a May 2008 U.S. signals intelligence intercept in which Pakistan's Army Chief allegedly referred to terrorist leader Jalaluddin Haqqani as a \"strategic asset.\" In early 2009, Secretary of Defense Gates told an Afghan interviewer that \"the ISI's contacts with some of these extremist groups [such as those led by Hekmatyar, Haqqani, and others] are a real concern for us.\" During the same period, coinciding with the public release of the newly seated Obama Administration's regional strategy, senior U.S. military officers issued other accusations of ongoing ISI support the regional militants. In September 2009, the then-top U.S. commander in Afghanistan, General Stanley McChrystal, accused ISI elements of materially aiding insurgent groups that attack coalition forces in Afghanistan. A 2010 book by investigative journalist Bob Woodward makes the unsourced claim that the CIA \"received reliable intelligence that the ISI was involved in the training for [the November 2008 terrorist attack on] Mumbai.\" A retired senior Canadian diplomat who spent six years working in Afghanistan, testifying before an Ottawa parliamentary committee in 2010, stated that the Taliban would already have been conclusively defeated if not for ongoing support from Pakistan's intelligence agencies. A 2010 report based on extensive interviews with current and former Taliban commanders concluded that the ISI \"orchestrates, sustains, and strongly influences the [Taliban] movement,\" and that ISI officials are at times physically present, as participants or observers, at the Taliban's supreme leadership council sessions. In October 2010, a Pentagon spokesman expressed U.S. concerns about the ISI's \"strategic focus,\" saying some of its interaction with insurgents \"may be seen as supporting terrorist groups.\"\nEven some retired, U.S.-trained Pakistani military officers are suspected of continuing to recruit, train, and finance Islamist insurgents. One, known as \"Colonel Imam,\" was among those believed to have served as a \"quasi-official bridge\" to Taliban leaders.\nIn 2008, a top U.S. intelligence official reportedly presented evidence to Pakistani officials that ISI agents were providing assistance to militant elements who undertake attacks in Afghanistan. Specifically mentioned was an alleged relationship between ISI agents and members of the Haqqani network believed based in the FATA and named as responsible the Kabul embassy bombing. U.S. counterterrorism officials do not appear to believe that senior Pakistani leaders have sanctioned aid to the Haqqani network, but suspect that local and retired ISI operatives are complicit. Islamabad angrily rejected such reports as \"baseless and malicious,\" but the federal information minister did concede that some individuals within ISI \"probably\" remain \"ideologically sympathetic to the Taliban\" and act out of synch with government policy. In 2010, Afghan officials were again accusing the ISI of lethal malfeasance inside their country, this time involving a May suicide bombing in Kabul that killed six NATO soldiers.\nIn September 2008, the Islamabad government named a new ISI chief, Lieutenant General Ahmed Shuja Pasha, who had served as director general of military operations since 2005. Pasha, said to be close with General Kayani, is identified as a professional soldier who takes the threat of Islamist extremism seriously. Although little is known about this intelligence chief, his appointment was met with cautious optimism by the Bush Administration. Later that year, the civilian government disbanded the ISI's political wing, which was widely suspected of manipulating domestic political outcomes over a period of decades. Foreign Minister Qureshi said the move would free the ISI to concentrate on counterterrorism efforts. In March 2010, General Kayani granted an unusual one-year extension to General Pasha's term under \"compulsory retainment.\"\nPakistani officials repeatedly provide assurances that no elements of the ISI are cooperating with militants or extremists. In May 2009, a State Department spokesman indicated that the United States takes such officials \"at their word,\" but U.S. suspicions about the ISI have not receded. A late 2009 Los Angeles Times report indicated that the ISI's cooperation with U.S. intelligence agencies has been instrumental in the capture or killing of numerous militant fugitives, and that covert U.S. rewards for such assistance is valued in the hundreds of millions of dollars, accounting for as much as one-third of the entire ISI budget. According to this report, despite holding deep misgivings about the ISI, U.S. intelligence officials recognize no alternative but to work with them.", "Over the past one or two years, Pakistani public sentiments toward both Islamist militancy and the United States appear to have grown measurably less favorable. During the first several months of 2009, the FATA-based Taliban launched numerous suicide bombings and other terrorist attacks across Pakistan in retaliation for the army operations against their allies in Swat. They took responsibility for multiple bomb explosions and warned people to evacuate several large cities, saying major attacks would be forthcoming. Taliban militants and their allies had been terrorizing the people of western Pakistan for some time before 2009, but they may have gone one step too far by quickly violating the Swat accord with incursions into neighboring districts. Moreover, in April 2009, video footage of Taliban militants in Swat flogging a teenaged girl accused of having an affair was widely viewed on television and the internet, and contributed to turning public sentiment against the extremists. Available evidence now strongly indicates a major shift in Pakistani public attitudes toward religious militancy and extremism has occurred, with a majority of citizens now supporting military operations that were only recently and for many years seen to have come only at the behest and in the interests of the United States.\nAnti-American sentiments and xenophobic conspiracy theories remain rife among ordinary Pakistanis, however. A Pew Research Center survey released in June 2010 showed only 17% of Pakistanis holding a favorable opinion of the United States, as low a percentage as in any of the 22 countries surveyed, and roughly the same as in the three previous years. Many across the spectrum of Pakistani society express anger at U.S. global foreign policy, in particular when such policy is perceived to be unfriendly or hostile to the Muslim world (as in, for example, Palestine, Afghanistan, and Iraq). Some popular, mainstream Pakistani TV talk-show hosts routinely promote anti-American conspiracy theories, call for more Islamist-influenced governance, and bash religious and ethnic minorities. Pakistan's Urdu-language press is much more widely read than are English-language sources, and the Urdu press is much more willing to convey exaggerated and/or distorted views on both the United States and India, including conspiracy theories only tenuously linked to facts. In late 2009, the U.S. Embassy in Islamabad began issuing statements to immediately and directly counter false or misleading information about American foreign policy in the Pakistani media.\nAllegations of U.S. malfeasance inside Pakistan abound. The alleged presence of thousands of American security contractors in Pakistan is a key focal point of the paranoia. Fears that private contractors were pouring into Pakistan has added to the growing sense that a larger American footprint has potentially sinister aspects. U.S. plans to significantly expand its embassy compound in Islamabad only fuel theories among Pakistanis convinced that Americans are seeking to dominate their country. A November 2009 U.S. press report claimed that employees of the private security contractor Blackwater—now called Xe Services—work closely with U.S. Special Operations anti-terrorism missions on Pakistani soil, by at least one account in a Pentagon effort to bypass congressional oversight. While in Pakistan in January 2010, Secretary of Defense Gates made a statement inadvertently fueling rumors of Blackwater's presence there; Pentagon clarifications did not fully repair the damage. Pakistan's Islamist politicians commonly blame Blackwater—as a representation of covert U.S. operations inside Pakistan—as actively fomenting terrorism in their country.", "", "Long-standing worries that American citizens were being recruited and employed in Islamist terrorism by Pakistan-based elements have become more concrete in recent months. In May 2010, a naturalized U.S. citizen of Pakistani origin, Faisal Shahzad, was arrested on charges related to the attempted detonation of a large, but crudely-constructed car bomb in New York City on May 1. The Pakistani Taliban claimed responsibility for the attempted bombing, calling it an act of vengeance for the killing of two Iraqi Al Qaeda leaders in April, but later withdrew the claim and denied even knowing the suspect. Shahzad himself confessed to having received bomb-making training in \"Waziristan,\" although later reports indicate the training took place in the nearby Mohmand tribal agency. He also told investigators he drew inspiration from radical Muslim cleric Anwar al-Awlaki, a Yemeni-American fugitive believed hiding in Yemen. Eight days after Shahzad's arrest, Attorney General Eric Holder Jr. said investigators had \"developed evidence that shows the Pakistani Taliban was behind the attack.\" Shahzad was indicted by a federal grand jury in June, then four days later pled guilty to ten criminal charges related to the bombing attempt. In October, he received a mandatory life sentence.\nPakistani authorities made numerous arrests and detentions in connection with the Times Square case. These include an unnamed man believed connected with the TTP who claims to have aided Shahzad in traveling to the FATA; the owner of an Islamabad catering company that organized events for American diplomats; an Islamabad computer business owner suspected of providing Shahzad with up to $15,000 to finance the attack; and a Pakistan army major said to have had cellphone contact with Shahzad just before the attempted bombing. A senior Pakistani official said another among those detained in Pakistan was Mohammed Rehan, identified as head of the Peshawar branch of the Pakistan-based Jaish-e-Mohammed (JeM) terrorist group, who allegedly traveled to Peshawar with Shahzad in July 2009. Pakistani authorities claim to have received confessions from three Pakistani businessmen admitting to providing financial and other assistance to Shahzad. Meanwhile, the FBI has pursued leads that individuals in Massachusetts and Maine may have helped Shahzad with financing.", "In December 2009, federal prosecutors charged David Coleman Headley, a Chicagoan convert to Islam, with traveling to Mumbai five times from 2006 to 2008 as scout for the 2008 Mumbai terrorist attack by the Pakistan-based Lashkar-e-Taiba (LeT) terrorist group; he subsequently pleaded guilty to the charges. Headley's case is perhaps the first in which a former Pakistani military officer has been directly linked to terrorism suspects in the United States. Headley and another Pakistan-born Chicagoan, Tahawwur Rana, are suspected of having reported to Abdur Rehman, a retired Pakistani major suspected of being an LeT contact. Headley also interacted with Ilayas Kashmiri, a possible former Pakistani special forces commando with close ties to Al Qaeda. Kashmiri was subsequently indicted by a federal court for abetting a plot to attack the offices of a Danish newspaper that had published cartoon depictions of the Prophet Mohammed. The Indian government energetically petitioned Washington for direct access to Headley as part of its own investigative efforts. Such access was granted with an extensive interrogation in June; afterward Indian officials said the information gleaned established an official Pakistani role in the attack.\nJust days after Headley was charged, Pakistani authorities arrested five young American men reported missing from their homes in northern Virginia. The men's families had contacted the FBI, fearing they were intent on joining jihadi groups inside Pakistan. The Muslim men are believed to have had extensive coded email contacts with a Taliban recruiter and with the chief of an Al Qaeda-linked Pakistani terrorist group, the Harakat-ul-Jihad-al-Islami (HuJI). A Pakistani judge barred their deportation back to the United States, and the police chief in Sargodha, the city of their arrest, stated that the Taliban intended to use the men to carry out attacks inside Pakistan. The men deny this and claimed to only be seeking to \"help the helpless Muslims.\" In March, the court charged the five with financing and plotting terrorist attacks. In June 2010, the so-called Virginia Five were sentenced to ten years of labor in prison by a Sargodha court for conspiring against the Pakistani state and helping to finance a militant organization. The conviction came surprisingly quickly for Pakistan's weak and slow-moving criminal justice system.\nThe case of would-be terrorist bomber Najibullah Zazi—an Afghan national and legal U.S. resident arrested in September 2009 after months of FBI surveillance—seemed to demonstrate that terrorist training camps continue to operate in the FATA, where Zazi is said to have learned bomb-making skills at an Al Qaeda-run compound. In July 2010, the Justice Department unsealed new terrorism-related charges against Zazi and four other men who allegedly had plans to bomb the New York subways under the direction of Al Qaeda leaders based in Pakistan. Among the others was Tariq ur Rehman, a Pakistani-American.\nOther Americans have received terrorist training in western Pakistan, including Bryant Neal Vinas, who was in the region in 2008 and later confessed to plotting a bomb attack against the Long Island Railroad in New York. After traveling to Lahore, Mohmand, North Waziristan, and Peshawar, Vinas reportedly became a full-fledged member of Al Qaeda. In 2009, he pleaded guilty to all charges against him, including receiving military-type training from a foreign terrorist organization. In June 2010, a Pakistani-American man was sentenced to 15 years in prison by a New York court for conspiring to provide material support to terrorists. Syed Hashmi, who loaned money to an Al Qaeda operative in London in 2004-2006, was found by the judge to have been a \"knowing and willing Al Qaeda supporter.\" Most recently, in October 2010, federal law enforcement agents arrested a Pakistani-American Virginia man on charges that he was plotting a series of bomb attacks on the Washington Metro system.", "Senior U.S. government officials have recognized increasing evidence of links between Pakistan, terrorism, and U.S. nationals. In the period immediately after the failed car bomb attack in Times Square, President Obama allegedly determined that militant safe havens would no longer be tolerated, telling his lieutenants that \"We need to make clear to people that the cancer is in Pakistan.\" When asked in May if, even in light of the Times Square bombing attempt, she was \"comfortable with the cooperation\" from Pakistan, Secretary Clinton replied,\nWell, no, I didn't say that. I said that we've gotten more cooperation and it's been a real sea change in the commitment we've seen from the Pakistani government. We want more. We expect more. We've made it very clear that if, heaven forbid, an attack like this that we can trace back to Pakistan were to have been successful, there would be very severe consequences.\nSuch stern warnings from senior U.S. officials in the wake of the Times Square incident are considered a departure from the more gentle prodding Pakistani leaders received from the Administration in the past, and the episode has served to highlight persistent mistrust that clouds the bilateral relationship. Also in May, President Obama dispatched his national security advisor and CIA director to Pakistan, reportedly to press officials there for more aggressive military action in the tribal areas. Centcom commander General Petraeus has opined that, by further illuminating the extremist threat, the failed Times Square bombing attempt could actually serve to strengthen the U.S.-Pakistan relationship.\nA successful terrorist strike inside the United States that is traced back to Pakistani sources is apt to lead to more direct U.S. military intervention in that country. The Pentagon reportedly has stepped up reviews of options for a unilateral strike in Pakistan under \"extreme circumstances\" such as a catastrophic attack. Such an effort would likely rely on air and missile strikes, but could also involve small Special Forces units already positioned near the border in Afghanistan.", "The spread of Islamist militancy in Pakistan has elicited acute U.S. government attention, multiple high-level visits, and increasingly large amounts of security-related assistance. The New York Times reported that, during President G.W. Bush's second term, the U.S. military used secret authority to carry out covert attacks against Al Qaeda and other militants in several countries, including Pakistan. Then-President Musharraf rejected suggestions that U.S. troops could be more effective than Pakistanis in battling militants, saying a direct U.S. military presence in Pakistan was neither necessary nor acceptable. Upon assuming the presidency, Asif Zardari warned that Pakistan \"will not tolerate the violation of [its] sovereignty and territorial integrity by any power in the name of combating terrorism.\" He, too, insisted that, with the provision of U.S. intelligence, Pakistani forces are better suited to combating terrorists in the border region. In mid-2009, it was reported that the CIA had recently halted a program to insert Special Forces teams into Pakistan (and other countries) to capture or kill top Al Qaeda leaders. The plans, which were never operational, reportedly had been kept secret from Congress for nearly eight years on the orders of former Vice President Dick Cheney.\nPast U.S. military incursions into Pakistan (see below) put tremendous pressure on both Islamabad's civilian government and on the country's military. Pakistan's Ambassador to the United States warned that such attacks are counterproductive to the extent that they turn Pakistani public opinion against the counterterrorism effort. A line of argument exists that U.S. efforts to strengthen the civilian government in Islamabad and improve the U.S. image in Pakistan suffer major setbacks with even one occurrence of Western airstrikes on Pakistani territory, and may ultimately be rendered futile by continued drone strikes on Pakistani territory.", "In the face of \"red lines\" precluding direct U.S. military operations inside Pakistan, American policy has concentrated on improving intelligence collection and sharing among U.S., Pakistani, and Afghan services, and on bolstering the Pakistani military's own counterinsurgency capabilities. Forums for these efforts include an institutionalized defense consultative body and a formal defense working group, a dedicated U.S. counterinsurgency assistance fund, border coordination centers near the Pakistan-Afghanistan border, U.S.-provided training for Pakistani security forces, and joint intelligence operations. The U.S. government also apparently has funded covert \"Counterterrorism Pursuit Teams,\" a 3,000-man Afghan paramilitary force reportedly designed as an \"elite\" unit to pursue\" highly sensitive covert operations into Pakistan.\" Islamabad denies the existence of such a force.\nIn 2003, a U.S.-Pakistan-Afghanistan Tripartite Commission was established to bring together military commanders for regular discussions on Afghan stability and border security. Officers from NATO's International Security Assistance Force in Afghanistan have since joined the body, which met for the 32 nd time in December 2010. The United States has built coordination and intelligence-sharing centers on the Afghan side of the shared border. Three such Border Coordination Centers (BCCs) are operating and more are being considered. In October 2010, Pakistan for the first time provided senior officers at the BCCs to join those from Afghanistan and the United States.\nHundreds of millions of dollars of U.S. aid has been devoted to training and equipping thousands of paramilitary Frontier Corps (FC) troops who operate in Pakistan's two western provinces. A task force of U.S. military advisors and technical specialists has been working in Pakistan since the summer of 2008; by mid-2010, their numbers had grown to about 200. The American soldiers are reported to be joining their Pakistani trainees in the field for the \"hold and build\" phases of their domestic counterinsurgency operations. Other reports say that U.S. Special Operations Forces join Pakistani troops on aid projects. Plans to establish new training centers near the Afghan border suggest that the number of U.S. Special Forces trainers is likely to increase.\nJoint CIA-ISI operations reportedly became more common in 2010, even as the two organizations continue to have sometimes conflicting goals; one report had the lead American and Pakistani intelligence agencies carrying out 63 joint operations for the year ending in mid-April 2010. Moreover, in 2009, the Obama Administration reportedly launched a clandestine effort in Pakistan and Afghanistan to prevent Taliban forces from using FM radio transmissions and the internet to intimidate civilians and plan attacks, by jamming or otherwise blocking such communication channels.\nU.S. and Pakistani military forces continue to improve their coordination and intelligence sharing efforts, perhaps reflecting a greater willingness by Pakistan to combat militants on its territory. Pakistani officers are now allowed to view video feeds from unmanned American drones and to access U.S. intercepts of militants' communications. Yet some reporting has been less encouraging and suggests that progress on cooperation and coordination is hampered by language barriers, tensions between Pakistani and Afghan officials, and pervasive mistrust among the U.S., Pakistani, and Afghan militaries. For example, the $3 million BCC at Torkham opened in March 2008, but operations were long delayed by logistical problems and political wrangling. During the period, the number of insurgent attacks in the region increased sharply, reportedly delaying construction of a second BCC to the southeast.", "In June 2008, Pakistani paramilitary troops were caught in a firefight between Taliban militants and U.S.-led coalition forces at the Pakistan-Afghanistan border in the Mohmand tribal agency. U.S. air assets, apparently targeting insurgents, delivered 12 gravity bombs on Pakistani territory, killing 11 Frontier Corps soldiers. Islamabad strongly condemned the airstrike, calling it \"unprovoked\" and \"a gross violation of the international border.\" A Pakistani military statement called the airstrike \"cowardly,\" and some in Pakistan believed the country's troops were intentionally targeted. The Bush Administration expressed regret for the deaths of Pakistani soldiers, but the incident served to inflame already sensitive bilateral ties.\nTwo months later, U.S. special forces troops staged a helicopter raid in a South Waziristan village; at least 20 people were reported killed, women and children among them. The Pakistani government condemned the \"completely unprovoked act of killing\" and lodged formal protests with the U.S. Embassy for the \"gross violation of Pakistan's territory.\" Both chambers of Parliament issued unanimous resolutions condemning the \"cowardly\" attack. In a strongly-worded statement, Pakistan's army chief, \"The sovereignty and territorial integrity of the country will be defended at all cost and no external force is allowed to conduct operations inside Pakistan.... There is no question of any agreement or understanding with the Coalition Forces whereby they are allowed to conduct operations on our side of the border.\" Plans for further U.S. ground incursions reportedly were suspended to allow the Pakistani military to press its own attacks, although some observers say the Pentagon had underestimated the strength of the Pakistani response to cross-border raids. The backlash may have caused U.S. officials to focus on an intensified missile strike campaign.", "In September 2010, NATO helicopters reportedly entered Pakistani airspace after a NATO outpost near the border came under attack from militants on the Pakistani side. In ensuing combat, some 55 suspected Haqqani network insurgents were reported killed inside Pakistan. Islamabad reacted angrily, calling the incident \"a clear violation and breach of the UN mandate.\" Pentagon officials attributed the incident to \"communication breakdowns\" that prevented local commanders from contacting their Pakistani counterparts until after the combat had ended. Only two days later, the Pakistan army reported that two NATO helicopters crossed into Kurram agency airspace and attacked a Frontier Corps outpost 200 meters from the border, killing at least two Pakistanis. A NATO spokesman said the helicopters were dispatched after ground troops in Afghanistan's Paktia province determined that a mortar attack from the Pakistani side was imminent. U.S. officials later extended a \"deepest apology\" over the incident, saying that warning shots had been mistaken for hostile fire. Within hours of the incident, Pakistan ordered the Torkham border crossing closed and, despite U.S. expressions of regret, it remained closed for ten days.", "", "Missile strikes in Pakistan launched by armed American Predator and Reaper unmanned aerial vehicles (UAVs) have been a controversial, but sometimes effective tactic against Islamist militants in remote regions of western Pakistan. Pakistani press reports suggest that such drones \"violate Pakistani airspace\" on a daily basis, and there appear to have been 169 separate U.S.-launched drone attacks on Pakistani territory since President Obama took office through December 2010. The year 2010 alone saw more such strikes (118) than were reported for the previous six years combined (96), for an average of more than two attacks each week. More than 90% of the strikes have taken place in the two Waziristan agencies, with more than half in North Waziristan alone. Attacks on Haqqani network targets in that region were accelerated in the latter half of 2010. According to one extensive assessment, the strikes have caused roughly 1,750 deaths since 2004, including perhaps 1,325 militants among these, for a civilian fatality rate of approximately one-quarter. However, internal U.S. intelligence estimates reportedly claim a civilian death rate of only 5%, and other estimates vary widely. New levels of coordination and common strategizing between the United States and Pakistan apparently have led to much more accurate strikes from the summer of 2009 and correspondingly fewer civilian casualties.\nAt least three Predators reportedly are deployed at a secret Pakistani airbase and can be operated by the U.S. Central Intelligence Agency without specific permission from the Islamabad government. However, most strikes on Pakistan-Afghanistan border region are said to be launched from an air base in Jalalabad, Afghanistan, although the base at Shamsi, Pakistan, is still in use. While the assembly and fitting of ordinance previously was performed by CIA employees, these tasks reportedly are more recently being performed by contractors from Blackwater/Xe.\nBy some accounts, U.S. officials reached a quiet January 2008 understanding with then-President Musharraf to allow for increased employment of U.S. aerial surveillance and UAV strikes on Pakistani territory. Musharraf's successor, President Zardari, may even have struck a secret accord with U.S. officials involving better bilateral coordination for UAV attacks and a jointly approved target list. Reports citing unnamed senior officials from both countries have claimed that a tacit agreement on drone attacks was reached in September 2008; these reports are officially denied by Islamabad. Nevertheless, Secretary of Defense Gates has assured Congress that the U.S. intent to continue with such strikes was conveyed to the Pakistani government.\nIn February 2009, the CIA for the first time publically acknowledged the drone campaign it is widely believed to oversee in Pakistan when the Agency's new director, Leon Panetta, said the effort had been successful and would continue. During the latter half of 2009, Obama administration officials reportedly considered expanding drone attacks on western Pakistan as an alternative to escalating U.S. troop levels in Afghanistan; the White House later authorized such an expansion, a move opposed by Islamabad. Still, there was no indication that such strikes would be made in the Baluchistan province, something President Obama himself reportedly believes would be risky and unwise. Yet, in late 2010, Washington again sought Islamabad's permission to expand drone strikes into the Quetta area. Such requests are consistently rebuffed.\nThe accelerated UAV-launched missile campaign in western Pakistan appears to have taken a significant toll on Al Qaeda and other Islamist extremist militants. Centcom Commander General Petraeus claims that such strikes are \"extremely important.\" According to Pakistani intelligence officials, who reportedly are now providing targeting information to the United States, drone attacks have eliminated more than half of the top 20 Al Qaeda \"high-value targets\" in western Pakistan since mid-2008. Even a self-described \"Taliban logistics tactician\" conceded that the tactic has been \"very effective.\" Yet, despite an intensive campaign to destroy Haqqani Network targets in North Waziristan in 2010, the impact has been moderate, and the militants remain a major obstacle to progress in Afghanistan. Moreover, as the drone strikes in the FATA have intensified, so too has the rate of assassinations of suspected spies in the region. By one accounting, some 70 ISI informants have been killed in North Waziristan alone since 2004.\nIn the spring of 2009, the U.S. military said that Pakistan was for the first time being given a broad array of noncombat surveillance information, including real-time video feeds, collected by American UAVs, but they denied a Los Angeles Times report that Pakistan had been offered joint control of armed drones. The Pakistani government also denied any agreement on joint control. The limited intelligence-sharing program is said to be part of a bilateral trust-building effort. While in Pakistan in January 2010, Secretary of Defense Gates made the unprecedented offer to Pakistan of a dozen \"Shadow\" surveillance UAVs. Although smaller than the Predator and unarmed, the Shadows would significantly boost Pakistan's aerial surveillance capabilities and are seen as a compromise offer aimed at placating Pakistani political leaders who face a suspicious and anti-American public. The Pentagon originally had aimed to deliver the Shadows or alternative unarmed drones by early 2011, yet, more than a year after Secretary Gates first offered to supply them, the offer remains in suspension, with Pakistani officials reportedly complaining that quoted prices are too high and the delivery schedule too long.", "President Zardari had called on then-President-Elect Obama to re-assess the Bush Administration policy of employing aerial attacks on Pakistani territory. Yet dual Predator strikes took place just days after President Obama took office. Officially, Pakistan's Foreign Ministry calls drone attacks \"destabilizing\" and \"helping the terrorists.\" Strident Pakistani government reaction has in the past included summoning the U.S. Ambassador to lodge strong protest, and condemning missile attacks that Islamabad believes \"undermine public support for the government's counterterrorism efforts\" and should be \"stopped immediately.\" In 2009, Pakistan's defense minister warned a visiting General Petraeus that the strikes were creating \"bad blood\" and contributing to anti-American outrage among ordinary Pakistanis. The Islamabad government has asked for full Pakistani control of UAVs over Pakistani territory.\nA 2010 opinion survey taken in the KPk and FATA found nearly three in five respondents saying drone strikes in the region were \"never justified,\" with less than 30% offering qualified or full support for the tactic. Yet, in other accounts, drone strikes actually have broad support among local residents as a successful and relatively limited counterterrorism tool, and media reports of civilian casualties are said to be of dubious credibility.\nUnited Nations officials have called for an end to drone strikes on human rights grounds, and even some CIA drone operators are reported to believe the program is a major boon to Al Qaeda recruitment efforts in the region. Indeed, there exists an ongoing and vigorous debate over whether drone attacks create more extremists than they eliminate. Some critics suggest that its managers use the secrecy surrounding the effort to hide abuses and sometimes significant civilian casualties. Increased anti-Americanism is identified as one result of drone strikes, as is a corresponding increase in support for the Taliban. By angering American Muslims, some assert that the tactic is even fomenting homegrown militancy in the United States.\nCritics contend that the many perceived costs of drone strikes outweigh any short-term benefits accrued. Civilian deaths, the undermining of Pakistani government authority, resentments that fuel militant recruitment, and concerns that the United States is violating international law are among the downsides outlined by such critics. The secrecy surrounding the program has also caused some analysts to complain about a lack of accountability and that international laws are being violated. One called the drone campaign a largely ineffective and merely tactical response to a serious long-term problem. Moreover, as alleged wrongful actions, the strikes could also lead to legal action against their perpetrators: In November 2010, a North Waziristan man announced that he planned to sue the CIA for the \"wrongful death\" of two relatives.\nThe State Department has pushed back against accusations that the strikes represent a form of \"unlawful extrajudicial killing\" by citing domestic and international laws allowing for national self-defense. In March 2010, the Department's legal advisor laid out a legal rationale for drone strikes, saying the U.S. \"armed conflict\" with Al Qaeda and the Taliban allows for \"use of force consistent with its right to self-defense under international law.\" This view has been echoed by other Administration counterterrorism officials, as well as by senior figures in Congress.", "Three full-scale wars—in 1947-1948, 1965, and 1971—and a constant state of military preparedness on both sides of their mutual border have marked six decades of bitter rivalry between Pakistan and India. The acrimonious partition of British India into two successor states in 1947 and the unresolved issue of Kashmiri sovereignty have been major sources of tension. Both countries have built large defense establishments at significant cost to economic and social development. The Kashmir problem is rooted in claims by both countries to the former princely state, divided since 1948 by a military Line of Control (LOC) into the Indian state of Jammu and Kashmir and Pakistan-held Azad [Free] Kashmir. India blames Pakistan for supporting a violent separatist rebellion in the Muslim-dominated Kashmir Valley that has taken up to 66,000 lives since 1989. Pakistan admits only to lending moral and political support to the rebels, and it criticizes India for human rights abuses in \"Indian-occupied Kashmir.\"\nA major factor in U.S. interest in South Asia is the ongoing tension between Pakistan and India rooted largely in competing claims to the Kashmir region and in \"cross-border terrorism\" in both Kashmir and major Indian cities. In the interests of regional stability, the United States strongly endorses an existing, but recently moribund India-Pakistan peace initiative, and it remains concerned about the potential for conflict over Kashmiri sovereignty to cause open hostilities between these two nuclear-armed countries. Most observers assert that U.S. success in Afghanistan is to a significant degree dependent on improved India-Pakistan relations, the logic being that Pakistan will need to feel more secure vis-à-vis a perceived existential threat on its eastern front in order to shift its attention and military resources more toward the west. Some in Pakistan believe that, by feeding their country's insecurities, the increasingly warm U.S.-India relationship actually foments regional instability.", "A bilateral Composite Dialogue reengaged in 2004 has realized some modest, but still meaningful successes, including a formal cease-fire along the entire shared frontier, and some unprecedented trade and people-to-people contacts across the Kashmiri Line of Control (LOC). As per Islamabad's and New Delhi's intent, the dialogue is meant to bring about \"peaceful settlement of all bilateral issues, including Jammu and Kashmir, to the satisfaction of both sides.\" Yet 2008 saw significant deterioration in Pakistan-India relations, especially following the large-scale November terrorist attack on Mumbai, India, that left some 165 civilians dead. More broadly, militarized territorial disputes over Kashmir, the Siachen Glacier, and the Sir Creek remain unresolved, and Pakistani officials regularly express unhappiness that more substantive progress, especially on the \"core issue\" of Kashmir, is not occurring. Pakistani leaders maintain that the absence of substantive bilateral dialogue only favors extremists in both countries. The Obama Administration continues to refrain from taking any direct role in the bilateral dispute, and Indian leaders see no need for third-party involvement, in any case.\nIn February 2010, India proposed new high-level talks with Pakistan, inviting Foreign Secretary Salman Bashir to New Delhi. Pakistani observers variously attributed the Indian move to an apparent failure of coercive diplomacy, to U.S. pressure, and to new talk of Western reconciliation with the Afghan Taliban, which could leave India in a disadvantageous position vis-à-vis Kabul. From the Indian perspective, New Delhi's leaders were compelled by the desire to offer Islamabad tangible benefits for cooperating, and by a perceived need for greater flexibility in the case of a future terrorists attack traced to Pakistan. Pakistan accepted the Indian offer, saying it would raise \"all core issues\" at the talks and urge India to resolve them quickly. New Delhi responded by asserting that the Composite Dialogue remained in suspension and that, while all subjects could be raised at the impending meeting, India would focus only on terrorism. Following the meeting, which ended with no agreements, Bashir called it \"unfair, unrealistic, and counterproductive\" for India to have focused solely on the terrorism issue, saying the Kashmir dispute remained the \"core issue\" and calling for resumption of the Composite Dialogue. India's foreign secretary declined to comment on the outcome, but said \"the time is not yet right\" for such a resumption. Subsequent major military exercises by both countries near their shared border (India in February, Pakistan in April) indicated that mutual distrust remained serious. A new breakthrough in the peace initiative may be in store, however.\nIn 2010, conflict over water resources has emerged as another exacerbating factor in the bilateral relationship. Some in Pakistan accuse India of violating international law, bilateral agreements, and ethical principles of peaceful coexistence through the allegedly illicit manipulation of water flows into Pakistan. Of particular concern for Indian and Western observers has been the fact that some of these complaints are emanating from the leaders of militant Pakistani Islamist groups such as Lashkar-e-Taiba. Foreign Minister Qureshi sees water \"emerging as a very serious source of [bilateral] tension,\" but a senior Indian official denies that India is in violation of the Indus Waters Treaty and calls Pakistani rhetoric a \"political gimmick\" meant to distract from Islamabad's own poor water management.", "The perpetrators of a horrific terrorist attack on India's business and entertainment capital were identified as members of the Pakistan-based Lashkar-e-Taiba (LeT), a U.S.-designated terrorist group that has received past support for Pakistani government agencies. The Indian government demands that Pakistan take conclusive action to shut down the LeT and bring its terrorist leadership to justice. Of particular relevance for India is LeT founder Hafiz Saeed, whom India believes is demonstrably culpable, but whom Pakistani officials say they do not possess sufficient evidence to formally charge. In September, police in Lahore placed Saeed under house arrest. Only weeks later, a court dismissed the two cases brought against him (unrelated to the Mumbai attack), but he remained confined to his home. The Islamabad government insisted that it was powerless to take further action against Saeed in the absence of more convincing evidence of wrongdoing. New Delhi countered that Pakistan is \"shielding\" the masterminds of the attack. In May, Pakistan's Supreme Court dismissed a government appeal and upheld a lower court's decision to release Saeed, saying the case presented against him was insufficient. A senior Indian official expressed disappointment with the ruling.\nIn November 2009, Pakistani authorities brought formal charges against seven men accused of planning the Mumbai raid, among them Zaki ur-Rehman Lakhvi, a senior LeT figure said to have been the operational commander. Yet the Islamabad government has to date pressed no further than preliminary hearings, and the start-and-stop nature of the proceedings has only engendered Indian and international skepticism about Pakistan's determination. One senior observer, reflecting a widely-held view, contends that the Pakistani military \"will do everything to preserve Lashkar as long as it believes there is a threat from India.\" Analysts warn that another major terrorist attack in India that is traced to Pakistan would likely lead to a significant international crisis. One offers numerous U.S. policy options for preventing such an attack or managing any crisis that results.", "President Zardari, like many independent observers, believes that regional peace is inextricably linked to a solution of the Kashmir dispute. While levels of violence in Kashmir have declined significantly as compared to previous years, the situation there fragile, and Islamabad insists that what it calls New Delhi's \"administrative and half-hearted political measures\" will not resolve what is in essence a Kashmiri \"struggle for the right to self-determination.\" In September 2009, India's home minister stated that the Pakistani threat to Indian Kashmir has \"not diminished\" and he estimated that 50-60 militants infiltrate across the LOC each month. India's army chief accused Pakistan of providing assistance to \"push in additional terrorists\" before winter's onset. According to India's defense minister, militants made an average of more than one cross-LOC infiltration attempt per day during 2009.\nUnder the Obama Administration, the U.S. government has continued its long-standing policy of keeping distance from the Kashmir dispute and refraining from any mediation role therein. Special Representative Holbrooke, who has many times used the term \"K-word\" in discussing Kashmir, said in February, \"We are not going to negotiate or mediate on that issue and I'm going to try to keep my record and not even mention it by name.\" Despite suggestions by the previous (Musharraf) government that Pakistan might be willing to reconsider its traditional Kashmir position (focused on dispute settlement in accordance with relevant U.N. resolutions), the current government insists that this course remains Pakistan's unambiguous position. Islamabad's current leaders have criticized the \"wavering\" of the Musharraf regime, saying back-channel diplomacy from 2004-2007 had done damage to Pakistan's traditionally \"principled\" commitment to resolution through U.N. resolutions. An unusual major opinion survey of Kashmiris involved the interviewing of more than 3,700 on both sides of the LOC in 2010 and found that less than half supported separatist goals. Only in the Muslim-majority valley did a large majority (up to 95%) express support for full Kashmiri independence.", "Pakistan and India appear to be fighting a \"shadow war\" inside Afghanistan with spies and proxies. Islamabad accuses New Delhi of using Indian consulates in Afghanistan as bases for malevolent interference in Pakistan's Baluchistan province, specifically by materially supporting Baloch separatist militants. The Pakistani government also accuses India of interfering in the FATA. When asked about such claims in late 2009, Secretary of State Clinton said the U.S. government had seen no supporting evidence. Yet Pakistani officials remain insistent: In October, a senior Pakistani military officer declared there was \"a lot of evidence\" of Indian involvement in supporting the Baloch separatist movement, and Interior Minister Malik later echoed the claim, adding an accusation that India was supporting the Taliban, as well. This latter assertion was supported by the alleged discovery in Waziristan of large quantities of Indian-made arms, ammunition, and literature. In December, Malik said four arms-laden Indian trucks had been seized in the Khyber agency.\nIndia is the leading regional contributor to Afghan reconstruction and development efforts, having devoted some $1.3 billion in this effort, as compared to about $300 million from Pakistan. In the view of many analysts, Pakistan's \"paranoia\" with regard to the perceived threat from India leads Pakistani leaders engage a zero-sum regional competition with that rival. In this way, Pakistan's primary goal with regard to Afghanistan is to prevent any dominant Indian influence there. Some observers saw General McChrystal's August 2009 assessment that \"increasing India's influence in Afghanistan is likely to exacerbate regional tensions\" as sign that U.S. officials might press India to keep a low or lower profile there, the U.S. government has continued to welcome and laud India's role in Afghanistan while at the same time recognizing Islamabad's legitimate security interests in having a friendly western neighbor.", "The security of Pakistan's nuclear arsenal, materials, and technologies continues to be a top-tier U.S. concern, especially as Islamist militants have expanded their geographic influence there. The illicit nuclear proliferation network allegedly overseen by Pakistani metallurgist A.Q. Khan was disrupted after its exposure in 2004, but neither Khan himself—a national hero in Pakistan—nor any of his alleged Pakistani co-conspirators have faced criminal charges in the case, and analysts warn that parts of the network may still be intact. Some in Congress demand direct access to Khan by U.S. and international investigators (see, for example, H.R. 1463 in the 111 th Congress), but Pakistani authorities refuse such cooperation and insist that the case is closed. In August 2010, a State Department spokesman said suspected ongoing operations by Khan's network is \"an area of ongoing concern.\"\nWhile most analysts and U.S. officials believe Pakistan's nuclear security is much improved in recent years, there is ongoing concern that Pakistan's nuclear know-how or technologies remain prone to leakage. Two 2009 assessments both concluded that, despite elaborate safeguards put in place by the Pakistani government, serious weaknesses and vulnerabilities still exist in the country's nuclear safety and security structures. Insider threats are considered especially potent, along with the dispersion and increasing size of nuclear material and facilities.\nChina apparently intends to build two new civilian nuclear reactors in Pakistan in what would be an apparent violation of Nuclear Suppliers Group (NSG) guidelines (China has been an NSG member since 2004). The deal poses a challenge for the Obama Administration, which may tacitly allow it to go forward while seeking Beijing's cooperation on other issues. Some analysts urge the Administration to actively oppose the deal, contending that China has little reason to engage a quid pro quo and that the transfers would do harm to U.S. regional interests, in part by indirectly helping Pakistan to build its nuclear weapons arsenal. Others have advocated changing U.S. law to allow for civilian nuclear trade with Pakistan as a means of building bilateral trust, the argument being that overt U.S. acceptance of Pakistan's nuclear program would instill a confidence that billions of dollars in U.S. aid cannot.\nIn mid-2010, the Obama Administration suggested that the proposed Pakistan-China nuclear deal would require NSG consensus approval, and the State Department raised concerns that Beijing was not planning to seek what U.S. officials see as a required special exemption by the NSG as had been done for India in 2008. In September, Beijing provided its clearest statement of intentions to date by asserting that it would seek to build two new nuclear reactors in the Punjab province, saying the arrangement was consistent with a 2003 bilateral agreement on civil nuclear cooperation. This spurred the chief of the U.S. National Nuclear Security Administration to suggest the NSG directly address the issue. Many analysts warn that if the deal goes through, it could have serious negative implications on nuclear rivalries in South Asia and beyond. Some see the arrangement as a clear abrogation of China's NSG obligations and urge Washington to convey \"strong concern\" as a means of prompting Beijing to reconsider its plans.", "Soaring inflation and unemployment, along with serious food and energy shortages, elicit considerable economic anxiety in Pakistan and weigh heavily on the civilian government. All of these existing problems were hugely exacerbated by devastating flooding in mid-2010. A leading Pakistani economist has called his country's economy the worst-performing in Asia, and most experts do not see infusions of foreign aid and loans as having any lasting impact. About two-thirds of Pakistanis name economic issues, specifically inflation and unemployment, as the country's foremost problems. The federal government's 2010-2011 budget raised taxes on numerous sectors while also cutting some subsidies on energy and food.\nThe Finance Ministry's most recent annual Economic Survey (May 2010) reported provisional GDP growth of 4.1% in the outgoing fiscal year, up from a dismal 1.2% in 2008-2009, but called the \"recovery\" fragile and far from assured, and noting that \"not all sectors of the economy or regions of the country appear to have participated so far in the modest upturn.\" According to analyses by IHS Global Insight following the floods, \"a major correction to real growth will take place during FY2011.… Major supply setbacks stem from direct losses in agriculture and manufacturing, as well as indirect effects of the lost capital stock on the industrial production.\" However, a short-term boost in aggregate supply may partially counteract this, leading to an estimated growth rate of about 2% in the current fiscal year.\nClearly, even before the floods, Pakistan was in dire economic shape. In 2008, Pakistan was seen to require substantial external financing to stabilize its economy. Pakistani leaders approached the IMF to discuss infusions of desperately sought capital. In November of that year, the IMF reached a Stand-By Arrangement to provide a $7.6 billion loan to Pakistan aimed at resolving the country's serious balance of payments difficulties. Total IMF support was later raised to $11.3 billion. At 2010's end, the IMF agreed to extend Pakistan's loan, providing another nine months for officials there to complete the tax and other fiscal reforms.\nAccording to a 2010 World Bank report, Islamabad's stabilization efforts since 2008 combined with lower world commodities prices to reduce external imbalances, rebuild foreign exchange reserves, and reduce inflation. Yet\nThe government still has more work to do in a difficult security environment to further reduce inflation and the fiscal deficit, particularly to eliminate the large losses of public sector entities in the power, transport and manufacturing industries, and increase public revenues through the introduction of a value added tax and better tax administration.\nRepayment of IMF loans will place significant constraints on Islamabad's federal budget. Moreover, the World Bank provided more than $2 billion worth of loan assistance to Pakistan in FY2009 and FY2010, the institution's highest ever annual support for the country. Foreign direct investment dropped by nearly 10% in the quarter ending September 2010, with U.S. investors falling just behind those from the United Arab emirates as leading contributors.\nA June 2010 Pakistani government report on poverty reduction identified three main structural weakness in the national economy: (1) the large fiscal deficit; (2) the large trade deficit (with the value of imports far exceeding that of exports); and (3) inadequate social services. Further causes of economic instability included a poor law and order situation, a global spike in the prices of oil and other key commodities, uncertainty in international financial markets, and, \"most importantly,\" the direct and indirect costs of Pakistan's role as a frontline state in the \"War on Terror,\" which have included significant capital flight. The report calculates that this latter cost has exceeded $25 billion for the period 2004-2009.\nConsumer prices in 2008 reached their highest levels since 1975, with an inflation rate above 25% for many months. The rupee's value also hit record lows, down more than 20% against the U.S. dollar for that year, and net international reserves declined by more than half to below $7 billion. Inflation rates have declined from their 2008 peak, although they rose again in early 2010 and have remain in the double-digit range. The rupee's value is partly recovered, and IMF injections boosted foreign exchange reserves back to more than $17 billion by the end of 2010. Two major international investor rating indices cut Pakistan's sovereign debt rating to \"negative\" in 2008 and the county's rating remains six levels below investment grade.", "Pakistan's struggling power sector puts a significant damper on commerce and everyday activities, causing factory shutdowns and rioting by mobs angry with price hikes and shortages. A 2009 survey found more than half of all Pakistanis going without power for at least eight hours per day. More recently, shortfalls in electricity supply have led to unannounced outages of up to 20 hours per day in parts of the country. Prime Minister Gilani has called for provincial ministries and his own energy-related cabinet ministers to produce a detailed national energy strategy. In April 2010, he instituted measures including extending the official weekend from one to two days, earlier closure of street markets, and a 50% reduction in power to government offices. By one estimate, the government will need to add 20,000 megawatts of generation capacity over the next decade at a cost of $32 billion, roughly half of which would need to come from foreign donors.", "Much of Pakistan's economic instability is rooted in perpetually low government revenue generation. For most observers, this itself is caused by what essentially is mass tax evasion by the country's economic elite, and is exacerbated by a federal budget overemphasizing military spending at considerable cost to social development. Some analysts warn that, so long as international \"bailouts\" remain available to Pakistan, the country's elite will see little motive to adjust their habits, and unsustainable debt will continue to mount. In early 2010, the U.S. Ambassador to Pakistan noted for a Karachi business audience that, at 9%, Pakistan has one of the lowest tax-to-GDP ratios in the world, and she urged the government to raise more revenue from its own citizens. Finance Minister Shaukat Tarin resigned a month later, by some accounts because of Prime Minister Gilani's earlier refusal to give Tarin greater authority to crack down on tax evaders. Secretary of State Clinton and former SRAP Holbrooke made repeated public references to the fact that Pakistan's wealthy elite pay little or no taxes and, following massive devastation to Pakistan caused by mid-2010 floods, international relief donors pressured Islamabad to reform its tax system so that the country's wealthy citizens make increased contributions to national welfare. Pakistani legislators have moved forward a controversial Reformed General Sales Tax bill which, if passed into law, could have some ameliorative effects.", "Corruption is another persistent and serious problem for Pakistan's economy, harming both domestic and foreign investment rates, as well as creating skeptical international aid donors. For 2010, Berlin-based Transparency International placed Pakistan 143 rd out of 178 countries in its annual ranking of world corruption levels, giving it a lower ranking than such countries as Nigeria and Bangladesh, among others. A September 2010 agreement between the U.S. government and Transparency International established a hotline through which people can report any misuse of U.S. funds. TI contends that its workers in Pakistan have since faced threats and harassment, and there have even been reports that the Islamabad government planned legal action against TI for allegedly paying bribes to officials to extract information. In one survey, nearly one in three Pakistanis reported paying a bribe to settle a traffic violation in the past year. Islamabad unveiled a major new initiative to tackle corruption in November 2010.", "A central goal for Pakistani leaders is to acquire better access to Western markets. With the security situation scaring off foreign investors (net investment fell by nearly 50% in the latter half of 2009), exports, especially from the key textile sector, may be key to any future Pakistani recovery. As stated by Prime Minister Gilani in March 2010, \"If there is an acceptance of the heavy price that Pakistan is paying for this war, then there must be international action to facilitate our exports.\" That same month, U.S. officials vowed to work for greater U.S. market access while acknowledging that Pakistani hopes for a bilateral free-trade agreement will be dashed in the foreseeable future. To date, and despite the contention of many analysts that expanding market access would be a boon to U.S. strategic interests, significant changes in U.S. tariffs have not been seen, in large part because the American textile industry lobbies against them, arguing that they would cost American jobs.\nIslamabad has continued to press Washington and European capitals for reduced tariffs on textile exports, especially following massive flood damage to Pakistan's cotton crop. By some accounts, the textile sector directly employs 3.5 million Pakistanis and accounts for 40% of urban factory jobs. Pakistani officials and business leaders estimate that abolishing American tariffs, which currently average 17% on cotton apparel, would boost their country's exports by $5 billion annually. In September, EU leaders agreed to grant Pakistan limited trade concessions as a means of helping Islamabad to deal with the flood crisis and to enhance political stability there. The \"immediate and time-limited reduction\" in EU import duties was especially favored by Britain and Germany.\nThe Obama Administration has continued to support congressional passage of a bill to establish Reconstruction Opportunity Zones (ROZs) in western Pakistan (and Afghanistan) that could facilitate development in Pakistan's poor tribal regions. An initiative of President Bush during his 2006 visit to Pakistan, the program would provide duty-free access into the U.S. market for certain goods produced in approved areas and potentially create significant employment opportunities. The bill was considered by the 110 th Congress, but no action was taken. In the 111 th Congress, the House passed ROZ legislation as Title IV of H.R. 2410 . No action has been taken on the Senate version ( S. 496 ), although identical language has been introduced as an amendment to other bills.\nWhile observers are widely approving of the ROZ plan in principle, many question whether there currently are any products with meaningful export value produced in the FATA. Some analyses suggest that the ROZ initiative is unlikely to be useful even if it becomes U.S. law. Pakistani businessmen reportedly find the bill's restrictions on textile exports too extensive, essentially excluding the bulk of such Pakistani products, thus rendering the initiative \"largely worthless.\" In late August 2010, the U.S. Chamber of Commerce delivered a letter to the U.S. Trade Representative and the Secretary of State expressing its support for ROZ legislation, as well as further expansion of trade preferences to Pakistan. Only days later, a group of six major U.S. textile associations warned the same officials that such expansion \"would cause irreparable damage to the U.S. textile industry resulting in significant job losses.\"", "Democracy has fared poorly in Pakistan, with the country enduring direct military rule for more than half of its existence. From 1999 to 2008, Army Chief General Pervez Musharraf ran the government after leading a bloodless coup unseating the democratically elected Prime Minister Nawaz Sharif. Musharraf assumed the presidency and later oversaw passage of the 17 th Amendment to Pakistan's constitution, greatly increasing the power of that office. In March 2008, however, only months after the assassination of former Prime Minister Benazir Bhutto, a coalition led by Bhutto's Pakistan People's Party (PPP) was elected in a sweeping rejection of the Musharraf-allied parties. The Pakistan Muslim League led by Sharif (PML-N) also fared well, especially in the densely-populated Punjab province, and joined the PPP in an unprecedented coalition that collapsed only after Musharraf's August 2008 resignation from the presidency and exit from Pakistan's political stage. Bhutto's widower, Asif Zardari, subsequently won Electoral College vote for the presidency. Although Prime Minister Gilani was seated in early 2008, Zardari retained most of the powers of the Musharraf presidency until April 2010.\nU.S. officials had for some time expected Zardari's powers to wane and reportedly readied themselves for this by developing ties with other leaders in both the ruling and oppositions parties, as well as in the Pakistani military. Indeed, the demise of Zardari's influence could make the U.S. government increasingly reliant on the Pakistani army. Prime Minister Gilani has been able to step into the political space opened by Zardari's woes and has managed to balance well competing pressures from the opposition, members of his own party and coalition allies, and the army, which may find him more amenable and trustworthy than Zardari. Although April's passage of the 18 th Amendment gives him new and sweeping powers, Prime Minister Gilani, a consensus-builder and a staunch ally of Zardari, has not radically altered the dynamics of their relationship. Still, the civilian government has remained weak, and some analysts even expected the PPP-led coalition to collapse during 2010.\nNearly three years after Pakistan's relatively credible national elections seated a civilian government, the country's military establishment is still seen to be where Pakistan's foreign policy and national security policies originate. Hand-picked by President-General Musharraf to lead the army, General Kayani has since his 2007 appointment taken concrete measures to withdraw the military from direct involvement in the country's governance. Many analysts saw the moves being motivated by a desire to improve the institutional image of the military after a serious erosion of its status under Musharraf. Yet there remain no signs of meaningful civilian control of the army or ISI, and analytic views of Kayani's role as a secular- and democratic-minded figure appear to have shifted away from guarded optimism toward a perception that he, like the generals who came before him, will place the interests of the security services above all others, and may not be fully trustworthy partner in efforts to battle Islamist extremism. By all accounts, since Musharraf's 2008 departure the influence of what one commentator calls Pakistan's \"biggest and best organized political party, the Pakistani army,\" has only increased.", "President Zardari has for many years been a controversial figure dogged by allegations of serious corruption and other crimes. While he continued to dictate PPP (and thus civilian government) policy, he became increasingly unpopular as measured by public opinion polling. Moreover, a series of crises, including several high-profile battles with Pakistan's Chief Justice and a failed effort to gain parliamentary validation of a controversial amnesty bill promulgated under Musharraf—the National Reconciliation Ordinance (NRO)—further weakened his position.\nIn late October, the government floated a plan to validate the NRO through approval in the National Assembly. The proposed amnesty bill—which would have protected Zardari and other senior politicians from graft charges—nearly led to a split in the ruling coalition when parties aligned with the PPP and even some PPP legislators said they would vote against it. Opponents of the plan, led by Sharif and his opposition PML-N party, called it a \"legitimization of corruption.\" The government hastily withdrew the proposal, but further damage to Zardari's credibility was done. When hundreds of NRO beneficiaries, including Zardari and many senior PPP figures, were publically named in late November, it was seen as another blow to the president's position. The Supreme Court began hearing challenges to the NRO and, on December 16, in a unanimous decision, invalidated the law, suddenly leaving thousands of Pakistani politicians—including the president's chief of staff, and the interior and defense ministers—open to prosecution (under the Pakistani Constitution, the president himself is immune from prosecution while in office). Opposition leaders hailed the decision and called for the resignation of top PPP figures. Some 247 government officials were placed on an exit control watch list to prevent their leaving the country.\nAnticipated prosecutions of senior figures did not occur, and Zardari remained determined to remain in office. Yet his government began 2010 in a \"siege environment,\" under intense pressure and criticism from the military, the opposition, the judiciary, and the media. Zardari responded with defiance, counterattacking his detractors, putting them on the defensive, and winning votes of confidence in three of the country's four provincial assemblies. Soon he was making rare trips around the country to give rousing speeches and seemed to reverse his most negative fortunes, surviving in office even as he appeared to remain weak and unpopular.", "President Zardari's thin popularity nearly disappeared altogether in the closing months of 2009, as his perceived closeness to the United States and \"soft\" views on India, deadly battles with insurgents, and widespread economic woes combined with a perception that the government was rudderless and ineffective to bring the Pakistani president under more intense criticism, with some demanding his resignation. With pressure to abolish the 17 th Amendment and relinquish most powers of his office intensifying, analysts predicted that agreeing to become a \"figurehead\" was the most likely course for his political survival. Still, Zardari was able to reassert his grip on the presidency, in part because his PPP allies rallied behind him, and also because the army likely was reluctant to see the country again thrown into political chaos and suffer the international opprobrium that could result. In an effort to allay his critics, Zardari surrendered his office's powers to appoint military service chiefs, and later ceded his position as Chairman of the National Command Authority, giving his Prime Minister nominal control over the country's nuclear weapons (in practice, the military retains control of this arsenal).\nBy April, the National Assembly had fulfilled a long-standing PPP vow to overturn nondemocratic constitutional amendments made under Musharraf. The body unanimously passed the 18 th Amendment bill, which President Zardari then signed into law on April 19, saying \"the Constitution has been made truly democratic and federal in character, and provincial rights and Parliamentary sovereignty have been restored.\" Among the most notable of the 102 clauses of the bill were those removing the President's powers to dismiss the Prime Minister and Parliament; transferring to the Prime Minister the lead role in appointing armed service chiefs; ending the courts' abilities to suspend the Constitution; limiting the President's ability to impose emergency rule; removing the bar against prime ministerial candidates who had already served two terms; changing the name of the North West Frontier Province to Khyber Pakhtunkhwa; and adding four new Senate seats reserved for non-Muslim minorities.", "In February 2010, a new row between the executive and judiciary arose when the Chief Justice objected to the President's appointment of new Supreme Court and Lahore High Court judges without consultation, and convened an emergency panel that ruled to suspend Zardari's order. Numerous lawyers boycotted courts to protest Zardari's move and opposition leader Nawaz Sharif called it \"unconstitutional\" and a \"threat to democracy.\" The crisis was defused when the government withdrew the appointments. Yet the Supreme Court has kept pressure on the government to reopen numerous graft cases, including some against top officials, and the country's Attorney General resigned in April, accusing the government of preventing him from carrying out Supreme Court orders to reopen graft investigations involving President Zardari. There are fears that any escalating conflict between the executive and the judiciary would \"inevitably\" bring the military into the political fray, potentially precipitating an even greater political crisis. In October 2010, the Supreme Court gave the government a two-week deadline to reopen corruption cases against Zardari and several other top PPP leaders, spurring the opposition PML-N to threaten another \"long march\" demonstration, as well as rumors that the government would seek to unseat adversarial justices. Prime Minister Gilani subsequently pledged to respect the court, but the cases have remained moribund.", "In February 2008 National Assembly elections, the Pakistan People's Party of President Zardari and Prime Minister Gilani won a clear plurality of seats (121 out of 342), but not nearly enough to form a government without coalition allies. Some of these have proven difficult and unreliable, although a ruling coalition has remained in place to date. Yet, in late 2010, serious threats to majority status arose. In mid-December, the Jamaat Ulema Islami—a small, but influential Islamist party—withdrew its support for the PPP-led coalition, narrowing its National Assembly majority to only nine seats. The decision was taken after the Prime Minister dismissed a JUI federal minister on accusations of corruption.\nThen, only weeks later, the PPP-led ruling coalition began the year with a new crisis: in the first week of January, the Karachi-based MQM announced it was withdrawing from the national ruling coalition in reaction to rising fuel prices, inflation, and perceived government mismanagement. The loss of the MQM's 25 seats removed that coalition's majority in the National Assembly, potentially leading to the collapse of the government. Yet most observers concluded that the move was an effort to extract maximum concessions in the form of greater administrative control for the MQM in its Karachi base. Only days later, Prime Minister Gilani backtracked on recently enacted fuel subsidy reductions, a move that mollified opposition parties and cleared the way for the MQM's return to the coalition, but that also elicited criticism from the U.S. government and the IMF as a reversal of progress made toward strengthening Pakistan's economic base. Independent analysts echoed the criticisms, saying a collapse of reform efforts would preclude economic stabilization and leave the country dependent on foreign assistance.\nIn an apparent effort to capitalize on the PPP's crisis, Nawaz Sharif, leader of the opposition-leading PML-N, issued a 10-point \"national agenda\" for broad socioeconomic development. In addition to calling for an end to the fuel price hikes, the agenda includes requests that the government urgently address electricity shortages and eliminate ministers accused of corruption, among other measures. Prime Minister Gilani signaled that his government would extend cooperation in its implementation. Some commentators saw Gilani's acceptance of the opposition agenda as an implicit admission that his government had failed.", "Pakistan is the setting for serious perceived human rights abuses, some of them perpetrated and/or sanctioned by the state. According to the U.S. Department of State, the Islamabad government is known to limit freedoms of association, religion, and movement, and to imprison political leaders. Notable recent abuses have been related to violent attacks on religious minorities, indefinite government detention of detainees related to anti-terrorism efforts, and alleged extrajudicial executions perpetrated by the Pakistani military in conflict areas. Most recently, specific U.S. government attention to human rights abuses in Pakistan have centered on press freedoms, abuses perpetrated by security forces, and religious freedoms threatened by Pakistan's \"blasphemy law.\"", "Press freedoms in Pakistan are seen to be seriously constrained, despite the existence of booming news media. Watchdog groups rank Pakistan as the world's most dangerous country for journalists. In May 2010, the Islamabad government instituted a nation-wide ban on the Internet social networking site Facebook after a contest on that site invited users to submit caricatures of the prophet Mohammed, something viewed as blasphemous by Muslims. Soon after, the government blocked access to YouTube, a video sharing website with content deemed \"blasphemous.\" Many observers felt the authorities went too far and used the Facebook incident as an excuse to clamp down on political speech. Press freedom watchdogs assert that journalists who report on stories critical of Pakistani authorities often face threats. One high-visibility 2010 case involved the apparent kidnapping and torture of a journalist working for a major Pakistani newspaper, allegedly at the hands of government intelligence agents. Punjab's Law Minister later explicitly fingered the ISI for responsibility. The Ranking Member of the Senate Foreign Relations Committee called the case a \"bellwether\" and penned a letter to the Pakistani Prime Minister urging him to \"demonstrate Pakistan's commitment to rule of law and a free press by ensuring that your government aggressively investigates and prosecutes those responsible\" for the man's kidnapping.", "In late 2010, acute U.S. concerns were elicited by evidence that Pakistani security forces may have engaged in serious human rights abuses, including extrajudicial executions. New York-based Human Rights Watch has pressed the Pakistani government to launch investigations into reports of summary executions and torture perpetrated by soldiers and police during counterterrorism operations in the Swat Valley. In September, an internet video showed what appeared to be the extrajudicial execution by men in Pakistani military uniforms of six young men in civilian clothes in the Swat Valley. The Army Chief himself ordered an inquiry into the incident, saying such actions \"will not be tolerated.\" In December, two top Pakistani intelligence agencies admitted that 11 missing persons were, in fact, in their custody. The Obama Administration subsequently announced that it would abide by \"Leahy amendment\" provisions by withholding train and equip funding for several Pakistani army units believed to be complicit in human rights abuses, and it remains concerned about potential mass disappearances of detainees into the hands of Pakistani security forces.", "Laws prohibiting blasphemy in Pakistan are meant to protect Islamic holy persons, beliefs, customs, and objects from insult or defilement. They are widely popular with the public. Yet they are criticized by human rights groups as discriminatory and arbitrary in their use, which often arises in the context of personal vendettas, and can involve little or no persuasive evidence. Pakistan's blasphemy laws, rooted in 19 th -century colonial legislation but coming to the fore only under the Islamist-tinged rule of General Zia in the 1980s, have never resulted in an official execution and, while convictions are common, most cases are overturned on appeal. Still, accusations have led to lynchings, and are often used to cower religious minorities.\nThe blasphemy laws again came under scrutiny in late 2010 when a Pakistani Christian woman was sentenced to death for what seemed a minor offense. International human rights groups issued newly urgent calls for the law's repeal, and President Zardari himself vowed to personally review the case. However, the law appears to have significant public support in Pakistan, and a federal minister said that the government would only consider reforming the law to stop its \"misuse,\" but would not consider a repeal. A bill to amend the law was introduced in late November, with the aim of eliminating its perceived vague terminology and to limit its application to cases in which premeditation or malicious intent are clear. When PPP figures suggested the amendments, thousands of people took to the streets in protests and strikes organized by religious leaders. Islamist hardline groups, including some with links to terrorist organizations, were able to rally as many as 50,000 people on the streets of Karachi, where speakers sought to justify the assassination. Still, Bilawil Bhutto Zardari, the President's son and PPP co-chair, issued a televised pledge to \"defend\" Pakistan's Christian and other minorities, saying those who celebrated the January assassination of the Punjab governor (a critic of the laws) were \"the real blasphemers.\"", "Pakistan is today among the world's leading recipients of U.S. aid. Since the 2001 renewal of large U.S. assistance packages, Pakistan by the end of FY2010 had obtained more than $10.7 billion in overt assistance since 2001, including about $6 billion in development and humanitarian aid, and some $4.4 billion for security-related programs. (This does not include reimbursements for militarized counterterrorism efforts. See Table 1 .) In September 2009, both chambers of Congress passed their own Pakistan-specific bills authorizing increased nonmilitary aid to Pakistan (to $1.5 billion per year for five years) and placing certain conditions on future security-related aid to that country. The Enhanced Partnership with Pakistan Act of 2009 became P.L. 111-73 on October 15. Earlier in 2009, Congress established a new Pakistan Counterinsurgency Capability Fund (PCCF) that is being used to enhance the ability of Pakistani security forces to effectively combat militancy. To date, PCCF appropriations have totaled $1.1 billion. Moreover, since FY2002 Congress has appropriated billions of dollars to reimburse Pakistan (and other nations) for their operational and logistical support of U.S.-led counterterrorism operations. At more than $8 billion, these \"coalition support funds\" (CSF) have accounted for nearly half of all overt U.S. financial transfers to Pakistan since 2001.\nThe Obama Administration's FY2010 budget request had already reflected a major new emphasis on nonmilitary assistance to Pakistan, most notably by greatly increasing funds meant for economic development (the ESF request of more than $1 billion nearly doubled that of the previous fiscal year). In addition, both law enforcement and military training funding were roughly doubled. For FY2011, the Administration has requested further boosts in foreign assistance for Pakistan, including a doubling of Global Health and Child Survival funds (to $67 million) and increased economic support. Security-related assistance may also increase significantly, most notably with the Administration seeking to fund the PCCF—now overseen by the State Department—with $1.2 billion. The total assistance to Pakistan channeled through State is thus set to increase by about 20% (from $2.5 billion in FY2010 to more than $3 billion in FY2011), even when FY2010 supplemental requests are included.\nIn addition to boosting development aid and placing conditions on future military aid to that country, major Pakistan-specific legislation in the 111 th Congress ( P.L. 111-73 ), also known as the \"Kerry-Lugar-Berman\" bill, contains numerous reporting requirements, most aimed at ensuring maximal accountability and transparency for U.S. future assistance funds. The act caused major controversy in Pakistan, where elements of the military and political opposition parties criticized it as an \"infringement on Pakistani sovereignty.\" Many independent observers saw the unexpectedly strong Pakistani reaction as being fueled and perhaps even generated by a combination of military elements and opposition political forces who shared a common cause of weakening the PPP-led government. More specifically, this perspective had Army Chief General Kayani engaged in an ongoing struggle with President Zardari and Prime Minister Gilani over ultimate control of the country's military. One effect of the U.S. legislation was to place the United States in the middle of this battle, which dissipated as quickly as it had arisen.\nThere is an ongoing debate about how best to channel large increases in foreign assistance to Pakistan. It is claimed that roughly half of all U.S. aid pledged for Pakistan is spent on administrative costs, including highly-paid foreign experts, thus forwarding the argument that aid flows would be more effective if channeled through Pakistani agencies. Pakistani officials believe that administrative costs can be further reduced by channeling aid primarily through Pakistani government agencies rather than through nongovernmental organizations. The State Department has planned to significantly scale back its use of U.S. aid contractors in Pakistan and begin channeling more money directly to Pakistani officials and local groups. Yet there are energetic opponents of such a shift. Representative is a \"dissent cable\" from a senior economist working for USAID in Pakistan warning that Pakistani aid contractors and NGOs are inexperienced and ill-equipped to effectively deliver aid: \"Directing an immediate shift away from U.S. contractors already on the ground to local implementers without an appropriate transition period will seriously compromise the more important requirements for quick counterinsurgency and economic impacts.\" Some nongovernmental U.S. aid experts have issued similar warnings. Even some in Pakistan believe that experienced Western aid professionals are likely to produce better results than \"low-paid government functionaries.\"\nSenator John Kerry is concerned that large-scale corruption could seriously undermine the U.S. aid effort in Pakistan and he has pressed the State Department to carefully track aid flows to that country. The Senate Foreign Relations Committee Chairman has warned Ambassador Holbrooke that plans to shift a majority of assistance funds directly though Pakistani organizations and government agencies increases the possibility that those funds will be stolen or poorly spent.", "A \"Friends of Democratic Pakistan\" (FODP) group was launched in September 2008, when President Zardari and the top diplomats of the United Arab Emirates, Britain, and the United States were joined by foreign ministers from Australia, Canada, France, Germany, Italy, Japan, and Turkey, and representatives of China, the European Union, and the United Nations. A resulting statement expressed agreement to work in strategic partnership with Pakistan to combat violent extremism; develop a comprehensive approach to economic and social development; coordinate an approach to stabilizing and developing border regions; address Pakistan's energy shortfall; and support democratic institutions. In April 2009, 31 countries and 18 international institutions sent representatives to an FODP/Donors' Conference in Tokyo. There Ambassador Holbrooke announced the Administration's intent to provide a total of $1 billion in assistance to Pakistan over the 2009-2010 period, bringing to more than $5 billion the total offered by the international community on top of the IMF package. At an FODP summit meeting in New York in September co-chaired by President Obama, President Zardari, and British Prime Minister [author name scrubbed], the forum reiterated its central goals, but no further specifics were discussed pending more detailed Pakistani development proposals. The FODP's Third Ministerial Meeting took place in October, when donors continued to press Pakistan to reform its economy, especially through an expansion of the tax base.", "The Obama Administration's congressionally-mandated Pakistan Assistance Strategy Report, issued in December 2009, lays out the principal objectives of nonmilitary U.S. assistance to Pakistan (to help \"in building a stable, secure, and prosperous Pakistan\"), a general description of the programs and projects designed to achieve these goals, and a plan for monitoring and evaluating the effort. For FY2010-FY2014, it proposes to devote $3.5 billion—nearly half of the $7.5 billion of the aid authorized by The Enhanced Partnership With Pakistan Act of 2010—to \"high-impact, high-visibility\" infrastructure programs, especially in the energy and agriculture sectors. Another $2 billion will fund health, education, and humanitarian programs, while the remaining $2 billion will seek to develop Pakistani government capacity by improving national and local governance, and security and legal institutions.\nA focus on infrastructure projects is meant to \"provide tangible benefits to Pakistani citizens and help Pakistan ameliorate energy and water shortages, and to demonstrate that \"the United States is committed to helping address some of the problems that most affect the everyday lives of Pakistanis.\" Geographically, U.S. programs concentrate on the KPk province and FATA , along with other areas \"vulnerable to extremism,\" such as southern Punjab. The Special Representative for Afghanistan and Pakistan (SRAP) presents five goals for civilian assistance to Pakistan: (1) helping to address urgent energy and water crises ; (2) supporting broader economic and political reforms necessary for sustainable growth; (3) improving Pakistanis' prospects for better health care and education ; (4) helping respond to humanitarian challenges ; and (5) combating extremism . In this effort, reliance on large international contractors will be reduced in favor of building local capacity through Pakistani implementing partners that will be carefully vetted by American and Pakistani accountants. To mitigate the risk of increased corruption, the numbers of direct-hire contracting staff and inspector-general personnel inside Pakistan will be increased. In mid-2009, the Obama Administration began emphasizing the importance of upgrading Pakistan's struggling energy sector.", "U.S.-Pakistan security cooperation accelerated rapidly after 2001, and President Bush formally designated Pakistan as a major non-NATO U.S. ally in 2004. The close U.S.-Pakistan security ties of the cold war era, which came to a near halt after the 1990 aid cutoff, were restored as a result of Pakistan's role in the U.S.-led anti-terrorism campaign. In 2002, the United States began allowing commercial sales that enabled Pakistan to refurbish at least part of its fleet of American-made F-16 fighter aircraft and, three years later, Washington announced that it would resume sales of new F-16 fighters to Pakistan after a 16-year hiatus. During the G.W. Bush Administration, a revived U.S.-Pakistan Defense Consultative Group (DCG)—moribund from 1997 to 2001—sat for high-level discussions on military cooperation, security assistance, and anti-terrorism. The forum has continued under the Obama Administration; its 19 th and most recent session came in August 2010, when an American delegation led by Under Secretary of Defense for Policy Michelle Flournoy met with their Pakistani counterparts to continue dialogue on strategic security issues and seek means to accelerate counterterrorism cooperation.\nPentagon officials have for some time been frustrated by the allegedly feckless counterinsurgency efforts of the internally squabbling Islamabad government in the recent past. Reports indicate that U.S. officials have been disheartened by signs that the Pakistani military is slow to shift away from a conventional war strategy focused on India, and they have made clear the United States stands ready to assist Pakistan in reorienting its army for counterinsurgency efforts. This is not clearly a task the Pakistani military leadership has been eager to complete. In an effort to more effectively channel U.S. security assistance so as to specifically strengthen Pakistan's counterinsurgency capabilities, the Pentagon proposed—and Congress later endorsed—creation of a dedicated fund, the PCCF.\nThere are concerns that allegedly serious human rights abuses by the army in Swat, including extrajudicial killings and the holding of some 2,500 suspected militants in indefinite detention, could trigger so-called \"Leahy Amendment\" restrictions on future U.S. security assistance.", "Major U.S. arms sales and grants to Pakistan since 2001 have included items useful for counterterrorism operations, along with a number of \"big ticket\" platforms more suited to conventional warfare. In dollar value terms, the bulk of purchases are made with Pakistani national funds, but U.S. grants are currently eclipsing this in recent years. The Pentagon reports total Foreign Military Sales agreements with Pakistan worth $5.4 billion for FY2002-FY2010 (in-process sales of F-16 combat aircraft and related equipment account for more than half of this). The United States also has provided Pakistan with more than $2.1 billion in Foreign Military Financing (FMF) since 2001 (including scheduled FY2010 funds). These funds are used to purchase U.S. military equipment for longer-term modernization efforts. Pakistan also has been granted U.S. defense supplies as Excess Defense Articles (EDA). Major post-2001 defense supplies provided or soon-to-be provided under FMF include:\neight P-3C Orion maritime patrol aircraft and their refurbishment (valued at $474 million; two delivered); about 6,312 TOW anti-armor missiles ($186 million; at least 2,007 delivered); more than 5,600 military radio sets ($163 million); six AN/TPS-77 surveillance radars ($100 million); six C-130E transport aircraft and their refurbishment ($76 million); five refurbished SH-2I Super Seasprite maritime helicopters granted under EDA ($67 million); the USS McInerney , an ex-Perry class missile frigate (via EDA, $65 million for refurbishment); 20 AH-1F Cobra attack helicopters via EDA ($48 million, 12 refurbished and delivered); and 121 refurbished TOW missile launchers ($25 million).\nSupplies paid for with a mix of Pakistani national funds and FMF include:\nup to 60 Mid-Life Update kits for F-16A/B combat aircraft (valued at $891 million, with $477 million of this in FMF; Pakistan's current plans are to purchase 35 such kits); and 115 M-109 self-propelled howitzers ($87 million, with $53 million in FMF).\nNotable items paid for entirely with Pakistani national funds include:\n18 new F-16C/D Block 50/52 combat aircraft, with an option for 18 more (valued at $1.43 billion, 17 delivered to date); F-16 armaments including 500 AMRAAM air-to-air missiles; 1,450 2,000-pound bombs; 500 JDAM bomb tail kits for gravity bombs; and 1,600 Enhanced Paveway laser-guided bomb kits, also for gravity bombs ($629 million); 100 Harpoon anti-ship missiles ($298 million); 500 Sidewinder air-to-air missiles ($95 million); and six Phalanx Close-In Weapons System naval guns ($80 million).\nMajor articles transferred via EDA include:\n14 F-16A/B combat aircraft; 59 T-37 military trainer jets; and 550 M-113 armored personnel carriers.\nUnder 1206, Frontier Corps, and Pakistan Counterinsurgency Capability Fund authorities, Pakistan has received four Mi-17 multirole helicopters (another six were provided temporarily at no cost), two King Air 350 surveillance aircraft, 450 vehicles for the Frontier Corps, 20 Buffalo explosives detection and disposal vehicles, hundreds of M-141 Bunker Defeat Munitions, helicopter spare parts, sophisticated explosives detectors, night vision devices, radios, body armor, helmets, first aid kits, litters, and large amounts of other individual soldier equipment. Pakistan is eager to receive more counterinsurgency hardware for use in western Pakistan, including armored personnel carriers, laser target designators, laser-guided munitions, and more night-vision goggles and surveillance gear. They also request better and more sophisticated surveillance and communications equipment, along with more attack and utility helicopters.\nThe Defense Department has characterized F-16 fighters, P-3C patrol aircraft, and anti-armor missiles as having significant anti-terrorism applications. The State Department has claimed that, since 2005, FMF funds have been \"solely for counterterrorism efforts, broadly defined.\" Such claims elicit skepticism from some observers, and analysts who emphasize the importance of strengthening the U.S.-India strategic partnership have called U.S. military aid to Pakistan incompatible with U.S. strategic goals in the region. Moreover, U.S. officials are concerned that Pakistan has altered some conventional U.S.-supplied weapons in ways that could violate the Arms Export Control Act. Such alleged modification include expanding the capability of both Harpoon anti-ship missiles and P-3C naval aircraft for land-attack missions. The Islamabad government categorically rejects the allegations. Indian observers were unsurprised by the claims; New Delhi's leaders continuously complain that Pakistan diverts most forms of U.S. assistance toward India. Some more suspicious analysts even see purpose in such a dynamic: a U.S. wish to maintain Pakistan's viability as a regional balancer to Indian hegemony.\nIn the summer and fall of 2009, some reports had Pakistani officials claiming the military could not take immediate advantage of TTP chief Baitullah Mehsud's death due to a shortage of counterinsurgency equipment it needed from the United States. Some analysts complained that a delay in the expected South Waziristan offensive could in part be traced to U.S. \"withholding\" of equipment. Pentagon officials deny that Pakistan has been prevented or deterred from acquiring the counterinsurgency equipment it wants and needs. Indeed, during the course of the fighting in South Waziristan, Pakistan received low-profile but significant U.S. assistance in the form of transport helicopters, parts for helicopter gunships, and infantry equipment, along with unprecedented intelligence and surveillance video sharing from American UAVs. In anticipation of new counterinsurgency operations in 2010, the United States provided the Pakistani air force with about 1,000 quarter-ton bombs, along with up to 1,000 kits for making gravity bombs laser-guided-capable. As noted above, transfers to Pakistan of such offensive weaponry are viewed with a wary eye by the Indian government.\nPakistani officials have continued to complain that U.S.-supplied defense equipment, especially that most needed for counterinsurgency operations such as attack and utility helicopters, has been too slow in coming. The Pakistani Ambassador to the United States has himself been quoted as claiming that, in his first two years in Washington, Pakistan received only eight used Mi-17 transport helicopters and that Pakistan's military operations have been hindered by a lack of equipment. Such claims rile U.S. officials, who document that the United States has provided Pakistan with at least 50 helicopters since 2006—12 of them armed Cobra models—and who note that the delivery of more top-line attack helicopters has come under delay because of Pakistani inaction. Former Joint Chiefs Chairman and Secretary of State Colin Powell has urged the Obama Administration to do a better job of providing the Pakistani military with the mobility and intelligence capabilities needed for counterinsurgency operations. In September 2010, the Pentagon notified Congress of a potential sale to Pakistan of 30 Bell 412 utility helicopters and related support and training worth up to $397 million.", "The Bush Administration launched an initiative to strengthen the capacity of the Frontier Corps (FC), an 65,000-man paramilitary force overseen by the Pakistani Interior Ministry. The FC has primary responsibility for border security in the KPk and Baluchistan provinces. The Pentagon in 2007 began using its funds to train and equip the FC, as well as to increase the involvement of the U.S. Special Operations Command in assisting with Pakistani counterterrorism efforts. Americans are also engaged in training Pakistan's elite Special Service Group commandos with a goal of doubling that force's size to 5,000. The U.S. program to train Pakistan's paramilitary forces reportedly has been hampered by Pakistan's reluctance to send troops who are needed for urgent operations elsewhere. Some analysts also contend that only U.S. military personnel (as opposed to contractors) can effectively train Pakistani soldiers.\nOther security-related programs for Pakistan are aimed especially at bolstering Islamabad's counterterrorism and border security efforts, and have included U.S.-funded road-building projects in the KPk and FATA. The United States also has undertaken to train and equip new Pakistan Army Air Assault units that can move quickly to find and target terrorist elements. U.S.-funded military education and training programs seek to enhance the professionalism of Pakistan's military leaders, and develop respect for rule of law, human rights, and democratic values. At least 300 Pakistani officers have received such training since 2001.\nU.S. security assistance to Pakistan's civilian sector is aimed at strengthening the country's law enforcement capabilities through basic police training, provision of advanced identification systems, and establishment of a new Counterterrorism Special Investigation Group. U.S. efforts may be hindered by Pakistani shortcomings that include poorly trained and poorly equipped personnel who generally are underpaid by ineffectively coordinated and overburdened government agencies. Pakistan's weak criminal justice sector is marked by conviction rates below 10%, poorly trained investigators, and rampant corruption. Some analysts link the problem to democratization more broadly, and urge much greater U.S. and international attention to bolstering Pakistan's civilian security sector. The findings of a 2008 think-tank report reflected a widely held view that Pakistan's police and civilian intelligence agencies are better suited to combating insurgency and terrorism than are the country's regular army. The report found that Pakistan's police forces are \"incapable of combating crime, upholding the law, or protecting citizens and the state against militant violence,\" and placed the bulk of responsibility on the politicization of the police forces. The report recommended sweeping reforms to address corruption and human rights abuses.", "P.L. 111-8 : The Omnibus Appropriations Act, 2009 (became Public Law on March 11, 2009):\nLimits FY2009 Foreign Military Financing for Pakistan to \"border security, counterterrorism, and law enforcement activities directed against Al Qaeda, the Taliban, and associated groups.\" Bars the use of such funds for any program initially funded under the authority of Section 1206 of the 2006 defense authorization ( P.L. 109-163 ), which pertains to Pentagon programs for training and equipping foreign military forces.\nP.L. 111-32 : The Supplemental Appropriations Act, 2009 (became Public Law on June 24, 2009):\nAppropriates $672 million in supplemental FY2009 assistance funds for Pakistan. Appropriates $1 billion for continuing coalition support reimbursements to key cooperating nations (Pakistan typically receives roughly 80% of such funds). Establishes new U.S. Treasury funds providing a total of $1.1 billion for strengthening Pakistani counterinsurgency capabilities through FY2011. Requires the President to report to Congress an assessment of the extent to which the Afghan and Pakistani governments are demonstrating the necessary commitment, capability, conduct and unity of purpose to warrant the continuation of the President's policy announced in March 2009. Requires the President to report to Congress a clear statement of the objectives of United States policy with respect to Afghanistan and Pakistan, and the metrics to be used to assess progress toward achieving such objectives.\nP.L.-111-73 : The Enhanced Partnership With Pakistan Act of 2009 (became Public Law on October 15, 2009):\nAuthorizes $1.5 billion per fiscal year for nonmilitary assistance to Pakistan for FY2010-FY2014, and establishes a sense of Congress that, subject to an improving political and economic climate in Pakistan, such aid levels should continue through FY2019. Prohibits military assistance and arms transfers to Pakistan during FY2010-FY2014 unless the Secretary of State annually certifies for Congress that (1) Pakistan is continuing to cooperate with the United States to dismantle illicit nuclear proliferation networks; (2) Pakistan's government is making significant efforts to combat terrorist groups; and (3) Pakistan's security forces are not subverting Pakistan's political or judicial processes. Directs the Secretary of State to submit a Pakistan Assistance Strategy Report to Congress containing descriptions of objectives, and monitoring and accountability mechanisms.\nP.L. 111-84 : The National Defense Authorization Act for FY2010 (became Public Law on October 28, 2009):\nDirects the Secretary of State to carry out a program to provide for the registration and end-use monitoring of defense articles and services transferred to Pakistan (and Afghanistan), and to prohibit the retransfer of such articles and services without U.S. consent. Requires the Secretary to (1) assess possible alternatives to reimbursements to Pakistan for logistical, military, or other support provided to or in connection with U.S. military operations; and (2) report assessment results to the defense, appropriations, and foreign relations committees. Directs the Secretary to report semiannually to Congress on progress toward long-term security and stability in Pakistan.\nP.L. 111-118 : The Department of Defense Appropriations Act, 2010 (became Public Law on December 19, 2009)\nRequires the Director of the Office of Management and Budget, in consultation with the Secretary of Defense and other defense officials, to submit to Congress a quarterly report on the proposed use of all Pakistan Counterinsurgency Fund (PCF) spending on a project-by-project basis. Requires the Secretary of Defense to notify Congress of any new PCF projects or fund transfers in excess of $20 million.\nH.R. 1463 : To restrict U.S. military assistance to Pakistan (referred to House committee on March 12, 2009):\nWould have prohibited U.S. military assistance to Pakistan unless the President certified for Congress that the Islamabad government was making A.Q. Khan available for questioning by U.S. officials and that it was adequately monitoring Khan's activities so as to prevent his participation in any further nuclear proliferation.\nS. 496 : Afghanistan and Pakistan Reconstruction Opportunity Zones Act of 2009 (referred to Senate committee on February 26, 2009; a related bill, H.R. 1318 , was passed by the House as part of H.R. 1886 on June 11, 2009):\nWould have provided duty-free treatment for certain goods from designated Reconstruction Opportunity Zones in Afghanistan and Pakistan." ], "depth": [ 0, 1, 1, 2, 3, 3, 4, 4, 4, 3, 4, 4, 4, 4, 4, 3, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 3, 3, 2, 3, 3, 2, 3, 3, 3, 3, 3, 3, 2, 3, 3, 2, 3, 3, 3, 3, 3, 2, 2, 1, 1, 2, 2, 2, 1, 2, 2, 2, 2, 3, 3, 1, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 3, 3, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h4_full h1_full", "h4_full h2_title h0_title h3_title h1_title", "h0_title h2_title h4_title h3_title h1_title", "h4_full", "", "", "", "", "h0_title h2_title h4_title h3_title h1_title", "h2_full", "h0_full h4_full", "h3_full h4_full h1_full", "", "", "", "h3_full", "h3_title", "h3_full", "", "", "", "", "h0_title h2_title", "", "h2_full", "", "", "", "", "", "", "h0_full h2_title", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "h2_full", "", "", "", "", "", "h3_full", "", "", "", "", "h3_full", "", "", "", "", "", "", "", "", "h4_full", "", "", "", "", "", "" ] }

{ "question": [ "What US interest is in Pakistan?", "What are the US's specific concerns?", "What counterterrorism and counterinsurgency opinions are held with Pakistan's cooperation?", "What has happened in regard to Pakistan tolerance?", "What challenges does Pakistan pose to the US?", "What is one of the large US foreign policy concerns regarding Pakistan?", "How does this stance hinder US goals?", "How has American-Islamist terrorist connection worries been advanced?", "Why was Pakistan-India peace halted?", "How has the process progressed since then?", "How does Pakistan regard India presence in Afghanistan?", "What is US focus in South Africa?", "What is Pakistan's current political setting?", "How is the military included in political power?", "What has caused economic anxiety in Pakistan?", "Why did these anxieties increase?", "How is the US advising based on the economic issues?", "How does the Obama Administration seek relations with Islamabad?", "What is the strategy to stabilize Afghanistan?", "How have US efforts been supported?", "What aid does the US provide Pakistan?", "What specifically military assistance has Pakistan received?", "What does this report cover?", "How will this report be updated?" ], "summary": [ "A stable, democratic, prosperous Pakistan actively combating religious militancy is considered vital to U.S. interests.", "U.S. concerns regarding Pakistan include regional and global terrorism; efforts to stabilize neighboring Afghanistan; nuclear weapons proliferation; the Kashmir problem and Pakistan-India tensions; democratization and human rights protection; and economic development.", "Pakistan is praised by U.S. leaders for its ongoing cooperation with U.S.-led counterterrorism and counterinsurgency efforts, although long-held doubts exist about Islamabad's commitment to some core U.S. interests.", "A mixed record on battling Islamist extremism includes ongoing apparent tolerance of Taliban elements operating from its territory.", "Pakistan's troubled economic conditions and political setting combine with perilous security circumstances and a history of troubled relations with neighbors to present serious challenges to U.S. decision makers.", "Islamist extremism and militancy in Pakistan is a central U.S. foreign policy concern.", "The development hinders progress toward key U.S. goals, including the defeat of Al Qaeda and other anti-U.S. terrorist groups, Afghan stabilization, and resolution of the historic Pakistan-India rivalry that threatens the entire region's stability and that has a nuclear dimension.", "Long-standing worries that American citizens have been recruited and employed in Islamist terrorism by Pakistan-based elements have become more acute in the past year, especially following a failed May 2010 bombing attempt in New York City that was linked to the \"Pakistani Taliban.\"", "A bilateral Pakistan-India peace process was halted after a November 2008 terrorist attack on Mumbai was traced to a Pakistan-based terrorist group.", "This process, strongly supported by the United States, remains moribund, and serious mutual animosities persist.", "Pakistan is wary of India's presence in Afghanistan, where Islamabad seeks a friendly and perhaps malleable neighbor, and has had troubled relations with the Kabul government.", "A perceived Pakistan-India nuclear arms race has been the focus of U.S. nonproliferation efforts in South Asia.", "Pakistan's political setting remains fluid, with a weak ruling coalition struggling to stay in power.", "While the most recent iteration of direct military rule ended in 2008, Pakistan's military and intelligence institutions are seen to possess inordinate political power.", "Rampant inflation and unemployment, along with serious food and energy shortages, elicit considerable economic anxiety in Pakistan.", "These pressures were hugely exacerbated by unprecedented devastation resulting from mid-2010 flooding.", "The U.S. government and international financial institutions are among those strongly urging Islamabad to more quickly institute economic reform.", "The Obama Administration continues to pursue close and mutually beneficial relations with Islamabad.", "As part of its strategy for stabilizing Afghanistan, the Administration's Pakistan policy includes a tripling of nonmilitary aid to improve the lives of the Pakistani people, as well as the conditioning of U.S. military aid to Islamabad on that government's progress in combating militancy and in further fostering democratic institutions.", "A Special Representative was appointed to coordinate U.S. government efforts with both Pakistan and Afghanistan.", "Pakistan is among the world's leading recipients of U.S. aid and by the end of FY2010 had obtained about $10.7 billion in overt assistance since 2001, including more than $6 billion in development and humanitarian aid.", "Pakistan also has received more than $8 billion in military reimbursements for its support of and engagement in counterterrorism and counterinsurgency efforts against Islamist militants.", "This report reviews key current issues and developments in Pakistan and in U.S.-Pakistan relations.", "It will be updated periodically." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 0, -1, -1, 0, -1, -1, -1, 0, -1, 2, 2, -1, -1, 1, -1, 3, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 4 ] }

{ "title": [ "Background", "Both Broad and Targeted Federal Alternative-Fuels Initiatives Support the Development and Use of Alternative Jet Fuels", "Broad Federal Strategies and Initiatives Have Supported Alternative Jet- Fuel Development and Use", "Four Federal Agencies Support Alternative Jet Fuels Development and Use through Targeted Goals, Initiatives, and Coordination Efforts", "Federal Agencies’ Usage Goals", "Federal Agency Initiatives for R&D and Direct Financial Support", "Coordination Efforts with Private Industry and Other Stakeholders", "Price- Competitiveness Is the Main Challenge; Federal Activities Help Address Challenge, but Market Factors Affect the Long-term Commercial Viability of Alternative Jet Fuels", "While Some Progress Has Been Made, No Alternative Jet Fuels Are Currently Commercially Available at a Price That Is Competitive with Conventional Jet Fuels", "The Overarching Challenge to Developing an Alternative Jet Fuels Market Is Making the Price Competitive with Conventional Jet Fuels", "High Development Costs across the Alternative Jet Fuel Supply Chain", "Uncertainty of Federal Policies and Regulations", "Stakeholders Generally Believe Federal Actions Are Needed to Advance the Development of Alternative Jet Fuels, While Market Factors Also Affect Long-term Commercial Viability", "Federal Actions", "Market Factors", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Environmental Protection Agency", "Appendix III: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments" ], "paragraphs": [ "Definitions vary somewhat, but for the purpose of this report, we define alternative jet fuels as drop-in liquid fuels that are derived from non- petroleum feedstocks, including renewable biomass (such as crop and tree residues, algae, or separated municipal solid waste) and some nonrenewable sources (such as natural gas or coal). Because they are “drop-in,” alternative jet fuels can replace conventional petroleum-based jet fuel (i.e., conventional jet fuel) without the need to modify aircraft engines and fuel distribution infrastructure. This definition means that alternative jet fuels are a substitute for conventional jet fuel and would directly compete with it on the commercial market. Most development activities—both federal and private industry activities—are focused on alternative jet fuels derived from renewable sources, in part, because of the prominence of environmental sustainability in national strategies and a federal requirement that any alternative jet fuel for operational use procured by any federal agency must have lifecycle greenhouse gas emissions less than or equal to conventional fuel of the same purpose.\nAlternative jet fuels are generally derived from the same feedstocks and processes as other advanced fuels (e.g., renewable diesel) and even some industrial products (e.g., plastics). As a result, alternative jet fuel producers have some flexibility in producing a variety of fuels and other products, seeking to maximize their profit relative to demand and costs. Figure 1 describes the six segments of the supply chain for the development and use of alternative jet fuels.\nThe first three segments of the alternative jet-fuel supply chain— feedstock production, feedstock logistics, and fuel production—are common to all alternative fuels, and the first two segments are generally independent of the end-use product or co-products that are produced. For example, the camelina crop can be processed, converted, and refined into multiple end-use products, including renewable gasoline, diesel, and jet fuel, with the relative quantities of each of these end-use products determined by the fuel refiner. The activities associated with producing the camelina (e.g., growing the crop) and the logistical activities of collecting, storing, and transporting the camelina feedstock before it is converted to fuel are the same regardless of the relative quantities of renewable diesel or jet fuel produced. In the third segment of the supply chain, alternative jet fuels are generally co-produced with other end-use products, although fuel producers do have some flexibility in the mix of products they make.\nThe remaining three segments of the supply chain—fuel testing and approval, fuel distribution, and end use—include activities that are specific to jet fuel. For example, this supply chain includes a segment for fuel testing and approval because before any alternative jet fuel can be approved for commercial or military use, it must meet unique safety and performance standards that are more rigorous than standards for other alternative transportation fuels. Standards for alternative jet fuels are set out in applicable standards controlled by ASTM International and the appropriate military department within DOD (the Navy and the Air Force). The requirements for fuel testing and approval under ASTM International and military standards vary by the characteristics of the fuel and the feedstock and production process used, but generally the requirements include a significant amount of fuel, engine, and aircraft testing. Initially, a fuel may be tested in a laboratory using small quantities of fuel (as little as 500 milliliters), but as it progresses through the approval process, fuel quantity requirements could reach as much as 225,000 gallons if extensive engine testing is required.\nThe last two segments of the alternative jet fuel supply chain—fuel distribution and end use—also include activities specific to jet fuels, but not specific to alternative jet fuels relative to conventional jet fuel. Specifically, according to the applicable ASTM International and military standards, once an alternative jet fuel is produced, certified, and released under the applicable standard, it also meets the standards for conventional jet fuel. Accordingly, alternative jet fuels can be seamlessly integrated into the existing jet fuel distribution system and onto aircraft without changes to any infrastructure.\nAlthough no alternative jet fuels are currently available in the United States at a competitive price, as discussed later in this report, two alternative jet fuel production processes—referred to as the Fischer- Tropsch process and the HEFA process—are approved for use by commercial and military aviation. Under the previously mentioned ASTM International and military standards, fuels produced through these two processes are approved for up to a 50 percent blend with conventional jet fuel. As with conventional jet fuel production processes, both of these processes produce multiple end-use products, including, for example, diesel and jet fuel. The fuel producer, to a limited extent, determines the relative quantities of jet fuel, diesel, and other products to be produced. For many feedstocks used in the HEFA process, changing the product ratio to produce more jet fuel and less diesel, however, is more costly because it requires additional processing and increases the proportion of output that is comprised of less-valuable co-products, such as liquefied petroleum gas. Seven other production processes for alternative jet fuels, such as converting alcohols to jet fuel, are undergoing review in the ASTM International testing and approval process and in some military departments’ testing and approval processes.", "", "The White House has developed broad national strategies that promote the development of alternative fuels to help secure energy independence, foster economic development, and reduce greenhouse gas emissions. For example, the Blueprint for a Secure Energy Future (March 2011), the National Bioeconomy Blueprint (April 2012), and the President’s Climate Action Plan (June 2013), all describe how supporting the development of alternative fuels can contribute to achieving these broad national goals. However, these strategies also note that alternative fuels are only part of a wide variety of other complementary activities working toward the same goals. For example, according to the President’s Climate Action Plan, meeting U.S. greenhouse gas-emission reduction goals depends not only upon the development and use of alternative fuels, but also on numerous other activities such as increasing fuel economy standards, expanding and modernizing the electric grid, and improving the energy efficiency of homes and businesses.\nSome initiatives led by one or more of our five selected federal agencies involved in the development or use of alternative jet fuel help support these broad national strategies and are often similarly broad—focusing on issues that are common to a variety of alternative fuels, including alternative jet fuels. For example, to support the development of technologies and processes necessary for the commercial production of biofuels at prices that are competitive with conventional fuels, USDA and DOE jointly administer the Biomass Research and Development Initiative, which assists in developing these technologies through research, development, and demonstration projects. According to USDA and DOE officials, most of the initiative’s projects do not target alternative jet fuels specifically. However, officials from these agencies noted that general scientific advancements that broad initiatives identify can also advance alternative jet fuels development specifically. For example, research that improves the efficiency of a particular fuel-conversion process often supports the development of all fuels that the process could produce.\nIn 2007, the Energy Independence and Security Act (EISA) of 2007 expanded the Renewable Fuel Standard (RFS) to cover most surface transportation fuels, such as fuels for use in motor vehicles and engines and nonroad vehicles and engines, but not jet fuel. Overall, jet fuel is a fraction of the total transportation fuel consumed in the United States. The expanded RFS generally required that covered transportation fuels contain 9-billion gallons of renewable fuels in 2008, with renewable fuels’ volumes increasing annually to 36-billion gallons in 2022. To demonstrate compliance with the RFS, fuel producers or importers use renewable identification numbers (RINs). Fuel producers or importers can obtain RINs by purchasing and blending renewable fuels themselves, or they can purchase RINs from renewable fuel producers, importers, blenders, or other parties. In this way, the renewable fuel program has created a market for RIN credits. While jet fuel is not used to calculate a fuel producer’s or importer’s renewable fuel obligation, EPA determined in its March 2010 final rule for the expanded renewable fuel program that some feedstocks and conversion processes for renewable jet fuel qualify as “advanced biofuels,” one of the new categories of renewable fuel established by EISA. In addition, through regulations issued in March 2013, EPA clarified that some renewable diesel processes that had been previously evaluated included jet fuel and also approved additional jet-fuel pathways. If alternative jet fuels produced through these approved processes generate RIN credits—which the fuel producer may then sell to others—their sale may help subsidize the cost of producing qualifying alternative jet fuels.", "Four of the selected agencies—FAA, DOD, USDA, and DOE—support initiatives that target alternative jet-fuel development or use specifically. FAA and DOD have established specific goals for using alternative jet fuels in commercial and military aircraft and support research and development (R&D) activities—such as testing to approve new alternative jet fuels—to help them to achieve these goals. DOD, USDA, and DOE also have initiatives that provide direct financial support for future alternative jet-fuel production on a commercial-scale. All of these agencies coordinate their alternative jet fuel-related efforts with industry and other stakeholders through partnerships and agreements.", "FAA and DOD have established usage goals specifically for alternative jet fuels. In fiscal year 2012, FAA set a goal for the U.S. aviation industry (including commercial and military aircraft) to use 1-billion gallons of alternative jet fuels annually by 2018 with the intent of encouraging commercial production. According to FAA officials, this represents about 5 percent of the predicted jet fuel consumption for domestic airlines and the military in 2018. Achieving this goal, however, will depend on a variety of factors, including support from other federal agencies and industry stakeholders. USDA and other nongovernmental stakeholders have stated their intent to help enable commercial production of alternative jet fuels in support of FAA’s goal through existing programs and expanded collaboration.\nTwo of DOD’s military departments—the Navy and the Air Force—have also established usage goals for alternative fuels, including alternative jet fuels. To support these usage goals, the Navy and Air Force are willing to purchase alternative fuels that meet specific criteria, including availability at a price that is competitive with conventional fuels.\nThe Navy’s 2010 A Navy Energy Vision for the 21st Century states that increasing its use of alternative energy—including alternative jet fuels—will help protect it from energy price volatility and supply disruptions. The plan sets a goal of deriving 50 percent of total Navy energy consumption afloat—including its jet fuel consumption—from alternative sources by 2020, which, according to Navy estimates, would require using about 336-million gallons of alternative fuels annually (both marine and jet fuels) by 2020. The Navy consumes over 600-million gallons of petroleum-based aviation fuel each year, which according to a Navy official, constitutes about 40 percent of its total petroleum consumption. In addition to setting quantitative goals, the plan established a goal of demonstrating (which the Navy completed in July 2012) and deploying the Great Green Fleet—a group of ships and aircraft fueled by alternative jet fuels and other alternative energy sources—by 2016.\nThe Air Force’s 2013 U.S. Air Force Energy Strategic Plan includes a goal of increasing the use of cost-competitive drop-in alternative jet- fuel blends for non-contingency operations to 50 percent of total consumption by 2025. According to the plan, the Air Force consumes about 2.5 billion gallons of jet fuel each year, accounting for about 80 percent of its total energy consumption. The plan states that using alternative jet fuels could help to diversify the types and secure the quantities of energy that are needed to perform the Air Force’s missions, which are currently “heavily dependent” upon petroleum and petroleum-derived fuels, posing significant strategic and security vulnerabilities on energy supplies.", "Two types of federal initiatives specifically support the development and use of alternative jet fuels—sponsoring R&D and direct financial support for future commercial production. FAA, DOD, and DOE support R&D activities to target alternative jet fuels specifically, such as testing to approve new alternative jet fuels or research to determine the environmental or economic impact of using them. USDA, DOE, and DOD have also taken some steps to provide direct financial support for future commercial-scale production of alternative jet fuels.\nDOT—primarily FAA—supports activities to determine the technical feasibility and impact of using alternative jet fuels, including ways to reduce the cost of production, through FAA’s Continuous Lower Energy, Emissions and Noise (CLEEN) program and Centers of Excellence (COEs), and through other DOT activities.\nCLEEN Program: Launched by FAA’s Office of Environment and Energy in 2010, CLEEN is a cost-sharing program that, among other things, supports fuel-testing activities to generate data that can be used to support the approval of new alternative jet fuels. According to FAA officials, under the program, FAA is providing about $125 million in matching funds (of which about $93 million was provided through fiscal year 2013) to five projects with engine and airframe manufacturers. According to FAA officials, four of these projects address issues related to alternative jet fuels development or use. For example, through fiscal year 2013, FAA has awarded about $5.5 million through the CLEEN program to conduct laboratory and engine- component tests of advanced alternative jet fuels that could be approved for commercial use by ASTM International. FAA has announced its plans to implement a follow-on program in 2015, called CLEEN II—when FAA plans to end the initial CLEEN program. Like the initial program, CLEEN II’s goals will include developing and demonstrating drop-in sustainable alternative jet fuels. However, FAA officials told us that under CLEEN II they intend to place an emphasis on advancing coordinated test methods and capabilities to reduce testing cost and time and the possibility of redundant testing by multiple engine manufacturers.\nCenters of Excellence: FAA also sponsors research studies related to the environmental impact of using alternative jet fuels through its COEs. Beginning in 2003, FAA sponsored the Center of Excellence for Aircraft Noise and Aviation Emissions Mitigation, named Partnership for AiR Transportation Noise and Emissions Reduction (PARTNER), a collaborative effort that researched solutions for existing and anticipated aviation-related noise and emissions problems. According to FAA officials, five PARTNER projects focused on alternative jet fuels specifically. For example, one project studied the economic feasibility, production potential, and environmental impact of alternative jet-fuel use. Upon the expiration of PARTNER’s 10-year cooperative agreement in September 2013 and as required in the FAA Modernization and Reform Act of 2012, FAA selected a team of universities to form a new COE for Alternative Jet Fuel and Environment, named the Aviation Sustainability Center (ASCENT), with research goals that include better understanding ways to reduce the costs of production processes and ways to meet FAA’s goal of using 1-billion gallons of alternative jet fuels by 2018. ASCENT is being led by Washington State University and the Massachusetts Institute of Technology, and is expected to receive at least $4 million annually for 10 years to explore ways to meet FAA’s environmental and energy goals, including sustainable alternative jet fuels.\nDOT activities: DOT also helps fund research through broad agency announcements for FAA-sponsored projects that address specific alternative jet fuels’ testing needs. Specifically, in 2010 DOT invited research in four priority areas: development of novel “drop-in” alternative jet fuels, alternative jet fuels’ quality control, sustainability guidance for alternative jet fuels’ users and performance, and durability testing of new fuels. According to FAA officials, DOT’s John A. Volpe National Transportation Systems Center has administered six FAA-sponsored broad agency-announcement research projects related to alternative jet fuels at a total cost of about $7 million. For example, DOT provided funds to three alternative jet-fuel producers to develop and optimize conversion processes for alternative jet fuels. These funds better positioned the fuel producers to produce fuel for testing purposes and develop knowledge to help overcome key technical hurdles to commercial-scale production.\nDOD also supports activities to test and approve alternative jet fuels. All three DOD military departments coordinate their alternative jet-fuel testing and approval efforts through the Tri-Service Alternative Fuels Working Group. According to Air Force officials, this working group helps share data, reports, testing, and certification practices across DOD and is working toward developing a department-wide certification strategy. Specifically, the Army, Navy, and Air Force test alternative jet fuels to ensure that they are safe to use on military ships, aircraft, and fuel distribution systems. Their testing programs capture technical data through laboratory, component, engine, fuel system, and weapon system tests that evaluate the effects of changes in fuel chemistry and properties on the performance and reliability of military equipment. According to DOD officials, the department purchased about 1.5-million gallons of alternative jet fuels to conduct the department’s testing and approval activities from fiscal years 2007 to 2013 at a total cost of almost $40 million. Officials from the Navy and Air Force told us that these activities will help enable them to achieve their stated goals for alternative jet-fuels use. DOE also, on behalf of DOD, recently solicited applications for R&D projects that help enable conventional coal-to-liquid production plants to produce commercially viable quantities of jet fuel that have equal or lower greenhouse gas emissions and make significant progress toward being cost-competitive to conventional jet fuel. DOE expects to select and award applications by the end of August 2014, with about $20 million available under the solicitation.\nIn addition, federal agency officials representing eight federal agencies recently formed an interagency working group that is currently drafting a national R&D strategy for alternative jet fuels. According to members of the working group, a national R&D strategy is needed to create a national vision for alternative jet fuels specifically and a unified federal government approach to help facilitate interaction with external stakeholders, such as industry and academia. As part of the working group’s efforts, in January 2014, the working group sponsored a workshop attended by government and industry stakeholders. The workshop identified a variety of challenges to making alternative jet fuels, including challenges associated with feedstock logistics, fuel production and scale-up, fuel certification and qualification, as well as other cross-cutting issues. According to members of the working group, the national strategy for alternative jet fuels will focus on R&D challenges and will not address policy issues.\nDirect Financial Support for Future Commercial Production In June 2011, USDA, DOE, and one of DOD’s military departments (the Navy) signed a memorandum of understanding (MOU) that initiated cooperation among these agencies in assisting the development and support of a sustainable commercial biofuels industry, which could produce alternative jet fuels among other types of biofuels. The MOU explained that given the current economic environment, significant start- up risks, and competitive barriers of an established conventional fuels market, it is necessary for the federal government to cooperate with private industry to create a strong demand signal and to make targeted investments to achieve the necessary alternative-fuels-production capacity. The stated objective is to construct or retrofit multiple domestic commercial- or pre-commercial-scale advanced drop-in biofuel production facilities. Specific characteristics required for the facilities include that the biofuels that they produce must be capable of meeting military fuel standards at a price that is competitive with conventional jet fuel and have no significant impact on the supply of agricultural commodities for the production of food.\nUnder the MOU, USDA, DOE, and the Navy stated their intent to contribute $170 million each over 3 years, for an aggregate total of $510 million. Under the authority of the Defense Production Act, Title III, DOE and the Navy planned to fund their share of $340 million for capital investment and production. USDA planned to provide its contribution under the authority of the Commodity Credit Corporation Charter Act. Under this MOU, in June 2012, USDA, DOE, and DOD announced the initiation of and a solicitation for the Advanced Drop-In Biofuels Production Project, which would provide awards for biofuels production facilities over two phases. In May and June 2013, four private companies were selected to receive awards totaling $20.5 million, with private industry paying at least 50 percent of the cost. According to Defense Production Act Title III program officials, the Advanced Drop-In Biofuels Production Project should provide production capacity for about 35 million gallons per year of renewable jet fuels that meet military standards and are available at a price that is competitive to conventional fuels by 2016. But the amount of production capacity is dependent, in part, on the timing and the number of awards for the Advanced Drop-In Biofuels Production Project’s second phase. According to DOD officials, the department plans to make its determination for the second phase of awards in July 2014.\nMore recently, in December 2013, the Secretaries of USDA and the Navy announced another initiative that complements the Advanced Drop-In Biofuels Production Project called Farm to Fleet, which is intended to help the Navy meet its alternative-fuels usage goals. Under the initiative, DOD plans—through its regular domestic bulk-fuel purchases—to issue solicitations in 2014 for the purchase of about 80-million gallons of any combination of jet and marine diesel fuels in 2015 that are blended with at least 10 percent alternative fuels. USDA plans to contribute up to about $161 million (under the authority of the Commodity Credit Corporation Charter Act) toward these fuel purchases to help defray any domestic feedstock costs that would have caused the final alternative fuel to not be price competitive with conventional fuels.\nIn addition, DOE provides direct financial support for future alternative jet fuels production through its integrated biorefineries program, which was initiated in 2005. Under the program, DOE’s Bioenergy Technologies Office (BETO) works in partnership with industry to develop, build, operate, and validate integrated biorefineries at various scales (pilot, demonstration, and commercial). The purpose of these projects is to provide federal support to private industry to help bridge the gap between promising R&D scientific advancements and commercial-scale production by validating fuel conversion technologies at progressively larger scales. According to BETO, federal financial support is essential to help offset the technical and financial risks associated with producing alternative fuels at a commercial-scale. According to BETO officials, DOE has obligated almost $198 million for 14 integrated biorefinery projects related to the development or use of alternative jet fuels. For example, it obligated about $50 million to a fuel producer to demonstrate the technical and economic feasibility of refining algal oil into gasoline, diesel, and jet fuel.", "Because of private industry’s indispensible role throughout the alternative jet fuel supply chain—such as producing feedstock and fuel—it is critical that the federal government’s activities are coordinated with external stakeholders. As a result, USDA, DOE, FAA, and DOD participate in a variety of coordination efforts, such as partnerships with industry and other stakeholders, to identify opportunities to work toward common goals and needs. For example, FAA and other federal agencies participate in the Commercial Aviation Alternative Fuels Initiative (CAAFI), a public- private partnership formed in 2006 to facilitate the development and deployment of drop-in alternative jet fuels that are intended to reduce all aviation emissions, improve price stability, and support supply security. Key CAAFI efforts have included developing and sharing user guides and tools, as well as organizing workshops for alternative fuel producers and other stakeholders. For example, in December 2013, CAAFI published a user’s guide to help alternative jet-fuel producers understand and comply with ASTM International’s process to test and approve new alternative jet fuels. The partnership also developed a “Path to Alternative Jet Fuel Readiness” tool that describes the testing and environmental evaluations required to show a new alternative jet fuel’s suitability for aviation use and how to best facilitate ASTM International approval. In addition, in January 2013 and January 2014, CAAFI conducted workshops on current regulatory, voluntary, and research efforts related to alternative jet-fuel sustainability issues. Among other things, 2013 workshop participants identified the need to understand and reconcile differences among various approaches to calculating life-cycle greenhouse gas emissions that result from producing alternative jet fuels, and 2014 participants began assessing the differences.\nUSDA coordinates with private industry and other governmental stakeholders through the FARM to FLY initiative, which was initially established in July 2010 to accelerate the availability of a commercially viable and sustainable domestic alternative jet-fuels industry, increase domestic energy security, establish regional supply chains, and support rural development. USDA expanded the initiative by signing a 5-year FARM to FLY 2.0 resolution with CAAFI, FAA, Airlines for America, and others. Under the expanded resolution, participants agreed to designate personnel for a working group tasked with assessing and proposing ways to support FAA’s goal of using 1-billion gallons of alternative jet fuels by 2018. The working group plans to issue a final report by the end of 2018.\nIn addition to the two efforts described above, federal agencies participate in a variety of other coordination efforts, including the following.\nUSDA, DOE, FAA, and DOD work with industry and other stakeholders through regional initiatives that are aimed at advancing alternative fuels within specific regions of the United States.\nDOE’s BETO co-sponsored a September 2013 workshop to obtain input from industry, academia, and other experts on optimizing and integrating the use of natural gas and biomass to produce liquid transportation fuels, including alternative jet fuels.\nFAA has signed onto or agreed to engage in activities under international cooperative agreements with four countries: Australia (2011), Brazil (2011), Germany (2012), and Spain (2013). Under each of these agreements, FAA agreed to share information about R&D efforts, fuel testing or approval requirements, and environmental or sustainability studies, among other things. According to FAA, these international partnerships contribute to FAA’s ongoing efforts to support approval of additional sustainable alternative jet fuels by ASTM International. For example, representatives from all four countries participated and shared information about their respective initiatives at a recent meeting sponsored by CAAFI. Also, FAA and German Ministry of Transport officials recently participated in a technical and coordination exchange to share details on fuel testing and approval activities to identify complementary activities, among other things.", "", "The dates FAA and DOD have established for meeting their alternative jet-fuel usage goals are several years or more away, and, to date, all alternative jet fuels purchased in the United States have been for fuel testing, approval, or demonstration activities, not for day-to-day operations. For example, in November 2011, two domestic airlines purchased alternative jet fuels for a limited number of commercial flights. According to DOD officials, DOD purchased about 150,000 gallons in fiscal year 2012 (about 1.5-million total gallons since fiscal year 2007) of alternative jet fuels, all for fuel testing and approval activities, including about 100,000 gallons for the Navy’s Great Green Fleet demonstration in July 2012. Commercial and military use is constrained because alternative jet fuels are not yet produced on a commercial-scale at a price that is competitive with conventional jet fuel. While FAA officials acknowledged that FAA’s usage goal is “aspirational,” they noted that alternative jet fuel use could increase substantially once the industry is capable of producing alternative jet fuels at a commercial scale and at a price that is competitive with conventional jet fuels.\nCurrently, the price for alternative jet fuels exceeds that of conventional jet fuel. Jet fuel end users—both commercial airlines and DOD—are extremely price sensitive when making purchasing decisions. Fuel purchasers are either unwilling to pay a premium for alternative jet fuels as compared to conventional jet fuel, or in the case of DOD, are precluded by law and department policy from doing so. The actual price differential depends on the feedstock, the production process used to produce the alternative jet fuel, as well as fuel distribution and quantities produced. Of the two alternative jet-fuel production processes approved for use in commercial and military aircraft (Fischer-Tropsch and HEFA), DOD, according to a DOD official, paid from about $3 to $150 per gallon. These prices, however, reflect purchases of small quantities of fuel for testing and approval activities, which according to government officials and a fuel producer we interviewed and literature we reviewed, are higher than what the price would be if the quantities were produced at a commercial scale. A study conducted by one of FAA’s COEs in March 2013 estimated that alternative jet fuels produced on a commercial scale using the HEFA process would require a subsidy of $0.35 to $2.86 per gallon to be price-competitive with conventional jet fuels in 2020.\nRecent developments indicate that alternative jet fuel use may increase in the future, which could contribute to achieving FAA’s and DOD’s usage goals. For example, as of January 2014, seven new potential alternative jet-fuel production processes are undergoing review by ASTM International for approval—at least one of which FAA officials told us may be approved by June 2014. According to a couple of government officials and an industry representative whom we spoke with, a range of approved production processes could diversify and expand the future supply of alternative jet fuels. Another potential alternative jet-fuel production process that will be submitted to ASTM for approval involves using a type of renewable fuel that is currently used in ground transportation. Because production capacity already exists for this fuel, it could be made available more quickly to meet demand from the aviation industry. In addition, two airlines—United Airlines and Alaska Airlines—have entered into agreements, known as “off-take agreements,” to purchase alternative jet fuels from fuel producers’ future production.", "We interviewed 23 academic, federal government, and private industry stakeholders with expertise in various segments of the supply chain to help identify challenges to developing and using alternative jet fuels (see app. I for more information on the criteria used to select the stakeholders interviewed). Through interviews with these stakeholders using open- ended questions, we identified two major factors—high development costs for alternative jet fuels and uncertainty with respect to federal regulations and policies—as the primary contributors to the overarching challenge that alternative jet fuels are not commercially available at a price that is competitive with conventional jet fuel.", "Almost all of the stakeholders whom we interviewed (22 of 23) cited at least one factor related to high development costs. While one of these stakeholders discussed the challenges associated with high development costs broadly, the remaining 21 of them highlighted development cost challenges associated with specific supply-chain segments.\nFeedstock production: Stakeholders we interviewed most commonly cited the high cost of feedstock in connection with the first segment of the supply chain (15 of 23 stakeholders). Five of these stakeholders noted that for fuel produced using the HEFA production process, the cost of some types of feedstock—even before it is transported or converted—currently exceeds that of conventional fuel. For example, when comparing conventional jet-fuel prices reported by the Energy Information Administration and soybean oil prices reported by the World Bank between 1990 and 2012, the price per gallon of soybean oil exceeded the price per gallon of conventional jet fuel in almost every year. In addition, an increase in demand for alternative jet fuels could increase the derived demand for feedstocks (as alternative jet fuel producers increase their production output) and the price of feedstocks could rise.\nSix stakeholders noted that the expansion of low cost natural gas production in the United States could help lower production costs for alternative fuels derived from nonrenewable sources, such as natural gas. However, jet fuel produced from nonrenewable sources, such as natural gas, does not meet the statutory definition of “renewable biomass,” and therefore could not generate RINs. Expanding the production of different types of renewable feedstocks could also help lower feedstock production costs, but three stakeholders noted that the agriculture community does not have much experience in growing crops that could be used to produce alternative fuel, and farmers are hesitant to grow those crops without a guarantee that they can be sold or the certainty that the energy crop would be more profitable than what the farmer could otherwise grow.\nFeedstock Logistics: While the logistics differ depending on the type of feedstock, one private-industry stakeholder and studies we reviewed explained that feedstock used to produce alternative fuels is generally costly to collect, store, handle, and transport. For example, oil producing feedstocks—such as camelina, soy, or jatropha—require special handling, including proper moisture and temperature conditions for storage and cleaning, drying, and de-hulling before the process for extracting the oil from the plant occurs. And, some other feedstock crops, such as wood residues or switchgrass—which are fibrous, have a low energy density, and have variable moisture content—are costly to collect, store, and transport because of this complexity. Moreover, to be more cost effective, these feedstocks may need to be grown near fuel production facilities; otherwise, they may need to be shipped by bulk freight transportation (such as by rail or pipeline), which increases the transportation cost. That is why a demonstration-scale ethanol biorefinery that we visited that anticipates producing alternative jet fuels acquires its feedstock (woody biomass) from a poplar tree plantation less than 10 miles away (see fig. 2). Operators of the biorefinery told us that the close proximity of the feedstock source to the biorefinery helps reduce its feedstock logistics costs.\nFuel production: More than half of the stakeholders we interviewed (14 of 23), as well as literature we reviewed, indicated that the high costs associated with transitioning to commercial scale production— such as the capital costs required to construct a commercial-scale production plant—is a key contributing factor affecting the cost of producing alternative jet fuels. For example, one study conducted by the National Research Council estimated that the costs to construct a single biorefinery converting biomass into a liquid transportation fuel using different conversion technologies range from $200 million to $606 million. Stakeholders (5 of 23) also noted that the capital investment costs for constructing alternative fuel-production plants would be even higher when producing fuel from nonrenewable feedstock, such as natural gas.\nTen stakeholders we interviewed highlighted fuel producers’ difficulty in obtaining the private investment needed to help construct commercial-scale alternative fuel production plants. According to stakeholders and literature we reviewed, private financiers are hesitant to invest, in part, because of risks associated with the uncertainty about access to a steady supply of feedstock, high feedstock and capital costs, and an unwillingness on the part of fuel end users to pay a premium price for alternative jet fuels. This is generally true of many capital-intensive start-ups, including other renewable energy industries; four stakeholders noted to us, for example, that the ethanol industry would not be as commercially viable today without considerable federal support. One private- industry stakeholder whom we spoke to noted that fuel producers learn and adapt their processes as they gain experience building and operating commercial-scale production plants. In other words, once fuel producers construct a commercial-scale plant and begin operating it, they can work to create efficiencies in the production process to reduce costs in other ways. Another private-industry stakeholder underscored that the amount of time and funding it takes to move from a good idea in the lab to a commercial scale of production is substantial. Another stakeholder highlighted the cyclical nature of the challenge—that is, fuel producers typically require outside investment finance to construct a commercial-scale plant that can create efficiencies sufficient to decrease costs, while a private financier is hesitant to invest funds unless the producer can lower development costs and guarantee that the fuel price will be competitive with the price of conventional fuels.\nFuel testing and approval: Ten stakeholders, as well as literature we reviewed, explained that the time and testing requirements associated with the testing and approval process for alternative jet fuels add additional cost—in part because alternative jet fuels, in contrast to alternative fuels used for other purposes such as surface transportation, require a more rigorous testing and approval process. According to an industry report, the ASTM International’s testing and approval process can last as long as 3 years and cost upwards of $30 million. One stakeholder explained that the fuel testing and approval process requires producers to demonstrate that their production processes are “robust and repeatable” and can reliably control product quality. With regard to the time required to reach fuel approval, the commercial and military approval process for HEFA generally took about 3 years. One stakeholder highlighted that given the amount of time required to get approval for alternative jet fuels, producers may opt to produce other products, such as diesel, that they can get to market more quickly.\nIn addition, as an alternative fuel progresses through the testing and approval process, the sequence of tests—ranging from laboratory tests on the fuels to potentially full-scale aircraft tests—require an increasing quantity of fuel to conduct. Some stakeholders (5 of 23) elaborated that since most fuel producers are generally companies with limited funds and small-scale operations, it is extremely costly for them to produce fuel in large quantities. For both the Fischer-Tropsch and HEFA approval processes, the federal government has in some cases provided funding—including purchasing fuels for testing and providing the equipment needed to conduct the tests—to help relieve some of the costs for producers. Air Force officials estimated that DOD generated about 80 percent of the testing data for past approvals, while private parties are leading most of the current fuel certifications. Four government and private-industry stakeholders whom we interviewed, as well as other FAA and DOD officials, expressed concerns that recent cuts to the Air Force Alternative Fuels Certification Division overseeing testing and approval will add to the time and cost of getting additional alternative jet fuels approved. Specifically, the Air Force’s Alternative Fuels Certification Division was eliminated in fiscal year 2013 and the funding for the other Air Force division involved in fuel testing and certification—the Air Force Research Lab—is also being cut. A senior Air Force Energy official noted that the Air Force plans to request that funding for its fuel testing and approval activities be restored once the budget situation has improved. The official did not know what the consequences of the recent cuts would be, but indicated that because none of these alternative jet fuels would be immediately commercially available, the short-term impact would be minimal.", "As discussed above, federal policies and regulations can support the development and use of alternative jet fuels, but uncertainty regarding the future of this federal support may limit the support that these policies provide to the alternative jet-fuels industry. More than half of the stakeholders we interviewed (13 of 23) indicated that continued uncertainty in federal regulations and policy contribute to the overarching challenge of making the price of alternative jet fuels competitive with the price of conventional jet fuels, a situation that undermines the viability of the alternative jet-fuels industry as compared to conventional jet fuel. Specifically, these stakeholders cited uncertainty about the RFS and federal tax expenditures as a challenge to developing and using alternative jet fuels.\nRFS: Government, academic, and private-industry stakeholders (8 of 23) highlighted legal and political challenges to the RFS, which creates uncertainty about requirements in the future. These challenges include multiple lawsuits filed regarding the validity of the program’s volumetric requirements, and political opposition for the program from some lawmakers. The uncertainty about the future of the RFS contributes to private financiers’ hesitancy to invest in the biofuels industry, including alternative jet fuels. Even though renewable jet fuels produced from specified feedstocks and conversion processes can qualify as a renewable fuel to meet the advanced biofuels requirement of the RFS, EPA officials reported that no RINs for the production of renewable jet fuel have been generated as of January 2014. However, four stakeholders noted that alternative jet-fuel producers could use RIN credits to help offset fuel development costs and to make the fuel’s price more competitive with the price of conventional jet fuel. Four stakeholders, as well as a private financier whom we spoke with, noted that, generally, private financiers wholly or partly discount any potential RIN credit value when evaluating a fuel producer’s financial prospects and deciding whether to invest because of uncertainty about the future of the program. Discounting the value of a RIN credit in financial models makes the investment in an alternative fuel producer look less profitable and overall less attractive than the same investment would look with a stable and fully valued RIN credit. Thus, while the uncertainty does not increase the actual price of alternative jet fuel, it may hinder investments that could make alternative jet fuels more price-competitive to conventional jet fuels. Two other stakeholders pointed to the EPA’s recent proposal to reduce the total advanced biofuels standard in 2014 under the RFS as indicative of this uncertainty. Specifically, one stakeholder highlighted that when EPA uses its statutory authority to reduce the statutory standards, for example, for volume under RFS, it creates uncertainty, which ultimately makes supporting the research, development, and production of alternative fuels—including alternative jet fuels—less attractive to private financiers.\nTax expenditures: Two private-industry stakeholders pointed out that tax credits to incentivize alternative jet fuels and general biofuels investment and production are authorized for short periods of time, such as 1 year, and on occasion, were not renewed. For example, since its enactment in 2004, the biodiesel tax credit expired in 2010, 2011, and again, most recently, on December 31, 2013. This introduces uncertainty and, similar to the RIN credits, generally causes private financiers to minimize or discount the tax expenditures’ value when assessing fuel producers’ future expenses and profitability. Literature we reviewed highlighted the potential for stable federal tax policy to contribute to the growth of the renewable energy sector. For example, one study noted that investments in new commercial scale wind and solar power production facilities were fostered by production and investments tax credits, respectively. We also found that the long-term ethanol tax credit was important in creating a profitable ethanol industry when the industry had to fund investment in new facilities.", "", "Stakeholders and studies we reviewed identified a variety of actions that could assist in the development of alternative jet fuels, ranging from continuing the current federal efforts to providing greater regulatory and policy certainty to providing greater financial support. Stakeholders identified a variety of federal actions as being the most critical for the federal government to take.\nResearch and development efforts: A majority of the government, academic, and private-industry stakeholders that we interviewed (19 of 23) generally agreed that the federal government should continue research and development efforts to advance the development and use of alternative jet fuels. Seven of the government, academic and private-industry stakeholders suggested, however, that the federal government could be more targeted in its feedstock research and development efforts, such as finding scientific breakthroughs to converting algae and cellulosic feedstocks into fuels; developing more feedstock options; and identifying what feedstocks may be particularly well-suited to producing alternative jet fuels. Five private-industry stakeholders noted their support of the federal government’s current efforts related to fuel testing and approval activities. For example, FAA and DOD have helped or plan to help fund specific fuel tests for seven new potential alternative jet-fuel processes that, as of January 2014, are undergoing review by ASTM International for approval. According to federal agency officials, they anticipate that at least one of these new processes may be approved by June 2014. Four government and private-industry stakeholders proposed that the federal government use and increase access to its jet engine assets for testing purposes or help streamline the fuel-testing and approval process for commercial use. For example, one of these government stakeholders suggested that the federal government use an outside contractor to manage the fuel-testing and approval process with subcontracts with facilities for fuel testing, so fuel samples would be sent to a centralized location. All entities with a role in the fuel-testing and approval process (laboratories, engine and aircraft manufacturers, and administrative functions) could then coordinate and agree upon a final approval determination within several months. Ultimately, this approach, the stakeholder noted, could help shorten the ASTM International’s approval timeline, lower the fuel testing costs, and add clarity and regularity to the process. Three stakeholders believed that expanding the range of approved production processes would diversify and expand future supply of alternative jet fuels.\nRegulatory and policy certainty: More than half of the government, academic, and private-industry stakeholders we interviewed (15 of 23) generally agreed that the federal government should provide greater regulatory and policy certainty to support the development and use of alternative jet fuels. The most commonly cited actions (12 of 23 stakeholders) were providing greater certainty that the renewable fuel program will not be repealed and changes minimized—specifically, reductions—in mandated volumes from year to year. Multiple stakeholders (8 of 23) told us that this may encourage private financiers to value RIN credits when making investment decisions. Ultimately, these stakeholders believe that this certainty would attract more private investment in the industry and help it advance. Other actions mentioned by stakeholders included expanding the RFS by expanding the types of feedstocks that would generate a RIN or mandating a minimum volume standard for alternative jet fuels. EPA officials told us, however, that because the definition of transportation fuel in Section 211(o) of the Clean Air Act, which pertains to the RFS, does not include jet fuels, having the fuel refiner or importer include the jet fuel they produce or import in determining their annual renewable fuel obligation would require Congress to revise the program. Two stakeholders noted that some tax expenditures that are authorized for short periods of time, such as 1 year, should be authorized for a longer period of time—such as a minimum of 10 years. They said that this would be helpful in spurring additional private investment in producing alternative fuels, including alternative jet fuels. Researchers currently studying the impacts of government subsidies on this industry told us that government mandates, such as the RFS, and tax subsidies, as well as their duration, are key factors in making the production of alternative jet fuels profitable.\nDirect financial support: A majority of stakeholders (15 of 23) and literature we reviewed also highlighted that greater financial support for alternative jet fuels derived from both renewable and nonrenewable sources would advance the industry. The two most common potential federal government actions cited by stakeholders included entering into long-term contracts for fuel purchases (6 government, academic, and private-industry stakeholders) and stabilizing existing federal direct support programs (6 government and private-industry stakeholders). Both of these actions would provide greater certainty and reduce some of the risks of private investment. Currently, DOD has statutory authority to enter into certain contracts procuring services or property, including contracts for the purchase of alternative fuels, for up to 5 years with an option to extend the contracts up to 10 years. However, stakeholders we interviewed, as well as industry experts said that the length of the initial contract period is too short to stimulate the private capital market or to encourage potential alternative fuels suppliers to construct or expand production facilities. Alternative fuels producers have told DOD that initial contracts for fuel purchases of at least 10 years in duration would help advance the industry beyond the small production volumes currently planned. Because this would require a statutory change to DOD’s authority to contract for jet fuel purchases, DOD has drafted legislative proposals over the past several fiscal years that would allow it to enter into longer-term contracts. One proposal advanced for congressional consideration, but was not adopted. A senior DOD official told us that under current law, DOD would be required to obligate sufficient funds in the first year of a long-term contract—for example, 10 years in length—to pay for the total guaranteed minimum purchases over the duration of the contract, unless it received a specific statutory exemption to do otherwise. Without such an exemption, according to this official, long-term contracts would have a major effect on DOD’s budgets and obligational authority. Also, according to a senior DOD official, obtaining and exercising the authority to enter into longer-term contracts could commit DOD to a particular type of alternative jet-fuel production process, while the technological advancements in this industry are changing quickly and could provide a newer and potentially less expensive production process, which DOD may not be able to take advantage of. This DOD official also noted that conventional fuel providers prefer 1-year fuel purchase contracts. Thus, if DOD had and exercised authority to issue longer-term solicitations for bulk fuel purchase, the department could find itself subjected to a bifurcated procurement strategy where the majority of its fuel contracts would be 1-year contracts with conventional fuel providers and the remainder would be longer-term contracts with alternative fuel providers.\nSome stakeholders (6 of 23) suggested ensuring stability in the funding stream for the existing Advanced Drop-In Biofuels Production Project, discussed previously, which was to be jointly funded by the USDA, DOE, and DOD. To date, the funding put toward the project is less than the intended amount of $170 million from each federal agency for an aggregate total of $510 million. According to DOD officials, $100 million in fiscal year 2012 funds were applied to this project. For fiscal year 2013, the explanatory statement for the Consolidated and Further Continuing Appropriations Act, 2013, listed an additional $60 million for this purpose, which was conditioned by a provision in the authorization act providing that the funds appropriated would not be obligated or expended until matching funds were received from DOE and USDA. And, only in fiscal year 2014, did DOE receive specific authorization to contribute $45 million, which will be applied to Phase 2 of the project. According to a senior USDA official, while USDA was apportioned about $23 million in fiscal year 2013 for these activities, it has not expended any funds to date toward this initiative. In May and June 2013, four private fuel producers were selected to receive awards totaling $20.5 million for Phase 1.\nThe 23 stakeholders whom we interviewed had varying views about the future of the alternative jet-fuels industry if current federal activities continue at the same level and no additional federal government action is taken. Specifically, 5 stakeholders believed that the industry would remain commercially unviable—that is, continue to produce small quantities of fuel at prices that are not competitive to conventional jet fuels’ prices. Another 6 stakeholders believed that the alternative jet-fuels industry would continue to progress, but at a slow pace. The remaining 12 stakeholders did not articulate a specific prediction for the future of the alternative jet-fuels industry. Some highlighted their concerns that existing policies and programs—such as, the RFS or the Advanced Drop-In Biofuels Production Project—would be repealed, while others expressed pessimism about the future of the industry if the federal government does not address larger industry-related economic or policy challenges.", "More than half of the stakeholders (15 of 23) highlighted that market factors, such as the favorable economics for developing competing products (e.g., diesel), will ultimately be a key factor in determining the long-term success of the alternative jet-fuels industry. These stakeholders highlighted three key market factors—favorable economics for competing end-use products or co-products, dependence on commodity markets, and the cost of conventional jet fuel—that they believe will affect the future prospects for the alternative jet-fuels industry. The remaining 8 stakeholders did not offer comments on market factors.\nFavorable Economics for Competing End Products: Nine stakeholders, as well as literature we reviewed, highlighted that, currently, end-use products or co-products (such as diesel fuel, naphtha, cosmetics, and plastics) from the same production processes used to produce alternative jet fuels are often cheaper and easier to produce and therefore more profitable as compared to alternative jet fuels. For example, a study of the HEFA process, funded, in part, through one of FAA’s COEs, found that if the production goal was to maximize the total amount of all types of liquid fuel, rather than specifically jet fuel, then less than 13 percent of the product mix output would be jet fuel, while almost 70 percent would be diesel; the remaining product mix would consist of propane, naphtha, and liquefied petroleum gas. Maximizing the amount of jet fuel produced would reduce a fuel producer’s profitability due to higher operating costs and lower revenues. Two stakeholders that we spoke with who have expertise in fuel production told us that they choose to produce more of the other end products over alternative jet fuels because the other products are more profitable. For example, one stakeholder stated that he has experience selling renewable diesel in one state at a price premium and market demand is higher for renewable diesel.\nDependence on Commodity Markets: Because some alternative jet fuels are made from tradable commodities, the cost of jet fuel production depends on prices in commodity markets. As noted earlier, the price of soybean oil—an input to alternative fuels—has historically exceeded the price of conventional jet fuel. Consequently, it has been impossible for a producer of alternative jet fuels that uses the HEFA production process and soybean oil as a feedstock to compete on price alone with conventional jet fuels, even if the producer’s other production and transportation costs were negligible. Furthermore, in many instances, the input commodities (feedstock) have alternative uses. For example, oil-producing and cellulosic feedstocks can be used to generate heat, power, and other ground transportation fuels. Therefore, an increase in demand for these feedstocks in alternative uses could raise their price and the costs of producing alternative jet fuels.\nCost of Conventional Jet Fuels: Increases in the supply of conventional jet fuels would make it harder for alternative fuels to compete based on price alone. And although international petroleum markets heavily influence the prices of conventional fuels, which can be volatile and difficult to predict into the future, domestic policies can affect jet fuel supply and fuel prices. For example, five stakeholders highlighted that there has been significant previous federal investment in establishing the conventional petroleum industry, such as through long-standing federal tax expenditures that encourage exploration and drilling for conventional petroleum oil. In addition, two stakeholders highlighted that the price of conventional jet fuel does not reflect its full life-cycle cost. Costs not reflected in the price of conventional jet fuel could include environmental externalities, such as the impact of greenhouse gas emissions from aviation on climate change, or direct negative effects on human health from the combustion of jet fuel. If comparing the full life-cycle costs of conventional versus alternative jet fuels, alternative jet fuel could be more cost competitive. However, there is no globally recognized approach for determining the greenhouse gas effects of renewable fuels and the magnitude of any greenhouse gas reductions attributable to their production and use.", "We provided DOT, USDA, DOE, DOD, and EPA with a draft of this report for their review and comment. DOT provided technical comments that we incorporated as appropriate. In addition, in comments emailed to us, DOT highlighted that alongside its federal agency partners, it is fully committed to the development and use of sustainable alternative jet fuels to address the nation’s energy security, economic development and environmental needs. DOT also stated that it believes that it has taken a comprehensive approach to overcome barriers to the development and deployment of sustainable alternative jet fuels that are drop-in replacements to fuels derived from petroleum and that these fuels hold great promise and are an essential component of ensuring that the flying services the nation relies upon today remain affordable and available into the future. USDA, DOE, DOD, and EPA also provided technical comments that we incorporated as appropriate. In addition, EPA provided written comments, reprinted in appendix II, stating that the report’s findings related to approved jet fuel pathways under RFS are accurate.\nWe are sending copies of this report to interested congressional committees and the Secretaries of Transportation, Agriculture, Energy, and Defense, and the Administrator of the EPA. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Gerald Dillingham at (202) 512-2834 or [email protected] or Zina Merritt at (202) 512-5257 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "This report examines (1) the role of the federal government in the development and use of alternative jet fuels and (2) key challenges to developing and using alternative jet fuels and actions that the federal government plans to or could take to help address those challenges.\nTo examine the role of the federal government, we first identified the federal agencies most involved in the development or use of alternative jet fuels through review of relevant documents and preliminary interviews with stakeholders. We selected five federal agencies: the Department of Transportation’s (DOT) Federal Aviation Administration (FAA), the Department of Agriculture (USDA), the Department of Energy (DOE), the Department of Defense (DOD) and its military departments (Army, Navy, and Air Force), and the Environmental Protection Agency (EPA). For each of these five selected federal agencies, we interviewed officials and reviewed strategic plans, performance reports, and other relevant documents to obtain information about key federal programs, initiatives, or goals that targeted the development or use of alternative jet fuels. We also reviewed literature related to alternative jet fuels and interviewed other stakeholders, including representatives from the private industry, such as fuel producers and airlines, as well as representatives from public-private partnerships. To identify activities that federal agencies are involved in to coordinate their alternative jet fuel related activities with other federal agencies, private industry, and stakeholders, we reviewed relevant memoranda of understanding; international cooperative agreements; reports from public-private partnerships—such as the Commercial Aviation Alternative Fuels Initiative—and regional initiatives; as well as interviewed officials from the five selected federal agencies and relevant interagency working groups. In addition, to identify broad federal strategies and initiatives related to alternative fuels generally, we reviewed key White House and other relevant government-wide documents, including the National Plan for Aeronautics Research and Development and Related Infrastructure (December 2007); Growing America’s Fuels strategy (February 2010); the Blueprint for a Secure Energy Future (March 2011); the National Bioeconomy Blueprint (April 2012); and the President’s Climate Action Plan (June 2013). Finally, we also reviewed applicable federal laws and regulations related to alternative transportation fuels, including the Defense Production Act of 1950; Commodity Credit Corporation Charter Act; Energy Policy Act of 2005; Energy Independence and Security Act of 2007; the Food, Conservation, and Energy Act of 2008; the FAA Modernization and Reform Act of 2012; and EPA’s regulations for the renewable fuel program. We focused our study on federal efforts, except to the extent that international or private-sector efforts are coordinated with federal efforts. We did not provide an exhaustive list of federal initiatives; rather, we discussed key programs or initiatives that federal agency officials told us and our review of agency documents identified as playing a key role in supporting the development or use of alternative jet fuels or in achieving related goals.\nTo examine key challenges to developing and using alternative jet fuels and actions that the federal government plans to or could take to help address those challenges, we (1) identified the extent to which alternative jet fuel has been purchased for commercial and military use in the United States; (2) selected and interviewed 23 stakeholders representing government, academia, and the private sector to obtain their views on key challenges and planned or possible federal actions; (3) reviewed relevant literature on challenges to developing and using alternative jet fuels to help corroborate the views obtained from the 23 stakeholders; and (4) interviewed officials from the five selected federal agencies, as well as representatives from other non-federal entities involved in the alternative jet-fuels industry. To identify the extent to which alternative jet fuel has been purchased for commercial and military use, we obtained alternative jet-fuel purchase information for fiscal year 2012 from Airlines For America—a domestic airline industry group—and for fiscal years 2007 to 2013 from DOD. While we obtained actual quantities from Airlines For America and from DOD, we did not assess the data’s reliability because it is not material to our findings and reported the fuel purchase quantities on an order of magnitude in this report. As part of our methodology for selecting the 23 stakeholders, we first identified a list of potential stakeholders by reviewing background information, including federal agency documents; articles published in scholarly journals; and documents produced from conferences and by regional initiatives related to alternative jet fuels. In addition, we considered names of stakeholders recommended during initial interviews we conducted with federal government officials, as well as representatives from professional associations and private industry. We selected the 23 stakeholders representing government, academia, and private industry based on criteria that included: type and depth of experience and knowledge in the area of alternative jet fuels; recognition in the professional community; relevance of published work to the scope of our review; representation of a range of expertise across the alternative jet fuel supply chain, such as feedstock development or fuel production; representation of a range of stakeholders with knowledge about alternative fuels derived from renewable, nonrenewable, or both sources; and representation of a range of stakeholders with knowledge about alternative fuel use in commercial, military, or both settings.\nWe asked each of the 23 stakeholders a series of semi-structured, open- ended questions about economic, policy, technological, and other key challenges related to developing and using alternative jet fuels and actions that the federal government plans to or could take to help address them. We synthesized the stakeholders’ views to identify categories of key challenges and planned or potential federal actions to help address those challenges. The views of these stakeholders are not generalizeable to those of all stakeholders with expertise in the area of alternative jet fuels; however, we believe that they represent a balanced and informed perspective on the topics discussed. In addition, we reviewed relevant literature obtained through background research and from federal agency officials that discussed challenges to developing and using alternative fuels and planned or potential federal actions to help address those challenges. We also conducted a literature search and reviewed five documents that we identified as relevant to challenges related to developing and using alternative jet fuels. Our literature search targeted bibliographic databases containing content on commercial and defense aviation, energy, or both, including Transportation Research International Documentation (TRID); SciSearch; and the Defense Technical Information Center (DTIC). Within these resources, the search focused on scholarly journal articles, conference papers, government reports, and industry trade press published in 2011 and forward. Through the literature search and review of abstracts, we initially identified 36 documents that potentially discussed economic, policy, technological, or other challenges to developing and using alternative jet fuels. We could not obtain 2 of the 36 documents because they were not readily available. Ultimately, after a review of the remaining 34 documents, we identified 5 relevant to our review and reviewed them to help corroborate the key challenges identified by the 23 stakeholders we had interviewed. For those studies we cited in the report, we reviewed their methods, assumptions, and limitations to ensure that they were sufficiently methodologically sound and determined that they were sufficiently reliable for the purposes of our report. Lastly, we interviewed officials from the five selected federal agencies and representatives from other non-federal entities involved in the alternative jet-fuels industry, including fuel producers, airlines, airframe and engine manufacturers, environmental groups, and a private financier to also obtain their views on key challenges to developing and using alternative jet fuels and actions that the federal government plans to or could take to help address those challenges. We did not rank the planned or potential federal actions to help address the key challenges that were identified.\nWe conducted this performance audit from February 2013 to May 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the individuals named above, Paul Aussendorf, Assistant Director; Marilyn K. Wasleski, Assistant Director; William Colwell; Leia Dickerson; Bert Japikse; Delwen Jones; Shvetal Khanna; Sara Ann Moessbauer; Chris Murray; Josh Ormond; Madhav Panwar; Richard Scott; Marylynn Sergent; Gretchen Snoey; Benjamin Soltoff; Ardith Spence; Maria Stattel; and Elizabeth Wood made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 3, 3, 3, 1, 2, 2, 3, 3, 2, 3, 3, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "", "", "h0_title", "h0_full", "h0_title", "h0_full", "h0_full", "h0_title", "h0_full", "h0_full", "h1_full", "h1_full", "", "", "", "" ] }

{ "question": [ "What is the main challenge facing the jet fuel market?", "Why is there no current viable market?", "What are the concerns around jet fuel pricing?", "How does this play into private investment?", "How does uncertainty also cite challenges for private investment?", "What potential developments have stakeholders identified?", "Why might price reduction not ensure market success?", "What market factors did stakeholders identify?", "What agencies did the GAO interview for this report?", "Why were these agencies chosen?", "What did the GAO review for this report?", "What recommendations does this report provide?" ], "summary": [ "Achieving price competitiveness for alternative jet fuels is the overarching challenge to developing a viable market.", "No alternative jet fuels are currently commercially available at prices competitive with conventional jet fuels.", "The 23 stakeholders that GAO interviewed most frequently cited high development costs and the uncertainty of federal regulations and policies as primary reasons why alternative jet fuels are not priced competitively and believe that federal activities are needed to help advance the alternative jet-fuels industry.", "For example, according to 10 stakeholders, fuel producers face difficulties in obtaining private investment to help construct commercial-scale fuel production facilities, in part because of concerns about the supply and high cost of feedstock (the source used to produce the fuel, such as crops) and high capital costs.", "Also, 13 stakeholders stated that continued uncertainty about the future of current federal policies—particularly the renewable fuel program—generally causes potential investors to discount the value of federal subsidies, discounting that, in turn, limits the support these policies may provide the industry.", "Stakeholders identified a variety of federal actions to advance alternative jet-fuels development, including continuing current federal research efforts, providing greater regulatory and policy certainty, and giving more direct financial support.", "However, even if the cost to produce alternative jet fuels is reduced, market factors may still determine the long-term success of the industry.", "The main market factors identified by stakeholders were (1) comparative value of competing end products, (2) feedstock prices, and (3) the costs of conventional jet fuels.", "GAO interviewed officials from five federal agencies—FAA, USDA, DOE, DOD, and EPA.", "GAO selected these agencies for review because GAO identified them as the federal agencies most involved in the development and use of alternative jet fuels.", "GAO also reviewed relevant literature and federal and industry documents and discussed challenges and potential federal actions with 23 stakeholders from government, academia, and the private sector, selected to represent a range of perspectives and expertise in areas related to each step in the development and use of alternative jet fuels.", "GAO is not making recommendations in this report. DOT, USDA, DOE, DOD, and EPA reviewed a draft of this report and provided technical comments that were incorporated as appropriate." ], "parent_pair_index": [ -1, 0, -1, 2, 3, -1, -1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 4, 4, 4, 4, 4, 4, 4, 4, 2, 2, 2, 2 ] }

{ "title": [ "Background", "Family Caregiver Program Eligibility Requirements", "Family Caregiver Program Organizational Structure", "Family Caregiver Program Funding", "Family Caregiver Program Application Adjudication Process", "Some VAMCs Had Difficulty Meeting Higher-Than- Expected Demand and Data System Limitations Have Impeded VHA’s Ability to Monitor Workload", "Program’s Staffing Not Adequate to Handle Higher-Than-Expected Demand at Some VAMCs", "Staffing Shortages Impeded Timeliness of Key Functions and Negatively Affected Services to Caregivers Despite Actions Taken to Address Them", "VHA’s Oversight of the Family Caregiver Program Is Impeded by IT System Limitations", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Veterans Affairs Medical Centers by CSC-to-Approved Caregiver Workload Ratio, as of May 2014", "Veterans Integrated Service Networks (VISN) VAMCS with CSC-to-approved caregiver ratio of 25 or less 16", "1 VAMCS with CSC-to-approved caregiver ratio of 26 to 50 9 Huntington VAMC", "Veterans Integrated Service Networks (VISN) 4", "Veterans Integrated Service Networks (VISN) 6", "Veterans Integrated Service Networks (VISN) 9", "Veterans Integrated Service Networks (VISN) 11", "VAMCS with CSC-to-approved caregiver ratio of 101 to 150 9 Robley Rex VAMC (Ft. Knox)", "VAMCS with CSC-to-approved caregiver ratio of 151 or more 8 Orlando VAMC", "Veterans Integrated Service Networks (VISN) 7", "Appendix II: Comments from the Department of Veterans Affairs", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "VHA’s Family Caregiver Program is designed to provide support and services to family caregivers of post-9/11 veterans who have a serious injury incurred or aggravated in the line of duty. The program provides approved primary family caregivers with a monthly financial stipend as well as training and other support services, such as counseling and respite care.", "The Family Caregiver Program has a series of eligibility requirements that must be satisfied in order for family caregivers to be approved.\nTo meet the program’s initial eligibility criteria the veteran seeking caregiver assistance must have a serious injury that was incurred or aggravated in the line of duty on or after September 11, 2001. According to the program’s regulations, a serious injury is any injury, including TBI, psychological trauma, or other mental disorder, that has been incurred or aggravated in the line of duty and renders the veteran or servicemember in need of personal care services.\nThe veteran must be in need of personal care services for a minimum of 6 continuous months based on any one of the following clinical eligibility criteria: (a) an inability to perform one or more activities of daily living, such as bathing, dressing, or eating; (b) a need for supervision or protection based on symptoms or residuals of neurological or other impairment or injury such as TBI, PTSD, or other mental health disorders; (c) the existence of a psychological trauma or a mental disorder that has been scored by a licensed mental health professional, with a Global Assessment of Functioning score of 30 or less, continuously during the 90-day period immediately preceding the date on which VHA initially received the application; or (d) the veteran has been rated 100 percent service connected disabled for the veteran’s qualifying serious injury and has been awarded special monthly compensation that includes an aid and attendance allowance.\nTo be considered competent to care for the veteran, family caregivers must meet certain requirements including (1) having the ability to communicate and follow details of the treatment plan and instructions related to the care of the veteran; (2) not determined by VA to have abused or neglected the veteran; (3) being at least 18 years of age; and (4) either being a family member—such as a spouse, son or daughter, parent, step-family member, or extended family member— or an unrelated person who lives or will live full-time with the veteran.\nFamily caregivers must also complete required training before being approved for the program.", "VHA’s Caregiver Support Program office is responsible for developing policy and providing guidance and oversight for the Family Caregiver Program. It also directly administers the program’s stipend, provides support services such as a telephone hotline and website, and arranges CHAMPVA coverage for eligible caregivers. Furthermore, the office provides funding to VAMCs to cover certain program costs, such as the salaries of the CSCs, who implement and administer the Family Caregiver Program at the local VAMC level, as well as the costs VAMCs incur for having their clinical staff, such as nurses, conduct the program’s required in-home visits to approved caregivers and their veterans.\nCSCs are generally licensed social workers, clinical psychologists, or registered nurses, and they have both clinical and administrative responsibilities. Their clinical responsibilities may include identifying and coordinating appropriate interventions for caregivers or referrals to other VA or non-VA programs, such as mental health treatment, respite care, or additional training and education. Their administrative responsibilities may include responding to inquiries about the program, overseeing the application process, entering information about applications and approved caregivers into IT systems, and facilitating the processing of appeals. As of May 2014, there were 233 CSCs assigned to 140 VAMCs or healthcare systems across the country. Additionally, each of the 21 regional VISN offices also has a VISN CSC lead for the program, who provides guidance to CSCs and helps address their questions or concerns.", "Congress authorized over $1.5 billion for the Family Caregiver Program and other caregiver services for fiscal years 2011 through 2015. VHA’s actual and estimated obligations for the program for fiscal years 2011 through 2015 have increased at a steady rate. (See fig.1.)\nThe Caregiver Support Program office uses this funding to cover costs such as program staffing, general caregiver education and training, caregiver stipends, CHAMPVA costs for primary family caregivers, the Caregiver Support Line, the Caregiver website, and outreach materials. It also provides funding to VAMCs to cover certain program costs rather than requiring the VAMCs to pay for them directly from their medical facilities’ budgets. These costs include CSC salaries, reimbursement for home visits, respite care, and mental health services as well as assistance with travel expenses for eligible caregivers when accompanying the veteran to an appointment.", "The Family Caregiver Program application has a sequential, multistep adjudication process. CSCs are responsible for overseeing this process and for ensuring that all steps of the application process are completed within 45 days, as outlined in the program’s guidance. CSCs are expected to cultivate relationships with VAMC medical staff to request their assistance in performing medical eligibility assessments and completing the home visits—2 key steps in the process. For applications that cannot be fully adjudicated within the program’s 45-day goal, the CSC may request additional time to process the application from the Caregiver Support Program office. The steps of the application process are as follows: Step 1: Application Review. After the caregiver and veteran submit an application for the program, the CSC reviews the application and determines the caregiver’s potential eligibility.\nStep 2: Initial Eligibility Determination for the Veteran. The CSC then determines whether the veteran is a post-9/11 veteran enrolled in VHA (or servicemember undergoing medical discharge) and has a documented line-of-duty injury.\nStep 3: Final Eligibility Determination for the Veteran. After initial eligibility has been determined, a VHA medical provider is to complete a medical assessment to determine the medical condition of the veteran, their need for a caregiver, and all other program eligibility criteria. The provider then determines the veteran’s rating for the stipend amount the primary family caregiver is eligible to receive. The stipend amounts are organized into three tiers. The stipend amount that the caregiver could receive is based on the assigned tier level and the geographic location of the veteran’s residence. Tier 3 indicates the highest level of injury and need for a caregiver and has the highest level of payment, while Tiers 2 and 1 indicate the lower levels of injury and correspondingly lower levels of payment.\nStep 4: Eligibility Determination for the Caregiver. While the veteran’s eligibility is being verified, the CSC determines the caregiver’s eligibility for the program by conducting an assessment of the caregiver’s ability to serve in that role, either through a phone call or in-person meeting.\nStep 5: Review of Program Services. Once the veteran and caregiver have been determined eligible for the program, the CSC schedules a joint meeting to discuss the types of Family Caregiver Program services for which they may be eligible once they complete the application process and are approved for participation in the program. This would include a discussion of the stipend payment as well as potential coverage through CHAMPVA.\nStep 6: Caregiver Training. The caregiver must complete the program’s training class, which is offered online, through self-instruction with a workbook and a CD or DVD, or where available, through 2 days of facilitated classroom instruction. The training covers 10 competencies, including self-care, nutrition, and medication management.\nStep 7: Home Visit. Within 10 days after the caregiver completes the training, an initial home visit is conducted to determine if the caregiver has the physical capacity and skills necessary to provide medical care to the veteran, and if the home is safe and adequately equipped. Since the initial home visit includes physical assessment and medical components, it must be completed by a medical professional such as a registered nurse, nurse practitioner, clinical nurse specialist, physician assistant or physician. When a veteran requires a caregiver due to a mental health diagnosis, the home visit is to be completed by or in collaboration with a mental health provider.\nStep 8: Notification of Program Eligibility. Once the home visit assessment has been completed and the results confirm that the caregiver is prepared to provide satisfactory care of the veteran, the CSC completes the final approval of the caregiver. This entails sending approval paperwork to the caregiver, including the direct deposit form for the stipend, and updating the relevant VHA systems, including the program’s IT system and the veteran’s medical record.\nCaregivers who are denied eligibility for the program, or who believe that the veteran’s condition is more severe than the rating indicates, may appeal the decision. CSCs coordinate with VAMC patient advocates and other VHA staff to process these appeals—requests for review and reconsideration—first with the VAMC director and subsequently at the VISN level, if necessary.\nAs of May 2014, approximately 15,600 caregivers had been approved for the program. About 6,000 of these caregivers were assigned to Tier 3 (highest level) for their stipend payments, about 6,000 to Tier 2 (middle level), and 3,600 to Tier 1 (lowest level). The average monthly payments per tier were approximately $2,320 for Tier 3, $1,470 for Tier 2, and $600 for Tier 1. At this time, almost 8 out of 10 of the caregivers approved for the Family Caregiver Program were spouses, while other approved caregivers were parents, relatives, and friends. Most of these caregivers were assisting veterans with mental health diagnoses or brain injuries who may also have had other physical injuries or disabilities. Specifically, 92 percent of these veterans have a service-connected mental health condition, 63 percent have PTSD, and 26 percent have a TBI.\nThe program requires interim quarterly home visits for its approved caregivers, unless otherwise clinically indicated. These visits are to be conducted by clinical staff, but CSCs may also conduct them if they have a clinical background, such as being a registered nurse or a clinical The home visits serve multiple purposes and are intended psychologist.to monitor the well-being of the veteran. They are also used to determine whether the caregiver continues to have the physical capacity and skills necessary to provide medical care to the veteran, and whether the home remains safe and adequately equipped. The Caregiver Support Program office also permits home visits to be conducted by telephone after 1 year of satisfactory home visits has been completed for cases that do not pose exceptional medical risk.", "VHA officials significantly underestimated the demand for the Family Caregiver Program. As a result, the program did not have sufficient support for the ensuing workload at some VAMCs, and the resulting staffing shortages impeded the timeliness of key functions and negatively impacted services to caregivers. Furthermore, VHA’s Caregiver Support Program office does not have ready access to the type of data that would allow it to monitor and manage the program’s workload due to the limited capabilities of its data system, which was designed to manage a much smaller program.", "VISN and VAMC officials told us that the program’s initial staffing did not provide sufficient resources to support the unexpectedly high and increasing workload since the program began in 2011. VHA officials originally estimated that approximately 4,000 caregivers would be approved for the program by the end of fiscal year 2014. This estimate was based on the number of expected post-9/11 veterans and servicemembers who have serious medical or behavioral conditions involving impairment in at least one activity of daily living or who require supervision or protection, using available data from the Veterans Benefits However, the number of individuals approved Administration and DOD.for the Family Caregiver Program far exceeded the original estimate: by May 2014, almost 30,400 caregivers had applied and about 15,600 had been approved. (See fig. 2.)\nCaregiver Support Program officials told us that after 3 years of operation, demand for the Family Caregiver Program remains high: system-wide, there has been no appreciable decrease in the number of caregivers submitting applications for the program. In fact, the number of “in- process” applications for the Family Caregiver Program more than doubled from 1,966 in April 2013 to 4,318 in May 2014. As of May 2014, 98 VAMCs had more than 50 approved caregivers. (See fig. 3.)\nThe initial arrangement for CSCs and VAMC staff that VHA established for this program proved inadequate in the face of such high demand. The program initially placed a single CSC at each VAMC largely to perform administrative and caregiver support functions, with the expectation that each VAMC would provide the program with physician, nursing, and administrative staff as needed to perform specific program functions. However, VISN officials and VAMC officials we spoke with said that there are too few CSCs to handle the program’s workload effectively. Specifically, at some VAMCs, CSCs have been unable to perform all of the routine administrative tasks associated with their approved caregivers, as initially expected. For example, some VISN and VAMC officials told us that the number of appeals filed by veterans and caregivers has become an unexpectedly large component of CSCs’ workload, making it difficult to fulfill the full range of their responsibilities. A Caregiver Support Program official clarified that while CSCs typically work with the VAMC patient advocates to handle appeals, they may be taking on greater responsibility for the appeals process at VAMCs with large numbers of appeals for the program.\nCaregiver Support Program officials acknowledged that the workload for the Family Caregiver Program has been burdensome for some CSCs, depending on the number of their approved caregivers and the amount of assistance they have at the local level. As of May 2014, the number of approved caregivers per CSC varied widely across VAMCs, ranging from 6 to 251. (See fig. 4.) Caregiver Support Program officials stated that their office does not use a formal CSC-to-caregiver target ratio because staffing decisions are largely the domain of local managers and the use of a specific workload ratio by the Caregiver Support Program could limit VAMCs’ discretion in determining when to request additional CSCs. (See app. I for a list of VAMCs’ CSC-to-caregiver workload ratio.)\nFurthermore, Caregiver Support Program officials had expected VAMC officials to direct their clinical staff to perform the medical assessments and home visits needed by the Family Caregiver Program as part of their ongoing care to veterans. However, VISN and VAMC officials we contacted told us that their facilities do not have sufficient medical staff to effectively manage the additional workload generated by the Family Caregiver Program, which they view as a collateral duty. According to most VISN and VAMC officials, obtaining clinical staff for the program can be difficult at VAMCs where directors may not consider the Family Caregiver Program to be a high priority. For example, officials at one VAMC told us that lack of support from the VAMC director led to a situation in which the director refused to have nurses conduct home visits for the Family Caregiver Program. At another facility, a VAMC director told us that lack of support by her predecessor led to large backlogs of unprocessed applications and incomplete home visits for the Family Caregiver Program, which she discovered following her recent transfer to that facility. According to some VISN officials, this dynamic sometimes placed CSCs, as the administrators of the local Family Caregiver Program, in the position of pleading for support from VAMC physicians and nurses. In May 2014, a Caregiver Support Program official explained that although the office has issued program policy and guidance to medical facilities, it also plans to issue a directive that outlines organizational responsibilities for the Family Caregiver Program, including those at the VAMC level. This official did not provide a specific timeframe for the issuance of the directive but stated that it would occur following the issuance of final program regulations.\nVISN and VAMC officials we spoke with noted that the Family Caregiver Program’s approach of having VAMC physicians conduct medical assessments for program eligibility has been a challenge. Physicians at the VAMCs we contacted were already experiencing heavy workloads prior to the implementation of the Family Caregiver Program, and some physicians were not able to take on additional tasks that they viewed as collateral duties, according to VISN and VAMC officials. Some physicians who were initially willing to conduct medical assessments could not continue doing so when the number of applications for the program increased. VISN and VAMC officials also stated that some physicians do not want to perform medical assessments because they are concerned that having a role in determining eligibility for a program that includes a financial stipend could compromise their clinical relationship with the patient. As a result of these factors, the number of physicians willing to conduct medical assessments for the program is limited at some VAMCs. CSCs at some VAMCs told us that the typical wait time for a medical assessment can be a month or longer.\nVISN and VAMC officials also agreed that providing nurses for the home visits needed by the Family Caregiver Program has posed problems and remains an ongoing challenge. These officials explained that most clinic nurses are already too busy to assume an additional workload. Officials at one VISN told us that some nurses who originally agreed to conduct quarterly home visits for the Family Caregiver Program stopped doing so after home visits became a burden, due to the increasing number of approved caregivers. In addition, VAMC and VISN officials at every location we contacted told us that home visits to remote areas require long driving times, which are challenging to accommodate. Staff at one VAMC we contacted pointed out that their catchment area covers 147,000 square miles, and some of their caregivers live over 8 hours away, requiring nurses to contend with multiple overnight stays per month and dangerous travel conditions in the winter.", "Timelines for key functions of the caregiver program, such as those for adjudicating applications within 45 days or making quarterly home visits to family caregivers, are not being met because CSCs at some VAMCs were not able to obtain sufficient support from medical facility staff. As a result, some caregivers have had to wait longer for an eligibility determination and to receive program benefits. Staff at many of the VAMCs we contacted told us that delays exist at some or every step of the application process for the Family Caregiver Program, including determining caregiver eligibility, administering medical assessments, and conducting initial home visits. Officials at all of the VAMCs we contacted stated that there were applications at that facility that had been open for longer than 45 days, and one VAMC had over 400 open applications, some going back to June 2013. According to the Caregiver Support Program office, in June 2014, 111 VAMCs had applications that had been in process for 45 to 90 days; most of these facilities (95 percent) had 20 or fewer applications in this category. Additionally, the office reported that 65 VAMCs had applications that had been open 91 days or more; most of these VAMCs (85 percent) had 25 or fewer applications in this category.\nFurthermore, home visits are not always being made on a timely basis. At one VAMC, initial home visits to assess caregivers’ skills, which are supposed to take place within 10 days of the caregiver’s completion of core training, took from one to two months to complete, which delayed eligibility determinations. Staff at some of the VAMCs we contacted were also struggling to maintain the quarterly schedule for follow-up home visits due to the larger-than-expected number of approved caregivers. At one VAMC, CSCs told us that follow-up home visits occur every 6 to 9 months, in contrast to the program’s standard of every 90 days. Delays in home visits could be problematic because these visits provide medical staff with an opportunity to assess the welfare and environment of the caregiver and veteran—issues that may not be evident during clinic visits, such as whether special dietary needs are being met and whether medications are being properly administered.\nAt some VAMCs, the volume of administrative and procedural activities performed by CSCs has curtailed or even displaced their ability to provide services to caregivers and veterans. VISN staff we spoke with told us that as a result of the high workload burden, CSCs who are overwhelmed do not have the ability to perform some caregiver support functions offered by the Family Caregiver Program, such as support groups and counseling. Caregivers and officials from non-VA organizations told us that some CSCs do not return caregivers’ phone calls. One caregiver recounted that when she became desperate to learn how to manage a veteran with increasingly severe symptoms from a TBI, her CSC told her that hers was one of many requests and that the program could not provide counseling for caregivers. This caregiver subsequently received services from a non-profit organization.\nOfficials from the Caregiver Support Program and the VAMCs we contacted also told us that they have taken steps to address staffing shortages for the Family Caregiver Program, although some of the steps have had limited success. For example, In recognition that some VAMCs had more approved caregivers than originally anticipated, the Caregiver Support Program office began to allow VAMCs to request additional CSCs in August 2011. By May 2014, VAMCs had submitted 99 requests for salary funding to the Caregiver Support Program office for adding one to five more CSCs to their facility. Specifically, the requests from VAMCs totaled 112 additional CSCs, of which the Caregiver Support Program office approved about 94 additional positions.\nIn March 2014, the Caregiver Support Program also began funding temporary CSCs, who were hired for terms of 120 days. As of May 2014, the office has funded 10 CSCs on a temporary basis. According to a Caregiver Support Program official, these CSCs must meet the same qualifications as a full-time CSC, and their duties are to be established at the local level. In addition, some VAMCs have provided their own clerical support to CSCs for routine administrative tasks.\nIn August 2012, the Caregiver Support Program office also began allowing VAMCs to conduct home visits by telephone after 1 year of satisfactory home visits had been completed for cases that do not pose exceptional medical risk. Some of the VAMCs we contacted are planning to expand their use of follow-up telephone contact with caregivers in lieu of in-person home visits. However, officials at one VAMC told us that they did this with only three to four families because they considered almost all families approved for the Family Caregiver Program to be at risk because of the high proportion of caregivers who were caring for veterans with PTSD who were not clinically stable.\nVAMCs have also tried various approaches for improving physicians’ willingness and ability to participate in the Family Caregiver Program. For example, officials from the Caregiver Support Program office told us that some VAMCs use a multidisciplinary team—instead of individual physicians—to make determinations for eligibility and for the level of financial stipend, enabling the workload to be shared by multiple clinicians. Another VAMC hired a physician on a part-time basis just to perform eligibility examinations for the program. One VAMC with serious workload backlogs is examining the option of using physicians who are already under contract for conducting medical assessments for determining disability benefits, instead of using VAMC treatment physicians. The VAMC director who is exploring this option mentioned that this approach could also resolve physicians’ concerns about compromising the physician/patient relationship posed by determining eligibility for a program that includes a financial stipend. However, Caregiver Support Program officials stated that regardless of the approaches VAMCs may take to conduct the medical assessments, the program’s regulation requires that the physician making eligibility determinations for the Family Caregiver Program be a member of the veteran’s treatment team.\nTo increase nurses’ willingness to provide assistance to the program, some VAMCs offered their nurses overtime pay to conduct home visits, and other VAMCs made temporary work-sharing arrangements with nearby VAMCs for nursing coverage. Officials in the VISNs we contacted told us that some VAMCs have used the funding they received for additional CSC positions to hire nurses for the sole purpose of conducting home visits for the program because of the heavy workload. Some officials also told us that they consider the home visit reimbursement amounts to be insufficient to cover their expenses, such as for GPS units, other electronic devices, and time needed for associated administrative activities. However, an official with the Caregiver Support Program office stated that this should not be necessary because the program’s reimbursement for home visits covers salary expenses, travel costs, and time for administrative activities.\nSome VAMCs have also hired contractors to conduct home visits, although contractors may not be available in some locations.\nA Caregiver Support Program official stated that the budget for the Family Caregiver Program has been adequate to meet operating costs as of March 2014. Nonetheless, VHA officials at all levels told us that VAMC directors were cautious about requesting additional CSCs or hiring additional nurses for making home visits. These officials explained that VAMC directors are concerned that when the Family Caregiver Program’s initial 5-year budget authorization expires, the cost of the additional nurses and CSCs could shift from the Caregiver Support Program office to the VAMCs. VAMC directors stated that their caution is based on experience, in that this shift has occurred in the past with other new VHA programs that had initially received funding support from their program offices. Caregiver Support Program officials acknowledged VAMC officials’ concerns about the program’s funding and added that they are aware of some VAMCs—even facilities with growing numbers of approvals—that are cautious about requesting additional CSCs. Nonetheless, a Caregiver Support Program official stated that VHA continues to request funding for the Family Caregiver Program, including a funding request for fiscal year 2015 that was submitted with the budget request.\nNotwithstanding incremental efforts to improve staffing levels for the program at some VAMCs, CSCs and VAMC staff predict that staffing shortages and the ensuing workload problems are likely to recur because VHA’s current staffing of the program is not sufficient and overall approvals continue to increase at a steady rate—about 500 approvals per month. As a result, according to VAMC officials, some facilities have not been able to overcome the workload problems that developed upon program implementation. A Caregiver Support Program official stated that program officials recognize the need to formally re-evaluate key aspects of the Family Caregiver Program, including program staffing and the processes for eligibility assessments and home visits, in light of the fact that the program was designed to manage a much smaller caregiver population. This is consistent with federal internal control standards, which emphasize the need for effective and efficient operations, including the use of agency resources such as human capital.", "The Caregiver Support Program office does not have ready access to the workload data that would allow it to monitor the effect of the Family Caregiver Program on VAMCs’ resources due to limitations with the Caregiver Application Tracker—the IT system that was established for the program. According to federal standards for internal control, agencies should identify, capture, and distribute pertinent information in a form and time frame that permits officials to perform their duties efficiently.However, the Caregiver Support Program office is not able to easily retrieve data that would allow it to better assess workload trends at individual VAMCs—such as the length of time applications are delayed or the timeliness of home visits—even though these data are already captured in the Caregiver Application Tracker. Consequently, Caregiver Support Program officials only retrieve these data on an ad hoc, as- needed basis, which limits their ability to assess the scope and extent of workload problems comprehensively at individual VAMCs and on a system-wide basis.\nA Caregiver Support Program official told us that the office becomes aware of workload problems at some VAMCs through various informal information channels, such as CSCs’ requests for application extensions and communication with the CSCs and VISN CSC leads. relying on informal information channels does not provide the office with a comprehensive picture of the program’s workload across all VAMCs, and this puts it in a reactive position of addressing workload issues after problems have already developed. Having a system that allows for easy retrieval of data would better position the office to proactively identify both existing and potential workload problems at VAMCs and work with their CSCs to identify solutions before problems develop or worsen. It would also facilitate access to data needed for pinpointing where certain processes may be getting stalled. For example, a Caregiver Support Program official told us that it would be helpful to be able to track the status of the various phases of the application process to identify the phases that are taking too long, which would help the office to better determine how to improve the overall timeliness of application adjudication.\nAccording to this official, in these instances, they provide coaching and support to the CSC and VISN CSC lead and may work with them on identifying solutions, which may include the development of an action plan with the support of VAMC leadership. caregivers between VAMCs and other VHA entities, including the Health Administration Center, which processes the caregiver stipend payments and administers CHAMPVA. CSCs are responsible for entering nonclinical data into the system, which includes information related to the application process and the status of home visits. The Caregiver Support Program office manages the system and uses its data to monitor certain aspects of the program. Specifically, a program official explained that the system can generate a few basic reports that have been preprogrammed, including a weekly report with aggregate data on the status of applications and stipend payments. The Caregiver Support Program office uses these data to monitor the program as well as data from other sources, including data on the number of approved caregivers who have completed training and the number of telephone calls to the Caregiver Support Line. However, data that are not contained in the preprogrammed reports must be extracted from the system on an ad hoc basis.\nCaregiver Support Program officials told us that they take steps to validate the data they obtain from the system because they have observed some inconsistencies—particularly with ad hoc data—and as a result, they have concerns about its reliability. These officials told us that each time they extract ad hoc data from the system, they validate the data through additional sources to ensure its accuracy. Caregiver Support Program officials explained that they have already taken steps to verify the sources of the data that are used for the system’s reports and do not need to verify these data every time a report is generated. Nonetheless, these officials noted that they will periodically compare the current weekly data that is reported by the system with data from the prior week to ensure that there are no drastic changes which would indicate a need for additional verification.\nProgram officials explained that the system has no agility or flexibility to perform additional tasks beyond its basic tracking functions, and retrieving data from the system on an ad hoc basis often requires time- consuming manual procedures. These officials explained that the system’s data files are organized by veteran, and all of the veterans who apply for the program are captured in the system whether or not their caregivers were approved. As a result, the system that was designed to manage 5,000 records by the end of 2015 had over 30,000 records as of May 2014. Officials said that the system’s limited capabilities became more apparent as the number of records in the system increased, which made retrieving data on an ad hoc basis more difficult and time consuming. For example, according to program officials, in response to our request for the number of VAMCs with applications over 45 days old, they had to download all of their relevant data into a spreadsheet, review the data for accuracy, make the necessary corrections, and then manually count the number of applications over 45 days old. A Caregiver Support Program official told us that it took three people about 8 to 10 hours in total to pull this information together.\nOfficials further explained that the Caregiver Application Tracker is a stand-alone system that is not integrated with other VHA systems, and as a result, it cannot perform sophisticated functions or searches that would require pulling information from these other systems. Officials told us that this hinders their ability to monitor certain aspects of the program and results in time-consuming efforts to compile program-related data. For example, the use of respite care—one of the benefits of the Family Caregiver Program—is tracked by a different VHA system. To determine how many veterans in the Family Caregiver Program are using respite care, program officials told us that they must download their data into a spreadsheet and then upload this information to the IT system for respite care use in order to crosswalk the information. Furthermore, data on Family Caregiver Program appeals are maintained in the Patient Advocate Program’s tracking system, which is also managed by a different VHA office. Caregiver Support Program officials told us that they have to request appeals data from this office, and to date, there have been a few requests for caregiver appeals data in response to congressional inquiries. However, because the Patient Advocate Program’s tracking system was not designed in a way that allows them to easily retrieve information that is specific to the Family Caregiver Program, the Caregiver Support Program office had received a report for only one of the inquiries as of May 2014. A Caregiver Support Program official told us that they are working with the Patient Advocate Program to identify methods to obtain the appeals data they need, such as by capturing whether an appeal is related to the Family Caregiver Program.\nAs a result of these system limitations, the Caregiver Support Program office does not have the capability to routinely track and analyze the type of workload data it needs to produce a meaningful assessment of the program’s impact on VAMCs. According to federal standards for internal control, agencies should conduct monitoring activities to assess the quality of performance over time and should use the results to correct identified deficiencies and make improvements. However, the lack of ready access to comprehensive workload data impedes the program office’s ability to proactively identify and correct workload problems as they manifest or to identify and make modifications as necessary to ensure that the program is appropriately structured to meet caregivers’ demand for its services. Consequently, a Caregiver Support Program official told us that the program office has only been able to assess workload problems and make interim adjustments, such as allowing VAMCs to request additional CSC positions, based on informal feedback and has not been able to conduct a formal re-assessment of the program that is based on comprehensive program data.\nA Caregiver Support Program official acknowledged that they recognize the need for a more capable, flexible system that can interface with other departmental systems. This official also told us that program office officials are working with their information technology office to develop the requirements for a comprehensive system and that they are exploring the possibility of whether an existing VHA system could be adapted to meet their needs. However, this official was not sure how long it would take to obtain another IT system and whether this effort would be displaced by higher priorities. As a result, it is not clear when program officials will have access to comprehensive workload data for the Family Caregiver Program to better assess how it is functioning. Although it will be difficult to identify changes needed to improve the program’s efficiency and effectiveness without these data, VAMCs’ workload problems will persist—and caregivers will not get the services they need—unless the program office begins taking steps towards identifying solutions.", "Family caregivers play a crucial role in caring for seriously injured post- 9/11 veterans by taking on critically important and often stressful responsibilities for their well-being and potentially keeping them out of costly institutions. The Family Caregiver Program was intended to provide supportive services to this caregiver population, but VHA significantly underestimated program demand. The subsequent stress on resources at some VAMCs resulted in delayed application decisions and home visits— ultimately limiting services to caregivers. Incremental steps to alleviate staffing shortfalls have benefited the program in some locations, but these efforts will not likely be sufficient in light of the steady growth of approved caregivers in the program. After 3 years of operation, it is clear that VHA needs to formally reassess and restructure key aspects of the Family Caregiver Program, which was designed to meet the needs of a much smaller population. This would include determining how best to ensure that staffing levels are sufficient to manage the local workload as well as determining whether the timelines and procedures for application processing and home visits are reasonable given the number of approved caregivers.\nTo accomplish this, the Caregiver Support Program office will need to take a strategic, data-driven approach that would include an analysis of the program’s workload data at both the aggregate and VAMC levels. It will therefore be necessary for VHA’s Caregiver Support Program office to obtain an IT system that will facilitate access to the types of data— including interfacing with other VHA systems, such as systems for clinical patient records and respite care—that would allow it to more fully understand the program’s workload and its effect on VAMCs, CSCs, and caregivers. The current approach of relying on informal information channels limits the program office’s ability to comprehend the scope and magnitude of workload problems system-wide and leaves it in a reactive position of adding staff to the program only after significant workload problems have developed. A more capable IT system would enable the Caregiver Support Program to comprehensively monitor the program and proactively identify both actual and potential VAMC workload problems and target areas where improvements could be made. However, without a clear time frame for obtaining another IT system, workload issues will persist unless the Caregiver Support Program office starts to identify solutions to help alleviate VAMCs’ workload burdens, such as modifications to the timelines and procedures for application processing and home visits, and the identification of additional ways to provide staffing support. If the program’s workload problems are not addressed, the quality and scope of caregiver services, and ultimately the services that veterans receive, will continue to be compromised.", "To ensure that the Family Caregiver Program is able to meet caregivers’ demand for its services, we recommend that the Secretary of the Department of Veterans Affairs expedite the process for identifying and implementing an IT system that fully supports the program and will enable VHA program officials to comprehensively monitor the program’s workload, including data on the status of applications, appeals, home visits, and the use of other support services, such as respite care.\nWe also recommend that the Secretary of the Department of Veterans Affairs direct the Undersecretary for Health to identify solutions in advance of obtaining a replacement IT system to help alleviate VAMCs’ workload burden, such as modifications to the program’s procedures and timelines, including those for application processing and home visits, as well as the identification of additional ways to provide staffing support, and use data from the IT system, once implemented, as well as other relevant data to formally reassess how key aspects of the program are structured and to identify and implement modifications as needed to ensure that the program is functioning as envisioned so that caregivers can receive the services they need in a timely manner.", "We provided a draft of this report to VA for review and comment. While the draft was at VA for comment, officials from VHA’s Management Review Service expressed concerns with two of the three recommendations in the draft report.\nOfficials expressed concern that our recommendation to expedite the process for identifying and implementing an IT system for the Family Caregiver Program was directed to the Undersecretary for Health. They explained that obtaining a new IT system would require the involvement of multiple offices within VA, including central offices that are under the Secretary of VA. Based on this information, we revised our recommendation and have redirected it to the Secretary to ensure that it is inclusive of all necessary offices within the department.\nOfficials also commented on our recommendation about using data from the new IT system to formally reassess key aspects of the program and make modifications as needed. They suggested broadening the recommendation to include data from other sources, such as any data they may obtain through the solutions they implement in advance of obtaining a new IT system. In consideration of this information and the fact that we refer to relevant data from other IT systems in our report, we modified our recommendation to state that the Undersecretary for Health should use data from the IT system, once implemented, as well as other relevant data to formally reassess how key aspects of the program are structured.\nAs a result of these revisions, VA concurred with all three of our recommendations in its letter, which is reprinted in appendix II. VA also provided technical comments, which we incorporated as appropriate. In concurring with our third recommendation to use data from the IT system as well as other relevant data to reassess the program, VA did not mention using data from the new IT system as part of its evaluation. As a result, we are concerned that VA’s proposed actions only partially address this recommendation. Specifically, VA’s response focused on using relevant information from solutions developed in response to our second recommendation as well as other relevant data to formally reassess key aspects of the program. A VHA official explained that no one knows how long it will take to develop the new IT system, or how long it will be before data from the system are available, and as a result, VHA developed their response based on actions they knew they could accomplish. However, the substance of our recommendation is focused on using comprehensive workload data from the new IT system as the foundation of a data-driven program analysis. Without such data, VHA will not be positioned to make sound, well-informed decisions about the program, potentially allowing it to continue to struggle to meet the needs of the caregivers of seriously wounded and injured veterans.\nWe are sending copies of this report to the Secretary of Veterans Affairs, appropriate congressional committees, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of the report. GAO staff who made major contributions to this report are listed in appendix III.", "", "Veterans Affairs Medical Center (VAMC)", "", "Veterans Affairs Medical Center (VAMC)", "Veterans Affairs Medical Center (VAMC)", "Veterans Affairs Medical Center (VAMC)", "Veterans Affairs Medical Center (VAMC)", "", "", "Veterans Affairs Medical Center (VAMC)\nTotal (140 VAMCs)", "", "", "", "In addition to the contact above, Bonnie Anderson, Assistant Director; Frederick Caison; Christine Davis; Cathy Hamann; Jacquelyn Hamilton; Giao N. Nguyen; and Chan-My J. Sondhelm made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h2_full h3_title", "", "h3_full", "", "", "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full", "h0_full", "h3_full h1_full", "h0_full", "h3_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "How did the Veterans Health Administration incorrectly estimate the need for their Family Caregiver Program?", "What issues has this caused?", "What is the statistical difference in their estimates?", "How was staffing an issue for the Family Caregiver Program?", "What issues did understaffing cause?", "What timeline issues exist due to the underestimate?", "How has VHA addressed the understaffing of the program?", "How does the federal government affect this program and the VHA?", "Why is the Family Caregiver Program not monitored fully?", "Why is access to a capable program not available?", "How do federal standards regard the control of information?", "How does VAMCs fail to do this?", "What is a big issue with the system outside of its size capabilities?", "How does the lack of ready access harm the usefulness of the program?", "How does this fail to meet federal standards?", "How have program officials addressed their issues?", "How does this response fail to address current issues?", "Why was the Family Caregiver Program initialized?", "How was the Family Caregiver Program created to fulfill the Congress requirements?", "How is the Family Caregiver Program funded?", "What was the GAO asked to evaluate?", "What does this report cover?", "What material did the GAO review?", "What additional information did the GAO collect?" ], "summary": [ "The Veterans Health Administration (VHA)—within the Department of Veterans Affairs (VA)—significantly underestimated caregivers' demand for services when it implemented the Program of Comprehensive Assistance for Family Caregivers (Family Caregiver Program).", "As a result, some VA medical centers (VAMCs) had difficulties managing the larger-than-expected workload, and some caregivers experienced delays in approval determinations and in receiving program benefits.", "VHA officials originally estimated that about 4,000 caregivers would be approved for the program by September 30, 2014. However, by May 2014 about 15,600 caregivers had been approved—more than triple the original estimate.", "The program's staffing was based on VA's initial assumptions about the potential size of the program and consisted of placing a single caregiver support coordinator at each VAMC to administer the program. In addition, each VAMC was to provide clinical staff to carry out essential functions of the program, such as conducting medical assessments for eligibility and making home visits.", "This led to implementation problems at busy VAMCs that did not have sufficient staff to conduct these program functions in addition to their other duties.", "As a result, timelines for key program functions, such as those for completing applications within 45 days and making quarterly home visits to caregivers, are not being met.", "VHA has taken some steps to address staffing shortages; however, some VAMCs have not been able to overcome their workload problems because the program continues to grow at a steady rate—about 500 approved caregivers are being added to the program each month.", "Federal internal control standards emphasize the need for effective and efficient operations, including the use of agency resources.", "The Caregiver Support Program office, which manages the program, does not have ready access to the type of workload data that would allow it to routinely monitor the effects of the Family Caregiver Program on VAMCs' resources due to limitations with the program's information technology (IT) system—the Caregiver Application Tracker.", "Program officials explained that this system was designed to manage a much smaller program, and as a result, the system has limited capabilities.", "According to federal standards for internal control, agencies should identify, capture, and distribute information that permits officials to perform their duties efficiently.", "However, outside of obtaining basic aggregate program statistics, the program office is not able to readily retrieve data from the system that would allow it to better assess the scope and extent of workload problems at VAMCs.", "Program officials also expressed concern about the reliability of the system's data, which they must take steps to validate.", "The lack of ready access to comprehensive workload data impedes the program office's ability to monitor the program and identify workload problems or make modifications as needed.", "This runs counter to federal standards for internal control which state that agencies should monitor their performance over time and use the results to correct identified deficiencies and make improvements.", "Program officials told GAO that they have taken initial steps to obtain another IT system, but they are not sure how long it will take.", "However, unless the program office begins taking steps towards identifying solutions prior to obtaining a new system, VAMCs' workload problems will persist and caregivers will not be able to get the services they need.", "In May 2010, Congress required VA to establish a program to support family caregivers of seriously injured post-9/11 veterans.", "In May 2011, VHA implemented its Family Caregiver Program at all VAMCs across the country, offering caregivers an array of services, including a monthly stipend, training, counseling, referral services, and expanded access to mental health and respite care.", "In fiscal year 2014, VHA obligated over $263 million for the program.", "GAO was asked to examine VA's implementation of the Family Caregiver Program.", "This report examines how VHA is implementing the program, including the types of issues that have been identified during initial implementation.", "GAO obtained and reviewed relevant policy documents and program data and interviewed officials from VHA's Caregiver Support Program office.", "GAO also met with officials from five VAMCs and their corresponding Veterans Integrated Service Networks to obtain information on program implementation at the medical facility level." ], "parent_pair_index": [ -1, 0, 0, -1, 3, -1, -1, -1, -1, 0, -1, 2, -1, -1, 5, -1, 7, -1, 0, -1, -1, -1, -1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 1, 1, 1, 1 ] }

{ "title": [ "", "Introduction", "General ESEA Formula Grant Characteristics", "Individual ESEA Program Formulas", "Title I, Part A: Education for the Disadvantaged", "Basic Grants", "Concentration Grants", "Targeted Grants", "Education Finance Incentive Grants (EFIG)", "ESEA Title I-A School Improvement Grants", "Title I, Part B, Subpart 1: Reading First", "Title I, Part B, Subpart 3: William F. Goodling Even Start Family Literacy Programs", "Improving Literacy Through School Libraries", "Title I, Part C: Migrant Education Program", "Title I, Part D: State Agency Neglected, Delinquent, or At-Risk Program", "Title I, Part F: Comprehensive School Reform", "Title I, Part G: Advanced Placement Programs", "Title I, Part H: School Dropout Prevention", "Title II, Part A: Teacher and Principal Training and Recruiting Fund", "Title II, Part B: Mathematics and Science Partnerships", "Title II, Part D: Education Technology State Grants", "Title III-A, English Language Acquisition State Grants", "Title IV, Part A: Safe and Drug-Free Schools and Communities", "Title IV, Part B: 21st Century Community Learning Centers", "Title V, Part A: Innovative Programs", "Title VI, Part A, Subpart 1: State Assessment Grants", "Title VI, Part B, Subpart 1: Small, Rural School Achievement Program", "Title VI, Part B, Subpart 2: Rural and Low-Income School Program", "Title VII, Part A, Subpart 1: Indian Education Formula Grants to Local Educational Agencies", "Title VIII (Section 8003(b)): Impact Aid, Payments for Federally Connected Children: Basic Support Payments", "Title VIII (Section 8003(d)): Impact Aid, Payments for Federally Connected Children: Payments for Children with Disabilities", "Title VIII (Section 8007): Impact Aid, Construction Payments", "Analyses", "ESEA Allocations, and Total Federal Funds, Compared to Total Revenues From All Sources for Public K-12 Education", "State Expenditure and Effort Factors and Equity Multiplier", "Expenditure Factor", "Effort Factor", "Equity Factor and Multiplier", "State Population Size", "ESEA Formula Grants and State Average School-Age Child Poverty Rates" ], "paragraphs": [ "", "The primary source of federal aid to K-12 education is the Elementary and Secondary Education Act (ESEA), particularly its Title I, Part A program of Education for the Disadvantaged. The ESEA was initially adopted in 1965, and was most recently reauthorized and amended by the No Child Left Behind Act of 2001 (NCLB), P.L. 107-110 , that authorized ESEA programs through FY2008. It is widely expected that the 111 th Congress will consider whether to amend and extend the ESEA.\nThe NCLB initiated a major expansion of federal influence on several aspects of public K-12 education, primarily with the aim of increasing the accountability of public school systems and individual public schools for improving achievement outcomes of all pupils, especially the disadvantaged. States that receive grants under ESEA Title I-A must implement in all public schools and school districts a variety of standards-based assessments in reading, math and science; make annual adequate yearly progress (AYP) determinations for each public school and local educational agency (LEA); and require virtually all public school teachers and aides to meet a variety of qualification requirements. State AYP policies must incorporate an ultimate goal of all public school pupils reaching a proficient or higher level of achievement in reading and mathematics by the end of the 2013-2014 school year. Further, states participating in ESEA Title I-A must enforce a series of increasingly substantial consequences for most of their schools and almost all school districts that fail to meet the AYP standards for two consecutive years or more.\nMajor ESEA programs other than Title I-A provide grants to support the education of migrant students; recruitment of and professional development for teachers; language instruction for limited English proficient (LEP) students; school safety and drug abuse prevention programs; after-school instruction and care; expansion of charter schools and other forms of public school choice; education services for Indian, Native Hawaiian, and Alaska Native students; Impact Aid to compensate LEAs for taxes foregone due to certain federal activities; and a wide variety of innovative educational approaches or instruction to meet particular student needs.\nThe ESEA contains 45 separately authorized programs, plus approximately 20 specified sub-programs. The methods by which federal funds are provided to grantees under these programs fall into five general categories:\nprograms under which federal funds are allocated by the U.S. Department of Education (ED) to states, as well as to all or most LEAs via one or more formulas specified in the ESEA (example: ESEA Title I, Part A, Education for the Disadvantaged); programs under which federal funds are allocated by ED to states via a statutory formula, while state educational agencies (SEAs) suballocate these funds either on a competitive or discretionary basis, or via a state-developed allocation formula consistent with general statutory guidance (example: ESEA Title IV, Part B, 21 st Century Community Learning Centers); programs under which federal funds are allocated by ED directly to LEAs via formulas specified in the ESEA (example: ESEA Title VIII, Impact Aid); programs under which federal funds are allocated by ED to state and/or local grantees on a competitive or discretionary basis (example: ESEA Title V, Part D, Subpart 6, Gifted and Talented Students); and programs under which federal funds are allocated by ED to a single eligible grantee specified in the ESEA (example: ESEA Title II, Part C, Subpart 2, National Writing Project).\nESEA allocation formulas are mechanisms established through statute or other official policy documents that define how appropriated funds are to be allocated among SEAs or LEAs nationwide. They take the form of mathematical equations through which ED, and possibly also SEAs, calculate specific grant amounts for each potential grantee meeting statutory eligibility criteria. They almost always include one or more population factors, but typically include a number of additional factors.\nThis report discusses and analyzes the current allocation formulas for ESEA programs in the first three categories listed above. It provides the following:\n1. a description of general categories of factors used in the ESEA's allocation formulas; 2. descriptions of each program's formula(s); and 3. analyses of general patterns and issues related to these formulas.\nOther CRS reports provide more detailed discussions and analyses of the allocation formulas of major individual ESEA programs.\nThis report will be updated infrequently, when major changes occur in ESEA program allocation formulas.", "It is important to understand the vocabulary commonly applied to federal K-12 education allocation formulas. Therefore, an explanation of key terms precedes the discussion of the ESEA formulas.\nLevel of Recipient Entity and Level at Which Grants Are Calculated by ED. Under most ESEA formula grant programs, grants are made to LEAs via the SEAs. If LEAs are the ultimate grantees in a state formula grant program, the ESEA program may provide for substate distribution of grants by SEA-administered competition, through a statutory substate allocation formula directing SEAs how to determine LEA grants or, less frequently, through a statutory LEA-level formula with grants calculated by ED itself but distributed to LEAs by SEAs (with limited options for SEAs to adjust the LEA grants as calculated by ED). Under a few ESEA formula grant programs, LEA grants are calculated and directly allocated by ED (e.g., Impact Aid). Formula Factors. Allocation formulas have one or more factors that target funds to SEAs, LEAs, or other entities to accomplish or facilitate some policy outcome. For example, a program aiming to serve children from poor families would have a formula based on estimated numbers of school-age (5-17 years) children in poor families. In a simple formula, each state would be allocated funds in proportion to the estimated number of such children living in that state: that is, a state's proportion is obtained by dividing its number of school-age children in poor families by the total number of such children nationwide. For example, if 14% of all school-age children in poor families live in California, this simple formula would allocate 14% of all state grant funds to California. A formula can include more than one population factor, and it can weight the factors differently. For example, a formula could distribute 50% of funds based on total school-age population and 50% based on school-age children in poor families. Population Factor. The most common allocation formula factor is a population factor. Almost all federal K-12 education program allocation formulas include such a factor. The most common population factors are school-age children in poor families and total school-age children. In addition, several ESEA programs allocate funds on the basis of a population factor that is specifically related to the program's purpose, such as Indian pupils, migratory children, or children whose parents live or work on federal property. Usually, a population factor is direct, but sometimes it is indirect. For example, if a program allocates grants in proportion to grants made under ESEA Title I-A, this provision indirectly incorporates the Title I-A formulas' population factors (primarily school-age children in poor families). Title I-A Grant Factor. Many ESEA programs allocate some or all of their funds in proportion to grants made under the largest ESEA program—aid for the Education of the Disadvantaged under Title I, Part A. For example, grants under ESEA Title II, Part D, Education Technology, are made in proportion to Title I-A grants (subject to a higher state minimum grant provision than under Title I-A). Thus, grants calculated under Title I-A become an allocation factor for several other programs. Eligibility Threshold. Many ESEA programs require LEAs to meet population factor thresholds in order to be eligible to receive grants. For example, under the Title I-A Concentration Grant allocation formula, LEAs must meet either of two population factor eligibility thresholds: (1) 6,500 population factor children (mostly school-age children in poor families) or (2) a population factor child percentage (population factor children divided by total school-age population) of 15%, in order to receive grants. Expenditure Factor. Several ESEA program allocation formulas include an expenditure factor. These are based on state or (less frequently) LEA average per pupil expenditure for public K-12 education. Expenditure factors are intended to adjust for state or local differences in the costs of providing public K-12 education, although they are often criticized as reflecting differences in ability to pay for educational services as well. In most cases, floors and ceilings, based on percentages of the national average, are applied to this factor (e.g., a floor of 80% and a ceiling of 120% of the national average per pupil expenditure). Usually, an expenditure factor is direct, but sometimes it is indirect. For example, if a program allocates grants in proportion to grants made under ESEA Title I-A (see above), this provision indirectly incorporates the Title I-A formulas' expenditure factors. Hold Harmless. Some formulas establish a minimum state or LEA grant equal to a specified percentage of the amount received in a previous year. Usually, this is the immediately preceding year, although sometimes it is a \"base year\" that may be several years in the past. The minimum percentage may be the full amount received in the previous year (i.e., 100%) or, more often, some lesser percentage (e.g., 85%). Raising a state or LEA to its hold harmless level almost always reduces grants to other states or LEAs that do not benefit from the hold harmless. Hold harmless amounts are only guaranteed if funds are sufficient to pay for them. If not, hold harmless amounts are ratably reduced (see below) to meet the level of the appropriation. Further, in almost all cases, hold harmless provisions only apply to grantees meeting program eligibility criteria for the current year, not necessarily every grantee that received a grant in the preceding year. Foundation Grant. Under some ESEA programs, each state or LEA first receives a \"foundation grant\" amount, then additional appropriations, if any, are allocated on the basis of a population and possibly other formula factors. If funds are insufficient to pay the full foundation grant amount, then each grantee receives an equal proportion of its foundation grant. The foundation grant may be an equal amount per grantee (e.g., $3 million per state) or, more often, it is the amount received in a base year under one or more antecedent programs. The latter usually occurs when two or more programs are consolidated into one new program in a reauthorization of the ESEA. Minimum State Grant. In addition to hold harmless amounts (see above), which are always expressed in terms of a percentage of a previous year grant, several programs have a state minimum grant expressed primarily in terms of a percentage of all allocations to states or as a fixed dollar amount per state. Such minimum grant provisions are aimed at providing what advocates argue is a minimum 'viable' grant to all states. State minimums are set at a percentage of total state grants (typically 0.25%, 0.35%, or 0.5%). Occasionally, they are fixed dollar amounts (e.g., $500,000) or the greater (or lesser) of a fixed amount or a percentage of the total. In some cases, one or more \"caps\" may be placed on these minimums (e.g., a state minimum might be 0.25% of total state grants, subject to a cap of 150% of the national average grant per population factor child multiplied by the state total number of such children). When applying the minimum, the money to increase grants to relatively low population states that would otherwise receive less than the minimum amount comes from all other states, which would see their initial grants ratably reduced. Ratable Reduction or Ratable Increase. This is the process of either reducing or increasing grants as initially calculated in order to adjust for the level of available appropriations or application of certain formula factors, such as a state minimum or LEA hold harmless. These reductions or increases are applied in proportion to initial grants (i.e., they are \"ratable\"). For example, raising certain states to minimum grant amounts requires that funds be redistributed from states with initial grants above the minimums. Ratable reduction reduces funds in proportion to their initial grants for states above minimum levels and redistributes these funds to states with initial grants below minimum levels. When ratable reduction occurs, all states (or LEAs) above the minimum have their initial grants reduced by the same percentage, resulting in different dollar amount changes. Similar processes of ratable reduction occur in the application of hold harmless provisions. Fiscal Accountability Requirements. Most ESEA programs include one or more of three types of fiscal accountability requirements. These are intended to assure that federal funds provide a net increase over state and local funds devoted to K-12 education. The two most common ESEA fiscal accountability requirements are (1) maintenance of effort: recipients must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is equal to at least some specified percentage (usually 90%) of the level in the second preceding year; and (2) funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the same purpose as under the ESEA program in question. A third type of fiscal accountability requirement, comparability, applies only to Title I, Parts A, C, and D: services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools of the same LEA. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs . ESEA programs usually distribute funds by formula only to the 50 states, the District of Columbia, and Puerto Rico (the latter two entities are defined as 'states' for the purposes of program formulas). Other entities usually receive funds from amounts that are reserved from the total appropriation. These set-asides can include funds for the Outlying Areas (American Samoa, Guam, Commonwealth of the Northern Marianas, and the U.S. Virgin Islands), and funds provided to the Bureau of Indian Affairs (BIA) for services to certain Indian students. Typically, a total of 1% of program appropriations is reserved for these entities. Other Reservations from Appropriations. Under many programs, before remaining funds are allocated to states, a portion of appropriations is also reserved for such national activities as competitive grants, program evaluation, research, or technical assistance related to the overall program. Further Adjustments by SEAs of LEA Grants as Calculated by ED. Many state grant formulas permit states to reserve a proportion of their total grant for state level activities. These activities include state administration of the program together with statewide services, such as technical assistance and program evaluation, aimed at assisting and improving the implementation of the program. Under Title I-A, states are required to reserve 4% of state grants (subject to certain limitations described later in this report) for school improvement activities. A typical total state set-aside might be 5% of the state grant, with no more than 1% of the grant (i.e., 20% of the set-aside) for administration and 4% for other state activities.\nThe following Tables 1-9 summarize the provisions of ESEA allocation formulas with respect to many of the formula factors or provisions discussed above.\nAs illustrated in Table 1 , the recipients of a majority of the funds under almost all ESEA formula grant programs are LEAs. Under most of these programs, grants are provided to LEAs via SEAs: that is, they are \"state-administered formula grant\" programs. Funds are allocated by ED directly to LEAs only under a limited number of ESEA programs.\nWithin states, either (a) funds are allocated to LEAs under formulas that are specified in the ESEA, but are actually calculated by SEAs, or (b) funds are distributed on a competitive or discretionary basis within states. Title I-A is the only ESEA program under which funds are allocated via SEAs, but grants are calculated by ED at the LEA level. Even under Title I-A, SEAs make a number of authorized adjustments to initial LEA grants as calculated by ED.\nAs indicated in Table 2 , in terms of numbers of programs in each category (without regard to program size), ESEA formula grant programs fall relatively evenly into three groups: (a) programs where the primary population factor is school-age children in poor families (either directly or indirectly), (b) programs under which the primary population factor is a measure of total school-age population; and (c) programs with a primary population factor that is specifically related to the program's purpose (e.g., Indian children and youth for the Title VII-A-1 Indian Education program). The programs where school-age children in poor families are the indirect primary formula factor are those where all or part of funds are allocated in proportion to grants under ESEA Title I-A. Two programs, Improving Teacher Quality (Title II-A) and Safe and Drug-Free Schools and Communities (Title IV-A), have both (a) and (b) as primary population factors. In terms of funding, given the relative size of Title I-A, as well as the number of other programs with allocations linked to those under Title I-A, a majority of ESEA funds are allocated under programs where school-age children in poor families are the primary population factor.\nNote that all ESEA formula grant programs are included in Table 1 and Table 2 , above. The remaining tables in this section include only the ESEA formula grant programs that are relevant to the specific topic of the table.\nAs listed in Table 3 , there are five ESEA programs under which grants are made, in part or in full, on the basis of LEA grants calculated under Title I, Part A. Four of these programs base allocations on total Title I-A grants, whereas the fifth uses Title I-A Concentration Grants only. In calculating grants under such programs outside of Title I-A, the Title I-A LEA hold harmless provision is not to be applied to the Title I-A grants upon which allocations are based.\nOnly the ESEA formula grant programs listed below in Table 4 include an expenditure factor, either directly or indirectly (i.e., as a result of allocating funds in proportion to grants under Title I-A). Under the Title I-A formulas (and by extension, the other formulas based on Title I-A grants), Title I-C, Title I-D, and the Title VII-A-1 Indian Education program, the expenditure factor is based on state average per pupil expenditure for public K-12 education, after applying a floor and ceiling (in the case of Indian Education, a floor only) on the basis of the national average per pupil expenditure. The Title VIII Impact Aid programs employ an expenditure factor (local contribution rate) that in most cases is either one-half of the state average per pupil expenditure or one-half of the national average per pupil expenditure.\nESEA formula grant programs that have minimum or hold harmless provisions at either the state or LEA level are listed in Table 5 . State minimum grant provisions are applied to several programs; they range from up to 0.25% of total grants to states with respect to appropriations equal to or below the FY2001 funding level for Title I-A Basic and Concentration Grants, to 0.5% of the total amount available for state grants under several programs. In general, state minimum grant provisions (expressed as a percentage of total state grants) are more common than hold harmless provisions (expressed as a percentage of grants for a previous year) in the ESEA. Only the Title I-A formulas have LEA hold harmless provisions (minimum percentages of the previous year grant, if sufficient funds are available and eligibility thresholds are met where applicable), while only the Safe and Drug-Free Schools and Communities program has a state level hold harmless (which is not currently fully met).\nSeveral of the ESEA formula grant programs include provisions allowing SEAs to reserve a limited percentage of state total grants for administration, evaluation, and technical assistance. Maximum reservations for these specific activities range from approximately 1% for Title I-A to 5% under a number of other ESEA programs. As noted in Table 6 , some programs have maximum reservation percentages above 5%, but these funds are to be used for a variety of activities in addition to administration, evaluation, and technical assistance, such as statewide competitive grant programs. Limits on the use of funds by LEAs for administration, evaluation, and technical assistance occur only with respect to four ESEA programs, with limits ranging from 2% to 5%.\nAs seen in Table 7 , a large majority of ESEA formula grant programs provide for grants to be made to the Outlying Areas (American Samoa, Commonwealth of the Northern Mariana Islands, Guam, and the Virgin Islands). Some programs simply treat these areas the same as the 50 states, the District of Columbia, and Puerto Rico; others reserve a share of state grants (either 0.5% or 1%) for this purpose. A somewhat smaller majority of ESEA formula grant programs provide funds to the Bureau of Indian Affairs (BIA) for services to Indian pupils, either by treating the BIA the same as a state, or more often by reserving 0.5% or 1% of grants for this purpose.\nOnly a few ESEA formula grant programs reserve a share of formula grant funds for national programs or activities. National programs are much more often authorized under separate provisions of the statute (e.g., Safe and Drug-Free Schools and Communities national programs are authorized in ESEA Title IV, Part A, Subpart 2, whereas state formula grants are authorized under Subpart 1). Similarly, only a few programs authorize reservations from formula grant appropriations for evaluations and technical assistance. However, as with national programs, several ESEA formula grant programs contain separate authorizations for evaluations (e.g., evaluations for Title I-A are authorized in Title I-E). In addition, the ESEA contains a general authorization (in Title IX, Part F) for the Secretary of Education to reserve for program evaluation up to 0.5% of appropriations under any ESEA program, except those in Titles I and III (or any other ESEA program for which the reservation of funds by the Secretary for evaluation is explicitly provided).\nAs indicated in Table 8 , most ESEA formula grant programs have both maintenance of effort and supplement, not supplant, provisions. A few programs have only one, but not both of these fiscal accountability provisions. Only Title I, Parts A, C, and D have comparability provisions (requirements that educational services funded from state and local sources be comparable in schools that do, and do not, participate in the program within the same LEA). Table 8 depicts the types of fiscal accountability provisions that are in place; details about these provisions are included in the discussions of individual programs.\nAs shown in Table 9 , three current ESEA programs allocate grants on a competitive basis if annual appropriations are below a specified threshold level, then allocate funds to states by formula if appropriations meet or exceed this threshold. The threshold is $100 million for two of these programs and $250 million for the third. Only one of these programs, Mathematics and Science Partnerships, has met its threshold thus far.", "Detailed descriptions of individual ESEA program allocation formulas are provided below. Programs are discussed in the order of their appearance in the ESEA.", "Title I, Part A, of the ESEA authorizes aid to LEAs for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other pupils attending pre-kindergarten through grade 12 schools with relatively high concentrations of pupils from low-income families. In recent years, it has also become a \"vehicle\" to which a number of requirements affecting broad aspects of public K-12 education for all pupils have been attached as a condition for receiving Title I-A grants. These include requirements for assessments of pupil achievement; adequate yearly progress (AYP) standards and determinations for schools, LEAs, and states; consequences for schools and LEAs that fail to make AYP for two consecutive years or more; plus teacher and paraprofessional qualifications.\nUnder Title I-A, funds are allocated to LEAs via SEAs. Annual appropriations bills specify portions of each year's appropriation to be allocated under four different formulas; once funds reach LEAs, the amounts allocated under the four formulas are combined and used jointly. Under three of the formulas—Basic, Concentration, and Targeted Grants—funds are calculated initially at the LEA level, and state total grants are the total of allocations for LEAs in the state, adjusted to apply state minimum grant provisions. Under the fourth formula, Education Finance Incentive Grants, grants are first calculated for each state overall, with state totals subsequently suballocated by LEA using a different formula. A primary rationale for using four different formulas to allocate shares of the funds for a single program is that the formulas have distinct allocation patterns, providing varying shares of allocated funds to different types of LEAs or states (e.g., LEAs with high poverty rates or states with comparatively equal levels of spending per pupil among their LEAs). In addition, some of the formulas contain elements that are deemed to have important incentive effects or to be significant symbolically, in addition to their impact on allocation patterns.\nIn the discussion below, each of the four ESEA Title I-A allocation formulas is discussed separately.", "Basic Grants are the original Title I-A formula, authorized and implemented each year since FY1966. It is also the formula under which the largest proportion of funds is allocated (47% of FY2008 appropriations), and under which the largest proportion of LEAs participate (approximately 91% in FY2007), largely due to its low LEA eligibility threshold (see below). However, because all post-FY2001 increases in Title I-A appropriations have been provided for the Targeted and Education Finance Incentive Grant formulas (see below), the proportion of Title I-A funds allocated under the Basic Grant formula has been declining steadily since FY2001, when it was 86%.\nCompared to some of the other Title I-A formulas, the Basic Grant formula is relatively straightforward. Grants are based on each LEA's share, compared to the national total, of a population factor multiplied by an expenditure factor, subject to available appropriations, an LEA minimum or \"hold harmless,\" and a state minimum. These formula factors are described below, followed by a mathematical expression of the formula.\nPopulation Factor. Children aged 5-17: (a) in poor families, according to the latest available estimates for LEAs from the Census Bureau's Small Area Income and Poverty Estimates (SAIPE) program (these constitute approximately 96% of all formula children for FY2007); (b) in institutions for neglected or delinquent children or in foster homes (approximately 3.9% of all formula children for FY2007); and (c) in families receiving Temporary Assistance for Needy Families (TANF) payments above the poverty income level for a family of four (less than 0.1% of all formula children for FY2007). Each element of the population factor is updated annually.\nEligibility Threshold. In order for an LEA to be eligible for a Basic Grant, the number of children counted in the population factor must constitute 10 or more such children and more than 2% of the total school-age population.\nExpenditure Factor. State average per pupil expenditure for public K-12 education, subject to a minimum of 80% and a maximum of 120% of the national average, further multiplied by 0.40. The expenditure factor is the same for all LEAs in the same state.\nLEA Minimum Grant or \" Hold Harmless \" Level. If sufficient funds are appropriated, each LEA is to receive a minimum of 85%, 90%, or 95% of its previous year grant, depending on the LEA's school-age child poverty rate, assuming that the LEA continues to meet the Basic Grant formula's eligibility thresholds.\nMinimum State Grant. Each state is to receive a minimum of up to 0.25% of total Basic Grant appropriations if total Basic Grant funding is equal to or less than the FY2001 level (as has been the case each year since FY2001 thus far), and up to 0.35% of total Basic Grant appropriations in excess of the FY2001 amount, if any. A state may not, as a result of the state minimum provision, receive more than the average of (1) 0.25% of the total FY2001 amount for state grants plus 0.35% of any amount above the FY2001 level, and (2) 150% of the national average grant per formula child, multiplied by the number of formula children in the state.\nRatable Reduction. After maximum grants are calculated, if appropriations are insufficient to pay the maximum amounts (as has been the case every year beginning with FY1967), these amounts are reduced by the same percentage for all LEAs, subject to LEA hold harmless and state minimum provisions , until they equal the aggregate level of appropriations.\nFiscal Requirements. There are three Title I-A fiscal accountability requirements, which are applicable to total LEA grants under all four formulas: (1) maintenance of effort: recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year; (2) Title I-A funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the education of disadvantaged pupils in Title I-A participating schools; (3) comparability: services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools of the same LEA.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. With one possible exception, Puerto Rico is treated the same as a state under the Basic Grant formula. Grants to schools operated or supported by the Bureau of Indian Affairs, the Outlying Areas of Guam, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands, as well as a competitive grant to the Outlying Areas plus certain Freely Associated States are provided via reservation of 1% of total Title I-A appropriations.\nFurther Adjustments by SEAs of LEA Grants as Calculated by ED. Among ESEA programs, a distinctive aspect of Title I-A is that after calculation of LEA grants by ED, applying the methods discussed herein, SEAs make a number of adjustments before determining the final amounts that LEAs actually receive. These adjustments are made to the total of Title I-A grants to LEAs under all four formulas combined. These adjustments include (1) reservation of 4% of state total allocations to be used for school improvement grants; (2) reservation of 1% of state total allocations under all formulas for ESEA Title I, Part A, plus Title I, Parts C and D (discussed below), or $400,000, whichever is greater, for state administration; (3) optional reservation of up to 5% of any statewide increase in total Part A grants over the previous year for academic achievement awards to participating schools that significantly reduce achievement gaps between disadvantaged and other pupil groups or exceed adequate yearly progress standards for two consecutive years or more; (4) adjustment of LEA grants to provide funds to eligible charter schools or to account for recent LEA boundary changes; and (5) optional use by states of alternative methods to reallocate all of the grants as calculated by ED among the state's small LEAs (defined as those serving an area with a total population of 20,000 or fewer persons).\nBasic Grant Allocation Formula\nStep 1: Preliminary Grant 1 = PF * EF or L_HH, whichever is greater\nIn Step 1, the population factor is multiplied by the expenditure factor for each eligible LEA. If this is less than the LEA's hold harmless level, the latter amount is used.\nStep 2: Preliminary Grant 2 = ( Preliminary Grant 1 / ∑ Preliminary Grant 1 ) * APP or L_HH, whichever is greater\nIn Step 2, the amount for each LEA in Step 1 is divided by the total of these amounts for all eligible LEAs in the nation, then multiplied by the available appropriation. Again, if this is less than the LEA's hold harmless level, the latter amount is used.\nStep 3: Preliminary Grant 3 = (Preliminary Grant 2 * S_MIN_ADJ * L_HH_ADJ) or L_HH, whichever is greater\nIn Step 3, the amount for each LEA in Step 2 is adjusted through application of the state minimum grant provision and by a factor to account for the aggregate costs of raising affected LEAs to their hold harmless level, given a fixed total appropriation level. The state minimum grant adjustment is upward in the smallest states, where total grants are increased through application of the minimum, and downward in all other states, where funds are reduced in order to pay the costs of applying the minimum. The LEA hold harmless adjustment is downward for all LEAs except those at their hold harmless level. Again at this stage, if this is less than the LEA's hold harmless level, the latter amount is the LEA's grant.\nStep 4: Final Grant = Preliminary Grant 3 * SCH_IMP_ADJ * S_ADMIN_ADJ * AWD_ADJ * OTR_ADJ\nIn the final step of calculating LEA grants under all Title I-A allocation formulas, LEA grants as calculated in Step 3 are further adjusted for the school improvement and state administration reservations, possible state reservations for achievement awards, and other possible adjustments (such as for grants to charter schools) discussed above.\nWhere:\nPF = Population factor EF = Expenditure factor L_HH = LEA minimum or \"hold harmless\" level APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) L_HH_ADJ = LEA minimum or \"hold harmless\" adjustment (proportional decrease, in LEAs not benefitting from the LEA \"hold harmless,\" to apply the LEA minimum grant) SCH_IMP_ADJ = Reservation by SEA for school improvement grants S_ADMIN_ADJ = Reservation by SEA for state administration AWD_ADJ = Possible reservation by SEA for achievement awards OTR_ADJ = Other possible adjustments by the SEA ∑ = Sum (for all eligible LEAs in the nation)", "The Concentration Grant formula is essentially the same as that for Basic Grants, with one major exception—it has a much higher LEA eligibility threshold. There are also differences regarding the LEA hold harmless and state minimum grant provisions. Although the Title I-A statute has included Concentration Grant formulas (with varying provisions and sometimes under different names) since 1970, the current version dates from 1988 ( P.L. 100-297 ). A relatively small (10% of FY2008 appropriations) and declining (from 14% in FY2001) proportion of Title I-A appropriations is allocated under the Concentration Grant formula. Approximately 48% of LEAs receive Concentration Grants (FY2007).\nAs with Basic Grants, Concentration Grants are based on each eligible LEA's share, compared to the national total, of a population factor multiplied by an expenditure factor, subject to available appropriations, an LEA minimum or \"hold harmless,\" and a state minimum. These formula factors are described below, followed by a mathematical expression of the formula.\nPopulation Factor. Same as Basic Grants (see above).\nEligibility Threshold. In order for an LEA to be eligible for a Concentration Grant, the number of children counted in the population factor must exceed either 6,500 such children or 15% of the total school-age population.\nExpenditure Factor. Same as Basic Grants (see above).\nLEA Minimum Grant or \" Hold Harmless \" Level. The hold harmless rates for Concentration Grants are the same as those for Basic Grants. Unlike Basic Grants and all of the other Title I-A formulas, the hold harmless applies to all LEAs that received grants for the previous year, even if they do not currently meet one of the Concentration Grant formula's eligibility thresholds, unless they fail to meet one of the thresholds for 4 consecutive years. That is, an LEA that is eligible to receive a Concentration Grant in one year can continue to receive a Concentration Grant for three succeeding years, even if it does not meet either of the eligibility thresholds in those succeeding years.\nMinimum State Grant. The Concentration Grant state minimum is a modified version of the Basic Grant minimum. Each state is to receive a minimum of up to 0.25% of total Concentration Grant appropriations if total Concentration Grant funding is equal to or less than the FY2001 level (as has been the case each year since FY2001 thus far), and up to 0.35% of total Concentration Grant appropriations in excess of the FY2001 amount, if any. A state may not, as a result of the state minimum provision, receive more than the average of (1) 0.25% of the total FY2001 amount for state grants plus 0.35% of the amount above this, and (2) the greater of (i) 150% of the national average grant per formula child, multiplied by the number of formula children in the state, or (ii) $340,000.\nRatable Reduction. Same as Basic Grants (see above).\nFiscal Requirements. Same as Basic Grants (see above).\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Same as Basic Grants (see above).\nFurther Adjustments by SEAs of LEA Grants as Calculated by ED. With one exception, these are the same as for Basic Grants. The exception is that in states where the state total number of children counted in the population factor constituted less than 0.25% of the national total of such children as of the date of enactment of the NCLB, SEAs may allocate Concentration Grants among all LEAs with a number or percentage of children counted in the population factor that is greater than the state average for that year (not just LEAs meeting the 6,500 or 15% thresholds).\nConcentration Grant Allocation Formula. The mathematical expression of the Concentration Grant formula is the same as that for Basic Grants (above), with one exception. As discussed immediately above, in states where the number of children counted in the population factor constituted less than 0.25% of the national total of such children as of the date of enactment of the NCLB, the state total is to be allocated on the basis of the population factor among the LEAs that are to receive grants. These LEAs may include, at state discretion, either those LEAs in the state meeting the Concentration Grant eligibility criteria described above, or all LEAs in the state with a number or percentage of children counted in the population factor that is greater than the state average. In either case, for states where the number of children counted in the population factor constituted less than 0.25% of the national total of such children as of the date of enactment of the NCLB only (after state totals have been determined):\nLEA Grant = PF / ∑ PF * ALL or L_HH, whichever is greater\nWhere:\nPF = Population factor ALL = State total allocation L_HH = LEA minimum or \"hold harmless\" level ∑ = Sum (for all eligible LEAs in the state)", "Targeted Grants were initially authorized in 1994, but no funds were appropriated for them until FY2002, after the formula was slightly modified by the NCLB. Beginning in FY2002, all increases in Title I-A appropriations have been allocated as either Targeted or Education Finance Incentive Grants (below). Thus, Targeted Grants constitute a substantial (21% of FY2008 appropriations) and growing portion of total Title I-A grants. They are allocated among a large majority of LEAs (83% in FY2007).\nThe allocation formula for Targeted Grants is essentially the same as that for Basic Grants, except for significant differences related to how children in the population factor are counted. For Targeted Grants, the poor and other children counted in the formula are assigned weights on the basis of each LEA's school-age child poverty rate and number of school-age children in poor families. As a result, LEAs receive higher grants per child counted in the formula , the higher their poverty rate and/or number. There is also a somewhat higher LEA eligibility threshold for Targeted Grants than for Basic Grants. Aside from these two differences, Targeted Grants are, like Basic Grants, based on each eligible LEA's share, compared to the national total, of a population factor multiplied by an expenditure factor, subject to available appropriations, an LEA minimum or \"hold harmless,\" and a state minimum. These formula factors are described below, followed by a mathematical expression of the formula.\nPopulation Factor. The children counted for calculating Targeted Grants are the same as for Basic Grants (see above). However, for Targeted Grants, LEA-specific weights are applied to these child counts to produce a weighted child count that is used in the formula. Children counted in the formula are assigned weights on the basis of each LEA's school-age child poverty rate and (separately) number of school-age children in poor families. As a result, an LEA would receive higher grants per child counted in the formula , the higher its poverty rate or number. The weighting factors are applied in the same manner nationwide; formula children in LEAs with the highest poverty rates have a weight of up to four, and those in LEAs with the highest numbers of such children have a weight of up to three, compared to a weight of one for formula children in LEAs with the lowest poverty rate and number of such children (see Table 10 , below). The higher of its two weighted child counts (on the basis of numbers and percentages) is actually used in the formula for calculating grants for each LEA.\nThere are five ranges associated with each of the number and percentage weighting scales. These steps, or quintiles, were based on the actual distribution of Title I-A population factor children among the nation's LEAs, according to the latest available data in 2001 (at the time that the NCLB was being considered). Based upon those data, one-fifth of the national total of population factor children were in LEAs in each of the five numbers ranges and, separately, each of the five percentage ranges.\nThe Targeted Grant population factor weights are applied in a stepwise manner, rather than the highest relevant weight being applied to all population factor children in the LEA, and the greater of the two weighted child counts for each LEA is the number actually used to calculate the Targeted Grant. For example, assume an LEA has 2,000 population factor children, the total school-age population is 10,000, and therefore the population factor percentage is 20%. The population factor figure used to calculate Targeted Grants would be determined as follows:\nNumbers Scale:\nStep 1: 691 * 1.0 = 691\nThe first 691 population factor children are weighted at 1.0.\nStep 2: (2,000 - 691) = 1,309 * 1.5 = 1,963.5\nFor an LEA with a total number of population factor children falling within the second step of the numbers scale, the number of population factor children above 691 (the maximum for the first step) is weighted at 1.5.\nTotal (Numbers Scale) = 2,654.5\nThe weighted population factor counts from Steps 1 and 2 are combined.\nPercentage Scale:\nStep 1: 15.58% * 10,000 = 1,558 * 1.0 = 1,558\nA number of population factor children constituting up to 15.58% of the LEA's total school-age population is weighted at 1.0.\nStep 2: (20% - 15.58%) = 4.42% * 10,000 = 442 * 1.75 = 773.5\nFor an LEA with a population factor percentage falling within the second step of the percentage scale, the number of population factor children above 15.58% of the LEA's total school-age population (the maximum for the first step) is weighted at 1.75.\nTotal (Percentage Scale) = 2,331.5\nThe weighted population factor counts from Steps 1 and 2 are combined.\nSince the numbers scale weighted count of 2,654.5 exceeds the percentage scale weighted count of 2,331.5, the numbers scale count would be used as the population factor for this LEA in the calculation of Targeted Grants.\nEligibility Threshold. In order for an LEA to be eligible for a Targeted Grant, the number of children counted in the population factor (with no weights applied) must constitute 10 or more such children and 5% or more of the total school-age population.\nExpenditure Factor. Same as Basic Grants (see above).\nLEA Minimum Grant or \" Hold Harmless \" Level. Same as Basic Grants (see above).\nMinimum State Grant. Each state is to receive a minimum of up to 0.35% of all Targeted Grant appropriations. A state may not, as a result of the state minimum provision, receive more than the average of: (1) 0.35% of total state grants, and (2) 150% of the national average grant per formula child, multiplied by the number of formula children in the state. (In the latter calculation, population factor child counts are not weighted.)\nRatable Reduction. Same as Basic Grants (see above).\nFiscal Requirements. Same as Basic Grants (see above).\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Same as Basic Grants (see above), with the additional provision that for Puerto Rico (only), a cap of 1.82 is placed on the aggregate weight applied to the population factor under the Targeted Grant formula.\nFurther Adjustments by SEAs of LEA Grants as Calculated by ED. Same as Basic Grants (see above).\nTargeted Grant Allocation Formula. Same as Basic Grants (see above), except that the population factor (PF) would be the weighted child count, as described above.", "The EFIG formula is in several ways significantly different from the other Title I-A allocation formulas. As with Targeted Grants, EFIG Grants were initially authorized in 1994, but no funds were appropriated for them until FY2002, after the formula was (in the case of EFIG) considerably modified by the NCLB. Beginning in FY2002, all increases in Title I-A appropriations have been allocated as either EFIG or Targeted Grants. Thus, as with Targeted Grants, EFIG Grants constitute a substantial (21% of FY2008 appropriations) and growing portion of total Title I-A grants. They are allocated among a large majority of LEAs (83% in FY2007).\nThe distinctive elements of the EFIG formula begin with the fact that the first stage in the process of calculating grants is based on data for states as a whole, not LEAs. LEA grants are determined in a separate, later stage of the allocation process.\nA second major difference is that the EFIG formula includes not only a population factor and an expenditure factor, but also two unique factors. These are an effort factor, based on average per pupil expenditure for public K-12 education compared to personal income per capita for each state compared to the nation as a whole, and an equity factor, based on variations in average per pupil expenditure among the LEAs in each state.\nA third distinctive feature of the EFIG formula is that while population factor child counts are not weighted when calculating state total grants, they are weighted in the separate process of suballocating state total grants among LEAs. This intra-state allocation process is based on the same number and percentage scales as used for Targeted Grants, although the weights attached to each point on those scales varies among states, based on the state's equity factor. A final difference between the EFIG Grant and other Title I-A formulas is that the expenditure factor is modified through application of slightly more narrow floor and ceiling constraints for EFIG Grants.\nThus, state total EFIG Grants are based on each state's share, compared to the national total, of a population factor multiplied by an expenditure factor, an effort factor, and an equity factor, adjusted by a state minimum. Then, each LEA's share of the state total EFIG Grant is based on a weighted population factor count for the LEA, compared to the total for all LEAs in the state, adjusted by an LEA hold harmless provision. These formula factors are described below, followed by a mathematical expression of the formula.\nPopulation Factor. In the first-stage calculation of state total EFIG Grants, this factor is the same as for Basic Grants—the estimated number of children aged 5-17: (a) in poor families; (b) in institutions for neglected or delinquent children or in foster homes; and (c) in families receiving TANF payments above the poverty income level for a family of four. In the second-stage suballocation of state total grants among LEAs, as under all stages of the allocation process for Targeted Grants, weights are applied to these child counts before they are actually used in the formula. This process is the same as for Targeted Grants with respect to the number and percentage scales used, and use of the greater of the two weighted child counts to calculate LEA grants. However, for EFIG Grants only, the weights attached to each point on the number and percentage scales differs, depending on the state's equity factor (described below). This variation is illustrated in Table 11 , below.\nAs indicated in Table 11 , the weights rise more rapidly as the numbers and percentages of population factor children increase in states with higher equity factors. For states with an equity factor below 0.10, the weights are the same as for Targeted Grants. For states with equity factors between 0.10 and 0.20, or above 0.20, the maximum weights are 50% higher, and twice as high, respectively, as for Targeted Grants. As is discussed below, states with higher equity factors have relatively high degrees of variation in average per pupil expenditure among the state's LEAs.\nFactors Not Found in Other ESEA Program Formulas. As noted above, the EFIG formula has two additional factors not found in any other ESEA program allocation formula.\nEffort Factor. The effort factor is based on a comparison of state average per pupil expenditure (APPE) for public elementary and secondary education with state personal income per capita (PCI). More specifically, it is the ratio of APPE to PCI for each state divided by the ratio of APPE to PCI for the nation. The resulting index number is greater than 1.0 for states where the ratio of expenditures per pupil for public elementary and secondary education to personal income per capita is greater than average for the nation as a whole, and below 1.0 for states where the ratio is less than average for the nation as a whole. Narrow bounds of 0.95 and 1.05 are placed on the resulting multiplier, so that its influence on state grants is rather limited and its importance is largely symbolic.\nEquity Factor. The equity factor is based upon a measure of the average disparity in average per pupil expenditure among the LEAs of a state called the coefficient of variation (CV). The CV is expressed as a decimal proportion of the state average per pupil expenditure. In the CV calculations for this formula, an extra weight (1.4 vs. 1.0) is applied to estimated counts of children from poor families. The effect is that grants would be maximized for a state where expenditures per pupil from a poor family are 40% higher than expenditures per pupil from a non-poor family. Typical state equity factors range from 0.0 (for the single-LEA jurisdictions of Hawaii, Puerto Rico, and the District of Columbia, where by definition there is no variation among LEAs), to approximately 0.25 for a state with high levels of variation in expenditures per pupil among its LEAs; the equity factors for most states fall into the 0.10 - 0.20 range. In calculating grants, the equity factor is subtracted from 1.30 to determine a multiplier to be used in calculating state grants. As a result, the lower a state's expenditure disparities among its LEAs, the lower is its CV and equity factor, the higher is its multiplier and its grant under the EFIG formula. Conversely, the greater a state's expenditure disparities among its LEAs, the higher is its CV and equity factor, and the lower is its multiplier and its grant under the EFIG formula.\nEligibility Threshold. Same as Targeted Grants (see above).\nExpenditure Factor. State average per pupil expenditure for public K-12 education, subject to a minimum of 85% (not 80%, as in the other Title I-A formulas) and a maximum of 115% (not 120%, as in the other Title I-A formulas) of the national average, further multiplied by 0.40. The expenditure factor is the same for all LEAs in each state.\nLEA Minimum Grant or \" Hold Harmless \" Level. Same as Basic Grants (see above), with one exception. The hold harmless is not taken into consideration in the initial calculation of state total grants. Therefore, it is possible (and has occurred in a small number of instances) that state total grants are insufficient to fully pay hold harmless amounts to all LEAs in the state. In that case, each LEA gets a proportional share of its hold harmless amount.\nMinimum State Grant. Same as Target Grants (see above).\nRatable Reduction. Same as Basic Grants (see above).\nFiscal Requirements. Same as Basic Grants (see above).\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Same as Basic Grants (see above).\nFurther Adjustments by SEAs of LEA Grants as Calculated by ED. Same as Basic Grants (see above).\nEducation Finance Incentive Grant Allocation Formula.\nStage 1: Calculation of State Total EFIG Allocations\nStep 1: Preliminary State Grant = PF * EF * EFF * (1.30 - EQ)\nIn Step 1, the population factor is multiplied by the expenditure factor, the effort factor, and 1.30 minus the equity factor for each state.\nStep 2: Final State Grant = ( Preliminary State Grant / ∑ Preliminary State Grant) * APP * S_MIN_ADJ or S_MIN, if greater\nIn Step 2, the amount for each state in Step 1 is divided by the total of these amounts for all eligible states in the nation, then multiplied by the available appropriation, adjusted through application of the state minimum grant provision. The state minimum grant adjustment is upward in the smallest states, where total grants are increased through application of the minimum, and downward in all other states, where funds are reduced in order to pay the costs of applying the minimum.\nStage 2: Calculation of LEA EFIG Allocations\nStep 1: Preliminary LEA Grant 1 = ( PF / ∑ PF ) * S_ALL, or L_HH, whichever is greater\nIn Step 1, the population factor for each eligible LEA is divided by the total population factor for all eligible LEAs in the state. If this is less than the LEA's hold harmless level, the latter amount is used.\nStep 2: Preliminary LEA Grant 2 = Preliminary LEA Grant 1 * L_HH_ADJ or L_HH, whichever is greater\nIn Step 2, the amount for each LEA in Step 1 is adjusted through application of a factor to account for the aggregate costs of raising affected LEAs in the state to their hold harmless level, given a fixed total state allocation level. The LEA hold harmless adjustment is downward for all LEAs except those at the hold harmless level.\nStep 3: Final LEA Grant = Preliminary LEA Grant 2 * SCH_IMP_ADJ * S_ADMIN_ADJ * AWD_ADJ * OTR_ADJ\nIn the final step of calculating LEA grants under all Title I-A allocation formulas, LEA grants as calculated in Step 2 are further adjusted for the school improvement and state administration reservations, possible state reservations for achievement awards, and other possible adjustments (such as for grants to charter schools) discussed above.\nWhere:\nPF = Population factor EF = Expenditure factor EFF = Effort factor EQ = Equity factor APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) S_MIN = State minimum S_ALL = State total allocation L_HH = LEA minimum or \"hold harmless\" level L_HH_ADJ = LEA minimum or \"hold harmless\" adjustment (proportional decrease, in LEAs not benefitting from the LEA \"hold harmless,\" to apply the LEA minimum grant) SCH_IMP_ADJ = Reservation by SEA for school improvement grants S_ADMIN_ADJ = Reservation by SEA for state administration AWD_ADJ = Possible reservation by SEA for achievement awards OTR_ADJ = Other possible adjustments by the SEA ∑ = Sum (for all states in the nation in Stage 1, and for all eligible LEAs in the state in Stage 2)", "Under ESEA Title I-A, two different mechanisms are authorized for the generation of funds for School Improvement activities. Whatever the source, these funds are to be targeted on schools that are identified as being in need of improvement, corrective action, or restructuring because they have failed to make AYP for two consecutive years or more. First, states are to reserve 4% of their total Title I-A LEA grants, under the four formulas described above, for School Improvement activities.\nSecond, the ESEA authorizes a separate appropriation for state School Improvement Grants. These funds are allocated to states in proportion to state total grants under ESEA Title I, Parts A, C (State Agency Migrant Program; see below), and D (State Agency Neglected, Delinquent, or At-Risk Program; see below). At least 95% of each state's funds from either source (the reservation or the separate appropriation) is to be allocated to LEAs for schools identified as being in need of improvement, corrective action, or restructuring. For each such school that will be served using School Improvement Grants, the state must provide the LEA with at least $50,000 but not more than $500,000. The funds are allocated at state discretion: there is no statutory intrastate allocation formula for School Improvement funds, beyond the general direction that they are to be directed to LEAs with schools identified as being in need of improvement, corrective action, or restructuring.\nThrough the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), the School Improvement Grants program was amended to provide a maximum grant of $2 million to each school served using funds appropriated under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) or FY2010 appropriations. In addition, provisions in P.L. 111-117 altered school eligibility criteria to receive School Improvement Grants to include any school eligible to receive assistance under Title I-A that has not made adequate yearly progress (AYP) for at least two years or is in the state's lowest quintile of performance based on proficiency rates or, for secondary schools, has a graduation rate below 60%.\nTitle I Grant Factor: Funds are allocated to states in proportion to total grants under Title I, Parts A, C, and D.\nSchool Improvement Grant Allocation Formula\nState Grant = [ ( T1A + T1C + T1D ) / ∑ ( T1A + T1C + T1D ) ] * APP\nEach state (including Outlying Areas and the Bureau of Indian Affairs) receives a School Improvement Grant equal to its proportional share of total grants under ESEA Title I, Parts A, C, and D.\nWhere:\nT1A = State total grant under ESEA Title I, Part A T1C = State total grant under ESEA Title I, Part C T1D = State total grant under ESEA Title I, Part D APP = Appropriation (separate) for School Improvement Grants ∑ = Sum (for all states)", "Subpart 1 of Title I-B authorizes the Reading First program. Under Reading First, grants are allocated among participating states on the basis of a population factor, subject to a state minimum. SEAs then make competitive subgrants to LEAs, with priority given to LEAs in which the estimated number of children aged 5-17 in poor families is at least 6,500 or the poverty rate for 5-17 year-olds is at least 15%. Each participating LEA is to receive a share of the state's Reading First grant that is at least proportional to its share of state total grants under Title I-A. LEAs are to use these funds to improve reading programs for pupils in grades K-3 in schools that either have percentages of pupils from low-income families that are among the highest in the LEA or have been identified for improvement, corrective action, or restructuring under Title I-A. The supported reading instruction must be grounded in scientifically based reading research. Subpart 1 also authorizes discretionary targeted assistance performance awards to states that have demonstrated improvements in pupil reading performance. This program is no longer funded.\nPopulation Factor. Children aged 5-17 in poor families, according to the latest available estimates for LEAs from the Census Bureau's SAIPE program. These estimates are updated annually.\nMinimum State Grant. Each state is to receive a minimum of 0.25% of total state grants.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state, although its grants are capped; its share of state grants may not exceed the share of funds it receives for Title I-A grants. Bureau of Indian Affairs schools receive 0.5% of total appropriations, and an additional 0.5% is allocated to the Outlying Areas of Guam, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands.\nOther Reservations from Appropriations. At the national level, the Secretary of Education may reserve up to $25 million, or 2.5% of total appropriations, whichever is less, for program evaluation and national activities, and $5 million for dissemination of information. And in any fiscal year when the total appropriation for this program exceeds the appropriation for FY2003, the Secretary is to reserve $90 million, or 10% of the increase over the FY2003 appropriation, whichever is less, for Targeted Assistance grants to states. Targeted Assistance grants were made with funds appropriated for each of FY2004-2006. The latter would be competitive awards, although available funds are to be distributed among eligible states in proportion to the population factor for Title I-A Basic Grants. At the state level, up to 20% of grants may be used for a variety of state activities (no more than 10% of this reservation may be used for state administration). At the local level, up to 3.5% of funds may be used for planning and administration.\nReading First Allocation Formula.\nState Grant = [ ( PF / ∑ PF ) * APP ] * S_MIN_ADJ, or S_MIN if greater\nEach state receives a Reading First Grant equal to its proportional share of the population factor for all states, adjusted downward to provide funds to raise the smallest states to the state minimum level.\nWhere:\nPF = Population factor APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states)", "Subpart 3 of Title I-B authorizes the William F. Goodling Even Start Family Literacy Programs. Under Even Start, funds are allocated to states in proportion to grants under Title I-A, with a state minimum. Within states, funds are competitively awarded to partnerships of LEAs and other entities to provide a combination of services to parents and their children aged birth to seven years, including early childhood education, adult basic education, and parenting skills training to parents lacking a high school diploma.\nUnder this program, as well as any other ESEA program outside Title I-A where grants are made in proportion to ESEA Title I-A grants, grants are made in proportion to Title I-A grants as if no LEA hold harmless were applied. Thus, in practice, Even Start grants are made in proportion to what Title I-A grants would be if Title I-A had no LEA hold harmless provision, not actual Title I-A grants.\nTitle I-A Grant Factor. Grants to states are made in proportion to Title I-A grants, calculated as if no LEA hold harmless were applied.\nMinimum State Grant. Each state is to receive a minimum of the greater of $250,000 or 0.5% of total funding for state grants.\nFiscal Requirements. Even Start is one of many \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. A total of 5% of appropriations (if $200 million or less) or 6% (if above $200 million) is to be reserved to serve Indian tribes and tribal organizations, the Outlying Areas, and children of migratory workers.\nOther Reservations from Appropriations. At the national level, the Secretary may reserve up to 3% of total appropriations for program evaluation and technical assistance activities. The Secretary may also reserve funds for research. If appropriations are greater than in the previous year, up to $1 million may be reserved for competitive grants to states for statewide family literacy initiatives. At the state level, up to 6% of state grants may be reserved for administration, technical assistance, program improvement, and other activities (no more than 50% of this reservation may be used for administration).\nEven Start Allocation Formula\nState Grant = [ ( T1A / ∑ T1A ) * APP ] * S_MIN_ADJ, or S_MIN, if greater\nEach state receives an Even Start grant equal to its proportional share of total grants under ESEA Title I, Part A, adjusted downward to provide funds to raise the smallest states to the state minimum level.\nWhere:\nT1A = State total grant under ESEA Title I, Part A, but calculated as these grants would be if no LEA hold harmless were applied APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states)", "Subpart 4 of ESEA Title I-B authorizes grants to LEAs to improve the services provided by school libraries. If annual appropriations are less than $100 million (as has been the case each year thus far), competitive grants to LEAs are made directly by ED. If appropriations were $100 million or above, grants would be made by formula to SEAs, in proportion to Title I-A grants, and SEAs would make competitive grants to LEAs.", "The Migrant Education Program (MEP) provides grants to SEAs to develop or improve education programs for migrant children. Most migrant programs are administered by LEAs and operate during the regular school year, as well as during the summer months. In the allocation of funds, each state first receives a base grant amount equal to its FY2002 grant amount, adjusted for updated migrant children counts (discussed below). States are held harmless at this amount to mitigate a substantial redistribution of funds under the new provisions. Appropriations in excess of the FY2002 level are provided to states based on their proportional share of the sum of (1) the number of identified eligible migrant children, ages 3 through 21, residing in the state during the previous year, plus (2) the number of identified eligible migrant children, ages 3 through 21, who received services under the MEP in summer or intersession programs provided by the state during the previous year. The sum of these two groups of migrant children is multiplied by 40% of the average per-pupil expenditure (APPE) in the state, except that the state's APPE may not be less than 32% or more than 48% of the national APPE.\nAppropriations for MEP have not exceeded the FY2002 appropriations level of $396 million. Thus, since FY2002, the amount of a state's grant allocation has been based on the level of its FY2002 base-year state grant, which is largely dependent on the state's 2000-2001 count of eligible migrant children residing in the state relative to other states, although these numbers have been adjusted in recent years for inaccurate or incomplete data submitted by states for the calculation of their FY2002 MEP grants. That is, for each state, ED calculates a defect rate that is then applied to the 2000-2001 counts of eligible migrant children that were used to make FY2002 awards. These counts are then multiplied by 40% of the average per-pupil expenditure (APPE) in the state used to calculate the FY2002 grants, except that the state's APPE may not be less than 32% or more than 48% or the national APPE. States receive a proportional share of available appropriations based on the results of this calculation. Thus, the base grant amount received by states is actually an \"adjusted\" FY2002 grant.\nStates receiving funds under MEP are required to develop a comprehensive state plan for addressing the needs of migrant children. They have substantial flexibility in determining which services and activities to offer. Uses of funds may include, for example, providing instruction (remedial, compensatory, bilingual, multicultural, and vocational), health services, counseling and testing, career education, preschool services, and transportation to migrant students. Priority for services, however, must be given to migrant children who are failing or most at risk of failing to meet state academic content standards and achievement standards and whose education has been interrupted during the regular school year.\nPopulation Factor. The 12-month count is based on the number of eligible students from 3 to 21 years of age, who within three years of making a qualified move, resided in the state for one or more days from September 1 to August 31 of the reporting year. The summer and intersession count is based on the unduplicated number of eligible migrant children that were served in either a traditional summer or year-round school intersession program at least once during the reporting year.\nExpenditure Factor. The state's migrant education student count is multiplied by 40% of the state's average per pupil expenditure. The state's APPE may not be less than 32% of the national APPE or greater than 48% of the national APPE\nHold Harmless. Each state receives its \"adjusted\" FY2002 grant amount provided appropriations are sufficient to make these awards.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Grants to Puerto Rico are determined by multiplying the number of children calculated using the population factors by the product of (1) the percentage which Puerto Rico's APPE is of the lowest APPE of any of the 50 states and (2) 32% of the national APPE. No funds are provided to the Outlying Areas or the Bureau of Indian Affairs under this program.\nOther Reservations from Appropriations. The Secretary of Education may reserve up to $10 million of total appropriations to make grants or enter into contracts for the coordination of migrant education activities. Up to $3 million of the $10 million may be used to award competitive grants to SEAs that propose a consortium arrangement with another state that will improve the delivery of services to migrant children whose education is interrupted.\nFiscal Accountability Requirements. The MEP is one of many \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title I-C funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the education of migrant pupils, and the Title I-A comparability requirement also applies to Title I-C.\nMigrant Education Program Allocation Formula\nIf appropriations are equal to or less than the FY2002 level of $396 million\nStep 1: ADJ_COUNT = 00_01CNT * DR\nIn Step 1, a state's adjusted student count is calculated by multiplying its 2000-2001 student count, the count used to make FY2002 grants, by a defect rate. The defect rate adjusts the 2000-2001 migrant child count for inaccurate or incomplete data submitted by states for the calculation of their FY2002 awards.\nStep 2: GCNT = ADJ_COUNT * EF\nIn Step 2, the adjusted count from Step 1 is multiplied by an expenditure factor to produce the count used to make state grant determinations. In making this calculation, the adjusted count is multiplied by 40% of the average per-pupil expenditure in the state used for calculating FY2002 grants, except that the state's APPE may not be less than 32% or more than 48% or the national APPE.\nStep 3: State Grant = (GCNT / ∑ GCNT) * APP\nIn Step 3, a state receives a proportional share of funds based on the grant count calculated in Step 2. This proportion is equal to the state's grant count divided by the national grant count, multiplied by the appropriated amount.\nIf appropriations exceed the FY2002 level\nStep 1: MSC = NMC + MCSI\nIf appropriations exceed the FY2002 appropriations level, any additional funds over this level are allocated based on the sum of the prior year counts of the number of identified eligible migratory children, aged 3 through 21, residing in the state and the number of identified eligible migratory children, aged 3 through 21, who received services through summer or intersession programs provided by the state.\nStep 2: State Grant 1 = 02_GRANT + [(MSC * EF) / ∑ (MSC * EF)] * (EXCESS)\nIn Step 2, the state's migrant education student count is multiplied by and expenditure factor (40% of the state's average per pupil expenditure). The state's APPE may not be less than 32% of the national APPE or greater than 48% of the national APPE. After calculating the state's proportional share of migrant children adjusted for the state's expenditure factor, the amount is multiplied by the appropriations amount in excess of the FY2002 appropriations amount. This total is added to the state's adjusted FY2002 grant amount to determine the state's initial grant. (See previous set of calculations for determination of the FY2002 adjusted grant amount.)\nStep 3: Final State Grant = State Grant 1 * (APP / ∑ State Grant 1)\nIn Step 3, if funds are not sufficient to provide the amount calculated in Step 2 to each state, all states have their grant amounts ratably reduced by multiplying the state's initial grant amount by the result of dividing the total appropriation by the total amount generated under Step 2.\nWhere:\nADJ_ COUNT = Adjusted 2000-2001 eligible migrant child count 00_01CNT = 2000-2001 eligible migrant child count used to make FY2002 state grants DR = Defect rate GCNT = Grant count used for calculation of state awards EF = Expenditure factor APP = Annual appropriation MSC = Total number of migrant children NMC = Number of migrant children living in the state during the prior year MCSI = Number of migrant children who received services during summer or intercession programs during the prior year 02_GRANT = State's FY2002 grant amount based on its adjusted student count EXCESS = Appropriations in excess of the FY2002 appropriations level ∑ = Sum (for all states)", "Title I-D authorizes a pair of programs intended to improve education for pupils who are neglected, delinquent, or at risk of dropping out of school. Subpart 1 authorizes grants for the education of children and youth in state institutions for the neglected or delinquent, including community day programs and adult correctional institutions. Funds are allocated to states on the basis of a population factor multiplied by an expenditure factor. A portion of each state's grant is to be used for transition services for children and youth transferring to regular public schools.\nSubpart 2 provides aid for programs operated by LEAs in collaboration with locally operated correctional facilities, and in coordination with the Title I-A program. These funds are allocated to states as part of the Title I-A allocation process (described above). Once Title I-A grants reach SEAs, the portion of state total grants that is based on delinquent youth in local programs is set aside and separately allocated to LEAs providing services to such youth. SEAs are to allocate these funds to LEAs with concentrations of youth in local correctional facilities. SEAs may allocate these funds through a state-developed formula or on a discretionary basis. Therefore, the remainder of this discussion is based on the Subpart 1 state agency program only.\nPopulation Factor. Neglected or delinquent children and youth receiving public education services in institutions operated by state agencies, including those in community day programs and adult correctional institutions. Such children and youth must receive at least 15 hours per week of educational services in adult correctional institutions, and at least 20 hours per week in other eligible institutions.\nExpenditure Factor. Same as for Title I-A Basic Grants (see above).\nRatable Reduction. After maximum grants are calculated, if appropriations are insufficient to pay the maximum amounts (as has been the case for every year from FY1981 to the present), these amounts are reduced by the same percentage for all states until they equal the aggregate level of appropriations.\nFiscal Requirements. The State Agency Neglected and Delinquent program is one of many \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title I-D funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the education of neglected and delinquent pupils, and the Title I-A comparability requirement also applies to Title I-D.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Grants are available only for the 50 states, the District of Columbia, and Puerto Rico. Puerto Rico is treated in the same manner as it is treated under the Migrant Education Program (see above).\nState Agency Neglected and Delinquent Allocation Formula\nStep 1: Grant 1 = PF * EF\nIn Step 1, the population factor is multiplied by the expenditure factor for each state.\nStep 2: Grant 2 = ( Grant 1 / ∑ Grant 1 ) * APP\nIn Step 2, the amount for each state in Step 1 is divided by the total of these amounts for all states, then multiplied by the available appropriation.\nWhere:\nPF = Population factor EF = Expenditure factor APP = Appropriation (separate) for Neglected and Delinquent state grants ∑ = Sum (for all states)", "Title I-F authorizes grants via SEAs to LEAs to implement comprehensive reform strategies in schools participating in Title I-A. This program is no longer funded. If state grants were funded, appropriations would be allocated to states in proportion to Title I-A Basic Grants (calculated as if no LEA hold harmless were applied).", "Title I-G authorizes grants to SEAs to pay advanced placement test fees on behalf of low-income individuals, as well as competitive grants to SEAs, LEAs, or non-profit educational entities with relevant expertise, to support activities intended to expand access to advanced placement programs for low-income individuals. While the test fee grant program (Section 1704) does not have an explicit allocation formula, the statute does provide that in the allocation of available funds among the states, the Secretary of Education \"shall consider\" each state's number of children counted in the Title I-A population factor.", "At annual appropriations levels of $75 million or less (as has been the case each year thus far), Title I-H authorizes competitive grants to SEAs or LEAs for dropout prevention and reentry programs in high schools with dropout rates above the state average and for middle schools whose graduates attend these high schools. At annual appropriations levels above $75 million but less than $250 million, competitive grants would be made to SEAs for dropout prevention and reentry services to be provided via competitive subgrants to LEAs. If annual appropriations were $250 million or above, grants would be made by formula to SEAs, in proportion to Title I-A grants, with competitive subgrants to LEAs. At all funding levels, the Secretary of Education is authorized to carry out a variety of activities as part of a \"coordinated national strategy\" for dropout prevention and reentry.", "Title II, Part A authorizes a program of state grants that may be used for a variety of purposes related to recruitment, retention, and professional development of K-12 teachers and principals. In the allocation of funds, each state first receives an amount equal to its FY2001 grant under two antecedent programs. Remaining funds, if any, are allocated as follows: 35% on the basis of total population aged 5-17, and 65% on the basis of population aged 5-17 in poor families, with a state minimum grant amount of 0.5% of funds available for state grants. SEAs may reserve up to 5% of funds for administration and statewide services, such as teacher or principal support programs, or certification reform, and must suballocate at least 95% of grants to LEAs.\nIn making grants to LEAs, each LEA first receives an amount equal to its FY2001 grant under the two antecedent programs. Remaining funds, if any, are allocated as follows: 20% on the basis of total population aged 5-17, and 80% on the basis of population aged 5-17 in poor families. LEAs may use these grants for purposes that include recruiting and retaining highly qualified teachers, and professional development activities for teachers and principals, consistent with a locally developed needs assessment.\nFoundation Grant. In the allocation of grants to states, if sufficient funds are available, each state first receives an amount equal to the total of the grants it received for FY2001 under two antecedent programs: the Eisenhower Professional Development Program authorized under Title II, Part B, of the ESEA as in effect immediately preceding enactment of the NCLB, and the Class Size Reduction Program authorized under Section 306 of the Department of Education Appropriations Act, 2001 ( P.L. 106-554 ).\nIn the suballocation of state grants to LEAs, if sufficient funds are available, each LEA first receives an amount equal to the total of the grants it received for FY2001 under the same two antecedent programs. If an LEA did not receive a grant under one or both of the antecedent programs in FY2001, its foundation grant is to be equal to the amount it would have received if it had participated in each program that year.\nThe antecedent programs and their allocation formulas continue to substantially influence the distribution of current grants under Title II-A, as the FY2001 appropriation for state grants under these programs ($2,062,620,000) constitutes approximately 71% of the FY2008 appropriation for state grants under Title II-A ($2,920,572,000). The formulas for the two antecedent programs may be briefly described as follows:\nEisenhower Professional Development Program : In the allocation of grants to states, 50% of funds were allocated on the basis of grants under Title I-A, and 50% on the basis of population aged 5-17, with a 0.5% state minimum. For substate allocations to LEAs, 50% of funds were allocated on the basis of total public and private school enrollment, and 50% on the basis of Title I-A grants.\nClass Size Reduction Program : Allocations of the amounts available for state grants were initially calculated using: (1) the Eisenhower Professional Development Program formula (above), and (2) the ESEA Title I-A formula. The greater of these two amounts was selected for each state, then these amounts were ratably reduced to the available state grant funding level, while applying a 0.5% state minimum. For substate allocation to LEAs, 20% of funds was allocated on the basis of total public and private school enrollment, and 80% on the basis of school-age children in poor families.\nThus, the foundation grants incorporate a mixture of factors related to poverty or Title I-A grants, plus total school-age population or enrollment. In particular, the substate allocation formula for Title II-A is very similar to the substate formula for the Class Size Reduction Program. Overall, while proportions differ, formulas for the antecedent programs are similar to the factors used to allocate the remaining Title II-A funds, although less current population and other data are involved since the foundation grants are based on FY2001 population and other factors.\nPopulation Factor. In the allocation of funds to states, 35% of funds above the amount necessary to provide foundation grants is allocated on the basis of total school-age population (ages 5-17) and 65% on the basis of school-age population in poor families. In the suballocation of state total grants to LEAs, 20% of funds above the amount necessary to provide foundation grants is allocated on the basis of total school-age population and 80% on the basis of school-age population in poor families.\nLEA Minimum Grant or \" Hold Harmless \" Level. There is no direct LEA \"hold harmless\" provision, but see the foundation grant entry above.\nMinimum State Grant. Each state is to receive a minimum of 0.5% of total grants (i.e., both the foundation grant formulas and the formula for allocation of funds above the foundation grant level incorporate a 0.5% state minimum).\nRatable Reduction. If funds are insufficient to provide full foundation grants to each state, grants are reduced by the same percentage for all states until they equal the aggregate level of appropriations.\nFiscal Requirements. Title II-A is one of may \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title II-A funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for activities authorized under this program.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state under the Title II-A formula. One-half of one percent of total Title II-A state grants is reserved for grants to the Bureau of Indian Affairs and the same amount is reserved for the Outlying Areas.\nOther Reservations from Appropriations. At the state level, up to 5% of grants may be reserved for administration and other state activities. Of this amount, the lesser of: (i) 2.5% of each state's grant, or (ii) an annually specified lower percentage that would result in a national total of $125 million, may be reserved for grants to local partnerships consisting of an institution of higher education, a college-level school of arts and sciences, and a high need LEA (with either 10,000 or more children from poor families or a school-age poverty rate of at least 20%, and a high percentage of teachers who are not highly qualified).\nTeacher and Principal Training and Recruiting Fund Allocation Formula\nStage 1: Calculation of State Total Teacher and Principal Training and Recruiting Fund Allocations\nIf appropriations are equal to or less than the FY2001 level\nStep 1: Final State Grant = ( S_EIS_01 + S_CSR_01 ) * ( APP / APP_01 )\nIn Step 1, if appropriations are equal to or less than the FY2001 level, each state receives an equal proportion of its FY2001 grants under the two antecedent programs. This proportion is equal to the total amount available for state grants in the current year (after all national reservations) divided by the comparable amount for FY2001.\nIf appropriations exceed the FY2001 level\nStep 1: Preliminary State Grant = S_EIS_01 + S_CSR_01 + ( EXCESS * 0.35 ) * ( POP / ∑ POP ) + ( EXCESS * 0.65 ) * ( POV / ∑ POV )\nIn Step 1, if total appropriations exceed those for the two antecedent programs in FY2001, each state first receives its FY2001 grant under those programs. Of the remaining funds available for state grants, 35% is allocated in proportion to state share of total population aged 5-17, and 65% is allocated in proportion to population aged 5-17 in poor families.\nStep 2: Final State Grant = Preliminary State Grant * S_MIN_ADJ, or S_MIN if greater\nIn Step 2, if total state grant appropriations exceed the FY2001 level, each state's final grant is equal to the greater of: (i) the amount calculated in Step 1 multiplied by a (downward) adjustment to pay for increased grants to states where the initial (Step 1) grant was less than the minimum, or (ii) the state minimum.\nStage 2: Calculation of Teacher and Principal Training and Recruiting Fund LEA Allocations\nIf appropriations are equal to or less than the FY2001 level\nFinal LEA Grant = ( L_EIS_01 + L_CSR_01 ) * ( S_ALL / S_ALL_01 )\nIf appropriations are equal to or less than the FY2001 level, each LEA receives an equal proportion of its FY2001 grants under the two antecedent programs. This proportion is equal to the total amount available for state grants in the current year (after all national reservations) divided by the comparable amount for FY2001.\nIf appropriations exceed the FY2001 level\nFinal LEA Grant = L_EIS_01 + L_CSR_01 + ( POP / ∑ POP ) * ( S_EXCESS * 0.2 ) + ( POV / ∑ POV ) * ( S_EXCESS * 0.8 )\nOf the state total allocation, after LEAs receive their foundation grants (FY2001 amounts under the two antecedent programs), 20% of the excess state allocation is allocated on the basis of each LEA's share of the state total of the total population aged 5-17, and 80% on the basis of population aged 5-17 from poor families.\nWhere:\nS_EIS_01 = State total Eisenhower Professional Development Program grant, FY2001 S_CSR_01 = State total Class Size Reduction Program grant, FY2001 APP = Appropriation (for the current year) APP_01 = Total appropriation for FY2001 state grants under the Eisenhower Professional Development and Class Size Reduction Programs ($2,062,620,000) EXCESS = Appropriation in excess of total Eisenhower Professional Development Program and Class Size Reduction Program grants, FY2001 POP = Total population aged 5-17 POV = Population aged 5-17 in poor families S_MIN == State minimum allocation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) L_EIS_01 = LEA Eisenhower Professional Development Program grant, FY2001 L_CSR_01 = LEA Class Size Reduction Program grant, FY2001 S_ALL = State total allocation for grants to LEAs, current year S_ALL_01 = State total allocation for grants to LEAs under the antecedent programs, FY2001 S_EXCESS = State allocation for grants to LEAs, current year, in excess of the FY2001 level ∑ = Sum (for all states in the nation in Stage 1, and for all LEAs in the state in Stage 2)", "Part B authorizes grants to eligible partnerships—that include an SEA, an engineering, mathematics, or science department of an institution of higher education (IHE), and a high-need LEA—for activities that include professional development, summer workshops or institutes, and recruitment of mathematics and science teachers, as well as development of rigorous curricula in these fields. Title II-B funds are allocated to states by formula if appropriations are equal to or greater than $100 million, as has been the case in recent years.\nPopulation Factor. Children aged 5-17 in poor families, according to the latest available estimates for LEAs from the Census Bureau.\nMinimum State Grant. Each state is to receive a minimum of 0.5% of total funds available for grants to states.\nFiscal Requirements. Title II-B funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico and the Outlying Areas are treated fully as states.\nOther Reservations from Appropriations. Of the total amount appropriated for Title II-B, 0.5% of total appropriations is reserved for a national evaluation. There is no specific authority for this reservation in Title II-B itself, rather it appears to be an exercise of general authority—in ESEA Title IX, Part F—for the Secretary to reserve up to 0.5% of appropriations for any ESEA programs, except those under Titles I and III, for evaluation activities.\nMathematics and Science Partnerships Allocation Formula\nState Grant = [ ( PF / ∑ PF ) * APP ] * S_MIN_ADJ, or S_MIN if greater\nEach state receives a Mathematics and Science Partnerships grant equal to the greater of (1) its proportional share of the population factor for all states, adjusted downward to provide funds to raise the smallest states to the state minimum level, or (2) the state minimum grant.\nWhere:\nPF = Population factor APP = Appropriation for Mathematics and Science Partnerships grants to states S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states)", "Part D authorizes the Education Technology State Grants (EdTech) program, which is intended to help elementary and secondary schools improve student academic achievement by utilizing technology. Formula grants are made to states based on the proportion of Title I-A funds received by each state relative to the total amount of funding provided through Title I-A. States subsequently award 50% of the grants in the form of formula subgrants to all eligible LEAs that submit an application for authorized activities. Each LEA receives the same proportion of funding from the 50% that it received under Title I, Part A for the same year. The remaining EdTech funds are awarded competitively to high-need districts or local partnerships through a state- determined, competitive process. All local formula and competitive grant recipients must use at least 25% of the funds received for continual and effective professional development. Other funds may be used for relevant technology-related purposes, such as the development or expansion of the Internet and other technology efforts to connect schools and teachers with parents and students. The discussion below relates only to the portion of Title II-D funds that is allocated by formula.\nTitle I-A Grant Factor. Grants are allocated to states in proportion to total Title I-A grants (calculated as if no LEA hold harmless were applied).\nMinimum State Grant. Each state is to receive at least 0.5% of total state grants.\nMaximum SEA and Eligible Entity Reservations for Administration, Evaluation, and Technical Assistance. No recipient of funds may use more than 5% of the funds received for administrative costs or technical assistance, of which not more than 60% may be used by the recipient for administrative costs.\nFiscal Requirements. Title II-D is one of may \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Title II-D funds must also be used to supplement, not supplant , state and local funds that would otherwise be available for the activities authorized under this program.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Grants to the Outlying Areas are provided through a reservation of 0.5% of Title II-D appropriations specifically available for state and local technology grants. Grants to the Bureau of Indian Affairs are provided through a reservation of 0.75% of Title II-D appropriations specifically available for state and local technology grants.\nOther Reservations from Appropriations. Not more than 2% of the total Title II-D appropriation may be reserved for studies and other national technology activities.\nEducation Technology State Grants Allocation Formula\nStage 1: Calculation of State Total Education Technology Grant\nState Grant = [ ( T1A / ∑ T1A ) * APP ] * S_MIN_ADJ, or S_MIN, if greater\nEach state receives an EdTech grant equal to its proportional share of total grants under ESEA Title I, Part A, adjusted downward to provide funds to raise the smallest states to the state minimum level. If funds are sufficient, no state receives less than its minimum grant amount.\nStage 2: Calculation of LEA Formula Grant\nLEA Grant = ( L_T1A / ∑ L_T1A ) * ST_APP]\nEach LEA receives an EdTech grant equal to its proportional share of total grants provided to LEAs in the state under ESEA Title I, Part A.\nWhere:\nT1A = State total grant under ESEA Title I, Part A, but calculated as these grants would be if no LEA hold harmless were applied APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant L_T1A = LEA total grant under ESEA Title I, Part A ST_APP = Amount of state total grant used to made formula grants to LEAs ∑ = Sum (for all states or LEAs)", "Title III-A authorizes formula grants to states to ensure that limited English proficient (LEP) students and immigrant children develop English proficiency. Grants to the 50 states, the District of Columbia, and Puerto Rico are determined based on the state's proportional share of LEP students and immigrant students relative to the U.S. population of LEP students and immigrant students. For the purposes of this report section, the term \"state\" includes the District of Columbia and the Commonwealth of Puerto Rico.\nStates are required to distribute funds to eligible local entities based on the number of LEP students in schools served by the entity relative to the total population of LEP students served by all eligible entities in the state. If this calculation would result in an eligible entity receiving a grant of less than $10,000, the SEA may not provide the subgrant. While 95% of the state allocation must be distributed to the local level, the SEA must reserve up to 15% of its allotment to award subgrants to eligible entities that have experienced a \"significant increase\" in the percentage or number of immigrant students who have enrolled during the prior fiscal year in public and non-public elementary and secondary schools in the geographic area served by the eligible entity. These subgrants, however, do not have to be awarded by a formula.\nPopulation Factors. Grants are determined based on the state's proportional share of LEP students and immigrant students relative to the U.S. population of LEP students and immigrant students. These shares are then weighted with a higher weight (0.8) being assigned to the state's population of LEP students and a lower weight (0.2) being assigned to the state's population of recent immigrant students.\nIn determining the number of LEP and immigrant students in an individual state and in the United States, statutory language directs ED to use \"the more accurate\" of (1) data available from the American Community Survey (ACS), or (2) the number of children being assessed for English proficiency as required under Title I-A of the ESEA. In practice, ED has been using the ACS data to make state allocations since FY2005. Title III grants for a specific fiscal year have been based on ACS data from two years prior. For example, FY2008 grants are based on the 2006 ACS data.\nMinimum State Grant. No state can receive a grant of less than $500,000.\nMaximum SEA and LEA reservations for Administration, Evaluation, and Technical Assistance. Each SEA may not reserve more than 5% of its allotment to carry out professional development activities, planning, evaluation, administration, technical assistance, or recognition of subgrantees that have exceeded their annual measurable achievement objectives. Each eligible entity receiving funds may not use more than 2% of such funds for administration.\nFiscal Requirements. Title III-A is one of may \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title III funds must be used so as to supplement the level of federal, state, and local funds that, in the absence of Title III funds, would have been expended to support programs for LEP and immigrant children and youth. Further, Title III funds shall not be used to supplant such federal, state, and local funds; that is, Title III funds may not be used to pay for services that, in the absence of Title III funds, would be required to be provided by other federal, state, or local funds.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state, but its grant may not exceed 0.5% of the total available for state grants. Grants to the Outlying Areas are provided through a reservation of 0.5% of the total Title III-A appropriations. There is no specific reservation for the Bureau of Indian Affairs, but funds are available to support students in BIA schools (see below).\nOther Reservations from Appropriations. The Secretary of Education is required to reserve the greater of 0.5% or $5 million of the total Title III-A appropriation for grants to eligible entities that operate elementary, secondary, and postsecondary schools predominantly for Native American and Alaska Native children. Eligible entities include, for example, an Indian tribe or an elementary or secondary school that is operated or funded by the BIA. The Secretary is also required to reserve 6.5% of the total Title III-A appropriation for national activities. Of the reserved funds, not more than 0.5% of total Title III-A appropriations may be used for evaluation activities, and not more than $2 million may be reserved for the National Clearinghouse for English Language Acquisition and Language Instruction Educational Programs (NCELA).\nEnglish Language Acquisition State Grants Allocation Formula\nStage 1: Calculation of State English Language Acquisition Grant\nState Grant = [ (( LEP / ∑ LEP ) * 0.8) + ((RIM / ∑ RIM ) * 0.2) * APP ] * S_MIN_ADJ, or S_MIN, if greater\nEach state receives an English Language Acquisition grant equal to its proportional share of LEP children and recent immigrant children weighted by 0.8 and 0.2, respectively, adjusted downward to provide funds to raise the smallest states to the state minimum level.\nStage 2: Calculation of English Language Acquisition Grant for an Eligible Entity\nEligible Entity Grant = (EE_LEP / ∑ EE_LEP) * ST_APP\nEach eligible entity receives an English Language Acquisition grant equal to its proportional share of LEP students in schools served by the eligible entity. If this calculated amount is less than $10,000, the eligible entity may not receive a grant.\nWhere:\nLEP = Number of limited English proficient students in a state RIM = Number of recent immigrant children and youth in a state APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant EE_LEP = Number of limited English proficient students in schools served by the eligible entity ST_APP = Amount of state total grant used to made formula grants to eligible entities ∑ = Sum (for all states or eligible entities)", "Title IV-A is the federal government's major initiative to prevent drug abuse and violence in and around schools. One-half of state grant funds is allocated on the basis of total population aged 5-17, and one-half is allocated in proportion to Title I-A Concentration Grants, with a minimum grant amount of the greater of 0.5% of total funding for state grants or each state's grant for FY2001. SEAs subsequently make formula grants to LEAs based on each LEA's share of total Title I-A funding (60%) and share of enrollment in public and private non-profit elementary and secondary schools (40%). Title IV-A also provides funds to state governors to create programs to deter youth from using drugs and committing violent acts in schools, and for national programs supporting a variety of national leadership projects designed to prevent drug abuse and violence in elementary and secondary schools (e.g., the Safe Schools/Healthy Students initiative).\nPopulation Factor. In the allocation of funds to states , 50% of the appropriations available for grants to states is allocated in proportion to total school-age (ages 5-17) population.\nIn the allocation of state total grants to LEAs , 40% of state total funds is distributed on the basis of total K-12 enrollment in public and private, non-profit schools.\nTitle I-A Grant Factor. In the allocation of funds to states , 50% of the appropriations available for grants to states is allocated in proportion to Title I-A Concentration Grants (calculated as if no LEA hold harmless were applied).\nIn the allocation of state total grants to LEAs , 60% of state total funds is distributed in proportion to total Title I-A grants.\nMinimum State Grant. If sufficient funds are appropriated, each state is to receive the greater of two minimum amounts: (a) 0.5% of total allocations to states; or (b) a hold harmless amount equal to the state's FY2001 allocation under this program. If appropriations are insufficient to provide the full FY2001 minimum to all states, as has been the case in some recent years, each state receives an equal proportion of its FY2001 grant. (Since the 0.5% minimum was applied to FY2001 grants as well, this also provides each state with at least 0.5% of current state grants.)\nFiscal Requirements. Title IV-A is one of many \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Also, Title IV-A funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Grants to the Outlying Areas are provided through reservation of the greater of 1% of state grant appropriations, or $4,750,000, whichever is greater, to be allocated among the Outlying Areas at the discretion of the Secretary. An additional 1% of state grants or $4,750,000 (whichever is greater) is reserved for the Bureau of Indian Affairs, and 0.2% of state grants is reserved for programs serving Native Hawaiians.\nOther Reservations from Appropriations. At the national level , of the total amount appropriated for state grants under Title IV-A, up to $2 million may be reserved for a national evaluation. At the state level , the chief state executive officer may reserve up to 20% of state total grants for competitive grants. Of the remaining state funds, up to 3% may be reserved by the SEA for state administration costs, and up to 5% for statewide activities; regardless of these separate limits, at least 93% (i.e., not 92%) of state grants remaining after the state's chief executive officer's reservation is to be allocated to LEAs.\nSafe and Drug Free Schools and Communities Allocation Formula\nStage 1: Calculation of State Total Safe and Drug-Free Schools and Communities Allocations\nStep 1: Preliminary State Grant = ( APP * 0.5 ) * ( T1A_CON / ∑ T1A_CON ) + ( APP * 0.5 ) * (PF / ∑ PF)\nIn Step 1, one-half of the appropriations available for state grants is multiplied by the state share of the national total of Title I-A Concentration Grants, and one-half is multiplied by the state share of the population factor.\nStep 2: S_MIN = Greater of ( APP * 0.005 ) or FY2001 Grant\nIn Step 2, the state minimum is calculated as the greater of 0.5% of total state grants or each state's Safe and Drug-Free Schools and Communities grant for FY2001.\nStep 3a: If appropriations exceed the FY2001 level\nFinal State Grant = Preliminary State Grant * S_MIN_ADJ, or S_MIN if greater\nIn Step 3a, if total state grant appropriations exceed the FY2001 level ($439,250,000), each state's final grant is equal to the amount calculated in Step 1 multiplied by a (downward) adjustment to pay for increased grants to states receiving the minimum grant amount, or the state minimum, which is greater.\nStep 3b: If appropriations are equal to or less than the FY2001 level\nFinal State Grant = S_MIN * ( APP / APP_01 )\nIn Step 3b, if appropriations are equal to or less than the FY2001 level, each state receives an equal proportion of its FY2001 grant. This proportion is equal to the total amount available for state grants in the current year (after all national reservations) divided by the comparable amount for FY2001.\nStage 2: Calculation of LEA Safe and Drug-Free Schools and Communities Allocations\nFinal LEA Grant = ( PF / ∑ PF ) * ( S_ALL * 0.4 ) + ( T1A / ∑ T1A ) * ( S_ALL * 0.6 )\nOf the state total allocation, 40% is allocated on the basis of each LEA's share of the state total of the population factor, and 60% on the basis of total Title I-A grants.\nWhere:\nAPP = Appropriation (for the current year) T1A_CON = Title I-A Concentration Grants (calculated as if no LEA hold harmless were applied) PF = Population factor S_MIN = State minimum allocation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) APP_01 = Appropriation for FY2001 ($439,250,000) S_ALL = State total allocation (less funds reserved by the SEA and the chief state executive officer) T1A = Total Title I-A Grants ∑ = Sum (for all states in the nation in Stage 1, and for all eligible LEAs in the state in Stage 2)", "Title IV-B supports activities provided during non-school hours that offer learning opportunities for school-aged children. Formula grants are made to states based on state shares of Title I-A grants. States subsequently award grants to local entities (e.g., LEAs, community-based organizations) on a competitive basis for a period of three to five years. SEAs are required, to the extent possible, to distribute funds equitably among the various geographic areas within the state, including urban and rural communities. Eligible entities are to serve primarily students who attend schools eligible for school wide programs under Title I-A and the families of these students. Eligible entities may use funds for before- and after-school activities that advance student academic achievement. The program's focus, however, is currently on providing after-school activities for children and youth, and literacy-related activities for their families.\nTitle I-A Grant Factor. Grants are allocated to states in proportion to total Title I-A grants (calculated as if no LEA hold harmless were applied).\nMinimum State Grant. Each state is to receive at least 0.5% of total state grants.\nFiscal Requirements. Title IV-B is one of many \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Also, Title IV-B funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Grants to the Outlying Areas and the Bureau of Indian Affairs are provided through reservation of up to 1% of total Title IV-B appropriations.\nOther Reservations from Appropriations. At the national level, of the total amount appropriated for Title IV-B, up to 1% may be reserved by the Secretary for national activities. At the state level, up to 2% of grants may be reserved for administration and up to 3% for evaluation and technical assistance.\n21 st Century Community Learning Centers Allocation Formula\nState Grant = [ ( T1A / ∑ T1A ) * APP ] * S_MIN_ADJ, or S_MIN, if greater\nEach state receives a 21 st Century Community Learning Center grant equal to its proportional share of total grants under ESEA Title I, Part A, multiplied by a (downward) adjustment to pay for increased grants to states receiving the minimum grant amount, or the state minimum, which is greater.\nWhere:\nT1A = State total grant under ESEA Title I, Part A, but calculated as these grants would be if no LEA hold harmless were applied APP = Appropriation for state grants S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states)", "Title V, Part A authorizes the Innovative Programs block grant, under which aid may be provided to SEAs and LEAs that could be used for an especially wide range of educational services and activities. Part A grants are allocated to states on the basis of total population aged 5-17, with a state minimum grant amount of 0.5% of total funding for state grants. At least 85% of Title V-A funds must be allocated by SEAs to LEAs on the basis of state-developed formulas that take into consideration each LEA's enrollment of pupils in public and private schools, with adjustments to provide increased grants per pupil to LEAs with the greatest numbers or percentages of \"high cost\" pupils, including those from economically disadvantaged families and those living in sparsely populated areas or areas of concentrated poverty. Because the formulas for suballocation of state total grants to LEAs are developed by the states, the discussion below will focus on the national formula for allocation to states only.\nOf the Part A funds that may be retained by states (i.e., up to 15% of state total grants), no more than 15% of these amounts may be used for administrative costs; remaining funds reserved by states are to be used for one or more of seven specified types of programs and services, including the broad categories of statewide education reform, school improvement programs and technical assistance activities. LEAs may use their Part A funds for any of 27 different types of \"innovative assistance programs.\" Whereas several of these are relatively specific (e.g., programs to provide same gender schools and classrooms), others are more general (e.g., promising education reform projects). Although this program and its direct predecessors were funded for each of FY1982-2007, no appropriation has been provided for this program since FY2007.\nPopulation Factor. In the allocation of funds to states, the population factor is total school-age (5-17 years) children. While substate allocation formulas are ultimately determined by the states, for the suballocation of state grants to LEAs, the population factor is each LEA's enrollment of pupils in public and private schools, with state-determined adjustments to provide increased grants per pupil to LEAs with the greatest numbers or percentages of \"high cost\" pupils, including those from economically disadvantaged families and those living in sparsely populated areas or areas of concentrated poverty.\nState Minimum. Each state is to receive at least 0.5% of total state grants.\nFiscal Requirements. Under a separate (but substantively identical to others in the ESEA) maintenance of effort requirement, recipient states must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, funds must be used so as to supplement, and not supplant , any other state, local or federal funds.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. One percent of total appropriations is reserved for grants to the Outlying Areas. The Bureau of Indian Affairs receives no funds under this program.\nOther Reservations from Appropriations. Of the total received by each state, an amount equal to at least 85% of the state's FY2002 grant, plus 100% of the excess over FY2002 (50% for states receiving the minimum grant), must be allocated to LEAs. Remaining funds, if any, could be used for state level activities, with a maximum of 15% of these used for administration.\nInnovative Programs Allocation Formula\nState Grant = ( PF / ∑ PF) * APP * S_MIN_ADJ, or S_MIN if greater\nState grants are equal to the state share of the population factor, multiplied by the appropriation, multiplied by a (downward) adjustment to pay for increased grants to states receiving the minimum grant amount, or the state minimum, whichever is greater.\nWhere:\nPF = Population factor APP= Appropriation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) S_MIN = State minimum ∑ = Sum (for all states)", "Subpart 1 of Title VI-A authorizes grants to states for the development and enhancement of assessments meeting the requirements of Title I-A. In the allocation of funds, each state first receives $3 million per year, and remaining funds, if any, are allocated in proportion to population aged 5-17. Of the amount appropriated for this program each year, a minimum or \"trigger\" amount is to be allocated as state formula grants. Funds appropriated each year for state assessment grants that are in excess of \"trigger\" amounts are to be used for enhanced assessment grants, that are allocated through competition, not a formula. For FY2008, the \"trigger\" amount is $400 million; therefore, $400 million is allocated by formula, and the remainder of the FY2008 appropriation for Title VI-A ($8,732,000) is allocated competitively.\nFoundation Grant. Each state initially receives $3 million per year.\nPopulation Factor. After the payment of foundation grants to each state, remaining funds, if any, are allocated to states in proportion to total population aged 5-17.\nFiscal Requirements. Title VI-A-1 funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Of the total appropriated for Title VI-A-1, 0.5% is reserved for grants to the Outlying Areas and 0.5% for the Bureau of Indian Affairs.\nState Assessment Grants Allocation Formula\nState Grant = $3,000,000 + ( ( PF / ∑ PF ) * ( APP - $156,000,000) )\nEach state receives $3 million plus a share of remaining funds that is proportional to its share of total school-age (5-17) population in all of the states.\nWhere:\nPF = Population factor APP = Appropriation for State Assessment Grants formula grants to states (i.e., \"trigger\" amount) ∑ = Sum (for all states)", "Subpart 1 of Title VI-B authorizes the Small, Rural School Achievement Program (SRSA), that provides flexibility in the use of funds under several ESEA programs to rural LEAs with fewer than 600 pupils (or meeting certain other criteria). Eligible LEAs may also receive additional grants, although these are offset by amounts received by these LEAs under certain ESEA programs. Among ESEA formula grant programs, the SRSA is unique in that an initial grant, ranging from $20,000 to $60,000, is first calculated for each eligible LEA. Then, the amounts received by each LEA under certain ESEA programs (see below) is subtracted from the initial grant, and the final grant to each LEA is the remainder (if any) after this deduction. The rationale for this procedure is that the SRSA is intended to supplement funds provided under certain other ESEA programs. SRSA funds may be used for any purpose authorized under ESEA Title I, Part A (Education for the Disadvantaged), Title II, Part A (Teacher and Principal Training and Recruiting Fund), Title II, Part D (Enhancing Education Through Technology), Title III (English Language Acquisition), Title IV, Part A (Safe and Drug-Free Schools and Communities), Title IV, Part B (21 st Century Community Learning Centers), or Title V, Part A (Innovative Programs).\nGrants are calculated on the basis of LEAs. State total grants are simply the total of final grants calculated on behalf of the state's eligible LEAs.\nPopulation Factor (initial grant calculation). The number of students in average daily attendance (ADA) at the public schools operated by eligible LEAs.\nEligibility Criteria. Only small, rural LEAs are eligible for grants. These are defined as LEAs in which all of the schools have a rural locale code, and either the total enrollment of the LEA is 600 or less, or the total population density of the county in which the LEA is located is less than 10 persons per square mile. LEAs receiving grants under this program are not eligible to receive a grant under Title VI, Part B, Subpart 2 (below).\nExpenditure Factor. The initial grant for each eligible LEA is equal to $20,000 plus $100 multiplied by the number of students in the population factor in excess of 50 students. The initial amount may not exceed $60,000.\nDeduction from Initial Grant. Initial grants are reduced by the total of grants to the LEA under the following programs: (1) the Teacher and Principal Training and Recruiting Fund (ESEA Title II, Part A, Subpart 2); (2) Enhancing Education Through Technology (ESEA Title II, Part D); (3) Safe and Drug-Free Schools and Communities (Title IV, Part A); and (4) Innovative Programs (ESEA Title V, Part A). If the total deduction is equal to or greater than the initial grant, the LEA receives no funds under the SRSA program.\nRatable Reduction. After net initial grants are calculated, if appropriations are insufficient to pay the total of these amounts, grants are reduced by the same percentage for all LEAs until they equal the aggregate level of appropriations. If, on the other hand, sufficient funds are available to give all eligible LEAs an amount in excess of their initial grant, the initial grants are ratably increased, although the $60,000 maximum grant is maintained.\nFiscal Requirements. SRSA funds must be used so as to supplement, and not supplant , any other federal, state or local funds.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico and the Outlying Areas are treated as states. There is no provision for grants to the Bureau of Indian Affairs.\nSmall Rural Schools Achievement Program Allocation Formula\nStep 1: Initial Grant 1 = $20,000 + ( ( ADA - 50 ) * $100)\nIn Step 1, each LEA receives an initial grant of $20,000 plus $100 for each student in average daily attendance in excess of 50 students.\nStep 2: Initial Grant 2 = Initial Grant 1 or $60,000, whichever is less\nIn Step 2, a maximum of $60,000 is applied to the initial grant.\nStep 3: Initial Grant 3 = Initial Grant 2 - ( T2A + T2D + T4A + T5A ) or $0, whichever is greater\nIn Step 3, the LEA total of grants received under ESEA Title II, Part A; Title II, Part D; Title IV, Part A; and Title V, Part A is subtracted from the amount calculated in Step 2. If this amount is equal to zero or less, the LEA receives no SRSA grant.\nStep 4: Final Grant = ( Initial Grant 3 / ∑ Initial Grant 3 ) * APP\nIn Step 4, each eligible LEA receives a share of available appropriations that is proportional to its grant amount calculated in Step 3.\nWhere:\nADA = LEA students in average daily attendance T2A = LEA grant under ESEA Title II, Part A T2D = LEA grant under ESEA Title II, Part D T4A = LEA grant under ESEA Title IV, Part A T5A = LEA grant under ESEA Title V, Part A APP = Appropriation ∑ = Sum (for all eligible LEAs)", "Subpart 2 of Title VI-B authorizes the Rural and Low-Income School Program (RLIS), under which grants are made to rural LEAs, defined somewhat differently than under the SRSA program, that do not receive grants under the SRSA program and that have a school-age child poverty rate of 20% or more. The RLIS grants may be used for a variety of ESEA-related purposes, including (1) teacher recruitment, retention, and professional development; (2) parental involvement activities; and (3) activities authorized under ESEA Title I-A (Education for the Disadvantaged), Title II-D (Education Technology), Title IV-A (Safe and Drug-Free Schools and Communities), or Title III (English Language Acquisition).\nUnder the RLIS program, funds are generally allocated initially to SEAs, based on the state total number of population factor students in eligible LEAs relative to the national total of such students. However, if a SEA did not apply for RLIS grants, eligible LEAs might apply directly to ED for RLIS funds, based on the LEA's number of population factor students relative to the national total of such students. As of FY2007, all RLIS funds have been allocated via SEAs.\nWhen RLIS grants are made via SEAs, states may suballocate funds among eligible LEAs in one of 3 ways: (1) on a competitive basis; (2) on the basis of the population factor used to allocate RLIS funds to states; or (3) on the basis of a state-developed alternative formula, approved by the Secretary of Education, that increases the share of funds going to LEAs with a concentration of children in poor families.\nPopulation Factor. The RLIS population factor is the number of students in average daily attendance (ADA) at the schools operated by eligible LEAs (see immediately below).\nEligibility Criteria. Only rural LEAs with relatively high school-age child poverty rates are eligible for grants. These are defined as LEAs in which all of the schools have a rural locale code, and the percentage of school-age children from poor families is at least 20%. LEAs receiving grants under the SRSA program (above) are not eligible to receive a grant under the RLIS program.\nFiscal Requirements. RLIS is one of many \"covered programs\" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, RLIS funds must be used so as to supplement, and not supplant , any other federal, state or local funds.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. One-half of one percent of total RLIS grants is reserved for grants to the Bureau of Indian Affairs and the same amount is reserved for the Outlying Areas.\nOther Reservations from Appropriations. At the state level, up to 5% of grants may be used for administration and technical assistance.\nRural and Low-Income Schools Allocation Formula\nState Grant = ( ADA / ∑ ADA ) * APP\nThe grant is equal to the state total number of students in average daily attendance in schools operated by eligible LEAs compared to the national total number of such students (where grants are made via SEAs, as is the case for all funds currently).\nWhere:\nADA = Students in average daily attendance in eligible LEAs APP = Appropriation ∑ = Sum (for all eligible LEAs)", "Subpart 1 of Title VII-A authorizes grants to LEAs and to schools operated or funded by the Bureau of Indian Affairs (BIA). Eligible LEAs must generally meet Indian pupil enrollment thresholds of at least 10 pupils or 25% of total enrollment. Formula grants are allocated on the basis of the number of Indian pupils and the greater of the average per pupil expenditure for the state or 80% of the national average. The formula grants may be consolidated with grants under other federal education programs serving Indian pupils (under a demonstration project authority); and may be used for comprehensive programs of educational services for Indian pupils, such as culturally related activities and curriculum content, substance abuse prevention, and family literacy programs. The state total for this program is the sum of grants awarded to eligible LEAs in the state.\nPopulation Factor. Indian children and youth enrolled in educational programs provided by an LEA.\nEligibility Threshold. In most cases, LEAs are eligible for grants if they enroll at least 10 Indian pupils or Indian pupils constitute at least 25% of total enrollment. These thresholds do not apply to LEAs located in Alaska, California, or Oklahoma, or on or near an Indian reservation. Eligible LEAs must establish a committee, a majority of whose members are parents of Indian children, to develop a program for the use of funds received under this Subpart. If the LEA fails to meet this requirement, an Indian tribe representing at least one-half of the Indian children served by the LEA may apply for the grant.\nExpenditure Factor. The expenditure factor is the state average per pupil expenditure in average daily attendance, or 80% of the national average, whichever is greater.\nRatable Reduction. After maximum grants (population factor multiplied by the expenditure factor) are calculated, if appropriations are insufficient to pay the maximum amounts, these amounts are reduced by the same percentage for all LEAs until they equal the aggregate level of appropriations, subject to the LEA minimum grant provision (below).\nLEA Minimum Grant. If sufficient funds are available, each eligible LEA is to receive a minimum of $3,000. This minimum may be raised to $4,000 \"if the Secretary determines such increase is necessary to ensure the quality of the programs provided\" (Sec. 7113(b)(3)).\nFiscal Requirements. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico and the outlying areas are treated as states. The Bureau of Indian Affairs (Education) receives a grant under the same formula as used for grants to LEAs, based on the total number of Indian students enrolled in schools funded by the Bureau.\nOther Reservations from Appropriations. At the LEA level, up to 5% of grants may be reserved for administration.\nIndian Education Allocation Formula\nStep 1: Preliminary LEA Grant = PF * EF\nIn Step 1, maximum grants, equal to the population factor multiplied by the expenditure factor, are calculated for each LEA meeting the Indian student enrollment eligibility threshold (where applicable).\nStep 2: LEA Grant 2 = ( Preliminary LEA Grant / ∑ Preliminary LEA Grant ) * APP * L_MIN_ADJ,\nor L_MIN if greater\nIn Step 2, maximum grants, as calculated in Step 1, are adjusted through application of the LEA minimum grant provision.\nWhere:\nPF = Population factor EF = Expenditure factor APP = Appropriation L_MIN_ADJ = LEA minimum grant adjustment (proportional decrease, in LEAs not benefitting from the minimum LEA grant provision, to apply the LEA minimum grant) L_MIN = LEA minimum grant ∑ = Sum (for all eligible LEAs)", "The Impact Aid program compensates LEAs for \"substantial and continuing burden\" resulting from federal activities. These activities include federal ownership of certain federal lands, as well as the enrollments in LEAs of children of parents who work or live on federal land. The federal government provides compensation because these activities deprive LEAs of the ability to collect property or other taxes from these individuals even though LEAs are obligated to provide free public education to their children. Section 8003(b) authorizes payments directly to LEAs to compensate them for the cost of serving certain groups of federally connected children. The presence of these children can increase the number of children the LEA must serve without providing a commensurate increase in taxes that support public education. To be eligible for 8003(b) payments, an LEA must have at least 400 federally connected children, or such children must represent at least 3% of an LEA's average daily attendance (ADA).\nPopulation Factors. Each federally connected child is assigned to a category that has a specific weight associated with it. These weights are used to produce a weighted student count for each LEA that is used to determine grant amounts. The weights assigned to each category are shown in Table 12 . Federally connected children receiving the highest weights (i.e., 1.0 or above) have historically been referred to as \"a\" children, while students with lower weights have been referred to as \"b\" children.\nExpenditure Factor. Grants are calculated in part based on a local contribution rate (LCR). For most LEAs, the LCR used in this calculation is either one-half of the state APPE or one-half of the national APPE.\nFiscal Requirements. An LEA is eligible for a basic support payment for any fiscal year only if the state SEA finds that either the combined fiscal effort per student or the aggregate expenditures of that LEA and the state with respect to the provision of free public education by that agency for the preceding fiscal year was not less than 90% of such combined fiscal effort or aggregate expenditure for the second preceding fiscal year.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. LEAs in Puerto Rico and the Virgin Islands serving federally connected children are eligible to receive grants. Grants are not made to Outlying Areas or the BIA.\nImpact Aid Basic Support Payments Allocation Formula\nStep 1: WSC = ∑ (FCC * WGT)\nIn Step 1, a weighted student count is calculated by multiplying each federally connected child by the appropriate weight and summing the total of these calculations.\nStep 2: MBSP = WSC * LCR\nIn Step 2, the weighted student count calculated in Step 1 is multiplied by a local contribution rate to determine the LEA's maximum basic support payment.\nStep 3: LOT = ADA% + EXP%\nIn Step 3, an LEA's Learning Opportunity Threshold (LOT) percentage is calculated. An LEA's LOT percentage is based on (1) the percentage of an LEA's average daily attendance that is composed of federally connected children plus (2) the percentage of an LEA's total current expenditures that is composed of Section 8003 payments. The LOT percentage cannot exceed 100%.\nStep 4: LOT_P = MBSP * LOT\nIn Step 4, an LEA's maximum basic support payment is multiplied by its LOT percentage. This payment is known as an LEA's LOT payment. If appropriations are not sufficient to make 100% of LOT payments, LOT payments are (ratably) reduced. If appropriations exceed the amount needed to make LOT payments, but are not enough to provide maximum basic support payments, the percentage of LOT paid is increased.\nWhere:\nWSC = Weighted student count FCC = Federally connected children WGT = Weights for categories of federally connected children MBSP = Maximum basic support payment LCR = Local contribution rate ADA% = Percentage of an LEA's average daily attendance that is composed of federally connected children EXP% = Percentage of an LEA's total current expenditure that is composed of Section 8003 payments LOT = Learning Opportunity Threshold percentage LOT_P = LOT payment ∑ = Sum (for weighted student count)", "Section 8003(d) authorizes payments directly to LEAs based on the number of certain federally connected children with disabilities who are eligible to receive services under the Individuals with Disabilities Education Act (IDEA). More specifically, payments are limited to certain IDEA-eligible children, most notably those whose parents are members of the Armed Forces (residing on or off military bases) and those residing on Indian lands.\nPopulation Factors. Weighted child counts are calculated for eligible federally connected children who are also eligible for IDEA by multiplying eligible \"a\" children by a factor of 1.0 and eligible \"b\" children by a factor of 0.5. An LEA's payment is its percentage share of the total weighted child count multiplied by the funds appropriated for Section 8003(d).\nFiscal Requirements. An LEA is eligible for a basic support payment for any fiscal year only if the state SEA finds that either the combined fiscal effort per student or the aggregate expenditures of that LEA and the state with respect to the provision of free public education by that agency for the preceding fiscal year was not less than 90% of such combined fiscal effort or aggregate expenditure for the second preceding fiscal year.\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. LEAs in Puerto Rico and the Virgin Islands serving federally connected children are eligible to receive grants. Grants are not made to Outlying Areas or the BIA.\nImpact Aid Payments for Children with Disabilities Allocation Formula\nStep 1: WSC = [(HWC * 1.0) + (LWC * 0.5)]\nIn Step 1, a weighted student count is calculated by multiplying each federally connected child eligible for IDEA by the appropriate weight.\nStep 2: LEA grant = (WSC /∑ WSC) * APP\nIn Step 2, an LEA's weighted student count is divided by the total weighted student count and multiplied by the appropriation for Section 8003(d) to provide each LEA with a proportional share of available funds.\nWhere:\nWSC = Weighted student count HWC = Federally connected children with high weights LWC = Federally connected children with low weights APP = Appropriation ∑ = Sum (of weighted student count for eligible LEAs)", "Section 8007 provides funds for construction and facilities upgrading to certain LEAs with high percentages of children living on Indian lands or children of military parents. Of these funds, 40% are used to make formula grants, and 60% are used to make competitive grants. This discussion focuses on funds awarded by formula . Formula grants are available to LEAs receiving Section 8003 payments and in which either (1) students living on Indian land constitute at least 50% of the LEA's total student enrollment, or (2) military students living on or off base constitute at least 50% of the LEA's total student enrollment. The funds available for formula grant construction payments are divided equally between these two groups of LEAs (i.e., 20% of total Section 8007 appropriation for each group). Grants for LEAs impacted by military dependent students are determined by dividing the total amount of available funding by the total number of weighted student units of military children living on or off base across all eligible LEAs, and multiplying this result by the total number of weighted student units of these children enrolled in an LEA. The same calculation is made for LEAs impacted by children living on Indian lands.\nPopulation Factors. At least 50% of an LEA's total student enrollment must be composed of either (1) military children living on or off base, or (2) children living on Indian lands. These student counts are then multiplied by their relevant weights to produce a weighted student count. (See discussion of Section 8003(b) for additional information about these categories of students and the applicable weights.)\nTreatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. LEAs in Puerto Rico and the Virgin Islands serving federally connected children are eligible to receive grants. Grants are not made to Outlying Areas or the BIA.\nImpact Aid Payments for Construction Allocation Formula (for formula grants only)\nStep 1: WSC = [(MB * 1.0) + (MOB *0.02)] or WSC = (CIL * 1.25)\nIn Step 1, a weighted student count is calculated by (1) multiplying the number of military children living on or off base by the appropriate weight and adding the results, or (2) multiplying the number of children living on Indian lands by the appropriate weight.\nStep 2: LEA grant = [(APP * 0.2) / (∑WSC)] * WSC\nIn Step 2, the funds available for formula grants are divided equally between LEAs in which military students living on or off base constitute at least 50% of the LEA's total student enrollment and LEAs in which students living on Indian lands constitute at least 50% of the LEA's total student enrollment (20% of the total Section 8007 appropriation going to each group). For example, grants for LEAs impacted by military dependent students are determined by dividing the total amount of available funding (20% of the Section 8007 appropriation) by the total number of weighted student units of military children living on or off base across all eligible LEAs to produce an amount per weighted child. This amount is then multiplied by the total number of weighted student units of these children enrolled in the LEA. The same calculation is made for LEAs impacted by children living on Indian lands.\nWhere:\nWSC = Weighted student count MB = Federally connected children with parent in the military and living on a military establishment MOB = Federally connected children with parent in the military and living off of a military establishment CIL = Children living on Indian lands APP = Appropriation ∑ = Sum (of weighted student count for eligible LEAs)", "This report concludes with a series of analyses of selected aspects of the ESEA allocation formulas. Given space limitations, as well as the limited availability of current grant data at the LEA level, all of these analyses are conducted at the state (not LEA) level.", "Table 13 , below, provides two different \"federal share\" calculations for each state. The first of these compares total ESEA formula grant allocations for FY2006 to total revenues for public K-12 education for the 2005-2006 school year. The table is sorted on the basis of this calculation, from lowest to highest. The second calculation compares federal grants under all K-12 education programs administered by ED, including not only the ESEA but also the Individuals with Disabilities Education Act (IDEA) and other federal programs, to total public K-12 revenues for 2005-2006 (i.e., the same denominator as in the first comparison). Figure 1 further illustrates this ESEA share for the states; states are again sorted according to the ESEA share of total public K-12 revenues, from lowest to highest.\nAs seen in Table 13 , the share of public K-12 education revenues that is provided under ESEA programs varies substantially among the states, although ESEA funding constitutes only approximately one-tenth or less of total public K-12 education revenues in all cases except Puerto Rico. The ESEA share of revenues is lowest, 2.5% or less, for the states of Iowa, Massachusetts, Minnesota, Connecticut, and New Jersey. These states have relatively low rates of poverty, so their grants under Title I-A and other programs with formulas based on Title I-A grants are relatively low. Also, three of these states (Connecticut, Massachusetts, and New Jersey) have especially high levels of state and local source funding for public K-12 education, so federal grants are low in comparison.\nAt the other end of the scale, Puerto Rico is a special case, with an ESEA share (21.3% of total revenues) that is at least twice as high as that of any state. Among the states, the ESEA share is highest, at 8.4% to 10.7%, for the states of New Mexico, Montana, North Dakota, South Dakota, and Alaska. These states receive relatively high grants under the ESEA Impact Aid and Indian Education programs, among others. In addition, Alaska, Montana, North Dakota, and (to a lesser extent) South Dakota benefit substantially from the state minimum grant provisions in several of the ESEA program formulas.\nThe total federal share of revenues is in most cases slightly more than twice the ESEA share. For example, the national average for ESEA grants as a share of total public K-12 education revenues is 4.1%, while the national average for total ED funds as a share of public K-12 education revenues is 9.1%, a ratio of 2.2. States where this ratio is much lower, 1.6 or below, include South Dakota, Montana, Alaska, Wyoming, and North Dakota, plus Puerto Rico—all jurisdictions where the ESEA share is relatively high. In contrast, states where the ratio of the total federal share to the ESEA share is especially high, at 2.8 to 3.4, include Maine, Minnesota, Louisiana, Utah, Mississippi, and Iowa. Most of these states have especially low ESEA shares, but Louisiana and Mississippi have both relatively high ESEA shares and high ratios of total federal share to ESEA share, indicating a comparatively high level of support from both ESEA and other federal programs, as well as lower than average non-federal revenues per pupil.", "Table 14 , Table 15 , and Table 16 , along with Figure 2 , Figure 3 , and Figure 4 , provide the state expenditure, effort, and equity factors that are used in one or more of the ESEA Title I-A allocation formulas.", "The expenditure factor is the most broadly influential of these factors, as—in one form or the other—it applies to all Title I-A grants. Further, all Title I-A formula factors apply indirectly to several other ESEA formulas. As was discussed earlier, expenditure factors are intended to adjust for state or local differences in the costs of providing public K-12 education, although they are often criticized as reflecting differences in ability to pay for educational services as well.\nOne version of the Title I-A expenditure factor applies to all Title I-A formulas except Education Finance Incentive Grants (EFIG), while the other version is used in the calculation of EFIG Grants. These versions differ only with respect to the constraints, expressed as a percentage of the national average per pupil expenditure, applied to the state average per pupil expenditure (80%/120% of the national average for three formulas, 85%/115% for EFIG Grants). In Table 14 and Figure 2 , states are sorted on the basis of the three-formula version of the expenditure factor, from lowest to highest.\nTen states, those at the floor or the ceiling, are grouped at each end of the expenditure factor scale for the three-formula version of the expenditure factor; within each of the groups, states are listed in alphabetical order. For the EFIG Grant version, even more states are grouped at the floor (15 states) or the ceiling (13 states), since the bounds associated with this version of the expenditure factor are more narrow. The remaining states are distributed throughout the range between these bounds. While the state variation in expenditure values is not large in absolute terms, the factor does have substantial influence on the size of Title I-A grants. Holding all else constant, the expenditure factor provides grants that are 50% higher in states at the maximum factor than in states at the minimum factor under the three-formula version of the factor, and that are 35% higher in the EFIG Grant version.", "The effort factor used in the Title I-A EFIG Grant formula is illustrated in Table 15 and Figure 3 , below. As discussed above, this factor is intended to reward states with relatively high levels of expenditures per pupil for public K-12 education compared to their level of personal income per capita. This factor is equal to the average per pupil expenditure (APPE) for public elementary and secondary education divided by state personal income per capita (PCI) for each state, divided by the national average of this ratio. In other words, it is the ratio of APPE to PCI for each state divided by the ratio of APPE to PCI for the nation. The effort factor is greater than 1.0 for states where the ratio of expenditures per pupil for public elementary and secondary education to personal income per capita is greater than average for the nation as a whole, and below 1.0 for states where the ratio is less than average for the nation as a whole. However, the range of the effort factor is limited to 0.95 to 1.05. The limited range, and therefore the limited impact on grant levels, of this factor is evident. Only 14 states fall within the narrow range between the minimum of 0.95 and the maximum of 1.05, while 18 states are at the minimum of 0.95 and the remaining 20 states are at the maximum of 1.05. If all other relevant factors are held constant, a state with a maximum effort factor (1.05) would receive an EFIG grant of 11% more than if its effort factor were at the minimum (0.95). As a result, the factor has a limited impact on actual grants.", "Finally, the EFIG equity multiplier is displayed in Table 16 and Figure 4 . As discussed above, this factor is intended to reward states with relatively equal levels of expenditures per pupil among their LEAs. The equity multiplier is equal to 1.3 minus the state's equity factor. The equity factor is the coefficient of variation for average per pupil expenditure among the state's LEAs. In the CV calculations for this formula, an extra weight (1.4 vs. 1.0) is applied to estimated counts of children from poor families. As a result, the lower a state's expenditure disparities among its LEAs, the lower is its CV and equity factor, and the higher is its multiplier. Conversely, the greater a state's expenditure disparities among its LEAs, the higher is its CV and equity factor, and the lower is its multiplier.\nAmong the states, equity multipliers for FY2007 ranged from 1.0653 (Illinois) to 1.3 for the single-LEA entities of the District of Columbia, Hawaii, and Puerto Rico. Thus, all other relevant factors held constant, a state with a maximum multiplier would receive an EFIG Grant of approximately 22% more than if it had the lowest equity multiplier. States with the lowest equity multipliers (1.13 or below), in addition to Illinois, include Montana, Virginia, Massachusetts, Missouri, Wyoming, Vermont, and New York. States with the highest equity multipliers (1.21 or above), in addition to the 3 jurisdictions noted above, include West Virginia, Florida, Iowa, Washington, Delaware, and North Carolina.", "Table 17 and Figure 5 , below, provide state total ESEA formula grants per child for FY2007 calculated on the basis of total school-age children and school-age children in poor families. The states are sorted only on the basis of their total number of school-age children, from largest (California) to smallest (District of Columbia).\nAs shown below, there is substantial variation in average grants per school-age child as well as grants per school-age child in a poor family among states in all population size ranges. For example, among the 5 smallest jurisdictions (Wyoming, Vermont, North Dakota, Alaska, and the District of Columbia), the average grant per school-age child ranges from $592 to $1,407, while the average grant per school-age child from a poor family varies from $3,957 to $10,935. This variation results largely from 3 factors: the varying impact of \"caps\" placed on state minimums under the Title I-A allocation formulas; variations in school-age child poverty rates (a higher poverty rate is associated with higher grants per school-age child but, at least in the smallest states, lower grants per school-age child from a poor family); and the eligibility of Alaska for substantial funds under Titles VII and VIII. Smaller, but still substantial, variation also may be seen among states in other size ranges.\nNevertheless, overall the average grants per child are generally much higher for the smallest states than for the remaining states. The average for the 12 smallest jurisdictions (New Hampshire and smaller) is $644 per school-age child and $4,879 per school-age child from a poor family. Similarly, these jurisdictions received 5.18% of ESEA formula grants for FY2007, but have only 3.14% of the Nation's school-age children and 2.46% of the school-age children from poor families. In contrast, the average for all of the other states plus Puerto Rico is $386 per school-age child and $2,254 per school-age child from a poor family. Thus, the smallest states receive approximately 1.7 times as much as the remaining states per school-age child, and approximately 2.2 times as much per school-age child from a poor family. This results primarily from the state minimum grant provisions in many of the ESEA allocation formulas.\nWhile the differences in average grants per child between the smallest and other states are quite substantial, the small states receive a relatively modest share of total ESEA funds. The total share of funds received by the 12 smallest jurisdictions (11 smallest states plus the District of Columbia) for FY2007 was 5.2%. Even if these small states were to receive the same amount of ESEA funds per child as other states, the net increase in funds reallocated to the larger states would be relatively marginal. For example, if the share of funds going to the smallest states were reduced by half, the average increase for the remaining states would be approximately 2.7%.", "Table 18 and Figure 6 provide state total ESEA formula grants for FY2007 per child (both total school-age population and school-age population in poor families) with states sorted by their school-age child poverty rate, from lowest (New Hampshire) to highest (Puerto Rico). The states are divided into three groups based on their relative poverty rates.\nDifferences among states are less obvious or large than in the state population size analysis above. However, especially if one focuses on groups of states according to their school-age child poverty rate, as in Figure 6 , two significant patterns appear. First, the average grant per school-age child increases as the state average poverty rate rises, from $309 per child for low poverty states to $363 for states in the middle range to $445 for high poverty states, 1.44 times as much as for low poverty states. This reflects the fact that most ESEA funds are allocated under, or in proportion to, the Title I-A allocation formulas, and estimated school-age children in poor families is the primary formula factor in those.\nAt the same time, an opposite trend is found in average grants per school-age child in a poor family. This figure declines from $2,820 for low poverty states to $2,393 for states in the middle range and $2,182 for states with the highest poverty rates. This is a reflection of at least 3 factors. First, many of the states with the lowest poverty rates are small, and receive high grants per child as a result of state minimum provisions (e.g., New Hampshire, Wyoming, Vermont, North Dakota, and Delaware). Second, a large proportion of the low poverty rate states have high expenditure factors (e.g., Connecticut, New Jersey, Massachusetts, and others) while a large proportion of the highest poverty rate states have low expenditure factors (e.g., California, Arizona, Tennessee, North Carolina, Alabama, Arkansas, Mississippi, and others). And third, the targeting on high poverty areas under the Title I-A Concentration, Targeted, and Education Finance Incentive Grant formulas is carried out at the LEA, not the state, level. As was noted above, these formulas tend to favor LEAs with especially large numbers of school-age children in poor families. In many cases, LEAs with such high concentrations of poverty are found in states with low poverty rates overall (e.g., Baltimore City, Maryland or Boston, Massachusetts), while in several states with high poverty rates, poverty tends to be widely dispersed (e.g., West Virginia or Mississippi)." ], "depth": [ 0, 1, 1, 1, 2, 3, 3, 3, 3, 3, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 3, 2, 2 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "h1_full", "", "", "", "", "", "h1_full" ] }

{ "question": [ "What does the Elementary and Secondary Education Act (ESEA) consist of?", "How does the ESEA's larges programs allocate funds?", "What are the formulas?", "What factors do the formulas address?", "How does ESEA funding vary between states and Puerto Rico?", "What is the trend of program grants and poverty rates?", "How does this differ for only poor families?" ], "summary": [ "The Elementary and Secondary Education Act (ESEA) contains 45 separately authorized programs, plus approximately 20 specified sub-programs.", "The largest of these programs distribute funds by formulas that prescribe how funds are to be allocated among state educational agencies (SEAs) or local educational agencies (LEAs) nationwide.", "They take the form of mathematical equations through which the U.S. Department of Education (ED), and in many cases also SEAs, calculate grant amounts for each potential grantee meeting statutory eligibility criteria.", "They almost always include one or more population factors and may also include state or LEA minimum grant provisions, eligibility thresholds, expenditure factors, fiscal accountability provisions, and reservations of funds for a variety of purposes.", "The share of all public K-12 education revenues that is provided under ESEA programs varies substantially among the states, although ESEA funding constitutes only approximately one-tenth or less of total public K-12 education revenues in all cases except Puerto Rico.", "The average ESEA program grant per school-age child (poor and non-poor) increases as the state average poverty rate rises, with the third of states having the highest poverty rates receiving 1.4 times as much as low poverty states.", "At the same time, an opposite trend is found in average ESEA grants per school-age child in a poor family, with low poverty states receiving 1.3 times as much as states with the highest poverty rates." ], "parent_pair_index": [ -1, -1, 1, 2, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2 ] }

{ "title": [ "Background", "Businesses That Were New, Women- Owned, or Located in Distressed Areas Received a Majority of 7(a) Loan Dollars over the Past 10 Years", "SBA Has Processes in Place to Evaluate Lender Compliance, but Its Lender Reviews Do Not Document Reasons for Noncompliance", "SBA Conducts On-site and Targeted Lender Reviews to Evaluate Lender Compliance with the Credit Elsewhere Documentation Requirement", "SBA’s Lender Reviews in 2016 Identified a High Rate of Noncompliance with the Credit Elsewhere Documentation Requirement", "Lack of Internal Controls Led to Lender Noncompliance, but Were Not Documented by SBA’s Reviews", "SBA Collects Limited Data on Criteria Used for Credit Elsewhere Justifications and Does Not Analyze Patterns in Lender Practices", "SBA Collects Limited Data on Criteria Used for Credit Elsewhere Justifications", "SBA Has Not Conducted Analysis to Determine If There Are Any Patterns of Noncompliance or Identified Lenders That May Be at Risk", "Lenders Generally View Credit Elsewhere Criteria as Adequate, and SBA Has Implemented New Procedures for Reviewing Eligibility", "Lenders Said Credit Elsewhere Criteria are Generally Adequate for Determining Borrower Eligibility", "Factors Such as Lender Policies and Economic Conditions Also Affect Lenders’ Decisions to Offer a SBA 7(a) Loan", "SBA Has Issued New Procedures for Reviewing Liquidity of Small Business Borrowers, and Additional Lender Training Is Underway", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Selected Characteristics of 7(a) Lending, Fiscal Years 2007–2016", "Appendix III: Information on Borrower Characteristics Based on SBA’s Predictive Scores", "Appendix IV: Comments from the Small Business Administration", "Appendix V: GAO Contact and Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Under SBA’s 7(a) loan program, SBA guarantees loans made by commercial lenders to small businesses for working capital and other general business purposes. These lenders are mostly banks, but some are non-bank lenders, including small business lending companies— lenders whose lending activities are not subject to regulation by any federal or state regulatory agency, but were previously licensed by SBA and authorized to provide 7(a) loans to qualified small businesses. The guarantee assures the lender that if a borrower defaults on a loan, the lender will receive an agreed-upon portion (generally between 50 percent and 85 percent) of the outstanding balance. For a majority of 7(a) loans, SBA relies on lenders with delegated authority to approve and service 7(a) loans and to ensure that borrowers meet the program’s eligibility requirements. To be eligible for the 7(a) program, a business must be an operating for-profit small firm (according to SBA’s size standards) located in the United States and must meet the credit elsewhere requirement.\nBecause the 7(a) program is required to serve borrowers who cannot obtain conventional credit at reasonable terms, lenders making 7(a) loans must take steps to ensure that borrowers meet the program’s credit elsewhere requirement. Because SBA relies on lenders with delegated authority to make these determinations, SBA’s oversight of these lenders is particularly important. However, we found in a 2009 report that SBA’s lack of guidance to lenders on how to document compliance with the credit elsewhere requirement was impeding the agency’s ability to oversee compliance with the credit elsewhere requirement. To improve SBA’s oversight of lenders’ compliance with the credit elsewhere requirement, we recommended in 2009 that SBA issue more detailed guidance to lenders on how to document their compliance with the credit elsewhere requirement. As a result, SBA revised its standard operating procedure to state that each loan file must contain documentation that specifically identifies the factors in the present financing that meet the credit elsewhere test, which we believe met the spirit of our recommendation.\nSBA’s current credit elsewhere criteria for determining 7(a) loan eligibility include the following factors: 1. the business needs a longer maturity than the lender’s policy permits; 2. the requested loan exceeds the lender’s policy limit regarding the amount that it can lend to one customer; 3. the collateral does not meet the lender’s policy requirements; 4. the lender’s policy normally does not allow loans to new businesses or businesses in the applicant’s industry; or 5. any other factors relating to the credit which, in the lender’s opinion, cannot be overcome except for the guarantee.\nWhen the 7(a) program was first implemented, borrowers were generally required to show proof of credit denials from banks that documented, among other things, the reasons for not granting the desired credit. Similar requirements remained in effect until 1985, when SBA amended the rule to permit a lender’s certification made in its application for an SBA guarantee to be sufficient documentation. This certification requirement remained when the rule was rewritten in 1996. SBA stated that it believed requiring proof of loan denials was demoralizing to small businesses and unenforceable by SBA.\nSBA and lender roles vary among 7(a) program categories—including regular 7(a), the Preferred Lenders Program, and SBA Express. Under the regular (nondelegated) 7(a) program, SBA makes the loan approval decision, including the credit determination. Under the Preferred Lenders Program and SBA Express, SBA delegates to the lender the authority to make loan approval decisions, including credit determinations, without prior review by SBA. For each 7(a) program category, lenders are required to ensure that borrowers meet the credit elsewhere requirement for all 7(a) loans. The maximum loan amount under the SBA Express program is $350,000, as opposed to $5 million for other 7(a) loans. The program allows lenders to utilize, to the maximum extent possible, their own credit analyses and loan underwriting procedures. In return for the expanded authority and autonomy provided by the program, SBA Express lenders agree to accept a maximum SBA guarantee of 50 percent. Other 7(a) loans generally have a maximum guarantee of 75 percent or 85 percent, depending on the loan amount. In fiscal year 2016, 1,991 lenders approved 7(a) loans, of which 1,321 approved at least one loan with some form of delegated authority.\nSBA’s Office of Credit Risk Management is responsible for overseeing 7(a) lenders, including those with delegated authority. SBA created this office in fiscal year 1999 to help ensure consistent and appropriate supervision of SBA’s lending partners. The office is responsible for managing all activities regarding lender reviews; preparing written reports; evaluating new programs; and recommending changes to existing programs to assess risk potential. Generally, the office oversees SBA lenders to identify unacceptable risk profiles using its risk rating system and enforce loan program requirements. According to SBA’s standard operating procedures, one of the agency’s purposes of its monitoring and oversight activities is to promote responsible lending that supports SBA’s mission to increase access to capital for small businesses.\nIn the federal budget, the 7(a) program is generally required to set fees that it charges to lenders and borrowers at a level to cover the estimated cost of the program associated with borrower defaults (in present value terms). To offset some of the costs of the program, such as default costs, SBA assesses lenders two fees on each 7(a) loan. First, depending on the term of the loan, the guarantee fee must be paid by the lender within either 90 days of loan approval or 10 business days of the SBA loan number being assigned. This fee is based on the amount of the loan and the level of the guarantee, and lenders can pass the fee on to the borrower. Second, the servicing fee must be paid annually by the lender and is based on the outstanding balance of the guaranteed portion of the loan.\nThe 7(a) program accounts for a small portion of total small business lending. According to a May 2017 report by the Consumer Financial Protection Bureau, the total debt financing available to small businesses was estimated to be $1.4 trillion. Of that amount, the Consumer Financial Protection Bureau estimated that about 7 percent was SBA loans, including 7(a) loans.\nSBA and some other researchers have suggested that there may be disparities in credit access among small businesses, based on characteristics of the borrower and firm. SBA lists as a strategic objective to “ensure inclusive entrepreneurship by expanding access and opportunity to small businesses and entrepreneurs in communities where market gaps remain.” In 2007, we reported that some studies had noted disparities among some races and genders in the conventional lending market, but the studies did not offer conclusive evidence on the reasons for those differences. Much of the research we reviewed in 2007 relied on the Board of Governors of the Federal Reserve System’s Survey of Small Business Finance, which was last implemented in 2003. Although this survey is no longer available, recently the 12 Federal Reserve Banks conducted the Small Business Credit Survey. In a series of reports based on the more recent survey, researchers found disparities in credit availability based on gender, the age of the firm, and minority status.", "From fiscal years 2007 through 2016, a majority of loan dollars guaranteed under the 7(a) program went to small businesses that were new, partially or wholly owned by women, or located in a distressed area. As previously mentioned, recent studies we reviewed by the Federal Reserve Banks and other researchers suggest that certain small business borrowers—including businesses that are new or owned by women—have difficulty obtaining conventional small business loans, which may put them at a disadvantage. As shown in figure 1, almost two-thirds of loan dollars guaranteed under the 7(a) program for this period went to small businesses that were in these two categories or located in a distressed area. The remaining 37 percent of 7(a) loan dollars went to businesses that were established, solely male-owned, and not located in economically distressed areas. See appendixes II and III for additional data on 7(a) loans, such as the total volume, percentage of lending provided by year and by state, and other borrower characteristics, including SBA’s loan- and lender-level Small Business Risk Portfolio Solutions score (predictive score) information.\nIn the following figures, we present more detailed data on 7(a) loans to small businesses based on their status as a new business; gender of ownership; location relative to economically distressed areas; and minority ownership for fiscal years 2007 through 2016.\nNew businesses. As shown in figure 2, the percentage of 7(a) loans that went to new businesses decreased from 36 percent in fiscal year 2007 to 23 percent in fiscal year 2011 before increasing to 35 percent by 2016.\nGender. From fiscal years 2007 through 2016, the share of the total value of approved 7(a) loans by gender of owner remained fairly consistent (see fig. 3). An average of 70 percent of the total loan value went to male- owned businesses, and the remaining 30 percent went to businesses that were majority (more than 50 percent) or partially (50 percent or less) owned by women.\nEconomically distressed areas. SBA did not provide data on whether 7(a) loans go to businesses located in economically distressed neighborhoods. However, we used data from the American Community Survey for 2011 through 2015, the most recent version available at the time of our analysis, along with zip code information provided by SBA to determine the average poverty rate by zip code (see fig. 4). From fiscal years 2007 through 2016, the proportion of the total value of 7(a) loans approved that went to borrowers in economically distressed areas remained between 23 percent and 26 percent. We defined distressed areas as zip codes where at least 20 percent of the households had incomes below the national poverty line.\nMinority/Nonminority status of borrower. From fiscal years 2007 through 2016, the proportion of the total value of 7(a) loans approved that went to minority borrowers decreased overall—from 43 percent to 30 percent—with the lowest share at 24 percent in fiscal year 2010 (see fig. 5). The share of approved loan dollars that went to nonminority borrowers varied, increasing to 69 percent in fiscal year 2010 before decreasing to 56 percent in fiscal year 2016. Notably, the share of the total value of loans approved that went to borrowers whose race/ethnicity was categorized as undetermined increased from 5 percent in fiscal year 2007 to 13 percent in fiscal year 2016. This increase does not fully account for the declined share for minority borrowers. However, according to SBA officials, borrowers voluntarily provide self-reported information on race and ethnicity and therefore the associated trend data should be viewed with caution.", "", "SBA relies on on-site reviews as its primary mechanism for evaluating lenders’ compliance with the credit elsewhere requirement. The reviews are performed by third-party contractors with SBA staff participation and additional oversight from SBA. According to SBA’s standard operating procedures, these reviews are generally conducted every 12 to 24 months for all 7(a) lenders with outstanding balances on the SBA- guaranteed portions of their loan portfolios of $10 million or more, although SBA may conduct on-site reviews of any SBA lender at any time as it considers necessary. In fiscal year 2016, SBA conducted 40 on-site reviews of 7(a) lenders, representing approximately 35 percent of SBA’s total outstanding 7(a) loan portfolio.\nAs part of SBA’s on-site reviews, reviewers judgmentally selected a sample of approximately 30 to 40 loan files using a risk-based approach. These loan files accounted for approximately 6 percent to 19 percent of each lender’s total gross SBA dollars in fiscal year 2016. For each lender, approximately 70 percent to 90 percent of the loan files in the sample were reviewed to evaluate compliance with the credit elsewhere requirement. According to SBA’s contractors, loans that were selected for other reasons, such as issues related to liquidation, were not required to be reviewed for credit elsewhere compliance.\nSBA requires lenders to provide a narrative to support the credit elsewhere determination in the credit memorandum included in each loan file. SBA’s standard operating procedures state that lenders must substantiate that credit is not available elsewhere by (1) discussing the criteria that demonstrate an identifiable weakness in a borrower’s credit and (2) including the specific reasons why the borrower does not meet the lender’s conventional loan policy requirements.\nIn keeping with SBA’s documentation requirement, third-party contractors and SBA staff who conduct on-site reviews are supposed to assess whether lenders have adequately documented the credit elsewhere criteria and provided specific reasons supporting the criteria in the credit memorandum. According to SBA’s contractors, adequate documentation of the credit elsewhere determination in the credit memorandum would include not just which of the criteria a borrower met but also a discussion of the basis or justification for the decision. For example, if a lender determined that a borrower needed a longer maturity, the lender should explain in the credit memorandum the reasons why a longer maturity was necessary. SBA’s contractors also told us that they carefully review a lender’s loan policies in preparation for on-site reviews and refer to a lender’s policies throughout the reviews. Reviewers do not attempt to verify the evidence given in support of the credit elsewhere reason beyond the information provided in the credit memorandum.\nBased on our review of fiscal year 2016 reports, on-site reviews can result in three levels of noncompliance response:\nFinding: This is the most severe result and is associated with a corrective action for the lender to remedy the issue.\nObservation: This is a deficiency recorded in the review’s summary but may not warrant a corrective action for the lender.\nDeficiency Noted: This is the lowest level of response. It is a deficiency noted as part of the review that is not included in the review’s summary and also may not warrant a corrective action.\nAccording to SBA officials, SBA’s policy has been that any noncompliance with SBA loan program requirements results in a finding. However, according to SBA officials and our review of the fiscal year 2016 on-site review reports, if a single instance of noncompliance was identified in fiscal year 2016, SBA generally would not issue a finding. Instead, SBA’s contractors said they would attempt to determine whether that instance was an inadvertent error, such as by examining additional loan files.\nLenders that are subject to corrective actions are generally required to submit a response to SBA within 30 days to document how they have addressed or plan to address the identified issues. SBA subsequently asks for documentation to show that the lender has remedied the issue, and in some cases will conduct another review that usually includes an assessment of 5 to 10 additional loan files to determine whether the credit elsewhere reason has been adequately documented. According to SBA officials, SBA may also review lenders’ compliance with corrective actions from recent on-site reviews during targeted reviews (discussed below) and delegated authority renewal reviews (for lenders with delegated authority).\nIn addition to on-site reviews, SBA also monitors lenders’ compliance with the credit elsewhere requirement through targeted reviews (performed on- or off-site). Targeted reviews of a specific process or issue may be conducted for a variety of reasons at SBA’s discretion, including assessing a lender’s compliance with the credit elsewhere requirement. In fiscal year 2016, SBA conducted 24 targeted reviews that included an examination of lenders’ compliance with the credit elsewhere documentation requirement. For these reviews, SBA examined loan files for 5 judgmentally selected loans that were provided to SBA electronically, as well as copies of the credit elsewhere reasoning (among other underwriting documentation) for 10 additional recently-approved loans.\nSBA also conducts periodic off-site reviews that use loan- and lender- level portfolio metrics to evaluate the risk level of lenders’ 7(a) portfolios. According to agency officials, SBA also began using off-site reviews to evaluate lenders’ compliance with the credit elsewhere requirement in fiscal year 2016. In that year, SBA conducted off-site reviews of 250 lenders and required these lenders to report the credit elsewhere justification for a sample of 10 loans per lender that were identified by SBA’s selection process. Lenders were not required to provide supporting documentation, and SBA did not follow up with lenders or review loan files to ensure the validity of the self-reported reasons. According to SBA, off-site reviews followed the same procedures in fiscal year 2017 as in 2016 and that the agency planned to use the same procedures for these reviews in the future. According to the agency, it also routinely evaluates and revises its review processes and procedures.\nIn addition, SBA’s Loan Guaranty Processing Center and National Guaranty Purchase Center conduct Improper Payments Elimination and Recovery Act and quality control reviews at the time of loan approval and at the time of guaranty purchase, respectively. These reviews examine the credit elsewhere requirement, among other issues. Lastly, since 2014 SBA’s Office of Inspector General has also examined whether high-dollar or early-defaulted 7(a) loans were made in accordance with rules; regulations; policies; and procedures, including the credit elsewhere requirement.", "Our review of the on-site reviews conducted in fiscal year 2016 found that 17 of the 40 reviews—more than 40 percent—identified compliance issues with the credit elsewhere documentation requirement. Of those 17 reviews,\n10 reviews resulted in a Finding (all with associated corrective\n3 reviews resulted in an Observation (none with associated corrective actions or requirements), and\n4 reviews resulted in a Deficiency Noted (one with an associated requirement).\nFor all of the 17 on-site reviews that identified an instance of noncompliance, the issue was related to the lender’s documentation of the credit elsewhere criteria or justification. For example, one review found that the lender’s “regulatory practices demonstrate material noncompliance with SBA Loan Program requirements regarding documentation of the Credit Elsewhere Test.” Another review found that the lender “failed to demonstrate with adequate documentation that credit was not available elsewhere on reasonable terms and conditions.” For 2 of the 17 reviews, the issue was partly related to a discrepancy between the credit elsewhere justification used for some of the sample loan files and the lender’s own loan policy limits.\nWith regard to SBA’s targeted reviews, 7 of 24 reviews (29 percent) conducted in fiscal year 2016 found a compliance issue with the credit elsewhere requirement. Of those 7 reviews,\n6 reviews resulted in a Finding (all with associated corrective actions),\n1 review resulted in an Observation (without an associated corrective no reviews resulted in a Deficiency Noted.\nFor all of the 7 targeted reviews that identified a compliance issue, the issue was wholly related to the lender’s documentation of the credit elsewhere reason or justification. For example, 4 reviews found that for at least one loan reviewed, “the Lender failed to document justification that credit was unavailable elsewhere.” Another review found that for “three SBA Express loans and one Small Loan Advantage loan reported “other factors relating to the credit that in the lender’s opinion cannot be overcome except for the guaranty’ without specific identification of the factors.”", "Based on our review of on-site review reports and an interview with one reviewer, the key factors underlying lenders’ high rate of noncompliance with the credit elsewhere documentation requirement were lenders’ lack of proper internal controls and procedures and lack of awareness of the credit elsewhere documentation requirement. In fiscal year 2016, SBA’s corrective actions related to the credit elsewhere requirement required the lenders to establish or strengthen their policies; procedures; underwriting processes; or internal controls. In addition, contractors conducting the on- site reviews with whom we spoke stated that some lenders appeared to be unfamiliar with SBA’s standard operating procedures or were unclear on how to interpret them.\nFor the 11 on-site reviews conducted in 2016 that included corrective actions, SBA generally required lenders to improve controls or procedures. For example, one lender was required to “correct its policy, modify its procedure, and amend its internal controls to ensure that its consideration and documentation of credit unavailable elsewhere identifies the specific fact(s) which are applicable to the specific loan and the determination is rendered and accurate for each individual SBA loan that it originates.” Another lender was required to “improve underwriting processes and controls to ensure that the borrower meets the [credit elsewhere] requirement” and to “document the loan file with the reasons for the determination.”\nSimilarly, for the six targeted reviews in 2016 that included corrective actions, SBA issued a general requirement for the lender to “identify the causes for the Findings and implement corrective actions.” Based on our review of these targeted reviews, lenders generally remedied or intended to remedy the issue by amending their internal controls or procedures. For example, one lender stated that the “Credit Elsewhere test will be incorporated into the Credit Department process.” Another lender stated that it would “centralize all SBA underwriting and has developed an SBA addendum that will be utilized for all SBA-guaranteed loans.”\nAlthough some of SBA’s on-site reviews for fiscal year 2016 identified factors leading to noncompliance, they generally did not document reviewers’ assessment of lenders’ policies and practices for complying with the credit elsewhere documentation requirement. SBA’s standard operating procedures state that the on-site reviewers should determine whether or not lenders’ policies and practices adhere to the requirement, but they do not require them to document their assessment of these policies and practices. Only 4 of the 40 fiscal year 2016 review reports that we examined included such an assessment. As a result, although SBA required corrective actions by the lender to address deficiencies, there usually was no record of the underlying factors that resulted in the lender’s noncompliance.\nFederal internal control standards state that management should design control activities to achieve objectives and respond to risks, including appropriate documentation of transactions and internal control. Because SBA does not require reviewers to document their assessment of lenders’ policies and practices for complying with the credit elsewhere documentation requirement, the agency does not have good information to help explain why so many lenders are not in compliance. This hinders SBA’s ability to take informed and effective actions to improve lender compliance with the requirement and ensure that the program is reaching its intended population.", "", "SBA does not routinely collect information on the criteria lenders use in their credit elsewhere justifications. As previously discussed, lenders are required to maintain documentation of borrower eligibility (including the credit elsewhere justification) in each loan file for loans approved through lenders’ delegated authority. However, SBA cannot readily aggregate information on lenders’ credit elsewhere justifications for both delegated and nondelegated loans:\nFor delegated loans, lenders are required to certify the loan’s credit elsewhere eligibility on E-Tran, SBA’s online portal for origination of delegated and nondelegated loans. However, lenders are only required to check a box to certify that the loan file contains the required credit elsewhere justification and are not required to submit any additional information, including which of the criteria was used to make the determination. According to SBA officials, delegated loans account for loans approved by approximately 70 percent of lenders.\nFor nondelegated loans, lenders are required to submit credit elsewhere documentation to be reviewed by SBA’s Loan Guaranty Processing Center. For these loans, which comprise loans approved by the remaining 30 percent of lenders, SBA might maintain paper records of data on borrowers’ eligibility but does not compile such data electronically and thus cannot readily aggregate the data for analysis.\nInstead, SBA relies on on-site reviews or lender-reported information to review lenders’ credit elsewhere justifications and collects limited data from these reviews. For its on-site reviews, SBA does not collect sample data on lenders’ use of the credit elsewhere criteria. For its off-site reviews, SBA collected sample data on lenders’ use of the credit elsewhere criteria based on 250 such reviews conducted in fiscal year 2016. For these reviews, SBA asked lenders to self-report a short description of the credit elsewhere justifications used for an SBA-selected sample of 10 loans. However, as discussed earlier, SBA did not request or examine loan files as part of these off-site reviews and did not follow up with lenders or review loan files to ensure the validity of the self- reported reasons.\nOne reason why SBA does not routinely collect complete information on lenders’ use of the credit elsewhere criteria is that SBA’s loan origination system, E-Tran, is not equipped to record or tabulate this information. In addition, according to an SBA official, on-site reviews do not collect data on the credit elsewhere criteria because the loans reviewed are judgmentally selected and would not accurately represent the larger population.\nFederal internal control standards state that management should use quality information to achieve the entity’s objectives. To do so, management should identify the information needed to achieve the objectives and address the risks, obtain relevant data from reliable internal and external sources in a timely manner, and process the obtained data into quality information. More robust information on lenders’ credit elsewhere justifications, including the credit elsewhere criteria, would allow SBA to evaluate patterns in lender practices related to the credit elsewhere requirement and, in turn, help the agency ensure compliance with the requirement. In this context, generalizable data, which can be collected through random sampling, or complete data through required reporting for every loan would allow SBA to better understand patterns in lender practices across the 7(a) program. Further, nongeneralizable data, which are available through SBA’s current off- and on-site review processes, would allow SBA to examine specific groups of lenders and could help SBA determine if it is necessary to collect additional data.", "SBA does not analyze the limited data it collects to help it monitor lenders’ compliance with the credit elsewhere requirement. According to agency officials, SBA has not performed lender-level analyses of the criteria lenders use for their credit elsewhere justifications. Additionally, SBA has not analyzed 7(a) lenders’ use of the “other factors” criterion— that is, factors not specified in the other criteria that, in the lender’s opinion, cannot be overcome except for the guarantee—for example, by collecting data on the frequency of its use or examining why lenders rely on it. While some 7(a) lenders told us they avoided relying on the “other factors” criterion because it was vague and open to interpretation, some lenders have used it when a borrower’s profile did not meet any of the other criteria. For example, one lender stated that this criterion was used for a borrower who was no longer a start-up but had experienced fluctuations in cash flow due to relocation or change in ownership. Another lender stated that the criterion was used more frequently during the 2007-2009 financial recession to extend financing to borrowers whose owners had experienced a home foreclosure but were otherwise sound.\nFederal internal control standards state that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Analyzing data on lenders’ use of the credit elsewhere criteria as part of its monitoring procedures could help SBA determine whether there are patterns in lender practices related to the criteria that could predict lender noncompliance. For example, SBA could analyze lenders’ use of the criteria along with lender review results and other data on loan characteristics and performance to determine whether certain patterns indicate that a lender might be applying the requirement inconsistently. Additionally, such analysis could inform SBA’s selection of which lenders to review by improving its ability to identify lenders at risk of noncompliance with the credit elsewhere requirement. Better selection criteria for its lender reviews could, in turn, improve identification and remediation of such noncompliance, helping ensure that the 7(a) program serves its target population.", "", "Representatives at 8 of the 11 lenders that we contacted said they believed that SBA’s current credit elsewhere criteria are adequate in targeting small business borrowers who cannot obtain credit at reasonable terms. Representatives of these lenders also agreed that the criteria generally serve the types of small businesses that would otherwise have trouble obtaining conventional credit, such as new businesses or those with a shortage of collateral. One lender representative told us its most commonly used criterion related to the overall time in business because of the higher risk of failure. Another lender representative cited the lack of collateral as the most common criterion used. Additionally, representatives at an industry association told us that one of the most commonly used criteria was the one related to loan maturity and many small businesses seek 7(a) loans because they offer repayment terms of up to 10 years, compared to 1 to 3 years for conventional loans.\nRepresentatives of two other lenders suggested that the credit elsewhere criteria should not be overly prescriptive, which could limit lenders’ ability to make 7(a) loans to some businesses. For example, one representative said the credit elsewhere criteria should remain flexible because banks have different lending policies.\nIn addition, representatives at three lenders indicated that they were hesitant to use the “other factors” criterion. One lender believed the requirement was open to interpretation and could be used inappropriately with lenders determining their own individual conventional loan policies. Another lender commented that the criterion was vague and rarely used by his institution, noting that SBA should provide some additional guidance on its use.", "Lenders consider multiple factors in determining whether to offer small businesses a conventional loan or a 7(a) loan, according to stakeholders with whom we spoke. For example, representatives at an industry association stated that a bank goes through several analyses to determine what loan product to offer the borrower. These representatives stated that the credit elsewhere requirement is embedded in the analysis a bank performs, such as whether the borrower qualifies for a loan and has a financial need for an SBA loan and whether the 7(a) program is right for that borrower.\nRepresentatives at two other lenders also stated that many small businesses have already been turned down for conventional loans before they seek a 7(a) loan. One representative noted that the “reasonable rates and terms” component of the 7(a) program was important as it allows lenders to look more broadly at a borrower’s needs. For instance, the representative explained, lenders can assess whether repayment terms are reasonable given a particular borrower’s situation and the resources the borrower will have to repay the loan.\nEconomic conditions also affect lending policies, including whether borrowers qualify for a conventional loan, according to representatives at seven lenders with whom we spoke. For example, during the recent economic downturn, banks tightened their underwriting standards for small businesses and were less willing to lend without a government guarantee, according to one lender representative.", "SBA has issued revised primary operational guidance for the 7(a) program, effective January 1, 2018. As discussed previously, lenders are required to make a determination that the desired credit is not available to the applicant from nonfederal sources. Under the previous guidance, the lender had to determine that some or the entire loan was not available from nonfederal sources or the resources of the applicant business. However under the revised guidance, the scope of nonfederal sources a lender must review was further defined to include sources both related and unrelated to the applicant. The updated guidance states that lenders must consider:\nNonfederal sources related to the applicant, including the liquidity of owners of 20 percent or more of the equity of the applicant, their spouses and minor children, and the applicant itself; or\nNonfederal sources unrelated to the applicant, including conventional lenders or other sources of credit.\nRepresentatives of five lenders told us they have been determining how to interpret the new procedures with a few stating they would like additional guidance, including what information to retain in the file. Representatives of two lenders stated that there is some ambiguity in how to determine nonfederal resources and how to assess whether small business owners have too many available liquid resources to qualify for a 7(a) loan. One representative said that lenders can have different interpretations of what constitutes “available resources,” which is not specified in the new SOP. As a result, he said, there may be some confusion about how to assess family members of the borrower who have high net worths and whether the borrower should decline a family member contribution to qualify for an SBA loan. A representative of one lender stated that lenders will not know what SBA expects until loans are approved under the new procedures, default, and are then reviewed. Another lender’s representative suggested additional guidance on documentation, such as whether the bank must obtain a personal financial statement for each owner of the business.\nA SBA staff told us SBA has provided multiple training presentations to SBA staff, lenders, and trade associations on the statutory changes to the credit elsewhere requirements and standard operating procedure updates. These have included a presentation at a trade association conference, four monthly conference calls for SBA staff, and two conference calls for SBA lenders. SBA staff said SBA also plans to hold monthly training sessions with SBA field offices, quarterly training sessions with the industry, and at least four training sessions in 2018 at lender trade conferences. Additionally, a representative from an industry association told us it is providing industry training on SBA’s revised procedures, including the credit elsewhere liquidity requirement.", "SBA’s 7(a) loan program is required to serve creditworthy small business borrowers who cannot obtain credit through a conventional lender at reasonable terms, and SBA largely relies on lenders with delegated authority to make credit elsewhere determinations. However, although there is a high rate of lender noncompliance with the credit elsewhere documentation requirement, SBA does not require its reviewers to document their assessment of the policies and procedures lenders use to meet the requirement. Without better information from lender reviews on how lenders are implementing the requirement to document their credit elsewhere decisions, SBA may be limited in its ability to promote compliance with requirements and, in turn, use such information to help ensure that 7(a) loans are reaching their target population.\nFurthermore, SBA does not routinely collect or analyze information on the criteria used for credit elsewhere justifications to evaluate patterns in lender practices. SBA recently began collecting some information on lenders’ use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders’ practices. Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and whether 7(a) loans are reaching borrowers who cannot obtain credit from other sources at reasonable terms.", "We are making the following three recommendations to SBA.\nThe Administrator of SBA should require reviewers to consistently document their assessments of a lender’s policies and practices. (Recommendation 1)\nThe Administrator of SBA should use its on-site and off-site reviews to routinely collect information on lenders’ use of credit elsewhere criteria as part of its monitoring of lender practices related to the credit elsewhere requirement. (Recommendation 2)\nThe Administrator of SBA should analyze information on lenders’ use of credit elsewhere criteria obtained from its reviews to identify lenders that may be at greater risk of noncompliance and to inform its selection of lenders for further review for credit elsewhere compliance. (Recommendation 3)", "We provided a draft of this report for review and comment. SBA’s written comments are reprinted in appendix IV. SBA generally agreed with the recommendations. SBA also provided additional comments on certain statements in the draft report, which are summarized below with our responses.\nSBA noted that the draft Highlights did not discuss how credit elsewhere is determined for nondelegated loans. We have not revised the Highlights in response to this comment because our review focused on delegated lenders. In the body of the report we note that approximately 70 percent of 7(a) loans are approved under delegated authority. We also refer to SBA’s nondelegated loans in the report for additional context.\nAccording to SBA, the statement on our draft Highlights did not fully reflect its monitoring of lender compliance. SBA identified a variety of reviews it uses in addition to on-site reviews by third party contractors, which we discuss in the body of the report. We have modified the Highlights to reflect these other reviews.\nAlso in reference to the draft Highlights, SBA stated that it provides oversight on every on-site lender review and that an SBA employee is present as a subject-matter expert on every review. We revised the Highlights by adding that SBA provides oversight to the on-site reviews conducted by third-party contractors.\nIn response to a statement in our draft report that SBA guarantees loans to small businesses for working capital and other general business purposes, SBA commented that working capital generally is not the primary purpose for SBA-guaranteed loans. We did not revise the statement because SBA’s SOP 50 10 5 (version J) specifies that SBA’s 7(a) loan proceeds may be used for permanent working capital and revolving working capital, among other things.\nIn relation to a footnote in our report that mentions two lender reviews for which we did not receive documentation, SBA stated that on February 15, 2018, it provided documentation to us related to the reviews and that we had confirmed its receipt. However, the text in the footnote in question refers to two targeted lender reviews from 2016 that included corrective actions. The information SBA provided to us on February 15, 2018, was related to on-site reviews conducted in 2016. As a result, we did not revise the footnote.\nSBA’s letter also contained technical comments that we incorporated as appropriate.\nWe are sending copies of this report to congressional committees, agencies, and other interested parties. In addition, this report will be available at no charge on our website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "This report discusses (1) 7(a) lending to selected categories of small business borrowers from fiscal years 2007 through 2016; (2) how the Small Business Administration (SBA) monitors lenders’ compliance with the credit elsewhere requirement; (3) the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement; and (4) lenders’ views on the criteria used to determine eligibility for 7(a) loans and other issues related to the 7(a) program.\nFor background on the 7(a) program and the credit elsewhere requirement, we reviewed the legislative history of the 7(a) program and our previous reports. We also interviewed officials from SBA’s Office of Credit Risk Management on guidance provided to 7(a) lenders.\nFor background on constraints in the small business credit market, we reviewed recent academic literature on the characteristics of small businesses that historically have had more difficulty accessing credit. In addition, we reviewed recent studies published by the Federal Reserve Banks of Atlanta; Cleveland; Kansas City; and New York.\nTo describe the population of borrowers served by the 7(a) program, we selected characteristics (such as gender, minority status, and percentage of new business) that we used in our 2007 report and that were the subject of the recent studies by Federal Reserve Banks. We obtained and analyzed SBA loan-level data to describe 7(a) loans and borrowers. Specifically, SBA provided us with 581,393 records from its administrative data systems, which contained information on all loans approved and disbursed in fiscal years 2007 through 2016. The SBA data included various types of information describing each loan, including the total gross approval amount; the amount guaranteed by SBA; the loan term; and the interest rate; delivery method; and status of the loan. The SBA data also included information on borrower characteristics:\nAge of business. Firms were classified as new (less than 2 years in operation) or existing.\nGender. Firms were classified as 100 percent male-owned; 50 percent or greater women owned; 50 percent or less women-owned; or “unknown.” Information on gender was voluntarily provided by borrowers.\nEconomically distressed area. We identified borrowers in economically distressed areas by matching borrower zip codes provided by SBA to those in the 2011 through 2015 American Community Survey. We defined distressed areas as zip codes where at least 20 percent of households had incomes below the national poverty line. In about 1 percent of the cases, we were unable to classify a lender because a zip code had changed or had insufficient population to report a poverty rate. We consider 1 percent of unmatched cases to be low by data reliability standards.\nRace/ethnicity. Borrowers were placed in one of nine categories of race/ethnicity, including an “unknown” category. We aggregated these to create minority, nonminority, and undetermined categories. The minority category included all borrowers who reported being a race/ethnicity other than white. The nonminority category included borrowers who reported being white. Information on race was voluntarily provided by borrowers.\nIndustry. Firms were assigned a North American Industrial Classification code. These six-digit codes begin with a two-digit sector code that we used to draw more general conclusions about industries.\nGeographic information. The data provided the state where the borrower is located.\nIn addition, we obtained information from SBA on loan- and lender-level Small Business Risk Portfolio Solution scores (predictive scores) provided by Dunn & Bradstreet and Fair Isaac Company, for loans approved in fiscal year 2016, the latest available. We were able to obtain predictive scores for approximately 81 percent of the loans for which SBA had provided other information. According to SBA, some loans may not have been disbursed at the time we obtained the predictive scores and, as a result, we do not have scores associated with these loans. We analyzed the information to determine the range of predictive scores and the range of average predictive scores by lender.\nTo assess the reliability of loan-level data on borrower and loan characteristics and predictive scores we received from SBA, we interviewed agency officials knowledgeable about the data and reviewed related documentation. We also conducted electronic testing, including checks for outliers, missing data, and erroneous values. We determined that the data were sufficiently reliable for the purposes of describing the characteristics of borrowers who received 7(a) loans and the distribution of predictive scores.\nTo assess how SBA monitors lenders’ compliance with the credit elsewhere requirement and criteria, we reviewed SBA’s standard operating procedures and other guidance on 7(a) program regulations and lender oversight. Specifically, we reviewed SOP 50 10 5 (versions I and J) on Lender and Development Company Loan Programs, SOP 50 53(A) on Lender Supervision and Enforcement, and SOP 51 00, On-Site Lender Reviews/Examinations, as well as information and policy notices related to the credit elsewhere requirement. Additionally, we interviewed representatives including those at SBA’s Office of Capital Access and Office of Credit Risk Management on lender oversight and lender review processes. We reviewed all the on-site lender review reports (40 reviews), including corrective actions or requirements related to the credit elsewhere requirement (documentation for 11 lenders), and targeted review reports that had credit elsewhere findings (7 reviews) that SBA conducted in fiscal year 2016. We also interviewed officials and reviewed recent reports from SBA’s Office of Inspector General.\nTo assess the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement, we interviewed SBA officials and reviewed documentation for SBA’s online portal for loan origination. We also incorporated information from interviews with a nongeneralizable, nonrepresentative sample of 7(a) lenders, which we discuss below.\nTo obtain lenders’ views on the criteria used to determine eligibility for 7(a) loans and other program-related issues, we interviewed SBA staff including from the Office of Capital Access, and representatives of the National Association of Government Guaranteed Lenders; American Bankers Association; Independent Community Bankers Association; and National Federation of Independent Businesses. We also interviewed 11 banks (one bank provided written responses) in order to obtain the lender perspective of credit elsewhere. Nine of the banks were selected by us using a random process that concentrated on larger lenders. These nine lenders selected by us represent about 13 percent of the loans approved and 16 percent of the dollars approved in 2016. In addition, we interviewed two additional banks that represented an industry group – one larger bank and one small bank. Although we partially selected at random, the lenders we interviewed should not be considered generalizable because of the small number.\nWe conducted this performance audit from August 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "In this appendix, we provide information on the total amount and number of approved 7(a) loans and the top eight industry sectors receiving 7(a) loans. Data are also presented on fiscal year 2016 loan volume by state and per capita. As shown in figure 6 below, the total amount of approved 7(a) loans decreased during the period associated with the Great Recession (2007 through 2009). From fiscal year 2009 on, the total amount of approved 7(a) loans increased until a decline in fiscal year 2012. During this timeframe, the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010 provided fee relief and higher guaranties. The Small Business Jobs Act of 2010 also provided a temporary increase in Small Business Administration (SBA) Express loan limits to $1 million (instead of $350,000). These programs have since expired. 7(a) Loans by North American Industry Classification System (NAICS) code. Table 1 shows the largest eight industrial sectors by proportion of the total amount of 7(a) loans approved, using the NAICS code. The combined share of the top eight sectors declined slightly from 85 percent to 80 percent of the total lending from fiscal years 2007 through 2016, with an average of 82 percent. During this period, the Accommodation and Food Services sector had the largest average share of total loan amount at 17 percent, followed by the Retail Trade sector at 15 percent.\nApproved loan amount and per capita dollars by state. As shown in figure 7, California; Texas; Florida; Georgia; and New York received the highest total of approved loan dollars in fiscal year 2016. The average approval amount across all loans was $380,619. Georgia and Arkansas had the largest average approval amount in 2016. Also, during this period, Utah; Colorado; Georgia; California; and Washington received the highest per capita approved loan dollars.", "In fiscal-year 2016, creditworthiness varied widely among 7(a) program borrowers. We analyzed creditworthiness using the Small Business Administration’s (SBA) Small Business Risk Portfolio Solution score (predictive score), which ranges from 70 to 300, with 300 indicating the least risky loan. According to SBA, loans with scores above 180 are considered “lower risk,” scores between 140 and 179 are considered “moderate risk,” and scores 139 and lower are considered “higher risk.” There did not appear be differences in score based on the gender of the borrower or the age of the business. While SBA relies on the Predictive Score data to identify lenders that may pose excessive risk to the SBA 7(a) portfolio, the data also provide potential insights related to lender implementation of the credit elsewhere requirement.\nVariation. We found that some 7(a) borrowers were much more creditworthy than others. In 2016, the only year for which we obtained data, the predictive score at origination varied widely among borrowers. In 2016, the scores of borrowers ranged from a low of 91 to a high of 246. However, most scores were between 171 and 203, and the median score was 188.\nRace/ethnicity. We found that there were slight differences in creditworthiness by race/ethnicity, with median scores ranging from 180 to 189 depending on the category. Specifically, loans to African Americans in 2016 had a median score of 180, and loans to Hispanics had a median score of 183. In contrast, loans to whites had a median score of 188, and loans to Asian and Pacific Islanders had a median score of 189.\nLender size. We found that lenders with larger numbers of SBA loans tended to have slightly more creditworthy borrowers. The top 5 percent of lenders had a median average score of 187, whereas the bottom 75 percent of lenders had a median average score of 182.5. Among the top 5 percent of lenders (with 374 loans per lender on average, collectively representing about 70 percent of the loans approved), the average score ranged from 171 to 195. Among all lenders, the average score ranged from 116 to 233. However, because many lenders only approved one or two loans in 2016, the average may reflect very few borrowers for that lender, making it difficult to tell whether the scores reflect a real difference between lenders.", "", "", "", "In addition to the contact named above, Harry Medina (Assistant Director); Janet Fong (Analyst in Charge); Benjamin A. Bolitzer; Gita DeVaney; David S. Dornisch; Amanda D. Gallear (intern); Marc W. Molino; Jennifer W. Schwartz; and Tyler L. Spunaugle made key contributions to this report." ], "depth": [ 1, 1, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full", "", "h0_title", "h0_full", "", "", "h1_title", "h1_full", "", "h2_title", "h2_full", "h2_full", "h2_full", "h0_full h1_full", "", "h0_full", "", "", "", "", "", "", "" ] }

{ "question": [ "How does the Small Business Administration (SBA) authorize 7(a) loans?", "How does the SBA decide the 'credit elsewhere' requirement?", "How do lenders meet the requirement?", "How did GAO evaluate this monitoring?", "How does the SBA collect information on lending?", "How has this limited collection progressed?", "How does the federal government regard information quality?", "How does subpar information collection hurt the SBA?", "How did lenders evaluate SBA credit criteria?", "How was the lending criteria helpful?", "What outside factors also affect lenders' decisions?", "How has the SBA revised their guidance?", "How have these changes been perceived by lenders?" ], "summary": [ "For its 7(a) loan program, the Small Business Administration (SBA) has largely delegated authority to lenders to make 7(a) loan determinations for those borrowers who cannot obtain conventional credit at reasonable terms elsewhere.", "To monitor lender compliance with the “credit elsewhere” requirement SBA primarily uses on-site reviews conducted by third-party contractors with SBA participation and oversight, and other reviews.", "According to SBA guidance, lenders making 7(a) loans must take steps to ensure and document that borrowers meet the program's credit elsewhere requirement.", "However, GAO noted a number of concerns with SBA's monitoring efforts. Specifically, GAO found the following:", "SBA does not routinely collect or analyze information on the criteria used by lenders for credit elsewhere justifications.", "SBA recently began collecting some information on lenders' use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders' practices.", "Federal internal control standards state that management should use quality information to achieve the entity's objectives.", "Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and identify patterns of use by certain lenders that place them at a higher risk of not reaching borrowers who cannot obtain credit from other sources at reasonable terms.", "In general, representatives from 8 of 11 lenders that GAO interviewed stated that SBA's credit elsewhere criteria are adequate for determining small business eligibility for the 7(a) program.", "These criteria help them target their lending to small businesses that would otherwise have difficulty obtaining conventional credit because they are often new businesses or have a shortage of collateral.", "However, they also said that other factors—such as lender policies and economic conditions—can affect their decisions to offer 7(a) loans.", "In January 2018, SBA issued revised guidance for the 7(a) program and has provided training on this new guidance to lenders and trade associations.", "Lenders told GAO they are still in the process of understanding the new requirements." ], "parent_pair_index": [ -1, -1, 1, 1, -1, 0, -1, -1, -1, 0, -1, -1, 3 ], "summary_paragraph_index": [ 3, 3, 3, 3, 8, 8, 8, 8, 9, 9, 9, 9, 9 ] }

{ "title": [ "", "Introduction", "Animal Biotechnologies", "Embryo Transfer", "Transgenics", "In Vitro Fertilization", "Sexing Embryos", "Cloning", "Gene Knockout", "Regulation and Oversight", "Food and Drug Administration (FDA)", "FDA Guidance on GE Animals", "FDA Approval of Genetically Engineered Salmon", "U.S. Department of Agriculture (USDA)", "Other Authorities", "Cloning Policy Developments", "FDA Risk Assessment", "European Views", "Other Views", "Other Policy Concerns", "Environmental Issues", "Food Safety", "Consumer and Social Acceptance", "Labeling", "Animal Welfare", "Genetic Diversity", "Trade Issues", "Congressional Activity" ], "paragraphs": [ "", "The U.S. Food and Drug Administration (FDA) released two recent documents that renewed public and congressional interest in animal biotechnology in general and animal cloning in particular. On January 15, 2009, the agency released final guidance representing its current thinking on the regulation of genetically engineered (GE) animals for food or drugs. FDA did so under its existing statutory authority and regulations. A year earlier, on January 15, 2008, FDA had unveiled its final risk assessment and industry guidance on the safety of milk and meat from cloned animals and their offspring. FDA found that, generally, meat and milk products from cattle, pigs, and goats are as safe as products from their non-cloned counterparts.\nStill, some in the United States remain concerned about the safety and other impacts of GE animals and of animal cloning, and they continue to advocate a cautious approach to commercialization of such products. Outside of the United States, animal biotechnology, including both GE and cloning, is the focus of ongoing regulatory, policy and scientific discussions within the European Union (EU) as well as within the international organization for animal health, known by its French acronym, the OIE. (Cloning by itself is not considered to be genetic engineering; see discussion later in this report.)\nBiotechnology is a broadly defined term of relatively recent origin describing the range of modern knowledge, applications, and techniques underlying advances in many fields, notably health care and agriculture. Animal biotechnology has been defined as \"that set of techniques by which living creatures are modified for the benefit of humans and other animals.\" By its very nature, agricultural development is the history of humans modifying plants and animals to maximize desirable traits. For example, domestication and selective breeding of animals date back many thousands of years. Artificial insemination of livestock, notably dairy cattle, is a more recent technology, first finding wide commercial acceptance in the 1950s.\nDiscovery of the genetic code in the 1950s gave birth to modern techniques of biotechnology. One of the first commercial products of this new biotechnology in animal agriculture was bovine somatotropin (bST), a naturally occurring metabolic modifier that is now being manufactured in larger quantities through the use of recombinant DNA technology. Manufactured bST came onto the market in 1994 and is now administered to as many as half of all U.S. dairy cattle to increase per-cow milk output. Although bST is being used commercially in approximately 20 countries, it is banned in the European Union (EU).\nThe first U.S. approval of a commercial product from a GE animal is for the drug ATryn, an anticoagulant agent being produced in the milk of transgenic goats. FDA announced its approval on February 6, 2009. The goats were genetically engineered by introducing a segment of DNA into their genes that coded for the goat to produce human antithrombin in its milk. Antithrombin is a naturally occurring protein in healthy humans that helps keep blood from clotting in blood vessels.\nOther developments include pigs that have been engineered for increased sow milk output to produce faster-growing piglets. Chinese researchers announced in April 2011 that they had produced a herd of dairy cattle whose milk contains human breast milk proteins (lysozyme, lactoferrin, and alpha-lactalbumin). The researchers used cloning technology to introduce human genes into the DNA of Holstein dairy cows before the genetically modified embryos were implanted into surrogate cows. Cloned cattle also have been developed to resist mastitis, an infectious disease of the udder.\nA genetically engineered salmon—AquAdvantage salmon—with enhanced growth characteristics is currently under review by FDA for commercialization. If approved, it would be the first GE animal approved for human consumption. The company that developed the salmon, AquaBounty Technologies, Inc., has artificially combined growth hormone genes from an unrelated Pacific salmon with DNA from the anti-freeze genes of an eelpout. This modification causes production of growth hormone year-round, creating a fish the company claims grows at twice the normal rate.\nOutput traits such as drugs recovered from animal milk (\"pharming\"), milk that lacks allergenic proteins, and animal organs for human transplant (xenotransplantation) that resist rejection are other contemporary objectives of animal biotechnology research. In March 2006, researchers at the University of Missouri announced the creation of transgenic pigs whose tissue contains omega-3 fatty acids. The consumption of omega-3 fatty acids, found primarily in fish, has been linked to lowered incidence of heart disease in humans. Similar research is also under way to produce omega-3 fatty acids in cow's milk and in chicken eggs.\nThis report describes several scientifically emerging animal biotechnologies that are raising a variety of questions concerning risks to humans, animals, and the environment, as well as ethical concerns. The report examines applications of the technologies and discusses major issues that may arise. Consumers, agricultural producers, the biotechnology industry, and federal regulatory bodies are debating the relative costs and benefits of these technologies. As technologies move toward commercialization, Congress is being asked to examine these issues and possibly to refine the current federal regulatory structure governing the technologies and their agricultural products.", "Given the breadth of the term \"animal biotechnology,\" one might reasonably define it to include thousands of years of humans selectively breeding animals: observing desirable animal traits and attempting to breed those traits into successive lines of animals. One of the first modern forms of assisted reproductive technology (ART) was artificial insemination (AI). AI has been long established as a technological advance in traditional selective breeding and an important adjunct to the development of modern industrial animal production, especially in dairy and poultry. AI was adopted by producers and accepted by the public with virtually no controversy. For example, more than 70% of all U.S.-bred Holstein cows, by far the most widely used milk producers, are artificially inseminated. Estrus synchronization, which improves the efficiency of AI by more accurately controlling when a female is in heat, is also an important animal biotechnology.\nWith the development in the 1970s and patenting in the 1980s of recombinant DNA techniques, and the subsequent analysis of genes, their resulting proteins, and the role played by the proteins in animal biochemical processes (functional genomics), modern biotechnology is increasingly equipped with a set of sophisticated tools holding the promise of transforming the selective breeding of animals. The range of new techniques and technologies could transform animal biotechnology in ways that plant biotechnology was transformed in the 1980s and 1990s.\nModern animal biotechnology is developing against the background of public experience with plant biotechnology, and controversy over the technologies may be a continuing feature of animal biotechnology development, not least because of the closer connection between humans and some animals and the belief that techniques developed for animals are only a step away from application to humans. Some of the better known animal biotechnologies follow. A number of them are types of assisted reproductive technology (ART).", "After AI and estrus synchronization, embryo transfer (ET) is the third-most commonly used animal biotechnology technique. In ET, a donor cow of superior breeding is chemically induced to superovulate. The eggs are then fertilized within the donor, the embryo develops and is then removed and implanted in a recipient cow. Between removal and implantation, embryos may be frozen for safekeeping. Because of the relatively high costs, ET is used mostly within registered cowherds.", "A prominent area of contemporary animal biotechnology research is the development of transgenic animals through genetic engineering (GE) technology. Transgenic animals are produced by introducing an isolated DNA fragment into an embryo so that the resulting animal will express a desired trait. Transgenic animals may be generated by the introduction of foreign DNA obtained through animals of the same species, animals of different species, microbes, humans, cells, and in vitro nucleic acid synthesis. The only currently routine use of transgenic animals, primarily mice, is in the area of human disease research. The anti-clotting agent in goat milk is the first such application to be approved by FDA (March 2009). As noted above, a herd of GE dairy cattle has been created that produces human breast milk proteins in the cow's milk. That innovation could be 10 years or more away from any commercialization efforts. Potential agricultural applications from genetically engineering animals could include improved feed use and faster growth; more resistance to disease; meat that is leaner or that has more of some other desirable quality; and possibly even animal waste that is more environmentally benign. Table 1 provides examples of various objectives of animal biotechnology involving genetic modification.", "With in vitro fertilization (IVF), a technician removes unfertilized eggs (oocytes) from the donor cow's ovaries, usually recovering 6-8 useable oocytes. The oocytes mature in an incubator and are fertilized with sperm. The resulting zygotes incubate and develop in the laboratory before being placed into the recipient cow. While IVF can produce many fertilized embryos, the added expense of ET makes the procedure prohibitive in most cases.", "The dairy industry prefers heifers and the beef industry prefers bulls. Embryo sexing methods in cattle have been developed using a bovine Y-chromosome probe. Technicians remove a few cells from the embryo and assess the DNA in these cells for the presence of a Y-chromosome. Presence of a Y-chromosome determines the embryo is male. Research is also developing in sperm sexing technology.", "Cloning, discussed at greater length below, is a biotechnology technique developing rapidly and with significant public controversy. Most people think of cloning as the creation of an organism that is genetically identical to another one. However, scientists use the term more broadly, to refer to production not only of such organisms but also of genetically identical cells, and to replication of DNA and other molecules. It also refers to a form of reproduction found naturally in many single-celled organisms, as well as plants and animals. These differences in meaning and usage have caused some confusion in public debate about cloning, where the main area of controversy relates to artificial cloning involving higher organisms, including humans.", "This is a technique where researchers inactivate, or \"knock out,\" a gene by replacing it or disrupting it with an artificial piece of DNA in order to determine what that particular gene does—for example, cause or protect against some disease, alter metabolism, and so forth. A knockout mouse is a laboratory mouse subjected to this technology.", "The basic federal guidance for regulating the products of agricultural biotechnology is the Coordinated Framework for Regulation of Biotechnology (51 Fed. Reg. 23302), published in 1986 by the White House Office of Science and Technology Policy (OSTP). A key principle has been that GE products should continue to be regulated according to their characteristics and unique features, not their methods of production, that is, whether or not they were created through biotechnology. The framework provides a regulatory approach intended to ensure the safety of biotechnology research and products, using existing statutory authority and previous policy experience.\nSome newer applications of biotechnology did not exist when the current regulatory framework was enunciated. The NRC animal biotechnology report concluded that this regulatory regime \"might not be adequate to address unique problems and characteristics associated with animal biotechnologies\" and that federal agency responsibilities are not clear.", "Within the Department of Health and Human Services (HHS), FDA regulates food, animal feed ingredients, and human and animal drugs, primarily under the Federal Food, Drug, and Cosmetic Act (FFDCA; 21 U.S.C. §301 et seq. ). FDA has stated that most—although probably not all—gene-based modifications of animals for production or therapeutic claims fall within the purview of the agency's Center for Veterinary Medicine (CVM), which regulates them under the FFDCA as new animal drugs. A new animal drug (NAD) must be approved by the agency after it is demonstrated to be safe to man and animals, as well as being effective. Regulation of transgenic animals as NADs, however, suggests to some observers (e.g., the Center for Food Safety, Union of Concerned Scientists) the inherent weakness of existing regulatory structures to respond adequately to the complexities that arise with animal biotechnology innovations. The NAD review process is at the center of concern over FDA's potential approval of GE salmon for commercialization.\nPrimarily under the FFDCA, FDA's Center for Food Safety and Applied Nutrition (CFSAN) is responsible for assuring that domestic and imported foods are safe and properly labeled. Generally, FDA does not review new foods themselves for safety before they enter commerce but does have enforcement authority to act if it finds foods that are adulterated under the act. All food additives , whether or not introduced through biotechnology, must receive FDA safety approval before they can be sold; the exception to pre-market approval are those on a list FDA has determined to be \"generally recognized as safe\" (GRAS). In the approval of GE sugar beets, which was primarily a USDA Animal and Plant Health Inspection Service action, FDA also reviewed the application and concluded that the sugar from GE beets posed no dangers to human health.\nSections of the FFDCA and of the Public Health Service Act (42 U.S.C. §262 et seq .) provide the authorities for FDA's Center for Drug Evaluation and Research and Center for Biologics Evaluation and Research to regulate the safety and effectiveness of human drugs and other medical products, including those produced by GM animals. Under these laws, FDA requires pre-market review and licensing of such products, and requires that their production conditions ensure purity and potency.", "On January 15, 2009, FDA's CVM released its industry guidance on how it plans to regulate GE animals. This final document hews closely (with a few modifications) to the draft version that FDA published on September 18, 2008. The final document asserts that FDA's authority to regulate GE animals comes under the new animal drug provisions of the FFDCA. A drug is defined by the act, in part, as \"intended to affect the structure or any function in the body of man or other animals.\" Also, part of the FFDCA definition of \"new animal drug\" is one intended for use in animals that is not generally recognized as safe and effective for use under the conditions prescribed or recommended, and that has not been used to a material extent or for a material time.\n\"The rDNA construct in a GE animal that is intended to affect the structure or function of the body of the GE animal, regardless of the intended use of products that may be produced by the GE animal, meets the FFDCA drug definition,\" the guidance states (on page 5). A new animal drug is considered \"unsafe\" unless FDA has approved an application for that particular use, or it is for investigational use and subject to an exemption from the drug approval requirement (among a few other specified exemptions). Therefore, most developers will have to submit to the \"Investigational New Animal Drug\" (INAD) process at FDA prior to shipping any GE animals or to marketing any food or feed derived from GE animals. In other words, it is illegal to introduce food from a GE animal into the food supply that has not been approved by FDA. The guidance lays out the pre-market approval process including the information to be required of developers.\nUnder the guidance, FDA will examine both the direct toxicity (including allergenicity) potential of food from a GE animal as well as any indirect toxicity. Generally, food and feed will be considered safe if the composition of edible materials from the GE animal can be shown to be as safe as from a non-GE animal. The labeling requirements for GE-derived foods would be the same as for other foods: FDA has oversight over the labeling of seafood, dairy products, and whole shell eggs, and USDA over the labeling of most meat, poultry, and egg products (see below). More specifically, food from GE animals would not have to be so labeled, except when it takes on a different character from its non-GE counterpart.", "On August 25, 2010, FDA announced that it had begun the approval process of a GE salmon—called AquAdvantage Atlantic Salmon—developed by the Massachusetts biotechnology firm AquaBounty. The GE salmon has been engineered with a gene from the ocean eelpout that permits the salmon to grow at approximately twice the rate of a traditional Atlantic salmon. The GE salmon also contains a growth hormone from the Chinook salmon. FDA also announced at the same time that it would hold a public comment period and a hearing on labeling for the transgenic salmon. While the agency has stated that the salmon poses no threats to human health, FDA officials are undecided as to whether they would require any product labeling. Environmental issues associated with potential escape of the GE salmon into the wild are also being considered.\nThe GE salmon would be the first genetically engineered animal approved for human consumption and commercial-level farming. FDA scientists stated in a briefing document that the GE salmon is safe for human consumption and poses no risk to the environment. On September 19 and 20, 2010, FDA held a Veterinary Medicine Advisory Committee (VMAC) meeting on science-based issues surrounding the application for approval of the GE salmon. The meetings were open to the public. Committee members heard from FDA about GE animals generally and the agency's evaluation and approval process. On the second day, FDA presented data supporting AquaBounty's claim that the fish grew faster than conventionally bred Atlantic salmon.\nThe VMAC is currently reviewing FDA's recommendations and public comments. FDA is also moving through the environmental review process as required by the National Environmental Policy Act. While there is no timeline for making a decision, the VMAC will advise officials whether to approve the salmon and make recommendations regarding the need to label the fish, although FDA has indicated that it would not require labeling. FDA's position is that labeling should not suggest that GE foods are different from other foods. On May 10, 2011, the California Assembly Health Committee passed AB88, the Consumer's Right to Know Act, a bill requiring the labeling of all GE salmon entering or sold in the state.\nFDA is evaluating the GE salmon under its authority to regulate new veterinary drugs because the recombinant DNA construct that is intended to change the fish meets the definition of a drug, as defined under the Federal Food, Drug, and Cosmetic Act. This means that much of the supporting data AquaBounty supplies to FDA is confidential. A coalition of 31 organizations and restaurant chefs is demanding that FDA deny approval. Various environmental organizations are concerned that the GE salmon could escape from fish farms and threaten the wild salmon population. AquaBounty, however, says it would encourage producers to grow the GE Atlantic salmon only at in-land fish farms.\nCongressional Members have raised concerns about FDA's approval process. In a September 29, 2010, letter, 39 Members of both the House and the Senate requested that FDA Commissioner Margaret Hamburg halt the approval process. The letter stated that the Members had \"serious concerns\" regarding the process for review and approval of the GE salmon. In particular, the letter stated that the FDA process was \"inadequate\" and \"sets a dangerous precedent: the environmental review is flawed and the consumer's right to know ignored.\" In addition to concerns about the adequacy of the data supporting the safety for human consumption of the GE salmon, Members also expressed their concerns that the GE fish could pose serious risks to the wild population of fish, such as Atlantic, Coho, and Chinook salmon. Although the company intends to raise the fish at an egg hatchery facility on Prince Edward Island, Canada, and the GE salmon would be sterile, Members expressed their concern that the GE fish could pose threats to the remaining wild Atlantic salmon. AquaBounty acknowledged that 5% of the fish could remain fertile and could potentially mate with wild populations. A coalition of 53 consumer and environmental organizations and businesses endorsed the letter from House and Senate Members. The Center for Food Safety, a central actor in opposing federal regulatory standards for biotechnology, and a coalition of allied groups also submitted nearly 172,000 comments from individuals opposing the approval.\nIn February 2011, the House introduced H.R. 521 , a companion to S. 230 , which would prevent FDA from approving the GE salmon. The bills would amend the Federal Food, Drug, and Cosmetic Act to state that GE fish \"shall be deemed unsafe.\" The House and Senate bills have been referred to the Energy and Commerce Committee's Subcommittee on Health and the Committee on Health, Education, Labor, and Pensions, respectively.", "Several USDA agencies, operating under a number of statutory authorities, also have at least potential roles in the regulation of transgenic and cloned animals and their products. As several critical reviews have indicated, USDA has not had a clearly spelled out policy in this area, including whether it intends to exercise these authorities to regulate GE animals. USDA's Animal and Plant Health Inspection Service (APHIS) earlier had expressed its intention to publish an advance notice of proposed rulemaking (ANPR) on GE animals, possibly in 2008. Instead, in concert with FDA's notice on its draft guidance, APHIS published, in the September 19, 2008, Federal Register , a request for information from the public and scientists on how GE animals might affect U.S. animal health. Over 670 comments were received by November 18, 2008, as they had been for the FDA draft guidance. Most of the comments were outside APHIS's authority under the Animal Health Protection Act. FDA issued its final guidance for developers of GE animals on January 15, 2009. APHIS will work with FDA to determine its role in the comprehensive oversight of GE animals.\nAPHIS has broad authority, under the Animal Health Protection Act (AHPA; 7 U.S.C. §8301 et seq. ) to regulate animals and their movement to control the spread of diseases and pests to farm-raised animals. APHIS also administers the Viruses, Serums, Toxins, Antitoxins, and Analogous Products Act (21 U.S.C. §151-159), aimed at assuring the safety and effectiveness of animal vaccines and other biological products, including those of GM origin, and the Animal Welfare Act (7 U.S.C. §2131 et seq. ), portions of which govern the humane treatment of several kinds of warm-blooded animals used in research (but generally not agricultural animals). Elsewhere at USDA, the Food Safety and Inspection Service (FSIS) is responsible for ensuring the safety and proper labeling of most food animals and meat and related products derived from them under the Federal Meat Inspection Act (21 U.S.C. §601 et seq. ) and Poultry Products Inspection Act (21 U.S.C. §451 et seq. ).", "Reports and studies have cited a number of other authorities and federal agencies that are or could be relevant for the regulation of GE animals. The National Environmental Policy Act (NEPA; 42 U.S.C. §4321 et seq. ) requires federal agencies to consider the environmental impacts of their actions. The Environmental Protection Agency derives its authority from, among other laws, the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA; 21 U.S.C. §301 et seq. ); pesticides derived from living organisms, including those of biotechnology, are within its purview. The Interior Department's Fish and Wildlife Service and the Commerce Department's National Marine Fisheries Service have also been cited.", "In 1997, scientists at the Roslyn Institute in Scotland used nuclei from the mammary cells of an adult sheep to clone \"Dolly.\" Such nuclear transfer (NT) techniques were first developed in amphibians in the 1950s. They were first used in sheep in 1986, with the production of clones using nuclei taken from sheep embryos. The significance of Dolly was that she was cloned from differentiated cell types obtained from an adult (called \"somatic cell nuclear transfer\" or SCNT), rather than undifferentiated cells from an embryo (\"embryonic NT\").\nCloning in animal agriculture is generally not applied in isolation from other biotechnologies such as genetic engineering. Scientists note that cloning does not require fertilization and is not, by itself, a form of genetic engineering, that is, altering, removing, or inserting genes into an animal's existing DNA. However, cloning can involve transgenic as well as non-transgenic cells.\nSCNT is not yet a notably efficient technique ready for widespread commercial adoption. For example, only about 6% of the embryos transferred to recipient cows resulted in healthy, long-term surviving clones, according to a 2005 report. The European Food Safety Authority (EFSA) recently reported that overall success rates vary by species, ranging from 0.5% to 5%.\nSuccess rates are said to be improving, however. As more efficient cloning technologies, which can overcome the range of cloning abnormalities that have resulted from SCNT, are introduced, they could provide new opportunities in human medicine, agriculture, and animal welfare. This is the focus of much of the current international animal biotechnology research.\nThe EFSA draft scientific opinion estimated the number of live clones worldwide in 2007 to be less than 4,000 cattle and 1,500 pigs, of which about 750 cattle and 10 pig clones were in the United States. EFSA reported that life span data were limited, with only a few reports on cattle of six to seven years of age and no data available in 2007 on the full natural life span of livestock clones generally.", "FDA in July 2001 began asking companies to refrain voluntarily from marketing the products of cloned animals and their offspring until it could fully assess the scientific information on their safety. It subsequently issued two draft risk assessments on the matter, culminating in the release of a final risk assessment—and industry guidance that effectively lifted its voluntary moratorium—on January 15, 2008.\nSome stakeholders, including several Members of Congress, wanted a continuation of the moratorium until more studies are completed on safety and other aspects of animal cloning. Their views were reflected in nonbinding language to accompany the omnibus spending measure for FY2008, which passed in late 2007, and binding language in the Senate version of the pending farm bill ( H.R. 2419 ); see \" Congressional Activity ,\" at the end of this report, for details.\nIn an October 2003 draft risk assessment, FDA had concluded that \"the current weight of evidence suggests that there are no biological reasons ... to indicate that consumption of edible products from clones of cattle, pigs, sheep or goats poses a greater risk than consumption of those products from their non-clone counterparts.\" However, shortly after the assessment's publication, many members of FDA's Veterinary Medicine Advisory Committee stated that there were not enough data to fully understand any potential risks from this relatively new technology.\nOn December 28, 2006, FDA's CVM released another long-awaited risk assessment—also in draft form, along with a proposed risk management plan and draft guidance for industry—on the safety of animal clones and their offspring. The lengthy risk assessment examined two important questions: the safety of food from cloned animals and their progeny, and the effects of the process on the health of these animals. FDA officials stressed that the risk assessment did not address any other issues, such as the social and ethical aspects of cloning or consumer acceptance of cloned animal products. The risk assessment also focused only on cloning from non-transgenic cells. This risk assessment is now final.\nThe final risk assessment concluded—as had the December 26, 2006, draft—that the meat and milk of clones of adult cattle, pigs, and goats, and the meat and milk from the offspring of these clones, were as safe for human consumption as the food from conventionally bred animals. FDA added that not enough data were available to reach the same conclusions about sheep clones (or other species) and recommended that they not yet be used for human food. The risk assessment arrived at these conclusions after analyzing physiological, anatomical, health, and behavioral data on the animals and evaluating available information on the chemical composition of their milk and meat. FDA said its final assessment was peer-reviewed by an independent panel of experts, who agreed with the findings. The final assessment also took into account many thousands of public comments and additional data that became available since the draft was prepared, the agency said.\nThe agency said it would not require any special measures (including labeling) relating to the use of food products or animal feed derived from cloned cattle, goats, and pigs because they are \"no different from food derived from conventionally bred animals. Should a producer express a desire for voluntary labeling (e.g., 'this product is clone-free'), it will be considered on a case-by-case basis to ensure compliance with statutory requirements that labeling be truthful and not misleading.\" The industry guidance states that products from the offspring of cloned animals of any species are suitable for food or feed consumption.\nUpon release of the 2006 proposed assessment, FDA officials said they were continuing to ask livestock breeders and producers to keep food products from cloned animals and their offspring out of commerce. This moratorium was announced in July 2001 and remained in effect until the final guidance was released in January 2008. Although the FDA moratorium is no longer in effect, USDA has since been encouraging technology providers to maintain the voluntary moratorium, but for products from cloned animals only. Food products from cloned animals' offspring would not be similarly constrained. During a continuation of this moratorium, USDA said it would \"work closely with stakeholders to ensure a smooth and seamless transition into the marketplace for these products.\"\nOfficials emphasized that, at least initially, almost all cloning-related foods will come not from the clones themselves but rather from their sexually reproduced offspring. Cloned animals—like other \"elite\" breeding animals such as a prized bull—are too valuable to use for food production, except possibly when they reach the end of their productive lives. FDA observed that it can cost $20,000 or more to produce one such animal.\nOne ongoing question has been whether, in fact, milk and meat from the offspring of clones are entering the food supply. Several press accounts have quoted farmers and others who say they have sold such offspring to be slaughtered for food, and that the total number nationwide may be in the hundreds or even thousands. On the other hand, those numbers would amount to a small fraction of the total number of U.S. livestock slaughtered (e.g., 34 million cattle and 109 million hogs in 2007).\nFDA's January 2008 risk assessment did conclude that some animals involved in cloning (notably cattle and sheep surrogate dams) and some clones are at greater health risk than conventional animals. While the types of animal health problems observed in cloned animals are no different than those found with other assisted reproductive technologies, these problems appear more frequently in cloning than in the other technologies. Such problems include late gestational complications in the surrogate mothers, and increased risk of mortality and morbidity in calf and lamb clones that are apparently caused mainly by large offspring syndrome (LOS). Swine and goat clones and their mothers do not appear to experience any additional cloning-related problems, FDA reported.\nFDA found that livestock clones as a group tend to have more health problems and death rates at or right after birth. However, the risk assessment added that most animals surviving the neonatal period appear to grow and develop normally, and that no increased risk of adverse health effects have been reported in clones approaching reproductive maturity. The agency said that the technology was too new to draw any conclusions on the relative longevity of livestock clones.", "Cloning currently is not in commercial use in Europe, nor is there any specific authorization procedure in the European Union for products from cloned animals. The European Food Safety Authority (EFSA) on July 24, 2008, released its scientific opinion on the food safety, animal health and welfare, and environmental impacts of animals derived from cloning. The EFSA opinion was limited to cattle and pigs, but its findings generally do not appear to be substantially different from those in the FDA assessment. According to EFSA, \"Based on current knowledge, and considering the fact that the primary DNA sequence is unchanged in clones, there is no indication that differences exist in terms of food safety between food products from healthy cattle and pig clones and their progeny, compared with those from healthy conventionally-bred animals.\" As with FDA, the EFSA conclusion is based on an examination of compositional and nutritional data, the probability for the presence of novel constituents, the health status of the animal, and available data on toxicity, allergenicity, and microbiology.\nEFSA agreed that SCNT can be a successful reproductive technique, although death and disease rates of clones are significantly higher than those of conventionally reproduced animals. EFSA noted that surrogate dams have higher rates of failed pregnancies and other problems. \"A significant proportion of clones, mainly within the juvenile period for bovines and perinatal period for pigs, has been found to be adversely affected, often severely and with fatal outcome. Most clones that survive the perinatal period are normal and healthy,\" however. Adverse health effects were not observed in the offspring of clones, although studies have not been conducted for their entire lifespans.\nEFSA also found no indication of new or additional environmental risks compared with conventionally bred animals.\nThe EFSA report findings are being used by the European Commission (EC), the European Parliament, and member states as they discuss their policies regarding animal cloning. There is disagreement over the issue among officials in the various European bodies. This was illustrated when the European Parliament in early September 2008 approved a resolution asking the EC to propose a comprehensive ban on cloning animals for food, out of animal health and welfare and ethical concerns. However, at an initial discussion of the issue in early January 2009, EC commissioners indicated that there was time to consider a science-based risk assessment before deciding whether or not to ban cloning.\nIn April 2009, Members of the European Parliament (MEPs) called for the EU to introduce a ban on the marketing of meat and milk from cloned animals. The EC wanted meat and milk from cloned animals to be included under \"novel foods.\" A ban could be difficult to impose because an EFSA Opinion does not find a food safety risk in the meat or milk of cloned animals. To counter a possible challenge in the WTO, some MEPs have argued that the EU should use ethical grounds to justify a ban on food from cloned animals and their offspring. Some observers allege that WTO regulations could permit member-states to impose bans on ethical grounds.\nIn October 2010, the European Commission released a report to the European Parliament that proposed a five-year suspension of animal cloning for food production in the EU. A decision was expected at the end of March 2011, but that is pending.", "Critics, including a number of consumer advocacy and animal rights groups, oppose the use of cloned animals and their offspring for food. In October 2006, a coalition formally petitioned FDA to impose a moratorium on producing foods from cloned animals, and to establish rules for mandatory pre-market review and approval of cloned foods by regulating clones as new drugs under the food and drug act. These consumer and animal welfare groups contend that FDA has ignored or minimized a number of food safety and animal welfare problems. These include the treatment of surrogate mothers with high doses of hormones and their clone offspring, who often have severely compromised immune systems, with large doses of antibiotics, which could enter the human food supply; imbalances in clones' hormone, protein, or fat levels that could compromise meat and milk safety and quality; the possibility of increased foodborne illnesses; and a wide variety of health problems and abnormalities in the animals themselves. Consumer advocates continue to assert that there are no consumer benefits from cloning.\nFDA disagrees, citing the potential to breed livestock that meet consumers' changing tastes for traits like leanness, tenderness, color, size of meat cuts, and so forth. These would be in addition to potential producer-related benefits such as disease resistance, climate suitability, fertility, and improved physical qualities, FDA states.\nOpinion polls have suggested that the general public may not yet be ready for widespread animal cloning. A 2006 poll commissioned by the Pew Initiative on Food and Biotechnology, for example, found that Americans generally were not well informed about animal cloning, but 64% of those questioned are \"uncomfortable\" with it. Forty-three percent of Americans believed that foods from clones are unsafe, the survey found. Cloning opponents cite these types of findings to argue that products from cloned animals should be labeled so that consumers could avoid them if they wanted to. Some critics have urged the President to halt all FDA actions on cloning until a national panel that includes ethicists and religious leaders can consider the ethical and other social issues that they believe the technology has raised. Polls have also shown that a significant portion of the public would not eat GE salmon and believe that if FDA does approve the fish for sale, it should be labeled.\nThe NRC animal biotechnology report had stated that embryonic splitting and nuclear transfer using embryonic (not adult) cells were performed with some dairy cows to successfully produce genetically valuable offspring that were milked commercially and whose milk and meat did enter the food supply. Few concerns were raised by NRC authors about using these types of cloned animals for food, since they are generally believed to pose a low level of food safety concern. However, evaluating cloned-animal food composition \"would be prudent to minimize any food safety concerns. The products of offspring of cloned animals were regarded as posing no food safety concern because they are the result of natural matings.\" Other issues, notably consumer acceptance, social values, and animal welfare, could eventually overshadow any lingering questions about human health.\nIn August 2009, the Council for Agricultural Science and Technology (CAST), an international consortium of 33 professional and scientific societies based in Ames, IA, published a paper discussing issues surrounding animal cloning and transgenic animal research. The report acknowledges that biotechnology proponents \"have not convinced consumers that including these technologies in food production systems is in the consumer's best interest.\" The report also criticizes both FDA and USDA for failing to explain to the public the criteria for evaluating transgenic animals. Because FDA has taken a nontraditional approach to regulating transgenic animals by defining the transgene as a drug, the CAST authors argue that this \"establishes an unusually high hurdle for the approval of a food product.\" The report further argues that a regulatory process in which consumers have confidence and with which companies can afford to comply must be in place for transgenic technologies to be applied to livestock.", "The following are among the policy concerns that have arisen along with the development of new biotechnologies in animal agriculture. Some may be more applicable to GE-related technologies than to cloning per se , although others, like social acceptance and animal welfare concerns, may apply to both.", "Environmental concerns arising from emerging animal biotechnologies are largely speculative at this time because few products have been commercialized. For example, although the EFSA draft scientific opinion foresaw no environmental impact, it also noted that limited data were available on this aspect of animal cloning.\nIndustrial developers of agricultural biotechnology might argue that more efficient production of animal-based feeds could reduce the resources necessary to produce food and, thereby, reduce the environmental burden of animal production. Should the development and widespread adoption of the \"EnviroPig\" (tm), which produces less phosphorus in its waste, occur, it might be considered by some to be a positive environmental benefit of agricultural biotechnology.\nThe 2002 NRC animal biotechnology report noted potential negative environmental impacts of genetically altered animals. Escape, survival, and gene flow into wild populations were identified as major concerns. Of most concern to the NRC committee was the escape into the environment of GE salmon that have been genetically modified for rapid growth, and the likelihood that they could then breed with wild populations in the environment. FDA is currently discussing this and other environmental issues as they consider approving GE salmon. Other genetically altered animals such as fish, insects, and shellfish could also potentially escape into natural environments and become feral, disrupt ecosystems, or introduce novel genes in a natural population.\nThe FDA guidance on GE animals notes that the agency will comply with requirements of the National Environmental Policy Act (NEPA). Environmental risks are likely to differ depending upon the animal and application. For example, the types of environmental concerns arising from a GE cow bred for resistance to mastitis will differ greatly from the concerns raised by a GE fresh-water fish engineered to grow more rapidly. Material to accompany FDA's final guidance notes that \"although the agency has extensive experience in environmental assessment, including for fish, other federal and state agencies have overlapping or complementary authority and expertise\" that FDA intends to tap. It also promised to make the results of environmental reviews public.", "Unexpected and unintended compositional changes arise with all forms of plant and animal genetic modification, including GE, concluded the IOM-NRC report on genetically engineered foods. The report added that, so far, no GE-related adverse human health effects have been documented. However, the report's authors cited \"sizeable gaps\" in the ability to identify compositional changes caused by all forms of genetic modification—whether GE or conventional—and their relevance for human health, and they recommended new approaches for assessing the safety of new foods both before and after they enter the market.\nPrevious research and experience with commercializing transgenic plants suggested that negative effects on human health were virtually nonexistent. While not asserting that genetically modified organisms necessarily generate health problems, more recently reported research in peer-reviewed scientific journals has suggested that GMOs may raise food safety concerns:\nAustralian researchers have published an article explaining that the transfer from a bean to a pea gene that expresses an insecticide protein has resulted in antibody production in mice fed the transgenic pea. The antibody reaction is a marker of allergic reaction. Italian researchers at the University of Urbino had previously shown that absorption of transgenic soy by mice induced modifications in the nuclei of their liver cells. Recent research showed that a return to non-transgenic soy made the observed differences disappear. Norwegian scientists at the University of Tromso demonstrated that the catalyst 35S CaMV, an element of the genetic structures used to modify a plant, can provoke gene expression in cultured human cells. This catalyst was previously believed to operate in this way only in plants.\nIn the NRC animal biotechnology report, experts observed that the scientific principles for assessing the safety of GE animals are \"qualitatively the same\" as for non-GE animals. However, because GE can introduce new proteins into foods, the potential for allergenicity, bioactivity, and/or toxicity responses should be considered, they said. Others have remarked that animals genetically engineered for nonfood products like pharmaceuticals or replacement organs might be of concern if such animals entered or affected the food supply.", "Criteria for selecting desirable traits to be produced through transgenic animals will likely be based on the demand for specific commercial characteristics. Even if scientific evidence is convincing that GE and cloned animal products are safe and beneficial for human consumption or economically valuable to producers, other concerns may limit marketplace and consumer acceptance.\nPolls in recent years in the United States indicate that public knowledge about food and biotechnology generally remains limited. In two 2005 surveys, approximately half of those surveyed expressed opposition to the use of biotechnology in the food supply. More than half of those in a 2005 Pew-sponsored poll said they opposed research into genetically modified animals, although opposition declined with increased knowledge. Many Americans have heard about animal cloning; two-thirds expressed discomfort with it—more of them out of religious or ethical concerns than food safety concerns. A majority of respondents to the Pew survey believe that regulators should take into account ethical and moral considerations. (See also the 2006 Pew findings on cloning, under \" Cloning Policy Developments ,\" section on \" Other Views .\")\nConsumers may be less willing to accept the practice of genetically modifying animals than plants, some have argued, observing that people relate differently to animals, which many recognize as sentient beings. Some observers have expressed the concern that cloning farm animals might lead more quickly to human and pet cloning, which those observers oppose. Others believe that modifying animals, for example, to save human lives through xenotransplantation or the production of some important drug, might be more acceptable than doing so simply to produce more or cheaper food.\nFurther, science alone cannot resolve ethical views that appear to vary widely:\nSome people, irrespective of the application of technology, consider genetic engineering of animals fundamentally unethical. Others, however, hold that the ethical significance of animal biotechnologies must derive from the risk and benefits to people, the animals, and/or the environment. Yet another view focuses on the right of humans to know what they are eating or how their food or pharmaceuticals are being produced and therefore labeling becomes an issue to be addressed.\nFood industry leaders appear sensitive to consumer unease with animal biotechnology in general and cloning in particular. Many companies are not yet ready to process and sell meat and milk from transgenic and cloned animals because, they believe, consumers may view the products as less safe than more conventionally produced food products. The food industry also does not want to be portrayed as overstepping any widely held ethical or moral concerns about the new technologies.\nSuch observations led some skeptics of animal biotechnology to propose that FDA not only consider the science and safety issues, but also these broader concerns. In the area of human reproductive health, for example, FDA and other federal agencies have invoked particular moral arguments either to reinforce scientific arguments or to counterbalance scientific evidence. Others believe that FDA should base its decisions only on scientific evidence, and perhaps some other body should be established to consider the ethical and cultural questions. As the NRC animal biotechnology report observed, regulatory decisions and enforcement involving animal biotechnology \"are difficult in the absence of an ethical framework.\"", "Some believe that segregating and labeling the products of biotechnology in agriculture, including meat and milk, would enable the consumer to choose whether or not to buy such products. Either segregating and labeling biotechnology products or failing to do so could contribute to public suspicion that these products are flawed or different in some negative way, which may lead to contradictory policy decisions. As noted, the FDA guidance on GE animals does not require their products to be so labeled. Opponents of labeling argue that biotechnology products essentially are the same as more conventional products—and are subjected to the same rigorous safety standards—and therefore should be treated no differently in the marketplace. A study by USDA's Economic Research Service reported that consumers' willingness to pay for a food item declines when the food label indicates that it was produced with the aid of biotechnology.\nIn December 2007, two leading U.S. livestock cloning companies announced they were creating a voluntary system for tracking cloned animals. The program, which they asserted \"is designed to facilitate marketing claims,\" is to involve a national registry providing for the individual identification of each cloned animal, affidavits that owners will sign committing to proper marketing and disposal of such animals, and monetary deposits to be returned when such commitments are fulfilled. Consumer organizations immediately criticized the initiative, noting that it would not track the offspring of cloned animals and was not mandatory.\nHowever, fierce debate continues regarding even the voluntary labeling of products to denote that they are not derived from biotechnology—notably the use of so-called \"rBST-free\" labels on dairy products. Although FDA cleared rBST as safe for commercial use in 1994, and it has been widely adopted by U.S. dairy farmers, the substance continues to be viewed skeptically by some consumer advocates. They have convinced a number of dairy processors and retailers to label their products as free of added BST manufactured through the use of recombinant DNA technology. FDA guidance permits such labeling so long as it is not misleading, is presented in the proper context, and is adequately substantiated. For example, a firm cannot state that its product is \"BST-free\" because the substance occurs naturally in milk, or even simply that it is \"rBST-free\" because that could imply a compositional difference between naturally occurring and rBST, which there is not, FDA has ruled. But certain claims that no rBST was used could be acceptable, the agency stated.\nFDA has looked to the states to evaluate the acceptability of such labels, and a number of these states have challenged processors' use of them. Battles over such restrictions have been notable in Pennsylvania, Ohio, Utah, Kansas, and elsewhere. The California Assembly passed a bill in May 2011 that would require labeling of GE salmon should FDA issue an approval to the AquaBounty company.\nMeanwhile, USDA has reminded stakeholders that products from cloned animals are not eligible to be labeled as organic, under its National Organic Program (NOP). While cautioning that the organics program is a marketing, not a food safety, program, USDA also noted: \"Cloning as a production method is incompatible with the Organic Foods Production Act and is prohibited under the NOP regulations.\" However, the status of products from clone offspring is less clear. The department noted that USDA's Agricultural Marketing Service, where the NOP is located, was preparing rulemaking to address the organic status of such offspring.", "Some aspects of gene transfer, and of cloning, have the potential to create infectious disease hazards and/or impaired reproduction. Looming large in the ethical debate are questions about whether genetic modifications, cloning, and other technologies stress animals unnecessarily, subject them to higher rates of disease and injury, and hasten death. The NRC animal agriculture report noted, for example, that ruminants produced by in vitro culture or nuclear cell transfer methods tend to have higher birth weights and longer gestation periods than those produced by artificial insemination, creating potential calving problems. Nuclear transfer techniques to propagate genetic modifications may increase risks to the reproductive health and welfare of both the surrogate female animals and their transgenic offspring. The report cited other evidence of problems such as anatomical, physiological, or behavioral abnormalities in many transgenic animals. Some scientists have countered that animal welfare problems have been exaggerated and tend to recede, particularly as the technologies are perfected. Most appear to agree, however, that animals originating from some forms of genetic modification or from cloning may require closer observation and care. (See also the section of this report on \" Cloning Policy Developments .\")\nIn Europe, officials continue to consider the ethical dimensions of animal welfare in formulating their own cloning policies. The EC charged a separate panel, the European Group on Ethics in Science and New Technologies, with drafting an opinion. This group released an opinion on January 16, 2008, stating, in part:\nConsidering the current level of suffering and health problems of surrogate dams and animal clones, the EGE has doubts as to whether cloning animals for food supply is ethically justified. Whether this applies also to progeny is open to further scientific research. At present, the EGE does not see convincing arguments to justify the production of food from clones and their offspring.\nIf such products were to be allowed into the market, certain requirements regarding food safety, animal welfare and traceability should be met, the group added.", "Could the introduction of a few genetically altered or cloned \"superspecies\" bring too much genetic uniformity to herds? As genetic diversity declines, herds could be more susceptible to diseases, leading to large production losses and/or much heavier use of antibiotics and other animal drugs to treat them, some have argued. A related concern is that a relative handful of \"elite\" producers or breeders might hold the proprietary rights to these species, to the disadvantage of many farmers and ranchers. Some animal biotechnology researchers have pointed to the potential importance of preserving unaltered germlines in domestic animals because they could prove to be an invaluable \"gene bank\" in the event that novel infectious diseases or inheritable genetic defects were inadvertently introduced into modified subpopulations as a consequence of genetic modification.", "If the United States were to be the first country to approve food products from cloned animals, how might the decision affect U.S. exports? Any exports of the products of animal biotechnology would presumably encounter a wide spectrum of foreign regulatory regimes, some more restrictive than the U.S. system. For example, the current European Union restriction on new biotechnology products is likely to encompass various restrictions on animal biotechnology as it does on plant biotechnology. On the other hand, researchers in a number of other countries, including some EU members, have been producing clones, and one—France—has published its own risk assessment on clones that, FDA has observed, generally agrees with the U.S. assessment.\nInternational guidelines pertaining to exports of animal products derived from biotechnology are being considered. The Codex Ad Hoc Intergovernmental Task Force on Foods Derived from Biotechnology held an initial meeting in September 2005 in Chiba, Japan, to determine the new work projects. Almost every country, except for the United States, proposed an animal biotechnology project. The task force agreed to move forward with a recombinant DNA (r-DNA) animal project, specifically to develop guidelines for how countries would assess the safety of foods derived from r-DNA animals. At a meeting in November-December 2006 in Chiba, the task force, among other things, reviewed the developing guidelines, agreeing to limit their scope to food safety and nutritional issues (while recognizing the importance of others like animal welfare, environmental, and ethical concerns).\nUSDA has said it would consider \"discussion with industry on possible verification of its supply chain management plan to ensure that trading partners are aware of whether or not they receive cloned or non-cloned products.\"\nImports of GE animals and their products into the United States also are of concern to some. In a December 2008 audit report, USDA's Office of Inspector General (OIG) concluded that the department has not established an import control policy for such imports but needs to do so. \"To mitigate any risks to the U.S. environment, agriculture, and commerce from unapproved transgenic plants and animals entering the U.S. food supply, USDA will need to monitor\" foreign developments in such technologies more closely, OIG also noted.", "Members of Congress in the past have proposed various bills aimed at more closely regulating the plant and animal products of agricultural biotechnology generally, requiring such products to be labeled, and providing a means to recover any damages caused by the technology. As with human cloning, ethical issues concerning animal clones and other animal biotechnologies also may continue to be visible public issues. As before, the 112 th Congress could be asked to play a larger role in weighing the benefits and costs of these evolving technologies, and to refine existing government oversight.\nIn the 110 th Congress, the Senate-passed version of the 2007-2008 farm bill ( H.R. 2419 , in Section 7507) contained statutory language that would have required FDA both to postpone publication of its final risk assessment until the completion of several newly mandated studies, and also to maintain the voluntary marketing moratorium until then. However, conferees deleted the Senate language from the final measure (signed into law as P.L. 110-234 ).\nMore specifically, the Senate bill would have directed the HHS Secretary to contract with the National Academy of Sciences to conduct a study on the safety of food products from cloned animals and the health effects and costs attributable to milk from cloned animals, with a report to Congress due within one year of enactment. The study was to address whether there were a sufficient number of studies to support the FDA draft assessment, and whether there were other pertinent ones that were not taken into account. It would have included an evaluation of potential public health effects and associated health care costs, and an evaluation of any consumer behavior and negative health and nutrition impacts resulting from a decrease in dairy consumption if milk from cloned animals and their offspring is commercialized.\nAnimal cloning-related bills ( S. 414 and H.R. 992 ) were introduced in early 2007, both of which would have amended federal food safety laws to require that foods from cloned animals and their offspring be so labeled. Also introduced in early 2007 was S. 536 / H.R. 1396 , which would have prohibited the use of the \"organic\" label on food products from cloned livestock or their offspring. Another ( H.R. 4855 ), introduced in late 2007, would have required studies like those in the Senate farm bill on the impacts of food products from cloned animals entering the food supply.\nIn late July 2008, three related bills were introduced that, their sponsor said, were to create a comprehensive framework for regulating GMOs. H.R. 6636 would have required the labeling of all foods produced with GE material. H.R. 6635 would have prescribed relatively stringent new regulations for FDA approval and oversight of GE crops. H.R. 6637 would have regulated business dealings between agricultural producers and the developers of genetically engineered plants and animals, and sought to hold biotechnology companies liable for any adverse on-farm impacts from their products.\nThese bills were not enacted, nor were they reintroduced in the 111 th or 112 th Congresses to date. As discussed above in the section on GE salmon, bills introduced in the 112 th Congress ( H.R. 521 / S. 230 ) would prevent FDA from approving the GE salmon. The bills would amend the Federal Food, Drug, and Cosmetic Act to state that GE fish \"shall be deemed unsafe.\" The House and Senate bills have been referred to the Energy and Commerce Committee's Subcommittee on Health and the Committee on Health, Education, Labor, and Pensions, respectively." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h3_full h2_full h1_full", "h0_full h3_full", "", "h0_full", "", "", "", "", "h0_full h2_title h4_title h1_full", "", "h1_full", "h4_full h2_full", "", "", "h3_full h0_title", "h3_full", "", "h0_full", "h0_title", "h0_full", "", "", "", "", "", "", "h4_full" ] }

{ "question": [ "How is animal agriculture changing?", "What is interest in animal agriculture from producers?", "How can transgenic animals impact human health?", "What are the criticisms of this application?", "How has the regulation of animal agriculture been questioned?", "How has the FDA guided animals and products?", "How is this guidance regulated?", "How are GE foods regulated?", "How does this impact GE approval from the FDA?", "How was a drug related to a GE animal approved?", "What was the drug?", "What other GE drug is being considered?", "What issues regard this GE salmon?", "How has the GE salmon been asked to be halted?", "What part of animal biotech the most attention?", "What assessment regarding the safety of cloning products has been made?", "How does this assessment compare to an earlier version?", "What did the FDA conclude about animal risks regarding cloning?", "How do scientists comment on this?", "What is the policy on marking cloned animals?", "How has animal cloning been restricted for labeling?", "Has this issue been reintroduced since then?", "What bill was introduced in 112th Congress concerning cloned fish?" ], "summary": [ "Animal agriculture is being transformed by rapid advances in biotechnology—a term that encompasses a variety of technologies, including genetic engineering (GE), genetic modification, transgenics, recombinant DNA techniques, and cloning, among others.", "Producers are interested in the application of biotechnology to improve productivity, consistency, and quality; to Introduce new food, fiber, and medical products; and to protect the environment.", "Potential human health applications of transgenic animals include producing biopharmaceuticals and generating organs, tissues, and cells for xenotransplantation.", "Criticisms of such applications involve issues ranging from food safety and social resistance to potential negative impacts on animal welfare and on ecosystems.", "Questions also have arisen about the adequacy of the current regulatory structure to assess and manage any risks created by these technologies.", "On January 15, 2009, the U.S. Food and Drug Administration (FDA) released final guidance on how it is to regulate GE animals and products.", "Consistent with the Coordinated Framework for Regulation of Biotechnology, FDA will do so under its existing statutory authority and regulations.", "Generally, GE-derived foods, for example, will be regulated like non-GE foods; if their composition does not differ from their conventional counterparts, they will not have to be labeled.", "Nonetheless, developers of GE animals and of GE-derived products must gain FDA pre-market approval.", "On February 6, 2009, FDA announced the first approval of a drug from a GE animal.", "The drug is a human anti-clotting agent produced in the milk of transgenic goats.", "FDA is also currently considering approval of the first genetically modified animal for human consumption, having declared in August 2010 that a GE salmon—AquaAdvantage Salmon—is safe to eat and poses no threat to the environment.", "FDA is considering environmental and labeling issues, and has not issued a final decision on the commercialization of the GE salmon.", "In letters from both houses, 40 Members have asked the FDA Commissioner to halt the approval process for the GE salmon, citing serious concerns with FDA's review and approval process. The congressional letters have been endorsed by over 50 consumer and environmental groups.", "Although animal biotechnology involves many techniques other than cloning, this latter technology has attracted widespread attention.", "A final risk assessment and industry guidance on the safety of meat and milk from cloned cattle, pigs, and goats and their offspring were released January 15, 2008, by FDA.", "The documents generally echoed FDA's December 28, 2006, draft risk assessment, which found that such products are as safe to eat as those of conventionally bred animals.", "FDA also concluded that cloning poses the same risks to animal health as those found in animals created through other assisted reproductive technologies—although the frequency of such problems is higher in cloning.", "(Scientists stress that cloning is an assisted reproduction technique that does not involve any transfer or alteration of genes through GE.)", "The agency said it was no longer asking industry to refrain voluntarily from marketing the products of cloned animals and their offspring, although the U.S. Department of Agriculture (USDA) did ask that it be continued for products from clones (but not from the offspring of clones).", "Bills on animal cloning introduced in the 110th and 111th Congresses would have required all food from cloned animals or their offspring to be labeled, and prohibited food from cloned animals from being labeled as organic.", "The bills have not been reintroduced in the 112th Congress.", "A bill that would amend the Food, Drug, and Cosmetic Act to prevent the approval of genetically engineered fish (H.R. 521/S. 230) was introduced in the 112th Congress." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, 0, -1, 2, -1, 0, -1, 2, 2, -1, -1, 1, -1, 3, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 4, 4, 4 ] }

{ "title": [ "", "Background", "UC Administration and Benefits", "UC Financing", "Recent Trends in Federal Unemployment Tax Revenues and Expenditures", "Unemployment Taxes and the Budget", "UC Benefits Are Mandatory Entitlements", "Appropriations for UC Administration", "Calculating the Federal Unemployment Tax", "Net FUTA Rate: 0.6%", "Taxable Wage Base: $7,000 of Each Worker's Yearly Earnings", "Legislative History and Brief Analysis of the Changes in Federal Unemployment Taxes", "Changes in the Taxable Wage Base", "Changes in the Tax Rate", "Federal Unemployment Taxes: Payment Timing and Requirements for Employers", "Required Quarterly Payment", "Annual Payment", "FUTA: Guidelines for State UC Programs", "FUTA: Coverage", "Exceptions", "FUTA: State UC Tax Requirements", "Experience-Rating of Employer Taxes", "State Tax Rate", "Taxable Base", "Appendix. Laws Impacting Federal Unemployment Taxes, 1935-Present" ], "paragraphs": [ "", "The Unemployment Compensation (UC) program is constructed as a joint federal-state partnership providing temporary and partial wage replacement to involuntarily unemployed workers. Federal law sets broad guidelines regarding UC benefits and financing. States administer UC benefits with U.S. Department of Labor (DOL) oversight. State laws establish the program's specifics, resulting in 53 different UC programs operating in the states, the District of Columbia, Puerto Rico, and the Virgin Islands.", "Titles III, IX, and XII of the Social Security Act (P.L. 74-271, as amended) establish the framework of the UC program. Title III of the SSA authorizes grants to states for the administration of state UC laws, Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF), and Title XII authorizes advances or loans to insolvent states.", "The financing arrangement for UC is specified within the Federal Unemployment Tax Act (FUTA) of 1939. Revenue for the program is provided through payroll taxes levied by both the federal government and the states on a portion of wages paid by covered employers. Total UC expenditures include benefit payments and administrative costs. During periods of economic expansion or stability, states fund approximately 90% of all UC expenditures—as almost all of the benefits are state financed by state unemployment taxes. By comparison, federal expenditures are relatively small during these expansions (approximately 10%), in which federal expenditures are primarily administrative grants to the states and are financed by federal unemployment taxes.\nFederal unemployment taxes are deposited with the U.S. Treasury and credited to the federal accounts within the UTF. Federal unemployment taxes pay for state administrative costs, half the cost of Extended Benefits (EB), and loans to insolvent state UC programs. (Federal agencies transfer funds into the UTF to pay for benefits for former employees and are not paid by federal unemployment taxes.) Likewise, state unemployment taxes are deposited into the UTF and credited to the corresponding state account. The funds within state UTF accounts are limited to paying each state's regular UC benefits and the state's half of EB costs.", "During periods of economic growth, the federal role in financing UC is small relative to the overall size of UC revenues and expenditures. Federal unemployment taxes are dedicated to pay for UC administration grants to the states and the federal share of the EB program, and to fund a federal account within the UTF for state loans. As shown in Table 1 , federal unemployment tax revenue for FY2016 is projected to be $5.8 billion of the $46.7 billion in all unemployment taxes collected (approximately 12%). Likewise, the projected $5.0 billion in federal spending on administration ($4.2 billion), EB ($0), and benefits for former federal employees (UCFE) and former servicemembers (UCX) ($0.8 billion combined) is much smaller than the projected state spending on regular UC benefits ($32.3 billion).\nWhen economic recessions occur, the UC program is designed to stabilize the economy as federal unemployment expenditures increase through the EB program and additional administrative grants. In addition, the federal government often has augmented the regular UC benefit with temporary unemployment benefit expansions. Thus, at the height of the recent recession, federal expenditures accounted for 60% of the $156 billion paid in total benefits (about $93 billion).", "All unemployment tax revenue and expenditures for benefits and administration flow through the U.S. Treasury, and thus affect federal revenue, outlays, and the overall financial position (deficit or surplus) of the federal government. However, as a practical matter, all UC and EB financial transactions occur within the trust fund.\nBoth federal and state unemployment tax revenue as well as administrative and benefit expenditures within the UTF are accounted for in the federal budget. Federal unemployment taxes are deposited into the UTF. The Treasury invests all receipts in federal securities that bear interest. Similarly, state unemployment taxes are credited to each state's account within the UTF, and the Treasury invests all receipts in federal securities that bear interest. The investment of state unemployment revenue in federal securities increases the federal debt. When states pay UC benefits to unemployed individuals, the Treasury redeems those securities held within that state's UTF account. Thus, the payment of regular state UC benefits decreases the federal debt.", "In budgetary terms, UC benefits are mandatory spending because the underlying law authorizes the Treasury to transfer funds to the states for UC benefit payments without the need for further appropriation. In other words, UC benefits are not subject to the annual appropriations process. Because UC benefits are mandatory entitlements, even if a state's trust fund account is depleted, the state remains legally required to continue paying benefits. To do so, the state might borrow money either from the dedicated loan account within the UTF or outside sources.", "Each fiscal year, Congress appropriates funds through the federal budget process to pay for both the federal and states' costs of administering unemployment compensation programs. The Secretary of Labor determines ( certifies ) the amount of the administrative payments and permits the Secretary of the Treasury to make the payments to the states.", "FUTA imposes a 6.0% gross federal unemployment tax rate on the first $7,000 of each worker's yearly earnings. However, FUTA provides tax incentives to states, which may lower the net tax rate, if states meet federal UC program guidelines.", "Employers in states with UC programs approved by the U.S. Labor Secretary and with no outstanding federal loans may credit up to 5.4 percentage points of state unemployment taxes paid against the 6.0% tax rate, making the minimum net federal unemployment tax rate 0.6%.\nThis tax credit is provided by two separate Internal Revenue Code (IRC) provisions.\n1. Section 3304 of the IRC provides for a state tax credit for all employers of up to 5.4%. 2. Section 3303 of the IRC provides an additional tax credit for state employers if the employer paid less than 5.4% in state taxes if the state unemployment tax schedule is such that employers generating the fewest claimants have the lowest tax rates (e.g., experience rates its employers).\nThe total of the state tax credits (state plus additional) cannot exceed 5.4%. Conventionally, these two tax credits are generally aggregated and discussed as the 5.4% state tax credit. This report follows this convention.", "The taxable wage base for federal unemployment tax is limited to no more than the first $7,000 of each worker's yearly earnings. Because most employees earn more than the $7,000 taxable wage ceiling in a year, the federal unemployment tax typically is $42 per worker per year. That is, $7,000 × 0.6%, or just over two cents per hour for a full-time, year-round worker.", "As to be expected, the federal unemployment tax has changed substantially since 1936. The Appendix provides a comprehensive list of changes in the federal unemployment tax law that altered either the taxable wage base or the tax rate. There have been many other changes within FUTA, including the expansion of covered work and specific uses of tax revenue, which are not explored in this report. DOL provides a chronology of major changes to UC law, accessible at http://workforcesecurity.doleta.gov/unemploy/pdf/chronfedlaws.pdf .", "The original Social Security Act of 1935 imposed the federal unemployment tax on total annual wages (and required the states to implement a state unemployment tax on wages as well). The decision to tax total wages \"was in keeping with the principle of imposing a tax that would apply uniformly throughout the country so that no state would have an advantage over another.\" However, in 1939, the Social Security Board recommended that taxes be limited to the first $3,000 of annual wages—the same taxable wage base to which Social Security payroll taxes were applied at the time. Because the $3,000 ceiling exceeded annual wages of 98% of all workers in 1939, it reduced revenues from the unemployment tax only slightly.\nSince 1940, Congress has increased the FUTA wage base three times: from $3,000 to $4,200 in 1972; from $4,200 to $6,000 in 1978; and from $6,000 to $7,000 in 1983. These increases did not keep pace with inflation or wage growth, and the divergence between taxable and total wages continues to grow as shown in Figure 1 . Applying the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to adjust for inflation, the $7,000 taxable wage base in 2015 is equivalent to $487 in 1940, approximately one-sixth of the actual tax base ($3,000) in 1940.", "The original Social Security Act of 1935 provided for a gradual increase in the net tax rate (from 0.1% in 1936, to 0.2% in 1937, to 0.3% in 1938) and was applied to all covered annual wages. Since 1939, Congress has permanently increased the net FUTA tax rate three times: from 0.3% to 0.4% in 1965, 0.5% in 1970, and 0.6% in 1983. These increases partially offset the erosion of the taxable wage base. (See the previous section \" Changes in the Taxable Wage Base \" for details.)\nIn addition to these three permanent tax increases, there have been three temporary ( surtax ) increases of short duration. In addition to these short-term changes, a temporary 0.2% surtax began in 1977 and was continually reauthorized (nine times) until finally lapsing at the end of June 2011—a span of over 34 years.\nFigure 2 depicts the changes of the net federal unemployment tax rate since 1954. In addition, it provides information on the effective tax rate (i.e., the total federal revenue as a proportion of total wages in covered employment). Although the statutory tax rate has doubled since 1954, the effective tax rate has decreased from 0.2% to 0.1%—the result of limited increases in the taxable wage base.", "", "Once employers owe more than $500 in estimated federal unemployment tax, they are required to pay the federal unemployment taxes on a quarterly basis. Employers must use Internal Revenue Service (IRS) Form 940, an annual tax form, to reconcile the quarterly deposits to the actual tax liability. For most employers, the fourth quarter employment taxes from the previous year are due on January 31. This is also the payment in which any additional taxes attributable to a reduced state tax credit would be due. IRS Instructions for the federal unemployment tax are available at http://www.irs.gov/pub/irs-pdf/i940.pdf .", "If the estimated quarterly federal tax is less than $500, an employer may roll the liability over to the next quarter until either when the liability is $500 or more or when the annual income tax is due. At that point, the employer must pay FUTA taxes to the Treasury.", "FUTA provides guidelines from which states construct UC benefits, coverage, and state financing. As an incentive to comply with the framework, FUTA provides a lower net federal unemployment tax if state UC programs meet certain guidelines on what types of employment must be covered by the state UC programs and meet the state unemployment tax requirements set out under FUTA. There remains significant state independence within these broad parameters. States generally determine individual qualification requirements, disqualification provisions, eligibility, weekly benefit amounts, potential weeks of benefits, and the state tax structure used to finance all of the regular state UC benefits and half of the EB.", "For most employers, FUTA requires that all positions be subject to the federal unemployment tax if an employer paid wages of at least $1,500 during any calendar quarter or employed at least one worker for at least one day of each of 20 weeks in the current or prior year. The federal coverage requirements have expensive net tax implications for state employers if they are not met. The 5.4% state tax credit on the federal unemployment tax is not allowed if a job is required to be covered under FUTA, but the state UC program does not cover that job.\nStates may cover additional types of employment that are not required to be covered by FUTA. However, most states have chosen not to expand unemployment insurance coverage significantly. The following employment generally is not covered by the unemployment insurance system:\nself-employment, work done by relatives, work of patients in hospitals, work by student interns, work by alien farmworkers, seasonal camp employment, and railroad workers (who have a separate unemployment program).", "There are exceptions to the broad FUTA coverage requirements. Certain nonprofit organizations; state and local governments; services provided while employed by federally recognized Indian tribes; certain agricultural labor; and certain domestic service all have different thresholds for coverage.\nNonprofit employers are subject to coverage requirements if the organization employs at least four workers for one day in each of 20 different weeks in the current or prior year. State or local governments and Indian tribes are subject to coverage requirements without regard to the number of employees. Agricultural employers are subject to coverage requirement if the employer paid cash wages of at least $20,000 for agricultural labor in any calendar quarter or employed 10 or more workers for at least one day in each of 20 different weeks in the current or prior year. Domestic service employers are subject to the coverage requirement if the employer paid cash wages of $1,000 or more for domestic service during any calendar quarter in the current or prior year.\nContingent on state laws, certain nonprofit, state or local government organizations, and federally recognized Indian tribes may opt to be a reimbursable employer in which the employing agency has the option to reimburse the UC program for benefits paid to their laid-off employees rather than pay state and federal unemployment taxes.", "FUTA provides basic guidelines for state unemployment taxes. States may opt to experience rate employers, tax employers that generate the most claimants at a rate of at least 5.4%, and have a taxable wage base of at least the first $7,000 of each employee's annual earnings.\nIf a state meets these minimum tax requirements, FUTA allows a state tax credit of up to 5.4% to be applied against federal unemployment taxes. In addition, if a state experience rates its employers (where employers who minimize UC claims have a lower state unemployment tax), FUTA provides an additional tax credit for state employers. This credit ensures the employer who paid less than 5.4% in state taxes receives a full 5.4% state tax credit (when combined with the state tax credit).", "Federal law allows states to experience rate their employers within their state unemployment tax schedule. Experience rating requires that states set up their tax systems such that employers generating the fewest claimants have the lowest tax rates. The state unemployment tax rate of an employer is based on the amount of UC paid to its former employees. In general, the more UC benefits paid to its former employees, the higher the tax rate of the employer—up to a cap established by state law. The experience rating is intended to ensure an equitable distribution of UC program taxes among employers and to encourage a stable workforce. All states use experience rating when determining an employer's state unemployment tax rate.", "Federal law remains silent on the lowest state unemployment tax rate that may be applied to employers. Indeed, federal law only sets a floor of 5.4% on the state's maximum unemployment tax rate to be applied to employers with proportionately the highest claims from former workers.\nAs a result of these few requirements, state unemployment tax rates have wide variation. In tax year 2015, several states (Iowa, Montana, and South Dakota) applied a tax rate of 0% to employers with the fewest claims from former workers. In comparison, the maximum state unemployment tax rates ranged from a lower bound of 5.4% (the lowest allowed under federal law) in Florida, Georgia, Idaho, Nebraska, Nevada, Oregon, and Puerto Rico to the highest ceiling of 11.13% in Massachusetts.", "Federal law requires the taxable wage base on which the state unemployment tax is applied must be at least $7,000 per worker per year.\nIn January 2016, state ceilings on taxable wages ranged from the $7,000 federal minimum (Arizona, Arkansas, Florida, and Puerto Rico) to $44,000 (Washington State).", "" ], "depth": [ 0, 1, 2, 2, 1, 1, 2, 2, 1, 2, 2, 1, 2, 2, 1, 2, 2, 1, 2, 3, 2, 3, 3, 3, 4 ], "alignment": [ "h0_title h2_title h1_title", "h0_title h2_title", "", "h0_full h2_full", "h2_full", "h0_title", "h0_full", "", "h1_full", "", "h1_full", "", "", "", "", "", "", "h1_full", "", "", "h1_full", "", "", "", "" ] }

{ "question": [ "How are federal unemployment taxes stored?", "What do federal unemployment taxes pay for?", "How are state unemployment taxes stored?", "What do state unemployment taxes pay for?", "How are UC benefits mandatory spending?", "What does FUTA impose on employers?", "How does FUTA incentivise employers to comply with this framework?", "What requirements are there for compliance?", "What is the result of compliance with the FUTA framework?", "What are the projections for unemployment tax revenue at the state and federal levels?", "How does this compare to federal unemployment tax financed expenditures?", "How does this compare to state financed UC expenditures?" ], "summary": [ "Federal unemployment taxes are deposited with the U.S. Treasury and credited to the federal accounts within the Unemployment Trust Fund (UTF).", "Federal unemployment taxes pay for state administrative costs, half the cost of Extended Benefits (EB), and loans to insolvent state UC programs.", "State unemployment taxes are deposited into the UTF and credited to the corresponding state account.", "State unemployment tax revenue is limited to paying each state's regular UC benefits and the state's half of EB costs.", "In budgetary terms, UC benefits are mandatory spending because the underlying law authorizes the Treasury to transfer funds to the states for UC benefit payments without the need for further appropriation.", "FUTA imposes a gross federal payroll tax on employers of 6.0% on the first $7,000 paid annually to each employee.", "As an incentive to comply with the framework, FUTA lowers the net federal unemployment tax to 0.6% if the state UC program follows the federal requirements.", "States must follow FUTA guidelines on what types of employment must be covered by UC; and state unemployment taxes on employers must meet FUTA's parameters. All states comply with these guidelines.", "Because most employees earn more than the $7,000 taxable wage ceiling in a year, the federal unemployment tax paid by an employer is typically no more than $42 per worker per year.", "Federal unemployment tax revenue for FY2016 is projected to be $5.8 billion, whereas state unemployment tax revenue is projected to be $40.9 billion.", "The federal unemployment tax financed expenditures are projected to be approximately $4.2 billion—approximately 12% of all UC expenditures.", "In comparison, state financed UC expenditures are projected to be $32.3 billion—approximately 88% of all UC expenditures." ], "parent_pair_index": [ -1, 0, -1, 2, 3, -1, 0, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3 ] }

{ "title": [ "Background", "HOPWA Program", "Ryan White HIV/AIDS Program", "Local Government Role in the HOPWA and Ryan White HIV/AIDS Programs", "Estimates of Housing Need for Persons with HIV Are Not Reliable, and the HOPWA Formula Does Not Effectively Target Funds", "With the Number of HIV Cases Increasing, Stable Housing Is Critical", "HUD Does Not Reliably Estimate the Extent of Housing Needs among Persons with HIV", "The HOPWA Formula Does Not Target Funds Based on Persons Living with HIV", "HOPWA and Ryan White Part A Provide Stable Housing for Persons with HIV, but Some Housing Data May Have Limitations", "HOPWA Grantees Have Primarily Funded Housing Assistance", "Ryan White Part A Grantees Spent a Small Share of Supportive Services Funds on Housing in 2011", "HOPWA and Ryan White Information Suggest Positive Outcomes in Housing Stability, but Ryan White Data May Have Limitations", "Stakeholders Cite Strengths and Weaknesses of Programs That Provide Housing Assistance for Persons with HIV", "Federal and Local Agencies Generally Coordinate Their Efforts to Deliver Housing Assistance to Persons with HIV", "HUD and HRSA Have Coordinated to Address the National HIV/AIDS Strategy, Share Information, and Develop Guidance", "Different Emphases and Local Coordination Help Ensure That the HOPWA and Ryan White Part A Programs Complement Each Other", "Persons with HIV May Be Eligible for Other Housing Programs but May Not Receive Timely or Appropriate Assistance from Them", "HUD and HRSA Monitor Their Programs but May Be Missing Opportunities to Use Data to Improve Performance", "HUD Field Office Staff Generally Follow Monitoring Policies for Selected Grantees", "HRSA Headquarters Staff Monitor Ryan White Part A Grantees and Reported Following Updated Monitoring Policies", "HUD Collects Performance Data but Does Not Assess Trends in Unmet Housing Need", "HRSA Collects Program Data but Does Not Monitor Housing Information", "Conclusions", "Matter for Congressional Consideration", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Relative Difference between Cumulative AIDS Cases and Living HIV Cases", "Appendix III: Comments from the Department of Housing and Urban Development", "Appendix IV: Comments from the Department of Health and Human Services", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "First identified in 1981, HIV impairs the immune system and leaves affected individuals susceptible to certain cancers and infections. HIV, the virus that causes AIDS, affects specific cells of the immune system. Over time, HIV can destroy so many of these cells that the body cannot fight off infections and disease, leading to AIDS. A person who has the HIV virus can move in and out of AIDS status, which is the third stage of the disease. Despite the number of deaths from AIDS and the steady increase of HIV prevalence, there have been successes in the fight against the disease. Developments in treatment have enhanced care options and can extend the lives of those with HIV. The introduction of highly active antiretroviral therapy in 1996 was followed by a decline in the number of deaths and new AIDS cases in the United States for the first time since the beginning of the disease. Since 1981, over 1.2 million persons diagnosed with AIDS have been reported to the CDC and over 600,000 of them have died. The CDC estimates that of the more than 1.2 million persons living with HIV in December 2011, some 14 percent had not been diagnosed and might not be unaware of their status.\nIn 2010, the White House’s Office of National AIDS Policy issued a national strategy for addressing HIV and AIDS in the United States. The strategy has three primary goals: (1) reduce the number of persons who become infected with HIV, (2) increase access to care and improve health outcomes for persons living with HIV, and (3) reduce HIV-related health disparities. To accomplish these goals, the strategy calls for a coordinated national response to the disease.", "Congress created the HOPWA program in 1990 under the National Affordable Housing Act, authorizing grants for housing activities and supportive services designed to prevent homelessness among persons with HIV. Specifically, HOPWA grants are used to provide a wide range of housing-related services, including rental assistance; operating costs for housing facilities; short-term rent, mortgage, and utility payments; permanent housing placement and housing information services; resource identification (to establish, coordinate and develop housing assistance); acquisition, rehabilitation, conversion, lease, and repair of facilities; new construction (for single-room occupancy dwellings and community residences only); and supportive services (case management and mental health, alcohol and drug abuse, and nutritional services). To be eligible for HOPWA, individuals must be HIV positive and low income (below 80 percent of area median income). HOPWA assists persons who are without stable housing arrangements, including those at severe risk of homelessness (e.g., persons in emergency shelters; persons living in a place not meant for human habitation, such as a vehicle or abandoned building; or persons living on the streets).\nHUD awards 90 percent of the annual HOPWA appropriation by formula to eligible metropolitan statistical areas (MSA) and states. On the basis of the statute, MSAs with populations greater than 500,000 and more than 1,500 cumulative cases of AIDS are eligible for HOPWA formula grants. The most populous city in an eligible MSA serves as that area’s HOPWA grantee. In addition, states with more than 1,500 cumulative cases of AIDS in areas outside of eligible MSAs qualify for formula funds.aside for grants awarded on a competitive basis.", "Congress enacted the Ryan White Comprehensive AIDS Resources Emergency Act of 1990 (CARE Act) to improve the availability and quality of community-based health care and support services for individuals with HIV and their families. The CARE Act was most recently reauthorized through the Ryan White HIV/AIDS Treatment Extension Act of 2009. HRSA administers the Ryan White HIV/AIDS program.program must be the payer of last resort, meaning that other sources of funds for services, including housing services, must be exhausted before using Ryan White HIV/AIDS program funds.\nRyan White Part A provides formula funds to Eligible Metropolitan Areas and Transitional Grant Areas. To qualify for Eligible Metropolitan Area status, an area must have reported at least a cumulative total of 2,000 AIDS cases in the most recent 5 years and have a population of at least 50,000. To be eligible for Transitional Grant Area status, an area must have a cumulative total of 1,000, but fewer than 2,000 cases of AIDS in the most recent 5 years and have a population of at least 50,000.absence of a waiver, Ryan White Part A grantees are required to spend at least 75 percent of their grant on core medical services and no more than 25 percent on supportive services, which include housing In the assistance. Ryan White HIV/AIDS program-funded housing assistance provides short-term aid to support emergency, temporary, or transitional housing so that an individual or family can gain or maintain health care.HRSA guidance encourages but does not require grantees to limit housing assistance to 24 months. Additionally, housing assistance must be accompanied by a strategy to transition the individual or family to stable, permanent housing.\nRyan White Part A grantees are required by the Ryan White HIV/AIDS Treatment Extension Act of 2009 to establish a Ryan White Part A Planning Council, which is appointed by the chief elected official of the city or county. The council is responsible for setting HIV-related service priorities and allocating grant funds based on the needs of persons with HIV. Planning councils are required to develop a comprehensive plan with the Ryan White Part A grantee for the provision of services. The Ryan White HIV/AIDS Treatment Extension Act of 2009 identifies 13 different parties that must be involved in the council, including representatives from community-based organizations serving affected populations, persons with HIV, and grantees providing services in the area under other federal HIV programs.", "Both HOPWA and Ryan White Part A funds are awarded to government agencies, which are referred to as “grantees” (see fig. 1). For the HOPWA program, the formula grantee is generally either the city office dedicated to housing and community development or the city health department. HOPWA grantees may carry out eligible program activities themselves, through any of their administrative agencies, or through a project sponsor. A project sponsor can be any nonprofit organization or governmental housing agency that receives funds from a grantee to carry out eligible HOPWA activities. The grantees and project sponsors may also contract with for-profit entities to provide services associated with their HOPWA activities.\nFor the Ryan White Part A program, grants are awarded to the chief elected official of the city or county that provides health-care services. The chief elected official is legally the grantee but usually chooses a department or other entity to manage the grant, and that entity is then referred to as the grantee. Ryan White Part A grantees are generally county or city health departments or public departments with responsibility for health. Part A grants consist of formula and supplemental components. Formula grants are based on reported living cases of HIV and AIDS in eligible areas. Supplemental grants are awarded competitively and are based on the ability of Eligible Metropolitan or Transitional Grant Areas to document both a demonstrated need for additional funds and the capacity to use them to meet community needs. Ryan White Part A grantees can deliver services to persons with HIV (clients) directly or through a subgrantee. Subgrantees are generally community-based, nonprofit organizations. In some cases, a city’s formula HOPWA grantee and Ryan White Part A grantee are the same entity. Also, in some cases local community-based organizations receive both HOPWA and Ryan White Part A funding.", "As the number of persons with HIV in the United States continues to increase, research finds that stable housing is critical for effective medical care and is associated with improved health outcomes for persons with HIV. The extent to which persons with HIV need housing assistance is not known, in part because HUD’s estimates of the housing needs of persons living with HIV are not reliable. In addition, the statutory HOPWA funding formula may not be effectively distributing grant funds to communities with the greatest need because the formula counts persons who are deceased. As a result, HOPWA funds may not be targeted as effectively as they could be.", "According to CDC estimates, there were about 50,000 HIV diagnoses each year from 2008 to 2012. In 2012, the estimated rate of diagnosed HIV infections in the United States was 15.3 per 100,000 population. Rates of diagnosis of HIV infection have varied by region from 2008 to 2012. For example, the rate of diagnosis of HIV infection increased from 2008 through 2012 in the Midwest, and decreased during this period in the Northeast, South, and West. In 2012, the rates of diagnosed HIV infection were highest in the South, followed by the Northeast, West, and Midwest, as shown in figure 2.\nAccording to CDC data, from 2008 through 2011, the estimated number of persons in the United States living with a diagnosed HIV infection, or the prevalence of diagnosed HIV infection, increased. The prevalence rate, or the number of persons living with diagnosed HIV infection per 100,000 population, was estimated to be nearly 283 at the end of 2011.\nPrevalence rates vary by region, and regional differences have remained relatively stable from 2008 through 2011. As shown in figure 3, prevalence rates of diagnosed HIV infection are highest in the Northeast, followed by the South, West, and Midwest.\nThe estimated rates of HIV diagnoses have varied over time across different demographic groups. For example, from 2008 through 2012 the rates of diagnosed HIV infection increased among persons aged 13 to 14 and 20 to 29 and either remained stable or decreased among other age groups. Rates of diagnoses during this period also increased for American Indian/Alaska natives and Asians, while decreasing for African- Americans, Hispanics/Latinos, and persons of multiple races. In 2012, the estimated rate of HIV diagnoses for African-Americans was 58 per 100,000 population—the highest rate compared to other racial and ethnic groups. From 2008 through 2012, rates of HIV diagnoses decreased among females and remained stable for males. In 2012, males accounted for 80 percent of all diagnoses newly reported among adults and adolescents.\nStable housing is critical for persons with HIV. Staff from several HIV/AIDS advocacy groups told us that stable housing was important because many persons with HIV were required to adhere to strict regimens for taking medicine. Some medicines require refrigeration, and some cause debilitating side effects. Health care officials from CDC told us that without stable housing, persons may not reach viral suppression In addition, the National HIV/AIDS or remain connected to medical care. Strategy states that access to housing is an important precursor to getting many people into a stable treatment regimen. Individuals living with HIV who lack stable housing are more likely to delay HIV care, have poorer access to regular care, are less likely to receive optimal antiretroviral therapy, and are less likely to adhere to therapy. A 2007 study emphasized the relationship between housing assistance provided to persons living with HIV and increased access to medical care and appropriate treatment. The need for housing is prevalent among persons living with HIV, and there is strong evidence that receipt of housing assistance has a direct impact on improved medical care outcomes.Research has also indicated that persons with HIV who live in stable housing have better health outcomes than those who are homeless or unstably housed.\nHowever, while stable housing is critical for effective medical care, persons with HIV often have difficulty maintaining stable housing because of the financial vulnerability that can be associated with the disease. As individuals become ill, they may find themselves unable to work, while at the same time facing health care expenses that leave few resources to pay for housing. According to a recent study, housing challenges for a person living with HIV may include the growing disparity between income and the cost of rental housing, loss of income due to inability to maintain employment, and loss of spouse or partner due to HIV-related death, among other things. homelessness among persons with HIV. In addition, those who are homeless may be more likely to engage in activities through which they could transmit HIV.\nAidala and others, “Housing Need.” members from HOPWA and Ryan White Part A grantees we interviewed told us that there was an increasing need for housing assistance for persons with HIV. Some staff told us that infected persons were living longer as a result of advances in medical care. Moreover, staff from several grantees told us that these persons generally needed both medical and nonmedical supportive services. Additionally, HUD officials noted that as local housing costs increased, the need for programs that provided affordable housing increased for all low-income people, including those with HIV.", "HUD’s estimate of the number of persons with HIV who have a housing need is not reliable. HUD requires each formula and competitive HOPWA grantee to report annually the number of HOPWA-eligible persons who have an unmet housing need within the grantee’s jurisdiction. HUD then develops an estimate of the number of persons nationwide with HIV who have an unmet housing need by totaling the numbers reported by each grantee. For 2013, HUD reported that approximately 131,000 HIV-positive persons had unmet housing needs. HUD uses this information to justify its HOPWA budget requests and to report on the program’s performance. HIV advocacy groups use HUD’s estimates in their publications and outreach efforts to Congress.\nWe found that HOPWA grantees used different methodologies to report unmet housing needs, limiting the reliability of the reported information. Grantees we met with used varying methods to produce the local unmet need estimates that they reported to HUD annually. For example, officials from one HOPWA grantee told us that they summed the unmet housing need data provided by their project sponsors. In contrast, officials from another HOPWA grantee use various data sources to produce both a low and high estimate of unmet housing need and have historically reported both numbers to HUD. In its 2010 and 2011 Consolidated Annual Performance and Evaluation Reports (CAPER) Reports, this grantee reported to HUD that the unmet need in its community could range from a low of approximately 7,500 persons to a high of 15,000.\nHUD officials told us that, at the time of our review, they did not require HOPWA grantees to use a consistent methodology to calculate unmet housing need for each jurisdiction. They told us that this policy was intended to allow for local flexibility, so that the data were collected using the most appropriate method for each jurisdiction. According to HUD’s CAPER guidance, grantees can use one or more of seven data sources to calculate unmet need, including data from prisons or jails on persons being discharged with HIV and housing providers’ waiting lists.Grantees are required to indicate on their CAPERs all of the data sources they use to estimate unmet need. However, HUD does not provide additional guidance on how grantees should use the data sources in a comparable manner. In June 2014 HUD granted a HOPWA technical assistance contractor a 1-year contract extension to help the agency address its unmet needs methodology, to include soliciting community feedback at the U.S. Conference on HIV/AIDS. HUD convened stakeholders and HOPWA grantees at this conference to discuss how unmet needs were estimated, and participants discussed establishing a working group to develop a consistent methodology. According to HUD, as of February 2015, the agency was working with its technical assistance contractor to develop a methodology and provide communities CDC data related to persons with HIV. However, according to HUD, the agency does not have specific goals or time frames for finalizing a standard methodology.\nGAO’s work on assessing data reliability indicates that data should be consistent—that is, data should be clear and well defined enough to yield similar results in similar analyses. Further, when data are entered at multiple sites or reported using multiple sources (as in the case of HOPWA program), there is a risk that data entry rules may be interpreted inconsistently, resulting in data that, taken as a whole, are unreliable. In addition, federal internal control standards state that program managers need operational data to determine whether they are meeting their goals for effective and efficient use of resources. In our 1997 report on HOPWA and the Ryan White HIV/AIDS program, we concluded that equitable distribution of resources should be consistent with the current need for such resources. Because HUD does not require grantees to use selected data sources in a consistent manner, the resulting information is not comparable. Further, the usefulness and reliability of these data as an indicator of the unmet housing needs of persons with HIV are unclear. Although data on unmet housing needs are not used to determine HOPWA formula funding amounts, such information would be helpful in determining the extent of the need for HOPWA funds in specific areas, as well as the extent to which HOPWA is meeting its goals of addressing the housing needs of persons with HIV.", "As previously discussed, 90 percent of HOPWA funds are awarded through formula grants to eligible states and MSAs. Seventy-five percent of these formula-based funds are awarded to cities and states that meet certain threshold criteria. These criteria are based on each jurisdiction’s share of the number of cumulative AIDS cases in all eligible jurisdictions. Cumulative AIDS case counts include both living and deceased AIDS cases reported in the grantees’ jurisdiction since the beginning of the AIDS epidemic in 1981.\nUse of cumulative AIDS cases rather than living HIV cases has led to MSAs with similar numbers of persons living with HIV receiving markedly different amounts of HOPWA funding. For example, in fiscal year 2012 a grantee in the South and a grantee in the Northeast both had about 2,300 persons living with HIV, according to CDC data. However, the grantee in the Northeast received about $154,000 more in HOPWA formula funding than the grantee in the South because it had approximately 776 more reported cumulative AIDS cases. Similarly, in the same fiscal year, both a HOPWA formula grantee in the West and one in the South had about 3,500 persons living with HIV. However, the grantee in the West received nearly $319,000 more in formula funding than the grantee in the South because it had about 1,600 more reported cumulative AIDS cases.\nThe difference between cumulative AIDS cases and living HIV cases is more pronounced in some MSAs than others. As shown in figure 4, the relative difference ranged from less than 15 percent to more than 43 percent in the MSAs that received HOPWA formula funds in 2012. In most of these MSAs (62 of 78), the number of cumulative AIDS cases was greater than the number of persons living with HIV. For example, the New York City MSA had 35 percent more cumulative AIDS cases than cases of persons living with HIV. In contrast, about one-fifth of the MSAs that received HOPWA funds in fiscal year 2012 had more persons living with HIV than cumulative AIDS cases. For example, the Charlotte, North Carolina MSA had 43 percent more cases of persons living with HIV than cumulative AIDS cases. According to CDC officials, there can be more living HIV cases than cumulative AIDS cases because not all persons with HIV progress to the third stage of the disease (AIDS). Appendix II provides additional information on the numbers of cumulative AIDS cases and living HIV cases for all MSAs that received HOPWA grants in fiscal year 2012.\nWe have assessed HOPWA’s funding formula in previous work. In 1997, we recommended that HUD consider the legislative changes that would be needed to make the HOPWA formula more reflective of current AIDS We also noted that the general principle of allocating grants on cases.the basis of the estimated number of persons living with HIV, excluding those who are deceased, would ensure a more equitable allocation of the available funds. In response, HUD reviewed potential changes to the formula. It compiled an analysis to show the effects of various alternatives on grantees’ funding levels, including use of 10-year weighted numbers to reflect living cases of persons with AIDS. However, at that time, HUD was reluctant to recommend any change that might disrupt funding for those who depended on HOPWA support.\nIn 2006, we recommended that if Congress wanted HOPWA funding to more closely reflect the distribution of persons living with AIDS, it should consider changing the program so that HOPWA formula grant eligibility would be based on a measure of living AIDS cases.the funding formula for the Ryan White HIV/AIDS programs in 2006 but did not make the same change for HOPWA. Since our 2006 report, medical treatment for HIV/AIDS and the make-up of the national population with HIV or AIDS have continued to evolve. Additionally, CDC officials now consider HIV case counts to be more accurate and reliable than counts of AIDS cases alone because persons with HIV may live many years before progressing to AIDS and may move between stages as their health changes.\nHUD officials and the four HOPWA grantees we met with stated that the HOPWA funding formula was out of date. In its last three congressional budget justifications, HUD has proposed updating the formula. According to HUD’s 2015 budget justification, the HOPWA formula should be updated to better reflect the nature of the HIV epidemic that has evolved over the years through advances in HIV care and the increasingly disproportionate impact on impoverished persons with HIV. HUD has proposed basing the funding formula on living HIV rather than cumulative AIDS cases and on consideration of local housing costs and poverty rates. HUD recognized that some communities could lose funds as a result of a redistribution of grant funds. To mitigate any potential negative impacts of large funding reductions on some communities, HUD has also proposed incrementally reducing funding over time.\nHUD’s projections based on its proposed formula change—using living HIV cases instead of cumulative AIDS cases and data on housing costs and poverty—show a redistribution of funds that results in funding increases for some communities and decreases for others. For example, based on HUD’s 2015 projections of HOPWA award amounts, the New York City MSA’s award would decrease by about $5 million from HUD’s 2014 estimated award amount. In contrast, smaller MSAs, such as Charlotte North, Carolina, and Cleveland, Ohio would receive increases of more than $200,000 from HUD’s 2014 estimated award amounts. Although our analysis of CDC data suggests that the proportions of living HIV cases among the cities that received HOPWA funds in 2012 are similar to the proportions of cumulative AIDS cases, these changes could result in meaningful differences in the amounts of funding that some grantees receive.\nThe Office of Management and Budget has also noted that the current formula for distributing HOPWA funds does not reflect the current nature of the disease. As discussed in GAO’s prior work, a cumulative count of AIDS cases that includes deceased persons does not necessarily reflect the number of living HIV cases in a particular year. In contrast, data on the number of persons living with HIV exclude the deceased and include persons in all stages of HIV infection. In addition, regional changes in the number of HIV cases may not be fully accounted for in the current HOPWA formula due to the continued inclusion of deceased persons. Reauthorizations of the Ryan White HIV/AIDS program in 2000, 2006 and 2009 required the use of living cases of both HIV and AIDS in the distribution of formula grants for Ryan White Parts A and B. Because HOPWA funds continue to be awarded based on cumulative AIDS cases, HOPWA funds are not being targeted as effectively or equitably as they could be.", "HOPWA grantees have used the majority of their grant funds to provide housing assistance to extremely low-income persons with HIV, primarily in the form rental assistance. In general, the majority of individuals who receive housing assistance through HOPWA are male, African-American, and extremely low income. Overall, a small share (about 2 percent) of total Ryan White Part A expenditures is used for housing. Individuals who receive temporary housing assistance through Ryan White Part A generally have the same demographic characteristics as HOPWA housing assistance recipients. Both HOPWA and Ryan White Part A information indicate that the majority of individuals provided with housing assistance became stably housed. However, the reliability of Ryan White Part A housing data is not clear because grantees do not update information on housing status consistently. Stakeholders such as HOPWA and Ryan White Part A grantees, as well as advocacy groups, note both strengths and challenges related to these programs.", "HOPWA grantees have primarily used their funds to provide housing assistance. As previously noted, grantees can use HOPWA funds for housing and supportive services and for administrative expenses. In 2012, the most recent program year for which data were available, HOPWA grantees spent nearly $314 million to assist persons with HIV. Of these expenditures, about $211 million (67 percent) was spent on housing assistance and $64 million (20 percent) were spent on supportive services, as shown in figure 5.receiving housing assistance decreased from around 60,000 in 2010 to about 56,000 in 2012. According to HUD officials, this decrease is likely due to improved grantee reporting as well as increases in the cost of housing—that is, as housing costs have increased, the program has been able to provide housing assistance to fewer persons.", "Housing assistance represented about 2 percent ($14 million) of the total expenditures of $592 million in fiscal year 2011 for all Ryan White Part A funding categories—including medical and supportive services. The largest category of program expenditures, $426 million, was for core medical services, followed by about $93 million for supportive services and about $73 million for clinical quality management and grantee administration. Under the Ryan White HIV/AIDS Treatment Extension Act of 2009, Ryan White Part A grantees are generally required to expend the majority of their funds on core medical services but can also fund Expenditures for the supportive services (including housing assistance).Ryan White Part A program also reflect the priorities established by Ryan White Part A Planning Councils.\nOf the $93 million grantees spent on supportive services, housing assistance made up about 15 percent (see fig. 7). Ryan White Part A grantees also spent supportive services funds on nonmedical case management, emergency financial assistance, food bank/home-delivered meals, and health education.\nRyan White Part A data for calendar year 2012 indicate that the majority of the 13,556 clients who received housing assistance were African- American. The data also indicate that the majority of clients who received housing assistance had incomes at or below the federal poverty level.Table 2 summarizes selected demographic characteristics of persons who received housing assistance through Ryan White Part A in calendar year 2012.", "HUD’s 2012 HOPWA performance data show a variety of positive outcomes related to housing stability, access to care, and homelessness. For the HOPWA program, permanent, stable housing includes private housing without a subsidy, subsidized housing, and HOPWA-funded rental assistance or facility-based housing. According to HUD’s 2012 data,\n96 percent of the households that received tenant-based rental assistance or lived in a HOPWA-funded permanent housing facility had stable housing;\n92 percent of households had contact with primary care;\n90 percent of clients accessed medical insurance; and\n5,736 formerly homeless individuals were placed in housingAdditionally, HUD’s 2013 Performance Report indicates that the HOPWA program has contributed to the agency’s goal of preserving affordable rental housing. The report states that HOPWA had funded 25,706 rental units as of the end of fiscal year 2012, helping HUD exceed its fiscal year 2012-2013 agency priority goal of continuing to serve 5.4 million families and serving an additional 61,000 families. According to the performance report, HUD exceeded this goal by nearly 82,000 families. HOPWA officials also told us that the program’s contributions to providing permanent supportive housing supported HUD’s strategic objective for ending homelessness. HOPWA officials noted that the HOPWA program helped to keep persons with HIV from becoming homeless.\nHUD uses the data that grantees report on outcomes to summarize the achievements of individual grantees and the program as a whole. More specifically, HUD contractors review the information grantees submit and produce grantee-level and national summaries of performance for the formula HOPWA program, the competitive HOPWA program, and both programs combined. HUD posts these summaries, or performance profiles, on a HUD website.\nHRSA officials told us that the majority of clients provided with housing assistance through the Ryan White HIV/AIDS program obtained permanent, stable housing. According to a December 2013 White House report addressing the outcomes associated with the National HIV/AIDS Strategy, increasing the percentage of Ryan White HIV/AIDS program clients with permanent housing to 86 percent is one of nine indicators in the National HIV/AIDS Strategy. For the Ryan White HIV/AIDS program, stable, permanent housing includes unsubsidized rooms, houses, or apartments; subsidized housing; and permanent housing for formerly homeless persons.\nAccording to HRSA officials, the National HIV/AIDS Strategy indicator of Ryan White HIVAIDS program clients with permanent housing is measured using the data on the housing status that HRSA collects annually. HRSA gathers this information from Ryan White HIV/AIDS program grantees through the Ryan White HIV/AIDS Program Services (RSR) report. However, it is not clear that HRSA’s housing status data are current because HRSA does not require or encourage grantees to maintain current data on clients’ housing status. RSR instructions state that the housing status data element is the client’s housing status at the end of the reporting period. HRSA officials told us that the instructions were not intended to be used as guidance for local jurisdictions in determining how often each client’s housing status should be collected. The officials added that the frequency with which a client’s housing status should be updated was decided at the local level and that currently HRSA does not require grantees to assess a client’s housing status beyond the initial intake period. Staff from one Ryan White Part A grantee told us that information on housing status in the RSR report was not very reliable because each client’s housing status was recorded at the point of intake but might or might not be updated subsequently. Another Ryan White Part A grantee told us that some of its subgrantees only reported on clients’ housing status at the point of intake, even though they recertified clients’ eligibility for the program every 6 months.\nInternal control standards for the federal government state that events should be promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. Because HRSA does not require grantees to ensure that their subgrantees regularly update data on each client’s housing status, the usefulness of these data to support housing-related outcomes is unclear. Among these outcomes, for example, the extent to which the Ryan White HIV/AIDS program is contributing to the National HIV/AIDS Strategy goal of improving access to permanent housing. Further, because the Ryan White HIV/AIDS program provides temporary housing assistance and clients’ housing status is likely to change frequently, housing data may not be as accurate and current as possible if they are not updated regularly.", "HOPWA grantees, project sponsors, and HIV advocacy groups noted several strengths of the design of the HOPWA program. For example, three of the eight HOPWA project sponsors that GAO interviewed and an HIV advocacy group stated that one strength of the program was that clients must be provided with supportive services. These stakeholders noted that HOPWA clients or other persons with HIV often had substance abuse issues and a mental illness and that supportive services that helped address these issues were critical to helping some clients become stable. Three HOPWA grantees noted that another strength of the program was the flexibility it offered to grantees, allowing them to fund the type of housing assistance that was most needed in their communities. Grantees that we visited funded a wide range of housing types, including a facility for persons with HIV who had mental, physical, or drug abuse issues; a facility for single adults who had progressed to AIDS and had a history of homelessness; and a hospice for HIV-positive persons. Finally, officials from four organizations that received both HOPWA and Ryan White Part A funding explained that HOPWA worked well with the Ryan White HIV/AIDS program. These officials explained that they took steps to transition Ryan White Part A clients who received temporary housing assistance into the HOPWA program, which offered permanent housing assistance. Also, in one of the cities we visited local program administrators emphasized that the programs were complementary and said that they used Ryan White Part A funds only for core medical services and nonmedical case management and HOPWA funds only for housing assistance.\nHOPWA grantees and project sponsors also identified weaknesses in the HOPWA program, including certain requirements, administrative fees, and the funding formula. Specifically, two of the four HOPWA grantees we met with noted that rental assistance generally could not exceed Fair Market Rent amounts, which HUD determined annually. Limiting rental assistance to Fair Market Rents is challenging, particularly in high-cost cities like New York City and San Francisco, where officials noted that the average price of an apartment was double the amount of the Fair Market Rent. Also, two of the four HOPWA grantees that we interviewed and HUD administrators of the HOPWA program stated that the administrative fee of 3 percent that grantees could retain from their HOPWA grant was low. HUD officials stated that other HUD programs had higher fees, including Community Development Block Grants (20 percent) and the Home Investment Partnerships Program (10 percent). Finally, staff from three HOPWA grantees, five organizations that receive HOPWA or Ryan White Part A funding, and HUD officials with responsibility for administering the HOPWA program told us that the funding formula needed to be updated so that it was based on the number of persons living with HIV. Officials from one HOPWA grantee stated that they understood the need to update the HOPWA funding formula but had concerns about potentially losing funding if cumulative HIV cases were excluded from the formula. As previously discussed, in congressional budget justifications for fiscal years 2013 through 2015, HUD proposed updating the funding formula to incorporate local housing costs and poverty rates. HUD has also proposed increasing the percentage of HOPWA grant amounts that may be used for administrative expenses from 3 percent to 6 percent of the grantee’s awarded amount.\nRyan White Part A grantees, subgrantees, and HIV advocacy groups that we met with noted several strengths and weaknesses of the Ryan White HIV/AIDS program. For example, three of the four Ryan White Part A grantees we met with, as well as two HIV advocacy organizations, stated that the Ryan White HIV/AIDS program complemented the HOPWA program. Grantee staff told us that persons with HIV could receive temporary housing assistance through Ryan White Part A and then transition to permanent assistance through HOPWA. Also, members of two HIV advocacy groups with whom we met stated that local Ryan White Part A Planning Councils were beneficial because they identified the unique, local needs of persons with HIV. Some Ryan White Part A subgrantees and staff from an HIV advocacy group stated that the inability to use Ryan White Part A funds for permanent housing assistance created challenges. For example, the subgrantees told us that it was generally difficult to address all of the issues that their clients face, including substance abuse and mental illness, within the 2-year time frame. As previously noted, HRSA guidance encourages but does not require grantees to limit housing assistance to 24 months. Additionally, staff from an advocacy group told us that because the Ryan White Part A program could fund only temporary housing, recipients of this assistance were still faced with a lack of stable, permanent housing.", "Responding to the administration’s 2010 National HIV/AIDS Strategy, HUD and HRSA have made formal and informal efforts to collaborate by sharing information related to housing for persons with HIV. Coordination in the delivery of housing assistance to persons with HIV also occurs extensively at the local level, helping to ensure that the assistance provided by both programs is complementary and mitigates the potential for programs to provide duplicative services. Persons with HIV may be eligible to receive housing assistance from other federal programs, such as public housing. However, other programs may not be available and may not provide supportive services.", "The White House’s 2010 National HIV/AIDS Strategy and its Implementation Plan encourage coordination among federal agencies and between federal agencies and state, territorial, tribal, and local governments, to achieve a more coordinated response to HIV. To address the National HIV/AIDS Strategy, HUD, HRSA, and other federal agencies have taken several steps. First, they have participated in a federal interagency working group led by the White House Office of National AIDS Policy. According to the July 2010 National HIV/AIDS Strategy Federal Implementation Plan, the working group convened to review public recommendations, assess scientific evidence, and make recommendations related to the National HIV/AIDS Strategy. Additionally, in July 2013, an Executive Order established an HIV Care Continuum Working Group to coordinate federal efforts to improve outcomes nationally across the HIV care continuum. This group is co-chaired by the White House Office of National AIDS Policy and HHS. According to HRSA officials, in September 2014 an HIV Care Continuum Initiative meeting was held to examine best practices in implementing care continuum recommendations and to provide agencies with the opportunity to learn from each other. Staff from HRSA, HUD, and other agencies attended the meeting. We have found that collaboration is enhanced when common outcomes are defined, mutually reinforcing strategies are established, and roles and responsibilities are agreed upon, among other things. The efforts of HUD and HRSA to work together to help address the National HIV/AIDS Strategy suggest that they have taken steps to enhance collaboration.\nSecond, HUD and HRSA have taken steps to share information. HRSA officials told us that, as required by statute, HHS issued a report to Congress in 2012 describing the coordinated efforts at the federal, state, and local levels to address HIV, including a description of barriers to HIV According to this report, between 2005 and 2008: program integration.\nHRSA worked with several federal agencies including HUD to examine case management models and examples of coordinated and collaborative case management guidelines;\nHRSA and HUD participated in the Interagency HIV/AIDS Case Management Workgroup to develop a set of guidelines around collaborative or coordinated case management services; and\nHUD and CDC collaborated in a study to examine housing assistance for homeless people with HIV to determine the impact of such assistance on the progression of their disease and the risk of transmitting HIV.\nHUD and HRSA officials with responsibility for the HOPWA and Ryan White HIV/AIDS programs told us that they had also met informally to share information and data on their grantees. For example, in June 2014 staff from both agencies met to discuss data collection that could be helpful to HUD in assessing the impact of the HOPWA program. During this meeting, HRSA also discussed the results of efforts that began in 2014 to identify HOPWA and Ryan White HIV/AIDS program grantees that collected both health and housing indicators. Additionally, HUD and HRSA are collaborating to provide both remote and onsite technical assistance to HOPWA grantees and project sponsors on improving program participants’ access to health care. We have found that collaboration is enhanced when two or more organizations engage in a joint activity that is intended to produce more public value than could be produced when the organizations act alone.\nHUD and HRSA also worked together to refine HRSA’s policy related to the length of time individuals can receive housing assistance through the Ryan White HIV/AIDS program. In 2008, HRSA issued a policy that imposed a 24-month cumulative cap on short-term and emergency housing assistance for recipients of Ryan White HIV/AIDS program housing assistance, to be effective beginning in March 2010. In consultation with HUD, HRSA rescinded this policy in February 2010 in response to feedback from Ryan White HIV/AIDS program grantees and others that the time limits could negatively impact recipients of the assistance. Ryan White Part A grantees with whom we met told us that their clients generally had both substance abuse and mental health issues that took time to address. They noted that 2 years was not always sufficient for someone to be able to move out of temporary housing. In May 2011 HRSA released a final notice that encourages, but does not require, grantees to limit assistance to 24 months. HUD’s efforts to work with HRSA on this housing policy are consistent with practices that we have found can enhance collaboration among federal agencies.", "Although some overlap exists between the HOPWA and Ryan White HIV/AIDS programs, different emphases and local coordination help to ensure that the programs complement rather than duplicate each other. HOPWA and the Ryan White HIV/AIDS program overlap in the areas of temporary housing and supportive services for persons with HIV, which both programs can fund. However, housing assistance for persons with HIV involves both housing- and health-related issues, and HUD and HRSA bring different types of expertise to these areas. HUD programs focus on the provision of housing assistance and HUD awards the bulk of federal housing-related resources. In contrast, HRSA’s primary focus is to provide health care for medically vulnerable people, among others. HRSA’s policy indicates that Ryan White HIV/AIDS program funds can be used for short-term or emergency housing only to the extent that such support is necessary for clients to gain or maintain access to medical care. Additionally, the Ryan White HIV/AIDS Treatment Extension Act of 2009 requires Ryan White HIV/AIDS program grantees to be the payer of last resort. In order to receive housing assistance through the Ryan White HIV/AIDS program, individuals must not have HOPWA or other forms of subsidized housing assistance available to them, even if they are eligible for the programs. However, they may receive Ryan White HIV/AIDS program assistance for other needs, such as medical care. The different program emphases and requirements helps prevent duplication between these programs.\nCoordination among local entities helps ensure that assistance provided by HOPWA and the Ryan White HIV/AIDS program complement each other and mitigates the potential for the programs to provide duplicative services. Coordination in the delivery of housing assistance to persons with HIV occurs at the local level through formal planning processes. As a condition of receiving a HOPWA grant, grantees must consult with other public and private entities, as well as local citizens, in implementing the HOPWA program and any other HUD Community Planning and Development grant funds that the community receives. Community Planning and Development grantees, including HOPWA grantees, contribute to the development of a consolidated plan and annual action plans. Through these plans, the grantees must describe the agencies, groups, and others who participated in the planning process; their consultations with social service agencies and other entities; and their activities to enhance coordination between public and assisted housing providers and private and governmental health, mental health, and service agencies.\nThe Ryan White Part A program requires local planning councils to help facilitate coordination between Ryan White Part A and HOPWA grantees. As we have seen, the Ryan White HIV/AIDS Treatment Extension Act of 2009 requires planning councils to have members from various groups and organizations. For instance, at least one-third of the planning council members must be persons with HIV who receive Ryan White Part A services and are consumers who do not have a conflict of interest, meaning that they are not staff, consultants, or board members of Ryan White Part A ‐funded agencies. The planning council and the grantee work together to identify the needs of people with HIV and to prepare a comprehensive plan on how to meet those needs. Both the planning council and the grantee work together to make sure that other sources of funding work well with Ryan White HIV/AIDS program funds and that the Ryan White HIV/AIDS program is the payer of last resort. While the Ryan White HIV/AIDS Treatment Extension Act of 2009 does not require that the HOPWA program be represented on planning councils, there is a requirement that other federal HIV programs be represented on the council (which could include HOPWA). In addition, the 2015 Part A funding announcement and 2013 program manual both indicate that the planning council could include a HOPWA or housing service representative.\nInformal efforts to coordinate the delivery of housing assistance also help to reduce the potential for duplication. Staff from four Ryan White Part A subgrantees, which can provide clients with housing assistance for only a limited period of time, told us that they consistently reached out to local providers of subsidized housing. These providers may include other city agencies, nonprofit organizations, and owners of single-room occupancy hotels. Such coordination efforts could help to minimize the potential for program duplication.\nCoordination between the HOPWA and Ryan White Part A programs does not appear to require formal agreements and processes when the same local agency is the grant recipient of both programs. In two of the four cities we visited, the same city agency was both the formula HOPWA project sponsor and the Ryan White Part A grantee. As a result, coordination between the activities funded and efforts to move clients from temporary to permanent housing occurred through the agencies’ regular business practices. Officials from one of these city agencies stated that different staff members were dedicated to each program, but that they worked together and shared information related to clients’ needs and the services provided. Officials from another city agency said that the same city staff focused on both HOPWA and Ryan White Part A funds. In this case, the same staff member reviewed performance information and invoices from the local HOPWA sponsors and Ryan White Part A subgrantees.", "Persons with HIV may be eligible to receive housing assistance from other federal programs that are focused on assisting persons with low or no income, including the following:\nPublic Housing provides housing aid for eligible low-income families, the elderly, and persons with disabilities. HUD administers this federal subsidy to participants of local public housing authorities that manage the housing for low-income residents at rents they can afford.\nThe Housing Choice Vouchers program assists very low-income families, the elderly, and persons with disabilities. Participants may choose any housing that meets the requirements of the program and is not limited to units located in subsidized public housing projects. HUD administers the Housing Choice Voucher program, public housing agencies manage it.\nAs we have seen, Continuum of Care is a HUD program that provides funding to nonprofit providers and state and local governments to quickly rehouse homeless individuals and families.\nEmergency Solutions Grant is a HUD program that provides funding to state and local governments for emergency shelters and services for homeless individuals and families. It also provides services to prevent families from becoming homeless.\nThe HUD Veterans Affairs Supportive Housing program combines HUD’s Housing Choice Voucher rental assistance for homeless veterans with case management and clinical services provided by the Department of Veterans Affairs.\nHome Investment Partnerships Program is a HUD program that provides formula grants to states and localities to fund a wide range of activities, including building, buying, or rehabilitating affordable housing for rent or ownership or providing direct rental assistance to low-income people.\nWhile these programs have similar goals related to providing housing assistance, they have varying eligibility requirements (see table 3). For example, only homeless veterans are eligible for HUD-VASH, and an individual must be homeless or at risk of homelessness to be eligible for the Continuum of Care and Emergency Solutions Grant programs.\nHousing assistance programs that are not targeted to persons with HIV, such as Public Housing and the Housing Choice Voucher programs, may not be able to provide timely assistance because they may not be readily available. HOPWA and Ryan White Part A grantees from three of the cities we visited, as well as staff from six organizations that received funding from these grantees, told us that the local public housing agencies had very long waiting lists and sometimes closed their Public Housing and the Housing Choice Voucher programs to new applicants. Staff from one non-profit agency that receives both HOPWA and Ryan White Part A funding told us that they require recipients of HOPWA or Ryan White Part A housing assistance to apply for public housing and the Housing Choice Voucher programs. However, staff said the local public housing agency has a long waiting list for both types of housing, and thus the client would not likely be able to benefit from these programs. Also, two of the HOPWA grantees with whom we met told us that even though the local public housing agencies had set up a preference for homeless persons with HIV, these agencies made few units available through this preference system.\nAccording to officials from organizations that receive HOPWA and Ryan White Part A grant funds, housing assistance programs that are not targeted to persons with HIV, such as public housing and the Housing Choice Voucher programs, may not be appropriate because they are not required to provide supportive services. Table 4 shows the kinds of services these and other housing assistance programs provide, such as substance abuse or mental health counseling. While not required to do so, administrators of these programs may help individuals receive supportive services through other funding sources.\nHIV advocates and a researcher told us that providing housing assistance without necessary medical care or other types of supportive services may not effectively facilitate housing stability or improved health for persons with HIV. Several of the organizations that received funding from HOPWA or Ryan White Part A grantees told us that their clients generally had mental health and substance abuse issues and would not thrive without intensive counseling. While some public housing agencies may offer their public housing residents access to a case manager or a staff member who can help the resident obtain the services that they need, public housing agencies are not required to offer this service. Additionally, HIV positive persons with criminal records or who engage in criminal activity may not be eligible for public housing and HCVs.HOPWA and Ryan White HIV/AIDS programs can provide housing assistance to persons with HIV who have criminal records.", "HUD field office staff use a risk-based process to guide their monitoring of grantees and provided evidence that they had implemented these procedures. HRSA headquarters staff with primary responsibility for monitoring Ryan White HIV/AIDS program grants have taken steps to improve their efforts in recent years. Both HUD and HRSA collect data from HOPWA and Ryan White HIV/AIDS program grantees, respectively, including data on the activities funded and clients’ housing status (i.e., whether they have stable and permanent housing). HUD summarizes the data it collects but does not evaluate year-to-year changes in unmet housing need for individual grantees. HRSA staff with primary responsibility for monitoring Ryan White Part A grantees assess whether grantee data are submitted to HRSA on time but are not required to review the housing-related data submitted. As a result, both programs may be missing opportunities to use existing data to manage the programs.", "HUD’s field office staff have primary responsibility for monitoring HOPWA grantees, and we found that they were generally following monitoring policies for the four grantees that we visited. Field staff are responsible for conducting annual risk assessments of all Community Planning and Development grantees, which include recipients of HOPWA grants. To conduct these assessments, field staff must adhere to Risk Analysis Policy Notices and rate each grantee based on specific factors, including financial factors, the physical condition of projects, and staff capacity, among others. HUD field office staff use these factors to assess the risk level for each grantee and assign a numeric score. Grantees with risk assessments above a certain threshold are to receive onsite monitoring, unless the local HUD field office determines that the grantee can be excepted on the basis of additional HUD criteria and consideration of the field office’s travel and staffing resources.meet with HOPWA sponsor staff and review documentation related to the sponsor’s implementation of the program. HUD staff may identify findings that the sponsor is required to address. In conducting site visits, HUD staff are required to follow specific monitoring guidance related to the HOPWA program.\nDuring site visits, HUD staff HUD has documented that it conducted risk assessments and onsite monitoring visits for formula and competitive HOPWA grantees from fiscal years 2008 through 2013. For the four formula HOPWA grantees we visited, HUD’s field office staff conducted 24 risk assessments— one assessment per year for each of the four HOPWA grants from 2008 through 2013. Nine of the 24 assessments indicated that the HOPWA grant met HUD’s criteria for triggering onsite monitoring. HUD field office staff subsequently conducted onsite monitoring for six of these nine grantees. For the three HOPWA grantees that HUD did not visit for onsite monitoring, the local HUD field office either did not have the resources to conduct the review or the site visit was excepted because the grantee had received a site visit within the previous 2 years, according to HUD.\nHUD headquarters monitors HOPWA grantees’ compliance with the requirement to submit annual performance reports—the CAPER for formula grantees and the Annual Performance Report for competitive grantees. These reports include information on the activities funded, client characteristics, and outcomes related to housing stability, homelessness, and access to care and support. According to HUD officials and contractor staff, a contractor sends HOPWA grantees reminders prior to report deadlines, tracks receipt of the reports, and reviews the reports for completeness and internal consistency. HUD’s contractor also tracks the timeliness of the initial submissions of performance reports. According to the contractor’s data, 93 percent of the CAPERs and Annual Performance Reports for program year 2013 were submitted within 30 days of their due date. HUD’s contractor staff told us that they assisted grantees with any technical difficulties or internal inconsistencies until the report was submitted and met the contractor’s standards for reliability.", "HRSA headquarters staff have primary responsibility for routine and onsite monitoring of Ryan White HIV/AIDS program grantees. Routine monitoring includes regularly scheduled phone calls and reviews of grantee reports. The purpose of routine monitoring is to assess grantees’ performance and compliance with statutory requirements, regulations, and guidance. HRSA staff are also responsible for conducting site visits with the grantees. Site visits are intended to provide an opportunity to review the grantee’s program and may serve as a technical-assistance session for the grantee. HRSA guidance states that site visits should be viewed as an opportunity to expand on information grantees have provided in their grant application, reports, and conference calls. During site visits, HRSA staff meet with grantee staff and may meet with staff from one or more of the subgrantees to obtain feedback on how the program is functioning. HRSA staff may also visit various locations at which subgrantees deliver services and review grantee and subgrantee program documentation.\nHRSA staff with responsibility for the four Ryan White Part A grantees we visited reviewed risk-related information, conducted monthly monitoring calls, and provided technical assistance. HRSA staff reviewed single audit documentation, including risk-related information. Two of the four risk assessments indicated that the grantees had no major issues, and the other two showed deficiencies with internal controls. For the latter two, HRSA determined that these issues did not warrant a restriction in HRSA funding. HRSA staff also conducted monthly calls to grantees and summarized the discussions in electronic files. Additionally, HRSA staff provided technical assistance to Ryan White Part A grantees. For example, in 2013 HRSA arranged for a consultant to provide on-site technical assistance to one of the Part A grantees that we visited.\nHRSA has increased onsite monitoring visits for Ryan White HIV/AIDS program grantees in response to our past recommendations. Specifically, our June 2012 report found that HRSA did not have written guidance describing its policy for selecting grantees to visit and did not prioritize site visits in the manner described to us. Moreover, 44 percent of all grantees did not receive a site visit from 2008 through 2011. We recommended, among other things, that HRSA develop a strategic, risk- based approach for selecting grantees for site visits to ensure that the visits were made at regular and timely intervals. HRSA addressed this recommendation by developing a risk-based approach for selecting grantees for site visits. Additionally, beginning in 2012, HRSA implemented a policy that all Part A and Part B grantees would receive site visits at least once every 5 years and more often if needed. According to our analysis of HRSA’s Part A site visits through 2013, HRSA staff conducted site visits to 11 of the 13 Part A grantees that had not been visited from 2008 through 2012. Additionally, 32 of 53 Eligible Metropolitan Areas and Transitional Grant Areas received a comprehensive site visit between July 2012 and July 2013.\nHRSA has taken additional steps to address four other recommendations we made in 2012 to improve oversight of Ryan White HIV/AIDS program grantees. As of October 2014, all four of these recommendations had been implemented. The steps taken include the following: improved the functionality of an information system, the Electronic Handbook, to enable staff to better document their oversight and monitoring activities, including monthly calls, emails, and technical assistance; assessed, revised, and updated records management policies for HRSA staff with primary responsibility for monitoring grantees; created updated program manuals and posted the manuals on HRSA’s technical assistance website; and updated its monitoring standards and worked with grantees that faced challenges with implementing the standards.\nAdditionally, HRSA grantees are responsible for monitoring subgrantees, which are the organizations that grantees contract with to provide services to persons with HIV. In 2011 HRSA developed National Monitoring Standards for Parts A and B of the Ryan White HIV/AIDS program. These standards are designed to help Ryan White Part A and Part B grantees meet federal requirements for program and fiscal management, monitoring, and reporting. The standards were developed because of the need to establish specific standards governing the frequency and nature of grantee monitoring of subgrantees and create a clear role for HRSA staff in monitoring grantee oversight of subgrantees. HRSA staff with whom we met told us that they used these standards and expected grantees to use them to monitor subgrantees.", "HUD headquarters staff collect annual performance data from HOPWA grantees on activities funded; client characteristics; and outcomes related to housing stability, access to health care, and unmet housing need. As noted earlier, HUD uses this information to create “performance profiles”—two-page summaries of this information—for each HOPWA grantee for each program year. Additionally, HUD creates annual performance profiles for the formula HOPWA program, the competitive HOPWA program, and both programs combined. Profiles are not cumulative—that is, they do not show the total number of clients served up to a point in time. Rather, the profiles provide data on the clients served during the previous program year. A HUD contractor posts all of the performance profiles on a HUD website.\nHUD contractors are responsible for collecting Annual Performance Reports and CAPERs and using the data grantees report to create performance profiles. The contractors review the data for completeness and follow up with grantees regarding inconsistencies. According to HUD, its contractors also identify and document inconsistencies in data using current and previously submitted data for four areas: access to care, cost per unit, stability, and administrative costs. The contractors also document efforts to clarify and correct data related to these issues. However, HUD’s contractors told us that they do not compare current- year data to prior-year data for unmet housing need. In addition, HUD field office staff with whom we met stated that they did not compare grantee data from year to year to identify any potential data reporting errors.\nOur analysis of the unmet housing need data collected through CAPERs from 2010 through 2013 found that some formula grantees reported significant changes in the number of HOPWA-eligible persons with an unmet housing need. For example, HUD data for 2012 indicated that 47 percent of the grantees reported changes of 30 percent or more in the number of persons with an unmet housing need compared with 2011 numbers. According to HUD’s data, in 2011 one grantee had 145 persons with HIV with unmet housing needs and 525,957 in 2012. Although changes in these estimates could be the result of increases or decreases in the need for housing assistance for persons living with HIV, large annual changes could also signal reporting errors. This and other examples are shown in table 5.\nHUD headquarters officials told us that the dramatic differences could be the result of a change in the methodology used to report the figure, staff turnover among grantees, or changes in grantee capacity. Prior to our review, HUD officials had not followed up with grantees that had reported significant changes in unmet need between 2010 and 2013. In response to our review, HUD officials determined that one of the significant changes in unmet housing need from year to year was the result of a data entry error made by HUD’s contractor. Although HUD staff have requirements for reviewing the accuracy of CAPER and Annual Performance Reports, the requirements do not contain specific instructions for assessing performance data over time.\nFederal internal control standards state that monitoring should assess the quality of performance over time and that activities need to be established to monitor performance measures and indicators. These controls could call for comparisons and assessments so that relationships can be analyzed and appropriate actions taken. has shown, leading organizations use performance information to identify gaps in performance, improve organizational processes, and improve their performance. By not analyzing trends in the unmet housing need data grantees are required to report, HUD may be missing opportunities to identify and address problems in grantee reporting. Moreover, by not following up on significant changes in the unmet housing need data submitted, HUD may be missing indications that these data for the program as a whole may not be reliable.\nGAO/AIMD-00-21.3.1.", "Although HRSA headquarters staff conduct routine monitoring of Ryan White HIV/AIDS program grantees, they do not focus on housing information. HRSA staff are responsible for overseeing Ryan White HIV/AIDS program grantees by routinely monitoring grantees’ performance and compliance with statutory requirements, regulations, and guidance. Routine monitoring includes regularly scheduled monitoring calls, reviews of grantee reports, and the provision of technical assistance to grantees. If during the course of routine monitoring HRSA staff find that a grantee has not met its program or financial requirements, the staff are responsible for determining whether the grantee requires more intensive monitoring. According to HRSA officials, agency staff with responsibility for monitoring can use resources like the National HIV/AIDS Strategy indicators to help grantees assess clients’ ability to access HIV care and treatment. HRSA staff are also responsible for monitoring any special conditions that are put in place. HRSA staff with responsibilities related to monitoring are the agency’s primary contact with grantees, and they are to communicate with their assigned grantees at least monthly.\nHRSA’s routine monitoring efforts for the Ryan White HIV/AIDS program do not focus on housing assistance. For example, monthly monitoring calls between HRSA staff and grantees generally follow a standard agenda, and housing is not an agenda item. According to HRSA officials, housing is included when matters pertaining to housing assistance need to be discussed. Also, according to HRSA’s 2011 Housing Policy, Ryan White HIV/AIDS program grantees must provide an individualized written housing plan to HRSA staff if they request one. The plan must cover each client who is receiving short-term, transitional, or emergency housing services. However, the four HRSA staff members we visited who had responsibility for monitoring the grantees told us that they had never requested or reviewed individualized housing plans. According to HRSA officials, documents related to housing are reviewed only if housing needs are identified as a priority by the grantee and HRSA staff. In addition, while HRSA staff are responsible for monitoring grantee reports, including whether RSR reports are submitted to HRSA on time, they are not required to review or monitor the housing-related data submitted in these reports.\nAs noted earlier, federal internal control standards state that activities need to be established to monitor performance measures and indicators. These controls could call for comparisons and assessments so that analysis of the relationships can be made and appropriate actions taken. Controls should also be aimed at validating the integrity of performance indicators. In addition, our previous body of work has demonstrated the importance of using performance management indicators for various management activities and decision making. We have previously found that there are five leading practices that can enhance or facilitate the use of performance information: (1) aligning agency-wide goals, objectives, and measures; (2) improving the usefulness of performance information; (3) developing agency capacity to use performance information; (4) demonstrating management commitment; and (5) communicating performance information frequently and effectively.\nHRSA staff with responsibility for monitoring grantees stated that they did not focus their monitoring efforts on housing because the primary focus of the program was medical care and because grantees spend a small portion of their grant funds on housing assistance. However, as previously noted the National HIV/AIDS Strategy emphasizes the importance of stable housing as a means of improving access to medical care for persons with HIV. The strategy states that access to housing is an important precursor to getting many people into a stable treatment regimen and emphasizes the importance of policies that promote access to housing. By not focusing attention on the housing data that grantees are required to report, such as housing status, HRSA staff with responsibility for program monitoring may be missing an opportunity to improve their management of grantees’ performance. Among other things, they may not be monitoring an important indicator in the National HIV/AIDS Strategy—the extent to which grantees are contributing to housing stability for persons with HIV.", "HIV continues to pose a serious health threat even with advances in medicine. In order to manage programs that provide housing assistance for persons with HIV, agencies need to have reliable data and effective practices for using that data to manage program performance. First, HUD’s estimate of HOPWA-eligible individuals with an unmet housing need is based on data that HOPWA grantees develop using varying methodologies. While HUD advises grantees to use one or more of seven specific data sources, HUD does not require grantees to use these sources in a consistent and therefore comparable manner, as suggested by federal internal control standards and our work on data reliability. HUD has taken steps toward developing a standard methodology but has not established time frames for finalizing these efforts. As a result, the usefulness of HUD’s overall estimate is not clear. Furthermore, Congress may not have a complete understanding of the continuing need for programs that provide housing assistance to persons with HIV.\nSecond, the funding provided under HOPWA has filled important gaps in the availability of affordable housing in communities throughout the country. However, the current statutory formula for HOPWA has not kept pace with the changing nature of the disease. Congress recognized this shift in the 2000, 2006, and 2009 reauthorizations of the Ryan White HIV/AIDS program that required HIV case counts to be used in the distribution of Ryan White HIV/AIDS program funds. While we recognize that it may not be appropriate to use precisely the same formula for both HOPWA and the Ryan White HIV/AIDS program, the rationale for allocating funds on the basis of those currently living with HIV applies to both grant programs. Because HOPWA funds are awarded based on cumulative AIDS cases, these funds are not being targeted as effectively or equitably as they could be.\nThird, HRSA relies on housing data reported by Ryan White HIV/AIDS program grantees to report on its progress in addressing one of the goals of the National HIV/AIDS Strategy but does not require grantees to ensure that these data are current. Internal control standards for the federal government state that events should be promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. Without taking steps to ensure that grantee-reported housing status data are current, HRSA may not have reliable information to use in reporting on the extent to which Ryan White HIV/AIDS program clients are reaching the National HIV/AIDS Strategy goals for attainment of permanent housing.\nWe also found that HUD had not optimized its use of the performance information it required HOPWA grantees to collect. While HUD has processes in place to review the completeness and internal consistency of each grantee’s annual data submission, HUD has not established specific procedures to compare the unmet housing need data individual grantees submit from year to year. The extent to which persons with HIV have an unmet housing need speaks to the continuing need for the HOPWA program. Reported data on unmet housing need may vary significantly, and HUD does not have steps in place to determine if the local unmet housing need has changed or whether the grantee may need technical assistance. Without a specific process to make comparisons among the unmet housing need data individual grantees submit from year to year, in accordance with federal internal control standards, HUD may not be able to ensure that significant changes are identified and addressed if necessary.\nFinally, HRSA has missed opportunities to help ensure that HRSA staff are using all available tools to effectively monitor grantee performance related to housing. While housing is not the primary objective of the Ryan White HIV/AIDS program, stable housing is critical to the health of persons with HIV, as HHS has acknowledged. Internal controls for the federal government note that activities need to be established to monitor performance measures and indicators. Moreover, we have reported on the importance of using performance management indicators for management activities and decision making. Without requiring HRSA staff with monitoring responsibility to review the housing data that individual Ryan White Part A grantees submit, HRSA may not be able to proactively identify performance issues, including the extent to which individual grantees are contributing towards housing stability.", "If Congress wishes HOPWA funding to more closely account for the current impact of the HIV, it should consider revising the funding formula used to determine grantee eligibility and grant amounts to reflect a measure of persons living with HIV, including those with AIDS.", "We make the following four recommendations:\nTo improve information on the unmet housing needs of persons with HIV and follow through on its efforts to develop a standard methodology, we recommend that the Secretary of HUD direct the Assistant Secretary for Community Planning and Development to require grantees to use comparable methodologies to analyze HUD’s recommended data sources on unmet housing need.\nIn order to improve the reliability of the housing data HRSA collects from Ryan White HIV/AIDS program grantees, we recommend that the Administrator of HRSA require program grantees that provide housing assistance to reflect each client’s current (within the previous 12 months) housing status in the client-level housing status data that they report to HRSA.\nTo help ensure that HUD is using grantee performance data to identify and address any irregularities or issues in grantee reporting, we recommend that the Secretary of HUD direct the Assistant Secretary for Community Planning and Development to develop and implement a specific process to make comparisons between the unmet housing need data submitted by individual grantees from year to year, including a process to follow up with grantees when significant changes are identified.\nIn order to promote the use of housing assistance data to monitor program performance, we recommend that the Administrator of HRSA require the HRSA staff who have primary responsibility for monitoring Ryan White HIV/AIDS program grants to monitor indicators of grantees’ performance in contributing towards housing stability, an HHS-identified indicator of HIV care.", "We provided a copy of this report to HUD and HHS for their review. In its written comments, which are reprinted in appendix III, HUD agreed with one of the two recommendations directed toward it and expressed concerns about the report’s description of the agency’s use of grantee data. In its written comments, which are reprinted in appendix IV, HHS agreed with both of our recommendations.\nHUD agreed with our recommendation that it require HOPWA grantees to use comparable methodologies to analyze HUD’s recommended data sources on unmet housing need. However, the agency said that our report did not acknowledge the agency’s efforts to provide further guidance to communities beginning in the first quarter of fiscal year 2014. We requested documentation of such efforts, but HUD was unable to provide it. Our report notes that the Consolidated Annual Performance and Evaluation Reports (CAPER reports) describe the data sources that grantees can use to estimate unmet need. Our report also acknowledges an October 2014 meeting between HUD, stakeholders, and HOPWA grantees to discuss identifying and reporting on unmet housing need as well as HUD’s efforts to work with a contractor to develop a standard methodology. While these efforts are helpful steps toward developing a standard methodology, HUD does not have specific goals or time frames for finalizing this methodology.\nHUD disagreed without our recommendation that it develop and implement a specific process to make comparisons between the data submitted by individual grantees from year to year, including a process to follow up with grantees when significant changes are identified. In its written response, HUD stated that the agency already conducts this type of analysis with contractor support. More specifically, HUD stated that data analysis is conducted using current and previously submitted data. However, HUD’s documentation of the contractor’s grantee-level analysis indicates that its trend analysis is focused on four areas: access to care, cost per unit, stability, and administrative costs. HUD’s documentation of its contractor’s analysis of data trends among formula grantees does not include other data elements collected through CAPER reports, including unmet housing need. Moreover, during the course of our review, HUD’s contractors told us that they do not assess grantee-level, year-to-year changes in unmet housing need. Based on our analysis of unmet housing need data collected from CAPER reports from 2010 through 2013, we found that some formula grantees reported significant changes in unmet housing need from year to year. As noted in the report, in response to our review HUD determined that its contractor had made data entry errors in some cases. In other cases, HUD had not followed up with the grantee and stated that dramatic differences could be attributed to a variety of causes, including grantee staff turnover or changes in grantee capacity. In addition, staff from the four HUD field offices we visited told us that they review CAPER reports but do not compare the information grantees report from year to year. We revised our recommendation to clarify that we are recommending that HUD analyze year-to-year trends in the unmet housing need data that individual grantees submit.\nHUD also agreed with our matter for congressional consideration. Specifically, HUD agreed that HOPWA funds are not being targeted as effectively or equitably as they could be, based on the outdated HOPWA statute. HUD noted that it has continued to seek congressional action on a legislative proposal, which includes statutory changes that reflect advances in both HIV health care and surveillance. Our report acknowledges HUD’s efforts by discussing its proposal for updating the formula in its last three budget justifications.\nIn its general comments, HUD stated that the introductory part of the draft report (highlights page) would benefit from a more balanced approach to the discussion of the HOPWA program’s strengths and weaknesses. The report discusses the strengths of the HOPWA program as part of one of our research objectives. Additionally, the section of the report that focuses on coordination describes HUD’s and HRSA’s efforts to collaborate with one another and provides examples of formal and informal coordination at the local level to avoid providing duplicative services. We also revised our highlights page to note that HUD has taken steps toward developing a standard methodology for grantees to use to assess unmet housing needs.\nIn its letter, HUD also provided technical comments, which we addressed as appropriate. HUD disagreed that it uses unmet housing need data to justify its HOPWA budget request and to assess the performance of the program. Regarding the first part of this statement—that HUD uses unmet housing need data to justify its HOPWA budget request—we did not make a change to the characterization of HUD’s use of the data in its budget requests, and our analysis of HUD’s budget requests supports our characterization. While HUD’s technical comments characterized the agency’s use of unmet need data in its budget requests as an anecdotal data point, HUD uses this information to justify the continuing need for the program. As an example, HUD’s 2015 budget request notes that 131,164 HIV-positive households had unmet housing needs in the portion of the budget request that describes why the program is necessary. Regarding the second part of the statement with which HUD disagreed—that HUD uses unmet housing need to assess the performance of the program—we revised the report to state that HUD uses unmet housing need data for reporting on the performance of the program, rather than assessing the performance of the program. Specifically, the agency reports this information to the public not only through budget justification documents, but also through individual grantee and program-wide performance reports.\nHUD also disagreed with the statement that the agency does not require HOPWA grantees to use a consistent methodology to calculate unmet need, and noted that formula grantees are required to report this need through CAPER reports. Our analysis of CAPER report guidance and grantees’ implementation of this guidance supports our characterization. As described in the report, according to CAPER guidance formula HOPWA grantees can use one or more of seven data sources to calculate unmet need, including housing providers’ waiting lists. However, HUD does not provide additional guidance on how these sources should be analyzed. As a result, grantees could use different methods for analyzing the same data sources. The report provides examples of how HOPWA grantees we interviewed use different methodologies to calculate unmet housing needs.\nHUD also disagreed with the statement that agency officials had not followed up with grantees that had reported significant changes in unmet housing needs between 2010 and 2013, and stated that contracted support plays a role in the review and analysis of HOPWA data. Our report acknowledges contractors’ efforts to review HOPWA data for completeness and follow up with grantees regarding inconsistencies. However, our work supports our description of HUD’s efforts to follow up with grantees that reported significant changes in unmet needs between 2010 and 2013, and therefore we did not make changes. As an example, our analysis of the unmet need data grantees reported to HUD found that one grantee reported an unmet need of 145 persons in 2011 and 525,957 persons in 2012. HUD did not research this anomaly until presented with our analysis. Furthermore, the documentation HUD provided of its follow- up efforts with grantees did not include information about unmet housing need data.\nHHS agreed with our recommendation that HRSA require program grantees that provide housing assistance to reflect each client’s current (within the previous 12 months) housing status in the client-level housing data that they report to HRSA. In its written comments, HHS also stated that HRSA does require Ryan White HIV/AIDS program grantees to maintain current clients’ housing status. As we discuss in the report, HRSA requires grantees to report data on clients’ housing status to HRSA every year. However, during the course of our review, HRSA officials told us that the frequency with which this information is updated is determined at the local level, and we found that this information may not be current. In its written comments, HRSA stated that it will update data instructions and provide a webinar for HRSA monitoring staff and Ryan White HIV/AIDS program grantees to help ensure that grantees are collecting data consistently and correctly. These actions, if implemented effectively, would address the intent of our recommendation.\nHHS also agreed with our recommendation that HRSA staff who have primary responsibility for monitoring Ryan White HIV/AIDS program grants monitor indicators of grantees’ performance in contributing towards housing stability. HHS noted that HRSA had taken steps to provide monitoring staff with reports that show grantee-level data and HHS indicators. According to HHS, these reports support the monitoring of performance indicators, including housing status. Additionally, HHS stated that monitoring staff have begun to be trained on how to interpret these data. These are positive steps that should help HHS to more effectively monitor individual grantees’ contributions towards housing stability. HHS also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the Secretary of Housing and Urban Development, the Secretary of Health and Human Services, and interested congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "Our objectives were to discuss (1) the need for housing assistance for persons with the human immunodeficiency virus (HIV) and the extent to which federal assistance reaches communities in need; (2) the results that have been achieved through federal programs that provide housing assistance for persons with HIV and what is known about the strengths and weaknesses of these programs; (3) the extent to which federal programs that provide housing assistance and supportive services for persons with HIV coordinate with one another; and (4) the extent of federal oversight of programs that provide housing assistance to persons with HIV.\nTo identify information on the housing needs of persons living with HIV, we obtained and reviewed available data from the Department of Housing and Urban Development (HUD) on the unmet housing needs of HOPWA- eligible persons for program years 2010 (the earliest year for which HUD considered the data to be reliable) through 2013 (program year refers to grantees’ fiscal years, which may vary from the federal fiscal year). To assess the reliability of this information, we interviewed HUD officials, conducted electronic testing of the data to identify outliers as well as missing or duplicated data, and interviewed grantees of HUD’s Housing Opportunities for Persons with AIDS (HOPWA) program. We compared HUD’s methodology for calculating unmet housing need to internal control standards for the federal government, as well as GAO guidance on preparing reliable data. We determined that HUD’s unmet housing need data were not sufficiently reliable for the purposes of estimating the number of HOPWA-eligible individuals with an unmet need because they were based on data developed by HOPWA grantees using inconsistent methodologies.\nWe also analyzed the Centers for Disease Control and Prevention’s (CDC) fiscal year 2012 HIV surveillance data—the most recent data available at the time of our review—to identify and describe geographic trends in persons living with diagnised HIV infections as well as the demographic characteristics of persons diagnosed with HIV.the reliability of this information, we interviewed CDC officials and reviewed documentation of CDC’s methodology for collecting the data. We determined that the data were sufficiently reliable for the purpose of describing trends in HIV infection. To determine whether the Health Resources and Services Administration (HRSA) assessed the number of HIV-infected persons that might need emergency housing assistance, we reviewed HRSA guidance and interviewed HRSA officials. In addition, we reviewed requirements for Ryan White Planning Councils to assess local needs for HIV-related services. To identify the federal programs that provide housing assistance specifically for persons with HIV, we reviewed Congressional Research Service, GAO, HUD, and HRSA reports issued from 1997 through 2014 on housing for persons with HIV and interviewed HUD and HRSA officials. For HRSA’s Ryan White HIV/AIDS program, we focused on Part A because it can fund housing assistance; because Part A grantees expended significantly more of their funding on housing assistance than Part B grantees in 2011, and because, like HOPWA grants, Part A grants are generally awarded to local governments.\nThe MSA delineations are based on the 2000 Office of Management and Budget Standards for Delineating Metropolitan and Micropolitan Statistical Areas (implemented in 2003). of March 2011. This approach helped ensure that the two data sets were comparable to one another and corresponded to the data that would have been available in fiscal year 2012. These data were not adjusted for reporting delays. According to the CDC, estimates of persons living with HIV (i.e., HIV prevalence data) in a given year are generally more accurate when at least 12 months have elapsed since the end of the measurement period, as both diagnoses and deaths are often subject to reporting delays. The specific direction of any bias is unclear and may vary by jurisdiction. For each MSA, we calculated the absolute relative difference between cumulative AIDS cases and the number of cases of persons living with HIV (including AIDS). Additionally, we identified examples of MSAs that had similar numbers of persons living with HIV but received notably different amounts of HOPWA formula funds for fiscal year 2012.\nWe also compared the current HOPWA funding formula to our previous work that addressed funding grants based on cumulative AIDS cases, including the deceased. To describe HUD’s proposed changes to the HOPWA funding formula, we reviewed HUD’s congressional budget justifications for fiscal years 2013, 2014, and 2015.\nGAO, Housing: HUD’s Program for Persons with AIDS, GAO/RCED-97-62 (Mar. 24, 1997) and HIV/AIDS: Changes Needed to Improve the Distribution of Ryan White CARE Act and Housing Funds, GAO-06-332 (Feb. 28, 2006). received both HOPWA and Ryan White Part A grants. We used HRSA’s 2011 Ryan White HIV/AIDS program expenditure data to identify grantees that had spent Ryan White Part A funds on housing assistance. We compared the locations of the Ryan White Part A grantees that had funded housing assistance to locations of the formula HOPWA grantees and selected four cities that had both. We based our selection on grant size (i.e., grant amounts at either the higher end or middle of the range in fiscal year 2011), the presence of Ryan White Part A grantees that had expended Ryan White Part A funds on housing assistance, and geographic diversity. Based on this analysis, we selected New York City, New York; New Orleans, Louisiana; San Francisco, California; and St. Louis, Missouri. In each city, we interviewed officials from the formula HOPWA grantees and Ryan White Part A grantees; one or more HOPWA project sponsors; one or more Ryan White Part A subgrantees; the local HUD field office; the local Continuum of Care grantee; and at least one HIV advocacy organization. We selected HOPWA project sponsors and Ryan White Part A grantees based on discussions with grantee staff and selected advocacy organizations based on information from a national HIV advocacy organization about active local HIV advocacy organizations. We also toured housing that was funded through formula HOPWA funds or Ryan White Part A in each city, including emergency housing, a permanent housing facility, and a hospice, to see how the funds had been used. To obtain views on the impact of the HOPWA and Ryan White HIV/AIDS Programs in rural areas, we also interviewed the State AIDS Directors for California, Louisiana, Missouri, and New York.\nTo determine the results that have been achieved through federal programs that provide housing assistance to persons with HIV, we obtained and analyzed HOPWA data on how funds were used and client characteristics for program years 2009 through 2012. To assess the reliability of the HOPWA data, we interviewed HUD officials and contractors that had responsibility for processing information about their data reliability procedures. We also conducted electronic testing for missing data, outliers, or obvious errors. We found that most data were reliable for the purposes of describing how funds were used and identifying the characteristics of the persons who benefitted from housing assistance. As previously noted, we found that HUD’s data on unmet housing need were not sufficiently reliable for our purposes.\nFor the Ryan White HIV/AIDS program, we obtained and reviewed Ryan White HIV/AIDS Program Services Report (RSR) data for Part A, and for fiscal years 2010 through 2012. Agency officials told us that 2009 data were only available in aggregate form and not by Part A grantee. To assess the reliability of HRSA’s Ryan White Part A data related to housing assistance, we reviewed HRSA guidance and policies, interviewed HRSA officials with responsibility for processing the data, interviewed four HRSA Program Officers, and conducted electronic testing. We also compared HRSA’s methodology for calculating the percentage of Ryan White HIV/AIDS program clients who had stable housing to internal control standards for the federal government. Because HRSA does not require grantees to regularly update each client’s housing status, we determined that housing status data were not sufficiently reliable for our purposes. Also, we obtained and analyzed expenditure data for both programs. For HOPWA and Ryan White Part A, the most recent years of expenditure data were 2012 and 2011, respectively. For HOPWA, we analyzed program data on activities funded (e.g., housing assistance, housing development, supportive services); types of housing assistance funded (e.g., tenant-based rental assistance, permanent facilities); and demographic characteristics (e.g., sex, race, ethnicity, age, income). For the Ryan White HIV/AIDS program, we analyzed RSR data on the number and proportion of clients who received housing assistance through Part A. For those clients who did receive housing assistance, we analyzed demographic characteristics (sex, race, ethnicity, age, earnings relative to the federal poverty level).\nTo describe the strengths of the HOPWA and Ryan White Part A programs, as well as any weaknesses associated with these programs, we reviewed program requirements; identified studies through a search of various databases using keywords such as “HOPWA” and “Ryan White”; and interviewed a purposive sample of program grantees, HOPWA project sponsors, and Ryan White Part A subgrantees. We also interviewed HIV advocates, HUD and HRSA officials with responsibilities related to the HOPWA and Ryan White HIV/AIDS programs, and an academic researcher on HIV and housing who had co-authored various articles on housing for persons with HIV in New York City. Upon completion of our initial search, we identified eight studies that discussed the effects of housing assistance programs on persons with HIV. We reviewed the studies’ methodology, limitations, and conclusions for the purposes of excluding studies that did not ensure a minimal level of methodological rigor and excluded two studies. Of the six remaining studies, two were randomized control trial studies, one was a cross- sectional study, and one used a quasi-experimental design. Two had weaker research designs but were retained since they were sufficiently rigorous and, given the limited number of empirical studies on this subject, provided useful information on the importance of access to housing for medical outcomes for people living with HIV.\nTo assess the extent to which the HOPWA and Ryan White Part A programs coordinated with each other at the federal level, we identified program requirements in the governing legislation for the HOPWA and Ryan White HIV/AIDS programs. We also obtained and reviewed documentation of HUD’s and HRSA’s efforts to coordinate with each other, interviewed HUD and HRSA officials about these efforts, and compared the efforts to GAO’s criteria related to coordination and program overlap.\nGAO, Housing Assistance: Opportunities Exist to Increase Collaboration and Consider Consolidation, GAO-12-554 (Washington, D.C.: Aug. 16, 2012) and Housing Assistance: An Inventory of Fiscal Year 2010 Programs, Tax Expenditures, and Other Activities, GAO-12-555SP (Washington, D.C.: Aug. 16, 2012), an E-supplement to GAO-12-554. the list of housing programs. For the five programs, we compared their primary goals, client eligibility requirements, requirements related to supportive services, and the specific types of housing assistance that could be provided. We also discussed whether and how HOPWA and Ryan White Part A grantees coordinated with these programs during our site visits to the purposive sample of cities. Additionally, we reviewed the Catalog of Federal Domestic Assistance program descriptions, program information from each program’s website, and prior GAO reports to determine each program’s size, administering agency, and assistance type. Finally, we interviewed HIV advocacy groups, HOPWA and Ryan White Part A grantees, HUD and HRSA officials, and an academic researcher about housing assistance and services for persons with HIV.\nTo assess HUD and HRSA’s monitoring and oversight efforts, we identified and reviewed their monitoring policies, procedures, and guidance. We also interviewed HUD headquarters and field office staff with responsibilities related to HOPWA grantee monitoring, as well as HRSA staff who had primary responsibility for monitoring Ryan White Part A grantees. We compared HUD’s risk assessment policies for program years 2008 through 2013 to documentation on the implementation of these procedures for the four HOPWA grantees we visited, including documentation of risk assessments and site visits conducted. For the Ryan White HIV/AIDS program, we reviewed the status of five previously issued GAO recommendations related to program monitoring and oversight and summarized HRSA’s efforts to address these recommendations. We also analyzed updated HRSA data on Part A site visits conducted in 2012 and 2013. Additionally, we interviewed both HUD and HRSA officials on how they use performance data to monitor HOPWA and Ryan White Part A grantees. For HOPWA, we reviewed documentation of HUD’s use of performance data for program years 2009 through 2013. For the Ryan White HIV/AIDS program, we reviewed published reports on the agency’s use of housing-related performance data. We compared HUD and HRSA’s monitoring efforts to federal internal control standards as well as practices that leading organizations used related to managing for results.\nWe conducted this performance audit from March 2014 to April 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on the audit objectives.", "In 2012, the Department of Housing and Urban Development (HUD) awarded formula Housing Opportunities for Persons with AIDS (HOPWA) grants to 78 metropolitan statistical areas (MSA), with the most populous city in each area serving as that area’s formula HOPWA grantee. Formula grant funding criteria are based on each MSA’s share of cumulative Acquired Immune Deficiency Syndrome (AIDS) cases. Table 6 shows the number of cumulative AIDS cases, the number of persons living with human immunodeficiency virus (HIV), and the relative difference between these two numbers for each MSA.", "", "", "", "", "In addition to the contact named above, Paul Schmidt, Assistant Director; Lisa M. Moore, Analyst-in-Charge; Imoni Hampton, John McGrail, John Mingus, Roberto Pinero, Jennifer Schwartz, and Jena Sinkfield made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "h0_full h3_title", "h3_full", "h0_full", "h0_full", "h1_title", "", "", "h1_full", "", "h4_title h3_title", "", "h3_full", "h4_full", "h5_title h2_full", "", "", "h5_full", "h2_full", "h0_full h2_full", "h5_full", "h5_full", "h5_full", "h5_full h4_full h2_full h1_full", "h0_full", "", "", "", "", "" ] }

{ "question": [ "Why is the extent to which persons with HIV need housing assistance unknown?", "Why is the HUD's estimate of this statistic unreliable?", "How has the HUD attempted to become more reliable?", "What does GAO's work on assessing data reliability indicate?", "Why is the HUD's data inconsistent?", "How has this approach been problematic?", "What does agency data for HOPWA and the HRSA's Ryan White program indicate?", "How does HOPWA process Ryan White housing data?", "Why does HOPWA process Ryan White housing data?", "What do federal control standards state regarding the recording of events?", "How might HRSA's data have limited usefulness?", "What opportunities might HUD and HRSA be missing?", "How do HUD and HRSA conduct monitoring of Ryan White grantees?", "How might HUD's data processing methods be inadequate?", "How might HRSA's data processing methods be inadequate?", "How is the population of people with HIV projected to change in the United States?", "What has research shown regarding persons with HIV?", "How do HOPWA and the Ryan White program strive to support persons with HIV?", "What was GAO asked to review?", "What does this report address?", "How did GAO collect data for this report?", "What should Congress consider changing HOPWA funding?", "What does GAO recommend HUD and HRSA do?", "How did HRSA and HUD respond to GAO's recommendations?", "How did GAO clarify HUD's concerns?" ], "summary": [ "The extent to which persons with human immunodeficiency virus (HIV) need housing assistance is not known, in part because the Department of Housing and Urban Development's (HUD) estimate of the housing needs of persons with HIV, including those with Acquired Immune Deficiency Syndrome (AIDS), is not reliable.", "HUD does not require Housing Opportunities for Persons with AIDS (HOPWA) grantees to use a consistent methodology to calculate unmet need.", "The agency has taken steps towards developing a standard methodology, but it has not established time frames for finalizing these efforts.", "GAO's work on assessing data reliability indicates that data should be consistent.", "Because HUD does not require grantees to use selected data sources in a consistent manner, the reported information on unmet housing needs of persons with HIV are not comparable across jurisdictions and are not useful and reliable. In addition, the statutory HOPWA funding formula is based on cumulative AIDS cases since 1981, including persons who have died, rather than on current numbers of persons living with HIV (including those with AIDS).", "This approach has led to areas with similar numbers of living HIV cases receiving different amounts of funding. Because HOPWA funds are awarded based on cumulative AIDS cases, these funds are not being targeted as effectively or equitably as they could be.", "Agency data for HOPWA and the Health Resources and Services Administration's (HRSA) Ryan White program indicate most recipients of assistance obtained stable, permanent housing, but Ryan White housing data may have limitations.", "HRSA, within the Department of Health and Human Services, does not require Ryan White grantees to maintain current data on clients' housing status. However, it uses the data that grantees report to calculate the proportion of clients that have stable housing.", "HRSA is charged with tracking Ryan White clients' housing status as a part of the White House's National HIV/AIDS Strategy.", "Federal internal control standards state that events should be promptly recorded to maintain their relevance and value to management in controlling operations and making decisions.", "Because HRSA does not require grantees to maintain current data on clients' housing status, HRSA's data may be of limited usefulness in tracking the National HIV/AIDS Strategy goal of improving clients' housing status.", "HUD and HRSA perform oversight activities but may be missing opportunities to use data to improve performance.", "HUD staff conduct risk-based monitoring of HOPWA grantees, and HRSA staff have improved monitoring of Ryan White grantees. HUD and HRSA both collect performance data from their grantees and take steps to ensure that the data are complete and submitted in a timely manner.", "HUD uses performance data to create summaries of program performance but does not have a specific process for comparing individual grantees' year-to-year data for unmet housing need. Federal internal control standards note the importance of such comparisons. By not analyzing these trends, HUD may not be identifying and addressing reporting problems.", "In addition, HRSA staff responsible for monitoring Ryan White grantees do not review grantee data on housing assistance provided. Federal internal control standards state that activities need to be established to monitor performance measures. By not focusing attention on housing data, HRSA staff with monitoring responsibility are not proactively using available resources to monitor individual grantees' contributions to the National HIV/AIDS Strategy goal of improving clients' housing status.", "Over 1.2 million people in the United States are estimated to have HIV, and about 50,000 new infections occur each year.", "Research has shown that persons with HIV who lack stable housing are less likely to adhere to HIV care.", "HUD's HOPWA program and HRSA's Ryan White program provide grants to localities that can be used to fund housing and supportive services specifically for persons with HIV.", "GAO was mandated to review housing assistance for persons with HIV.", "This report addresses (1) the need for housing assistance for persons with HIV and the extent to which assistance reaches communities in need, (2) results achieved through HOPWA and Ryan White, and (3) federal oversight of these programs.", "For both programs, GAO analyzed program data on persons served and outcomes achieved as of 2012, reviewed policies, interviewed agency officials, and visited a non-generalizable sample of four geographically diverse cities that received varying amounts of both HOPWA and Ryan White funding.", "If Congress wishes HOPWA funding to be more effectively targeted, it should consider revising the funding formula to reflect the number of living persons with HIV.", "GAO also recommends that (1) HUD require a consistent methodology for estimating unmet housing needs and (2) both HUD and HRSA improve the reliability and use of performance data to manage their programs.", "HRSA agreed with GAO's recommendations. HUD agreed with the first recommendation but disagreed with the second, stating that it already assesses trends in some program data.", "GAO clarified that HUD should identify reporting issues by analyzing trends in its unmet housing need data." ], "parent_pair_index": [ -1, 0, 0, -1, 3, 4, -1, 0, 0, -1, -1, -1, -1, 1, 1, -1, 0, 0, -1, -1, 1, -1, -1, 1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 1, 1, 1, 5, 5, 5, 5 ] }

{ "title": [ "Background", "Panel Size", "Encounters and Expenditures", "VA Lacks Reliable Data on Medical Facilities’ Primary Care Panel Sizes and Does Not Have Effective Oversight Processes to Verify and Use Facilities’ Data to Monitor Primary Care Data Reported by VA Facilities on Primary Care Panel Sizes Are Unreliable", "Wide Variations Exist between Actual Panel Sizes and VA’s Modeled Panel Size at Medical Facilities We Reviewed", "VA Central Office and Networks Do Not Have Effective Oversight Processes for Verifying and Using Facilities’ Panel Size Data to Monitor Primary Care", "VA’s Encounter and Expenditure Data Show Wide Variation across Medical Facilities, and VA Central Office and Networks Do Not Use These Data to Monitor Primary Care", "Expenditures per Primary Care Encounter Varied Widely across VA Facilities", "VA Central Office and Networks Verify and Use Facilities’ Encounter and Expenditure Data for Financial Purposes, But Not to Monitor Primary Care", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Expenditures per Unique Primary Care Patient in Fiscal Year 2014", "Appendix II: Comments from the Department of Veterans Affairs", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "Within VA Central Office, VHA’s Primary Care Services Office develops policies related to the management of primary care—including the recording and reporting of primary care panel size data—and VHA’s Primary Care Operations Office is responsible for executing policies related to primary care delivery and monitoring primary care. VHA’s Office of Finance develops policies related to the recording and reporting of primary care encounter and expenditure data. Each of VA’s 21 networks is responsible for overseeing the facilities within their network, and this responsibility includes overseeing facilities’ management of primary care. (See fig. 1.)", "Based on a review of studies, VA established a baseline panel size of 1,200 patients at any given time for a full-time primary care physician provider. The Primary Care Services Office adjusts the baseline panel size for each facility based on a model VA officials said they developed in 2003 that uses data reported by facilities—including data on the number of FTE providers, support staff, and exam rooms—and projections on the average number of primary care visits. These projections are based on patient characteristics, such as the proportion of patients with chronic conditions. VA refers to the adjusted baseline for each facility as the “modeled panel size,” which in fiscal year 2014 ranged from 1,140 to 1,338 across VA’s facilities. VA generally updates the modeled panel size annually for each facility.\nVA’s handbook on primary care management requires that facilities record and report primary care data using the Primary Care Management Module (PCMM) software. These data include the number of patients, FTE providers, support staff, and exam rooms, and the reported and modeled panel size. Each facility maintains its own PCMM software and is required to update its panel size data on an ongoing basis in PCMM, which electronically reports facilities’ data to a separate national database maintained by the Veterans Support Service Center. This national database allows the Primary Care Operations Office and VA’s networks to review the data.", "An encounter is a professional contact between a patient and a provider who has the primary responsibility for diagnosing, evaluating, and treating the patient’s condition. In addition to individual office visits, there are other types of encounters, such as telephone visits and group visits. Each facility identifies and tracks all of its expenditures associated with primary care encounters. Facilities transmit their encounter and expenditure data using the Decision Support System, which is maintained by the Office of Finance. This office is responsible for collecting and maintaining financial information for VA’s cost accounting—which identifies and assesses the costs of programs at the national, network, and facility levels—and for budgetary purposes.", "We found that VA lacks reliable data on primary care panel sizes across its facilities because the data that facilities record and report to VA Central Office and networks are sometimes inaccurate. Because reliable reported panel sizes were not available for all facilities, we calculated actual panel sizes at six of seven selected facilities and compared them to each facility’s modeled panel size for fiscal year 2014. We found that actual panel sizes across the six facilities varied from 23 percent below to 11 percent above their respective modeled panel size. Moreover, we found that VA Central Office and networks do not have effective oversight processes for verifying and using facilities’ panel size data to monitor facilities’ management of primary care.\nWe found that VA lacks reliable data on primary care panel sizes across its 150 facilities because the data that facilities record in the PCMM software and report to the Primary Care Operations Office and to networks are sometimes inaccurate. Federal internal control standards state that reliable information is needed to determine whether an agency is meeting its goals for accountability for effective and efficient use of resources.\nHowever, our review of the reported panel size data for all of VA’s facilities for fiscal year 2014 revealed missing values as well as values that appeared to be unreasonably high or low, which raised concerns about these data. Officials from the Primary Care Operations Office, whom we interviewed about the reliability of these data, agreed that inaccuracies exist in the way facilities report data elements in PCMM, such as the number of patients assigned to primary care panels and the number of FTE providers, support staff, and exam rooms. Primary Care Operations Office officials pointed out that because the data are self- reported, facilities can and sometimes do record the data inaccurately or in a manner that does not follow VA’s policy on panel management. For example, the officials stated that some facilities may not count support staff and exam rooms as outlined in VA’s policy. These officials also stated that PCMM has limitations that may affect the reliability of facilities’ reported panel size data. For example, officials explained that the software makes it difficult for facilities to ensure that inactive patients (i.e., those who have not seen their primary care provider within the preceding two years or have died) are removed from providers’ panels.\nWe identified similar inaccuracies in our more in depth review of panel size data reported by the seven selected facilities. Specifically, at three facilities we found inaccuracies in the reported number of FTE primary care providers and the reported number of patients, which impacted the facilities’ reported or modeled panel sizes. For example, the number of FTE primary care providers reported by one of these facilities was too low because the facility incorrectly recorded each FTE provider as only 90 percent of a FTE. We did not identify inaccuracies in the data reported by the remaining four facilities. (See table 1.)\nBecause some medical facilities’ reported panel size data are unreliable, VA Central Office and network officials cannot readily determine each facility’s average primary care panel size nor compare these panel sizes to each facility’s modeled panel size to help ensure that care is being delivered in a timely manner to a reasonable number of patients. Moreover, having unreliable data can misinform VA in other aspects as well. For example, because VA’s model is based on historical data reported by facilities, unreliable data may result in VA’s modeled panel size being too high or too low for certain facilities. Also, if facilities are using unreliable data to manage their primary care panels—for example, using the data to assign patients to primary care providers—the facilities may be misinformed about the available capacity on primary care providers’ panels—information that is key to determining facilities’ staffing and other resource needs.\nPrimary Care Operations Office officials told us that they intend to address data reliability issues over time. Specifically, the Primary Care Operations Office is in the process of implementing new software, called web-PCMM, which officials believe will address some concerns about the reliability of the data because the software features controls to help ensure that facilities record and report the data accurately and consistently. For example, web-PCMM will automatically remove inactive patients from providers’ panels. In preparation for the implementation of web-PCMM, Primary Care Operations Office officials said they have been training network and facility staff on the features and capabilities of the new software and instructing facility staff to review and correct their panel size data to help improve data accuracy. It is not yet known the extent to which the new software will actually address the data reliability issues because facilities will continue to self-report data. The Primary Care Operations Office started piloting the new software at selected facilities in 2014 and had planned to implement it agency-wide after resolving software interoperability issues identified during the pilot. However, officials said that implementation is currently on hold because of a lack of funding, and the officials could not provide an updated timeframe for its system-wide implementation. According to these officials, VA has spent about $8.8 million through July 2015 on the development and implementation of web-PCMM and requires an additional $1.5 million to implement it agency-wide.", "Because reliable data on reported panel sizes were not available for all of VA’s facilities at the time of our review, we calculated actual panel sizes at six of the seven selected facilities using updated data from these facilities and correcting for the inaccuracies we found at two facilities. We compared the actual panel size to each facility’s modeled panel size for fiscal year 2014. Although Primary Care Operations Office officials recommend that facilities keep panel sizes 10 to 15 percent below modeled panel sizes to accommodate growth and provider attrition, we found that actual panel sizes ranged from 23 percent below to 11 percent above their respective modeled panel size. This wide variation may indicate that actual panel sizes at some facilities are too low—potentially leading to inefficiency and wasted resources—or too high—potentially leading to veterans experiencing delays in obtaining care, among other negative effects. It may also indicate that VA’s modeled panel sizes are determined incorrectly based on unreliable facility data or do not sufficiently account for patient acuity levels and demand for primary care services. Actual average panel sizes across the six facilities ranged from a low of 1,000 patients per provider to a high of 1,338 patients per provider. (See fig. 2.)\nAt the three facilities where actual panel sizes were the highest of the six for which we calculated the actual panel sizes, officials cited three key factors that contributed to the higher panel sizes.\nGrowing patient demand: Officials at all three facilities stated that the growing number of patients seeking primary care services at their facilities has required them to assign a larger number of patients to each provider. Officials at one of these facilities stated that not assigning new patients to a panel would result in a greater number of walk-in patients seeking emergency care and a loss of continuity of care.\nStaffing shortages: Officials at all three facilities described difficulty recruiting primary care providers, which resulted in a shortage of providers. At one of these facilities, about 40 percent of primary care provider positions were vacant at the time of our review. Officials at all three facilities attributed recruiting difficulties to the rural location of these facilities, lack of academic affiliation of the facilities, and the lower pay that VA offers primary care providers compared to nearby private sector medical facilities. In addition, at one of these facilities, officials stated that non-compete clauses limited the facility’s ability to hire providers currently working in the private sector who might otherwise seek employment with VA.\nExam room shortages: Officials at two of the three facilities stated that a lack of available exam room space has limited their ability to hire additional primary care providers—and thereby reduce panel sizes. They stated that the process for acquiring additional space—whether through building additional space or leasing it—is cumbersome and requires extensive preplanning. For example, at one of these facilities, officials stated that expanding the facility’s existing exam room space or opening another CBOC to accommodate growing demand for primary care typically takes 5 to 6 years. The officials told us that while the Veterans Access, Choice, and Accountability Act of 2014 provided facilities with funds to acquire additional space, it did not simplify the process for acquiring space.\nOfficials at two of the three facilities stated that the higher actual panel sizes have contributed to provider burnout and attrition. At one facility— where actual panel sizes were 11 percent above the modeled panel size—officials stated that the facility has been unable to hire enough providers to make up for attrition. The officials added that providers have expressed concerns to facility leadership that high panel sizes were impeding their ability to provide safe and effective patient care. All three facilities have taken measures to address higher actual panel sizes. For example, in order to ease staffing shortages the facilities have contracted with non-VA providers to provide care at VA facilities and have offered evening and weekend clinic hours to fully utilize available exam room space. However, while these measures have helped address capacity shortages at these facilities, they do not fully address the longstanding concerns resulting from higher panel sizes.\nIn contrast, at the facility where actual panel size was the lowest of the six we reviewed—23 percent below its modeled panel size—officials said they have made a concerted effort to establish lower panel sizes while increasing the number of primary care providers. Officials stated that they had recently lowered providers’ panel sizes because they believed that the modeled panel size did not sufficiently account for factors affecting patients’ demand for primary care services, such as high acuity levels. These officials noted that they previously followed the modeled panel size but found that it was too high and resulted in primary care provider burnout and poor patient access to primary care providers. Since VA Central Office and network staff generally do not examine differences across medical facilities VA-wide, it is unclear whether the facility with lower panel sizes for providers was providing primary care services in an inefficient manner or whether VA’s modeled panel size for this facility was too high.", "VA Central Office and networks do not have effective oversight processes for verifying and using facilities’ panel size data to monitor facilities’ management of primary care. VA’s panel management policy requires facilities to ensure the reliability of their reported panel size data, but the policy does not assign oversight responsibility to VA Central Office or the networks for verifying the reliability of these data or for using the data for monitoring purposes. Federal internal control standards state that agencies should clearly define key areas of authority and responsibility, ensure that reliable information is available, and assess the quality of performance over time.\nHowever, officials from the Primary Care Operations Office told us that— except for a few isolated situations—they do not verify the panel size data recorded in PCMM to systematically identify unreliable data or to monitor panel sizes across all VA medical facilities. For example, these officials told us that in 2014, they conducted reviews of three facilities that were struggling with recording and reporting reliable data in PCMM to identify ways to improve the reliability of the facilities reported data. The officials said they have not validated facilities’ reported panel size data or used the data to monitor primary care because the office has a limited number of staff and mainly relies on the networks and facilities to ensure that the data are recorded and reported correctly and that monitoring is conducted.\nAcross the seven networks that oversee the seven selected facilities for which we conducted a more in-depth analysis, we also identified variations in the extent to which the networks verified facilities’ panel size data and used the data to monitor and address panel sizes that were too high or too low. Specifically,\nData verification: Officials from four of the seven networks told us that they took some steps to verify that facilities’ panel size data were reliable, such as reviewing the data for errors and large variations. For example, officials from one of these networks stated that if they identified large variability in the number of exam rooms—a relatively stable data element over time—it could indicate problems with data reliability, which the network officials would discuss with officials from the facility reporting the data. Officials from another network stated that they compared data reported by facilities to data previously reported by the facilities to identify large variations. Officials from the remaining three networks told us that they did not any take steps to verify that facilities’ reported panel size data were reliable. According to Primary Care Operations Office officials, VA networks can request access to facilities’ PCMM software, which would enable them to verify the data; however, the officials acknowledged that many of VA’s 21 networks are unaware of this capability.\nUse of data for monitoring primary care: Officials from six of the seven networks said they discussed reported panel size data during monthly calls with facility officials, at primary care committee meetings, or during facility site visits. However, officials from only four of these six networks stated that they took steps to address panel sizes that are too high or too low compared to a facility’s respective modeled panel size. For example, officials at one network told us that they helped a facility recruit additional primary care providers to address high panel sizes. In another network, officials said that they were helping a facility secure additional exam room space to address high panel sizes. Officials at a third network told us that they recently had to curtail monitoring activities to address facilities’ panel sizes due to staffing shortages. In contrast, officials from the one network that does not use panel size data to monitor facilities’ management of primary care told us that they rely on the facilities to manage their own primary care panels and do not believe that the network should take an active role in this process. As a result, officials from this network were unaware that a facility within their network had made a concerted effort to establish panel sizes that were well below its modeled panel size.\nAbsent a robust oversight process that assigns responsibility, as appropriate, to VA Central Office and networks for verifying facilities’ panel size data and using the data to monitor facilities’ management of primary care—such as, examining wide variations from modeled panel sizes—VA lacks assurance that facilities’ data are reliable and that they are managing primary care panels in a manner that meets VA’s goals of providing efficient, timely, and quality care to veterans. Primary Care Operations Office officials stated that VA Central Office is in the process of revising its policy on primary care panel management and is developing additional guidance to require VA Central Office and VA networks to verify reported panel size data in addition to other monitoring responsibilities. However, as the revised policy and guidance are still under development, it is unknown when they will be implemented and whether they will fully address the issues we identified.", "", "Based on our review of fiscal year 2014 VA-wide primary care expenditure and encounter data, we found that expenditures per primary care encounter varied widely across VA facilities, from a low of $150 to a high of $396, after adjusting to account for geographic differences in labor costs. Expenditures per encounter at 97 of the 140 facilities we reviewed were within $51 or one standard deviation—a statistical measure of variance—of VA’s overall average of $242. According to officials from VHA’s Office of Finance, one standard deviation is typically used to identify potential outliers when examining encounter and expenditure data. For the remaining 43 facilities, our analysis found that expenditures per encounter at 20 facilities were at least one standard deviation above the average and at 23 facilities were at least one standard deviation below, which may indicate potential outliers that VA Central Office and the networks may need to examine further. (See fig. 3.) Among other things, this variation may indicate that primary care is being delivered efficiently at facilities with relatively low expenditures per encounter or inefficiently at facilities with relatively high expenditures per encounter. We also analyzed expenditures per unique primary care patient—that is, a patient with at least one primary care encounter in fiscal year 2014— and found similar variation across VA’s facilities. (See app. I.) We found that this variation remained when examining expenditures by encounter and per unique patient for facilities within the same complexity group.\nOf the seven selected facilities, one was among the least expensive facilities across all VA facilities and another was among the most expensive, in terms of expenditures per primary care encounter. An official from the facility that was among the least expensive of the seven we reviewed, with expenditures per encounter of $158, identified an increased use of secure messaging and telephone primary care as primary factors that contributed to a lower expenditure per encounter. Officials from the network that oversees the facility that was among the most expensive of the seven we reviewed, with expenditures per encounter of $330, identified the high cost of living in the area—which resulted in higher leasing and labor costs—as the primary factor that contributed to a higher than average cost per encounter. However, our analysis largely accounted for the higher cost of living in that expenditure data provided by VA were adjusted to account for geographic differences in labor costs, which made up 71 percent of this facility’s costs in fiscal year 2014. The officials also explained that part of the reason for the high expenditures per encounter was that the facility was not appropriately accounting for telephone-based primary care services it provided for the entire network. As a result, primary care encounters and expenditures for the selected facility included encounters and expenditures for telephone primary care services for other facilities within the network. According to network officials, steps are being taken to ensure that the facility is allocating these expenditures appropriately going forward.", "While VA Central Office and networks verify and use facilities’ encounter and expenditure data for financial purposes, VA’s policies governing primary care do not require VA Central Office and networks to use these data to monitor facilities’ management of primary care. Federal internal control standards state that agencies need both operational and financial data to determine whether they are meeting strategic goals and should use such data to assess the quality of performance over time.\nWe found that the Office of Finance in VA Central Office independently verifies facilities’ encounter and expenditure data to help ensure their reliability and uses the data for cost accounting and budgetary purposes. Similarly, chief financial officers or their designees at six of the seven networks that oversee the facilities we reviewed routinely examine encounter and expenditure data to identify outliers for the purposes of ensuring data reliability and for cost accounting. However, the Primary Care Operations Office in VA Central Office does not use encounter and expenditure data, even though officials stated that examining such data would likely help them monitor facilities’ management of primary care. Furthermore, primary care officials at the seven networks we examined generally do not use these data to monitor facilities’ management of primary care. Some officials told us that they do not use encounter and expenditure data for monitoring primary care delivery because panel sizes are the most effective means of measuring efficiency within primary care.\nBy not using encounter and expenditure data to monitor facilities’ management of primary care, VA may be missing opportunities to identify facilities—such as those that experience higher than average expenditures per encounter or significant changes in expenditures over time—that may warrant further examination and to strengthen the efficiency and effectiveness of the primary care program. Using panel size data in conjunction with encounter and expenditure data, would allow VA Central Office and networks to assess facilities’ capacity to provide primary care services and the efficiency of care delivery.", "The absence of reliable panel size data and oversight processes could significantly inhibit VA’s ability to ensure that facilities are providing veterans with timely, quality care and delivering that care efficiently. While VA planned to address some of the data reliability issues through new software to help VA facilities record data more accurately, development of this software is currently on hold, and VA could not provide any estimates of when the software would be implemented at its facilities. Even if this software is implemented, VA Central Office and networks will still be relying on self-reported data on primary care panel sizes from its facilities. By not having in place a process to verify the reliability of facilities’ panel size data or to monitor wide variations between facilities’ reported and modeled panel sizes, VA will likely continue to receive unreliable data and miss opportunities to assess the impact of panel sizes on veterans’ access to care. VA Central Office and the networks are also missing opportunities to use readily available encounter and expenditure data to potentially improve the efficiency of primary care service delivery. Consistent with federal internal control standards, using such data in conjunction with reliable panel size data could be a potent tool in “right- sizing” panel sizes to best serve veterans’ needs and deliver primary care efficiently.", "We recommend that the Secretary of the Department of Veterans Affairs, direct the Undersecretary for Health to take the following two actions to improve the reliability of VA’s primary care panel size data and improve VA Central Office and the networks’ oversight of facilities’ management of primary care: Incorporate in policy an oversight process for primary care panel management that assigns responsibility, as appropriate, to VA Central Office and networks for (1) verifying each facility’s reported panel size data currently in PCMM and in web-PCMM, if the software is rolled- out nationally, including such data as the number of primary care patients, providers, support staff, and exam rooms; and (2) monitoring facilities’ reported panel sizes in relation to the modeled panel size and assisting facilities in taking steps to address situations where reported panel sizes vary widely from modeled panel sizes.\nReview and document how to use encounter and expenditure data in conjunction with panel size data to strengthen monitoring of facilities’ management of primary care.", "VA provided written comments on a draft of this report, which we have reprinted in appendix II. In its comments, VA agreed with our conclusions, concurred with our two recommendations, and described the agency’s plans to implement our recommendations. VA also provided technical clarifications and comments on the draft report, including the recommendations contained in the draft report. We incorporated these comments, as appropriate. In particular, we modified our first recommendation in the draft report and now recommend that VA verify each facility’s panel size data in PCMM and, if the latter is available, in web-PCMM. We made this change to reflect the continued uncertainty over the implementation of the web-PCMM software. In addition, we modified our second recommendation in the draft report and no longer recommend VA incorporate into existing VA policy a requirement that the agency and its networks use encounter and expenditure data to strengthen the monitoring of facilities’ management of primary care. We made this change to reflect that VA officials were not prepared to incorporate such a requirement without first examining how to use these data for monitoring purposes.\nTo address our first recommendation, VA stated that it plans to issue guidance by September 2016 clarifying VA Central Office’s and the networks’ oversight responsibilities with regard to primary care panel size data. This guidance will include a process—developed by the Offices of Primary Care Services and Primary Care Operations—for addressing medical facilities whose panel sizes differ significantly from similar facilities’ panels. In its response, however, VA did not provide information on how it plans to address unreliable panel size data facilities record and report in PCMM. We would encourage VA, in the guidance it plans to issue in 2016, to assign responsibility for verifying each facility's reported panel size data as we recommended. To address our second recommendation, VA stated that it will take steps to understand encounter and expenditure data and determine how best to utilize these data to improve patient care with a target completion date for presenting its findings and decisions by September 2018.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 14 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of Veterans Affairs. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "We analyzed Department of Veterans Affairs (VA) fiscal year 2014 data on primary care expenditures and calculated expenditures per unique primary care patient. We found that expenditures per unique primary care patient varied widely across facilities in fiscal year 2014, ranging from $558 to $1,544 after adjusting to account for geographic differences in labor costs across facilities. We found that the expenditures per unique patient at 102 of the 140 facilities we reviewed were within $167 or one standard deviation—a statistical measure of variance—of VA’s overall average of $871. For the remaining facilities, expenditures per unique patient were at least one standard deviation above the average (19 facilities) or were at least one standard deviation below the average (19 facilities), which may indicate potential outliers that VA Central Office and the networks may need to examine further. (See fig. 4.)", "", "", "", "In addition to the contact named above, Rashmi Agarwal, Assistant Director; James Musselwhite, Assistant Director; Kathryn Black; Krister Friday; Cathleen Hamann; Aaron Holling; Emily Wilson; and Michael Zose made key contributions to this report.", "Department of Veterans Affairs: Expanded Access to Non-VA Care Through the Veterans Choice Program. GAO-15-229R. Washington, D.C.: Nov 19, 2014.\nVA Health Care: Actions Needed to Ensure Adequate and Qualified Nurse Staffing. GAO-15-61. Washington, D.C.: Oct 16, 2014.\nVA Health Care: Ongoing and Past Work Identified Access, Oversight, and Data Problems That Hinder Veterans’ Ability to Obtain Timely Outpatient Medical Care. GAO-14-679T. Washington, DC: Jun 9, 2014.\nVA Health Care: VA Lacks Accurate Information about Outpatient Medical Appointment Wait Times, Including Specialty Care Consults. GAO-14-620T. Washington, D.C.: May 15, 2014.\nVA Health Care: Ongoing and Past Work Identified Access Problems That May Delay Needed Medical Care for Veterans. GAO-14-509T. Washington, D.C.: Apr 9, 2014." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "h0_full h3_full h1_title", "h0_full", "h3_full h1_full", "h2_title", "h2_full", "h2_full", "h2_full", "", "h3_full", "", "", "", "", "", "h0_full h3_full" ] }

{ "question": [ "What did GAO find regarding the VA's data on primary care panel sizes?", "How did VA officials respond to these findings?", "How did GAO process collected data from primary care facilities?", "What did this data reveal?", "What concerns does this data raise?", "What issues did GAO find with the VA's data management?", "How does this compare to federal internal quality control standards?", "How does not meeting the federal control standards negatively affect the VA?", "What did GAO find about VA's primary care encounter and expenditure data in contrast to panel data?", "What might these wide variations indicate?", "How does the VA use panel size data?", "How does this differ from federal internal control standards?", "How could using panel size data in conjunction with encounter and expenditure data benefit the VA?", "How does not using panel size data negatively affect the VA?", "What was GAO asked to examine?", "What this report address?", "How did GAO collect data for this report?" ], "summary": [ "GAO found that the Department of Veterans Affairs' (VA) data on primary care panel sizes—that is, the number of patients VA providers and support staff are assigned as part of their patient portfolio—are unreliable across VA's 150 medical facilities and cannot be used to monitor facilities' management of primary care. Specifically, as part of its review, GAO found missing values and other inaccuracies in VA's data.", "Officials from VA's Primary Care Operations Office confirmed that facilities sometimes record and self-report these data inaccurately or in a manner that does not follow VA's policy and noted that this could result in the data reliability concerns GAO identified.", "GAO obtained updated data from six of seven selected facilities, corrected these data for inaccuracies, and then calculated the actual panel sizes for the six facilities.", "GAO found that for these six facilities the actual panel size varied from 23 percent below to 11 percent above the modeled panel size, which is the number of patients for whom a provider and support staff can reasonably deliver primary care as projected by VA.", "Such wide variation raises questions about whether veterans are receiving access to timely care and the appropriateness of the size of provider workload at these facilities.", "Moreover, GAO found that while VA's primary care panel management policy requires facilities to ensure the reliability of their panel size data, it does not assign responsibility to VA Central Office or networks for verifying the reliability of facilities' data or require them to use the data for monitoring purposes.", "Federal internal control standards call for agencies to clearly define key areas of authority and responsibility, ensure that reliable information is available, and use this information to assess the quality of performance over time.", "Because VA's panel management policy is inconsistent with federal internal control standards, VA lacks assurance that its facilities' data are reliable and that the facilities are managing primary care panels in a manner that meets VA's goals of providing efficient, timely, and quality care to veterans.", "In contrast to VA's panel data, GAO found that primary care encounter and expenditure data reported by all VA medical facilities are reliable, although the data show wide variations across facilities. For example, in fiscal year 2014, expenditures per primary care encounter—that is, a professional contact between a patient and a primary care provider—ranged from a low of $150 to a high of $396 after adjusting to account for geographic differences in labor costs across facilities.", "Such wide variations may indicate that services are being delivered inefficiently at some facilities with relatively higher per encounter costs compared to other facilities.", "However, while VA verifies and uses these data for financial purposes, VA's policies governing primary care do not require the use of the data to monitor facilities' management of primary care.", "Federal internal control standards state that agencies need both operational and financial data to determine whether they are meeting strategic goals and should use such data to assess the quality of performance over time.", "Using panel size data in conjunction with encounter and expenditure data would allow VA to assess facilities' capacity to provide primary care services and the efficiency of their care delivery.", "By not using available encounter and expenditure data in this manner, VA is missing an opportunity to potentially improve the efficiency of primary care service delivery.", "GAO was asked to examine these data and VA's oversight of primary care.", "This report examines (1) VA's panel size data across facilities and how VA uses these data to oversee primary care, and (2) VA's encounter and expenditure data across facilities and how VA uses these data to oversee primary care.", "GAO analyzed fiscal year 2014 data on primary care panel size, encounters, and expenditures for all VA facilities. GAO also conducted a more in-depth, nongeneralizable analysis of data and interviewed officials from seven facilities, selected based on geographic diversity and differences in facility complexity. GAO also interviewed VA Central Office and network officials to examine their oversight of primary care, including the extent to which they verify the data and use it to monitor the management of primary care." ], "parent_pair_index": [ -1, 0, -1, 2, 3, -1, 0, 0, -1, 0, -1, 2, 2, 2, -1, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4, 4, 4, 1, 1, 1 ] }

{ "title": [ "Background", "ARS and NIFA Use Agency and Scientific Safeguards to Prevent Duplication of Research Projects in Similar Topic Areas, but Some Shortcomings Exist", "ARS and NIFA Generally Focus on the Same Broad Topic Areas", "The Agencies Rely on Various Safeguards to Prevent Duplication of Research Projects", "Some Shortcomings May Limit the Utility of Certain Agency Safeguards", "High-Level Collaborative Planning Has Increased, but Agency-Level Collaborative Planning between ARS and NIFA Has Not Been Systematic", "High-Level Collaborative Planning Has Generated Key Products", "Several USDA Officials Said That Collaborative Planning between ARS and NIFA Has Not Been Systematic", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the U.S. Department of Agriculture", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The United States’ publicly funded agricultural research system is a critical component in finding answers to urgent global problems, including establishing sustainable food production, providing clean and abundant water, and strengthening food safety (see fig. 1). This public system is based on a federal-state partnership in which USDA and the states, through their land-grant colleges and universities, play multiple roles in agricultural research, extension, and education. According to a 2011 USDA report, studies have shown that private research productivity depends on government and university investments in science and technology. The federal, state, and private sectors provided 27 percent, 12 percent, and 61 percent, respectively, of total U.S. agricultural research funding in 2007, according to the most recent USDA estimate.\nThe federal portion of this public research system, with roots dating back to the 19th century, is overseen by USDA’s REE mission area. The REE mission area comprises the following four agencies:\nARS, USDA’s key intramural research agency;\nNIFA, USDA’s key extramural research agency; the Economic Research Service, USDA’s key intramural economics and social science research agency; and the National Agricultural Statistics Service, focused on agricultural statistics.\nThe Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) reorganized this mission area to include an umbrella coordinating unit within the Office of the Under Secretary for REE. The 2008 Farm Bill also designated the Under Secretary for the REE mission area as USDA’s Chief Scientist, and USDA also refers to this umbrella unit as the Office of the Chief Scientist. Accordingly, the Chief Scientist is to ensure, among other responsibilities, that USDA’s research, education, and extension activities are coordinated and integrated across agencies and disciplines. In addition, six division chiefs—commonly referred to by USDA as senior advisors—are to assist the Chief Scientist in identifying and addressing emerging needs and priorities in research, education, and extension.\nMandated by the 2008 Farm Bill, the Under Secretary of REE (i.e., USDA’s Chief Scientist) developed a Roadmap for USDA Science in 2010 to set USDA’s research, education, and extension agenda. This document identified five USDA priorities: bioenergy, climate change, food safety, international food security, and child nutrition. The Roadmap stated that solutions to many of modern society’s most intractable problems demand change that USDA would bring about by, for example, (1) better coordinating its science planning among and between REE science agencies and with other federal science agencies; (2) listening to the needs of stakeholders; and (3) institutionalizing outcome-driven scientific program planning and implementation. The 2008 Farm Bill specified that the Roadmap was not to be subject to review by any federal employee other than the Secretary of Agriculture or his designee.\nIn early 2012, the Chief Scientist followed up on issuance of the Roadmap with a document titled Research, Education, and Economics Action Plan (REE Action Plan). The REE Action Plan identifies seven goals that support top priorities for USDA science: (1) local and global food supply and security, (2) climate and energy needs, (3) sustainable use of natural resources, (4) nutrition and childhood obesity, (5) food safety, (6) education and science literacy, and (7) rural prosperity and rural-urban interdependence. Each of these seven goals has strategies and planned actions designating the specific USDA agencies that are to be responsible for implementing the actions (see fig. 2 for an excerpt). In addition, the first three goals are divided into multiple subgoals, each of which also has planned actions, or actionable items, designating the specific USDA agencies that are to be responsible.\nWithin REE, research conducted or funded by ARS and NIFA, respectively, may be basic or applied. According to USDA’s website, basic research discovers the underlying processes and systems that make a plant, animal, ecosystem, food system, community, or marketplace work. For example, basic research might seek to discover the genetic map of a plant or animal or to show how economic and human resources affect economic growth in rural areas. In contrast, applied research expands on basic research findings to uncover practical ways in which new knowledge can be advanced to benefit individuals and society. For example, in an applied research project, researchers might use a genetic map constructed through basic research to develop methods to combat plant and animal diseases. NIFA-funded research may also be integrated, in that it involves education and extension activities, as well as research.\nBoth ARS and NIFA solicit stakeholder input. Agency stakeholders consist of individuals and institutions that conduct or use agricultural research, education, and extension services provided by or for the agencies. These stakeholders include representatives of commodity groups, industry, interagency federal working groups, scientific societies, and university partners. Stakeholders also include members of the REE advisory board, which comprises 25 members, each representing a specific stakeholder category, such as a national nutritional science society or national farm organizations. ARS itself is considered a NIFA stakeholder because ARS scientists are eligible to compete for certain NIFA grants. In turn, NIFA is a stakeholder of ARS.\nUSDA differs from other federal science agencies in that the majority of its annual research appropriation supports research done in-house, or intramurally; in contrast, most federal science agencies primarily fund research done elsewhere, or extramurally. As USDA’s principal intramural research agency, ARS had over 2,200 research scientists in fiscal year 2012, who carried out about 800 research projects at more than 90 facilities nationwide and in a few foreign countries. To manage its 18 national research programs, ARS has developed a 5-year research cycle, consisting of four activities: stakeholder input, planning, implementation, and assessment. About 25 ARS national program leaders define and articulate the scope and objectives of each of these national programs with input from their various stakeholders; ARS scientists and managers; and others, including Congress. A key means of acquiring stakeholder input is through a meeting with stakeholders conducted at the start of each 5-year cycle. During this meeting, ARS gathers stakeholder input and defines which research problems it will address in the next 5 years to help meet high-priority needs within the agricultural community. Each national program uses this stakeholder input to help develop a research plan.\nNIFA is USDA’s primary extramural research agency, and, unlike staff of ARS, who conduct their own research, NIFA staff do not conduct research. Rather, NIFA’s 350 staff members, including about 70 national program leaders, help fund research at the state and local level, primarily through grants, and provide program leadership to state and local officials in research, education, and extension. Recipients of NIFA funds include 59 state agricultural experiment stations (i.e., the research arm of land- grant colleges and universities), 63 schools of forestry, 18 historically black land-grant colleges, 27 colleges of veterinary medicine, and other institutions and individual scientists. Figure 3 identifies the locations of ARS facilities, along with the land-grant colleges and universities established under the Morrill Act of 1862, those established under the Second Morrill Act of 1890 (historically black land-grant colleges), and those established under the Equity In Educational Land-Grant Status Act of 1994 (tribal colleges).\nCongressional legislation establishes the funding levels, eligibility requirements, and scope for each of NIFA’s research, education, and extension programs, and NIFA’s national program leaders manage and oversee these programs. NIFA generally funds grants for 1 to 4 years. In addition to direction from Congress, stakeholder input informs the development of NIFA requests for applications to its competitive grants programs. Each request generates from 2 to 600 applications, each of which must undergo external peer review by a panel of 3 to 25 individuals with expertise in the relevant field. The panels evaluate each application for scientific merit, how well the application addresses the research priorities, and the work’s potential to make a positive scientific impact. The panels then rank the applications and recommend the top projects for eventual funding. NIFA awards the following types of grants for distributing its research funds:\nFormula grants (commonly referred to as formula funds). Through several program authorities, NIFA provides funds for research and extension to land-grant colleges and universities, schools of forestry, and schools of veterinary medicine. The amount of funding provided to each institution is determined by formulas, often statutorily defined, which may include variables such as rural population, farm population, and poverty levels. According to NIFA’s website, local or regional university leaders decide which specific projects are to be supported by an institution’s formula grant allotment. As a result, according to a 2011 Congressional Research Service report, specific research priorities for formula grants tend to be more geographically focused than for NIFA’s other grants.\nCompetitive grants. NIFA awards nearly 40 types of competitive grants for research, extension, and higher education, as well as for projects that integrate all three activities. Competitive grants are designed to enable USDA to (1) attract a wide pool of applicants to work on agricultural issues of national interest and (2) select the best- quality applications submitted by highly qualified individuals, institutions, or organizations. Eligibility, administrative rules, and procedures vary for each specific competitive grant program according to authorizing statutes, and NIFA awards funds following external peer review of the applications. NIFA’s flagship competitive grant program is the Agriculture and Food Research Initiative, which funds research, education, and extension in the food and agricultural sciences and, according to NIFA’s website, awards grants to address agricultural problems of national, regional, or multistate importance.\nNoncompetitive grants. Before fiscal year 2011, according to the 2011 Congressional Research Service report, appropriated NIFA funds were directed by Congress to support a designated institution or set of institutions for particular research, education, or extension topics of local, regional, or national priority. These projects were supported through “special research grants” or “direct federal administration research or education grants.” Recent appropriations have not included such spending items, allowing NIFA to award more of its funds through competitive grants, according to USDA officials.\nEven with growing demand for agricultural research over the past decade, total appropriations for ARS and NIFA decreased when adjusted for inflation. Specifically, from fiscal year 2002 through fiscal year 2011, funding for ARS decreased by 23 percent, from $1.2 billion to $934 million, and funding for NIFA increased by more than 28 percent, from $1.1 billion to $1.3 billion. When adjusted for inflation, however, ARS and NIFA funding decreased by nearly 42 percent and 3 percent, respectively.\nTo document USDA’s publicly funded activities, including research conducted or funded by the department, and to provide ready access to information about its research projects and related work, USDA in 1966 developed CRIS. According to officials from NIFA, which is responsible for managing this system, CRIS contains descriptive project-by-project information for all completed and ongoing projects carried out or funded by ARS and NIFA, respectively, and by some other USDA agencies and state institutions. USDA scientists, stakeholders, and the public can search CRIS for ARS and NIFA projects, as well as for some information on related publications and researchers. USDA has expanded CRIS over time to also cover a number of education, extension, and integrated activities. According to NIFA’s website, a part of CRIS’s mission is to help users do the following: keep abreast of the latest developments in agricultural and forestry research and education, plan future activities, avoid costly duplication of publicly funded work, and establish valuable contacts within the research and education community.\nConcerning collaboration among federal agencies, in March 2000, we reported that agencies face a range of barriers when they attempt to collaborate with other agencies. Faced with these barriers, federal agencies carry out programs in a fragmented, uncoordinated way, resulting in a patchwork of programs that can waste scarce funds, confuse and frustrate program customers, and limit the overall effectiveness of the federal effort. Subsequently, in an October 2005 report, we discussed key practices that can help enhance and sustain collaboration among federal agencies. Among the practices we identified were (1) defining and articulating a common outcome; (2) defining and agreeing on roles and responsibilities; (3) establishing mutually reinforcing or joint strategies; (4) identifying and addressing needs by leveraging resources; and (5) establishing compatible policies, procedures, and other means to operate across agency boundaries. In our 2005 report, we stated that, while we generally believe that the application of as many of these practices as possible increases the likelihood of effective collaboration, we also recognize that agencies work together in a wide range of situations and circumstances.", "ARS and NIFA generally focus on many of the same broad topics, and the agencies rely on agency-developed safeguards, as well as on the scientific community’s professional norms, to prevent duplication of research projects within and between the agencies. Indeed, agency officials and stakeholders could provide no recent examples of duplication within or between the two agencies, and our review of 20 randomly selected agency research projects did not identify duplicative projects. Nevertheless, our review identified some shortcomings in certain safeguards the agencies rely on—shortcomings that somewhat limit the utility of these safeguards in preventing duplicative research.", "ARS and NIFA generally focus their work on the same broad topic areas. Our analysis of each agency’s research spending for fiscal years 2002 through 2011 shows that during this period, ARS performed and NIFA funded scientific activities in largely the same six broad topic areas: (1) plant systems; (2) human nutrition; (3) animal systems; (4) natural resources; (5) food and nonfood products; and (6) agricultural, natural resource, and biological engineering. For example, in fiscal year 2011— the most recent year for which data from the agencies were available— both agencies performed or funded work on plant systems (ranging from plant genetics to plant pests) more than on any other topic area, representing about 41 percent of ARS’s total $1.1 billion research spending and about 23 percent of NIFA’s total $1 billion fiscal year 2011 research spending (see table 1). ARS and NIFA both focused the next- largest shares of their spending in fiscal year 2011 on human nutrition, animal systems, and natural resources. NIFA also funded activities in two topic areas on which ARS did limited or no research from fiscal year 2002 through 2011: (1) economics, markets, and policy and (2) families, youth, and communities. Similarly, within some topic areas, ARS conducted research on certain issues that NIFA did not fund. For example, ARS includes six human nutrition research centers that conduct studies on a wide range of topics, such as the nutrient content of commonly eaten foods and food choices in schools.\nARS and NIFA also share responsibility for many actions needed to address REE goals as identified in its 2012 REE Action Plan. Our analysis of the 2012 REE Action Plan shows that ARS and NIFA share responsibility for two-thirds of the 139 planned actions delineated as involving either agency or both. Specifically, the action plan identifies ARS and NIFA as jointly responsible for 92 (66 percent) of the 139 planned actions. For the remaining 47 planned actions (34 percent), ARS or NIFA is solely or partially responsible. These planned actions align with strategies REE identified as needed to address its seven goals. For example, to help address its nutrition and childhood obesity goal, the action plan discussed a strategy to develop and extend approaches for preventing obesity and related diseases, and it designated both ARS and NIFA as responsible for determining the causes and consequences of obesity and related conditions.", "ARS and NIFA use various safeguards to prevent duplication of research projects within and between the agencies. Specifically, each agency has built its own safeguards against project duplication into processes for developing and reviewing research proposals. The agencies also rely on the scientific community’s professional norms, which discourage duplicating the work of other scientists, even in similar topic areas. Indeed, agency officials and stakeholders could provide no recent examples of duplication within or between the two agencies, and our review of 20 randomly selected agency research projects did not identify duplicative projects.\nARS has developed several internal agency safeguards to help prevent duplication, which operate at different stages in the agency’s 5-year research cycle. The agency implemented this research cycle to help ensure the relevance, quality, and impact of its research. As part of the cycle, leaders from ARS’s 18 national programs assign research objectives to scientists in the field, and to meet those objectives, these scientists, in turn, work with national program and local area management to develop project plans for the forthcoming 5-year period. Project plans are reviewed by independent experts in the relevant field of science, ARS managers and officials, including those in ARS’s Office of Science Quality Review. The key safeguards ARS developed to help prevent duplicative research projects include the following:\nNational program leaders set research project objectives. ARS’s national program leaders set the objectives for all proposed research under the agency’s 18 national programs and review each proposal to ensure that research plans align with assigned objectives. Specifically, national program leaders work with local managers to translate the research priorities of each national program into research objectives for the next 5 years. According to ARS officials, this step serves to prevent research duplication because national program leaders who write and assign the objectives can see if, for two different research projects, they are writing objectives that are too similar, and these national program leaders can rework objectives to be distinct.\nScientists develop project plans using specific guidance. Teams of ARS scientists then use the objectives approved by the national program leaders to develop project plans—research proposals for either a single assigned research objective or a group of assigned objectives. These project plans are to discuss the nature of the problem to be addressed and detail experimental approaches for examining the problem. According to USDA officials, each national program has multiple project plans, each addressing different objectives within the national program. ARS guidance states that each project plan must (1) discuss gaps in knowledge that proposed research is intended to address and (2) describe how proposed research relates to, and complements, other related research within and outside of USDA. Together, these required discussions of gaps in knowledge and relation to other research help the agency identify and prevent approval of potentially duplicative research projects within and outside of ARS.\nNational program leaders review project plans. Throughout development of each project plan and after a plan is complete, ARS national program leaders and local managers review the proposed research to ensure that the final objectives are consistent with the ones assigned. This process can identify when two research proposals are too similar or when a proposal has the potential to duplicate other proposed or existing work. For example, one scientist told us that his national program leader noticed that his proposed applied microbiology research was very similar to work already being done at another ARS laboratory. As a result, this scientist ceded his research to the other laboratory, thus averting duplication within ARS.\nExternal peer review by independent experts. In response to the Agricultural Research, Extension, and Education Reform Act of 1998, which requires the establishment of procedures for external peer review every 5 years of all research conducted by ARS, ARS scientists now submit completed project plans for review by an external panel of scientific experts before ARS approves funding for any research. According to ARS officials, successful completion of external peer review as a prerequisite for ARS’s funding of its own intramural research was a significant change for the agency. ARS’s Office of Science Quality Review coordinates this external peer review, in which external peer review panels—comprising non-ARS scientists selected for their expertise in a field pertinent to the research proposals under review and coming from different places, such as universities, industry, or other federal agencies including NIFA—independently assess the quality of ARS’s proposed research, including specific assessment of each proposal’s significance and relevance. According to agency officials, these external peer review panels each typically review from 4 to 12 ARS project plans and evaluate individual project plans for adequacy of their experimental approaches, probability of their success in achieving stated objectives, and significance of the proposed research. On the basis of recommendations from the peer review panels, officials from ARS’s Office of Science Quality Review certify project plans that successfully pass peer review or decline to certify plans that fail to adequately address peer reviewers’ concerns. ARS’s best practices on peer review state that the agency’s project plans must provide assurance that proposed work addresses a unique gap in knowledge and is not duplicative of ongoing or completed ARS work. Moreover, ARS guidance states that ARS scientists are to demonstrate to peer reviewers that they are aware of others performing similar research and to show how ARS’s proposed research is unique. Successful completion of ARS’s external peer review means that a proposed project has scientific merit and addresses relevant gaps in knowledge—including, in essence, that the proposed research is not duplicative.\nCRIS search for duplication. ARS guidance directs the agency’s scientists to search CRIS for potentially duplicative projects when preparing their project plans. As part of “due diligence,” ARS scientists must show that research proposed in their project plans is relevant and unique, and ARS guidance directs the scientists to survey relevant literature, including searching CRIS. According to ARS officials, the purpose of this CRIS search is to see if ARS or NIFA has already funded the research the scientists are proposing. ARS officials responsible for managing external peer review commented that this CRIS search is typically the best method for identifying potentially duplicative government research. In addition, the officials told us that reviewers expect to see that such a CRIS search has been done and will say if they feel that the search has not been done adequately. ARS officials told us that this CRIS search generally consists of using keyword lists associated with each project in CRIS and names of scientists leading the work to identify projects that might be too similar or have overlapping objectives. For example, an ARS team proposing to work on avian influenza found through its CRIS search that NIFA had funded a grant on various avian influenza strains; after reading the objectives of that grant, however, the team determined that, although similar, these objectives were not the same and that the ARS team’s research would be substantively different and not duplicative.\nLike ARS, NIFA has also built several agency safeguards into its reviews of proposed work, which help prevent the funding of potentially duplicative research projects. These safeguards operate in NIFA’s competitive grants programs and, to some extent, in the provision of formula funds to the states. The key safeguards NIFA relies on to help prevent duplicative projects include the following:\nExternal peer review of competitive grant applications. NIFA uses panels of external scientists—typically comprising 3 to 25 experts in the field pertinent to the applications being reviewed—to assess the strengths and weaknesses of all competitive grant applications and to confirm that proposed work is original. These panels generally review each application on the basis of scientific merit and how well the application addresses, among other things, NIFA’s research priorities. For example, criteria for the agency’s Agriculture and Food Research Initiative include, among other factors, originality of proposed research and relevance to NIFA priorities, including the importance of the proposed topic to agriculture. As part of their assessments, peer review panels check that the proposed work is not already funded by other grant-making agencies. According to USDA officials, panelists rely on their own familiarity with work in their fields to determine whether a proposed project duplicates existing work in those fields.\nApplication forms for competitive grants. According to agency officials, they use the application process to help identify and discourage potential duplication. NIFA requires competitive grant applicants to submit two forms, each of which serves as a partial check against potentially duplicative projects. The first form, called the Current and Pending Support form, requires a project’s lead researcher to document all sources of funding requested or received for his or her active and pending projects. The second form requires applicants to verify whether their application has also been submitted to other agencies for funding and states that submitting the same application in response to more than one NIFA request for application is not permissible. According to NIFA officials, information in these forms can alert the peer review panel or national program leader reviewing applications to instances where the research proposed in an application under review has already been funded, or is currently being considered for funding, by NIFA as part of a separate application and thus serves as a safeguard against duplication.\nCRIS duplication check for competitive grants under the Agriculture and Food Research Initiative. NIFA’s national program leaders direct staff to conduct a CRIS duplication check, using relevant keywords and the names of lead scientists, before awarding funds for any application submitted to this key competitive grant program. NIFA guidance on reviewing Agriculture and Food Research Initiative applications states that national program leaders must check CRIS to determine if the proposed work has already been funded by NIFA or ARS and to ensure that it is not unnecessarily repeating work not yet published. National program leaders must also check if the proposed work is receiving funds from two different sources for essentially the same work. NIFA guidance states that the Agriculture and Food Research Initiative will not fund projects that overlap with work already being funded by USDA or work that is unnecessarily duplicative.\nNational program leaders are to document this CRIS search and attest to the proposed work’s originality and uniqueness.\nReview of formula funds for innovation. Even though formula-funded projects do not undergo external peer review, and NIFA’s national program leaders are not required to check CRIS for duplication when reviewing formula-funded projects, agency guidance emphasizes that work proposed for formula funds be relevant and innovative. NIFA guidance states that, as part of their general quality review, national program leaders should consider whether the proposed research addresses an important problem. In addition, NIFA guidance directs national program leaders to assess whether the proposed work is innovative, by asking whether it has the potential to add to the body of scientific knowledge by, among other things, addressing new issues or taking an innovative approach. This assessment in effect evaluates whether the proposed project is potentially duplicative of other research and thus serves to safeguard against duplication.\nIn addition to the agency safeguards they have developed, ARS and NIFA rely on several of the scientific community’s professional norms to help safeguard against duplicating research projects. According to agency officials, scientists we spoke with, and the literature we examined about science, the agencies rely on three such professional norms:\nScientists have a strong incentive to produce original research and to make new discoveries. According to scientists and stakeholders, scientists are rewarded for producing new or original research, not for re-creating existing work; grants are not awarded for duplicative research. Scientists we spoke with often told us that a scientist would be penalized professionally for conducting research that unnecessarily duplicated another’s work. According to the 1991 National Academies report, a premium is placed on making breakthrough discoveries, and penalties may accrue for doing unnecessarily duplicative work, including difficulty in obtaining federal or private funding for future research.\nScientists must stay abreast of new research in their field to stay competitive. According to numerous scientists and USDA officials we spoke with, scientists must stay abreast of new research in their fields to incorporate novel ideas into their research, compete for research funding, and advance in their careers. Scientists keep current by reading professional journals; attending scientific conferences and related gatherings, where they and their peers present new findings; and communicating with colleagues worldwide on a continual basis. Moreover, scientists must successfully publish the results of their work in scientific journals to be competitive for new funding and promotions at the university level. This practice is also true for scientists at ARS, according to several ARS officials we spoke with. In fact, several scientists we spoke with echoed the expression “publish or perish,” underscoring the need for scientists to publish new findings in journals to remain competitive. According to USDA officials, the requirement to publish in peer-reviewed journals is an element in every ARS scientist’s annual performance plan, and a chronic failure to publish is grounds for termination of employment. Staying in touch with other scientists through online networks, conferences, and scientific publications reduces the likelihood of duplication.\nThe peer review process used by scientific journals limits the publication of unnecessarily duplicative research. As described in the literature we examined and illustrated by scientific journals’ instructions to authors and reviewers, peer review is the means journals use to vet the accuracy and quality of articles before they are published. Scientists submit articles detailing their research findings to a publication of their choice, which then sends the articles to several scientists working in the research area discussed by the article. These reviewers provide feedback on submitted articles and recommend to the publication’s editor whether they think the research merits publication. As explained in the literature we examined, only articles that meet certain scientific standards—including building on and not duplicating other work in the research area, as well as being sufficiently original, significant, and valid to merit the attention of other scientists—are accepted for publication. In effect, according to the 1991 National Academies’ report, the peer review process serves to limit unnecessary duplication of research.\nUSDA officials we spoke with stated that duplication of research projects had occurred in previous years, especially before ARS implemented its external peer review process, and NIFA shifted to more competitive grants. Moreover, in a March 2012 hearing, the Secretary of Agriculture testified before Congress that some duplication in research projects may exist today. During our review, however, USDA officials and stakeholders could provide no recent examples of duplication within or between ARS and NIFA, and many stakeholders told us that duplicative research projects were not a problem for ARS and NIFA today. In addition, we did not identify duplicative projects within or between the two agencies during our review of selected research projects. Some stakeholders and USDA officials called our attention to instances where they believed ARS or NIFA supported research that appeared duplicative but that, upon further investigation, was found to be complementary. For example, ARS researchers who used the agency’s base funding to study the potential of ultraviolet processing to improve the healthfulness of foods received a NIFA grant under the Agriculture and Food Research Initiative to investigate whether ultraviolet light improved the nutritional properties of a wide range of specialty crops, such as berries and apples. We found that this work built on previous ARS research in mushrooms in a way that extended ARS’s research, rather than duplicating it. Other instances called to our attention were, in fact, cases where industry intentionally funded research duplicating what ARS or NIFA was already funding to see which team would find the better solution. Further, we found no instances of actual duplication within or between ARS and NIFA during our review of 10 ARS and 10 NIFA research projects (see app. I for more information).", "Our review also identified some shortcomings with certain agency safeguards, which may somewhat limit their usefulness and increase the potential risk of duplication between or within the two agencies. Three of these shortcomings limit CRIS’s utility to guard against duplication of research projects, specifically, (1) ARS data in CRIS are not current; (2) NIFA directs staff to conduct a CRIS duplication check for what amounts to two-thirds, but not all, of its competitive grants; and (3) CRIS searches are not user friendly.\nAccording to USDA officials, the effectiveness of CRIS in preventing duplicative research projects depends on the system’s information on new, ongoing, and completed research. Our analysis of agency safeguards, however, showed that project information in CRIS may not be current because ARS has not always sent its project information in a timely manner to be entered into CRIS by NIFA, which maintains the system. ARS sends information in batches once or twice per fiscal year on its newly started or revised projects for uploading into CRIS. In contrast, NIFA officials stated that they upload information on new and revised NIFA projects continually throughout the year. According to ARS officials, the agency sent its project information for uploading only once in fiscal year 2011 (June), twice in fiscal year 2010 (February and July), and twice in fiscal year 2012 (February and June). According to ARS officials, any given batch contains data on all research projects started or revised since ARS sent its last batch of project data. For example, the July 2010 batch contained information on all ARS projects started or revised since March 1, 2010 (see fig. 4). All together, we found that information in CRIS about ARS projects started from February 2010 to December 2012 was typically at least 6 months out-of-date; at least one new project we identified was nearly 21 months old when ARS sent information about it to NIFA for uploading into CRIS.\nARS project information that is typically at least 6 months out-of-date when uploaded limits CRIS’s utility as a safeguard to prevent duplication of research projects and increases the risk of inadvertent project duplication at the two agencies. For example, a university scientist or NIFA national program leader searching CRIS for possible duplication could inadvertently propose or approve a project that unnecessarily duplicates an ARS project that might have started nearly a year before but had not been posted in CRIS. Agency information technology staff and managers agreed that sending ARS project data more often—such as quarterly—would be feasible, cost no more than 1 additional staff day of work, and increase CRIS’s utility as a safeguard to prevent project duplication by keeping ARS’s project information up-to-date. NIFA and ARS officials also acknowledged that requiring submissions of project information at least quarterly would help prevent other workload priorities from delaying ARS submissions. After discussing this topic with us, agency officials said that ARS now expects its staff to send ARS project information on a quarterly basis to NIFA for uploading. This expectation, however, is not documented in guidance. Under federal standards of internal control, agencies are to clearly document internal control in writing, in the form of management directives, administrative policies, or operating manuals.\nNIFA directs its staff to conduct a CRIS duplication search for certain projects accounting for about two-thirds of the funding it awarded for competitive grants over the last decade. In response to a 2008 USDA Inspector General’s recommendation specifically directed at grant applications for the predecessor to the Agriculture and Food Research Initiative, NIFA developed written guidance directing that such a duplication check specifically be done for Agriculture and Food Research Initiative grants. That recommendation advised the agency to develop written guidance—rather than rely on informal, unwritten guidance—for these types of grants. As a result, NIFA guidance states that its national program leaders must search CRIS for possible duplication when reviewing project applications recommended for funding under its Agriculture and Food Research Initiative; these projects, however, accounted for about two-thirds, but not all, of the agency’s competitive grant funding. The duplication search directive does not apply to projects funded by NIFA’s other competitive grants or to formula-funded grants. The amount of funding for competitive grants not subject to this directive has increased each year from about 31 percent of the funds the agency awarded for competitive grants in fiscal year 2002 to more than one-third, or about 37 percent, of the funds the agency awarded for competitive grants in fiscal year 2011. Thus, an increasing amount of the agency’s competitive grant funding has been awarded to projects without the benefit of this safeguard. In contrast, ARS’s CRIS search directive applies to all project plans proposed by ARS.\nAlthough NIFA responded to the 2008 USDA Inspector General’s recommendation by issuing written guidance directing staff to conduct CRIS duplication checks for the Agriculture and Food Research Initiative, it has not issued similar written guidance for the rest of its competitive grant programs. According to NIFA officials, many but not all national program leaders informally conduct CRIS duplication checks when reviewing competitive grant applications that are not part of the initiative, even though no written guidance explicitly directs them to do so. The agency recently convened a task force to study, among other issues, whether this directive should be extended to other competitive grants. At the time of our report, the task force was still studying expanding the CRIS duplication search to all competitive grants and had not yet made a decision. Under federal standards for internal control, agencies are to clearly document internal control in writing, and this documentation should be readily available for examination. Without written guidance directing staff to conduct CRIS duplication checks for all of NIFA’s competitive grant programs, the agency does not have an internal control in place to ensure consistency among national program leaders in checking for potential duplication when reviewing applications. As a result, NIFA cannot be assured that grant funds are consistently used for supporting unique work.\nIn addition, NIFA does not conduct CRIS duplication checks on formula- funded grants, meaning that research and related work proposed in the states’ plans of work are also not subject to this safeguard. According to NIFA officials, the agency’s formula funds are often used for researcher salaries and preliminary research, and CRIS duplication checks are not typically applicable. For example, the officials said, enough detail is seldom contained in these high-level plans of work to check CRIS for potential duplication on research objectives. Moreover, many projects proposed for formula funds, such as component parts of multistate projects, are all required to have the same title; consequently, a search in CRIS on any one of these would flag the others as being potentially duplicative, even though they are complementary and intentionally titled the same.\nUSDA officials, including those responsible for system management, acknowledge that CRIS is not user friendly, especially for project searches. Specifically, they reported that CRIS is not straightforward to search; links to authors, publications, and patents are limited or nonexistent; and researcher names are listed inconsistently. For example, as explained by agency officials, one must go through several nonintuitive steps to search all text in the system for specific keywords or subjects, such as “bark beetles” or “bioenergy.” In addition, because CRIS does not have a standard way of listing researcher names, someone using CRIS must enter a single researcher’s name into the system in multiple ways— such as Doe, J., and Doe, J. A.—to be certain of finding all projects by that one researcher. Consequently, CRIS searches are not always efficient, which, according to some scientists, has discouraged or kept researchers from using the system for duplication searches. NIFA has been trying to upgrade CRIS to make it less cumbersome but, according to USDA officials, it has not secured the resources to do so.\nTo provide additional capabilities for accessing and disseminating federal agricultural research, USDA’s Chief Scientist is implementing a new web platform called VIVO, which, according to USDA officials, has powerful search functionality for locating scientists and their research. According to USDA officials, a key purpose of VIVO—which is expected to become operational in 2013—is to serve as a one-stop source for USDA science expertise by integrating project information from all five USDA science agencies, thereby allowing USDA scientists to find possible research partners and allow those outside USDA to easily find USDA expertise in specific scientific topics (e.g., honeybees) or geographic areas (e.g., the Pacific Northwest). Unlike CRIS, VIVO is expected to contain not only information on ARS and NIFA projects but also active links to scientists and associated publications, organizations, patents, projects, and locations and to scientists’ contact information. VIVO also lists scientists—authors and coauthors—in a standardized format. Further, USDA officials stated that VIVO will reflect any new improvements made in the quality of project information fed into CRIS from other USDA project information systems because these systems of record are the source of VIVO’s data. For example, VIVO is expected to reflect improvements under way at NIFA to standardize researchers’ names in CRIS. In addition, USDA officials stated that they expect a related initiative known as STAR METRICS, a collaboration between federal science agencies and research institutions to coordinate federal investments in science, to build on VIVO and use the data to, among other things, illuminate research gaps and potentially duplicative research projects at ARS and NIFA, as well as at other federal science agencies. USDA officials agreed that VIVO has the potential to be a more robust and user-friendly system than CRIS in helping to identify USDA scientists and their work and, thus, in identifying potentially duplicative research projects.\nUnder policy issued by the Office of Management and Budget in 2000, agencies are to ensure that the information systems they select (1) maximize the usefulness of information and minimize any burden on the public and (2) do not unnecessarily duplicate existing information technology capabilities within the same agency, from other agencies, or from the private sector. USDA officials have identified potential benefits of VIVO for both elements of this 2000 policy because of VIVO’s more robust search capabilities. They said, however, that the department has no plans to assess whether VIVO significantly improves search capabilities compared with CRIS or is more effective or efficient than CRIS in identifying potentially duplicative research projects within and between ARS and NIFA. As a result, USDA has not assessed its information systems in a way that would allow it to (1) maximize the usefulness of information and minimize the burden on the public and (2) avoid unnecessarily duplicating existing information technology capabilities, as described in the 2000 Office of Management and Budget policy. Unless USDA officials assess VIVO’s effectiveness and efficiency, and unless USDA officials establish written procedures for staff to use the best method when searching for duplicative research projects, ARS and NIFA scientists and managers could remain dependent on a less robust safeguard.", "Over the past few years, USDA’s Chief Scientist has facilitated increased collaborative planning within the REE mission area, particularly between ARS and NIFA, but agency-level collaborative planning between these two agencies has not been systematic. Specifically, the Chief Scientist and her staff have led several REE-level planning efforts that, over the past several years, have brought together staff from the two agencies and generated key products. Nevertheless, six USDA officials with planning responsibilities said that collaborative planning between ARS and NIFA national program leaders has not been systematic for topic areas the agencies have in common, and 20 officials and stakeholders said that ARS and NIFA should systematically hold joint planning and stakeholder input meetings to make the best use of limited agricultural research resources.", "Over the past few years, the Chief Scientist, her senior advisors, and other staff have led efforts that have facilitated REE-level collaborative planning among ARS, NIFA, and the other REE mission area agencies, and these efforts have resulted in several key products. First, the Chief Scientist led a collaborative planning effort that involved the four REE agencies to develop the REE Action Plan. The Chief Scientist and her staff established seven teams, focused on the action plan’s seven goals, which held planning meetings from November 2010 to February 2012 and involved staff from multiple agencies in developing the subgoals, strategies, planned actions, and agency responsibilities corresponding to the action plan’s goals. For each goal and subgoal, the teams also identified specific challenges facing agriculture, natural resources, and conservation to be addressed by the planned actions. Several USDA officials told us that because the meetings led to more collaboration across REE agencies, these planning meetings were a major benefit of REE Action Plan development. For example, according to one USDA official, discussions among USDA officials during meetings about a subgoal related to energy and biofuels research highlighted the fact that research areas overlapped between USDA and the Department of Energy, creating the potential for duplicative work. Such discussions suggested a solution—a decision to focus USDA research efforts on developing biofuel feedstocks (i.e., materials such as perennial grasses from which biofuels are generated) and to move away from technology for converting materials into biofuels, a research area for which the Department of Energy has predominant responsibility. Further, according to this official, the discussions between ARS and NIFA officials during the development of the REE Action Plan clarified each REE agency’s role in each of the goals, strategies, and planned actions. Overall, this planning effort made use of practices consistent with two we identified in our October 2005 report as helpful to enhance and sustain agency collaboration, in particular, establishing mutually reinforcing or joint strategies and agreeing on roles and responsibilities.\nSecond, the Chief Scientist’s senior advisors led a collaborative effort from early 2011 to mid-2012 that resulted in six specific “white papers,” issued by the Office of the Chief Scientist, on the topics of global food security, bioenergy, nutrition and childhood obesity, climate change, food safety, and sustainable agricultural systems. These white papers were developed through a series of meetings and discussions with multiagency teams from ARS, NIFA, and other USDA agencies, and each white paper was independently peer reviewed. The senior advisors worked with these teams to describe in more detail challenges and strategies identified in the REE Action Plan, including (1) roles to be played by the agencies in addressing each challenge, (2) key strategies to focus on in fulfilling those roles, (3) USDA’s current actions, (4) USDA’s future plans, and (5) the research outcomes that USDA anticipates. Like the collaborative planning that led to the REE Action Plan, the white paper planning effort also made use of collaboration practices consistent with several we previously identified, particularly, defining and articulating a common outcome, establishing mutually reinforcing or joint strategies, and agreeing on roles and responsibilities.\nThird, the Chief Scientist’s senior advisors stated that in 2010 and 2011 they coordinated input from ARS, NIFA, and other agencies to help develop a number of products, including Feed the Future: Global Food Security Research Strategy. Issued in May 2011, this global research portfolio serves as an integral part of the President’s broader Feed the Future initiative. Specifically, the senior advisors said that they established multiagency working groups of USDA officials, who worked with their counterparts in the Agency for International Development to identify research priorities—aimed at sustainably advancing productivity, transforming production systems, and enhancing nutrition and food safety around the world—to help implement this strategy.\nThe Chief Scientist’s senior advisors also facilitated collaborative planning efforts not resulting in products. For example, in September 2012, one senior advisor began an effort to better coordinate ARS’s intramural and NIFA’s extramural research on nutrition and obesity. In this instance, the Chief Scientist provided guidance for the initial joint meeting, and the senior advisor scheduled follow-up meetings to address unresolved issues.", "Program leaders in ARS and NIFA meet throughout the year for various purposes, but, according to six USDA officials who have planning responsibilities, the program leaders have not systematically held joint planning meetings to help determine research priorities for topic areas the agencies have in common or their roles and responsibilities for addressing these priorities. According to our review of meeting agendas and other agency documents, ARS and NIFA program leaders meet with stakeholders—such as agricultural producers and industry representatives—at scientific society, commodity group, stakeholder input, and other meetings throughout the year. The six USDA officials acknowledged, however, that the two agencies do not systematically plan or hold joint stakeholder input meetings, nor do they hold joint planning meetings. Rather, each agency generally holds separate stakeholder input meetings, even when agency research topics and stakeholders are the same or similar. For example, according to our review of meeting documentation, ARS held most of its recent stakeholder input meetings for its national programs independently. Even though ARS and NIFA generally hold such meetings independently, ARS’s and NIFA’s websites both identify collaborative ARS-NIFA stakeholder input meetings for the animal sciences programs. According to these websites and agency documents, animal sciences is the one broad topic area in which the agencies have for several years systematically held joint ARS-NIFA national stakeholder input meetings. The animal sciences team also holds joint ARS-NIFA planning meetings afterward to address stakeholder input and help each agency determine its research priorities as well as roles and responsibilities. In contrast, according to the six officials, national program leaders have not systematically held joint planning meetings to (1) help the agencies determine their research priorities for topic areas they have in common or (2) help each agency determine its roles and responsibilities for addressing these priorities.\nAccording to USDA officials and stakeholders we interviewed, collaborative agency planning is important because the collective knowledge of both ARS and NIFA is needed to ensure that the agencies’ research areas and projects address top priorities and that research is complementary and not duplicative. In addition, these officials and stakeholders said that collaborative planning helps identify the appropriate entity—whether ARS itself, universities, or other organizations—to address a research problem. Each entity, they said, may have unique expertise, facilities, and equipment, and no one agency or official has all the relevant knowledge.\nOver the last decade, USDA and others have emphasized the need for enhanced collaborative planning and joint stakeholder input, but USDA has not implemented key recommendations. USDA’s 2010 Roadmap states that solutions to many of the nation’s most serious problems demand change that USDA will bring about, in part, by better coordinating its science planning among and between REE science agencies and with other federal science agencies and by listening to the needs of stakeholders. Also, a 2010 annual report in the plant sciences area cited the lack of strategic planning for research across federal agencies and it stated that regular team meetings held quarterly would help improve collaboration within NIFA. In addition, reports by USDA and others made specific recommendations to enhance collaborative planning and joint stakeholder input. USDA, however, has not implemented these recommendations. For example, USDA has not implemented the recommendation from an ARS-NIFA-sponsored study that the agencies develop a unified approach to the stakeholder community to address and solve critical problems. Neither has USDA implemented the recommendation in a 2003 National Research Council report that REE hold a national summit every 2 to 3 years to engage the agencies and a broad spectrum of national, regional, and local stakeholders.\nThe Chief Scientist told us that she envisions greater collaborative planning between the agencies in the future through, in particular, more joint meetings for obtaining stakeholder input and discussing agency-level research plans to support the REE Action Plan. Several USDA officials and stakeholders told us that joint ARS-NIFA stakeholder input should be sought at least every 5 years, to coincide with ARS’s 5-year planning cycle, and suggested that the two agencies hold joint planning meetings annually. In addition, two industry stakeholders said that joint meetings would benefit them by increasing their contact with NIFA national program leaders, whom they may not know as well as they know ARS national program leaders.\nPromising examples of systematic collaborative stakeholder input and planning, initiated independently by officials and individual teams within ARS and NIFA, already exist in one broad topic area—animal sciences— and in more limited areas that may fall within a national program or broad topic area. Specifically, for more than a decade, an animal sciences team of ARS and NIFA national program leaders has jointly sponsored large stakeholder meetings led by both agencies every 5 years, with smaller, annual stakeholder meetings on more specific topics (e.g., swine). The team started holding these meetings after a stakeholder requested such collaboration to save time spent attending two sets of similar meetings. The national program leaders meet after the stakeholder meetings to discuss ongoing research projects and associated resources, gaps in addressing stakeholders’ needs and priorities, and their respective agency’s potential roles and responsibilities; the program leaders also meet monthly by telephone or in person. Collectively, these meetings facilitate development of specific ARS and NIFA plans or requests for application. Several USDA officials and stakeholders we interviewed praised the animal sciences team’s collaborative effort as a best practice, and the team was nominated for a USDA-wide award for sustained collaboration that “has facilitated strong engagement with stakeholders and leveraged intramural and extramural programs to benefit U.S. animal agriculture.” Two industry stakeholders we spoke with who participate in these joint meetings said that the meetings assure them that the two agencies are coordinating their research plans.\nAccording to USDA officials, many benefits have come from the animal science team’s collaboration. For example, according to USDA officials, this team’s collaborative planning led to the development of a network of researchers working to enable development of veterinary vaccines for cattle, swine, poultry, and fish. This network now includes scientists from ARS, several universities, and industry and coordinates with similar endeavors internationally. According to a USDA official and the network’s website, products developed from these collaborative efforts benefit a large group of researchers, including veterinary clinicians, immunologists, pathologists, and microbiologists. Additionally, joint stakeholder and planning meetings hosted every 5 years by the aquaculture subgroup of the animal sciences team have led to NIFA funding for a 2008 Regional Collaborative Research and Extension Catfish Forum, linking ARS, NIFA multistate committees, and land-grant college and university programs. According to NIFA and ARS aquaculture program leaders, the collaboration helped bring about the development of an innovative catfish production system that is now used commercially.\nUSDA officials also provided examples of other ARS-NIFA collaborative stakeholder input meetings and planning efforts that are more limited in scope or fall within a national program or topic area. For example, the National Plant Germplasm Coordinating Committee was established in 2006. Largely funded by ARS, with support from NIFA and universities, the National Plant Germplasm System protects plant hereditary material, or germplasm, including seeds, to preserve the genetic diversity of our nation’s crops. The coordinating committee, comprising ARS and NIFA officials and academic scientists, meets annually to review and set national scientific priorities for the system. The committee also initiates a strategic planning effort to better define and communicate a vision, mission, and short- and long-term goals for the system. In addition, in the area of food safety, ARS and NIFA national program leaders hold a joint annual meeting with a group of key stakeholders—three federal agencies involved in regulating food safety and preventing foodborne illness—to identify the research needs of these stakeholders. ARS and NIFA then use this information to help coordinate each agency’s research plans.\nEven though the benefits of collaboration are widely recognized, part of the reason that ARS-NIFA collaborative planning may not be systematic, agency officials told us, is that REE does not require its agencies to systematically hold joint planning meetings or jointly meet with stakeholders. Moreover, some USDA officials we interviewed stated that it is a challenge for national program leaders—at both ARS and NIFA, where many national program leaders have heavier workloads because of recent retirements—to make systematic collaboration a high priority. One NIFA official stated that without a requirement for systematic collaborative planning, such planning is unlikely to increase. By enhancing collaborative planning for topic areas that ARS and NIFA have in common, as the animal sciences area has done, the agencies can take full advantage of their collective knowledge and expertise in setting their research priorities and determining their roles and responsibilities for carrying out these priorities.", "Agricultural science, like science in general, advances through research that may at first seem duplicative but may (1) actually replicate, and thereby validate or disprove existing research, or (2) complement and extend existing research. Recognizing the importance of both replication and complementarity in science—and in light of some duplication at USDA’s largest research agencies in the past and the potential for some duplication in the future—ARS and NIFA have each developed important agency safeguards for reviewing projects, which work in tandem with the scientific community’s professional norms, to prevent duplicative research projects within and between the agencies. We commend the agencies for developing multitiered safeguards. Modifications to these safeguards, however, could better position both agencies to further reduce the risk of duplicative research projects in the future. For example, information on ARS projects is not current in CRIS because ARS has no written guidance for how often to send its project information to NIFA for uploading into the system; as a result, ARS has not always sent its project information in a timely manner. Thus, ARS project information that is typically at least 6 months out of date limits CRIS’s utility as a safeguard against duplicative research. In addition, since NIFA does not direct that all competitive grant applications recommended for funding be checked against CRIS for potential duplication, about one-third of the funds NIFA awards in competitive grants go toward projects that are, in effect, not subject to a key agency safeguard to prevent potential duplication and are thus at increased risk of inadvertent duplication. NIFA recently convened a task force to study, among other issues, whether this directive should be extended to other competitive grants. At the time of our report, the task force was still studying expanding the CRIS duplication search to all competitive grants and had not made a decision. Moreover, without an assessment of whether the search functionality of the forthcoming VIVO platform is more effective or efficient than CRIS at finding duplicative research projects, and until assessment results are used to drive procedures for identifying potentially duplicative projects, scientists and national program leaders cannot be assured that they are using the best method or system for detecting duplication. Finally, by successfully engaging ARS, NIFA, and other REE agencies, USDA’s Chief Scientist has enhanced high-level collaborative planning. In addition, some collaborative planning initiated jointly by ARS and NIFA has occurred across national program areas, such as in the animal sciences area. By enhancing collaborative planning—including planning that involves key stakeholders—for topic areas the agencies have in common, ARS and NIFA national program leaders can consistently take full advantage of their collective knowledge and expertise to help set their research priorities and help the agencies determine their roles and responsibilities for carrying out these priorities.", "To help further reduce the risk of duplicative research within and between ARS and NIFA and to improve the agencies’ collaborative planning, we recommend that the Secretary of Agriculture direct the Under Secretary of Research, Education, and Economics to take the following four actions:\nRequire that ARS issue written guidance specifying that it should update its research project data in CRIS at least quarterly and ensure that this requirement is also applied to any new systems that receive these project data.\nRequire that NIFA issue written guidance that its national program leaders ensure that staff check all of NIFA’s competitive grant awards against CRIS for potential duplication.\nRequire, as USDA identifies promising systems for searching and disseminating research project information, the appropriate entity to (1) determine whether VIVO or other systems are more effective or efficient than CRIS in identifying potentially duplicative research and (2) revise guidance to reflect the best system and methods for identifying potentially duplicative research projects.\nEnhance ARS’s and NIFA’s collaborative approach across all topic areas they have in common—including holding jointly sponsored meetings with stakeholders—to help set their research priorities and help them determine their roles and responsibilities for carrying out these priorities.", "We provided a copy of the draft report to the Department of Agriculture for its review and comment. In written comments from the department, which are reproduced in appendix II, the Chief Scientist stated that the department generally agreed with our findings. Nevertheless, USDA responded to the statement in our report that “collaborative planning between ARS and NIFA has not been systematic.” In our report, we define the term collaborative planning as the act of bringing research agencies and stakeholders together to discuss priorities, roles, and responsibilities, and we use the term systematic to mean marked by thoroughness and regularity. In its comments, USDA outlined six steps within REE that together it states constitute a system for collaborative planning, noting that the report accurately describes these steps. As we describe in the report, some of these steps have contributed to collaborative planning conducted jointly by ARS and NIFA across national program areas, such as in the animal sciences area. We concluded, however, that by enhancing collaborative planning—including planning that involves key stakeholders—for all topic areas the agencies have in common, ARS and NIFA national program leaders can consistently take full advantage of their collective knowledge and expertise to help set their research priorities and help the agencies determine their roles and responsibilities for carrying out these priorities. Such an approach would be more systematic in carrying out collaborative planning.\nIn addition, while neither explicitly agreeing nor disagreeing with our recommendations, the Chief Scientist stated that the department will give strong consideration to our recommendations as it seeks to improve how it identifies fruitful approaches to address the highest priority food and agricultural research needs. In these written comments, the Chief Scientist did not comment specifically on one of our recommendations: that USDA require that NIFA issue written guidance that its national program leaders ensure that staff check all of NIFA’s competitive grant awards against CRIS for potential duplication. Nonetheless, the written comments cite the benefits of implementing the three other recommendations. The following list summarizes the department’s comments on our recommendations:\nFor our recommendation that USDA require that ARS issue written guidance specifying that it should update its research project data in CRIS at least quarterly and ensure that this requirement is also applied to any new systems that receive these project data: In the written comments, the Chief Scientist stated that such written guidance to direct more frequent updates of ARS data “to common data systems could benefit the use of these systems as decision- support tools.” The Chief Scientist also stated that such a “benefit extends to several efforts under way in REE to develop and improve common data systems,” including VIVO and others mentioned in the report.\nFor our recommendation that USDA require, as it identifies promising systems for searching and disseminating research project information, the appropriate entity to (1) determine whether VIVO or other systems are more effective or efficient than CRIS in identifying potentially duplicative research and (2) revise guidance to reflect the best system and methods for identifying potentially duplicative research projects: In the written comments, the Chief Scientist stated that, as the initiatives “mature and provide validated improvements over existing systems, guidance for use of the best available tools for safeguarding against duplication” could “enhance this benefit.”\nFor our recommendation that USDA enhance ARS’s and NIFA’s collaborative approach across all topic areas they have in common— including holding jointly sponsored meetings with stakeholders—to help set their research priorities and help them determine their roles and responsibilities for carrying out these priorities: While USDA did not expressly agree or disagree with this recommendation, it stated in its comments that it expects ARS and NIFA to “continue to increase the number of jointly sponsored planning activities” and that ARS- NIFA joint stakeholder meetings in Plant Sciences and Aquaculture are already planned for 2013.\nWe continue to believe that all four recommendations would enhance safeguards against project duplication and strengthen collaborative planning.\nUSDA’s Chief Scientist also provided technical comments, which we incorporated into the report as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Agriculture, the appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III.", "Our objectives were to examine (1) the topics the Agricultural Research Agency (ARS) and the National Institute of Food and Agriculture (NIFA) focus on and the safeguards they use to prevent duplication of research projects, along with any shortcomings in those safeguards, and (2) collaborative planning ARS and NIFA engaged in and how, if at all, such planning could be enhanced.\nFor both objectives, we collected and reviewed relevant law and agency guidance, as well as reports from the National Academies; the Inspector General of the U.S. Department of Agriculture (USDA); the National Agricultural Research, Extension, Education, and Economics Advisory Board (REE advisory board); and others. We also interviewed and gathered relevant documents from headquarters and field officials of USDA, including the Office of the Under Secretary for Research, Education, and Economics (REE); Office of the Chief Scientist; ARS; NIFA; and the Economic Research Service. We interviewed officials on the telephone and during our two site visits—one to ARS and NIFA headquarters offices in the Washington, D.C., area and the other to the University of California, Davis, and ARS’s field office in Albany, California. These officials included program leaders and other managers and scientists. In addition, we interviewed 16 stakeholders from the REE advisory board; industry organizations; and academic organizations, including land-grant colleges and universities. Stakeholders representing industry organizations came from the Florida Citrus Processors Association, American Dairy Science Association, National Pork Board, Iowa Soybean Association, and the National Grape and Wine Initiative. Stakeholders representing academic organizations were current or former officials of the Association of Public and Land-grant Universities; the University of Arkansas; the University of California, Davis; the University of Georgia Agricultural Experiment Stations; and Ohio State University. We selected industry and academic stakeholders on the basis of input from officials with USDA and the National Academy of Sciences’ Board on Agriculture and Natural Resources.\nTo examine the topics ARS and NIFA focus on, we collected and analyzed agency funding, spending, and planning data related to the topics on which ARS and NIFA focus their work. We collected and analyzed the President’s budgets to identify total ARS and NIFA funding for fiscal years 2002 through 2011 and NIFA budget data on the breakdown of its funding by mechanism (formula funding, competitive grants, and noncompetitive grants) for fiscal years 2001 through 2011. We assessed the reliability of these data and found them to be sufficiently reliable for our purposes. We also collected and analyzed spending by ARS and NIFA on research from fiscal year 2002 through fiscal year 2011. To assess the reliability of spending data provided from NIFA’s Current Research Information System (CRIS)—USDA’s primary database of completed and ongoing projects, which includes both financial and project information—we interviewed knowledgeable officials about the data, possible limitations of the data, and internal controls for the system containing the data. We found these data to be sufficiently reliable for our purposes. Nevertheless, our ability to quantify and compare the agencies’ spending on research topics was limited because, unlike ARS, NIFA could not isolate its research spending. Consequently, NIFA could only provide research spending data that also included an unknown amount of spending on education and extension activities. Moreover, we could compare ARS and NIFA research topics only at a high level and could not comparatively assess in detail the agencies’ spending on subtopic areas, such as which agency spent more money or a greater share of its money on childhood obesity or colony collapse disorder in honeybees. We also collected and analyzed estimates provided by NIFA on its research spending for fiscal years 2002 through 2011. These estimates are the same as those provided annually to the National Science Foundation. We assessed the reliability of these estimates by interviewing knowledgeable officials and comparing these estimates against data on spending and funding, and we determined them to be sufficiently reliable for our purposes.\nTo examine the safeguards used by the agencies to identify and prevent duplication within and between ARS and NIFA, we interviewed current and former scientists and agency officials, reviewed relevant scientific literature discussing professional norms and practices, and analyzed documentation of safeguards used at each agency to identify and prevent duplicative research. To identify shortcomings in those safeguards, we interviewed agency officials and analyzed relevant guidance. Also, we used agency guidance on searching CRIS to review for possible duplication a total of 10 ARS and 10 NIFA projects started in 2011, randomly sampled from the animal sciences and human nutrition areas. This review did not assess the extent of duplication across all NIFA and ARS projects. To ensure the reliability of the review, we also worked with knowledgeable USDA officials to develop the formulas used to query CRIS and obtain a master list of ARS and NIFA projects started in 2011 from which to derive a sample. As part of this review, we followed ARS and NIFA guidance to search CRIS by keywords and scientists’ names for potentially duplicative research projects within and between the two agencies. One analyst reviewed all 20 selected projects to determine whether they were potentially duplicative or, rather, complemented or replicated existing work. A second analyst then reviewed the first analyst’s initial determinations. We resolved any disagreement between the analysts through discussion and afterward obtained additional input from relevant ARS and NIFA scientists and officials for any project that either analyst determined to be potentially duplicative. Our review of selected projects flagged one ARS project and one NIFA project as potentially duplicative; after discussion with agency officials, however, we concluded that neither project was in fact duplicative. In ARS’s case, the same project was recorded twice because of two external funding sources, and in NIFA’s case, an existing formula-funded project supported the collection of preliminary data for a related competitive- grant-funded project.\nTo examine collaborative planning engaged in by ARS and NIFA and how, if at all, such planning could be enhanced, we analyzed the Chief Scientist’s actions aimed at increasing collaboration and the products resulting from these actions. We also interviewed USDA officials and stakeholders regarding the effects of these actions. To examine the collaborative planning ARS and NIFA engaged in, we reviewed agency plans and agendas and other documents related to stakeholders’ input into research priorities. In addition, we examined our own and USDA’s documents, issued from 1996 to 2010, discussing the need for improved collaboration and planning. For example, we reviewed two of our reports on barriers agencies face when attempting to collaborate on selected key practices that can help enhance and sustain collaboration among federal agencies. To identify practices that can enhance and sustain agency collaboration, we also reviewed a 2005 USDA-sponsored study on improving ARS-NIFA collaboration, two reports we issued on federal agency collaboration, other reports of ours on agricultural research planning, and National Research Council studies. Finally, we analyzed our interviews with USDA officials and stakeholders to report their views on whether collaborative planning—including stakeholder input meetings and priority-setting meetings—was sufficient and whether they had any recommendations that could enhance such collaborative planning. We also examined whether the agencies’ collaborative efforts reflected key practices we identified in October 2005 that can help enhance and sustain collaboration among federal agencies.\nWe conducted this performance audit from January 2012 through April 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "Daniel Garcia-Diaz, (202) 512-3841 or [email protected].", "In addition to the individual named above, Karen A. Jones (Assistant Director), Kevin Bray, Tony Calero, Ellen W. Chu, Paula Moore, Beverly Peterson, Dan Royer, Michael Silver, and Tama Weinberg made significant contributions to this report." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_full h2_title", "", "h0_full h2_full", "h0_full", "h1_full", "h1_full", "h1_full", "h2_full", "", "h2_full h1_full", "h2_full", "", "", "", "" ] }

{ "question": [ "What do the ARS and NIFA rely on to avoid duplication of research projects?", "What could increase the risk of research duplication?", "What structures do ARS and NIFA have to prevent duplication?", "How effective are these structures?", "What shortcomings did GAO identify within these structures?", "How could the ARS and NIFA's collaborative planning be improved?", "How did the Chief Scientist attempt to facilitate collaborative planning?", "How did the ARS and NIFA national program leaders facilitate systematic collaborative planning?", "How could enhancing collaborative planning be beneficial to ARS and NIFA?", "What questions have been raised regarding ARS and NIFA's data duplication and collaborative planning?", "What is research duplication?", "What is collaborative planning?", "What was GAO asked to assess?", "What does this report examine?" ], "summary": [ "The Department of Agriculture's (USDA) Agricultural Research Service (ARS) and the National Institute of Food and Agriculture (NIFA) generally focus on many of the same broad topics and rely on agency safeguards, as well as on the scientific community's professional norms, to prevent inadvertent duplication of research projects within and between the agencies.", "Shortcomings with certain agency safeguards, however, may increase the potential risk of project duplication within or between the two agencies.", "ARS and NIFA built in their own safeguards to help prevent project duplication, such as (1) panels of independent external scientists who review proposed projects and (2) agency requirements for staff to ensure that proposed work is relevant, including checking the Current Research Information System (CRIS)--USDA's primary system containing project-level information on its ongoing and completed research projects--for potentially duplicative research projects in both agencies. The agencies also rely on professional norms to safeguard against duplication, such as the peer review process used by scientific journals to limit the publication of unnecessarily duplicative research.", "Indeed, agency officials and stakeholders could not provide recent examples of duplication within or between the two agencies, and GAO's review of 20 randomly selected research projects did not identify duplicative projects.", "Nevertheless, GAO identified a few shortcomings that somewhat limit the utility of certain agency safeguards. First, information in CRIS about ARS projects was typically at least 6 months out-of-date when uploaded, which undermines CRIS's utility as a safeguard. ARS officials said that the agency now expects staff to provide ARS project information on a quarterly basis, but ARS has not issued guidance about this expectation. Second, NIFA directs staff to conduct a CRIS duplication check for projects that accounted for about two-thirds of the funding it awarded for competitive grants; as a result, about one-third of its competitive grants are not subject to this safeguard against duplication. NIFA recently convened a task force to study, among other issues, whether the directive to check CRIS should be extended to all competitive grants.", "USDA's Chief Scientist facilitated high-level collaborative planning, particularly between ARS and NIFA, in recent years, but 20 USDA officials and stakeholders said that agency-level collaborative planning between ARS's and NIFA's national program leaders working in common topic areas could be more systematic to make the best use of limited agricultural research resources.", "Specifically, the Chief Scientist and her staff led several high-level planning efforts that brought together staff from the two agencies and generated key products, such as a plan that identified USDA's seven goals for implementing its science priorities and the agencies responsible for implementing these goals.", "Nevertheless, national program leaders at the two agencies generally do not, and are not required to, systematically hold joint meetings for seeking stakeholder input and for setting research priorities. Some systematic collaborative planning, however, has been jointly initiated by ARS and NIFA national program leaders, such as in the animal sciences area.", "By enhancing collaborative planning across national program areas, as the animal sciences area has, ARS and NIFA can take fuller advantage of their collective knowledge and expertise to help set their research priorities.", "The USDA's principal research agencies, ARS and NIFA, play a key role in supporting agricultural science, and questions have been raised about the extent to which the two agencies may be performing duplicative research and whether the agencies collaborate in planning research.", "Research duplication is the inadvertent repetition of research that does not confirm or verify conclusions from prior studies.", "Collaborative planning involves bringing together research agencies and stakeholders to discuss priorities and roles and responsibilities.", "In this context, GAO was asked to assess how these agencies ensure the efficient use of their resources for research.", "This report examines (1) the topics ARS and NIFA focus on and the safeguards the agencies use to prevent duplication of research projects, along with any shortcomings in those safeguards, and (2) collaborative planning ARS and NIFA engaged in and how, if at all, such planning could be enhanced. GAO reviewed USDA safeguards against duplication within and between ARS and NIFA; reviewed 20 randomly selected projects; analyzed information on collaborative planning; and interviewed officials from USDA, universities, and industry." ], "parent_pair_index": [ -1, 0, 0, 2, 2, -1, 0, 0, 0, -1, 0, 0, -1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 0, 0, 0, 0, 0 ] }

{ "title": [ "", "Introduction", "Significance for Congress", "Report Roadmap", "Definitions of Bullying and Cyber-bullying", "Estimates of the Prevalence, Predictive Factors for, and Consequences of Bullying", "Prevalence of Bullying", "Student Bullying Research on the Precursors for, and Impacts of, Bullying", "Efficacy of Anti-bullying Programs", "State Bullying Legislation", "School Responsibilities Regarding Bullying", "Focus on Cyber-bullying", "ED Dear Colleague Letter: School Responsibilities Regarding Bullying that Rises to the Level of Discriminatory Harassment", "Harassment Based on Disability", "Response to Dear Colleague Letter", "Federal Agency Efforts on Bullying", "Interagency Initiatives", "Legal Issues", "Federal Law", "State Law", "Cyber-bullying", "Constitutional Considerations", "First Amendment: Freedom of Speech", "Fourteenth Amendment: Due Process", "" ], "paragraphs": [ "", "", "Many Members of Congress have become increasingly concerned about what can be done to address student bullying. Congressional interest is in response to high-profile incidents of bullying and their negative consequences, as well as to an increasing body of research documenting the detrimental effects of school bullying. This has spurred interest in ensuring that schools are safe, secure places for students, so that they can receive the full benefits of their education. Several bills that address school bullying have been introduced in the 113 th Congress, although none as of the date of this report have been enacted. However, currently 49 states have anti-bullying laws, although there is considerable variation in the content of these laws.", "This report begins with working definitions of bullying and cyber-bullying that were developed by a federal interagency working group. It provides a brief overview of research on the prevalence and impact of bullying, and it reviews research on what can be done to reduce student bullying. It discusses the responsibility of schools regarding bullying behavior; and it reviews the status of state laws that have been adopted to address student bullying. In addition, it discusses federal interagency initiatives intended to prevent bullying, and includes an appendix that summarizes many additional federal initiatives that permit some funding to be used for anti-bullying efforts. Finally, it discusses the legal issues and recent case law that define the parameters schools must consider in developing anti-bullying policies.", "The Centers for Disease Control and Prevention (CDC) is leading an effort to develop a consensus definition of bullying that can be used throughout the school bullying research field. A consensus definition is key to obtaining consistent and comparable data on bullying. According to CDC health scientist Alana Vivolo-Kantor: \"The lack of a uniform definition hinders our ability to understand the true magnitude, scope, and impact of bullying and track trends over time. Consistent terminology with standardized definitions is necessary to improve public health surveillance of bullying and inform efforts to address bullying.\" For the present, a federal working group has published working definitions of bullying and cyber-bullying (see text box below).", "Although this report focuses on bullying of students in grades K-12, it is worth noting that elementary and secondary students are not the only potential victims of bullying. Bullying also occurs at institutions of higher education (IHEs) and at workplaces, as well as other locations.\nStudents may be exposed to bullying at school for many reasons. Research indicates that although no single factor can explain bullying behavior, certain individuals are more vulnerable to being bullied, for example, those who have low self-esteem and are unpopular, friendless, or rejected. In addition, studies indicate that some students, including those with disabilities and those who are GLBT, are disproportionately subjected to bullying behavior. However, because bullying can happen to any student, some experts recommend that a school policy that enumerates groups protected by its anti-bullying policy also make clear that the requirements of the policy are not limited to those enumerated groups.\nThe number of research studies on student bullying has significantly increased in recent years. However, most studies on the prevalence and/or impact of bullying are not directly comparable for several reasons:\nthe definition of bullying is not consistent across studies; the age range of surveyed students varies; the time period for the analysis varies (e.g., bullying behavior in the last two months versus bullying behavior over a school year or lifetime exposure); the survey methodology varies; and some studies provide an overall prevalence rate for bullying, while other studies separate bullying by type (e.g., physical, emotional, or electronic).\nIn addition, when negative outcomes are found to be associated with bullying, it is difficult to discern the extent to which the bullying behavior is responsible. One study on bullying states that\nit is not entirely clear whether the connections between bullying, victimization, and psychosocial difficulties reflect causes, consequences, or merely concomitant correlates of bullying and/or victimization.", "A Government Accountability Office (GAO) study examined four federal agency sponsored nationally representative surveys that include questions on student bullying: the National Youth Risk Behavior Survey (2011, YRBSS); the School Crime Supplement to the National Crime Victimization Survey (2012, SCS/NCVS); Health Behavior in School-aged Children (2005/2006, HBSC); and the National Survey of Children's Exposure to Violence (2008, NatSCEV). Due to differences across the surveys in definitions, the age of students surveyed, and the time frame of the studies, among other things, each survey obtained different estimates for the prevalence of bullying and cyber-bullying (or electronic bullying). Three of the surveys included an overall measure of the prevalence of bullying behavior. The overall prevalence of bullying varied across the three surveys—from a low of 20.1% to a high of 27.8%. YRBSS estimated that 20.1% of surveyed youth reported being bullied; HBSC estimated that 27% of surveyed youth reported being bullied; and SCS/NCVS estimated that 27.8% of surveyed youth reported being bullied. In addition, all of the surveys included some measure of electronic bullying. The overall prevalence of electronic bullying varied across the four surveys—from a low of 1.8% to a high of 16.2%. NatSCEV estimated that 1.8% of surveyed youth reported Internet harassment; HBSC estimated that 8.1% of surveyed youth reported having been bullied using a computer or e-mail messages or pictures, and 5.7% reported having been bullied using a cell phone; SCS/NCVS estimated that 9% of surveyed youth reported being cyber-bullied; and YRBSS estimated that 16.2% of surveyed youth reported being electronically bullied. The surveys did not obtain consistent results on whether bullying was greater for one sex, race, or ethnic group. The surveys also varied in the extent to which they collected data on additional demographic characteristics on youth who were bullied.", "Many researchers who focus on student bullying believe that a variety of factors interact to influence bullying behavior, including \"families, schools, peer groups, teacher-student relationships, neighborhoods, and cultural expectations.\" The interaction of these factors can have a positive influence on reducing bullying—if a positive school environment with involved, supportive adults and teachers is created, a positive peer culture is established, and school connectedness is reinforced. Researchers also note that bullying generally occurs with the physical or virtual presence of an audience of peers. These bystanders can play an important role in reinforcing bullying behavior through laughter or other encouragement, or in curbing it by speaking out against the behavior.\nA 2010 meta-analysis of 153 studies evaluating predictors of being a bully, a victim, or bully-victim found some predictors were shared by both bullies and victims of bullying, including family environment, school climate, community factors, and poor social problem-solving skills. However, the authors found some factors to be more associated with one group than another. For example, bullies were more likely to have externalizing behaviors, poor academic performance, and negative thoughts or beliefs about others, and to be negatively influenced by their peers. Victims were more likely to have internalizing behaviors and negative thoughts about themselves, and to be rejected and isolated. Although both had deficits in social competence, bullies were generally more socially competent than victims.\nIn addition, some students engage in bullying behavior and are also a victim of bullying, either simultaneously, or by switching roles over time. These so called \"bully-victims\" were found to be the most at risk—containing risk factors associated with both of the other two groups:\nThat is, bully victims appeared to resemble victims by being rejected and isolated by their peers and to resemble bullies by being negatively influenced by the peers with whom they do interact.\nAs discussed above, both victims of bullying and those who engage in bullying behavior can experience psychological difficulties and social relationship problems. Additionally, a GAO literature review of seven meta-analyses on the impact of bullying on victims indicates that bullying may result in psychological, physical, academic, and behavioral issues.\nRecent high profile suicides following incidents of bullying have heightened concerns about bullying behavior. The American Foundation for Suicide Prevention (AFSP) states that \"Elevated rates of depression, suicidal ideation and suicide attempts have been found in youth who are bullied and also in those who bully others.\" However, AFSP indicates that no single factor is responsible for suicide. The factors that are correlated with suicide are multidimensional—for example, mental and developmental disorders, early life adverse events, and personality traits, among others. In addition, AFSP notes that \"Suicidal ideation and suicide attempts occur in a small percentage of youth involved in bullying.\"", "Some of the research on anti-bullying programs has found mixed success from anti-bullying programs, particularly in the United States. However, a cross-national meta-analysis of 44 evaluations identified particular characteristics of school-based bullying programs that may help reduce bullying. The study found that on average, school-based anti-bullying programs decreased bullying behavior by 20%-23% and victimization by bullies by 17%-20%.\nThis study found the intensity and duration of a program, as well as the number of program elements, to be linked with effectiveness. Other elements found important to effectiveness were parent training, parent meetings, firm disciplinary methods, classroom rules, classroom management, and improved playground supervision. The study did not find evidence that working with peers was effective. The authors also recommended that a system of accreditation for anti-bullying programs be established to help ensure that programs being adopted by schools include the elements that have been found to be effective.\nAnother study pointed out the importance of addressing peer norms in anti-bullying programs. In peer groups where bullying is the norm, the authors of the study argue that \"Until these peer norms are modified, it is likely that bullying behaviors will remain intractable in our schools.\"\nResources for states and schools on effective anti-bullying programs are becoming more widely available. There has been an increased focus in recent years on the importance of school climate to preventing bullying and improving a variety of other school indicators. The National School Climate Center has published a resource that addresses the implementation of positive school climate practices as they relate to a variety of issues important for schools, including school bullying. In August 2008, ED published a document to assist schools in evaluating anti-bullying policies and practices titled Effective Evidence-based Practices for Preventing and Addressing Bullying . In addition, several federal agencies maintain websites that include extensive information on anti-bullying programs that have proved effective or are promising.", "As of the date of this report, 49 states have at least one anti-bullying law, although the content of these laws varies considerably. The majority of these laws direct school districts to adopt anti-bullying policies. However, the requirements placed on schools by these laws are quite varied.\nIn 2010, ED issued an in-depth report focused on state bullying laws. The report noted the surge in state legislation addressing bullying in recent years, with 120 bills or amendments to existing legislation introduced between 1999 and 2010. According to the report, the landscape of state legislation has been changing as new bills (or amendments to existing laws) that address student bullying have been introduced that reflect:\nthe rapidly evolving political and policy environment surrounding bullying in schools, where lawmakers are continually refining legislative expectations for schools in response to the new problem dimensions (e.g., the growth of cyber-bullying), and to emerging research concerning effective policy strategies for combating student bullying.\nThe report's evaluation of the content and expansiveness of these laws highlighted the tremendous variation in these laws. The report was based on the 46 states that had bullying laws in place prior to the study. According to the report all but three of these states included definitions of what behaviors were prohibited. All but one of the 46 states required school districts in the state to adopt bullying policies. Forty-one of these states had developed model bullying policies, and 36 states included a prohibition on cyber-bullying or bullying using electronic media. In addition, 13 states included a provision stating that schools could address bullying that occurs outside of school grounds if it creates a hostile school environment.\nThe report delineated 11 key components of a comprehensive state anti-bullying statute. The topics addressed by these 11 key components include the following:\nPurpose Statement Statement of Scope Specification of Prohibited Conduct Enumeration of Specific Characteristics Development and Implementation of Local Policies Review of Local Policies Communication Plan Training and Prevention Education Transparency and Monitoring Statement of Rights to Other Legal Recourse\nThe report classified each state's legislation into one of three categories for each key component on a continuum from least to most expansive and scored them from 0-2. Key components in more expansive state laws were usually more inclusive and more prescriptive, used less discretionary language, or established stronger measures of accountability. There was considerable variation across states in the number of the 11 key components included in state law, and in the level of detail and scope in the components that were included. The report indicates that it did not include an analysis of how effectively school districts and individual schools are implementing these anti-bullying polices. A second phase of the study will address implementation in a sample of school districts and schools:\nWhile this report focuses on documenting and profiling policy across the states, these policies may not benefit schools or students unless they can be successfully implemented. For example, legislation that defines prohibited bullying behaviors, and specifies graduated and substantial sanctions, will often require extensive implementation procedures for the implementing of the sanction (e.g., expulsion). Whether these necessary actions are feasible within resource constraints cannot be determined through a policy review alone.", "Schools must balance a variety of factors in developing policies to address bullying. Among other things, they must meet state, federal, and local regulations and statutory requirements. Although resources on factors to consider in developing a comprehensive school anti-bullying policy are becoming more widely available, developing and implementing comprehensive and effective bullying policies can be challenging for schools. As more schools adopt anti-bullying policies, a variety of potential policy issues have arisen—including the wide variation in the coverage provided by these policies, the potential difficulty in ensuring civil rights laws are not violated while simultaneously ensuring that constitutional protections on free speech are not impinged upon, and the particular difficulties of developing policies to address the rising phenomenon of cyber-bullying.", "Although cyber-bullying frequently occurs off school grounds, it can have negative effects that are felt at school. Developing policies that address cyber-bullying can be a particular challenge for schools. School districts must deal with evolving case law on issues related to cyber-bullying that may cause uncertainty regarding a school's legal responsibility or potential culpability. For example, in some instances courts have prohibited disciplining a student for out of school speech. (See discussion of the Tinker standard under \" Legal Issues .\")\nCyber-bullying experts Sameer Hinduja and Justin Patchin recommend that schools ensure that their current policies on harassment and bullying permit disciplining students for cyber-bullying: They note that \"If their policy covers it, cyber-bullying incidents that occur at school—or that originate off campus but ultimately result in a substantial disruption of the learning environment—are well within a school's legal authority to intervene.\" The authors further note that\nEven though the vast majority of these incidents can be handled informally (calling parents, counseling the bully and target, expressing condemnation of the behavior), there may be occasions where formal response from the school is warranted. This is particularly the case in incidents involving serious threats toward another student, if the target no longer feels comfortable coming to school, or if cyber-bullying behaviors continue after informal attempts to stop it have failed. In these cases, the authors suggest that detention, suspension, changes of placement, or even expulsion may be necessary. If these extreme measures are required, it is important that educators are able to clearly demonstrate the link to school and present evidence that supports their action.", "In December of 2010, the U.S. Department of Education issued a Dear Colleague Letter (DCL) that provided guidance on schools' responsibilities regarding bullying, in particular how some forms of bullying could rise to the level of discriminatory harassment, and as a consequence, might violate civil rights statutes. Several civil rights statutes explicitly protect against harassment based on race, color, national origin, sex, and disability. (See discussion of \" Legal Issues .\") Several of these laws are enforced by ED's Office for Civil Rights (OCR). If a school or Institution of Higher Education fails to adequately address harassment of a student that falls under one of these protected categories, it has not met its statutory obligations to protect the student according to the DCL:\nHarassment creates a hostile environment when the conduct is sufficiently severe, pervasive, or persistent so as to interfere with or limit a student's ability to participate in or benefit from the services, activities, or opportunities offered by a school. When such harassment is based on race, color, national origin, sex, or disability, it violates the civil rights laws that OCR enforces…. A school is responsible for addressing harassment incidents about which it knows or reasonably should have known.\nFurthermore, according to the DCL, addressing the discriminatory harassment through a school's anti-bullying policy is not sufficient:\nIf an investigation reveals that discriminatory harassment has occurred, a school must take prompt and effective steps reasonably calculated to end the harassment, eliminate any hostile environment and its effects, and prevent the harassment from recurring. These duties are a school's responsibility even if the misconduct also is covered by an anti-bullying policy, and regardless of whether a student has complained, asked the school to take action, or identified the harassment as a form of discrimination.", "It is important to note that students with disabilities who are victims of bullying may be able to file a complaint under Section 504 of the Rehabilitation Act (Section 504), Title II of the American with Disabilities Act (Title II), and the Individuals with Disabilities Education Act (IDEA) in addition to pursuing redress through state anti-bullying laws, state civil rights legislation, other state laws, or in some circumstances through other federal civil rights legislation. This issue is addressed in an ED Dear Colleague letter issued on July 25, 2000. According to ED, state and school districts are required by Section 504, Title II, and IDEA to:\nensure that a free appropriate public education (FAPE) is made available to eligible students with disabilities. Disability harassment may result in a denial of FAPE under these statutes. Parents may initiate administrative due process procedures under IDEA, Section 504, or Title II to address a denial of FAPE.... In addition, an individual or organization may file a complaint alleging a violation of IDEA under separate procedures with the state educational agency.\nA recent ED DCL provided more detailed guidance on the responsibility of schools to address bullying of students with disabilities:\nWhether or not the bullying is related to the student's disability, any bullying of a student with a disability that results in the student not receiving meaningful educational benefit constitutes a denial of FAPE under IDEA and must be remedied.\nThe DCL also made clear that care must be taken in considering changing the placement of a student with a disability who is being bullied (i.e., the school must ensure that the student remains in the least restrictive educational environment in order to provide the student a FAPE).", "Some groups have raised concerns about the guidance ED provided in its December 2010 Dear Colleague Letter. The National School Boards Association (NSBA) submitted a letter to ED stating that the guidance would place too broad an obligation on schools. According to the NSBA's letter:\nour fear is that absent clarification, the Department's expansive reading of the law as stated in the DCL will invite misguided litigation that needlessly drains precious school resources and creates adversarial climates that distract schools from their educational mission.\nIn addition, the American Jewish Committee and the Religious Freedom Education Project/First Amendment Center issued proposed guidelines for school administrators intended to address bullying while also protecting students' freedom of speech and expression. Fifteen additional organizations signed on to these guidelines. The guidelines note that schools must balance safety concerns and free expression. They argue that unless student speech causes a substantial disruption at school it should not be censored.\nIn response to these proposed guidelines the Anti-Defamation League (ADL) submitted a letter to ED calling them \"ill-conceived, unnecessary, deeply flawed, and counterproductive to confronting the growing and serious problem of bullying and cyber-bullying.\" Furthermore, the ADL letter notes that\nBullying situations very rarely erupt as conflicts over political or religious speech.... Instead, they much more often involve the intentional targeting of an individual with less physical or social standing for physical or verbal abuse. Targeted students are in a very different power position than those who are doing the bullying. The aggressor's objective is not to convince his/her target of the rightness of a policy position—it is, rather, to cause physical or emotional harm.", "There are currently several federal initiatives that address student bullying. However, many of these initiatives are not solely or primarily focused on student bullying, but permit some funds to be used for this purpose. This section of the report summarizes interagency efforts to address student bullying. In addition, this report includes an Appendix that briefly summarizes selected federal bullying initiatives that may allow funding to be used to address school bullying. The Appendix focuses on some of the initiatives that have been undertaken by the three federal agencies that are most involved in addressing this issue: The U.S. Department of Education (ED), the U.S. Department of Health and Human Services (HHS), and the U.S. Department of Justice (DOJ). Note that bullying is often a small, optional part of the initiatives included in the Appendix. The initiatives that are included should not be viewed as an exhaustive list of federal initiatives that may address school bullying.", "Representatives from the U.S. Departments of Agriculture, Defense, Education, Health and Human Services, the Interior, and Justice; the Federal Trade Commission; and the White House Initiative on Asian Americans and Pacific Islanders have formed a Federal Partners in Bullying Prevention Steering Committee. The Federal Partners work to coordinate policy, research, and communications on bullying topics. The Federal Partners have created a website, http://www.stopbullying.gov , which provides extensive resources on bullying, including information on how schools can address bullying. In addition, with leadership from the U.S. Department of Education (ED), the Federal Partners have sponsored three anti-bullying summits attended by education practitioners, policymakers, researchers, and federal officials. With ED and HHS, the CDC is currently leading an effort to develop a consensus definition of bullying that is intended to provide a consistent definition that will enhance comparability of data across studies and consequently lead to better measurement and tracking of bullying, as well as to improved prevention and responses to bullying.\nThree agencies currently collaborate on a program called Safe Schools/Healthy Students (SS/HS). SS/HS is funded jointly by ED and HHS's Substance Abuse and Mental Health Services Administration (SAMHSA). The program is administered by ED, SAMHSA, and DOJ. Although SS/HS is not primarily an anti-bullying program, grantees may use program funds to include an anti-bullying component as part of their overall comprehensive plan of activities, programs, and services focusing on healthy childhood development and the prevention of violence and alcohol and drug abuse. SS/HS grants are awarded competitively to local educational agencies (LEAs). LEAs that receive a grant are required to establish partnerships with local law enforcement, public mental health, and juvenile justice agencies/entities.\nAdditionally, six agencies collaborated (U.S. Department of Education, U.S. Department of Health and Human Services, U.S. Department of Homeland Security, U.S. Department of Justice, Federal Bureau of Investigation, and the Federal Emergency Management Agency) to develop and publish comprehensive guides for developing high-quality emergency operations plans. Three separate guides were published; each was targeted to a different audience—elementary and secondary schools, institutions of higher education, and houses of worship.", "Currently, there are no federal statutes that explicitly prohibit student bullying or cyber-bullying. Under some circumstances, however, bullying in schools may be prohibited by certain federal civil rights laws. In contrast, many states have laws that explicitly prohibit bullying. In addition, bullying may, in some instances, constitute a violation of state criminal or tort law. The federal and state laws that govern traditional forms of bullying are described below, followed by a separate section that discusses federal and state laws that may pertain to cyber-bullying.", "Under certain circumstances, federal civil rights statutes may be used to combat bullying in schools. The applicable federal civil rights statutes that prohibit discrimination in schools include Title VI of the Civil Rights Act of 1964 (CRA), which prohibits discrimination on the basis of race, color, or national origin in federal funded programs or activities; Title IX of the Education Amendments of 1972, which prohibits discrimination on the basis of sex in federally funded education programs or activities; Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination on the basis of disability in federally funded programs or activities; Title II of the Americans with Disabilities Act of 1990, which prohibits discrimination on the basis of disability by state or local governments; Title IV of the CRA, which bars discrimination in public schools on the basis of race, color, sex, religion, or national origin; and the Equal Educational Opportunities Act, which prohibits states from denying equal educational opportunities based on race, color, sex, or national origin. The latter two statutes were largely designed to combat segregation in public schools.\nDiscriminatory conduct under these statutes includes peer harassment if such harassment is sufficiently serious that it creates a hostile environment and if such harassment is encouraged, tolerated, not adequately addressed, or ignored by school employees. If the bullying conduct in question involved discrimination or harassment on the basis of race, color, national origin, sex, or disability under the above statutes, then it is prohibited by federal law. However, bullying that does not constitute discrimination on these grounds is not covered.\nIn 2010, ED issued guidance that discusses when student bullying or harassment may violate federal education anti-discrimination laws and that clarifies a school's obligation to combat such bullying or harassment. The guidance includes a discussion of when bullying or harassment that targets lesbian, gay, bisexual, or transgender students may be a form of sex discrimination that violates Title IX, as well as a section that describes when bullying or harassment of students who share a particular religion may constitute national origin discrimination in violation of Title VI.\nAlthough none of these civil rights statutes explicitly prohibits discrimination on the basis of sexual orientation or gender identity, there may, as ED's guidance notes, be instances in which such discrimination may also be a form of sex discrimination that violates Title IX. In the employment context, the Supreme Court has recognized that sex discrimination may encompass same-sex sexual harassment, meaning that sex discrimination is prohibited even if the harasser and victim are members of the same sex. The Court has also ruled that gender stereotyping is a form of discrimination on the basis of sex. Therefore, if a student who is gay or transgender is being harassed because of a failure to conform to gender stereotypes, such harassment is prohibited by Title IX. It is important to note, however, that Title IX prohibits sexual orientation or gender identity discrimination only when it constitutes a form of sex discrimination. Thus, the statute does not prohibit all forms of sexual orientation or gender identity discrimination or harassment of students.\nLikewise, although none of the civil rights statutes described above explicitly prohibits discrimination on the basis of religion, there may be instances in which such discrimination may also be a form of national origin discrimination that violates Title VI. According to ED, \"harassment against students who are members of any religious group triggers a school's Title VI responsibilities when the harassment is based on the group's actual or perceived shared ancestry or ethnic characteristics, rather than solely on its members' religious practices.\" Thus, for example, Jewish, Muslim, or Sikh students who share a religious identity may be victims of national origin discrimination if they are being bullied or harassed due to actual or perceived ancestry or ethnicity.", "State laws also offer some protection to victims of bullying. Indeed, some states have statutes that explicitly prohibit bullying, while all states have general criminal and tort laws that may, under certain circumstances, provide remedies to victims of bullying. For example, certain forms of bullying are likely to violate a state's general laws against criminal assault and battery or other infractions such as disorderly conduct. Thus, bullies may incur penalties in states without explicit anti-bullying statutes and may even incur stiffer penalties under assault and battery statutes in states that also have anti-bullying laws.\nFurthermore, tort law remedies, which allow bullying victims to sue on their own behalf, are available in all states. Tort law, which is created by both court decisions and statutory enactments, is generally intended to provide a mechanism by which individuals who have been injured can sue to recover damages. Tort law also serves as a deterrent to prevent similar injurious activities in the future. With regard to bullying, typical tort actions include intentional tort claims or negligent tort claims.\nLawsuits based on an intentional tort theory typically involve claims that fall into two categories: assault and/or battery. In general, assault claims involve fear of harmful or offensive touching, while battery claims involve actual harmful or offensive touching. Lawsuits based on a negligent tort theory generally involve claims against schools for failure to reasonably supervise students or employees or for failure to anticipate the wrongful conduct of such third parties. In order to succeed in such claims, plaintiffs must establish that the school owed them a duty of supervision, that the school breached that duty, that the breach was a foreseeable cause of an injury, and that an actual injury resulted.\nFinally, it is important to note that many school districts and individual schools have anti-bullying policies that may be applicable.", "Cyber-bullying, which generally refers to harassment occurring among school-aged children through the use of the Internet, may or may not overlap with bullying that occurs in schools. Depending on the circumstances, some or all of the federal and state laws discussed above may apply to cyber-bullying. In addition, several states have passed legislation to prohibit cyber-bulling. In many cases, such legislation requires or authorizes school districts to adopt cyber-bullying policies.\nIt is important to note that the types of laws that may be invoked to combat cyber-bullying will vary depending on the circumstances of the particular case and thus may not be limited to the statutes cited above. For more information on legal protections for victims of cyber-bullying, see CRS Report RL34651, Protection of Children Online: Federal and State Laws Addressing Cyberstalking, Cyberharassment, and Cyberbullying , by [author name scrubbed].", "As noted above, there may be constitutional principles that limit the authority of federal, state, or local governments or schools from enacting anti-bullying laws and policies. These constitutional considerations primarily involve the First and Fourteenth Amendments.", "The First Amendment declares that \"Congress shall make no law ... abridging the freedom of speech.\" The Fourteenth Amendment's due process clause imposes the same restriction upon the states, many of whose constitutions have a comparable limitation on state legislative action. Although the First Amendment guarantees free speech, the right is not absolute. Governments impose limitations on many types of speech, and courts frequently distinguish between constitutionally protected speech and other less socially valuable categories of speech. One such example of unprotected speech is speech that constitutes a true threat. The Supreme Court has decided several \"true threat\" cases that provide the constitutional parameters that states or localities must meet when seeking to establish anti-bullying laws or policies.\nIn Watts v. United States , the Court held that only \"true threats\" are outside the scope of the First Amendment. In Watts , the defendant attended a political rally and made the statement, \"I have already received my draft classification ... I am not going. If they ever make me carry a rifle the first man I want to get in my sights is [President] L.B.J.\" The defendant was arrested and charged with violating 18 U.S.C. Section 871(a) for \"knowingly and willfully ... [making a] threat to take the life of or to inflict bodily harm upon the President of the United States.\" The Court held that, although the federal statute was not unconstitutionally overbroad, the defendant's statement was protected because it was not a \"true threat.\" The Court found that the content of Watts's statement, the context in which the statement was made, and the audience's reaction to the statement were all supportive of Watts's claim that he engaged in protected \"political hyperbole.\" The Court recognized that \"true threats\" should not be afforded First Amendment protection, and stated, \"What is a threat must be distinguished from what is constitutionally protected speech.\"\nWatts did not establish a bright-line test for distinguishing a true threat from protected speech. As such, lower courts have created varying tests for determining whether speech rises to the level of a true threat. The main point of contention among the appellate courts is whether the focus of a \"true threat\" test should be on the speaker or the listener. Some courts evaluate the existence of a threat by determining whether the speaker should reasonably have foreseen his words to be threatening, while others rest the determination on whether a reasonable recipient would be threatened by the statement.\nBased on these principles, it is possible that anti-bullying laws or policies could be deemed constitutionally deficient if the prohibited behavior does not rise to the level of a \"true threat\" under most circumstances. This analysis, however, may differ depending on whether the challenged language is contained in a state statute or school policy.\nIn the school context, school officials who use anti-bullying policies to take disciplinary action against students may face legal challenges based on the First Amendment. While students generally retain the protections of the First Amendment, these protections may not always mirror the constitutional protections afforded in other contexts. For example, in Tinker v. Des Moines Independent Community School District , the Court held that student expression may be regulated only if it would substantially disrupt school operations or interfere with the rights of others.\nIn Tinker , students wore black armbands to school to protest the United States' involvement in Vietnam, despite knowledge that such action was in violation of school policy. The students were asked to remove the armbands, and upon their refusal were suspended until they came to school without the armbands. The Court held that the wearing of armbands for the purpose of expressing different viewpoints is the type of symbolic act within the protection of the First Amendment. Specifically, the Court ruled that \"First Amendment rights, applied in light of the special characteristics of the school environment, are available to teachers and students. It can hardly be argued that either students or teachers shed their constitutional rights to freedom of expression at the schoolhouse gate.\"\nThe Court subsequently refined the Tinker rationale as it applies to verbal expression or \"pure speech.\" In Bethel School District 403 v. Fraser , the Court ruled that school officials had the authority to discipline a student for violating school rules by delivering a lewd speech at a school assembly. Shifting its focus from the students' rights articulated in Tinker , the Court instead emphasized the school's duty to inculcate habits and manners of civility and teach students the boundaries of socially appropriate behavior. In addition, the Court noted the importance of protecting minors from vulgar, lewd, or indecent language. As such, the Court concluded that the nomination speech had a disruptive effect on the education process, and that it was up to school officials to determine what manner of speech in the classroom or in school assembly is appropriate.\nWhile it is undisputed that the First Amendment does not protect \"offensive\" speech while on school grounds, courts are less clear when the speech occurs off school premises. For example, in J.S. v. Bethlehem Area School District , an 8 th grader created a website that contained derogatory remarks regarding a math teacher and a principal. Most of the website was devoted to ridiculing the math teacher, comparing her to Adolph Hitler and making fun of her physical appearance. In addition, the site contained a solicitation for contributions to pay for a \"hit man.\" School officials subsequently expelled the student, citing the extreme emotional distress suffered by the math teacher and the disruption the website caused at the school. The student argued that his website was protected speech.\nIn reviewing the case, the Pennsylvania Supreme Court decided two issues: (1) whether the student's speech constituted a true threat; and (2) whether the Tinker and Fraser standards permit a school district to discipline a student for off-campus speech. In addressing the \"true threat\" issue, the court determined that, although the website was in extremely poor taste, it was not a \"true threat.\" Specifically, the court stated that \"[w]e believe that the [w]ebsite, taken as a whole, was a sophomoric, crude, highly offensive and perhaps misguided attempt at humor or parody. However, it did not reflect a serious expression of intent to inflict harm,\" as the site focused primarily on the teacher's physical appearance, utilizing cartoons, hand drawings, and a reference to Adolph Hitler.\nThe court then addressed whether First Amendment jurisprudence permitted the school to discipline a student for off-campus speech. It dismissed the argument that the website was off-campus speech beyond the school's jurisdiction. Specifically, the court stated that \"[w]e find there is a sufficient nexus between the [w]ebsite and the school campus to consider the speech as occurring on-campus.\" The court made this determination because the student had accessed the site at school, showed it to a fellow student, and informed other students about the site. The court then reasoned that school officials could punish the student under the Tinker or Fraser standard —under the Fraser standard because the speech on the website was vulgar and highly offensive, and under the Tinker standard inasmuch as the website caused a substantial disruption of school activities.\nUltimately, court rulings in this area tend to depend on the circumstances that arise in a given case, with courts sometimes upholding a school's disciplinary actions and other times ruling in favor of a student's right to free speech.", "Another constitutional constraint that legislators and school administrators may face when drafting legislation or school policies aimed at curtailing bullying is the Fourteenth Amendment. The Fourteenth Amendment's due process clause provides that \"[n]o State shall ... deprive any person of life, liberty, or property, without due process of law.... \" Under the due process clause, criminal statutes that lack sufficient definiteness or specificity may be held \"void for vagueness.\" A governmental regulation or statute may be declared void if it fails to give a person adequate warning that his or her conduct is prohibited or if it fails to set out adequate standards to prevent arbitrary and/or discriminatory enforcement.\nIndeed, a statute may be so vague or threatening to constitutionally protected activity that it can be pronounced unconstitutional on its face. For example, in Papachristou v. City of Jacksonville , a unanimous Court struck down as facially invalid a vagrancy ordinance that punished:\ndissolute persons who go about begging, ... common night walkers, ... common railers and brawlers, persons wandering or strolling around from place to place without any lawful purpose or object, habitual loafers, ... persons neglecting all lawful business and habitually spending their time by frequenting houses of ill fame, gaming houses, or places where alcoholic beverages are sold or served, persons able to work but habitually living upon the earnings of their wives or minor children.\nThe Court found the statute facially invalid, as it failed to provide fair notice or require specific intent to commit an unlawful act. The Court concluded that the statute permitted arbitrary and erratic arrests and convictions, provided police officers too much discretion, and criminalized activities that are normally innocent.\nWhen evaluating the constitutionality of anti-bullying laws or policies, the courts may apply these due process principles. For example, in Flaherty v. Keystone Oaks School District , a student filed a lawsuit after being disciplined for posting on an online message board devoted to high school volleyball. A federal district court held that the breadth of student handbook policies pertaining to discipline and technology was overreaching, thus violating students' free speech rights. In addition, the court held that the policies were unconstitutionally vague in definition and as applied.\nThe court found the school policies unconstitutionally overbroad for several reasons. First, the policies were not referred to or incorporated in the student handbook. In addition, the policy \"authorizes discipline where a student's expression that is abusive, offending, harassing, or inappropriate, interferes with the educational program of the schools.\" This standard, concluded the court, did not comply with the Tinker requirement that discipline should be reserved for those circumstances that cause a substantial disruption to school operations.\nFinally, the court noted that even if it did not find the policy overbroad, it would find the student handbook policies unconstitutionally vague, as the terms \"abuse, offend, harassment, and inappropriate\" were not defined in any significant manner. In addition, the court found the policies not only vague in definition but also in application. The court noted that school personnel had varying interpretations of the policies. As such, the court concluded that the policies were vague enough to result in arbitrary enforcement. Therefore, the court concluded that the student handbook policies did not provide the student with adequate warning of proscribed conduct.\nUltimately, when drafting legislation or school policies to combat student bullying, legislators and school administrators must consider the constitutional constraints imposed by the First and Fourteenth Amendments. Specifically, such officials must ensure that statutes and school policies are narrow enough not to infringe upon protected speech and specific enough not to be found unconstitutionally vague.", "" ], "depth": [ 0, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 2, 2, 2, 2, 1, 2, 1, 2, 2, 2, 2, 3, 3, 4 ], "alignment": [ "h0_title h1_title", "h0_title", "h0_full", "", "", "h0_full", "", "", "", "h1_full", "", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What have many members of Congress become increasingly concerned about?", "What has this concern arisen in response to?", "What is Congress interested in ensuring?", "What steps has Congress taken to address these issues?", "How has the issue of bullying been addressed at state level in recent years?", "What do the majority of these laws require?", "How are the requirements placed on schools by these laws inconsistent?" ], "summary": [ "Many Members of Congress have become increasingly concerned about what can be done to address student bullying.", "This concern has arisen in response to high-profile bullying incidents that have occurred in recent years, and due to a growing body of research on the negative consequences of school bullying.", "Congress is interested in ensuring that schools are safe, secure places for students, so that they can receive the full benefits of their education.", "Several bills that address school bullying have already been introduced in the 113th Congress, although none has been enacted as of the date of this report.", "Although there is currently no federal anti-bullying statute, there has been a surge in state legislation in recent years. A Department of Education (ED) study found that between 1999 and 2010, 120 bills and amendments to existing bills were introduced by states. Currently, 49 states have passed anti-bullying legislation.", "The majority of these laws direct school districts to adopt anti-bullying policies.", "However, the requirements placed on schools by these laws are quite varied. In addition, many of these laws do not contain all the key components of anti-bullying legislation that the U.S. Department of Education identified as important in a document it distributed to school districts." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 4, 4, 4 ] }

{ "title": [ "Background", "Revenues Generated and Services Provided", "Concessions Process", "Legislative Authorities", "Challenges Highlighted in 2000 GAO Report", "Since 2000, Park Service Has Made Changes to the Concessions Program, but Some Oversight Issues Remain", "Park Service Has Hired Staff with Relevant Skills and Backgrounds, and the Agency Has Started Using Consultants and Added Training", "Park Service is Extending Fewer Concessions Contracts and for a Shorter Period", "Headquarters Office Has Increased Involvement in Concessions Program, but Some Data from Concessioners Were Missing or Inaccurate", "Concessions Program Continues to Face Challenges, Which the Park Service’s Strategic Plan May Address, but the Plan Is Missing Key Elements to Track Progress", "Prospectus Development Can Be a Lengthy or Expensive Process", "Generating Competition for Some Concessions Contracts Can Be Challenging", "Assessing Some Proposals Can Be Difficult and the Process for Awarding Concessions Contracts Can Be Lengthy", "Contract Management Can Be Affected by Limited Staffing", "Some Concessioners Find It Challenging to Determine How to Fund Maintenance and Capital Improvements", "Commercial Services’ Strategic Plan May Address Many of the Challenges We Identified, but Lacks Certain Elements Needed for Successful Implementation", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Information on Concessions Contracts at Selected Park Units", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The Park Service is composed of headquarters, seven regional offices, and 417 park units that cover 84 million acres across all 50 states. Park units include national parks, national battlefields, national recreation areas, and national lakeshores. The Park Service has long worked with concessioners who provide visitor services, such as lodging and recreational opportunities in national park units, and some concessions operations are nearly as old as the parks in which they operate. For example, the Many Glacier Hotel in Glacier National Park opened for business in 1915, 5 years after the park was established in Montana, and is currently operated by a concessioner.", "As of April 2016, the Park Service had 488 concessions contracts in over 100 park units, and in 2015, such operations collectively generated about $1.4 billion in gross revenues and paid about $104 million in franchise fees to the Park Service. Concessioners provide a vast array of services throughout the national park system. Table 1 shows the most commonly offered services under concessions contracts.\nConcessions contracts also vary in size and scope. The largest concessions contracts in terms of revenues generated generally offer lodging, food, and retail services. According to a Park Service presentation, these three services accounted for over half of the revenue generated under concessions contracts in 2014. In 2015, the five largest concessions contracts generated more than $50 million each in gross revenues for services in Yosemite, Yellowstone, and Grand Canyon national parks along with Statue of Liberty National Monument and Glen Canyon National Recreation Area. These contracts generally offer lodging, food, and retail services. In addition, in 2015, 20 concessions contracts with the largest gross revenues accounted for about two thirds of the total revenues generated under all concessions contracts. In contrast, 177 concessions contracts each generated less than $100,000 in annual revenues in 2015. Many of these contracts were for guide services and outfitters. Some concessioners, such as those that operate lodges, are assigned buildings or land that are owned by the federal government, and they are responsible for maintaining them during the life of the contract.", "As shown in figure 1, the concessions contracting process consists of three main steps: prospectus development, contract award, and contract management.\nPark Service staff at the headquarters, regional, and park unit levels serve different roles in the concessions program. Park Service headquarters provides guidance on the concessions program and oversees the process for developing prospectuses for contracts with anticipated annual gross revenues of more than $5 million a year or a contract term of more than 10 years, which are known as “headquarters- level” contracts. As of April 2016, there were 52 headquarters-level contracts, and these contracts accounted for almost 80 percent of the total gross revenues generated by concessions contracts in 2015. Within headquarters, four branches have different roles in the concessions program, as shown in table 2.\nAccording to Park Service officials, regional staff are also involved in developing prospectuses for headquarters-level contracts. In addition, regional staff take the lead in developing prospectuses for concessions operations that are under $5 million a year in revenue or 10 years in length and answer questions that park unit staff may have on the concessions program. The primary role of park unit staff is to oversee concessions contracts once they have been awarded. Park unit staff will also provide input into prospectus development, such as what services should be allowed. According to Park Service officials, park unit staff include full-time, dedicated staff who are generally known as concessions management specialists and collateral duty staff. Collateral duty staff have other responsibilities at the park in addition to overseeing concessions, such as being a law enforcement ranger.", "The 1998 Concessions Act authorizes the concessions program at the Park Service to provide necessary and appropriate services to visitors that are consistent with the preservation and conservation of a park unit’s resources. The 1998 Concessions Act repealed the National Park Service Concessions Policy Act, which was enacted in 1965 (1965 Concessions Act), and made changes to the concessions program. For example, the 1998 Concessions Act reduced the ability of the Park Service to offer a preferential right of renewal to incumbent concessioners, which allows an incumbent concessioner to match a better bid offered by a competitor. The 1998 Concessions Act allows a preferential right of renewal for concessioners offering guide or outfitting services or those with anticipated gross revenues under $500,000. In contrast, the 1965 Concessions Act allowed a preferential right of renewal for all concessioners.\nThe 1998 Concessions Act also changed how concessioners are to be compensated for capital improvements made to buildings or land assigned to them. Under the 1998 Concessions Act, concessioners that make approved capital improvements receive a leasehold surrender interest (LSI) for this improvement. LSI generally represents the initial value of capital improvements adjusted for inflation and depreciation made by a concessioner to a property, such as building a new structure, completing a major rehabilitation, or installing a non-removable piece of equipment, known as a fixture. LSI took the place of a system of compensation for capital improvements called “possessory interest” that existed under the 1965 Concessions Act. According to Park Service officials, one of the key differences between these systems is the method used to calculate their values, with LSI being easier to calculate than possessory interest because there is a defined formula to calculate LSI in the act. The Park Service tracks LSI balances during the contract term, and if a contract is awarded to a different concessioner when the contract ends, the 1998 Concessions Act requires the previous concessioner to be paid for any LSI. Table 3 compares selected provisions in the 1965 Concessions Act and 1998 Concessions Act.", "Our 2000 report on the concessions program, which we issued prior to the implementation of the 1998 Concessions Act, highlighted three management challenges: Inadequate staff qualifications and training: We generally found that Park Service staff at the headquarters, regional, and park unit levels did not have the necessary skills or training to implement the program. We found that concessions staff were often transferred from other career fields at the Park Service, such as interpretive or law enforcement rangers and the agency’s view was that “anyone could do concessions.”\nInability to manage contract workload and expired contracts: We found that the Park Service was unable to manage its concessions contract workload, and this had resulted in approximately 45 percent of concessions contracts and permits (283 of 630) being expired as of December 31, 1999, meaning that these contracts had exceeded their original term and were under an extension. We found that this backlog of expired contacts resulted in concessioners not having an incentive to invest in facilities that were under short-term extensions because the extensions gave concessioners little time to earn a return on their investment.\nLack of accountability: We found that the organizational structure of the Park Service impeded accountability because Park Service headquarters did not have direct authority over how park units were implementing the program. We also found that confusion existed about the roles and responsibilities in the program among headquarters, region, and park unit staff, and that the review process for concessioners was not adequate.\nTo address some of these challenges, we recommended that the Park Service improve the qualifications of concessions staff, use contractors in the program, or do some combination of both. We also recommended that the Park Service establish a formal process to conduct periodic independent inspections of concessioners’ lodging facilities. The Park Service agreed with these recommendations and has taken steps to implement them, as discussed below.", "The Park Service has made several changes to the concessions program since our 2000 report. Specifically, the Park Service has hired concessions staff with relevant skills or educational backgrounds, is using consultants, and has increased training opportunities. In addition, the Park Service has reduced the number of concessions contracts under extension because it is issuing contracts on a regular basis. The Park Service’s headquarters office has also increased involvement in the program and is collecting more data from concessioners. However, we found that some of these data are incomplete because concessioners did not submit required financial reports or data were reported incorrectly and were not identified in the agency’s review of the reports.", "In our 2000 report, we found that Park Service concessions staff generally did not have the business, financial, or contracting backgrounds needed to successfully carry out the concessions program. Since then, the agency has taken steps to hire concessions staff with relevant qualifications, particularly at the headquarters or regional level. Two park superintendents who have been in the Park Service for more than 30 years said the agency was hiring staff with business backgrounds and specialized skills for the program instead of moving people from other park unit positions, such as rangers, into the concessions program. This is a change from the time of our 2000 report, when we found that the Park Service typically filled concessions positions by transferring staff from other career fields.\nAccording to our interviews with Park Service concessions staff at headquarters, regional offices, and park units, many current program staff have relevant experiences or educational backgrounds as follows.\nHeadquarters: The chief of commercial services and the four branch chiefs have educational degrees in relevant fields, such as hospitality or business, prior work experience in relevant fields, or had worked in the concessions program for some time. For example, the commercial services chief, who was hired in November 2014, has more than 25 years of experience working in the hospitality industry along with degrees in hospitality and business.\nRegional offices: Most of the seven commercial services chiefs who oversee the concessions program in their regions have relevant educational degrees or work experience. Specifically, three of the chiefs had prior relevant experience, such as working on contracts in the private sector, while three others had worked in the concessions program for more than 8 years. In addition, several regional office concessions staff have similar backgrounds and experiences. For example, concessions staff at three of the regional offices have business degrees.\nPark units: Concessions staff at the 20 park units we interviewed have a variety of backgrounds. Some of these park staff have degrees in business or hospitality or several years of experience in the concessions program, while other staff did not. Those staff with fewer relevant qualifications were generally at parks that did not have large concessions programs, in terms of the number of the contracts at the park or the revenues generated under these contracts. For example, at one park unit that had one small concessions operation for a campground, the one collateral duty staff overseeing this operation did not have a relevant background or much experience in the program.\nIn our 2000 report, we recommended that the Park Service consider using contractors in the concessions program for activities such as writing prospectuses and performing financial analysis. The 1998 Concessions Act directs the Park Service to use contractors to conduct or assist in various aspects of the concessions program, including health and safety inspections, analysis of rates charged to the public, and the preparation of the financial aspects of prospectuses. According to Park Service officials and consultants we interviewed, we found that the agency uses consultants in certain aspects of the concessions program. In addition, the draft guidance directs concessions staff to use consultants to help develop prospectuses for headquarters-level contracts. Some of the ways in which consultants are used, according to our interviews, are as follows:\nCondition assessment: Consultants develop inventory of park assets, such as buildings and land that are part of concessions operations, and then conduct assessments of their condition. The results of these assessments are used to develop maintenance plans for concessioners to follow under their contracts.\nFinancial analysis: During prospectus development, consultants develop models that estimate future costs and revenues for concessions operations. These models are used to develop the minimum franchise fee that is published in a prospectus.\nRate administration: Consultants develop tools to support and conduct rate comparability studies to respond to requests from concessioners to change the rates they charge for visitor services.\nEnvironmental audits: Consultants examine environmental management programs that are part of concessions operations, such as their use of hazardous chemicals that are part of certain operations.\nIn our 2000 report, we also found that once staff were transferred from other fields into the concessions program, there was limited training available to them and this further limited their ability to carry out their duties. The Park Service now offers additional training courses on the concessions program to staff to help improve their skills, as shown in table 4. Specifically, the agency offers four classroom-based courses that are several days in length. According to a senior Park Service official, the Evaluation and Pricing course predated the implementation of the 1998 Concessions Act, but the other three classes were developed since the law’s implementation to provide additional training to concessions staff. Of these training courses, concessions staff are only directed to complete the Evaluation and Pricing training as of November 2016, while the other courses are optional. Many of the park unit staff we interviewed said they had taken one or more of the four classroom training courses. At one park unit, a collateral duty staff said that he did not have a background in the concessions area and that the courses had helped him understand how to administer the program. The Park Service supplements these classroom trainings with online training and monthly conference calls during which different concessions topics are covered.", "Based on our analysis of Park Service data, the Park Service has extended fewer concessions contracts past their contract term. Specifically, as we reported in 2000, approximately 45 percent of concessions contracts and permits (283 of 630) had expired as of December 31, 1999, and many of these had been under extension for 5 to 10 years. In contrast, as of April 2016, 28 percent (136 of 488) of concessions contracts were under extension, and 85 percent (116 of 136) had been under extension for 3 years or less. Table 5 shows the number of contracts that were under extension by region, as of April 2016. The Alaska region has the highest percentage of contracts under extension. According to Park Service officials from this region, limited staff were available to help prepare the prospectuses needed to award new contracts so the region extended some existing contracts.\nAccording to Park Service officials, the decrease in the proportion of contracts under extension is due, in part, to a provision in the 1998 Concessions Act, which limits contract extensions to a maximum of 3 years. Officials said that this led the agency to award contracts on a regular basis instead of extending them indefinitely, as had been allowed under the 1965 Concessions Act.", "In our 2000 report, we found that under the agency’s organizational structure, Park Service headquarters did not have direct authority over how park units implemented the program and that headquarters did not have information on certain aspects of the program, such as centralized information on the condition of lodging facilities. Since then, headquarters has increased its involvement in the concessions program. For example, headquarters is actively involved in preparing prospectuses for the 52 headquarters-level contracts, which are the largest concessions contracts. Specifically, a headquarters Planning and Development branch staff member serves as one of the project managers during prospectus development for these contracts. In carrying out this role, headquarters helps to determine how to structure the concessions contract, including what services to allow under the contract and whether to permit large-scale capital improvements during the term of the contract, such as constructing new buildings. According to the Park Service’s draft guidance on the concessions program, the Director of the Park Service must also approve any capital projects estimated to cost over $1 million. According to Park Service officials, the increased oversight of LSI eligible projects is intended to prevent LSI balances from growing too high under certain contracts. High LSI balances can discourage competition because few companies have the resources to purchase the LSI from the previous concessioner, according to Park Service officials.\nThe Park Service also has some initiatives under way to help oversee the performance of concessioners. For example, Park Service headquarters developed a data system to track the ratings that park unit staff give to concessioners as part of the annual overall review process, according to a senior Park Service official. In addition, this official said that 10 percent of annual overall reviews on concessioners will be subject to further review by Park Service headquarters staff, beginning in 2017. Park Service headquarters currently reviews these annual ratings for completeness, but it is aiming to determine if the rating given to a concessioner is justified by the supporting narrative.\nIn our 2000 report, we also found that the Park Service lacked centralized information on the condition of concessioner lodging facilities, which limited the agency’s ability to oversee the program. Since then, the Park Service has directed that condition assessments of structures maintained by concessioners be conducted during the prospectus development process, according to Park Service officials. Information from these assessments is entered into the Park Service’s Facility Management Software System, which contains data on Department of the Interior facilities. Park Service staff use this information to develop a maintenance plan for the concessions contract, which they review and update as needed, according to the agency’s draft guidance and agency officials.\nWhile the Park Service has taken steps to obtain more centralized information on the concessions program, we found that some concessioners’ financial reports were missing or data contained in the reports we reviewed were sometimes reported incorrectly. Standard concession contracts require concessioners to submit annual financial reports to the Park Service for each concessions contract they hold. These reports provide data such as gross revenues, operational costs, and franchise fees paid. The Park Service uses these reports and the data they contain for several purposes, including to reconcile franchise fee payments received from concessioners annually and to generate financial projections that are used to develop prospectuses for contracts, according to agency officials. We found instances where these reports had not been submitted or data on the financial reports that were submitted were incorrectly reported by concessioners.\nSome financial reports were missing: Financial reports for 2015 had not yet been submitted for 23 of 485 concessions contracts as of November 2016. Under these contracts, a total of about $20 million in gross revenues and about $98,000 in franchise fees were reported on their most recently available financial report, which in most instances was from 2014. According to the standard contract language the Park Service uses for concessions contracts, these reports are due within 120 days of the end of a concessioner’s fiscal year, and Park Service officials said that most concessioners use a calendar year for financial reporting. This means that these concessioners should have submitted their 2015 financial reports by April 30, 2016. When we asked Park Service officials about this issue, they said that this was a recurring issue for some concessioners and that it can be hard to obtain financial reports from smaller concessioners because these concessioners sometimes have only one or two employees and these limited resources can make it difficult to submit reports on time.\nFinancial reports sometimes contained incorrect data: For 39 of 485 contracts, concessioners reported gross revenues, but did not report paying a franchise fee in their 2015 financial report. Under these 39 contracts, a total of about $21 million in gross revenues was reported in 2015. According to Park Service data, a franchise fee should have been paid under these contracts. Park Service officials said that they believed these were instances where the concessioner had paid franchise fees, but had not filled out the annual financial reports properly. They added that these inconsistencies should have been identified by the relevant park unit or the regional office during their review of these financial reports. Some park unit officials said that they are overwhelmed by the number of reports, including financial reports, they receive from concessioners and do not have time to review all of them. In addition, we found that the data from these financial reports are entered into a spreadsheet that does not contain edit checks that could identify possible errors. We used supplemental data from the Park Service to determine that franchise fees had been paid under some of these contracts, but we were unable to confirm franchise fees had been paid for all of them because these data were reported at a park unit level and not at a contract level.\nAccording to Standards for Internal Control in the Federal Government, agencies should obtain information from external parties in a timely manner and should have control activities to ensure that data are reliable. However, not all financial reports were submitted in the time frames required by standard contract language, and some that were submitted contained errors that were not identified by Park Service staff during the review process. Without timely or accurate financial data from concessioners, the agency could be limited in its ability to oversee certain aspects of the concessions program such as determining whether concessioners have paid their franchise fees.", "In interviewing Park Service officials and concessioners, we identified some challenges in the three steps of the concessions process: prospectus development can be a lengthy and expensive process, and it can be hard to generate competition for some contracts; the agency’s evaluation panels can sometimes have difficulty assessing proposals, and the award process can be lengthy; and contract management can be affected by limited staffing and confusion about how to fund capital improvements and maintenance. The Park Service’s commercial services strategic plan highlights many of the challenges we identified and identifies initiatives to potentially address them, but is missing certain information, such as performance measures that are quantifiable to track progress and determine where additional effort may be needed.", "Several Park Service officials said that developing prospectuses can be a lengthy or expensive process, taking as long as 4 years to complete. Some of these officials noted that the process is lengthy, in part, due to the multiple levels of Park Service review or the time it takes for consultants to conduct condition assessments of concessioner-assigned buildings or land. In addition, according to one consultant we interviewed, it can cost between $70,000 and $400,000 for a consultant to do a condition assessment of the buildings that are part of a concessions operation, depending on the size and scale of the operation. A Park Service headquarters official acknowledged that it can be costly to develop a prospectus but a future contract can generate revenues that greatly exceed these costs. For example, this official told us that the agency spent about $2 million for a condition assessment of 800 buildings for a concessions contract that was anticipated to generate over $100 million in annual gross revenues and had a contract term of 20 years. In addition, several concessioners noted that responding to a prospectus can be time consuming or expensive. For example, some of these concessioners said that developing a proposal cost several tens of thousands to hundreds of thousands dollars.\nA few Park Service officials and a trade association representing guides and outfitters suggested that a simplified prospectus development process for small contracts may help to reduce the time and costs of developing the agency’s prospectuses and concessioners’ proposals. The Park Service was directed by the 1998 Concessions Act to use a simplified process for small, individually owned entities seeking concessions contracts. The Park Service has developed guidance for one part of the prospectus development process—determining franchise fees for small concessions contracts with projected annual gross revenues less than $250,000. In 2014, the agency began a pilot project designed to help it develop a simplified prospectus process, but it has not yet issued a prospectus using this process. According to Park Service officials, the agency plans to issue a prospectus under the pilot project by the end of 2016 and use the results of this effort to simplify the prospectus development process for small contracts.", "According to Park Service officials, one of the goals of the 1998 Concessions Act was to increase competition in the concessions program, but several Park Service officials and concessioners we interviewed said that increasing competition on concessions contracts continues to be a challenge. Competition for larger contracts is limited to a few companies, in part, because some contracts have high LSI balances, according to Park Service officials. High LSI balances can discourage competition because few companies have the resources to purchase these balances from the previous concessioner, as we found in 2015.\nThe Park Service has taken steps to manage LSI balances by either reducing high balances on existing contracts or limiting the LSI that a concessioner can incur on a new contract, as we found in 2015.\nSpecifically, the Park Service has reduced high LSI balances by using franchise fees to buy down these balances on contracts that would otherwise have attracted few bidders. Most notably, the agency spent almost $100 million to reduce the LSI balance for capital improvements at Grand Canyon National Park to encourage competition. On another contract, concessioners informed the Park Service that they would not submit proposals since the LSI balance on a concessions contract was too high, according to a Park Service official. As a result of this input, the park unit plans to buy down the LSI to zero, which staff said may help generate competition. In addition, the Park Service has limited the amount of LSI that concessioners can incur on new contracts, as we found in 2015. However, according to some concessioners, not allowing concessioners to incur LSI could limit their interest in investing in concessioner-assigned buildings or land because they would not be paid for eligible capital improvements they make.\nCompetition is also limited because over half of the Park Service’s concessions contracts continue to have a preferential right of renewal, according to Park Service officials. While the 1998 Concessions Act generally prohibits the Park Service from granting a preferential right of renewal for larger contracts, the Park Service estimates that about 70 percent of its concessions contracts continue to have a preferential right of renewal. These contracts generally have less than $500,000 in gross annual revenues or are for guide services or outfitters. Competition for contracts may be limited in such situations because the incumbent can match a better bid offered by a competitor. Some guiding concessioners we spoke with said that it was important to maintain a preferential right for guides and outfitters because these types of concessioners often have specialized equipment and skills unique to the park and service provided, such as mountain climbing.", "Several Park Service officials and concessioners said that it can sometimes be challenging for evaluation panel members to determine if a bidder can perform all of the services listed in its proposal. According to the agency’s draft guidance on the concessions program, panel members are to typically review information that is submitted as part of the bidder’s proposal, and according to Park Service officials, panel members generally do not ask for additional information during the evaluation process to help assess a bidder’s proposal. Some of these Park Service officials and concessioners said that this can sometimes result in the agency awarding the contract to a bidder who has a well-written proposal, but might have “overpromised” in its ability to implement its proposal. For example, a park unit official said that a concessioner submitted a proposal in response to a prospectus for a tour boat operation and included additional services not specifically required by the prospectus, such as offering a healthy food menu on board the boat. This concessioner was awarded the contract, in part, because of these additional services; however, it took years for the concessioner to follow through on providing this service, according to this park unit official.\nA concessioner we spoke with said that it would be helpful for park unit staff knowledgeable about the concessions operations at the park unit to be included as an advisor to the evaluation panel to help determine if proposed services are feasible. According to the Park Service’s draft guidance, park unit staff typically serve as technical advisors to the panel. Park unit staff are not always included because of limited travel funds, according to a Park Service official. However, the evaluation panel may informally contact park unit staff when it has technical or park-specific questions, according to agency officials.\nAnother challenge with the contract award phase of the process is the length of time it takes to award a concessions contract, according to some Park Service officials and concessioners. For example, one park unit official we interviewed in July 2016 said that a contract had not been awarded by an evaluation panel that took place in the prior winter and for which only one proposal was submitted. According to Park Service officials, this contract is to be awarded in December 2016. The length of time to award a contract can be affected by the need for agency review. According to the agency’s draft guidance, agency officials are to review the evaluation panel’s recommendation on which concessioner submitted the better proposal before announcing the winner of a contract. There is also a need for review by the Office of the Solicitor during several stages of the concessions process, according to agency officials. In addition, the 1998 Concessions Act requires that the Park Service submit headquarters-level contracts to specified congressional committees for a period of 60 days before they can be awarded.", "Several Park Service officials as well as concessioners we interviewed said that the agency does not always have enough staff to adequately manage concessions contracts. These management activities include reviewing a concessioner’s performance and compliance with its contract and approving concessioner rates. For example, concessions staff at two park units said they found it difficult to review required reports submitted by concessioners because of the large number of concessions contracts they managed. According to the Park Service’s draft guidance on the concessions program, staff are to review and update required reports to ensure that concessioners are meeting their established operational and maintenance responsibilities and providing visitors with satisfactory services, among other things. Furthermore, two concessioners said that not having enough concessions staff at parks slows the review and approval of their requests, such as changes to their rates. For example, one concessioner said that it took several months for concessions staff at a park unit with limited staff to respond to a request to adjust the prices for food the concessioner sold.\nStaff at some park units we contacted manage the concessions program as a collateral duty, meaning they have other primary responsibilities, such as law enforcement. A few of these park unit concessions staff said that managing the concessions program as a collateral duty works well because the concessions program is not large at their park. However, staff at other park units said that managing the concessions program as a collateral duty is challenging since their primary duties take up the majority of their time. As a result, they do not always have time to proactively manage concessions contracts, such as approving new prices for services. Park Service officials said headquarters offers a technical assistance program to parks that need support. In a typical year, the program funds a total of 10 onsite trips, during which headquarters staff travel to park units to assist park unit staff in areas such as conducting inspections of concessioner operations.\nFor the 20 park units we contacted, we generally found that parks that had more contracts or headquarters-level contracts also had more staff managing the program (see table 6). One exception was at Glacier Bay National Park and Preserve, where two full-time concessions staff are responsible for overseeing 39 concessions contracts. In addition, parks in our review that had concessions contracts generating higher revenues generally had more staff. For more information on gross revenues generated at these different park units, see appendix II.\nLimited staffing levels can also affect a regional office’s ability to support parks in the concessions program, according to Park Service officials. According to regional officials, parks that do not have full-time concessions staff can rely on the regional offices for assistance in managing the concessions program. In 2015, the agency tried to address staff shortages in regional offices by allowing each of them to use funding from franchise fees to hire an additional full-time concessions management specialist to help with the workload, according to Park Service officials. As of November 2016, six of the seven regional offices have requested funding to hire additional staff and three of these offices have hired staff using this funding.", "Some concessioners we interviewed said that it was challenging to determine how to fund maintenance or capital improvements. Concessioners that have been assigned buildings or land, such as hotels or restaurants, are required to maintain these assets, and they may also be required to undertake capital improvement projects. In the area of maintenance and capital improvements, projects may be funded in several ways, depending on the type of work required:\nRoutine maintenance: Activities, such as painting or replacing carpet, are paid for by the concessioner.\nPersonal property: Includes certain items, such as removable equipment and furniture, which are paid for by concessioners.\nReplacement of building components: Concessions contracts may require concessioners to set aside a percentage of their revenues into a repair and maintenance reserve fund that they establish and manage. These funds can be used to replace a building component, such as a roof or windows, at the end of its useful life. These funds cannot be used for large-scale capital improvements that would qualify for LSI, and cannot be used for routine maintenance needs.\nLarge capital projects or fixtures: Concessioners can also be required under their contracts to undertake capital improvements, which are eligible for LSI, such as constructing a new building, completing a major rehabilitation, or replacing fixtures. The Park Service tracks LSI balances during the contract term, and if a contract is awarded to a different concessioner when the contract ends, the 1998 Concessions Act requires the previous concessioner to be paid for any LSI.\nFigure 2 shows different types of maintenance or improvements that could be made by a concessioner in a lodging room and the applicable funding category. As this figure shows, a single project to update a lodge room could involve a concessioner determining whether a specific activity qualifies for one of the four categories mentioned above.\nA few concessioners said it was challenging to determine which category of funding a repair or improvement qualifies for within a single project. For example, one concessioner had to replace some carpet, furniture, and dry wall at a historic lodge due to mold, a project that cost about $50,000. The concessioner said it was surprised to learn that the repair and maintenance reserve fund they manage would cover only the dry wall replacement, which cost about $4,000, and the rest of the expense would be the concessioner’s responsibility. Another concessioner said it was confusing to determine which “bucket” of money to use for improvements made as part of one project. As a result, the concessioner was still trying to determine how to account for different parts of this project completed years ago.\nConfusion exists, in part, because the Park Service has not finalized certain guidance or made it publicly available. Park Service officials said that the agency provides information on the use of LSI and repair and maintenance reserve funds to concessioners upon request and that some information on these topics is in the contracts that concessioners sign. However, we found that detailed guidance on how to fund particular repairs and capital improvements was not always readily available and that some of the guidance for these funding sources is still in draft. Specifically, the Park Service issued draft guidance on LSI in 2012 and updated it in another draft dated October 2015, but this guidance has not yet been finalized and is not available on the Park Service’s website as of December 2016. Two concessioners said that the agency’s list of fixtures that qualify for LSI, which are listed in the guidance, periodically changes, adding to the challenge of determining what qualifies for LSI. Similarly, the Park Service has developed internal guidance on the use of repair and maintenance reserve funds, but this guidance is also not available on its website for concessioners to consult, as of December 2016.\nUnder Standards for Internal Control in the Federal Government, agencies should communicate with external parties to achieve their objectives. According to Park Service officials, one of their goals in implementing the 1998 Concessions Act was for the Park Service to improve the maintenance of concessioner-assigned buildings. However, confusion about how to fund maintenance and capital improvements will likely continue without finalized guidance that is publicly available to concessioners. This could lead to delays in undertaking needed maintenance projects and capital improvements, which could further contribute to the agency’s deferred maintenance in concessioner- assigned buildings, which was over $400 million in fiscal year 2015, according to Park Service officials.", "The Park Service developed a 5-year commercial services program strategic plan in 2015, to help improve the commercial services program, including concessions management. This plan was an update to the commercial services improvement plan that had been place for the prior 10 years. According to agency officials, the 2015 strategic plan provided the agency with an opportunity to review progress made on past goals and establish new plans going forward. The Park Service developed this plan based on interviews with concessioners, consultants, and park unit staff, according to a senior Park Service official. As a result, the strategic plan recognizes many of the challenges that we also identified in our interviews with Park Service officials and concessioners. For example, the plan has a goal to improve the prospectus and contract award process which aims to reduce costs and improve efficiency to the government and bidders. Similarly, the plan aims to attract more bids for concessions contracts, increase the accuracy of financial reporting, and increase the percentage of concessions staff who receive training.\nWhile the Park Service’s strategic plan recognizes many challenges that the concessions program faces, we found that the plan is missing quantifiable and measurable performance goals, which would help ensure that these challenges are addressed. Specifically, the plan identifies various performance measures, but it has no related targets or time frames, which would clearly identify the level of performance the agency is trying to achieve and by when. For example, within the goal to improve the prospectus and contract award process, the agency has identified four performance measures, one of which is “change in percent of responses to prospectuses (increase).” While the plan notes that Park Service is aiming to increase the percent of responses, which provides a sense of what the agency is trying to achieve, it does not state by how much (target) or by when (timeframe)—two key aspects of a performance goal. According to agency officials, the strategic plan is still a work in progress, and the agency plans to develop a process to track performance in 2017. Until this effort is complete, it is unclear whether this process will include targets and timeframes.\nAs we previously found, a critical element in an organization’s efforts to manage for results is its ability to set meaningful goals for performance and to measure progress towards these goals. The performance planning and reporting framework put into place by the Government Performance and Results Act of 1993 (GPRA), as updated by the GPRA Modernization Act of 2010, provides important tools to decisionmakers. For example, agencies are to develop performance goals that define the level of performance to be achieved in each fiscal year, and express those goals in an objective, quantifiable, and measureable form. Without clearly defined performance goals that would provide a basis against which results can be compared, it will be difficult for the Park Service to track its progress in these areas and determine where additional effort may be needed to address identified challenges to the concessions program.", "Concessioners help to provide a range of services to visitors to national park units. The Park Service has made positive changes in many of the areas that we identified as challenges in our 2000 report, such as obtaining more centralized information to oversee the concessions program. However, in some instances required reports from concessioners were not provided on time or those submitted contained incorrect financial data that was not identified in the review process. Without more timely and accurate financial data from concessioners, the agency could be limited in its ability to oversee certain aspects of the concessions program, such as whether concessioners have paid franchise fees.\nIn addition, Park Service officials and concessioners identified ongoing challenges with the concessions program. Specifically, some concessioners said they find it challenging to determine how to fund maintenance or capital improvements on buildings or land they can be assigned under their contracts. This is, in part, because some guidance in this area is not finalized or publicly available to concessioners.\nThe Park Service’s strategic plan for the commercial services program recognizes many challenges facing the concessions program and has identified goals that may address some of them. However, this plan lacks performance goals with targets that specify desired outcomes and timeframes. Without clearly defined performance goals, it will be difficult for the Park Service to track its progress in addressing these challenges and determine where additional effort may be needed.", "To help improve oversight of the concessions program, we recommend that the Secretary of the Interior direct the Director of the National Park Service to take the following three actions: review the financial reporting process and make any necessary adjustments to help ensure timely and accurate reporting of data on annual financial reports; finalize guidance on maintenance and capital improvements and make it publicly available to concessioners; and develop performance goals with targets and timeframes in its commercial services strategic plan.", "We provided a draft of this report to the Department of the Interior for review and comment. The GAO Audit Liaison from the Department of the Interior responded via e-mail, stating that the department agreed with our recommendations and providing technical comments, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "Our objectives were to examine (1) how the concessions program has changed since our 2000 report and (2) any ongoing challenges in the concessions program.\nTo address these objectives, we examined relevant laws, regulations, and Park Service documents. Specifically, we examined the National Park Service Concessions Management Improvement Act of 1998 (1998 Concessions Act), its associated regulations, and the National Park Service Concessions Policy Act. We examined the Park Service’s draft guidance on commercial services, known as Reference Manual 48A, along with guidance on repair and maintenance reserve accounts, and draft guidance from 2012 and 2015 on leasehold surrender interest. We reviewed some of our prior reports on the concessions program. In particular, we reviewed our 2000 report on the concessions program, which identified management challenges facing the concessions program prior to the implementation of the 1998 Concessions Act. We also examined the Park Service’s commercial services program strategic plan, which includes initiatives to help address challenges in the concessions program, and compared this plan with our past work on leading practices in strategic planning, as applicable.\nIn addition, we obtained and analyzed data on concessions contracts from the Park Service. Specifically, we analyzed administrative data that were provided to us in April 2016 on the concessions contracts in place, the services they provided, and their contract terms. We used these data to conduct various analyses, including identifying the number concessions contracts, the services offered under these contracts, and whether these contracts were under an extension. We analyzed financial data on concessions contracts, including their gross revenues and franchise fees paid, for 2015, the most recent year for which data were available. We used these data to determine the gross revenues that were generated under concessions contracts and the franchise fees that were paid. To determine the reliability of these data, we interviewed agency officials who were familiar with these data and conducted electronic testing of these data. We found these data to be sufficiently reliable for our purposes, which included providing information on the number of contracts, the services provided under contracts, the number of contracts under extension, and the total gross revenues and franchise fees in the concessions program. In our report, we noted some limitations in the financial data. Specifically, we found that some annual financial reports for the year 2015 were missing and that some of the financial reports contained incorrect data. However, we concluded that we could still use the financial data in our report because of the small number of contracts that had data issues, and we concluded that the data we report on total gross revenues and franchise fees would not be substantially affected by the data issues we identified.\nWe interviewed Park Service officials at the headquarters, regional, and park unit levels to better understand staff qualifications and training, the concessions program, as well as their perspectives on ongoing challenges in the program. We used a standard set of questions to obtain information on these topics. At the headquarters level, we interviewed the chief of the commercial services office, who oversees the concessions program, along with the branch chiefs of all four branches of the commercial services office—Asset Management, Planning and Development, Financial Analysis, and Contract Management. At the regional level, we interviewed regional commercial services chiefs in all seven regions—Alaska, Intermountain, Midwest, National Capital, Northeast, Pacific West, and Southeast—as well as concessions staff in these offices who help to manage the concessions program. At the park unit level, we interviewed concessions staff involved in managing concessions at 20 park units that had one or more concessions contracts. Specifically, we interviewed staff from 2 park units in person (Mount Rainier and Olympic national parks) and staff from the remaining 18 park units via phone to ask about their experiences in managing concessions contracts. We selected a range of parks that varied by region; the number of visitors to the park; type of park (i.e. scenic versus historical); and the size of the concessions program at these parks. We interviewed officials from at least two park units in all seven of the Park Service’s regions. Appendix II lists the park units that we contacted and information on the concessions contracts in these parks.\nWe also interviewed 21 concessioners, including at least one concessioner that operated in each of the 20 parks we contacted, to understand their perspectives on the concessions program. We selected a range of concessioners that varied by the gross revenues their operations generated and the types of services they provided under their contracts. We used a standard set of questions to obtain their views on the concessions process and any challenges they face. To identify the most common challenges mentioned in our interviews, we performed a content analysis of the answers to our interview questions for the 48 interviews we conducted with Park Service officials and concessioners. For reporting purposes, we categorized their responses as follows: “several” represents an answer mentioned in more than 10 of these interviews; “some” represents an answer mentioned in 7 to 10 of these interviews.\nWe also interviewed two trade groups, the National Park Hospitality Association and America Outdoors Association because they represented a variety of concessioners in the program. In addition, we conducted interviews with stakeholders who were familiar with the concessions program, including consultants that help the Park Service implement the program, academics in the hospitality field, and lawyers who represent concessioners. The views from the interviews we conducted are not generalizable to all parks, concessioners, or stakeholders, but they were used to provide a range of perspectives on the concessions program.\nWe conducted this performance audit from January 2016 to February 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Table 7 provides information on the number of, gross revenues, and services offered under concessions contracts at park units we contacted.", "", "", "In addition to the individual named above Elizabeth Erdmann (Assistant Director), Scott Heacock, and Carmen Yeung made key contributions to this report. Additional contributions were made by Penny Berrier, Anna Brunner, Greg Campbell, Antoinette Capaccio, Cindy Gilbert, Benjamin T. Licht, Ying Long, Guisseli Reyes-Turnell, and Dan Royer." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full h1_title h0_title", "h3_full", "", "", "h0_full h1_full", "h0_full h1_title", "", "", "h1_full", "h2_full", "", "", "", "", "h2_full", "h2_full", "h2_full", "h2_full", "", "h3_full", "", "", "", "" ] }

{ "question": [ "What changes has the Park Service made to its concessions program since a 2000 GAO report was issued?", "What issues did GAO highlight in its 2000 report?", "How do those discoveries contrast with what GAO found in this review?", "What has Park Service headquarters increased its involvement in?", "What issue did GAO discover with the Park Service's data collection?", "How might this issue negatively affect the Park Service's data processing?", "What challenges did GAO identify in the concessions process?", "Why is there confusion among concessioners?", "How will the Park Service's commercial services strategic plan address these challenges?", "What issues does this plan have?", "How might cause difficulties for the Park Service?", "What does the 1988 Concessions Management Improvement Act govern?", "How are concessions services managed under the Park Service?", "What was GAO asked to review?" ], "summary": [ "The Department of the Interior's National Park Service (Park Service) has made several changes to its concessions program since GAO issued a report on the program in 2000.", "In that report, GAO highlighted three management challenges: (1) inadequate qualifications and training of concessions staff; (2) backlog of expired contracts that were extended; and (3) lack of accountability in the concessions program.", "In this review, GAO found that the Park Service has taken steps to address these challenges:", "Accountability: Park Service headquarters has increased its involvement in the concessions program and has centralized more information on the program.", "However, in some instances, GAO found that some financial reports that were to be submitted by concessioners to the Park Service were not submitted in a timely manner or data in the submitted reports were inaccurate. Park Service staff did not identify these discrepancies when reviewing the reports.", "Without timely and accurate financial data from concessioners, the agency could be limited in its ability to oversee certain aspects of the program such as determining whether concessioners paid required fees.", "GAO identified some ongoing challenges in each of the three steps of the concessions process. First, developing a prospectus, which provides information on a concessions operation to potential bidders, can be a lengthy and expensive process, and it can be hard to generate competition. Second, the agency's evaluation panels can sometimes have difficulty assessing some proposals, and the award process can be lengthy. Third, contract management can be affected by limited staffing and confusion among concessioners about how to fund maintenance and capital improvements on buildings or land assigned to them by the Park Service.", "This situation is, in part, because the Park Service has not yet finalized related guidance and made it publicly available to concessioners.", "The Park Service's commercial services strategic plan recognizes many of the challenges GAO identified and lists goals to potentially address them. For example, the plan has a goal to improve the prospectus and contract award processes by reducing costs and improving efficiency to the government and bidders. In addition, the plan aims to attract more bids for concessions contracts, increase the accuracy of financial reporting, and increase the percentage of concessions staff that receive training.", "However, these goals do not have targets or timeframes for their completion.", "Without clearly defined performance goals that contain targets or timeframes, it will be difficult for the Park Service to track its progress in these areas and determine where additional effort may be needed to address identified challenges in the concessions program.", "The 1998 Concessions Management Improvement Act governs concessions services at national parks.", "In 2016, the Park Service managed 488 concessions contracts, and such contracts generated about $1.4 billion in gross revenues in the prior year. Under these contracts, companies and individuals operate businesses in parks, including lodges, restaurants, and recreational services.", "GAO was asked to review the concessions program." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 1, -1, 0, 0, 2, 3, -1, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 5, 5, 5, 6, 6, 6, 6, 6, 0, 0, 0 ] }

{ "title": [ "Background", "Drug Research, Discovery, Development, and Approval Process", "Patent and Market Exclusivity and Other Incentives for Drug Development", "Drug Distribution, Payment, and Pricing", "Consolidation and the Antitrust Review Process", "Drug Industry Profit Margins and Merger and Acquisition Deal Values Increased, and the Industry Underwent Structural Changes", "Company-Reported Revenues and Profit Margins Grew from 2006 through 2015", "The Number of Mergers and Acquisitions Generally Held Steady from 2006 through 2015, but the Values Fluctuated", "Concentration in the Drug Industry Varied by the Level of the Industry Considered", "Industry Experts Noted Market Pressures Have Driven Structural Changes in the Industry, Such as in the Types of Acquisitions and Increased Specialization in Therapeutic Areas", "Pharmaceutical Company-Reported Research and Development Spending Grew Slightly, while Biologics and Orphan Drugs Were a Greater Share of New Drug Approvals", "Pharmaceutical Company- Reported Research and Development Spending Increased Slightly, While Federally Funded Spending Decreased Slightly, from 2008 through 2014", "Pharmaceutical Company- Reported Spending Focused on Drug Development and Federal Spending Focused on Basic Research", "Federal Tax Provisions Encourage Drug R&D, with Claims for the Orphan Drug Credit Increasing Sharply", "Novel Drugs Consistently Accounted for About Thirteen Percent of New Drugs Approved in the United States from 2005 through 2016, and Biologics and Orphan Drugs Each Grew as a Share of Approvals", "Studies and Experts Suggest Potential Revenues, Costs, and Policy Incentives Influenced Drug Industry Research and Development Investment Decisions", "Research Suggests Market Concentration Affects Drug Prices, and Mergers May Affect Drug Company Innovation", "Research Finds High Market Concentration Is Associated with Higher Drug Prices", "Studies Find Competition Matters for Innovation, and Some Suggest a Negative Impact of Mergers on Drug Company Innovation", "Agency Comments", "Appendix I: Scope and Methodology", "How the Financial Performance and Structure of the Drug Industry Have Changed Over Time", "Analysis of Sales Revenue and Profit Margins", "Analysis of Mergers and Acquisitions", "Analysis of Concentration", "How Reported Research and Development Spending and New Drug Approvals Have Changed", "Analysis of Research and Development Spending", "Analysis of Tax Incentives", "Analysis of Drug Approvals", "What Is Known about the Potential Effects of Consolidation on Drug Prices and New Drug Development", "Literature Search on Consolidation Impacts", "Interviews", "Data Reliability", "Appendix II: Mergers and Acquisitions of Ten Large Drug Companies from 2006 through 2015", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments", "Bibliography of Research Articles Used in GAO Literature Review", "Related GAO Products" ], "paragraphs": [ "The drug industry encompasses a variety of companies involved in the research, development, distribution, and payment for chemically synthesized and biologic drugs. For the purpose of our review, the drug industry includes pharmaceutical companies that traditionally concentrate on developing or manufacturing drugs derived from chemicals and biotechnology companies that develop or manufacture biologics—more complex drugs derived from living cells.\nThe federal government plays a role in various aspects of the drug supply chain as well. To market drugs in the United States, drug companies must apply and receive approval from the FDA that their drugs are safe and effective. The federal government also supports R&D for new drugs, such as through grants by the National Institutes of Health (NIH), NSF, and other agencies, and through tax incentives administered by the IRS. In addition, mergers and acquisitions affecting the drug industry are subject to review by the federal government to ensure compliance with applicable antitrust laws.", "The process of bringing a new drug to the market is long and costly and involves multiple public and private entities that fund and perform R&D. (See fig. 1.) For a new drug, the entire drug discovery, development, and review process can take up to 15 years, often accompanied by high costs. The process consists of several main stages:\nBasic research: This is research aimed at acquiring new knowledge or understanding without immediate commercial application or use. Basic research is often federally funded and conducted to better understand the workings of disease, which increases the potential of discovering and developing innovative drugs.\nDrug discovery: This is undertaken by numerous researchers from drug companies, academia, and government searching for and identifying promising chemical entities, or chemical and biological compounds, capable of curing or treating diseases.\nPreclinical testing: During preclinical testing, compounds are tested in laboratories and in animals to predict whether a drug is likely to be safe and effective in humans. If the compound is found to be promising, a drug company may decide to test it as a new drug on humans and it proceeds to the clinical trials stage. Before doing so, the company must submit to FDA and have in effect an investigational new drug application that summarizes the data that have been collected on the compound and outlines plans for the clinical trials.\nClinical trials: Clinical trials test potential drugs in human volunteers to determine if they should be approved for wider use in the general population. An investigational new drug typically goes through three phases of clinical trials before it is submitted to FDA for marketing approval. Clinical trials proceed through Phases I, II, and III, beginning with testing in a small group of healthy volunteers and then moving on to testing in larger groups of patients whom the drug is intended to treat to assess the compound’s effectiveness, rate of adverse events, and uses in combination with other drugs.\nFDA Review and Approval: To market a drug in the United States, drug companies submit their research in a new drug application (NDA) or biologic license application (BLA) to FDA, which then reviews and approves the drug for marketing if it is shown to be safe and effective for its intended use. An NDA is an application to market a new chemically synthesized drug—either an innovative drug or a variation of a previously marketed drug. A BLA is an application for a license to market a new biological product (complex drugs derived from living organisms). Companies may also submit a supplement to an already approved NDA or BLA—known as an efficacy supplement—to propose changes to the way an approved drug is marketed or used, such as adding or modifying an indication or claim, revising the dose or dose regimen, providing a new route of administration, or changing the marketing status from prescription to over-the-counter use.\nFor the purposes of its review, FDA classifies certain NDAs as new molecular entities—products that contain active chemical substances that have not been approved by FDA previously—and certain BLAs as new therapeutic biologics. FDA generally considers drugs approved either as new molecular entities or new therapeutic biologics to be “novel” drugs—products that are often innovative and serve previously unmet medical needs or otherwise significantly help to advance patient care and public health.\nPost-approval: After FDA has approved a drug for marketing, the drug company may begin marketing and large-scale manufacturing of the drug. FDA also continuously monitors the safety of the drug which includes, amongst other activities, oversight of postmarket clinical studies that it can require or request companies to complete (known as phase IV clinical trials). Drug companies may also undertake these studies independently to identify modifications to the drug such as new delivery mechanisms or additional indications for use. The company may then submit a new application or supplement application with new clinical data to FDA to market the modification as a new drug, or market it for the new use.", "Patents and market exclusivity periods are two ways brand-name drug companies may recoup their R&D investments by limiting competition for specified periods of time. Typically, early in the R&D process, companies developing a new brand-name drug apply for a patent on the active ingredient and may additionally apply for patents on other aspects of the drug, such as the method of use, from the U.S. Patent and Trademark Office. Once a patent is granted, other drug companies are excluded from making, using, or selling the patented aspect of the drug during the term of the patent, which generally expires after 20 years from filing. In addition, federal law authorizes certain periods of exclusive marketing rights, or market exclusivity, for new FDA-approved drugs, during which time FDA generally cannot approve a similar competing version of the drug for marketing. These exclusivities are independent of the rights granted under patent and can relate to chemical entities never approved before by FDA (5 years of exclusivity); new biologics (12 years); approval of a supplement for a new condition or use or other change to a previously approved chemically synthesized drug based on new clinical studies (3 years); and orphan drugs—drugs designated to treat rare diseases or conditions (7 years); among others. Patent protection and market exclusivity are independent of one another and can run concurrently or not.\nWhen brand-name drug products’ patents expire and exclusivity periods end, similar versions of the drug product that have been approved by FDA may enter the market. These are referred to as generics for chemically synthesized drugs and biosimilars for biologics. The Drug Price Competition and Patent Term Restoration Act of 1984—commonly known as the Hatch-Waxman Amendments—facilitated earlier, and less costly, market entry of generic drugs. A generic drug must generally be demonstrated to be equivalent to the brand-name drug product in active ingredient, dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use. For biologics, the Biologics Price Competition and Innovation Act of 2009 provided an abbreviated pathway for companies to obtain approval of “biosimilar” and “interchangeable” biological products. A biosimilar must be demonstrated to be highly similar to an already approved biological product and to have no clinically meaningful differences in terms of safety and effectiveness from the reference product. See table 1 for a description of drug application types.\nIn addition to incentivizing drug development through patent and market exclusivity, the federal government supports new drug research both directly, through grants from—and intramural research by—agencies such as NIH and indirectly through tax incentives for companies that develop new drugs. Specifically, the Internal Revenue Code includes incentives for research-related spending in three ways: through two income tax credits—the credit for clinical testing expenses for certain drugs for rare diseases (known as the orphan drug credit) and the credit for increasing research activities (known as the research credit)—and through special methods for treatment and reporting of research and experimental expenditures, including current-year deduction to arrive at net income. In general, the credit incentives are available to companies with qualified research spending in the United States. Companies include businesses organized as corporations or non-corporate businesses such as partnerships. These provisions are described below:\nOrphan drug credit: Companies may claim the orphan drug credit for half the “qualified clinical testing expenses” for drugs intended to treat rare diseases. Expenditures that give rise to the orphan drug credit may include expenses related to testing outside the United States. A company may claim foreign clinical testing expenses if there is an insufficient testing population in the United States to test the safety and efficacy of the drug. The orphan drug credit is nonrefundable; that is, while the credit can be used to reduce a company’s income tax liability generally, the credit cannot be used to generate a refund if the business has no tax liability or fully used if the credit would reduce tax liability below zero. The credit is also a component of and subject to the limitations of the general business credit.\nResearch credit: Companies may claim a research credit for qualified research expenditures they undertake in a given year that exceed a threshold or base amount. This incremental design of the credit is intended to create an incentive for companies to do more research than they otherwise would. Qualified research expenses are certain expenses for qualified research incurred by the taxpayer during the taxable year in carrying on a trade or business. Qualified research is research that is undertaken for the purpose of discovering information that is technological in nature and the application of which is intended to be useful in the development of a new or improved business component of the taxpayer. In general, substantially all the activities that constitute a process of experimentation relating to new or improved functions, performance, or reliability or quality are qualified research. The rate of credit can be 14 or 20 percent. Like the orphan drug credit, the research credit is nonrefundable and is a component of, and subject to, the limitations of the general business credit.\nDeductions of qualified research expenses: If elected, the tax code allows businesses to currently deduct “research or experimental expenditures” from gross income in the tax year they are incurred rather than depreciate (or amortize) the assets the R&D created over time. Research and experimental expenditures include all costs incident to research, including research conducted outside the United States. Since “qualified research expenses” and “qualified clinical testing expenses” are a particular subset of research and experimental expenditures, expenditures that can give rise to either the research or orphan drug tax credits can be deducted in the year that they occur. However, these deductions must be reduced by the amount of tax credits claimed in order to prevent expenses from both generating a tax credit and being deducted from income.", "The distribution of, and payment for, prescription drugs involve interactions and negotiated transactions among multiple commercial entities along the supply chain from the drug manufacturer to the consumer (see fig. 2). Brand-name and generic drug manufacturers typically sell their drugs to drug wholesalers, who in turn sell the drugs to retail pharmacies or to health care providers (such as hospitals, clinics, and physicians). Pharmacies or providers dispense or administer prescription drugs to consumers. Most consumers purchasing drugs pay a portion of the drug’s price in the form of a copayment or coinsurance, with the specifics of this cost sharing dictated by the consumers’ insurance plan. Insurance plans often use pharmacy benefit managers (PBMs) to help them manage their prescription drug benefits, including negotiating prices with manufacturers, processing claims, and negotiating with retail pharmacies to assemble networks where the beneficiaries can fill prescriptions. PBMs negotiate with manufacturers for rebates on behalf of the insurance plan based on market share, volume, and formulary placement. PBMs also contract with pharmacies; contract terms and conditions may include specifics about negotiated reimbursement rates (how much the pharmacy will be paid for dispensed drugs) and payment terms. Health care providers may also negotiate with insurers for the drugs they administer. The price that payers, PBMs, and ultimately consumers pay for prescription drugs depends in part on the amount of competition and the purchasers’ negotiating power. The negotiating power is influenced by the ability to choose from competing drugs and the volume of drug purchased.\nAccording to economic experts, the usual mechanisms that enforce market discipline may not work in the same way in the health care market as they do in other markets. In most markets—automobiles, for example—consumers are expected to be conscious of the price of goods. If a company raises the price of its goods, consumers would likely purchase fewer goods, causing the company’s revenues to decline. However, in the health care market, the purchase of goods and services is largely influenced by health care providers, who may not be well- informed about, or incentivized to consider, the prices involved. In the case of drugs, some experts argue that marketing and advertising may further distort provider decision making. In addition, if the patients’ medical bills are largely paid by insurance plans (other than copayment or coinsurance costs), then patients’ demand may not be significantly influenced by changes in price to the extent that it might be in other markets where the consumers see and pay the bill themselves.\nCertain payment policies may also limit the negotiating power of insurers. For example, Medicare Part D is required to cover all drugs in six protected classes, which some experts argue reduces the negotiating power of its contractors (known as plan sponsors). In addition, some brand-name drug companies are providing coupons to consumers to mitigate patient drug costs when a company’s drugs are not covered by payer formularies or require higher patient costs than preferred drugs. Some research and experts we interviewed have noted that this practice erodes the negotiating power of insurers and the cost management utility of formularies, which may result in lower prices for the patient using the coupon but higher prices overall. In addition, patients and providers in many cases may not have clear information about the benefit relative to cost of one drug over another drug or treatment.", "Experts have said that consolidation as a result of mergers and acquisitions is one of multiple factors that could influence competition. Fewer companies producing and marketing drugs can lead to greater market dominance by certain companies and less competition.\nThe Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) enforce federal antitrust laws that prohibit activities, such as price fixing and mergers and acquisitions where the effect may be substantially to lessen competition or tend to create a monopoly. Drug companies are subject to these antitrust laws. Companies are required to notify FTC and DOJ of certain pending mergers, also known as the premerger notification program. As part of its premerger review process, these agencies can approve mergers contingent on company divestiture of assets, including those related to products in development—a process known as a negotiated merger remedy. These agreements are subject to public notice and comment and result in an enforceable order. The goal of a merger remedy is to preserve or restore competition in the relevant markets. Although FTC and DOJ each have authority and responsibilities under the antitrust laws, FTC typically examines proposed drug industry mergers. In addition, FTC has authority to investigate and take action against unfair methods of competition in or affecting commerce, as well as mergers and acquisitions that may substantially lessen competition or tend to create a monopoly, including in the drug industry.", "Among the worldwide drug companies included in the data we reviewed, reported pharmaceutical and biotechnology revenues and profit margins for most companies grew from 2006 through 2015. The number of mergers and acquisitions among companies in the industry generally held steady from 2006 through 2015, but merger and acquisition deal values increased. Market concentration varied by the specific market level considered. Industry experts we interviewed noted that market pressures have driven structural changes in the industry.", "According to the data we reviewed, between 2006 and 2015 estimated aggregate worldwide pharmaceutical and biotechnology sales revenue for drug companies grew from $534 billion to $775 billion in real 2015 dollars (about 45 percent), with most of the growth occurring between 2006 and 2011. The largest 25 of these companies (by 2015 pharmaceutical and biotechnology revenue) saw their aggregate sales revenue increase from $448 billion in 2006 to $569 billion in 2015, or about 27 percent. Aggregate sales revenue for all other drug companies in our data grew more sharply, from $86 billion in 2006 to $206 billion in 2015—an increase of about 140 percent (see fig. 3).\nDrug companies’ average profit margins also grew from 2006 to 2015, though the trends differed for the largest 25 companies compared to the remaining companies in our data. Overall, about 67 percent of companies saw their profit margins increase between 2006 and 2015. While there was some fluctuation over time, the average profit margin was 17.1 percent in 2015 for all drug companies; profit margins were higher for the largest 25 companies (20.1 percent in 2015) than for all others (8.6 percent in 2015; see fig. 4).\nTo better place large drug companies’ profit margins into context, we conducted a similar examination of profit margins for large companies in other industries, specifically software companies and the largest 500 companies (by 2015 total worldwide revenue as reported in Bloomberg) representing a wide range of industries. We included the software industry separately because, like the drug industry, it has been cited as having high R&D investment and low production and distribution costs, though caution should be taken in making this comparison. Among the largest 25 software companies (by 2015 software revenue), the average profit margin began at 21.7 percent in 2006 and remained relatively stable through 2014, before decreasing to 13.4 percent in 2015 (see fig. 5). As a broader comparison, the average profit margin among the largest 500 companies was consistently lower than the average among the largest 25 drug companies and software companies. Among the largest 500 companies, the average profit margin decreased from 8.9 percent in 2006 to 6.7 percent in 2015.", "The annual number of mergers and acquisitions involving drug companies generally held steady between 2006 and 2015, with some fluctuations in intervening years, based on our review of Bloomberg data. Overall, the number of transactions generally held steady, with 312 in 2006 and 302 transactions in 2015 (see fig. 6). The number of mergers and acquisitions involving one of the largest 25 companies (by 2015 pharmaceutical and biotechnology revenue) increased from 29 transactions in 2006 to 61 transactions in 2015. In contrast, the number of transactions in our data for the smaller drug companies decreased from 283 transactions in 2006 to 241 transactions in 2015. See appendix II for additional information on merger and acquisition activity of 10 large companies in the drug industry as of 2014.\nWhile the number of transactions generally held steady between 2006 and 2015, the total value of transactions completed over this period fluctuated considerably. These fluctuations were driven by a small number of high value transactions, which tended to occur among the largest 25 companies (see fig. 7). For example, in 2009, there were three transactions each valued above $20 billion in real dollars, all of which were conducted by companies in the largest 25:\nPfizer Inc. acquired Wyeth LLC for about $71 billion,\nMerck & Co Inc. acquired Schering-Plough Corp. for about $56 billion,\nRoche Holding AG acquired Genentech Inc. for about $48 billion.\nIn 2015, about half of the total merger and acquisition transaction value came from five transactions each valued over $10 billion in real dollars, including one very large transaction by Allergan for about $72 billion. The other four transactions also involved companies among the largest 25. Much as the total value of mergers and acquisitions fluctuated considerably from year to year, median disclosed transaction values generally increased between 2006 and 2015, with considerable fluctuation among years.", "For the overall drug industry, the share of total sales accounted for by the 10 largest companies—a measure of concentration—declined between 2007 and 2014, the years for which public data were available from QuintilesIMS. The largest 10 companies (by 2014 pharmaceutical revenue) had 48.9 percent of the drug industry’s sales revenue in 2007; by 2014, their share of the industry sales revenue declined to 38.2 percent. Concentration, which can be measured by share of sales, provides a basic indication of the competitiveness of companies in an industry or specified market level within an industry. Competition in the drug industry generally is examined at the level where products are viewed as substitutes, according to FTC officials. Substitutes can be products that are the same molecular entity or, in some cases, different molecular entities that treat the same condition.\nAt levels narrower than the entire industry, such as drugs within the same therapeutic class or of the same molecular entity (levels that are more relevant to competition), concentration in shares of sales can be higher than in the overall industry. For example, EvaluatePharma reported that the three largest companies in the anti-diabetics market accounted for 67.5 percent of the sales in that market in 2014. Similarly, the three largest companies in the anti-rheumatics market accounted for 56.8 percent of the sales in that market in 2014, and the three largest companies in the anti-virals market accounted for 72.4 percent of the sales in that market, with the leading anti-viral manufacturer accounting for over half (52.8 percent) of worldwide anti-viral sales.\nConcentration can also vary for drugs of the same molecular entity, as some generic drugs may have different numbers of manufacturers than others. For example, as of 2017, 14 companies have approved ANDAs for lisinopril, a drug for hypertension—that is, 14 companies have generic versions of the drug approved for manufacture. By comparison, only one company has an approved ANDA for efavirenz, a drug used to treat HIV infection. Greater numbers of generic manufacturers generally reduce concentration, as generic manufacturers compete with one another in addition to brand-name manufacturers. More broadly, one recent study found that of the novel drugs approved in tablet or capsule formulation since the 1984 Hatch-Waxman Act and eligible for generic competition, more than one-third had three or fewer generic approvals.", "Experts we interviewed noted that market pressures such as rising R&D costs, fewer drugs in the R&D pipeline, and the growth in sales of generic drugs have driven various structural changes in the drug industry, such as in the types of acquisitions being sought. Not all companies respond to those pressures in identical ways. For example, some experts said that some companies that traditionally manufactured brand-name drugs are expanding into the manufacturing of generic drugs. These brand-name companies may acquire a generics manufacturer to adjust the portfolio of drugs they manufacture or gain access to a generics business. Similarly, some traditionally generic manufacturers are expanding into brand-name manufacturing to acquire product lines with more generous profit margins. For both brand-name and generic manufacturers, expanding the size of their drug portfolio may improve their bargaining position with PBMs, according to two economists we interviewed. Experts also said that traditionally large companies are increasingly relying on mergers and acquisitions to obtain access to new research and are conducting less of their own research in-house. In addition, experts told us that investment in the development of traditional chemically synthesized drugs has produced increasingly lower financial returns, resulting in some traditional pharmaceutical companies turning to invest more in the development of more complicated and costly biologics. Many experts highlighted the proliferation of biotechnology companies as large pharmaceutical companies seek to acquire promising new research developments.\nMany experts told us that market pressures have also driven some drug companies to move towards specialization in certain therapeutic areas, including through mergers and acquisitions. As one example, GlaxoSmithKline acquired most of Novartis’s vaccine business in 2015, bolstering its own line of vaccines and helping to raise its share of sales of the worldwide vaccine market. Simultaneously, Novartis acquired GlaxoSmithKline’s oncology business, enabling both companies to shed one line of business and focus on the newly acquired therapeutic areas.\nExperts again noted that one reason companies may be specializing through mergers and acquisitions is because of the increasing cost of R&D—acquiring promising new or developed research or product lines helps companies mitigate R&D investment risk. Acquiring existing lines of business from competitors within a therapeutic area may also help a company increase its presence in a particular therapeutic area.\nAnother widely cited factor influencing structural changes in U.S. industries—including the drug industry—involves tax-influenced mergers, called corporate inversions. An inversion is a type of merger where a U.S. corporation merges with or acquires a company located in a foreign jurisdiction—often a lower-tax country—and reorganizes so the resulting parent corporation is located in the foreign country. This can reduce a corporation’s overall tax liability—often by reducing its U.S. tax liability. While taxes are one of many factors that may influence trends in mergers and acquisitions as discussed above, the incentive for drug companies to reduce tax burdens through inversions can be significant. In 2016, the Treasury Department issued new regulations to curb inversions.", "Pharmaceutical company-reported R&D spending grew slightly from 2008 through 2014, while federally funded spending decreased slightly over the period. Industry spending focused on drug development rather than earlier-stage research, whereas direct federal spending, such as through NIH grants, funded a greater amount of basic research. Claims for the orphan drug credit, one of several federal tax incentives encouraging drug development, increased sharply from 2005 through 2014. Biologics and orphan drugs accounted for an increasing share of new drug approvals from 2005 through 2016. Studies we reviewed and experts we interviewed suggested that potential revenues, costs, and policy incentives influenced brand-name drug company R&D investment decisions.", "Our analysis of industry survey data from NSF indicate that worldwide R&D spending by U.S.-owned pharmaceutical companies and U.S.-based R&D by foreign companies increased slightly (8 percent) in real dollars from $82 billion in 2008 to $89 billion in 2014, the years for which comparable data were available (see fig. 8). According to NSF survey data, the share of this spending that pharmaceutical companies paid others to perform also increased over the period. Estimates of worldwide R&D expenditures as a percentage share of total worldwide sales averaged 13 percent and ranged from 11.5 to 14.2 percent over the period 2008 to 2014. This amount, according to estimates from QuintilesIMS, is larger than the 7.6 percent of total pharmaceutical sales revenue that the industry spent on marketing and promotion in 2014; however, due to differences in the different sources’ methodology and data, publicly reported figures are not necessarily comparable.\nThe NSF Business Research, Development, and Innovation Survey data indicated worldwide R&D spending for respondent biotechnology companies was $9.2 billion in 2009, dropped to $2.7 billion in 2010, rose to $6.7 billion in 2011, then decreased to $1.7 billion in 2013, the years for which worldwide data were available. The percentage of biotechnology company-reported R&D to worldwide biotechnology sales ranged widely from 43 percent in 2011 to 7 percent in 2013.\nPharmaceutical companies reported spending a greater share of sales on R&D than comparably large, R&D-intensive industries and all aggregated manufacturing and non-manufacturing industries, according to comparable Business Research, Development, and Innovation Survey data (see table 2). For example, in 2014, self-reported R&D expenditures as a percentage of total sales were higher for pharmaceutical companies than for other comparably large, R&D-intensive sectors such as semiconductor and other electronic components, software publishers, and computer system design services.\nDirect federal spending for biomedical research, primarily funded through NIH, decreased 3.8 percent in real dollars from $27 billion in fiscal year 2008 to $26 billion in fiscal year 2014, after a peak of $32 billion in 2010, according to our analysis of federal survey data from NSF. NIH was the primary federal source for biomedical research and accounted for $26 billion of spending in 2008 and $25 billion in 2014. According to federal officials we interviewed, other agencies that fund biomedical research that could be relevant to drug R&D were the Department of Defense and the NSF.\nIn addition, state and local governments, foundations, charities, and venture capital also funded biomedical R&D, according to studies and experts we interviewed. Estimates of this spending are much smaller than those for industry and federal agencies. In 2015, National Health Expenditure estimates show that state and local governments spent $6.7 billion on research and non-industry private funders spent $5.3 billion.", "Pharmaceutical company spending from 2008 through 2014 focused on drug development, while federal spending focused on earlier-stage basic research. For example, in 2014 pharmaceutical companies reported allocating 13 percent of total reported domestic R&D spending on basic research, 21 percent on applied research, and 66 percent on development (see fig. 9).\nBy comparison, federal spending consistently funded a greater amount of basic research, according to our analysis of data from NSF’s Survey of Federal Funds for Research and Development. Studies show that basic research often supplies the innovation upon which the industry develops drugs. For example, as shown in figure 10 below, NIH obligated 54 percent, or $13.6 billion of its total $25 billion of drug related spending, for basic research in fiscal year 2014. This is more than twice as much as the $6.3 billion that NSF data show pharmaceutical companies reported spending domestically for basic research that year. NIH also funded applied research that includes more targeted research and activities aimed at translating basic research into new treatments for patients. For example, NIH supports clinical research through the National Center for Advancing Translational Sciences and several other NIH Institutes and Centers. This includes supporting pre-clinical and early-stage clinical trials; promoting and initiating collaborations and partnerships among industry, academia, and other stakeholder communities, such as patient advocacy groups, to address research barriers; and facilitating data sharing, according to agency officials. In accordance with the definition of “development” provided by NSF for the Survey of Federal Funds for Research and Development, NIH classifies R&D activities as “research.” Therefore, NIH does not report any of its activities as strictly drug development, according to agency officials.\nStudies and experts we interviewed suggested that the relative roles of R&D funders and performers are evolving. For example, some experts noted that there is less distinction between public and private investment in R&D than in the past because publicly funded research institutions, such as universities, are frequently involved in financial relationships with industry for commercial development. Some industry experts also noted NIH’s role in fostering these collaborations. As previously noted, there has been a proliferation of smaller, biotechnology-focused companies and greater use of acquisition and licensing agreements by larger, traditional pharmaceutical and biotechnology companies to build their earlier-stage product pipelines rather than conducting early research in-house. Experts suggested that this trend is a response to the increasing complexity and cost of R&D concurrent with the advent of biotechnology and waves of patent and exclusivity expirations for large companies.\nIn addition, traditional pharmaceutical companies also performed less R&D internally than in the past, according to NSF data. Worldwide R&D spending paid for and performed by pharmaceutical companies decreased in real dollars from $61.7 billion in 2008 to $58.2 billion in 2014 and as a share of total worldwide R&D spending. Conversely, the share of the worldwide pharmaceutical R&D spending that was paid for by the company and performed by others, such as through purchased R&D services, increased from 25 percent in 2008 to 35 percent in 2014.", "Similar to the R&D spending trend identified above from the NSF data, various IRS tax data consistently indicate that drug R&D activities did not change significantly—with the exception of the orphan drug credit, which over time increased sharply. Inflation-adjusted claims by all industries for the orphan drug credit increased five-fold between 2005 and 2014, from about $280 million to about $1.5 billion (see fig 11).\nClaims for the other tax credit that incentivizes drug development—the research credit—were more stable than the orphan drug credit between 2005 and 2014. As shown below in figure 12, IRS estimates of research credit claims for pharmaceutical-related corporations reached a high of $1.5 billion in 2007, but then fell to about $1.2 billion in 2014, a level close to the beginning of the period. This may be due in part to the fact that we were not able to obtain a specific estimate for the research credits claimed by biotechnology companies. By comparison, research credit claims grew for all industries over the period, particularly from 2012 to 2014.\nAccording to IRS data, between 2005 and 2014 the pharmaceutical manufacturing industry spent, on average, about $22.5 billion per year (in real dollars) in qualified research spending that factored into the calculation of the research credit (see fig. 13). Spending peaked in 2007 at $25.5 billion and then generally declined from 2007 to 2014. This amount of spending—reported on tax returns as meeting the requirements of qualified research spending as noted above—is less than half of the research spending reported by NSF’s Business Research, Development, and Innovation Survey data. These research spending differences can reflect both differences in the definitions of research spending in each data source and in the specific industry definitions used in the different data sources.\nThe ability of companies to deduct research expenditures in the year they are incurred simplifies tax accounting for research spending and reduces the after-tax cost of research investments. The amount of research spending deducted by large pharmaceutical corporations that submitted an IRS form M-3 has been largely consistent between 2010 and 2013, the years for which data were available (see table 3). Specifically, research expenditure deductions in real dollars increased to $30.7 billion in 2013 after a low over the period of $24.9 billion in 2012. The table also shows that the amounts shown as research expense on the financial statements of the same corporations were slightly higher than the amount deducted on tax returns in each year.", "The number of approvals for drugs FDA considered novel drugs increased from 20 in 2005 to 45 in 2015 but declined to 22 approvals in 2016, according to FDA data and reports (see fig. 14). Novel drugs accounted for between 8 and 18 percent of all drug approvals each year and averaged 13 percent over the period. The remaining majority of drug approvals each year included those not considered novel because they had chemical substances that were previously approved by FDA or were modifications to existing drugs.\nBiologics and orphan drugs each represented an increasing share of all drug approvals from 2005 through 2016. As shown in figure 15, biologics grew from 8 percent of all drug approvals in 2005 to 17 percent in 2016.\nBiologics also represented an increasing share of the subset of all approvals that were considered novel drugs—from 10 percent of novel drugs approved in 2005 to 32 percent in 2016.\nOrphan-designated drugs as a share of all drug approvals grew even more dramatically from 5 percent of all drug approvals in 2005 to 21 percent in 2016 (see fig.15). Orphan drugs as a share of novel drug approvals ranged from 22 percent in 2007 to 42 percent in 2015.\nWe also examined drug approval trends by product category. The product categories that led the largest number of drug approvals fluctuated over time, but oncology drugs were among the most frequently approved in all but 2 years from 2005 through 2016. Of the 263 drugs approved by FDA in 2016, the most common product categories were oncology (55 approvals) and metabolism and endocrinology (38 approvals). For the 22 novel drug approvals in 2016, the most common product categories were oncology (5 approvals) and neurology (4 approvals).", "Studies and industry experts we interviewed, including economists and industry association officials, suggested several drivers for drug company R&D investment decisions. These investment choices were influenced by revenue, cost, and regulatory and other policy incentives:\nPotential revenues: High revenue potential, typically associated with a large potential number of patients or the potential for high drug prices, is an important incentive for R&D investment, according to experts and some research. Studies show that potential market size, measured by revenue, is a determinant of R&D investment and market entry for both brand-name and generic drug companies. Companies also seek to maximize potential revenues by investing in the development of drugs that can command high prices, and drugs that address unmet medical needs or differentiate them from competitors. This includes investment in drugs for niche markets that may have limited competition, such as orphan drugs. Experts also noted that some companies invest to extend patent protection or exclusivity periods for existing drugs as a means to extend revenue generation by delaying or limiting the effect of generic competition— sometimes referred to as “evergreening” or “patent hopping.”\nCost reduction: Drug development costs, particularly for novel drugs, are increasing and companies have sought various ways to reduce their costs or limit risk. Experts we interviewed suggested that drug companies have attempted to reduce costs by focusing on drugs for which clinical trials are perceived to be less costly, drugs perceived as more likely to receive FDA approval, modifications to existing drugs rather than the development of novel drugs, outsourcing of clinical trials, and acquisition of R&D projects already underway.\nPolicy incentives: Often regulatory and other policy incentives influence potential revenues and risks and, in turn, R&D investment, according to experts. For example, exclusivity periods and patent protection, expedited review programs, and tax incentives were cited as influencing R&D investment. The supply of new science from federally funded research may also influence company investment decisions. Expectations about payer reimbursement could also influence potential pricing and investment decisions, according to some experts. For example, one expert noted that payers typically do not resist high prices for oncology drugs.\nThese drivers may also explain the observed brand-name drug approval trends for biologics, orphan drugs, and drugs for certain disease areas. For example:\nBiologics: Some experts noted that recent technological advances have spurred opportunity and investment in new biologics. The longer period of FDA market exclusivity for biologics relative to traditional chemically synthesized drugs may also be attractive to drug developers. In addition, there are currently few biosimilar drugs available to compete for market share once BLA exclusivity expires. Though FDA had approved seven biosimilars for marketing between 2010—the year the approval pathway for biosimilar biological products was established—and September 2017, and was reviewing additional applications, some experts suggest that the added cost and difficulty in developing biosimilars may hinder entry of biologics’ competitors relative to the entry seen for traditional generics.\nOrphan drugs: In addition to the exclusivity and orphan drug credit incentives to develop orphan drugs, an industry expert we interviewed also suggested that it is easier to get FDA approval for orphan drugs, and another suggested that it is less costly to develop them. In addition, orphan drugs can often garner high prices compared to non- orphan drugs, according to an industry report.\nDisease areas: Certain drug classes or disease areas, such as drugs for oncology or multiple sclerosis drugs, can garner higher prices and, in turn, more R&D investment because they often have fewer competitors, are often administered by providers who are insensitive to price, or are perceived as particularly life-saving, according to some experts we interviewed. In addition, some experts suggested that NIH investment in oncology research and gains in personalized medicine have resulted in many more research opportunities in which companies can invest. For example, many new oncology drugs are approved for treatment of tumors with specific genetic markers, and research suggests these drugs are more likely to succeed in clinical trials and face a less-elastic demand curve that, in turn, can facilitate higher pricing.\nAccording to several experts we interviewed, a company’s R&D focus on fewer therapeutic areas of more profitable drugs or niche markets may come at the expense of drug development in less lucrative disease areas—those that affect many patients but in which drugs are more costly to bring to market or have existing generic competition—for example, cardiovascular disease. According to a study of drug development pipeline data, the number of new drugs in all phases of clinical development to treat cardiovascular disease, a leading cause of death in the United States, declined from 1990 to 2012, whereas the number of new cancer drugs increased over the period.", "Research we examined in our literature review suggests that the level of competition in a relevant market influences drug prices. Competition also matters for innovation. Certain empirical economic studies suggest that mergers among brand-name drug companies can negatively impact companies’ innovation post-merger.", "The relationship between competition and drug price is well documented in the drug industry, and industry experts and available research point out that competition dynamics differ for brand-name and generic drugs. Brand name companies producing drugs under patent or exclusivity protection have monopoly pricing power unless alternative drugs that treat the same condition are available. For brand-name products that face competition from such therapeutic alternatives, companies compete on price, differentiation from competitors, or both. We and others have reported that brand-name drug companies consider the availability and price of therapeutic alternatives along with potential market size, the perceived value of the drug relative to competitors, and other factors when determining the price for a new drug. Conversely, generic drugs compete on price with the brand-name or other generic manufacturers of the same drug. As we have reported, and as experts we have interviewed agreed, generic drug companies compete primarily on price.\nBased on our literature review, we did not identify any empirical studies that examined the impact of drug industry concentration changes from mergers and acquisitions on drug prices post-merger. However, empirical studies we reviewed suggest that less competition—that is, a more highly concentrated market—is associated with higher drug prices, particularly for generic drugs. The following summarizes studies we reviewed on the effect of generic and brand-name competition:\nGeneric competition: Most notably, once brand-name drugs lose patent and marketing exclusivity and generic versions of drugs enter the market, drug prices fall and continue to decline as additional generic manufacturers enter. The price moderating effect of generic competition is well documented by FDA, FTC, the IMS Institute for Healthcare Information, and other research. FDA found that for drugs sold from 1999 through 2004, the first generic competitor reduced the drug price only slightly lower than the brand-name on average, but the second generic competitor reduced the drug price by nearly half. For drugs that attracted nine or more generic manufacturers, the average generic price fell 80 percent or more. The IMS Institute for Healthcare Information reported similar findings in 2016 based on its review of generics that entered the market between 2002 and 2014. The introduction of generics reduced the price of those drugs by 51 percent in the first year and 57 percent in the second year with price reductions driven, in part, by the increasing number of competitors. In addition, a 2017 study of 1,120 drugs available as generics between 2008 and 2013 determined that drugs with less market competition, measured by higher concentration, had higher price increases over the period compared to drugs in the cohort with the lowest concentration.\nBrand-name competition: For brand-name drugs, studies show that the presence of therapeutic alternatives in the market reduces the launch price—the price the company sets for a new drug. For example, an often-cited 1998 study of launch prices for 130 new molecular entities showed that a greater number of brand-name therapeutic alternatives was associated with substantially lower launch prices for new brand-name drugs compared to their predecessors. More recently, there are examples of therapeutic alternatives creating market pressure on, and thus reducing prices of, brand-name drugs, such as multiple brand-name hepatitis C therapies that became available between 2013 and 2014.\nResearch has also found that some brand-name drug companies are able to maintain or even raise prices for their drugs—despite competition from therapeutic or generic alternatives—for various reasons, such as product differentiation or brand loyalty stemming from marketing or prescribing patterns. For example, brand-name companies may actually increase prices for some of their drugs to capture the price-insensitive segment of the market. Research also suggests that the extent of price reductions resulting from the entry of generic drugs into a market can differ by the characteristics of the drug and may be less dramatic for biosimilar drugs than traditional generic drugs. For example, the 2016 IMS report noted that price reductions under these circumstances occurred faster for oral drugs than for injectable drugs, which often attract fewer generic competitors. Another 2017 study examining the state of generic competition found that injectables and drugs with other formulations, such as topical or inhaled drugs, were more likely than oral drugs to have only one or two manufacturers. Certain literature we reviewed and experts we interviewed suggested that biosimilars will moderate prices for biologic drugs, but not to the same extent as traditional generics do because they are more costly to manufacture and may be less consistently substituted for the brand-name drug; however, more time and research will be needed to understand the effects given the small number of biosimilars on the market.", "Competition is also relevant to innovation, according to economic studies we examined. As noted, brand-name drug companies compete to develop new products and differentiate their products from therapeutic alternatives. The analysis of how competition affects innovation is a fact- specific process. There is empirical evidence suggesting that, in certain circumstances the incentive to invest in R&D could be enhanced with more competitors. For example, a 2014 study examining multiple manufacturing and non-manufacturing industries demonstrated a positive relationship between competition and innovation (measured by patents), productivity, and R&D expenditures. While drug innovation comes from multiple sources and increasingly from smaller innovative biotechnology companies, the industry relies on large drug companies to invest in the expensive clinical trials needed to develop and bring new innovations to market.\nWe also identified several merger retrospective studies. These studies suggest that there are varied impacts of drug company merger and acquisition on innovation, including both inputs (e.g., R&D spending) and outputs (e.g., patents and new drug approvals).\nA 2009 study of 27 large, brand-name drug company mergers found that the mergers had a statistically significant negative impact on company R&D spending and patent issuance in the third year post- merger compared to non-merging companies. The authors concluded that the findings contradict the idea that mergers deliver advances in innovation that could outweigh possible anticompetitive risks.\nA 2007 study of 165 large mergers between 1988 and 2000 suggested that large companies sought to merge in response to patent expiration or product pipeline gaps, and small companies sought to merge as a response to financial trouble. When controlling for companies’ propensity to merge, small merging companies— defined as companies valued less than $1 billion—grew more slowly in R&D spending, sales, and R&D employees post-merger compared to similar non-merging companies. However, the study did not find these effects to last beyond one year and did not find differences in these growth rates between large merging companies and non- merging companies. Overall, the authors concluded that while merger in the drug industry is a response to being in trouble for both large and small companies, there is no evidence that it is a solution.\nAnother 2009 study examined the number of approvals for new molecular entities—innovative drugs—as a means to examine outputs rather than only R&D spending. The study suggests that while mergers and acquisitions may help small companies, they are not an effective way for larger companies to increase output of new molecular entities. For example, for a sample of 30 mergers and acquisitions with 10 years of data before and after the merger, the study found that for large companies the number of new molecular entities did not increase and may actually have declined slightly following merger or acquisition. Smaller companies, however, experienced an increase in new molecular entities after merger or acquisition.\nOther studies suggest mergers and acquisitions may have a positive impact on innovation using certain measures. For example, a 2006 study of 160 acquisitions involving drug companies between 1994 and 2001 estimated that companies with declining R&D pipeline and sales were more likely to engage in acquisition and that outsourcing R&D through acquisitions was a successful strategy to stabilize declines in drug R&D pipelines. This study estimated that 71 percent of acquiring companies either maintained or improved the health of their research pipelines after merger.", "We provided a draft of this report to the Department of Health and Human Services, FTC, IRS, and NSF for review. These agencies provided technical comments, which we incorporated as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, relevant agencies, and other interested parties.\nIn addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact John E. Dicken at (202) 512-7114 or [email protected] or Oliver Richard at (202) 512-8424 or [email protected]. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix III.", "This appendix provides further details on our scope and methodology in addressing each of our three reporting objectives, which are to describe: (1) how the financial performance and structure of the drug industry have changed over time; and (2) how reported research and development spending and new drug approvals have changed; and (3) what is known about the potential effects of consolidation on drug prices and new drug development. In addition, the appendix describes how we selected officials to interview and the steps we took to assure the reliability of the data we analyzed.", "", "To describe reported pharmaceutical and biotechnology sales revenue and profit margins, we used the Bloomberg Terminal to identify pharmaceutical and biotechnology companies that were still active as of the time of our review. Bloomberg uses a proprietary hierarchical classification system (the Bloomberg Industry Classification System) to categorize companies into different primary industries. We used the Bloomberg Terminal’s company classification browser to obtain an initial set of companies that currently have reported pharmaceutical or biotechnology revenue. We restricted the drug companies in our review to those that were categorized under the “Pharmaceutical & Biotechnology” Bloomberg Industry Classification System (BICS) level 2 category, which indicated that Bloomberg characterizes the company as being primarily a pharmaceutical or biotechnology company. Using this list, we downloaded each company’s reported pharmaceutical and biotechnology sales revenue, total sales revenue, profit margin, return on assets, and return on equity for each company’s fiscal years 2006 through 2015, which were the most current data available. To provide a comparison, we followed the same procedure to obtain data for software companies over the same period. We selected software companies as a comparison because they have high research and development (R&D) and low manufacturing costs similar to drug companies. Sales revenues were adjusted to reflect real 2015 U.S. dollars using the gross domestic product price index.\nWhen examining sales revenues, profit margins, return on assets, and return on equity, analyses were limited to the subset of companies with complete data over the 10-year period for the variables included in the analysis. We did not have a count of how many companies might have existed throughout the review period, but which had no data available on any of the variables we examined. Profit margin, return on assets, and return on equity were each weighted by the company’s industry-specific sales revenue (pharmaceutical and biotechnology or software) prior to averages being computed. To identify the “largest 25” companies for analyses, we first restricted data to companies that had data for the variables being examined for 2006 through 2015, then identified the 25 drug companies with the largest pharmaceutical and biotechnology revenue in 2015. This provided a consistent cohort of large companies to examine longitudinally for each analysis.\nWe also examined profit margins for the largest 500 companies by total worldwide 2015 sales revenue. We obtained a list of the largest 500 companies in 2015 from the Bloomberg Terminal that were still active during our review. Using this list, we downloaded each company’s BICS level 2 category; total sales revenue; pharmaceutical, biotechnology, and software revenues; and profit margins for each company for fiscal years 2006 through 2015. We removed any companies primarily classified by Bloomberg under one of those industries since we had analyzed these separately. For the remaining companies in our largest 500, we subtracted any reported pharmaceutical, biotechnology, and software revenues from their total sales revenues since some companies may have reported such revenues despite not being classified primarily as one of these types of companies. We then weighted each of the remaining companies’ profit margins by their remaining total sales revenue prior to calculating an average. This weighting differed slightly from the industry- specific sales weighting used in the earlier analyses of drug and software companies’ profit margins. For the software industry, the Congressional Budget Office only indicated that it had high R&D and low manufacturing costs similar to drug industry; it did not suggest the same for other lines of business that software companies might additionally be involved in. Because we had no reason to isolate industry-specific revenues for our remaining largest 500 companies, we weighted their profit margins by their total sales revenues. As with the prior profit margin analyses, analysis of the largest 500 sales weighted profit margins were limited to companies with data available for each of company fiscal years 2006 through 2015.", "For analyses of mergers and acquisitions, we again relied on data from the Bloomberg Terminal. We restricted our search to mergers and acquisitions that were completed from January 1, 2006, to December 31, 2015, and which featured a drug company on both sides of the transaction (e.g., as the acquirer and as the acquired company in the case of acquisition of a full company). The “largest 25” companies were determined by their 2015 pharmaceutical and biotechnology sales revenue only—because not every company could be expected to have a merger or acquisition transaction in every year, we did not make this a requirement to be included in the merger and acquisition analyses. We used what Bloomberg reported to be the completed transaction values in our analyses, and we adjusted the values to consistently reflect real 2015 dollars.\nMany companies were not included in analyses due to incomplete data, therefore the results of our analyses of these data do not reflect the entire industry. Bloomberg obtains much of its information from public filings, which provide companies considerable leeway in deciding what to report and how. For mergers and acquisitions, approximately 40 to 50 percent of the completed transactions in Bloomberg’s data between 2006 and 2015 did not have disclosed transaction values. Bloomberg officials told us that transaction values are often missing for private companies.", "To examine overall industry concentration we used pharmaceutical industry and company-specific sales data from QuintilesIMS from 2007 through 2014, the years for which data were publicly available. We also examined publicly available industry reports and generic drug approvals data for discussion of concentration across different therapeutic areas. Our findings on industry concentration and the variation of concentration across therapeutic classes is limited to these examples.", "", "To examine how reported R&D spending changed over time, we analyzed data from the Business Research, Development and Innovation Survey maintained by the National Science Foundation’s (NSF) National Center for Science and Engineering Statistics for years 2008 through 2014, the most recent years for which data were consistently available. The Business Research, Development and Innovation Survey data are collected annually from a probability sample of for-profit companies with a U.S. presence, which are classified in select manufacturing and nonmanufacturing industries based on their North American Industry Classification System (NAICS) code. We analyzed aggregate company- reported worldwide R&D expenditures and worldwide sales for respondent companies designated with NAICS code 3254 for pharmaceuticals and medicines. We also examined pharmaceutical company-reported domestic R&D expenditures by character of work— basic research, applied research, or development—as defined by NSF as well worldwide and domestic R&D expenditure by performer (whether R&D was paid for and performed by the company, or paid for by the company to be performed by others). We also examined worldwide expenditures and sales for companies designated as biotechnology research and development companies (NAICS 541711); however estimates were not available for 2008 or 2014 and were less reliable in the years between. We therefore reported biotechnology expenditures and sales separately from pharmaceutical companies and limited the majority of our analysis to pharmaceutical companies. For comparison, we also examined worldwide R&D expenditure and sales for comparably large industries with high R&D intensity as well as all manufacturing and all non-manufacturing industries. All spending and sales data were adjusted to real 2015 U.S. dollars using the gross domestic product price index. We also examined the Business Research, Development and Innovation Survey sample selection and sampling error information for each year of the survey. Finally, we compared worldwide and domestic R&D expenditure and sales trends to spending and sales reported by Pharmaceutical Research and Manufacturers of America (PhRMA)—a national trade association.\nTo examine federal spending trends, we analyzed publicly available data from NSF’s National Center for Science and Engineering Statistics’ Survey of Federal Funds for Research and Development on obligations for research in biomedical related fields made by federal agencies identified as funding drug-related research between fiscal years 2008 and 2014, years consistent with available industry data from NSF’s Business Research, Development, and Innovation Survey. Data represent federal agency obligations for basic and applied research in the fields of biological sciences, medical sciences, and other life sciences as reported by federal agencies. Obligations were adjusted to real fiscal year 2015 U.S. dollars using the gross domestic product price index. We identified agencies that fund drug-related research based on interviews with officials from the National Institutes of Health (NIH), NSF, and other industry experts. The Survey of Federal Funds for Research and Development is a census of federal agencies that conduct R&D, and provides data on obligations by agency and field of science rather than by specific industry or use. Our estimates of federal spending may be imprecise because the data preclude us from pinpointing spending specific to drug R&D projects, and because the type of research that federal agencies typically fund often has an impact on many different research areas that may not be specific to drugs. We also reviewed budget documents from NIH and reviewed select studies for spending estimates by non-federal or industry sources.\nIn addition, we obtained estimates of R&D spending by state and local governments and non-industry private funders for 2015 from National Health Expenditure account estimates. These estimates include spending for all biomedical research by these categories and thus also likely overestimate spending specific to drug development.", "To identify tax provisions that provide incentives for drug research and development, we reviewed reports by the Joint Committee on Taxation and the Congressional Research Service. We obtained and analyzed aggregate tax return data from the Internal Revenue Service (IRS) Statistics of Income division for the orphan drug credit and research credit claimed by relevant industries and all returns (all industries) for years 2005 to 2014, the latest ten years for which data were available. Specifically, we analyzed claims from companies with IRS Principle Business Activity codes for pharmaceutical manufacturing, drug wholesalers, and scientific research. IRS’s industry codes are based on NAICS definitions, and corporations are instructed to report the industry code for which it derives the highest percentage of its total receipts. These data are reviewed by Statistics of Income division staff for accuracy. The scientific research industry category includes corporations conducting biotechnology research and development, but also includes firms conducting research in nanotechnology and physical, engineering, and life sciences. As a result, we chose not to report research credits claimed by corporations in the broader scientific research industry category as being related to drug development, but we do report orphan drug credits claimed by corporations in this industry category. We also obtained and examined reported qualified research expenses for pharmaceutical manufacturing companies for years 2005 to 2014. IRS’ Statistics of Income division produces estimates based on a representative stratified sample of corporate returns. IRS provided additional information on the corporations that reported claiming the orphan drug and research credits; in both cases a high percentage of the claims came from large corporations that are included in the stratified sample with certainty. As a result, we concluded that the estimated credit totals are reliable given that the estimates are largely based on returns that were certain to be included in the sample. The amount of research and orphan drug credits claimed represents claims rather than amounts utilized due to limitations of the general business credit. Reported estimates therefore may reflect the upper bounds of what was utilized from claimed amounts. IRS also provided additional data on total deductions claimed for qualified research expenditures and amounts reported on financial statements from Form M-3, for 2010 to 2013. These data were limited to large corporations that filed form M-3, which is required for corporations with $10 million or more of assets. All claims were adjusted to 2015 U.S. dollars using the gross domestic product price index.", "To examine trends in new drug approvals, we obtained and analyzed data from the Food and Drug Administration (FDA) for new drug applications (NDA) and biologic license applications (BLA) and NDA- and BLA-efficacy supplements approved by the FDA’s Center for Drug Evaluation and Research between 2005 and 2016, the most recent ten years of available data at the time of our review. We determined which drugs FDA considered novel drugs by reviewing publicly available reports and resolving any discrepancies with agency officials. We analyzed these data to determine the type of drugs FDA approved, such as the product category and whether the drug was designated an orphan drug.\nFinally, we interviewed agency and industry experts and reviewed relevant academic, government, and industry literature on R&D investment trends and reasons for such trends.", "", "To determine what is known about the impact of drug industry consolidation on drug price and drug development, we reviewed studies obtained from a literature search. To identify relevant publications, we used a number of bibliographic databases, including ProQuest, Scopus, PubMed, National Technical Information Service, Lexis, Social Science Research Network, and the National Bureau of Economic Research. We reviewed the following document types: scholarly peer reviewed material, government reports, working papers, and policy research organization publications published by a U.S. publication from 2005 forward. We concluded our searches in August 2017. To the resulting list of publications, we added articles identified in our own background research and articles suggested by industry experts, including certain heavily cited papers published prior to 2005. From the revised list, we selected publications that empirically evaluated the effect of drug industry consolidation (mergers and acquisitions) on drug price or innovation (new drug development or R&D spending). We also selected publications that included empirical analyses of drug industry or subindustry concentration or competition and drug price or drug development. Finally, we reviewed the data sources and methodology used to support the assertions of each publication and included those that met our methodological criteria. See the bibliography at the end of this report for the 22 publications included in our review.", "To inform our understanding of the drug industry for all three objectives including structural changes that have taken place, reasons for consolidation trends, drivers of drug company R&D investment trends, and any impacts of consolidation on drug price or innovation, we interviewed drug industry experts including three drug trade associations, four advocacy organizations, two financial ratings agencies, and officials from the FDA, IRS, NSF, Federal Trade Commission (FTC), and NIH. We selected these experts to obtain a variety of industry perspectives. We also interviewed seven academic economic experts about economic factors influencing consolidation and other structural changes, R&D investments, and potential consolidation impacts. We selected these economic experts based on citations in our literature review and suggestions from FDA and FTC officials.", "To ensure that the data used to produce this report were sufficiently reliable, we took several steps. We performed data reliability checks on the data we obtained from the Bloomberg Terminal, such as comparing select companies’ financial data to company annual reports, checking for outliers, and discussing reliability issues with Bloomberg representatives. We did not independently verify the accuracy or completeness of the information reported by the companies. We verified the reliability of NSF’s Business Research, Development and Innovation Survey data used in this report by reviewing relevant documentation, including relative standard errors for specific measures, and by interviewing agency officials who were knowledgeable with the data. We also interviewed knowledgeable NSF officials regarding the reliability of reported Federal Funds for Research and Development survey data and compared reported obligations to NIH budget documents. To verify the reliability of aggregate tax return information, we reviewed relative standard errors for reported measures and interviewed knowledgeable agency officials. We verified the reliability of FDA-provided information by cross-referencing it against other published FDA sources and by interviewing knowledgeable agency officials. After taking these steps, we determined the data were sufficiently reliable for the purposes of our reporting objectives.\nWe conducted this performance audit from April 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings based on our audit objectives.", "The following table reflects mergers and acquisition transactions from 2006 through 2015 for 10 large drug companies, as measured by their 2014 pharmaceutical and biotechnology revenue. Transactions reflect those reported in Bloomberg that were completed from January 1, 2006, through December 31, 2015, and had values of at least $500 million in real 2015 dollars.", "", "", "In addition to the contact named above, Robert Copeland, Assistant Director; Yesook Merrill, Assistant Director; Rebecca Abela, Analyst-in- Charge; Reed Meyer; Brandon Nakawaki; Edward Nannenhorn; Laurie Pachter; and Matthew Rabe made key contributions to this report. Also contributing were George Bogart, Muriel Brown, Sandra George, Sarah Gilliland, and Giselle Hicks.", "We reviewed literature to identify what is known about the impact of drug industry consolidation on drug price and drug development. We included publications that empirically evaluated the effect of drug industry consolidation (mergers and acquisitions) on drug price, of which we did not identify any publications. We also reviewed publications that included empirical analyses of the impact of concentration or competition on drug price.\nBerndt, Ernst R., and Murray L. Aitken, Brand Loyalty, Generic Entry and Price Competition in Pharmaceuticals in the Quarter Century after the 1984 Waxman-Hatch Legislation, National Bureau of Economic Research Working Paper 16431 (October 2010).\nBerndt, Ernst R., and Rena M. Conti, Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007, National Bureau of Economic Research Working Paper 20016 (March 2014).\nBerndt, Ernst R., Rena M. Conti, and Stephen J. Murphy, The Landscape of US Generic Prescription Drug Markets, 2004-2016, National Bureau of Economic Research Working Paper 23640 (July 2017).\nDave, Chintan V., Aaron S. Kesselheim, Erin R. Fox, Peihua Qiu, and Abraham Hartzema. “High Generic Drug Prices and Market Competition: A Retrospective Cohort Study.” Annals of Internal Medicine, vol. 167, no. 3 (2017): 145-151.\nDepartment of Health and Human Services. U.S. Food and Drug Administration. “Generic Competition and Drug Prices.” 2015. Accessed July 31, 2017. https://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsa ndTobacco/CDER/ucm129385.htm Grabowski, Henry G., David B. Ridley, and Kevin A. Schulman. “Entry and Competition in Generic Biologics.” Managerial and Decision Economics, vol. 28, no. 4/5 (2007): 439-451.\nIacocca, Kathleen, James Sawhill, and Yao Zhao. “Why Brand Drugs Priced Higher Than Generic Equivalents.” International Journal of Pharmaceutical and Healthcare Marketing, vol. 9, no. 1 (2015): 3-19.\nIMS Institute for Healthcare Informatics. Price Declines After Branded Medicines Lose Exclusivity in the U.S. (Parsippany, N.J.: IMS Institute for Healthcare Informatics, 2016).\nLu, Z. John, and William S. Comanor. “Strategic Pricing of New Pharmaceuticals.” The Review of Economics and Statistics, vol. 80, no. 1 (1998): 108-118.\nOlson, Luke M., and Brett W. Wendling, Working Paper No. 317: The Effect of Generic Drug Competition on Generic Drug Prices During the Hatch-Waxman 180-Day Exclusivity Period, Bureau of Economics, Federal Trade Commission (Washington, D.C.: April 2013).\nRegan, Tracy L. “Generic Entry, Price Competition, and Market Segmentation in the Prescription Drug Market.” International Journal of Industrial Organization, vol. 26, no. 4 (2008): 930-948.\nRichard, Oliver, and Larry Van Horn. “Persistence in Prescriptions of Branded Drugs.” International Journal of Industrial Organization, vol. 22, no. 4 (2004): 523-540.\nTenn, Steven, and Brett W. Wendling. “Entry Threats and Pricing in the Generic Drug Industry.” The Review of Economics and Statistics, vol. 96, no. 2 (2014): 214-228.\nWe also reviewed publications that empirically evaluated the effect of drug industry consolidation on innovation—including new drug development or R&D spending—as well as publications on the impact of concentration or competition on innovation.\nBanerjee, Tannista, and Arnab Nayak. “Comparing Domestic and Cross- Border Mergers and Acquisitions in the Pharmaceutical Industry.” Atlantic Economic Journal, vol. 43, no. 4 (2015): 489-499.\nComanor, William S., and F.M. Scherer. “Mergers and Innovation in the Pharmaceutical Industry.” Journal of Health Economics, vol. 32 (2013): 106– 113.\nDanzon, Patricia M., Andrew Epstein, and Sean Nicholson. “Mergers and Acquisitions in the Pharmaceutical and Biotech Industries.” Managerial and Decision Economics, vol. 28, no. 4/5 (2007): 307-328.\nHiggins, Matthew J., and Daniel Rodriguez. “The Outsourcing of R&D Through Acquisitions in the Pharmaceutical Industry.” Journal of Financial Economics, vol. 80 (2006): 351-383.\nGetz, Kenneth A., Rachael Zuckerman, Joseph A. DiMasi, and Kenneth I. Kaitin. “Drug Development Portfolio and Spending Practices After Mergers and Acquisitions.” Drug Information Journal, vol. 43, no. 4 (2009): 493-500.\nGrabowski, Henry, and Margaret Kyle. “Mergers and Alliances in Pharmaceuticals: Effects on Innovation and R&D Productivity,” in The Economics of Corporate Governance and Mergers. Northampton, M.A.: Edward Elgar Publishing, Inc., 2008.\nMunos, Bernard. “Lessons from 60 Years of Pharmaceutical Innovation.” Nature Reviews Drug Discovery, vol. 8 (2009): 959-968.\nOrnaghi, Carmine. “Mergers and Innovation in Big Pharma.” International Journal of Industrial Organization, vol. 27, no. 1 (2009): 70-79.\nThakor, Richard T., and Andrew W. Lo. Competition and R&D Financing Decisions: Theory and Evidence from the Biopharmaceutical Industry, National Bureau of Economic Research Working Paper 20903 (September 2015).", "Investigational New Drugs: FDA Has Taken Steps to Improve the Expanded Access Program but Should Further Clarify How Adverse Events Data Are Used. GAO-17-564. Washington, D.C.: July 11, 2017.\nGeneric Drug User Fees: Application Review Times Declined, but FDA Should Develop a Plan for Administering Its Unobligated User Fees. GAO-17-452. Washington, D.C.: May 25, 2017.\nPhysician-Administered Drugs: Comparison of Payer Payment Methodologies. GAO-16-780R. Washington, D.C.: August 1, 2016.\nGeneric Drugs Under Medicare: Part D Generic Drug Prices Declined Overall, but Some Had Extraordinary Price Increases. GAO-16-706. Washington, D.C.: August 12, 2016.\nMedicare Part B: Data on Coupon Discounts Needed to Evaluate Methodology for Setting Drug Payment Rates. GAO-16-643. Washington, D.C.: July 27, 2016.\nDrug Shortages: Certain Factors Are Strongly Associated with This Persistent Public Health Challenge. GAO-16-595. Washington, D.C.: July 7, 2016.\nMedicare Part B: CMS Should Take Additional Steps to Verify Accuracy of Data Used to Set Payment Rates for Drugs. GAO-16-594. Washington, D.C.: July 1, 2016.\nCorporate Income Tax: Most Large Profitable U.S. Corporations Paid Tax but Effective Tax Rates Differed Significantly from the Statutory Rate. GAO-16-363. Washington, D.C.: March 17, 2016.\nDrug Safety: FDA Expedites Many Applications, But Data for Postapproval Oversight Need Improvement. GAO-16-192. Washington, D.C.: December 15, 2015.\nMedicare Part B: Expenditures for New Drugs Concentrated among a Few Drugs, and Most Were Costly for Beneficiaries. GAO-16-12. Washington, D.C.: October 23, 2015.\nPrescription Drugs: Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices. GAO-14-578. Washington, D.C.: June 30, 2014.\nDrug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability. GAO-14-194. Washington, D.C.: February 10, 2014.\nCorporate Tax Expenditures: Evaluations of Tax Deferrals and Graduated Tax Rates. GAO-13-789. Washington, D.C.: September 16, 2013.\nPrescription Drugs: Comparison of DOD and VA Direct Purchase Prices. GAO-13-358. Washington, D.C.: April 19, 2013.\nMedicare Part D Coverage Gap: Discount Program Effects and Brand- Name Drug Price Trends. GAO-12-914. Washington, D.C.: September 28, 2012.\nInternational Taxation: Information on Foreign-Owned but Essentially U.S.-Based Corporate Groups Is Limited. GAO-12-794. Washington, D.C.: July 16, 2012.\nPrescription Drugs: FDA Has Met Performance Goals for Reviewing Applications. GAO-12-500. Washington, D.C.: March 30, 2012.\nDrug Pricing: Research on Savings from Generic Drug Use. GAO-12-371R. Washington, D.C.: January 31, 2012.\nPrescription Drugs: Trends in Usual and Customary Prices for Commonly Used Drugs. GAO-11-306R. Washington, D.C.: February 10, 2011.\nBrand-Name Prescription Drug Pricing: Lack of Therapeutically Equivalent Drugs and Limited Competition May Contribute to Extraordinary Price Increases. GAO-10-201. Washington, D.C.: December 22, 2009.\nTax Policy: The Research Tax Credit’s Design and Administration Can Be Improved. GAO-10-136. Washington, D.C.: November 6, 2009.\nPrescription Drugs: Improvements Needed in FDA’s Oversight of Direct- to-Consumer Advertising. GAO-07-54. Washington, D.C.: November 16, 2006.\nNew Drug Development: Science, Business, Regulatory, and Intellectual Property Issues Cited as Hampering Drug Development Efforts. GAO-07-49. Washington, D.C.: November 17, 2006." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 1, 1, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 2, 2, 1, 1, 2, 2, 1, 1 ], "alignment": [ "h2_title", "", "", "h2_full", "", "h0_title", "", "", "h0_full", "h0_full", "h3_full h1_full", "", "h1_full", "", "h1_full", "", "h2_full", "", "", "h3_full", "h3_full", "", "", "", "", "", "", "", "", "", "", "", "", "h3_full", "", "", "", "", "h3_full h2_full" ] }

{ "question": [ "How was sales revenue distributes among drug companies in 2014?", "How did concentration differ in narrower markets?", "What factors have driven structural changes in the industry?", "How did worldwide company R&D spending change from 2008 to 2014?", "How did federal spending change during this period?", "How was industry R&D spending incentivised by the government?", "What did these incentives result in?", "What did retail prescription drug expenditures account for in 2015?", "What was this growth driven by?", "What reasons have been identified for drug price increases?", "How might this be amended?", "What was GAO asked to examine?", "What does this report describe?", "How did GAO collect data for this report?" ], "summary": [ "The largest 10 companies had about 38 percent of the drug industry's sales revenue in 2014.", "However, concentration was higher for narrower markets, such as for certain drugs in the same therapeutic class.", "In addition, experts noted that market pressures such as rising research and development (R&D) costs, fewer drugs in development, and competition from generic drugs, have driven structural changes in the industry such as increased use of acquisition by large drug companies to obtain access to new research.", "From 2008 through 2014, worldwide company-reported R&D spending, most of which went to drug development (rather than research), increased slightly from $82 billion to $89 billion in 2015 dollars.", "During the same period, federal spending, which funded a greater amount of basic research relative to industry, remained stable at around $28 billion.", "In addition to grants, several federal tax provisions provided incentives for industry R&D spending, including the orphan drug credit, available for companies developing drugs intended to treat rare diseases, which increased more than five-fold from 2005 through 2014.", "Pertaining to drug approvals, the total number of new drugs approved for marketing in the United States fluctuated between 2005 and 2016, ranging from 179 to 263 drug approvals annually. Novel drugs—innovative products that serve previously unmet medical need or help advance patient care—accounted for about 13 percent of all approvals each year. Biologics—drugs derived from living rather than chemical sources—and orphan drugs accounted for growing shares of drug approvals, reflecting market and policy incentives to invest in these areas, according to experts GAO interviewed.", "Retail prescription drug expenditures were estimated to account for about 12 percent of total personal health care service spending in the United States in 2015, up from about 7 percent through the 1990s.", "Retail prescription drug expenditures were estimated to account for about 12 percent of total personal health care service spending in the United States in 2015, up from about 7 percent through the 1990s.", "Prior GAO reports have identified multiple reasons for drug price increases, including limited competition.", "Experts have questioned whether consolidation among drug companies could reduce competition and R&D investment in new drugs.", "GAO was asked to examine changes in the drug industry.", "This report describes: (1) how the financial performance and structure of the industry have changed over time, (2) how reported R&D spending and new drug approvals have changed, and (3) what is known about the potential effects of consolidation on drug prices and new drug development.", "GAO analyzed Bloomberg drug industry financial data for 2006 through 2015, and examined select publicly available estimates of company market shares for 2014 and market shares for certain therapeutic classes for 2016. GAO also analyzed estimates of company self-reported R&D spending and federal funding for biomedical R&D data, aggregate tax credit claims data, and drug approval data for the same approximate time period. All data were the most current available. In addition, GAO also reviewed published research and interviewed federal agency officials, economists, and representatives from industry and advocacy groups." ], "parent_pair_index": [ -1, 0, -1, -1, 0, -1, 2, -1, 0, -1, 2, -1, -1, 1 ], "summary_paragraph_index": [ 6, 6, 6, 7, 7, 7, 7, 0, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "Background", "Retirements, Retrofits, and New Construction May Result in a Smaller but Cleaner Coal- Fueled Electricity Generating Fleet", "Power Companies Are Planning to Retire a Significant Number of Older, Smaller, More Polluting Units", "Many Units May Be Retrofitted with Pollution Control Equipment", "Some New Generating Units May Be Built and Would Be Larger, Cleaner, and More Efficient Than the Fleet Overall", "Coal Likely to Remain a Key Fuel Source, but Future Use May Be Affected by Fuel Prices, Environmental Regulations, and Other Factors", "Coal Likely to Continue to Be a Key Source of Electricity in the Future, though Its Share Is Generally Expected to Decline in the United States", "Agency Comments and Our Evaluation", "Appendix I: Analysis of Characteristics of Coal-Fueled Generating Units That Power Companies Plan to Retire", "Methodology", "Model of Plans to Retire Coal-Fueled Generating Units", "Data Used", "Results", "Analysis Indicates Units Power Companies Likely to Consider Retiring", "Limitations and Alternative Model Specifications", "Limitations", "Alternative Specifications", "Appendix II: Description of Selected Scenarios and Forecasts", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "Because of its abundance and historically low cost, coal is an important fuel source in the United States, accounting for about 20 percent of total energy use in 2011. Nearly all coal consumed in the United States is produced domestically, and coal represents about 29 percent of all domestically produced energy. U.S. coal production generally increased since 1960 and reached its highest level in 2008. Advancements in mining technology and a shift to using surface mines to a greater extent than underground mines has boosted coal’s overall productivity and enabled production to increase even as the number of workers decreased. In 2011, half as many workers produced 24 percent more coal than in 1985, as shown in figure 1. Data from the Bureau of Labor Statistics indicate that about 86,200 people were employed in coal mining in the United States in 2011.\nIn the United States, coal is primarily used to generate electricity—over 90 percent of coal was used to generate about 42 percent of electricity in 2011. The amount of electricity generated using coal has generally increased since the 1960s, but decreased recently due to a combination of a decline in overall electricity demand, shifts in the relative prices of fuels, and other reasons. (See fig. 2.) Meanwhile, coal’s share of total electricity generation has fluctuated over time. EIA has stated that several factors, including low oil prices during the late 1960s—which served to increase electricity generation from oil—and the oil price shocks of the 1970s have influenced the mix of fuel sources used to produce electricity.\nTwo broad trends—recent environmental regulations and changing market conditions—are affecting power companies’ decisions related to coal-fueled electricity generating units. Regarding environmental regulations, as we have previously reported, since June 2010, EPA proposed or finalized several regulations that would reduce certain adverse health or environmental impacts, including impacts associated with coal-fueled electricity generating units.potentially significant implications for public health and the environment. One of the most significant regulations in terms of EPA’s estimated benefits and costs, EPA’s Mercury and Air Toxics Standards, establishes emissions limitations on mercury and other toxic pollutants. Mercury is a toxic element, and human intake of mercury, for example, through consumption of fish that ingested the mercury, has been linked to a wide range of health ailments. In particular, mercury can harm fetuses and cause neurological disorders in children, resulting in, among other things, impaired cognitive abilities. Other toxic metals emitted from power plants, such as arsenic, chromium, and nickel can cause cancer. EPA estimates that its finalized regulation would reduce mercury emissions from coal- fueled electricity generating units by 75 percent, as well as reduce SOemissions.retrofit generating units with controls to reduce pollutants and, when it is not economic to retrofit, may retire some generating units.\nIn response to these regulations, power companies might Regarding broader market conditions, important market drivers have been weighing on the viability of coal-fueled electricity generating units. Key among these has been the recent decrease in the price of natural gas, which has made it more attractive for power companies to build new gas-fueled electricity generating units and to utilize existing units more. In addition, slow expected growth in demand for electricity in some areas has decreased the need for new generating units. Power companies may weigh the costs of any needed investments compared with the benefits of continuing to generate electricity at a particular unit. When the costs outweigh the benefits, a power company may decide to retire a unit rather than continue to operate the unit or install new pollution control equipment.\nThe majority of coal produced in the United States is used domestically, though exports represent a small but recently growing fraction of U.S. coal production. In 2010, the United States exported 82 million tons of coal, which accounted for 8 percent of total production. As shown in figure 3, coal exports to European and Asian markets represented 76 percent of total U.S. coal exports in 2011. In 2011, total coal exports were up 31 percent compared with 2010, reaching 107 million tons, due largely to rising exports to Europe and Asia. This was the highest level of exports since 1991. In 2011, 35 percent of U.S. coal exports were of the types of coal typically used to produce electricity, the remainder were of metallurgical coals used in industrial processes, such as steelmaking.\nTo better understand the potential future of the coal and electricity industries, the federal government, private companies, and others use models to project future industry conditions, including the future use of coal. For example, EIA, IEA, and IHS Global Insight produce long-term projections of electricity generation and generation from coal. Because the future depends on a multitude of factors that are difficult to predict, EIA assesses various scenarios with different assumptions about future conditions to better understand the range of potential future outcomes. For example, EIA’s primary scenario, called its “reference” scenario, is a business-as-usual estimate based on existing policies, known technology, and current technological and demographic trends. Additional scenarios make different assumptions about fuel prices, economic conditions, and government policies, among other things. Some of these scenarios are especially relevant to the question of coal’s future, because they address factors currently affecting the industry, such as the prices of coal and natural gas—a fuel that competes with coal—and possible future policies to address climate change. Appendix II presents further information about the major assumptions behind these forecasts and scenarios.", "The nation’s fleet of coal-fueled electricity generating units may have less total generating capacity in the future, and the fleet may be capable of emitting lower levels of pollutants, according to available information. These changes will be driven by industry plans to retire a significant number of units, install pollution control equipment on others, and build a few, new coal-fueled units that may emit lower levels of pollutants than the current fleet’s average emissions.", "According to forecasts we reviewed, power companies may retire a significant number of coal-fueled units in the future. In its reference scenario reflecting current policies, EIA projects that power companies may retire 49,000 MW of coal-fueled capacity from 2011 through 2035 (i.e., 15 percent of coal-fueled capacity in 2011). IHS Global Insight projects that power companies may retire 76,476 MW of capacity from 2011 through 2035 (i.e., 24 percent of coal-fueled capacity in 2011).\nOur statistical analysis of Ventyx data on announced retirement plans indicates that, among other things, companies are planning to retire units that are older, smaller, and more polluting. To assess the types of units that may be retired, we analyzed data on current power company plans to retire coal-fueled units. According to Ventyx data, power companies have already reported plans to retire 174 coal-fueled units with a total 30,447 MW net summer capacity through 2020—which accounted for 10 percent of coal-fueled capacity in 2011. As we have previously reported, this would be significantly more retirements than have occurred in the past–– almost twice as much coal-fueled capacity as retired in the 22 years from 1990 through April 2012. Based on our statistical analysis of these plans, power companies are more likely to plan to retire units that are older, smaller, and more polluting. (Appendix I provides further information on our statistical analysis, which included examining several other characteristics that may affect plans to retire units such as (1) whether power companies are traditionally regulated or operate in restructured markets and (2) a unit’s cost of generating electricity relative to regional prices.)\nOlder. Power companies’ plans indicate they are more likely to retire older coal-fueled electricity generating units than newer units. Today’s fleet of operating coal-fueled units was built from 1943 through 2012, with the bulk of the capacity built in the 1970s and early 1980s. As shown in figure 4, units that power companies plan to retire are generally older, on average 54 years old compared with units with no retirement plans that average 39 years old. Some stakeholders we interviewed said that power companies are more likely to retire older units because these units may be reaching the end of their useful lives, can be less efficient at converting coal to electricity, and can be more expensive than newer units to retrofit, maintain, and operate.\nSmaller. The smaller a unit is, the more likely a power company is to be planning to retire it. (See fig. 5.) Size can be important when assessing the economics of additional investments needed to continue to operate coal-fueled units, as smaller units can be more expensive to retrofit, maintain, and operate on a per-MW basis. For example, some power companies may choose to install flue gas desulfurization units—known as scrubbers—to control SO and other air emissions. According to an EPA report, a typical 100 MW coal- fueled unit could incur capital costs 66 to 74 percent higher per MW to install a scrubber than a 700 MW unit. In addition, smaller generating units are generally less fuel-efficient than larger units. Units that are planned for retirement average 175 MW of capacity compared with units that are not planned for retirement that average 351 MW of capacity. Figure 5 shows the number of coal-fueled units by capacity in MW.", "As we reported in July 2012, power companies may retrofit many coal- fueled electricity generating units with new or upgraded pollution control equipment in response to new environmental regulatory requirements.Though the requirements and deadlines these regulations may establish for generating units are somewhat uncertain at this time, EPA’s analyses and two other studies we reviewed in our prior report suggest that one- third to three-quarters of all coal-fueled capacity could be retrofitted or upgraded with some combination of pollution control equipment, including scrubbers and other technologies to reduce SO, mercury, and other emissions. Once retrofitted with this pollution control equipment, the coal- fueled fleet would be capable of generating electricity and emitting much lower levels of pollution. For example, EPA projects that mercury emissions from coal-fueled electricity generating units will decrease by 75 percent as a result of its new regulatory requirements. Nevertheless, even the cleanest running coal-fueled unit may still be more polluting than generating units that use other fuel sources. For example, the 10 least- emitting coal-fueled units emitted over 10 times as much SO per million Btu compared with an average of 0.0006 for combined cycle units. Electricity generating units that rely on solar and wind sources produce no such emissions.", "Available information suggests that industry intends to build some new coal-fueled electricity generating units. According to Ventyx data, power companies have plans to build 42 new coal-fueled electricity generating units with 21,634 MW of capacity in various stages of planning or development (see fig. 7). However, as we have previously reported, developers generally have more planned projects than they complete.\nThe total capacity of coal-fueled electricity generating units in the United States may decline in the future as less capacity is expected to be built than is expected to retire. As discussed, 49,000 to 76,476 MW of coal- fueled capacity is projected to retire by 2035 according to EIA and IHS Global Insight, respectively, and they project that 11,000 MW and 22,134 MW of new coal-fueled capacity will be added by 2035, respectively. EIA officials told us that new coal-fueled capacity in their projections is primarily expected in the next few years and represents units that are already planned or under construction. As less capacity is expected to be built than is expected to retire, total coal-fueled capacity is expected to decline in the future, as shown in figure 8. Coal's share of total electricity generating capacity was about 30 percent in 2011. In EIA’s reference scenario, coal's share of capacity declines to 25 percent in 2035 as retiring coal-fueled units are not fully replaced, and as 176,100 MW of other generating capacity is added in the future.\nAny coal-fueled units that are built in the future are likely to be larger, less polluting, and more fuel-efficient than the average of the coal-fueled fleet overall. Units that power companies are currently planning to build average 515 MW of net summer capacity, and the operating fleet averages 319 MW. Additionally, new units must install technologies to control emissions, and so are likely to emit lower levels of pollutants and thus be cleaner than the fleet overall. For example, generating units built after August 7, 1977, have had to obtain preconstruction permits that establish air emissions limits and require the use of certain emissions control technologies such as scrubbers to reduce emissions of SO.addition, some stakeholders we interviewed said that new coal-fueled units were likely to incorporate designs that are able to convert fuel to electricity more efficiently.", "Coal is likely to continue to be a key fuel source for electricity generation in the United States, but its share as a source of electricity is expected to decline, and the future use of coal to generate electricity in the United States may be affected by several key factors that include the price of natural gas and other competing fuels, environmental regulations, and the demand for electricity, among others. In addition, several stakeholders we interviewed said that coal may increasingly be exported for use in other nations, though the extent of future exports is uncertain.", "According to stakeholders we interviewed and projections by EIA, IEA, and IHS Global Insight, coal is likely to continue to be a key fuel source for U.S. electricity generation, but its share as a source of electricity is generally expected to decline in the future. Some stakeholders told us that, in the future, electricity generation from coal is likely to be displaced by generation from other fuel sources, particularly natural gas, but they still expect coal’s contribution to electricity generation to be significant. Furthermore, in its reference scenario, EIA estimates that coal will represent 38 percent of U.S. electricity generation in 2035 under current policies––down from 42 percent in 2011.amount of electricity generated using coal is expected to remain relatively constant over this same period under EIA’s reference scenario, growing by 0.1 percent annually. However, the amount of electricity generated using some other fuel sources, for example, natural gas and renewables, will increase at higher annual rates—1.4 percent and 2.3 percent respectively—diminishing coal’s total share of electricity generation.", "We met with EIA officials to discuss an early draft of this report and incorporated technical suggestions where appropriate. We also provided a draft of this report to EIA and EPA for formal comment. EIA and EPA did not provide written comments for inclusion in this report. EPA's Office of Air and Radiation did provide technical comments and stated that the report contained a very good description of many of the changes going on in coal and electricity markets that are affecting the use of coal to generate electricity. In its technical comments, EPA suggested that the draft’s emphasis on environmental regulations, particularly on the Highlights page, was misleading and not consistent with the rest of the report, which has a fuller discussion of many factors affecting the future use of coal. EPA stated that market changes, which we discuss in the report, would have significant impacts even in the absence of EPA's regulations. We do not agree that the report was misleading, but given that the Highlights page may be read without the benefit of the fuller discussion found in the report, we moved language from the body of the report to the Highlights page about other factors affecting the use of coal. EPA provided other technical comments, which we incorporated where appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Administrators of the EIA and EPA, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "This appendix describes our statistical analysis of characteristics of coal- fueled electricity generating units, such as age and size, that are likely to affect power companies’ plans to retire certain units. We use this analysis to estimate the number and generating capacity of other coal-fueled units that power companies are likely to consider retiring.", "To test the hypothesis that power companies are likely to retire older, smaller, and more polluting coal units by 2020, we used logistic regression analysis. We analyzed industry data on all coal-fueled units owned by power companies that have already announced plans to retire one or more of these units. Using unit- and company-level data, primarily from company-reported databases, we developed a model depicting the relationship between companies’ announced plans to retire a unit and that unit’s characteristics—age, size, emissions rates of sulfur dioxide (SO) and nitrogen oxides (NO), and the regulatory status of the power company that owns the unit, specifically whether the company is traditionally regulated or operates in a restructured market. To estimate the number and generating capacity of additional units likely to be retired, we applied our model to a dataset consisting of coal-fueled units owned by power companies that have not announced any retirements.", "In developing our model of power companies’ plans to retire coal-fueled units, we relied on economic theory, as well as discussions with stakeholders and our review of studies. Stakeholders included representatives from power companies, a coal company, industry associations, and nongovernmental organizations, and officials from federal and state agencies. Stakeholders and studies mentioned the following characteristics as likely unit-level determinants of power companies’ plans to retire a coal-fueled unit or keep it in operation: age; generating capacity; fuel efficiency (i.e., how efficiently a unit converts fuel to electricity) operating cost and profitability; pollution emission rates and whether a unit already has various types of emissions control equipment; and regulatory status.\nAs a general matter, the larger, newer, more efficient, and less polluting a generating unit is, the more likely it is that a power company may to want to keep it in service and invest in retrofits that may be needed for it to comply with environmental laws or regulations. For example, if a large, new generating unit that a power company uses to meet a significant portion of customer demand is not in compliance with environmental regulations, retiring it would likely require replacing it with another unit of similar size. Doing so may be very costly, and retrofitting it with the requisite pollution control equipment may be a more economical choice.\nIt is also reasonable to expect regulatory status to have some impact on power companies’ retirement plans because such plans could involve significant investments. For companies that are traditionally regulated, state public utility commissions review power companies’ plans for major investments in pollution control equipment in the case of a retrofit, or in replacement power generation capacity if it is needed after a unit is retired. Decisions by power companies in restructured markets are not subject to the same state public utility oversight. Furthermore, once state public utility commissions approve a traditionally regulated company’s plan to invest in major retrofits or replacement units, they allow it to charge rates to recover its investment costs. Companies operating in restructured markets have no such cost-recovery provisions, so their investments in retrofits or replacement units may be riskier.\nOur model does not include all the characteristics that stakeholders and studies identified as possible characteristics that power companies consider in deciding which coal-fueled units to retire. First, economic theory and our analysis of data on coal-fueled units indicate that there are interrelationships among some of these characteristics; for example, newer, larger electric generating units tend to be more fuel efficient, and this fuel efficiency contributes to lower operating costs. Hence, including all characteristics would be redundant and weaken the statistical results. Below, we discuss some specifications of the model with alternative sets of variables. Second, there are likely other characteristics that may influence power companies’ plans to retire generating units that we were unable to include in our statistical analysis. We discuss limitations of our model below.", "We used U.S. electricity data at the level of individual coal-fueled generating units that we obtained under contract from Ventyx, a company that maintains a proprietary database containing consolidated energy and emissions data from the Energy Information Administration (EIA),size, measured in megawatts (MW) of generating capacity; fuel efficiency; , and carbon dioxide; types of installed control equipment or whether owners plan to install control equipment in the future; various cost measures, including generating unit marginal cost; and regulatory status: equals 1 if the power company that owns the unit was traditionally regulated or 0 if the company was operating in a restructured market.\nWe also used regional day-ahead market prices from the IntercontinentalExchange (ICE) company, and spot market prices from the Federal Energy Regulatory Commission (FERC) to calculate an average wholesale market price for the regional markets associated with each unit in our dataset. For each market region, we calculated a simple average of daily prices for the year 2011 from daily ICE price data. For some of the regions, however, there were no price data available from ICE, so we used the 2011 average spot market price from FERC.\nWhile our model does not include all the aforementioned characteristics, we used most of these characteristics in alternative specifications of the model and discuss two of these specifications below.\nOur complete dataset includes 959 coal-fueled units. This dataset includes only units that have a net summer generating capacity greater than 25 MW, making them subject to EPA emissions monitoring and reporting requirements. We excluded units that have not reported any electricity generation or SO or NO emissions over the past 5 years.the total 959 units, 482 units belong to power companies that have announced plans for retiring at least one coal-fueled unit.", "We used logistic regression (logit) analysis to analyze the characteristics that are affecting power companies’ retirement plans of coal-fueled electricity generation units. Regression analysis in general estimates the effect of a change in an independent variable on the outcome (dependent) variable, while holding other variables constant. Logit is a type of regression analysis for situations in which the dependent variable is a categorical variable—one that can take on a limited number of values—instead of a continuous, quantitative variable. In this case, the categorical variable is binary, which means that the choice is between only two outcomes.\nWe estimated the logit regression equation for the subgroup of 482 coal- fueled generating units belonging to power companies that have announced plans to retire at least one coal-fueled unit. The dependent variable in our model is whether to retire or not retire a coal unit, and the independent variables are the (1) age of unit; (2) net summer capacity as a measure of unit size; (3) unit’s SO emissions per unit of heat input from the fuel used in the unit’s electricity generation, measured using millions of British thermal units (Btu); (4) unit’s NO emissions rate in lb/million Btu; (5) whether the power company that owns the unit is traditionally regulated or operates in a restructured market.\nTable 2 shows our resulting estimated equation and relevant statistics.\nThese results generally confirm that smaller, older and more polluting units are more likely candidates for retirement. In the table above, the second column gives the estimated value of the coefficient, which describes the relationship between the independent variables and the likelihood of retirement. The remaining columns give the standard error and the significance level. For example, the coefficient on net summer capacity is negative, which means that an increase in capacity decreases the probability that a unit is planned for retirement. Furthermore, as shown in table 2, the estimated coefficient is significant at the 6 percent level. An estimated coefficient is typically considered statistically significant if the significance is less than 10 percent and very significant if it is less than 5 percent. Similarly, the coefficient on unit age is positive, which means that an older unit is more likely to be retired, and this coefficient estimate is significant at the 1 percent level. The coefficients on SO and NO emissions are also positive and significant at the 1 percent level.\nUsing the resulting logit regression equation, we analyzed “marginal effects” of changes in each of the independent variables on plans to retire an “average” unit owned by a power company in (1) a traditionally regulated market and (2) a restructured market, and the “average unit,” for this purpose, is one with median values for age, size/net summer capacity, SO emissions rates, as shown in tables 3 and 4.\nFor example, a 10 percent increase in the capacity of an average unit owned by a power company in a restructured market, from 193 to 212 MW, would decrease the probability of that unit’s retirement by about 2 percent, all other variables being held constant. For a unit owned by a power company in a traditionally regulated market, the same 10 percent would decrease the probability of retirement by about 1 percent. Note that the median values for units owned by power companies operating in traditionally regulated and restructured markets are not the same and that a 10 percent increase is therefore different.", "The next step in our analysis was to use the resulting logit regression equation to estimate the number and generating capacity of other coal- fueled units that companies are likely to consider retiring among units belonging to companies that have not, as of yet, announced plans to retire coal-fueled units. We also estimated the generation associated with these potential retirements in megawatt-hours (MWh). We assume that some or all of these companies are likely to retire coal-fueled units, but that they either have not decided which ones, or simply have not publicly announced their plans. We further assume that these companies have or will base their decisions on the same characteristics as the companies that have already made announcements. Table 5 shows our analysis of units that power companies may consider for retirement by 2020.\nAs shown in table 5, for the group of coal-fueled units whose owners have not reported any coal-fueled unit retirements, our analysis indicates from 90 to 138 units may likely be considered for retirement by 2020. This range represents the 95 percent confidence interval around our point estimate of 114 units. In other words, our model indicates that there is a 95 percent probability that the actual number of units that will retire is within this range. These 90 to 138 units account for 15,700 to 25,200 MW of capacity and 91 to 151 million MWh of electricity generation. If we add these units to those that power companies have announced for retirement, the total of coal-fueled retirements could range from 264 to 312 units by 2020, amounting to from 46,100 to 55,600 MW of capacity and average annual generation of 241 to 301 million MWh.percentage terms, this would be 15 to 18 percent of the capacity and 13 to 16 percent of the generation of the current coal-fueled fleet of generating units.", "This section discusses the limitations of our model and alternative model specifications that we tested.", "A major limitation of our model is that we used a nonrandom sample of the entire population of coal-fueled units to estimate the relationship between the characteristics of coal-fueled units and power companies’ plans to retire a unit. Our sample consisted of companies that announced plans to retire at least one unit but was not a random sample. It is possible that the companies that announced planned retirements and those that did not so announce differ in systematic ways that we do not observe from the data.bias.\nSuch differences could result in omitted variable Another important limitation of our model is that we did not include all factors that contribute to power companies’ decision to retire coal-fueled units. Apart from unit-level considerations, major factors that affect a power company’s decision to retire a coal-fueled unit include fuel costs, environmental regulations, regional and local market considerations (e.g., expected future electricity demand and supply conditions, and transmission constraints), and technological developments in electricity generation and pollution control. For example, we did not take into account that planned unit retirements might make otherwise marginal units in some regions more valuable and less likely to retire. Companies that own coal-fueled units may have different expectations regarding these factors, which we did not consider in our analysis. Effectively, therefore, we assumed that power companies have very similar expectations regarding these factors.\nThese above limitations could mean that our model does not accurately or fully reflect power companies’ unit retirement decisions. This would also mean that our estimates of how many unannounced units will retire may be inaccurate. For most of the limitations, the direction of bias in our model—the extent to which it may over- or under-estimate the likelihood of a unit retiring—is unclear. Addressing these limitations was beyond the scope of our review.", "To check the robustness of our model, we tested different specifications; that is, we ran logistic regressions using different sets of independent variables. For example, we tried specifications that included a measure of a unit’s fuel efficiency, and another representing whether a unit is planning to install pollution control equipment. We also tried a version with unit average capacity factors in recent years, a measure of how intensively a unit is utilized. Based on our results, none of these variables significantly improved the model. Below, we discuss two other alternative specifications in more detail.\nIn one alternative specification, we used clustered standard errors. Our model assumes that each individual coal-fueled unit has a unique error term that is independent of every other unit. In this specification, we allow for the possibility that units owned by the same power companies may be related in unobserved ways and, therefore, the error terms may be correlated. As shown in table 6, the estimated coefficients in this alternative specification are very similar to our model, but the standard errors are generally bigger, and the estimated coefficients are generally less statistically significant. This is especially true for net summer capacity, which is no longer statistically significant at the commonly accepted 10 percent level.\nIn a second alternative specification, we used adjusted marginal cost as a proxy for the profitability of a unit. Based on economic logic and what we heard from stakeholders, we expected some indicator of the cost and profitability of electricity generation to contribute significantly to the retirement decision. Table 7 shows a version with marginal cost adjusted for regional wholesale prices and an interaction term with marginal cost and regulatory status. We adjusted marginal cost by dividing it by the regional wholesale price to account for the fact that units are more or less valuable depending on regional wholesale electricity prices. The interaction term allows us to effectively estimate two coefficients for adjusted marginal cost, one for power companies in traditionally regulated markets, and one for power companies in restructured markets. We included an interaction term to account for the possibility that power companies in traditionally regulated and restructured markets view costs Indeed, as shown in table 7, the estimated adjusted marginal differently.cost coefficients differ—for power companies in restructured markets, the adjusted marginal cost coefficient is about 5.8, while the estimated coefficient for power companies in traditionally regulated markets is the adjusted marginal cost coefficient plus the interaction term (or 5.8 plus - 8.2 = -2.4). These results suggest that while higher adjusted marginal costs increase the probability of retirement of units owned by power companies in restructured markets, they decrease the probability for units owned by traditionally regulated power companies. The interpretation of these results is unclear.\nRegarding the costs of producing electricity, our findings differed for companies in restructured markets and companies that are traditionally regulated. Specifically, our results suggest that companies in restructured markets are more likely to retire units with higher adjusted marginal costs. In contrast, our results suggest that companies operating in regulated markets are less likely to retire units with higher adjusted marginal costs. A number of characteristics, not considered in our model, could provide alternative explanations for this difference. For example, it could be the case that the units in our sample have unique characteristics. One such potential case could be that units owned by power companies in traditionally regulated markets may be located in areas where concerns about the reliability of the electricity system are significant, and the costs of retrofitting an older generating unit are less costly than retiring it. Similarly, it could be that our sample contains a number of units located in areas with lower cost alternative suppliers or where prices are low— diminishing the attractiveness of even a relatively low-cost unit.", "Table 8 describes key scenarios and assumptions in the EIA, IEA, and IHS Global Insight forecasts discussed in this report.", "", "", "In addition to the contact named above, Jon Ludwigson (Assistant Director), Mike Armes, Patrick Dudley, Philip Farah, Quindi Franco, Cindy Gilbert, Paige Gilbreath, Alison O’Neill, Kendal Robinson, Jeanette Soares, and Kiki Theodoropolous made key contributions to this report.", "EPA Regulations and Electricity: Better Monitoring by Agencies Could Strengthen Efforts to Address Potential Challenges. GAO-12-635. Washington, D.C.: July 17, 2012.\nAir Emissions and Electricity Generation at U.S. Power Plants. GAO-12-545R. Washington, D.C.: April 18, 2012.\nCoal Power Plants: Opportunities Exist for DOE to Provide Better Information on the Maturity of Key Technologies to Reduce Carbon Dioxide Emissions. GAO-10-675. Washington, D.C.: June 16, 2010.\nClean Coal: DOE’s Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks. GAO-09-248. Washington, D.C.: February 13, 2009.\nClimate Change: Federal Actions Will Greatly Affect the Viability of Carbon Capture and Storage As a Key Mitigation Option. GAO-08-1080. Washington, D.C.: September 30, 2008.\nRestructured Electricity Markets: Three States’ Experiences in Adding Generating Capacity. GAO-02-427. Washington, D.C.: May 24, 2002." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 1, 1, 2, 3, 3, 2, 2, 2, 3, 3, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full h3_full h2_full h1_full", "h0_full h2_title h1_title", "h0_full", "h0_full h2_full", "h0_full h1_full", "", "", "h3_full", "h0_title h3_title", "h0_full h3_full", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What changes to the electricity generating fleet can be made to improve its generating capacity and decrease pollution?", "What influenced these changes?", "What did GAO's analysis of retirement trends reveal?", "What did GAO's analysis of retrofit trends indicate?", "How will new coal-fueled units be superior to older units?", "Why is coal important to the US economy?", "What is the main purpose of coal for the US economy?", "Why has the consumption of coal fallen in recent years?", "Why is the use of coal to generate electricity a harmful practice?", "What changes might power companies make to help mitigate these concerns?", "What was GAO asked to examine?", "What data did GAO collect for this report?", "What recommendations will GAO make in this report?" ], "summary": [ "Retirements of older units, retrofits of existing units with pollution controls, and the construction of some new coal-fueled units are expected to significantly change the coal-fueled electricity generating fleet, making it capable of emitting lower levels of pollutants than the current fleet but reducing its future electricity generating capacity.", "Two broad trends are affecting power companies' decisions related to coal-fueled generating units--recent environmental regulations and changing market conditions, such as the recent decrease in the price of natural gas.", "Regarding retirements, forecasts GAO reviewed based on current policies project that power companies may retire 15 to 24 percent of coal-fueled generating capacity by 2035--an amount consistent with GAO's analysis. GAO's statistical analysis, examining data on power companies that have announced plans to retire coal-fueled units, found that these power companies are more likely to retire units that are older, smaller, and more polluting. For example, the units companies plan to retire emitted an average of twice as much sulfur dioxide per unit of fuel used in 2011 as units that companies do not plan to retire. Based on the characteristics of the units companies plan to retire, GAO estimated additional capacity that may retire. In total, GAO identified 15 to 18 percent of coal-fueled capacity that power companies either plan to retire or that GAO estimated may retire--an amount consistent with the forecasts GAO reviewed.", "Regarding retrofits, the coal-fueled generating fleet may also become less polluting in the future as power companies install controls on many remaining units.", "Regarding new coal-fueled units, these are likely to be less polluting as they must incorporate advanced technologies to reduce emissions of regulated pollutants. Coal-fueled capacity may decline in the future as less capacity is expected to be built than is expected to retire.", "Coal is a key domestic fuel source and an important contributor to the U.S. economy.", "Most coal produced in the United States is used to generate electricity. In 2011, 1,387 coal-fueled electricity generating units produced about 42 percent of the nation's electricity.", "After decades of growth, U.S. coal production and consumption have fallen, primarily due to declines in the use of coal to generate electricity.", "According to the Environmental Protection Agency (EPA), using coal to generate electricity is associated with health and environmental concerns such as emissions of sulfur dioxide, a pollutant linked to respiratory illnesses, and carbon dioxide, a greenhouse gas linked to climate change.", "In response to recent environmental regulations and changing market conditions, such as the recent decrease in the price of natural gas, power companies may retire some units, which could affect the coal fleet's generating capacity--the ability to generate electricity--and the amount of electricity generated from coal. Power companies may also retrofit some units by installing controls to reduce pollutants.", "GAO was asked to examine (1) how the fleet of coal-fueled electricity generating units may change in the future in terms of its generating capacity and other aspects and (2) the future use of coal to generate electricity in the United States and key factors that could affect it.", "GAO conducted a statistical analysis of plans for retiring coal-fueled units, interviewed stakeholders, and reviewed information on industry plans and long-term forecasts by EIA and others.", "GAO is not making any recommendations in this report." ], "parent_pair_index": [ -1, 0, 0, 0, 0, -1, 0, 0, -1, 0, -1, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 0, 0, 0, 1, 1, 2, 2, 2 ] }

{ "title": [ "", "Overview", "Report Phases", "Phase I: Background on the U.S. Cotton Sector", "Domestic Program Support", "Export Credit Guarantee Programs", "Phase II: Brazil's WTO Dispute Settlement Case Against the U.S. Cotton Program", "Brazil's Six Principal Claims Against U.S. Cotton Programs", "Claim 1: Peace Clause Violation", "Finding 1", "Claim 2: U.S. Direct Payments Do Not Qualify for Exemption from Reduction Commitments as Decoupled Income Support", "Finding 2", "Claim 3: The Step 2 Program Functions as an Export Subsidy", "Finding 3", "Claim 4: U.S. Export Credit Guarantees Function as Export Subsidies", "Finding 4", "Claim 5: U.S. Subsidies Have Caused \"Serious Prejudice\"", "Finding 5", "Claim 6: FSC-ETI Act of 2000 Acts as an Export Subsidy to Upland Cotton", "Finding 6", "Panel and Appellate Body Recommendations", "Prohibited Subsidies", "Prohibited Export Subsidies", "Prohibited Import Substitution Subsidy", "Actionable Subsidies", "Implementation of Panel/Appellate Body Recommendations25", "Prohibited Subsidies Potential Time Track", "Actionable Subsidies Potential Time Track", "U.S. Compliance Actions", "Phase III: WTO Compliance Panel Review and Ruling", "Arbitration Requested, Then Suspended, Over Brazil's Proposed Retaliation Amounts", "Brazil Requests WTO Compliance Panel", "WTO Compliance Panel Rules Against the United States", "Phase IV: WTO Arbitration of Brazil's Proposed Countermeasures", "Brazil Requests Resumption of Arbitration", "Brazil Alters Its Countermeasure Request", "Arbitration Panel Ruling", "First Finding", "Second Finding", "Third Finding", "Fourth Finding", "Threshold for Permitting Cross-Retaliation Countermeasures", "Brazil's Reaction", "U.S. Reaction", "Phase V: Retaliation or Settlement?", "Brazil Targets Goods and Services for Countermeasures", "Negotiations Seek Mutual Settlement", "Brazil and United States Sign Memorandum of Understanding", "Brazil and United States Reach Framework Agreement", "Changes to Trade-Distorting Domestic Cotton Support Programs", "Changes to the GSM-102 Program", "Phase VI: Implementation of the MOU and Framework Agreement", "Payments to the Brazilian Cotton Institute", "Semi-Annual Operational Review of the GSM-102 Program", "Quarterly Discussions of U.S. Farm Programs", "APHIS Rule Changing Animal Disease Status of Brazilian State of Santa Catarina", "Recent Action Related to the WTO Brazil Cotton Case", "Congressional Action", "Industry Action", "Phase VII: Potential Policy Implications of WTO Panel Ruling", "Bringing GSM-102 into WTO Compliance", "Bringing Price-Contingent Programs into WTO Compliance", "Direct Payments Classification", "Other Cotton-Related Trade Issues", "Role of Congress", "Monitoring Trade Agreements and Negotiations", "Bringing Domestic Farm Programs into Compliance" ], "paragraphs": [ "", "This report provides a description and status report on Brazil's challenge to certain aspects of the U.S. cotton program under the rules of the World Trade Organization's (WTO's) dispute settlement process in case DS267. The \"Brazil cotton case\" had its WTO origins in 2002 and has since evolved into a sprawling legal enterprise that is still ongoing as of 2011.\nReaders interested in the current status of the dispute—including details of the implementation of a memorandum of understanding between the United States and Brazil—should proceed directly to the report section entitled \" Recent Action Related to the WTO Brazil Cotton Case .\"", "The Brazil cotton case has touched on many aspects of WTO legal procedure, including an initial WTO panel and appeal phase, a compliance dispute phase, and the ongoing retaliation phase. Because of the case's longevity and complicated legal twists and turns, this report seeks to keep the timeline clear and to footnote official reference documents. The report begins with a brief overview of the U.S. cotton sector and domestic support programs. It then provides a detailed history of the case in chronological phases, each representing a different (and somewhat independent) phase of the case. These phases are followed by a summary of the potential role of Congress with respect to the WTO case rulings and their implications for U.S. cotton programs.\n1. Phase I : Pre-case background on the U.S. cotton sector and its global context. 2. Phase I I : Brazil's WTO dispute settlement case against U.S. cotton programs. a. Brazil's specific charges and the WTO panel's findings. b. WTO panel and Appellate Body (AB) recommendations. c. Implementation timeline for panel and AB recommendations. 3. Phase I I I : WTO compliance panel and AB review of U.S. compliance with dispute settlement panel's and AB's recommendations. 4. Phase I V : WTO arbitration of Brazil's request for retaliatory countermeasures. 5. Phase V : Retaliation or settlement. 6. Phase VI : Implementation of the MOU and Framework Agreement. 7. Phase V I I : Discussion of the potential policy implications of this WTO case for the U.S. cotton sector. 8. Role of Congress .\nThe report ends with a timetable of the WTO dispute settlement process ( Table 5 ), to facilitate the reader's understanding of and access to the multifaceted legal procedures involved in the case's slow progression. However, the main thrust of this report is to provide an economic and policy perspective on case developments. For more on the legal aspects of WTO dispute settlement cases in general, and the cotton case in particular, see CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed].", "The cotton industry is a major component of the U.S. agricultural sector. From 1991 to 2010 U.S. cash receipts from cotton production averaged $4.3 billion per year, while export sales averaged nearly $3 billion. Cotton is grown across the southern tier of states stretching from Virginia down through the Carolinas and into Georgia, then westward through a belt of contiguous states to California. Texas is the largest cotton-producing state, accounting for an average of 26% of U.S. production since 1990. In 2002, when Brazil first originated its WTO dispute settlement case against U.S. cotton programs, 17 states reported cotton production valued at over $20 million.\nThe United States is the third-largest producer of cotton in the world, behind China and India, and the world's largest cotton exporter. In the 1990s, U.S. exports accounted for 25% of world trade in cotton. However, since 2000 the United States has accounted for an increasing share of world trade (averaging over 37%). U.S. exports as a share of domestic production have averaged over 70% since 2000, up from a 40% average during the early 1990s, due in large part to a decline in domestic mill use. (See Figure 1 .) The expanding U.S. prominence in global markets since 2000, coupled with large U.S. subsidy levels directed considerable international attention to U.S. cotton program outlays.", "Cotton is one of the principal U.S. program crops, along with wheat, rice, feed grains, soybeans, and peanuts. Traditionally, qualifying U.S. cotton producers were eligible for direct payments, counter-cyclical program (CCP) payments, marketing loan benefits, Step 2 payments, and other program benefits. Since 2000, U.S. farm subsidies for cotton production have averaged $3.4 billion per year, while the harvest-time value of production has averaged $4.3 billion ( Table 1 ).\nMarketing loan program benefits and CCP payments are price-contingent in the sense that payments are determined by market prices falling below their respective price triggers (i.e., the loan rate and the adjusted target price). For upland cotton, the loan rate is set at $0.52 per pound and the target price is set at $0.71 per pound for calendar years 2010 through 2012 by the 2008 farm bill ( P.L. 110-246 ). The target price is adjusted by subtracting the direct payment for upland cotton of $0.0667 per pound for calculating any CCP payment.\nIf the price triggers are set too far above market prices, they act as an incentive to encourage greater production (and exports) than what the market would otherwise demand. This results in lower domestic and international prices than would exist in the absence of these programs. It is this \"price effect\" that was found by the WTO to cause adverse effects and serious prejudice in the international cotton market, as described below. Indeed, a comparison of relative support prices versus market prices for major U.S. program crops reveals that cotton producers receive payments under these programs far more routinely than do other crops. This would suggest that cotton support prices are set too high relative to general cotton market conditions, as well as to other crop prices.", "In 2002, at the time that Brazil first initiated WTO case DS267, the United States operated three principal export credit guarantee programs to facilitate the export of U.S. agricultural products (including but not limited to cotton). These were the GSM-102 program (which extended credit for periods ranging from 90 days to three years), the GSM-103 program (which extended credit for periods of more than three years, but not more than 10 years), and the Supplier Credit Guarantee Program (SCGP). The GSM-103 and SCGP programs were part of Brazil's original case; however, they both were eliminated by congressional action in 2008, as described below.\nThe GSM-102 export credit guarantee program (hereafter referred to as the GSM-102 program) is authorized under the Agricultural Trade Act of 1978 (7 U.S.C. §5622), as amended. The program, backed by USDA's Commodity Credit Corporation (CCC), guarantees the repayment of credit made available to finance export sales of agricultural commodities on credit terms between 90 days and three years. Typically, 98% of principal and a portion of interest are covered by a guarantee. To obtain a guarantee, an exporter has to pay a fee (or \"premium\") calculated on the basis of guaranteed value, according to a schedule of rates applicable to different credit terms and repayment intervals. At the time that Brazil initiated DS267, the fee was capped by law at 1% of the guaranteed value.", "In 2002, Brazil—a major cotton export competitor—expressed its growing concerns about U.S. cotton subsidies by initiating a WTO dispute settlement case (DS267) against certain features of the U.S. cotton program. Once initiated, a dispute settlement case follows a sequence of events designed to produce resolution of the dispute within a 12-15 month time frame. However, the WTO dispute settlement (DS) process that reviewed Brazil's charges against the U.S. cotton program has extended well beyond the hypothetical 15-month time frame. In this particular case, the initial WTO panel review took 17 months from the establishment of the panel in March 2003 to its final ruling in September 2004.\nFurthermore, substantial additional time has since been added to the dispute settlement process—first, for an Appellate Body review of the initial ruling on appeal, then for a WTO compliance panel to review a dispute over U.S. compliance with the initial panel's ruling, and finally for an arbitrator to review a disagreement between Brazil and the United States over Brazil's proposed retaliation amounts. See Table 5 for a timeline of the dispute settlement case and related events.\nWith respect to the initial dispute settlement case, it was broadly written and touched on almost every aspect of U.S. commodity programs, although the focus was on the six principal claims described below along with the WTO dispute settlement panel finding (of September 8, 2004) and Appellate Body (AB) ruling (of March 3, 2005).", "", "Brazil claimed that the United States was no longer exempt from WTO dispute proceedings under the so-called \"peace clause\" (Article 13) of the WTO's Agreement on Agriculture (AA) because U.S. domestic and export subsidies to its cotton sector were in excess of its 1992 benchmark level. Prior to its expiry in January of 2004, Article 13 exempted domestic support measures that complied with the AA's requirements from being challenged as illegal subsidies through dispute settlement proceedings, as long as the level of support for a commodity remained at or below the benchmark 1992 marketing year (MY) levels. Brazil argued that U.S. cotton subsidies were about $2 billion in MY1992 compared with over $4 billion in MY2001. Therefore, Brazil argued that the United States was no longer in compliance with the requisite conditions and could no longer seek protection under the WTO's peace clause rule.\nIn response, U.S. trade officials argued that WTO members agreed to the peace clause recognizing that agricultural subsidies could not be eliminated immediately and needed, under certain conditions, to be exempted from the Subsidies and Countervailing Measures (SCM) Agreement and GATT 1994 subsidies disciplines. As a result, U.S. officials argued that the words \"exempt from actions\" as used in Article 13 of the AA were of overarching importance and precluded not only the \"taking of legal steps to ... obtain a remedy,\" as Brazil has argued, but also the \"taking of legal steps to establish a claim.\" Furthermore, U.S. trade officials argued that the immunity granted by the peace clause was still important, since even if a country was no longer in compliance with the peace clause, it was incumbent on the complaining party to prove there had been injury. (See Table 5 , below.)", "The panel found (and was upheld by the AB in finding) that Brazil had successfully discharged its burden to show that U.S. domestic cotton support measures during MY1999-MY2002 (which averaged $3.28 billion) were in excess of WTO commitments (of $2.0 billion) during MY1992. (See Table 2 .) As a result, U.S. domestic cotton support measures lost the protection afforded by the \"Peace Clause,\" which had shielded them from substantive challenges in the past. This occurred in part because, under Finding 2, Production Flexibility Contract and Direct Payment outlays were included with other commodity program outlays and evaluated against \"peace clause\" limits.", "Brazil claimed that two types of U.S. payments—production flexibility contract (PFC) payments made under the 1996 farm bill and direct payments (DP) made under the 2002 farm bill—failed to fully meet the conditions for decoupled income support in Annex 2 of the Agreement on Agriculture and should therefore be counted against the U.S. \"Peace Clause\" domestic support benchmark limit.\nThe United States considers both PFC and DP programs to be consistent with WTO language for exempt domestic support that has \"no, or at most minimal, trade-distorting effects or effects on production.\" As a result, the United States notifies both the PFC and DP outlays as \"green box\" where they are not subject to any limits. Furthermore, the United States argued strongly against including such \"minimally distorting, non-commodity specific\" payments in evaluating whether the United States has met or exceeded its \"peace clause\" limits.", "The panel found (and was upheld by the AB in finding) that U.S. payments made under the PFC and DP programs, because of the prohibition on planting fruits, vegetables, and wild rice on covered program acreage, do not qualify for the WTO's green box category of domestic spending. (The green box contains only non-distorting program payments and is not subject to any limit). Instead, they should be counted as domestic subsidies directly affecting cotton production (i.e., distorting) and be included with other commodity program outlays to evaluate whether the United States has met or exceeded its \"peace clause\" limits.", "Brazil argued that Step 2 payments made under the U.S. cotton program functioned as export subsidies and were inconsistent with U.S. WTO obligations regarding export subsidies as specified under the SCM Agreement.\nStep 2 payments were part of special cotton marketing provisions authorized under U.S. farm program legislation to keep U.S. upland cotton competitive on the world market. Step 2 payments were made to exporters and domestic mill users to compensate them for their purchase of higher priced U.S. upland cotton. Under the 2002 farm act, the Step 2 payment rate for the 2002-2005 marketing years was calculated as the difference between the price of U.S. upland cotton, delivered c.i.f. (cost, insurance, freight) in Northern Europe, and the average of the five lowest prices of upland cotton delivered c.i.f. Northern Europe from any source.\nThe United States argued that Step 2 payments were part of its domestic support program since they were targeted to domestic cotton users as well as exporters. As a result, Step 2 payments were notified to the WTO as \"amber\" box (trade-distorting) domestic support payments and not as export subsidies. Consequently, U.S. trade officials contended that Step 2 payments were not subject to any limitations placed on export subsidies.", "In its finding, the panel considered Step 2 program payments to eligible exporters separately from payments to domestic users.\nPayments to exporters were found to be \"contingent upon export performance\" and therefore qualified as prohibited export subsidies in violation of WTO commitments. Payments to domestic users were found to be \"contingent on the use of domestic over imported goods\" and therefore qualified as prohibited import substitution subsidies.\nThe DS panel finding was upheld by the AB.", "Brazil argued that the U.S. GSM-102 program operated as a prohibited export subsidy under item (j) of Annex I of the Agreement on Subsidies and Countervailing Measures (SCM) because the premium rates (i.e., fees) charged to GSM-102 program beneficiaries were inadequate to cover the long-term operating costs of the program, thus imparting an implicit subsidy benefit.\nItem (j) of Annex I identifies a prohibited export subsidy as:\n[t]he provision by governments (or special institutions controlled by governments) of export credit guarantee or insurance programs, of insurance or guarantee programs against increases in the cost of exported products or of exchange risk programs, at premium rates which are inadequate to cover the long term operating costs and losses of the programs.\nBrazil claimed that the favorable terms (i.e., the interest rate and time period that countries have to pay back the financing) provided under U.S. export credit guarantee programs—GSM-102, GSM-103, and the Supplier Credit Guarantee Program (SCGP) —were effectively export subsidies inconsistent with the WTO's AA and SCM Agreements. Further, the subsidy effects of export credit guarantees applied not only to cotton, but to other eligible commodities.\nU.S. trade officials argued that the U.S. export credit guarantee programs were consistent with WTO obligations. Furthermore, the United States asserted that Article 10.2 of the AA reflected the deferral of disciplines on export credit guarantee programs contemplated by WTO members to the next WTO multilateral negotiating round—the Doha Round.", "The panel found (and was upheld by the AB in finding) that U.S. export credit guarantees effectively functioned as export subsidies because the financial benefits returned by these programs failed to cover their long-run operating cost as specified by item (j) of the SCM. Furthermore, the panel found that this applied, not just to cotton, but to all commodities that benefit from U.S. commodity support programs and receive export credit guarantees. As a result, export credit guarantees for any recipient commodity were subject to previously scheduled export subsidy commitments for that commodity. This referred to those U.S. export subsidies under the Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP). Under these criteria, export credit guarantees benefits extended to cotton and other \"unscheduled\" commodities (that are supported under U.S. agricultural programs) were found to be in violation of previous WTO commitments. With respect to \"scheduled\" commodities, export credit guarantees extended to U.S. rice exports were found to be in violation of previous EEP volume commitments. The panel found (and was upheld by the AB) that \"unscheduled\" commodities not supported under U.S. agricultural programs, as well as scheduled agricultural products that remain within WTO commitments are exempt from actions under this dispute settlement case.", "Brazil argued that domestic farm subsidies provided to U.S. cotton growers contributed to significant overproduction and resulted in a surge in U.S. cotton exports, particularly during the 1999-2002 marketing years, when unusually large outlays were made under provisions of the U.S. cotton program (see Table 1 and Figure 1 ). Brazil claimed that the resultant rise in U.S. exports led to three market conditions, each of which contributed to serious injury to Brazilian cotton exporters: (1) an increase in the U.S. share of the world upland cotton market; (2) a displacement of Brazilian upland cotton sales in third-country markets; and (3) a steep decline in world cotton prices (see Figure 2 and Figure 3 ).\nIn particular, Brazil claimed that injury to its economy due to low cotton prices, measured as the sum of individual negative impacts on income, foreign trade revenue, fiscal revenues, related services (transportation and ginning), and employment, exceeded $600 million in 2001 alone. Brazil asserted that injury under each of these three circumstances are in violation of the SCM Agreement. In addition, Brazil argued that these same programs would be harmful (i.e., threatened serious prejudice) in future years.\nU.S. trade officials argued that the subsidies provided to U.S. cotton growers have been within the allowable WTO limits and are consistent with U.S. WTO obligations. Furthermore, they argued that the decline in U.S. domestic use (due to declining U.S. competitiveness in textile and apparel production), rather than government support program outlays, contributed to larger U.S. raw cotton exports. In addition, they contended that international market forces—including weakness in world demand for cotton due to competing, low-priced synthetic fibers, and weak world economic growth—have played a larger role in determining the generally weak price level during the period in question, rather than U.S. export levels.\nIn evaluating this particular claim, the DS panel separated U.S. cotton support programs into two groups: those that are directly contingent on market price levels (i.e., loan deficiency payments, marketing loss assistance payments, counter-cyclical payments, and Step 2 payments), and those that are not (i.e., PFC and Direct Payments, and the federal crop insurance program).", "The panel found (and was upheld by the AB in finding) that U.S. domestic support measures that are directly contingent on market price levels caused serious prejudice in terms of market price suppression for the period 1999 to 2002. However, U.S. domestic support measures that are not contingent on market price levels were not included in this finding as the panel could not find enough of a connection between the direct payments program and cotton planting decisions to declare the direct payments program a serious factor in price suppression.\nThe panel also did not find in favor of Brazil's alleged serious prejudice in terms of an effect on international market share. Article 6.3 of the SCM lists several factors indicating serious prejudice; the panel only had to find one of the factors in violation to rule in Brazil's favor on the claim of serious prejudice during the 1999 to 2002 period.\nWith respect to Brazil's claim of a threat of serious prejudice going forward (2003 to 2007, the remaining life of the 2002 farm act), the panel stated in its final report that those \"prohibited\" subsidies that caused serious prejudice during the 1999-to-2002 period—namely, user marketing (Step 2) payments to exporters and domestic users; and export credit guarantees in respect of certain products under the GSM-102, GSM-103, and SCGP programs—must be withdrawn \"without delay\" pursuant to Article 4.7 of the SCM Agreement. According to the panel, required withdrawal of the prohibited subsidies, within the time frame set by the panel, would curtail the future threat posed by U.S. cotton support programs. As a result, the panel stated that \"it is not necessary or appropriate to address Brazil's claims of threat of serious prejudice.\"", "Brazil claimed that the Foreign Sales Corporation Repeal and Extraterritorial Income Act of 2000 (ETI Act of 2000), by eliminating tax liabilities for U.S. upland cotton exporters who sell to foreign markets, constitutes an export subsidy and is inconsistent with U.S. export subsidy commitments for cotton.\nThe United States asserted throughout the proceedings that Brazil failed to make any specific case with respect to the ETI Act of 2000 and U.S. upland cotton exports.", "The panel concurred with the United States (and was upheld by the AB) in stating that Brazil failed to present any new arguments or evidence concerning effects upon upland cotton, but instead simply repeated the arguments that the European Union made in its WTO dispute settlement case with the United States (DS108). As a result, the panel declined to further examine Brazil's claims on this particular issue.", "The initial panel's final ruling was released publicly on September 8, 2004. The following month (October 18, 2004) the United States notified the WTO of its intent to appeal the panel's ruling. A WTO Appellate Body (AB) reviewed the legality of the case and issued its final report on March 3, 2005, upholding most of the initial panel's rulings. The policy recommendations that emerged from the panel and AB rulings are described below.", "The AB recommended that the United States withdraw those support programs identified as prohibited subsidies within six months of the date of adoption of the panel report by the Dispute Settlement Body (DSB) or by July 1, 2005 (whichever was earlier). Since the DSB adopted the AB and panel reports on March 21, 2005, the relevant deadline for withdrawal was July 1, 2005. The list of prohibited subsidies subject to withdrawal \"without delay\" included the following.", "Export credit guarantees under GSM-102, GSM-103, and SCGP that assist exports of upland cotton and other unscheduled agricultural products that are supported under government agricultural support programs. Export credit guarantees under GSM-102, GSM-103, and SCGP that assist exports of one scheduled agricultural product (rice), but in excess of the scheduled volume. Step 2 program payments to exporters of upland cotton.", "Step 2 payments to domestic users of upland cotton.\nIn contrast, unscheduled agricultural products not supported under government agricultural support programs and scheduled agricultural product exports that remain within their schedules were judged not to circumvent U.S. export commitments and therefore were not subject to trade remedy actions in this case.", "The panel recommended that the United States take appropriate steps by September 21, 2005, to remove the adverse effects or to withdraw those U.S. subsidy measures singled out as price-contingent—marketing loan provisions, Step 2 payments, and CCP payments. These subsidies were identified as \"actionable\" subsidies that contributed adverse effects to the interests of Brazil during the marketing years 1999-2002.\nIt is noteworthy that the actionable subsidies remedy dealt with adverse effects that occurred during a historical time period and not future prejudice or injury. In support of this concept, the panel stated (in its original ruling on the \"threat of serious prejudice\" by actionable subsidies) that U.S. compliance with recommendations on prohibited subsidies—the Step 2 provisions and export credit guarantees—could so significantly transform the basket of measures in question that it was not necessary or appropriate to address Brazil's claims of threat of serious prejudice. This appeared to leave open the possibility that removal of the prohibited subsidies might resolve the dispute under the actionable subsidies recommendation.", "Following is a discussion of how the implementation phase was to unfold in accordance with WTO rules and how the actual implementation has unfolded.\nIn accordance with WTO rules, the evolution of the implementation phase depends on how both parties choose to respond to the different sequences of events as they unfold. In addition to the potential time tracks described below, the implementation phase also provides opportunities for the disputing parties to mutually resolve the dispute. If the United States failed to comply, Brazil could (upon visible evidence of noncompliance) request negotiations with the United States to determine mutually acceptable compensation (e.g., tariff reductions in areas of particular interest). Furthermore, if Brazil did not want to press ahead full force with imposing sanctions, there would be considerable opportunity to delay compliance steps.\nThe time track for compliance with panel and AB recommendations could diverge depending on whether the United States chose to respond separately to the rulings on prohibited subsidies and actionable subsidies. This is because prohibited subsidies are given expedited treatment under SCM, Article 4.12, which states that, \"except for time-periods specifically prescribed in [SCM, Article 4], time-periods applicable under the DSU for the conduct of such disputes shall be half the time prescribed therein.\"", "As a result of their expedited treatment, the AB recommended that the United States remove the prohibited export subsidies by July 1, 2005. Within 15 days after the AB and panel reports were adopted by the DSB (done on March 21, 2005), the United States was expected to present an implementation plan to the DSB, although precedence suggests that such a plan could be as minimal as stating intentions to work with Congress to bring U.S. policies into compliance. This was indeed the case when, on April 20, the U.S. representative to the WTO announced that the United States intended to implement the recommendations and rulings of the DSB in a manner that respected U.S. WTO obligations. The representative noted, however, that determining acceptable options would take a reasonable period of time and requested that Brazil be willing to consult on the potential timetable.\nIf, 10 days after the designated period (July 1, 2005) expires, no satisfactory compensation is agreed to, the complaining side (Brazil) may ask the DSB for permission to impose limited trade sanctions against the United States. The trade sanctions are limited to a value equivalent to no more than the level of nullification or impairment of benefits. The DSB must grant this authorization within 15 days of expiry of the \"reasonable\" time period unless a consensus exists against the request.\nIf the United States objects to the amount proposed by Brazil, the level of suspension would be arbitrated (by the original panel if available). Arbitration shall be completed within 30 days after the date of expiry of the designated period (July 1, 2005). No trade sanctions are to be imposed during the arbitration period.\nOnce armed with the authority to impose trade sanctions, Brazil could still choose to wait. A precedent for this occurred under the WTO dispute settlement case (DS108) involving the U.S. Foreign Sales Corporation Statute. Under DS108, the European Communities (EC) requested and received authorization to impose retaliatory measures against the United States on May 7, 2003. However, the EC refrained from immediate action, stating that it would review U.S. actions for a period of time before proceeding. The EC eventually began imposing additional duties on U.S. products in March 2004.", "In contrast to the July 1, 2005, deadline, the removal of actionable subsidies was subject to a six-month period starting on the date of adoption of the AB and panel reports (March 21, 2005). As a result, the panel recommended that, upon adoption of its final report, the United States take appropriate steps to remove the adverse effects or to withdraw those subsidies identified as contributing to serious prejudice to the interests of Brazil—marketing loan provisions, Step 2 payments, and CCP payments—by September 21, 2005. Thus, in every other respect, the timetable for actionable subsidies would follow the same sequence of events listed above for prohibited subsidies, but subject to the full time allotment for each event as described in the preceding footnotes rather than the \"halved\" time periods.", "A spokesperson for the Office of the U.S. Trade Representative (USTR) expressed disappointment in the AB ruling, but also said that USTR would study the AB report carefully and work closely with Congress and U.S. farmers on its next steps. However, U.S. officials said that they preferred to resolve the cotton case through trade negotiations in the WTO Doha Round rather than a separate settlement. The National Cotton Council (NCC) of America—the principal national organization representing the interests of U.S. producers, ginners, warehousers, merchants, cottonseed processors/dealers, cooperatives, and textile manufacturers—also expressed disappointment in the AB ruling, but stated that it would work with USTR and USDA to coordinate a response to the decision.\nOn July 1, 2005, USDA instituted a temporary fix for its export credit guarantee programs, whereby the Commodity Credit Corporation (CCC) would use a risk-based fee structure for the GSM-102 and SCGP programs. The new structure responded to a key finding by the WTO that the fees charged by the programs should be risk-based. The 1% cap on user fees for GSM-102, the primary export credit program, was cited by the DS panel as contributing to the subsidy component of the GSM program. Higher fees would ensure that the financial benefits returned by these programs would fully cover their long-run operating costs, and eliminate the subsidy component. USDA could not remove the cap administratively as it is required by statute (7 U.S.C. 5641). In addition, the CCC stopped accepting applications for payment guarantees under GSM-103.\nOn August 1, 2006, the Step 2 cotton program, which was authorized by the 2002 farm act ( P.L. 107-171 , §1207), was eliminated by a provision (§1103) in the Deficit Reduction Act of 2005 ( P.L. 109-171 ).\nOn June 18, 2008, the date of enactment of the 2008 farm bill ( P.L. 110-246 ), a provision (§3101(a)) in the Trade title (Title III) eliminated the GSM-103 and SCGP programs, and removed the 1% cap on fees that can be charged under the GSM-102 program. In addition, the same 2008 farm bill provision explicitly requires the Secretary of Agriculture, in carrying out the GSM-102 program, to \"work with the industry to ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees cover, but do not exceed, the operating costs and losses over the long-term.\"\nHowever, the 2008 farm bill defined the \"long-term\" as a period of 10 or more years. While the WTO panel did not explicitly define its view of the \"long-term,\" it clearly is less than 10 years and more likely is on the order of a period of two years—that is, a net loss in one year must be offset by a net gain in the following year.\nAt this point the Administration likely felt that sufficient program changes had been enacted to fully comply with the both the prohibited and actionable subsidies portions of the WTO ruling.", "This section describes Brazil's charges of noncompliance, the proposed retaliation, the beginning of WTO arbitration over the size and nature of the proposed retaliation, and a ruling by a WTO compliance panel reviewing whether the United States had fully complied with earlier recommendations.", "As the reform deadlines under the two different subsidy types expired, Brazil first requested (July 4, 2005) authorization from the WTO to impose $3 billion in countermeasures against the prohibited U.S. subsidies. According to WTO rules, trade sanctions are limited to a value not to exceed the level of lost benefits. The $3 billion value corresponded to (1) Step 2 payments made in the then-most-recently-concluded marketing year (2004/2005) and (2) the total of exporter applications received under the three export credit guarantee programs, for all unscheduled commodities and for rice, for the then-most-recent fiscal year (2004). This amount was later pared back to $1.155 billion in annual retaliation to counter the prohibited subsidies based on Brazil's methodology applied to FY2006 data. The United States objected to the amount of Brazil's proposed sanctions and requested WTO arbitration. However, on August 18, 2005, the United States and Brazil reached a procedural agreement temporarily suspending arbitration proceedings concerning the prohibited subsidies.\nThen, as the September 21, 2005, deadline to address the actionable subsidy ruling expired, Brazil charged that the United States had neither taken nor announced any specific initiative for the price-contingent programs deemed to cause adverse effects to Brazil's trade interest. Brazil then requested authorization from the WTO to impose countermeasures valued at $1.037 billion as retaliation against the actionable programs. According to WTO rules, trade retaliation should take place within the sector where the violation occurred. In this case, retaliation would be restricted to punitive tariffs on U.S. goods entering Brazil. However, Brazil argued that limiting retaliation to the goods sector alone would have a more deleterious effect on the Brazilian economy (via higher input costs) and Brazilian consumers (via higher inflation) than on U.S. exporters due to the asymmetries between the two economies. Instead, Brazil proposed to suspend tariff concessions as well as obligations under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS) in the amount of $1.307 billion until the United States withdrew the four domestic subsidies (counter-cyclical payments, market loss assistance payments, market loan program benefits, and Step 2 payments) or removed their adverse effects. This type of \"cross-retaliation\" has been permitted twice previously in WTO dispute settlement cases, so it is not without precedent. However, its impact is potentially very far-ranging and could include the protection of copyrights, trademarks, industrial designs, patents, and undisclosed information, as well as withdrawal of concessions in services related to communication, construction, distribution, finance, tourism, and transport.\nOnce again, the United States objected to both the amount and nature of Brazil's proposed request and asked for WTO arbitration over the level of the proposed sanctions (October 18, 2005). Again, the United States and Brazil reached a procedural agreement (December 7, 2005), thereby temporarily suspending further retaliation proceedings on the actionable subsidies.\nThe suspensions were likely intended to permit policy reform to occur in a less confrontational forum under either the then-ongoing congressional debate on an extension or revision of U.S. farm legislation (as current farm law was set to expire in 2007) or the ongoing Doha negotiations.", "Initially Brazil showed a willingness to permit the U.S. legislative process—motivated by the 2007 expiration of U.S. farm programs and the prospects of a successful Doha Round of trade negotiations —to bring U.S. farm programs into compliance with the WTO ruling, even if this process extended well beyond the deadlines established under the WTO dispute settlement ruling. However, Brazil argued that U.S. program changes were insufficient and, on August 21, 2006, requested the establishment of a WTO compliance panel to review whether the United States had fully complied with panel and AB rulings.\nBrazil identified below-market premium rates (i.e., user fees) charged to GSM-102 program beneficiaries as the primary reason that the revised GSM-102 program operated at a net loss and was still out of compliance with WTO rules. The WTO Compliance Panel (upheld on appeal) concurred with Brazil, after an examination of new evidence on GSM-102 operations for the 2006-2008 period showing that it continued to operate at a net loss. See Table 3 for the most recent estimates of credit subsidies under CCC export credit guarantee programs.\nThe GSM-102 premium rates were identified as below-market rates, in part, because they failed to fully account for the risk of non-payment or default for individual countries. There is no widely accepted international standard for determining country risk and assigning \"market\" premium rates. In its determination, the Compliance Panel used a list of \"minimum premium rates\" as reported in the Organization for Economic Cooperation and Development (OECD) Arrangement on Officially Supported Export Credits. A comparison with premium rates charged under the GSM-102 program found the GSM-102 rates to be significantly below the OECD measures, suggesting that they were under-valued.\nIn addition, Brazil charged that U.S. farm programs continued to provide significant (and injurious) support to U.S. cotton producers ( Table 1 and Table 4 ).", "Following Brazil's request, the WTO's Dispute Settlement Body (DSB) agreed to establish a compliance panel to review U.S. farm program changes at the September 28, 2006, DSB meeting.\nOn July 27, 2007, the compliance panel released a confidential interim ruling to the two countries that the United States had not fully complied with the March 2005 WTO ruling against certain U.S. cotton support programs. On October 15, 2007, the compliance panel's final report was released confidentially to the U.S. and Brazilian governments and, two months later on December 18, 2007, it was released publicly. The panel's final ruling confirmed the earlier interim ruling against the United States.\nIn February 2008, the United States appealed the compliance panel's ruling. On June 2, 2008, a WTO Appellate Body (AB) publicly released its final report upholding the compliance panel's ruling that the United States had not fully complied with the March 2005 WTO ruling. The AB report was adopted by the WTO's Dispute Settlement Body on June 25, 2008.", "", "On August 25, 2008, Brazil requested a resumption of the arbitration proceedings to review its proposed retaliatory countermeasures. On October 1, 2008, Brazil and the United States agreed on the arbitration panelists, who then were to produce a ruling within 60 days. However, the arbitration review continued past the normally allotted 60 days and into 2009. During that period, both parties made written submissions to the WTO arbitrator stating their positions with respect to retaliation in this case.", "At a March 3, 2009, Dispute Settlement Body meeting, Brazil revised its total retaliation request to $2.5 billion, down from an earlier $3 billion request. Brazil's proposed sanctions total comprised both prohibited and actionable subsidy countermeasure components.\nUnder the prohibited subsidies arbitration case, Brazil was seeking two countermeasures:\n1. a one-time countermeasure in relation to the Step 2 program of $350 million based on U.S. government payments made under the Step 2 program in marketing year 2005 (this corresponds roughly to the period that elapsed between the expiration of the prohibited subsidy compliance period on July 1, 2005, and the effective repeal of the Step 2 program by the U.S. Congress on August 1, 2006); and 2. annual countermeasures proportionate to the entire annual amount of GSM 102 export credit guarantees issued to all countries for export transactions involving unscheduled products—rice, pork, and poultry—valued at $1.155 billion during FY2006 (initially Brazil valued this countermeasure at $1.294 million) and composed of three parts: a. an interest rate subsidy component amounting to $234.7 million; b. the additional export sales obtained by the United States as a result of these discounts, including sales to creditworthy foreign obligors, referred to as marginal additionality and valued at $62.3 million; and c. the additional export sales to noncreditworthy foreign obligors, referred to as full additionality and valued at $855 million.\nUnder the actionable subsidies arbitration case, Brazil again asked for:\n3. annual countermeasures valued at $1.037 billion until the United States withdrew the relevant subsidies or removed their adverse effects (based on marketing year 2005 data, Brazil calculated the amount of adverse effects on the rest of the world at $3.335 billion, although it only requested countermeasures of $1.037 billion).\nUnder the combined prohibited and actionable subsidy cases, Brazil asked for:\n4. the right to engage in cross-retaliation (i.e., countermeasures in sectors outside of the trade in goods, most notably in the area of U.S. copyrights and patents, as well as services), stating that retaliation in goods would not be practicable or effective due to limited trade in goods between Brazil and the United States.\nThe United States argued that it had removed the prohibited subsidy component of its export credit program via provision 3101(a) of the 2008 farm bill ( P.L. 110-246 ). Furthermore, the United States argued that it had operated its remaining GSM-102 export credit program at \"no net cost\" to the government since 2005. The United States asked the arbitrators to dismiss all claims related to prohibited subsidies since they currently operated at \"no net cost\" to the government. Furthermore, the United States argued that Brazil's prohibited-subsidy countermeasure request continued to include a program that no longer exists (i.e., Step 2). Finally, with respect to Brazil's actionable-subsidy countermeasure request, the United States pointed out that Brazil included a calculation for the entire global adverse effect, not just those adverse effects relevant to Brazil. According to U.S. calculations, the total effects of U.S. counter-cyclical payments and marketing loan payments on Brazil during the 2005-2007 period averaged $30.4 million per year.", "On August 31, 2009, the arbitrator ruled on Brazil's arbitration requests in two separate reports. The first report (WT/DS267/ARB/1) ruled on Brazil's retaliation requests regarding the prohibited subsidies—the Step 2 cotton program and the GSM 102 program (under certain conditions)—based on Article 4.11 of the SCM Agreement. The second report (WT/DS267/ARB/2) ruled on Brazil's retaliation requests regarding the actionable subsidies—market loss assistance payments, marketing loan benefits, counter-cyclical payments (CCP), and Step 2 payments—based on Article 7.9 of the SCM Agreement. The arbitrator's decisions are final and are not subject to appeal.\nWith respect to the four main countermeasure requests, the arbitrator issued four key findings, discussed below.", "Brazil was not entitled to its request of a one-time $350 million retaliation award to compensate for previous Step 2 injury. In rejecting Brazil's request on this point the arbitrator stated that countermeasures are an exceptional temporary remedy, available only where compliance has not been achieved, and aimed at inducing such compliance, and that in fact the United States had fully (albeit belatedly) complied with the panel's recommendation to eliminate the Step 2 program.", "With respect to Brazil's request for $1.155 billion in countermeasures related to the \"prohibited\" subsidies, the arbitrator found that Brazil was only entitled to retaliate for the effects of these subsidies on Brazilian products and not for their full effect on the rest of the world (ROW). The arbitrator used Brazil's share of world exports of those products receiving GSM 102 credit guarantees (estimated to be 11.7% in 2006) to apportion Brazil's share of the subsidy effect from the entire global market effect. With this revision to Brazil's formula, the arbitrator estimated the countermeasure at $147.4 million in FY2006—comprising an interest rate effect of $25.27 million, marginal additionality of $41.3 million, and full additionality of $80.8 million. Furthermore, the arbitrator ruled that the retaliatory amount accorded Brazil would vary each year (via formula) based on the total of exporter applications received by the U.S. government under the GSM 102 program for the most recently concluded fiscal year. The formula would consider an interest rate subsidy component and the trade displacement additionality (both full and marginal) of the subsidy component of GSM 102.", "The arbitrator found that the amount of countermeasures specific to Brazil and commensurate with the degree and nature of adverse effects resulting from the actionable subsidies was fixed at an annual amount of $147.3 million. This figure was obtained, first, by a recalculation of the total adverse effects on the ROW resulting from the actionable subsidies, to an amount of $2.905 billion in the 2005 marketing year. The adverse effect was calculated as a price effect whereby it was determined that the world price of cotton would have been 9.38 cents per pound higher in the absence of U.S. marketing loan benefits and CCP payments, and that the lower world price resulted in both lost income effects in the ROW of $2.384 billion and reduced production effects of $521.5 billion, for a total of $2.905 billion. However, the WTO arbitrator determined that Brazil should be entitled to retaliation on only a specific portion of the $2.905 billion. The share apportioned to Brazil was based on Brazil's share of cotton production in the ROW in marketing year 2005, which equaled 5.1% or $147.3 million. Furthermore, the panel fixed Brazil's maximum annual retaliation with respect to the \"actionable\" U.S. subsidies at this same $147.3 million (in other words, this amount will not vary from year to year).\nThus, the overall annual permissible retaliation amount for 2006 was $294.7 million (= $147.4 million + $147.3 million). Furthermore, this amount varies annually, since it consists of both a fixed retaliatory amount in response to \"actionable\" U.S. subsidies, and a variable retaliatory amount in response to \"prohibited\" U.S. subsidies.", "Finally, Brazil had requested the right to engage in cross-retaliation, that is, retaliatory countermeasures in sectors outside of the trade in goods, most notably in the area of intellectual property (IP) rights such as copyrights and patents. A key determinant in ruling on this request was Brazil's contention that there is insufficient trade in consumer goods with the United States to permit compensatory retaliatory action, and that a substantial portion of those imports were of critical importance to Brazil's economy such that punitive sanctions on them would harm Brazil's economy. However, the panel felt that a certain percentage of Brazil's imports of consumer goods originating from the United States should be eligible for countermeasures without causing harm to Brazil's economy because there was available to Brazil a sufficient amount of alternate sources of imports or of sufficiently close substitutes in consumption so as to avoid economic harm. As a result, the panel ruled that Brazil would be entitled to cross-retaliation, if (and only if) the overall retaliation amount (combining both the variable and fixed components) to which it would otherwise be entitled exceeds a variable annual threshold (described below). If the threshold is surpassed, then Brazil would be entitled to suspend certain obligations under the TRIPS Agreement and/or the GATS in the amount in excess of the threshold.", "For purposes of determining eligibility to apply cross-retaliation, the panel established an initial threshold amount of $409.7 million that could be subject to countermeasures without harming Brazil's economy based on the volume and composition of Brazil's imports of consumer goods in the year 2007. The amount of $409.7 million represents the sum of the value of those consumer goods imported by Brazil where the U.S. share is less than 20%, excluding books and automotive parts which are considered essential to Brazil's economy.\nThe threshold amount may vary from year to year according to the following formula:\nT t+1 = T t * (1 + g t+1 ) where T 2007 = $409.7 million\nwhere\nT t+1 = threshold value in year t+1\nT t = threshold value in year t\ng t+1 = percentage change in the value of Brazil's total imports from the United States between years t and t+1.", "Following the arbitration panel's ruling, Brazil claimed that applying the panel's countermeasure determination formulas to preliminary 2009 data would allow for $800 million in total retaliation, including both the fixed $147.3 million of actionable subsidy countermeasures and $650 million of prohibited subsidy countermeasures. The $650 million figure resulted from expanded use of GSM 102 credit guarantees by the United States during FY2009—rising from $1.36 billion in FY2006 to $5.5 million in FY2009. According to Brazil, using 2009 data to calculate the threshold for cross-retaliation would produce an amount of $460 million. If confirmed, these data would suggest that Brazil would be authorized to engage in cross-retaliation equal to $340 million (i.e., the difference between $800 million and $460 million) by suspending commitments it made under the WTO concerning the protection of intellectual property and services.", "USTR spokeswoman Carol Guthrie issued the following statement:\nWhile we remain disappointed with the outcome of this dispute, we are pleased that the Arbitrators awarded Brazil far below the amount of countermeasures it asked for. In its first requests for countermeasures in the Cotton dispute, Brazil asked for more than $4 billion in annual countermeasures. During the arbitration proceedings, Brazil argued for more than $2 billion annually. Further, we are grateful that the Arbitrators denied Brazil's request for unlimited ability to suspend concessions on intellectual property or services. And we are pleased that the Arbitrators denied Brazil's request for an additional one-time $350 million in countermeasures in connection with the repealed Step 2 payment program for cotton.\nAt this time, we do not know when or if Brazil will move to obtain final authorization to suspend concessions or when or if Brazil would act on any such authorization.\nThe Administration will be actively consulting within the U.S. Government and with stakeholders on how to move forward.\nU.S. industry groups, led by the National Cotton Council (NCC), argued that substantial changes had been made to the GSM 102 programs since the initial WTO dispute settlement panel issued its ruling in 2005 and that, as a consequence of those changes, the GSM 102 program now operates in a fully WTO-compliant manner. Similarly, the NCC argued that changes under the 2008 farm bill ( P.L. 110-246 ) to the marketing loan and CCP programs had made them more WTO-compliant. Finally, the NCC complained that the WTO arbitration ruling was based almost entirely on 2005 data, when U.S. cotton support programs were at their peak and the U.S. share of the world cotton market was near 40%, compared with about 12% today.\nAs a result of these changed circumstances, the NCC and other U.S. farm groups publicly stated that USTR should seek the establishment of a new WTO compliance panel in order to prove that U.S. cotton subsidy programs and export credit programs no longer violate WTO rules. However, in accordance with WTO rules, even if the United States were to initiate such a new compliance panel, Brazil would be able to proceed with its WTO-authorized retaliation.", "Following the WTO arbitrator's August 31, 2009, ruling, Brazil now had the approval to initiate sanctions against the United States. The arbitrator's decisions were final and not subject to appeal, and Brazil had complete freedom to decide which products would be subject to retaliatory hikes in import tariffs and which IP and services rights could be targeted by supplementary countermeasures. However, before Brazil could proceed with any retaliation, it first had to request the WTO Dispute Settlement Body (DSB) to authorize its retaliation request in an amount, and with respect to types of trade, consistent with these decisions. Following the circulation of the arbitrator's decisions on August 31, 2009, Brazil accordingly submitted requests to the DSB to authorize the suspension of concessions or other obligations. Such approval is decided under reverse consensus, such that WTO members would have to decide by consensus (including Brazil voting against itself) to not allow Brazil to proceed.\nOn November 19, 2009, the DSB agreed to grant Brazil authorization to impose countermeasures consistent with the arbitrator's decisions. WTO dispute settlement rules did not require that Brazil pursue its retaliation request or, if it did so, that it request authorization to retaliate by a given date. Other possible options included the negotiation of a settlement of the case before Brazil were to impose retaliatory measures or, as suggested by some, a request by the United States for a ruling by a new compliance panel that the objectionable elements of the prohibited subsidy have been eliminated.", "On December 21, 2009, Brazil announced that it was authorized by the WTO to impose trade retaliation against up to $829.3 million in U.S. goods in 2010 (based on 2008 U.S. trade data). The countermeasure included a fixed annual amount of $147.3 million, reflecting the adverse effects from U.S. price-contingent subsidies (i.e., marketing loan benefits and counter-cyclical payments), and the balance of $682 million related to the volume of U.S. export credit guarantees (found to operate as a prohibited export subsidy), which may vary annually. The WTO also established a threshold value (related to the value of Brazil's consumer goods imports from the United States) for determining the extent of permissible cross-retaliatory countermeasures. The threshold varies annually based on changes in Brazil's total imports from the United States, but is currently estimated at $561 million, yielding a remaining value of $268.3 million ($829.3 million - $561 million) in eligible cross-retaliatory countermeasures.\nOn March 10, 2010, Brazil released a final list of goods of U.S. origin valued at $561 million that would be subject to import tariffs within 30 days unless a last-minute agreement was reached. The following week (March 15), Brazil released a preliminary list of U.S. patents and intellectual property rights it could restrict, barring a joint settlement. The new measures—which were open to public comment for a period of 20 days and subject to public hearings—included the temporary suspension of U.S. patents on pharmaceuticals, chemicals, and biotechnology, and the restriction of copyrights in the music and audiovisual industry.", "The United States and Brazil continued to seek a last-minute negotiated settlement to avoid the retaliatory measures. Brazil said that it would only apply sanctions if the United States refused to eliminate its cotton subsidies. The United States reiterated its intention to comply with the DSB's recommendations and rulings and therefore did not believe that it would be necessary for Brazil to exercise that authorization. The United States added that suspending concessions or obligations could present economic and other challenges for both Brazil and the United States.\nBrazil indicated that it could accept a U.S. pledge to send a reform bill to Congress to alter the offending cotton program provisions, if Brazil were compensated for damages until the bill's approval. Some Brazilian leaders proposed compensation through U.S. investments into cotton research, as well as more U.S. imports of Brazilian beef, orange juice, and ethanol. In contrast, some speculated that the United States could take offense at Brazil's retaliatory action and suspend the more than $2.5 billion in trade privileges that it offers Brazil under its Generalized System of Preferences (GSP).\nSeveral U.S. trade associations—including the Brazil-U.S. Business Council, the National Association of Manufacturers, the U.S. Chamber of Commerce, the Council of the Americas, and the American Chamber of Commerce in Brazil, and others—voiced strong concerns that the U.S. government take every measure possible to avoid Brazil's imposition of trade retaliation.\nSteven Bipes, executive director of the Brazil-U.S. Business Council, argued that settlement of the dispute would likely have to occur in two stages:\nthe first stage would involve administrative action by the U.S. government on any number of several pending trade issues with Brazil as a gesture of good faith; the second stage would have to occur in the context of the 2012 farm bill, where Congress could make further substantive changes to U.S. cotton subsidies or to the GSM 102 export credit guarantee program.", "On April 1, 2010, Deputy U.S. Trade Representative (USTR) Miriam Sapiro and USDA Under Secretary for Farm and Foreign Agricultural Services Jim Miller met with Ambassador Antonio Patriota, Secretary General of Brazil's Ministry of External Relations, to discuss possible resolution of the dispute. On April 5, 2010, the United States floated a proposal to Brazil on a negotiated settlement. After reviewing the proposal, Brazil's Foreign Trade Council (CAMEX) approved a resolution that postponed until an initial deadline of April 22 the implementation of WTO-approved countermeasures by Brazil against U.S. imports. Key features of the U.S. proposal and the ongoing negotiations included the following:\nThe United States will establish a fund in the amount of $147.3 million per year to provide technical assistance and capacity-building for Brazil's cotton sector. Under terms of a memorandum of understanding (MOU) signed by Brazil and the United States, the fund will continue until the passage of the next U.S. farm bill or a mutually agreed solution to the dispute, whichever is sooner. Also, the fund will be subject to transparency and auditing requirements, as well as a list of allowable uses specified in the MOU. The United States agreed to make some near-term modifications to the operation of the GSM-102 Export Credit Guarantee Program, and to engage with the government of Brazil in technical discussions regarding further operation of the program. On April 6, 2010, USDA announced that it was cancelling unutilized balances from the GSM-102 program for FY2010, and that these balances would be re-announced under a new guarantee fee rate schedule announced on April 19, 2010. The United States also agreed to publish a proposed rule by April 16, 2010, to recognize the state of Santa Catarina as free of foot-and-mouth disease (FMD), rinderpest, classical swine fever, African swine fever, and swine vesicular disease, based on World Organization for Animal Health guidelines, and to complete a risk evaluation that is currently underway and identify appropriate risk mitigation measures to determine whether fresh beef can be imported from Brazil while preventing the introduction of FMD into the United States.\nUSDA would finance the annual \"cotton\" fund of $147.3 million using Commodity Credit Corporation (CCC) funds under the auspices of the CCC Charter Act (15 U.S.C. 714). The CCC Charter Act contains language that allows USDA to use CCC funds to \"export or cause to be exported ... agricultural commodities.\"\nIn light of the conclusion of the MOU with Brazil (April 20), publication of the proposed rule on meat imports from Santa Catarina (April 16), and the above changes to the GSM-102 program, Brazil extended the ongoing negotiations for resolving the path forward by 60 days, to a second deadline in June 2010. Brazil said that it was still pursuing the full U.S. compliance with the WTO dispute settlement ruling, particularly as concerns U.S. cotton-specific farm program subsidies. However, any changes to farm programs would likely have to be made in the context of the 2012 farm bill.\nAlthough the proposal succeeded in avoiding, at least temporarily, the imposition of harmful trade countermeasures including the suspension of copyright and patent protection, the U.S. proposal was met with both praise and criticism. Proponents of U.S. farm programs (and their incumbent support payments) were generally in favor of the ongoing negotiations and the U.S. proposal. In contrast, opponents and critics of U.S. farm programs were generally critical of the U.S. negotiating offer. In particular, the establishment of the $147.3 million annual fund to support Brazil's cotton sector was described as \"subsidy payments to Brazil's cotton farmers needed to permit the continuation of subsidy payments to U.S. cotton farmers.\"", "On June 17, 2010, U.S. and Brazilian trade negotiators concluded the Framework for a Mutually Agreed Solution to the Cotton Dispute in the WTO (WT/DS267) for moving forward in the dispute settlement case. The framework agreement—which lays out a number of \"steps and discussions\"—represents a path forward toward the ultimate goal of reaching a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against U.S. goods and services. The framework agreement was formally accepted by Brazil's Foreign Trade Council of Ministers (CAMEX) on June 17, 2010. As a result, Brazil has suspended trade retaliation pending U.S. compliance with the framework agreement measures.", "The framework agreement includes quarterly discussions on potential limits to trade-distorting U.S. cotton subsidies (recognizing that actual changes to cotton-specific subsidies require legislation by Congress and are not likely to happen outside of the 2012 farm bill debate). Specifically, the agreement identifies parameters for a future annual limit on U.S. domestic support for upland cotton such that \"[t]he level of the limit would be significantly lower than the average annual level of trade-distorting domestic support provided for upland cotton in the period MY 1999-2005.\" Based on fiscal year data from Table 1 , annual upland cotton subsidies for the FY1999-FY2005 period averaged $3.568 billion.", "In addition, the framework agreement provides semi-annual operation reviews to evaluate two sets of guided changes to the GSM-102 agricultural export credit guarantee program. First, the weighted-average length for a GSM-102 contract will be lowered to 16 months by the end of 2012, down from the current average of about 20.5 months. Second, a set of benchmarks is established for implementing changes to GSM-102 contract premiums (i.e., the rates charged for each dollar of credit guarantee) contingent on performance. The current $5.5 billion in annual GSM-102 export credit guarantee value remains intact; however, the annual value is broken into two six-month tranches of $2.7 billion. Every six months an operational review (held each October and April) will determine how GSM-102 usage (i.e., the value of uncancelled guarantee value) for the preceding six-month period compares with the eligible $2.7 billion:\nif usage is greater than $1.3 billion, premiums increase by at least 11% of the simple average fee rate; if usage is not greater than $1.3 billion, then during the following six-month period, if usage exceeds $1.5 billion, premiums increase by at least 15% of the simple average fee rate; and if usage is below $0.8 billion, premiums could be decreased by an amount equal to half of the most recent premium increase.\nThe GSM-102 semi-annual operational reviews will coincide with the relevant quarterly cotton program discussions. Both parties to the dispute have said that a final mutually agreed solution would not be possible until after the 2012 farm bill, when the nature of any changes to U.S. domestic cotton subsidies has been made clear.", "The United States has taken several steps to comply with the three major points identified under the April 2010 Memorandum of Understanding (MOU) and the June 2010 Framework Agreement.", "The United States has agreed to pay $147.3 million annually into a Brazilian fund (known as the Brazilian Cotton Institute) for technical assistance and capacity building for Brazil's cotton sector.\nIn June 2010, the United States began making payments to the Brazilian Cotton Institute (BCI) with an initial tranche of $34.3 million, to be followed by successive monthly payments of $12.275 million going forward. The BCI's board of directors consists of three private-sector representatives (including a representative from the Brazilian Association of Cotton Producers (ABRAPA) and two state-level cotton sector representatives) and three government representatives (one each from the ministries of foreign affairs, agriculture, and the ministry of development, industry, and foreign trade). Harold Cunha, a former president of ABRAPA, was designated as the BCI's first executive director.\nThe BCI's board of directors—who will be responsible for deciding on the uses of funds—are limited by a negotiated list of \"acceptable uses\" that includes activities such as pest and disease control, purchase and use of capital equipment, and generic promotion of cotton uses. The money is prohibited from being used as a direct subsidy for Brazil cotton production.", "The United States has agreed to meet with Brazilian officials on a semi-annual basis to review the operation of the U.S. GSM-102 program (both funding levels and average length of tenor) relative to a series of benchmarks.\nOn October 20, 2010, U.S. and Brazilian government officials met in their first \"operational review\" of the GMS-102 program, as called for under the framework agreement. The principal purpose of the review was to evaluate U.S. use of GSM-102 credit guarantees during the six-month period April through September of 2010 against the $1.3 billion threshold (described above). According to public USDA figures, USDA received $1.39 billion in GSM-102 applications during the six-month period. However, the officials jointly agreed that the actual usage of GSM-102 had come very close to the $1.3 billion threshold but had not exceeded it. Apparently cancellations reduced the actual usage level substantially from the initial application level. As a result, no fee increase under the U.S. operation of the program was triggered.\nThe two sides also discussed the average length of loan tenors made under the GSM-102 program. Under the framework agreement, the United States is obligated to try to lower the weighted-average tenor to 16 months by the end of 2012. It was jointly concluded that the weighted-average tenor exceeded the target of 16 months. In response, the United States committed to make further changes to the program before the next operational review. U.S. officials suggested that a possible method to lower the weighted average loan tenor would be to raise fees for use of credit guarantees with longer tenors as an incentive for use of shorter tenors. As a result, in February 2011 USDA initiated fee hikes.\nThe second operational review of GSM-102 usage took place in April 2011 and covered the October 2010 through March 2011 period. GSM-102 usage for the six-month period was about $1.54 billion, thus exceeding the larger $1.5 billion threshold. As a result, the United States was obligated to increase fees associated with the program by an average of 15%. The fee hikes are also intended to help draw down the average length of tenor for GSM-102 transactions. For transactions involving an annual payment of principal, USDA increased fees for transactions using longer loan tenors by a greater amount than for transactions using shorter loan tenors.", "The United States has agreed to meet with Brazilian officials on a quarterly basis to exchange information on U.S. domestic cotton support with a goal of bringing annual spending on trade-distorting upland cotton programs under a cap equal to the annual average provided during the 1999 through 2005 marketing years.\nDuring the October 20 meetings, it was deemed too early relative to the 2012 farm bill to discuss any substantive program changes. However, Brazilian officials expressed their interest in eventually meeting with members of the House and Senate Agricultural Committees to discuss their concerns.", "Under the April MOU, the United States agreed to expedite publication of a rule governing modification to the animal disease status of the Brazilian State of Santa Catarina.\nOn November 16, 2010, USDA's Animal and Plant Health Inspection Service (APHIS) published its final rule amending the regulations in the U.S. Code (9 CFR part 94) governing the importation into the United States of certain animals and animal products by modifying the disease status for the Brazilian State of Santa Catarina with respect to certain ruminant and swine diseases—FMD, rinderpest, swine vesicular disease, classical swine fever, and African swine fever. These changes will make it easier for animal products such as pork and live swine from Santa Catarina to enter the United States.\nAt the second review of GSM-102 held in April 2011 (mentioned earlier), Brazil also inquired as to why the United States had not yet released a proposed rule concerning the increased imports of meat products from 14 additional Brazilian states by declaring those states free of foot-and-mouth disease, after having announced that it would do so by January 31, 2011. The U.S. officials did not give a precise timetable for when the rule would come out.", "", "Although the House and Senate Agriculture Committees agreed that the issue of bringing U.S. cotton programs into compliance with the WTO ruling should be addressed in the context of the next farm bill (expected in 2012), several other Members of Congress have been outspoken critics of the terms imposed on the United States in the MOU negotiated with Brazil to temporarily avoid trade retaliation. Since February 2011, several bills or amendments have been introduced that would alter or prevent U.S. compliance with the MOU, especially as regards the annual payment of $147.3 million to the Brazilian Cotton Institute (BCI).\nOn February 18, 2011, Representative Kind introduced an amendment to the Full-Year Continuing Appropriations Act, 2011 ( H.Amdt. 108 to H.R. 1 ). The Kind amendment read:\nNone of the funds made available by this Act may be used to provide payments (or to pay the salaries and expenses of personnel to provide payments) to the Brazil Cotton Institute.\nIf passed, the Kind amendment would have brought the United States into noncompliance with the terms of the MOU. However, the amendment failed in a floor vote of 183-246.\nOn May 31, 2011, during the House Appropriations Committee's full committee markup of the FY2012 Agriculture appropriations bill ( H.R. 2112 ), two amendments were adopted and subsequently removed on the floor that again dealt with funds originally targeted for paying the $147.3 million annual fee to the BCI. One provision (§743, as reported), offered by Representative DeLauro, would have prohibited any payments to the BCI in FY2012. (In a separate provision offered by Representative DeLauro and also subsequently removed on the floor, the $147.3 million in BCI payments were instead added to the Women, Infants, and Children public nutrition program for FY2012.) A second provision (§741, as reported), offered by Representative Flake, would have reduced outlays to U.S. upland cotton producers under the direct payment program of the 2008 farm bill (§1103; P.L. 110-246 ) by $147.3 million to offset the BCI payments. However, during the bill's floor debate on June 15, 2011, House Agriculture Committee Chairman Lucas raised a point of order against these provisions, which was sustained, thus removing them from the bill.\nThe next day, on June 16, 2011, during the House floor debate, two new amendments were introduced to H.R. 2112 that dealt explicitly with the WTO Brazil cotton case. Representative Kind introduced an amendment ( H.Amdt. 454 to H.R. 2112 ) identical to his February amendment to H.R. 1 to prohibit use of funds for payments to the BCI. This time, however, the amendment passed by a vote of 223-197. A second amendment ( H.Amdt. 472 to H.R. 2112 ) introduced by Representative Flake would have prohibited any funds from being used to provide payments under the price-contingent cotton programs—marketing loan benefits, counter-cyclical payments, or cotton storage program—identified by the WTO dispute settlement panel as being the primary source of U.S. cotton program market distortions. However, this second amendment was strongly opposed by several Members from cotton-producing regions, and the amendment failed by voice vote.\nOn June 16, 2011, H.R. 2112 was passed by the U.S. House of Representatives, inclusive of the Kind amendment, by a vote of 217-203. The Senate version of H.R. 2112 , which passed on November 11, 2011, did not contain a similar amendment banning the use of funds for payment to the BCI. The final conference report, passed by both chambers on November 17, 2012, and signed into law on November 18, 2011, also did not contain the Kind amendment.\nCongress is expected to address the next farm bill in 2012. As mentioned earlier, Chairman Lucas has stated that any changes to the U.S. cotton program should occur as part of larger farm program changes within the next farm bill debate.", "On August 26, 2011, the National Cotton Council (NCC) issued a statement recommending an adjustment to the current U.S. cotton program as part of the 2012 farm bill negotiations. In particular, the NCC recommends that changes to the U.S. cotton program should include replacing the direct payments, the counter-cyclical payments, and the Average Crop Revenue Election (ACRE) programs with an affordable revenue-based crop insurance program created by making \"modest enhancements\" to existing crop insurance products, complemented by adjustments to the upland cotton marketing loan program.\nThe NCC proposes using a modified Group Risk Income Protection (GRIP) type of insurance program (where losses are determined at the county level rather than the farm level) to protect farms against shallow revenue losses. However, unlike crop insurance, which uses a projected price based on pre-planting time prices for harvest-time futures contracts, the NCC proposal would also include a \"fixed reference\" price to act as a floor price guarantee for the projected price. With respect to its marketing loan adjustments, the NCC proposes using a two-year moving average of USDA's calculated Adjusted World Price (AWP) for the most recently completed marketing years to serve as the marketing loan provided it stays within a tight price-band of 47 to 52 cents per pound. If the moving average AWP moves below 47 cents/lb., then the proposed marketing loan for upland cotton would be 47 cents/lb. The current marketing loan rate for upland cotton is set at 52 cents/lb.\nUnder the terms of the MOU between the United States and Brazil, Brazil retains substantial privileges in determining whether any proposed changes to the U.S. cotton program (including the NCC's proposed changes) would bring U.S. cotton programs into compliance with WTO commitments. A key measure will likely be the extent to which the proposed changes bring the U.S. cotton programs into line with market conditions—a key criteria cited by the WTO dispute settlement panel.", "The arbitration ruling in favor of Brazil's requested cross-retaliation countermeasure could raise the stakes in this particular dispute by potentially expanding retaliation into TRIPS and the General Agreement on Trade in Services. The U.S. response to the WTO cotton ruling is being watched closely by developing countries, particularly by a consortium of four African cotton-producing countries that has submitted its own proposal to the WTO calling for a global agreement to end all production-related support for cotton growers of all WTO-member countries.\nTrade experts have expressed concern that the panel findings could extend beyond cotton to other major field crops, particularly as concerns the potential limits on export credit guarantees. Some trade and market analysts, as well as legislators, have expressed concern that a broad finding against U.S. farm program provisions under the actionable subsidies ruling could necessitate legislative changes to the U.S. farm bill to bring existing program operations into compliance.", "Brazil argued that the fees charged to users of GSM failed to cover the U.S. government's costs (whether a default on the credit or late or partial payment) associated with running the program. This charge was confirmed by the original WTO panel (based on U.S. historical data of GSM-102 program operations) and upheld on appeal. Thus, a key to bringing the GSM-102 program into compliance would be setting premium rates high enough to cover long-run program operating costs. By the WTO Compliance Panel's own measure, this could be achieved by adopting the minimum premium rates as reported in the OECD Arrangement on Officially Supported Export Credits . Further, the rates could be subject to a proviso that, should the GSM-102 program operate at a loss during any given year, then the fees would be adjusted higher by some amount to offset the loss in the subsequent year.\nA review of the estimated credit subsidies on CCC export credit guarantees since 2001 suggests that an annual average of $302 million could be saved by adjusting fees upward to more fully cover operating costs. The program net losses have varied annually with changes in the rates of participation and default.", "The obvious adjustment needed to bring price-contingent cotton programs into compliance involves lowering the support prices (i.e., the loan rate and the target price) until they are more in line with market prices. Depending on the degree to which cotton price triggers are adjusted downward relative to market prices, the average payment rate will decline. By setting trigger prices at a moving average of market prices, payments could approach zero.\nCCC outlays to cotton producers under the price-contingent market loan provisions (including loan deficiency payments, marketing loan gains, and certificate exchange gains) and the CCP program have, on average, accounted for about 42% of all CCC payments under these programs since 2003 ( Table 4 ). During that period, cotton producers received an annual average of over $1.8 billion. During the 2007-2009 period, cotton receipts surged to a 66% share of total CCC outlays as high world commodity prices raised prices for most other major U.S. program crops above their program price triggers. In 2010, cotton prices have also moved above their program trigger levels.", "Concerns have also been expressed regarding the reclassification of PFC and direct payments away from non-trade-distorting green box support. However, the panel finding that U.S. direct payments do not qualify for WTO exemptions from reduction commitments as fully decoupled income support (i.e., they are not green box compliant) appears to have no further consequences within the context of this case and does not involve any compliance measures. This is because direct payments were deemed \"non-price contingent\" and were evaluated strictly in terms of the Peace Clause violation.\nThe panel did not specifically reclassify U.S. PFC and DP payments as \"amber box,\" nor did the panel recommend that the United States should notify such future payments as \"amber box.\" This is a subtle but critical distinction because of the enormity of PFC and DP payments. During FY1996 to FY2008, PFC and DP payments averaged $5.2 billion per year and accounted for 34% of total U.S. farm program outlays. Shifting this amount to amber box could have important implications for future dispute settlement cases, as well as for the United States' ability to meet its WTO amber box commitments.\nU.S. cotton industry and government officials are concerned that the specific finding on the apparent failure of U.S. \"decoupled\" payments to meet WTO green box criteria leaves such programs open to future charges, and that third countries may feel emboldened by knowing how a WTO panel is likely to rule on such matters. The European Union (EU) is also likely to be concerned about this finding since the EU's agricultural program (following agricultural policy reforms of June 2003) relies heavily on \"decoupled\" payments similar to the those of the U.S. program. These concerns appear to have merit, as both Canada and Brazil initiated a WTO dispute settlement proceeding against the United States charging that the United States has indeed incorrectly notified PFC and DP payments as green box and that their inclusion in the U.S. amber box results in the United States exceeding its WTO-agreed AMS spending limit on several occasions in recent years ( Figure 4 ).", "Besides Brazil's WTO-initiated dispute settlement case (DS267), U.S. cotton subsidies are being challenged at the WTO on two additional fronts.\nFirst, the Doha Development Agenda negotiating round has substantial reductions in trade-distorting domestic program support as one of its principal modalities. If realized, a new round of domestic spending limitations could potentially represent a \"real\" ceiling on U.S. commodity spending and could result in lower program outlays. Second, a consortium of four African cotton-producing countries—Benin, Burkina Faso, Chad, and Mali—has submitted a WTO proposal calling for a global agreement to end all production-related support for cotton growers of all WTO-member cotton producing nations. In acknowledgment of the concerns of African cotton-producing countries, the United States—while not agreeing with the African proposal—worked with the African countries on a formulation in the initial agriculture framework (of July 31, 2004) of the WTO's ongoing Doha Round. Although no specific cotton program concessions were mentioned in the framework, the United States committed \"to achieve ambitious results expeditiously\" under the framework. Further, it is notable that cotton is the only commodity singled out for special mention in the framework.", "", "Given the importance of cotton in the U.S. agricultural economy and the potential for WTO-imposed limitations on U.S. cotton program operations, Congress likely will be closely monitoring developments in the WTO cotton case and the Doha Round of trade negotiations. Both the Senate and House Agriculture Committees regularly hold hearings on agricultural trade negotiations. In addition to congressional hearings, Congress will likely be engaged in consultations with the Administration on the bilateral trade negotiations as well as the Doha Round of WTO trade negotiations. Such consultations will be a major vehicle for Members to express their views on this dispute and on the negotiating issues it raises.\nWhen confronted with a negative WTO dispute settlement ruling, a country has essentially five options to choose from: eliminate the subsidy; reduce the subsidy to diminish its adverse effect; revise the program function to reduce the linkage between the subsidy and the adverse effect (referred to as decoupling); pay a mutually acceptable compensatory payment to offset the adverse effects of the subsidy; or suffer the consequences of trade retaliation.", "Ultimately, Congress is responsible for passing farm program legislation that complies with U.S. commitments in international trade agreements. The United States would appear to have already complied with several of the AB's recommendation concerning \"prohibited subsidies\" through changes in the 2008 farm bill ( P.L. 110-246 ; §3101(a)) by eliminating the Step 2, GSM-103, and SCGP programs, and by removing the fee cap on GSM-102 credit guarantees (i.e., by eliminating the \"subsidy\" component of export credit guarantees). In addition, by the same 2008 farm bill provision Congress requires that the Secretary of Agriculture, in carrying out the GSM-102 program, \"work with the industry to ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees cover, but do not exceed, the operating costs and losses over the long-term.\" However, a more explicit definition of \"long-term\" such as a two-year period would perhaps provide a stronger signal to the Secretary of Agriculture in regard to operating the GSM-102 program with no net losses.\nAlso, some questions remain as to what extent the 2008 farm bill has addressed the adverse effects charge related to price-contingent subsidies. Instead of eliminating or reducing program triggers, the 2008 farm bill appears to offer higher levels of price and income support that potentially could aggravate the perception (if not the reality) of adverse effects in the marketplace. Several of the proposed changes are specifically relevant to the Brazil cotton case, but also germane to the broader issue of program vulnerability to WTO challenge. For example, the enacted 2008 farm bill:\nextends the counter-cyclical payments (CCP) program and current marketing loan provisions (§§1104 and 1201 of P.L. 110-246 ); raises both target prices and loan rates for several commodities, while only lowering (marginally) the target price for upland cotton (§§1104 and 1202); offers producers the choice (subject to a 30% reduction in marketing loan rates and in lieu of 100% of CCP and 20% of direct payments) of a revenue-based support option under the Average Crop Revenue Election program (ACRE, §1105) with potentially higher per-acre revenue guarantees for several crops than under the previous 2002 farm bill; and creates a new cotton-user payment of 4 cents per pound (§1207). This payment appears similar to the WTO-illegal Step 2 payment except that cotton from all origins (not just domestic sources) is eligible for the payment. Since the United States imports very little cotton, most payments would still likely go to domestically sourced cotton. As a result, this subtle technical loophole might ultimately be subject to a WTO challenge, but would not be part of the current WTO cotton case.\nFinally, the 2008 farm bill does not address the issue surrounding the disqualification of direct payments from the WTO's green box exclusion as decoupled payments due to the planting restriction on fruits, vegetables, and wild rice on program base acres. Instead, direct payments are extended with no change to the current planting restriction, except for a small pilot program on 75,000 acres in seven states (§1107). This retention of the status quo has important WTO implications for the AMS case being brought against the United States by both Canada and Brazil. The U.S. aggregate measure of support (AMS) has exceeded, on at least two occasions, its total WTO limit if direct payments are included in the AMS calculation ( Figure 4 ).\nAdditional uncertainty arises from the ongoing Doha Round of trade negotiations, where a successful conclusion could potentially mitigate or end Brazil's interest in continuing its case against the U.S. farm programs. Both agriculture committees (House and Senate) of the 112 th Congress will likely continue to monitor developments in the WTO cotton case and the Doha negotiations, as well as the aftermath of the compliance panel's final ruling." ], "depth": [ 0, 1, 2, 1, 2, 2, 1, 2, 3, 4, 3, 4, 3, 4, 3, 4, 3, 4, 3, 4, 2, 3, 4, 4, 3, 2, 3, 3, 2, 1, 2, 2, 2, 1, 2, 2, 2, 3, 3, 3, 3, 4, 3, 3, 1, 2, 2, 2, 2, 3, 3, 1, 2, 2, 2, 2, 2, 3, 3, 1, 2, 2, 2, 2, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "", "", "", "", "h0_title", "h0_title", "", "", "", "", "", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_full", "", "h0_full", "", "h0_title h1_title", "", "h1_full", "h0_title h1_title", "", "", "", "h1_full", "", "", "h0_full", "h2_title h1_title", "h1_full", "h2_full", "h2_full", "h2_full", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What is the \"Brazil cotton case\"?", "How did the case begin?", "What changes did the US make to meet WTO recommendations?", "How did Brazil respond to these changes?", "What did a WTO arbitration panel rule in 2009 to resolve the cotton case?", "What is cross-retaliation?", "How did Brazil respond to the panel's ruling?", "What did negotiations between Brazil and the US culminate in?", "How was this agreement supported by the WT/DS267?", "What did this framework agreement result in?", "What are the key aspects of this framework agreement?" ], "summary": [ "The so-called \"Brazil cotton case\" is a long-running World Trade Organization (WTO) dispute settlement case (DS267) initiated by Brazil—a major cotton export competitor—in 2002 against specific provisions of the U.S. cotton program.", "In September 2004, a WTO dispute settlement panel found that certain U.S. agricultural support payments and guarantees—including (1) payments to cotton producers under the marketing loan and counter-cyclical programs, and (2) export credit guarantees under the GSM-102 program—were inconsistent with WTO commitments.", "In 2005, the United States made several changes to both its cotton and GSM-102 programs in an attempt to bring them into compliance with WTO recommendations.", "However, Brazil argued that the U.S. response was inadequate. A WTO compliance panel ruled in favor of Brazil's non-compliance charge against the United States in December 2007, and the ruling was upheld on appeal in June 2008.", "In August 2009, a WTO arbitration panel—assigned to determine the appropriate level of retaliation—announced that Brazil's trade countermeasures against U.S. goods and services could include two components: (1) a fixed amount of $147.3 million in response to U.S. cotton program payments, and (2) a variable amount based on U.S. GSM-102 program spending. In response to Brazil's argument that insufficient trade in goods occurred between the two countries, the arbitrators also ruled that Brazil would be entitled to cross-retaliation if the overall retaliation amount exceeded a formula-based variable annual threshold.", "Cross-retaliation involves countermeasures in sectors outside of the trade in goods, most notably in the area of U.S. copyrights and patents.", "Based on the arbitrators' formulas, using 2008 data, Brazil announced in December 2009 that it would impose trade retaliation starting on April 6, 2010, against up to $829.3 million in U.S. goods, including $268.3 million in eligible cross-retaliatory countermeasures.", "The threat of sanctions led to intense negotiations between Brazil and the United States to find a mutual agreement and avoid the trade retaliation. In April 2010, the two parties reached a preliminary memorandum of understanding (MOU) spelling out certain actions which, if undertaken by the United States, would lead to suspension of Brazil's threatened retaliation.", "Then, on June 17, 2010, U.S. and Brazilian trade negotiators concluded the Framework for a Mutually Agreed Solution to the Cotton Dispute in the WTO (WT/DS267). The framework agreement—which lays out a number of \"steps and discussions\"—represents a path forward toward the ultimate goal of reaching a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against U.S. goods and services.", "As a result, Brazil has suspended trade retaliation pending U.S. compliance with the framework agreement measures.", "Key aspects of the framework agreement include (1) payment by the United States of a $147.3 million annual fund to a newly created \"Brazilian Cotton Institute\" to provide technical assistance and capacity-building for Brazil's cotton sector, (2) quarterly discussions on potential limits of trade-distorting U.S. cotton subsidies (recognizing that actual changes will not occur prior to the 2012 farm bill), and (3) near-term modifications to the operation of the GSM-102 program coupled with a semi-annual review of whether U.S. GSM-102 program implementation satisfies certain performance benchmarks." ], "parent_pair_index": [ -1, 0, 1, 2, -1, 0, 0, -1, 0, 1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2 ] }

{ "title": [ "Background", "DOD Policies on Military Whistleblower Reprisal Are Governed by Statute", "DODIG and Service IGs Have Responsibility for Investigating Military Whistleblower Reprisal Complaints", "DOD’s Military Whistleblower Reprisal Investigative Process Focuses on Identifying Four Elements of Reprisal", "DOD Did Not Always Meet Statutory Notification and Internal Timeliness Requirements for Completing Military Whistleblower Reprisal Investigations", "DOD Did Not Meet Statutory Notification Requirements for about Half of Reprisal Investigations in Fiscal Year 2013", "DOD’s Military Whistleblower Reprisal Investigations Took Almost Three Times DOD’s Internal Timeliness Requirement in Fiscal Years 2013 and 2014", "DODIG’s New Case Management System Does Not Support Complete Oversight of Service Military Reprisal Investigations", "DODIG’s New Case Management System to Improve Monitoring of Reprisal Investigations Is under Development", "DODIG Provides Limited Guidance to Case Management System Users", "DOD Uses Multiple Decentralized Case Management Systems, Which Hinders Visibility, and Does Not Have an Implementation Plan for Expanding the DODIG Whistleblower Case Management System to the Service IGs", "DOD Has Not Formalized Its Oversight Processes to Review Service IG Reprisal Investigations and to Help Ensure Investigation Quality and Independence", "DODIG Established an Oversight Team to Review Service-Investigated Reprisal Complaints, but the Oversight Process Is Not Formalized", "DODIG and Service IG Adherence to CIGIE Standards", "DODIG Oversight Guidance and Instruction", "DODIG Does Not Have Standardized Investigative Guidance and Provides Limited Feedback on Investigation Quality", "DODIG and the Service IGs Do Not Have Standardized Guidance Regarding Investigation Stages", "DODIG Does Not Consistently Provide Service IG Investigators with Feedback on Investigation Quality", "DOD Does Not Have a Process for Investigators to Certify Their Independence", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: General Information on Case Characteristics for Military Whistleblower Reprisal Investigations", "Servicemember Characteristics for Closed Cases", "Protected Communication Characteristics", "Unfavorable Personnel Action Characteristics", "Reasons for Closing Cases", "Substantiation Rates", "Appendix III: Comments from the Department of Defense", "GAO Comments", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "In 1988, Congress enacted the Military Whistleblower Protection Act to provide protection to servicemembers who report wrongdoing within DOD. According to DOD policy, a military whistleblower is a servicemember who makes, prepares to make, or is perceived as making or preparing to make a protected communication—that is, a report of a violation of law or regulation, gross waste of funds, or abuse of authority, among others, to an authorized individual or organization. An authorized individual includes, among others, a Member of Congress, an IG, and any person or organization in the servicemember’s chain of command. Further, any lawful communication to a Member of Congress or IG is Reprisal occurs when a responsible management official protected.takes, threatens to take, withholds, or threatens to withhold a personnel action because a servicemember made or was preparing to make a protected communication. A personnel action is any action taken on a servicemember that affects or has the potential to affect a servicemember’s current position or career, such as an adverse performance evaluation, letter of reprimand, or separation from service, among others.\nServicemembers and former servicemembers may submit reprisal complaints to DODIG or an IG within DOD. In 2013, Congress expanded the time for servicemembers to file a reprisal complaint from 60 days to 1 year following the date on which the servicemember becomes aware of the personnel action. While the law affords military whistleblowers certain protections, those who allege they have suffered reprisal generally do not receive relief from the alleged reprisal until DOD has completed an investigation and substantiated the claims of reprisal.", "DODIG can conduct an investigation into a military reprisal complaint or refer the investigation to the appropriate service IG; however, according to DOD policy, no determination is complete without final approval from DODIG. Whistleblower Reprisal Investigations is the directorate within DODIG’s Administrative Investigations component that is responsible for conducting and overseeing investigations of reprisal and restriction complaints filed by servicemembers. According to DOD policy, the Whistleblower Reprisal Investigations directorate is to approve service IG recommendations to dismiss cases, review and approve the results of investigations conducted by the service IGs, and initiate follow-up investigations to correct any inadequacies in service IG investigations. The majority of DODIG’s investigation workload for military reprisal cases is related to oversight reviews of investigations conducted by the service IGs. The directorate is also responsible for investigating reprisal complaints filed by DOD civilian employees, and employees of DOD contractors and subcontractors, among others. According to DODIG’s semiannual reports to Congress, military whistleblower reprisal complaints account for approximately 60 percent of the reprisal complaints it receives. Figure 1 provides a summary of the investigation process, as described in DODIG guidance.", "According to DODIG’s Guide to Investigating Military Whistleblower Reprisal and Restriction Complaints, DODIG and service IG investigators are to assess reprisal complaints by answering four questions to determine whether the elements of reprisal are present. Specifically: 1. Did the servicemember make or prepare to make a protected communication, or was the servicemember perceived as having made or prepared to make a protected communication? 2. Was an unfavorable personnel action taken or threatened against the servicemember, or was a favorable personnel action withheld or threatened to be withheld, following the protected communication? 3. Did the responsible management official have knowledge of the servicemember’s protected communication or perceive the servicemember as making or preparing to make a protected communication? 4. Would the same personnel action have been taken, withheld, or threatened absent the protected communication?\nDuring the complaint intake process, the investigator is to review the complaint and timeline and conduct an interview with the servicemember to determine whether (1) the servicemember made or prepared to make a protected communication and (2) a responsible management official took a personnel action against the servicemember. The investigator is to also assess whether the allegation supports an inference that the responsible management official had knowledge of the protected communication and suggests a causal connection between the protected communication and the personnel action, such as whether the personnel action closely followed the protected communication. If the investigating officer determines there was no protected communication, no personnel action, or no inference of responsible management official knowledge or causation, the investigating officer can recommend that DODIG dismiss the case.\nIf a servicemember’s complaint contains a personnel action and a protected communication, and an inference of knowledge and causation, the case is to proceed to a full investigation, according to DODIG guidance.official would have taken the personnel action if the servicemember had not made a protected communication, the investigating officer is to determine the official’s reasons for taking the action, the timing between the protected communication and the personnel action, the official’s motive, and whether the servicemember was treated differently than other servicemembers who did not make protected communications. The investigating officer is to determine the case outcome based on a “preponderance of the evidence,” defined by DODIG as the degree of relevant evidence that a reasonable person, considering the record as a whole, would accept as sufficient to find that a contested fact is more likely to be true than untrue.\nWhen determining whether the responsible management According to DODIG guidance, if the investigating officer finds: (1) that the servicemember made a protected communication, and that the responsible management official (2) took a personnel action against the servicemember following the protected communication, (3) had knowledge of the protected communication, and (4) would not have taken the personnel action without the protected communication, the investigator writes a report that substantiates the reprisal complaint. After the investigator completes the report, it is subject to DODIG supervisory and managerial review and approval, as well as a legal sufficiency review. If the investigation is conducted by a service IG investigator, the service IG headquarters reviews and forwards the report to DODIG for oversight and final approval. In cases where DODIG substantiates a reprisal complaint, the servicemember may take an additional step to petition the appropriate Board for the Correction of Military Records for relief from the personnel action.", "DOD did not meet statutory notification requirements to inform servicemembers about delays in investigations for about half of military whistleblower reprisal investigations in fiscal year 2013. Further, in the notifications that DOD sent, reasons about the delays were general in nature and projected report completion dates were, on average, significantly underestimated. In addition, DOD rarely met internal timeliness requirements for completing military whistleblower reprisal investigations within 180 days for cases that it did not dismiss at intake. The average length of an investigation during fiscal years 2013 and 2014 was almost three times the DOD requirement.", "According to 10 U.S.C. § 1034 if, during the course of the investigation, the IG determines that it is not possible to submit the report of investigation to the Secretary of Defense and the service Secretary within 180 days after the receipt of the allegation, the IG shall provide to the Secretary of Defense, the service Secretary concerned, and the servicemember making the allegation a notice of that determination including the reasons why the report may not be submitted within that time and an estimate of the time when the report will be submitted. DODIG considers its office to be in accordance with the statute as long as it either completes the investigation within 180 days or submits a letter to the servicemember within 180 days, according to a senior DODIG official. In February 2012, we found that DODIG officials acknowledged that they and the service IGs had not been making the required notifications, but that they were taking steps to ensure that they met statutory notification requirements. For example, in February 2012, DODIG issued policy guidance to the service IGs reemphasizing the statutory requirement to notify servicemembers if investigations are not completed within 180 days.are to determine whether the service IG sent the 180-day notification letter as part of DODIG’s oversight review of service IG-investigated Further, according to oversight investigators we spoke with, they cases and in fiscal year 2013, it was included as an item on DODIG’s oversight worksheet for oversight investigators to look for during their oversight review. DODIG officials stated that they have taken additional action to ensure they meet statutory notification requirements since fiscal year 2013, which was the time frame covered by our case-file review. Specifically, in fall 2013, DODIG assigned an oversight investigator to periodically reconcile 180-day notification letters with the service IGs to ensure that the service IGs have sent the required letters and that DODIG has received a copy, according to DODIG officials. In addition, DODIG developed a mechanism in its case management system to indicate which cases are older than 180 days. However, DOD officials told us they have not developed a tool, such as an automated alert, to proactively ensure that they are in compliance with the statutory 180-day notification requirement.\nOn the basis of our file review of a stratified random sample of 124 cases closed by DODIG in fiscal year 2013, we found that DOD has made improvements related to these reporting requirements and that some case files that required letters contained evidence that DOD had sent the letters. However, we estimate that about 47 percent of the files for cases that DOD took longer than 180 days to close in fiscal year 2013 did not contain evidence that the investigating IG sent the required letters to servicemembers. In addition, we found that in cases in which DODIG or the service IG sent the required letter, it typically did so after the case had reached the 180-day mark. Based on our file review, we estimate that for cases in which DODIG or the service IG sent a 180-day notification letter to the servicemember to explain the delays in the investigation, the median notification time was about 353 days after the servicemember filed the complaint. In some service investigations, the investigating IG did not send the required letter to the servicemember until it forwarded the report of investigation to DODIG for review, more than 1 year after the servicemember filed the complaint.\nFurther, the letters that DOD sent provided general reasons for the delay, but, on average, significantly underestimated the date by which it would complete the investigation. For example, reasons for the investigation delay included case complexity, case volume, and delays that the service IG experienced in coordinating information, witnesses, and testimony. Based on the results of our file review, we estimate that the median time for case completion stated by DODIG and the service IGs in the letters, which they sent, on average, around 353 days into the investigation, was However, we estimate that for cases in about an additional 78 days.which the investigating IG sent the required letter, the median time for case closure was actually 488 days, 57 days past the stated estimate for case completion.\nService IG officials stated that, for most cases over 180 days, they provide a standard estimate for case completion because it is difficult to estimate the amount of time required for case completion due to the unique characteristics of each case and the number of layers of review prior to case closure. According to federal standards for internal control, an agency must have relevant, reliable, and timely communications relating to internal and external events in order to determine whether the agency is achieving its compliance with various laws and regulations. On the basis of our file review, we estimate that, on average, the notifications present in 53 percent of investigations closed in fiscal year 2013 in which they were required were untimely and contained unreliable estimates. Figure 2 shows the median notification timeframes and estimates for case completion for fiscal year 2013 cases over 180 days.\nGAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).", "DOD rarely met internal timeliness requirements for completing military whistleblower reprisal investigations in fiscal years 2013 and 2014. According to DOD Directive 7050.06, which implements the statute 10 U.S.C. § 1034 and establishes DOD policy, DODIG shall issue a whistleblower reprisal investigation report—containing a thorough review of the facts and circumstances, relevant documents acquired, and summaries or transcripts of interviews conducted—within 180 days of the receipt of the allegation of reprisal.\nWe found that the average investigation time for all cases that DOD (that is, both DODIG and the service IGs) investigated and closed in fiscal years 2013 and 2014 was 526 days. The average length of DODIG- investigated cases closed in fiscal years 2013 and 2014 was 443 days. The average length of service IG–investigated cases during this time was 530 days, which is almost three times DOD’s internal timeliness requirement. For cases DODIG dismissed after completing the complaint intake process, the average processing time was 48 days. See table 1 for details regarding case-processing times for cases closed by DODIG and the service IGs in fiscal years 2013 and 2014.\nIn our total timeliness calculations for all DOD investigations, we did not include complaints that DODIG or the service IGs dismissed at intake because the IG determined that the complaint did not have sufficient evidence to warrant an investigation. While the statute requires the service IG receiving the reprisal allegation to promptly notify DODIG of the allegation, services do not consistently provide DODIG notification when they receive complaints that do not contain a protected communication or personnel action, according to service IG officials and guidance. Specifically, the Air Force IG’s guidance states that DODIG must be notified when a complaint contains an allegation of reprisal. However, the guidance states that a complaint does not contain a reprisal allegation unless the first two elements of reprisal—a protected communication and a personnel action—are present. DODIG officials stated that any service determination that a complaint does not meet its first two elements of reprisal must be submitted to DODIG for oversight. However, officials from the two service IGs, which accounted for approximately 80 percent of the service IG reprisal investigative workload in fiscal years 2013 and 2014 told us that they do not track or report to DODIG complaints that they dismiss at intake because they lacked a protected communication or personnel action. Since DODIG does not have data on cases that the services dismiss at intake, because the services do not notify them of these cases, we did not have data on all cases that were dismissed at intake. Therefore we reported the timeliness of cases that DODIG dismissed at intake separately, and did not include them in our overall timeliness calculations.\nIn fiscal years 2013 and 2014, DODIG investigated and closed a total of 39 cases and dismissed another 375 complaints after completing the intake process. The service IGs closed a total of 674 cases during this period. See table 2 for the number of cases closed by each investigating organization in fiscal years 2013 and 2014.\nDOD received a total of 640 reprisal complaints in fiscal year 2013 and 584 reprisal complaints in fiscal year 2014. As of September 30, 2014, DODIG and the service IGs had a total of 822 open military whistleblower reprisal cases. While the majority of these open cases were filed from fiscal years 2012 through 2014, some of these cases had been open since fiscal year 2008. We found that almost 20 percent of DOD’s open military reprisal cases were filed in fiscal year 2012 and had been open for at least 2 years. Further, approximately 33 percent of the open military reprisal cases were filed in 2013 and had been open for at least 1 year. Table 3 provides additional information on DOD’s open military reprisal cases and when the servicemembers filed their reprisal complaints. Appendix II provides information about substantiation rates and the general characteristics of military whistleblower reprisal cases.\nDOD officials described several factors affecting the timeliness of military reprisal investigations and stated that they are taking steps to improve investigation timeliness. For example, in addition to investigations, DODIG’s workload includes completing the intake process for complaints filed with DODIG. Intake requires staff to review complaints and determine whether there is sufficient evidence for those complaints to warrant an investigation. As we stated previously, DODIG dismissed 375 complaints after completing the intake process in fiscal years 2013 and 2014. Further, service IG officials indicated that the decentralized investigation structure is a factor that affects the timeliness of their investigations. For example, service IGs assign investigations to field- level investigators, which, according to officials, results in a multilayer review process as the investigation is reviewed by each organizational level of the service with each layer of review adding to case-processing times. Additionally, all six field-level service investigators we interviewed stated that, in their opinion,180 days was not a reasonable amount of time to complete all investigations unless an investigator has no competing responsibilities and is able to focus solely on one reprisal investigation at a time. Service IG investigators further stated that in addition to competing responsibilities, the complexity of cases, the volume of cases, and low staffing numbers all affect the timeliness of investigations. We found in February 2012 that DODIG also identified staffing shortages as a factor affecting the timely processing of cases and that staffing levels had not kept up with an increased reprisal caseload.\nDODIG officials stated that they have increased their personnel levels to accommodate the increased caseload. Specifically, DODIG’s Whistleblower Reprisal Investigations directorate increased from 30 staff in January 2012 to 53 staff in March 2015.\nFurther, DODIG officials stated that DOD leadership has made improving the timeliness of administrative investigations—which include both investigations of whistleblower reprisal and of other allegations made against senior officials—a priority. Specifically, in an effort to improve the timeliness of senior official investigations, including senior official whistleblower reprisal cases, DODIG convened a timeliness task force in coordination with the service IGs, which issued a report with recommendations in November 2014. Specifically, the task force recommended that DODIG expand its case management system to track and manage the timeliness of senior official investigations. DODIG officials stated that they believe the expansion of the case management system will improve timeliness for all reprisal investigations. Following the issuance of the task force’s report, in January 2015, the Deputy Secretary of Defense issued a memorandum endorsing the findings of the report, specifically stating that the service IGs should not impose any staffing reductions on the investigation offices because they must be adequately resourced when faced with multiple high-priority investigations.\nGAO-12-362. the final outcome. DODIG officials stated that they use this metric to track timeliness for service IG reprisal investigations. However, according to officials, this calculation is inaccurate for cases opened prior to the case management system being implemented in December 2012, which accounts for approximately 24 percent of open investigations. Specifically, based on the results of our file review, we estimate that the timeliness metric in DODIG’s case management system underestimates total case time for each case closed in fiscal year 2013 by at least 26 days on average, which limits DODIG’s ability to monitor the timeliness of all service IG investigations. DODIG officials stated that they are able to identify the cases that are affected by the inaccurate timeliness metric and that they have implemented processes to manually calculate the case age for these cases.\nFurther, as we discuss later in this report, DOD has not implemented procedures to ensure accurate and complete recording of total case- processing time. DODIG collects timeliness information but cannot analyze the data to identify potential reforms because the case management system is under development and has limited reporting capabilities. In addition, the service IGs have separate case management systems; therefore the timeliness of all service investigative phases is not maintained in DODIG’s case management system, which does not allow DODIG to consistently track all case processing times. Finally, DODIG responds to ad hoc congressional requests related to investigation timeliness, but does not include overall timeliness information in its semiannual reports to Congress, as we recommended in February 2012. We continue to believe these recommendations are valid and should be implemented.", "DODIG implemented a new whistleblower reprisal investigation case management system to improve its monitoring of investigations; however, as of March 2015, the system is under development and has limited reporting capabilities. In addition, DODIG has provided its staff with limited user guidance on how to use and record information in the case management system. Further, DOD’s use of multiple case management systems hinders its visibility over total workload and investigative activity at the service IG level, such as the number and status of military whistleblower reprisal investigations in process at the service IGs. DOD’s planned expansion of its reprisal case management system to the service IGs may not result in improved visibility over its workload without further planning and guidance.", "In February 2012, we found that DOD’s efforts to improve case processing-times had been hindered by unreliable and incomplete data, and, as previously discussed, we recommended that DOD implement policies and procedures to ensure accurate and complete recording of In case-processing time. DOD concurred with this recommendation.December 2012, DODIG took steps to improve its military whistleblower reprisal investigation data by implementing a new case management system to monitor its administrative investigations, including senior official and whistleblower reprisal investigations. We found the data from this case management system reliable for our purposes of reporting the average lengths of investigations for this report—an improvement since February 2012, when we reported that similar data from DODIG’s previous system were not reliable for our reporting purposes. According to DODIG, the case management system is intended to streamline processing, investigations, and service IG oversight reviews by serving as an automated, real-time complaint tracking and investigative management tool that electronically stores all case-file documentation. However, as of March 2015, the case management system was under development and according to officials has limited reporting capabilities.\nAccording to a DODIG official, DOD selected an incremental process to develop the case management system in order to incorporate user feedback into each phase of development, and, in accordance with this type of development, in December 2012 DODIG staff began using the case management system prior to the completion of the system. DODIG officials stated that they had planned to finish the development of the case management system by February 2014; however, according to these officials, DODIG delayed funding for the final development phase until fiscal year 2015, delaying the completion of the case management system. As a result of the delayed funding, DODIG has not been able to incorporate all user feedback to ensure that the case management system is fully functioning at the desired level, according to DODIG officials. For example, according to DODIG officials, the case management system’s reporting capabilities are limited. The case management system contains the fields necessary to track the length of various investigative phases for DODIG investigations as we recommended in February 2012, such as the dates for the legal and internal review processes, but according to a DODIG official, it cannot track this information for service IG investigations. In addition, the case management system contains dashboards for users to manage cases by the whistleblower statutes for which DODIG is responsible. For example, users can view the dashboards to determine the number of investigations or oversight cases assigned to a particular investigator and the number of DODIG investigations over 180 days, among other things.\nDODIG can also determine the length of time it took to complete these phases when users drill down to individual cases and review key dates for these phases in the investigation and oversight events tabs. However, according to DODIG officials, DODIG is not able to extract and aggregate these data from its case management system for analysis and reporting purposes, which would allow it to identify possible areas for implementing case-processing reforms, as we recommended in February 2012. DODIG officials stated that even though they have not completed the final development phase of the case management system, using the system has improved their ability to provide oversight of the service IG investigations, allowing them to track the corrective actions that services have taken in substantiated reprisal cases. Officials stated they can also calculate overall case age, the number of days to complete the intake phase, the number of days to complete the investigation phase, and the number of days in oversight, in response to findings in our previous report. However, DODIG can calculate these milestones only for cases that it investigates, which is a small portion of the military reprisal investigations on which this report focuses. In addition, as we previously stated, we found the case management system’s field to calculate case age was inaccurate because it underestimates total case time for cases opened in the prior system and closed in fiscal year 2013 by at least 26 days on average.\nFurther, according to DODIG officials, DODIG spent approximately $2.22 million on the development of the case management system as of February 2015, and plans to spend approximately $1.4 million to further develop the case management system prior to the end of fiscal year 2015. DODIG officials stated that they plan to complete the final phase of case management system development, which includes improvements to reporting capabilities, by the end of fiscal year 2015. Other needed improvements include restrictions on which cases users can access and edit, as well as additional fields to better track specific types of case outcomes, such as cases withdrawn by servicemembers, according to DODIG officials. However, DODIG officials stated that they are unsure of the extent to which they will be able to make improvements to the case management system during the next phase of development given their current funding levels. As a result, DODIG officials stated that they have initiated a process to prioritize the improvements based on necessary and desired changes.", "DODIG has provided limited guidance to case management system users on how to populate case information into the new whistleblower reprisal case management system. DODIG investigators have been using the case management system to manage reprisal investigations since December 2012. As previously discussed, according to officials, DODIG planned to finish the final development phase for its case management system in February 2014, but changed that benchmark to September 2015.\nAccording to an official, when the case management system was implemented, DODIG internally developed and provided its staff with a user manual. According to oversight investigators, guidance on the case management system is limited and does not include detailed operating instructions, such as the type of information to enter into the case notes fields. Further, one oversight investigator stated that the guidance DODIG provided before the system was implemented was minimal and included features of the system that were not yet operable. DODIG officials provided documentation of two types of guidance, a draft user manual created by Whistleblower Reprisal directorate staff with screen captures of the system, and desk aids for various staff positions that provide descriptions of the data fields the investigators are to complete. DODIG officials noted that they have issued several versions of the desk aids since they implemented the case management system. During our case file review, we found that DODIG investigators had incorrectly coded some cases in the case management system as fully investigated when the service IG had dismissed the case prior to a full investigation.\nBased on the results of our file review, we estimate that, in fiscal year 2013, about 43 percent of cases that DODIG investigators coded as fully investigated were incorrectly coded in this way. Due to these miscoded cases, we are unable to report on the number of military whistleblower reprisal complaints that DOD fully investigated in fiscal years 2013 and 2014. In its semiannual reports to Congress, DODIG reports on the number of military whistleblower reprisal investigations fully investigated by DODIG and the service IGs. DODIG officials stated that they use their case management system to compile information for these semiannual reports. Based on our estimate of the number of cases affected by the miscoding in fiscal year 2013, DODIG may have mischaracterized its investigative work in its fiscal year 2013 semiannual reports to Congress. DODIG officials stated that they were aware that DODIG staff had improperly coded some reprisal cases as fully investigated when they were dismissed prior to a full investigation, but that they were not aware of the extent of the miscoding. Further, DODIG officials stated that they are taking steps to ensure that future cases are coded properly. For example, DODIG officials said that once they realized that DODIG staff were coding cases incorrectly, they provided desk aids to users in March 2014 that describe how to code cases that were fully investigated and those that were dismissed prior to a full investigation. However, during our case-file review we found that DODIG staff were still coding cases incorrectly as of April 2014. Further, in September 2013, DODIG assigned an Investigations Analyst to monitor its whistleblower reprisal investigations data. According to DODIG officials, the Investigations Analyst uses a dashboard in the case management system which helps identify missing data or entry errors, and then manually corrects them.\nAs previously discussed, DODIG’s case management system is to serve as a real-time complaint tracking and investigative management tool for investigators within its Administrative Investigations component. Further, DODIG’s fiscal year 2014 performance plan for oversight investigators notes that investigators should ensure the case management system reflects current, real-time information on case activity. However, based on our file review of a sample of 124 cases closed in fiscal year 2013, we found that DODIG investigators were not using the case management system for real-time case management as intended by DODIG officials. Specifically, we estimate that DODIG personnel uploaded key case documents to the case management system after DODIG had closed the case in 77 percent of cases closed in fiscal year 2013. For example, DODIG staff uploaded, among other things, reports of investigation, oversight worksheets, 180-day letters, and copies of the servicemembers’ complaints after the case had already closed, indicating that the case management system was not being used for real-time case management at that time.\nFurther, we estimate that, for 83 percent of cases closed in fiscal year 2013, DODIG staff made changes to the case variables in the case management system in 2014, at least 3 months after case closure. For cases where DODIG made changes to the data, we estimate that about 68 percent had significant changes, such as changes to the date the servicemember filed the complaint and the organization that conducted the investigation, as well as the result code, which indicates whether the case was fully investigated. In explaining why the changes were made, DODIG officials stated that leadership from DODIG’s Whistleblower Reprisal Investigations directorate instructed oversight investigators and other DODIG staff to verify and correct the data as necessary for all cases closed in fiscal years 2013 and 2014 by comparing case management system data to case file documentation. DODIG officials stated that this was necessary to ensure the reliability of DODIG’s investigative data because the case management system was new to investigators and they had not been consistently recording information. Further, officials stated that prior to the implementation of the case management system, investigators reviewed hard-copy case files of service IG investigations and they did not immediately transition to reviewing case files electronically when the case management system was implemented in December 2012. The guidance DODIG has issued for the new case management system does not include instructions that the staff are to use the system for real-time case management and investigation review or which types of events to record, both of which could have helped guide the transition from hard-copy to electronic case file review.\nDODIG officials stated that they plan to further develop their draft manual for the case management system expansion to the service IGs which they anticipate will be complete by the end of fiscal year 2016, as discussed later in the report. Officials further stated they will continue to update internal desk aides, which contain only descriptions of the case management system’s fields, as needed, but do not plan to issue additional internal guidance for DODIG staff on the case management system because they believe that the current guidance is sufficient. However, DODIG’s draft user manual does not instruct users on how to access the system, troubleshoot errors they may encounter, or monitor their caseloads using the case management systems dashboards. Further, DODIG’s Administrative Investigations manual, which provides guidance to the Whistleblower Reprisal Investigations directorate staff, is outdated because it refers only to DODIG’s prior case management system, which was replaced in December 2012.\nAccording to CIGIE quality standards for investigations, accurate processing of information is essential to the mission of an investigative organization. It should begin with the orderly, systematic, accurate, and secure maintenance of a management information system. Written guidance should define the data elements to be recorded in the system. Further, management should have certain information available to perform its responsibilities, measure its accomplishments, and respond to DODIG officials stated that requests by appropriate external customers.they plan to develop a user manual when they expand the case management system to service IGs, as discussed later in the report. Without updating and finalizing the internal user guidance from 2012 as necessary until the case management system is complete, including providing instructions on how to use the system as a real-time tracking system in the meantime, DODIG will continue to face challenges in its ability to report on the military whistleblower reprisal program. For example, unless investigators update and upload case information during the course of an investigation, DODIG will be unable to report on the real- time status of investigations and therefore may not be able to respond to congressional requests for case information without significant efforts. Further, DOD uses the case management system to compile information for reporting to Congress on its military reprisal investigation workload and thus may have inaccurately represented its workload—the number of cases fully investigated—to Congress in its semiannual reports. Without updating and finalizing internal guidance on how to correctly enter case information into the case management system, DODIG cannot ensure the reliability of its data without manually reviewing and correcting each case.", "Each service IG conducts and monitors the status of military whistleblower reprisal investigations in a different case management system. Although DODIG has access to one of the service’s case management systems, according to officials DODIG does not have complete visibility over service investigations from complaint receipt to investigation determination. As a result, DODIG may not know that some servicemembers have filed reprisal complaints until the service IGs forward the completed reports of investigation to DODIG for review. Further, DODIG does not have knowledge of the real-time status of service-conducted investigations and is unable to anticipate when service IGs will send completed reports of investigation for review, according to officials. DODIG is required to review all service IG determinations in military reprisal investigations in addition to its responsibility for conducting investigations of some military reprisal complaints. Without a common system to share data, DODIG’s oversight of the timeliness of service investigations and visibility of its own future workload is limited.\nOur analysis indicates that DODIG’s case management system did not have record of at least 22 percent of service investigations both open as of September 30, 2014, and closed in fiscal years 2013 and 2014. According to DOD officials, DOD’s decentralized structure for military reprisal investigations, paired with the fact that servicemembers can submit complaints to DOD or their respective service IG, or their chain of command, contributes to the possibility of duplicate complaints or that one IG fails to notify another of an ongoing reprisal investigation. According to DOD Directive 7050.06, when the service IGs receive reprisal complaints from servicemembers, those offices are required to notify DODIG within 10 days; however, based on our file review, we estimate that there was no evidence of this required notification in 30 percent of cases closed in fiscal year 2013 where the servicemember In response, DODIG officials filed the complaint with the service IG.noted that one of their oversight investigators was assigned to reconcile DODIG’s open military reprisal investigations with the service’s open reprisal investigations in fall 2013. According to service IG officials, this reconciliation is conducted at various points throughout the year by manually comparing lists of investigations from each IG’s respective case management system.\nThrough our analysis we identified challenges reconciling DODIG and services IG cases because the investigating organizations do not share a common case identifier. In addition, in fiscal years 2013 and 2014 each investigating organization did not consistently track the other organization’s unique case identifier. DODIG officials stated that they have since taken steps to ensure that DODIG tracks the service IGs’ case identifiers in its case management system. For example, the oversight investigator that DODIG assigned to reconcile cases updates service case identifiers in DODIG’s case management system as part of the reconciliation process. Further, service IG officials stated that there have been instances where DODIG did not notify them that it was investigating a reprisal complaint from one of their servicemembers and they did not find out about the investigation until after DODIG had conducted the investigation. Standards for internal control in the federal government state that, for an entity to run and control its operations, it must have relevant, reliable, and timely communications relating to internal and external events.\nDOD is taking steps to improve its visibility over service investigations. In November 2014, a DODIG task force that focused on improving the timeliness of DOD’s senior official investigations recommended that DOD expand the case management system to the service IGs as a way to improve investigation timeliness. According to DODIG officials, expanding the case management system is also an effort to improve DODIG’s visibility of administrative investigations conducted by the service IGs. In January 2015, the Deputy Secretary of Defense endorsed the recommendation to expand the case management system to the service IGs, stating that an enterprise data system is essential to achieving a more seamless and efficient processing of complaints and investigations across the department. that they plan to expand the case management system to the service IGs by the end of fiscal year 2016.\nDeputy Secretary of Defense Memorandum, Report on Task Force to Improve Timeliness of Senior Official Investigations.\nHowever, DODIG does not have an implementation plan for the expansion and has not yet taken steps to develop one. According to DODIG officials, they are in the process of developing a strategy to expand the case management system and are in the early stages of the planning process. DODIG officials stated they have set an aggressive time frame for the expansion because leadership has made investigation timeliness a priority and they believe a common case management system is part of the solution. Officials stated that they have completed the process to classify the case management system as a defense business system in April 2014 and that DODIG has been using the system to process all whistleblower reprisal investigations since December 2012. Further, officials stated that they developed a working group comprising representatives of each of the service IGs to facilitate planning for the expansion. The working group held its first meeting in February 2015, and plans to meet bimonthly until the expansion is complete. A DODIG official tasked with leading the expansion of the case management system stated that he intends to refer to best practices for project management to help facilitate the planning process for this expansion project.\nThe Project Management Institute’s Guide to Project Management Body of Knowledge (PMBOK® Guide) provides guidelines for managing individual projects, including developing a project management plan. A project management plan defines the basis of all project work, including how the project is executed, monitored and controlled, and closed. According to the PMBOK® Guide, project management plans should include a scope—to describe major deliverables, assumptions, and project constraints—project requirements, schedules, costs, stakeholder roles and responsibilities, and stakeholder communication techniques, among other things. Further, project management plans are to be updated when issues are found during the course of the project, which may modify project policies or procedures, and when actions are needed to forestall negative effects on the project. Project management plans also include methods to define and document stakeholder needs. According to the Project Management Institute, detailed requirements documentation is essential for stakeholders to understand what needs to be (1) done to deliver the project and (2) produced as the result of the project.\nDODIG officials stated that, in coordination with the service IGs, they will review and incorporate some needs of each service IG prior to expanding the case management system, but they do not plan to fully customize the case management system for each service IG, such as developing a different interface for each service. Service IG officials expressed concerns that they have requirements, such as specific data fields and report capabilities to meet leadership needs to be incorporated into the case management system prior to expansion. For example, service IG officials stated that it is important that case management system user roles are defined in a way that reflects how their organizations operate and that case access is restricted according to the organizational level of the user. Some service IG officials stated that they are concerned that DODIG will expand the case management system without incorporating all of their needs and that they will not be able to meet their respective service leaderships’ reporting requirements as a result. These officials stated that if DODIG’s case management system does not meet their needs they may need to continue to use their current case management systems, which would be duplicative.\nGiven DOD’s stated plans to expand the case management system to the service IGs by the end of fiscal year 2016, doing so without developing an implementation plan that addresses the needs of DODIG and the service IGs, and defines project goals, schedules, costs, stakeholder roles and responsibilities, and stakeholder communication techniques, puts DODIG at risk of creating a system that will not improve its visibility over total workload or investigation timeliness. Further, without such a plan, DODIG may not be well-positioned to monitor the expansion and measure project success. In addition, without developing a plan in coordination with the service IGs that defines the roles and responsibilities of all stakeholders, and sets expectations for communication, DODIG may not be able to balance all stakeholder needs and interests. Further, as previously discussed, DODIG has not completed the development of the case management system and it does not meet DODIG user needs. Finally, in the absence of an implementation plan that adequately addresses the requirements of the service IGs, the service IGs may not know whether or when their needs will be met and as a result they may unnecessarily continue to use their own systems, which could be duplicative.", "In 2011, DOD designated a team in DODIG’s Directorate for Whistleblower Reprisal Investigations to review service-conducted investigations on a full-time basis; however, DODIG has not formalized the process for the review of military whistleblower reprisal investigations. For example, it is unclear to what extent DODIG has incorporated the relevant investigative standards into its process. Several factors affect the quality of DOD’s oversight of service-conducted military whistleblower reprisal investigations, including the absence of standardized guidance and DODIG feedback to the service investigators. Finally, DOD does not have a tool for investigators to certify their independence to ensure its military whistleblower reprisal investigations are objective in fact and appearance.", "In September 2011, DODIG took steps to improve its oversight of service IG investigations by establishing an investigator team that is solely dedicated to the oversight review of service IG-conducted military reprisal investigations, according to officials, but it has not formalized its process by providing detailed guidance to its oversight team. DODIG is responsible for reviewing and approving service determinations regarding whistleblower reprisal complaints, including both (1) service determinations that an investigation into a reprisal complaint is not warranted, and (2) the results of completed service reprisal investigations. To improve oversight, DODIG officials said that they staffed the team with investigators who had experience at either DOD or service IGs. The oversight investigators are to document their review using an oversight worksheet, which captures information about how the service investigation was conducted as well as the investigation’s findings and conclusions. DODIG has used various versions of this oversight worksheet since it established the oversight team. Our case-file review included case files closed in fiscal year 2013, and during this period DODIG’s oversight worksheet was designed to capture information about (1) the servicemember’s allegations of reprisal, (2) the personnel action or actions taken against the servicemember, (3) service investigation thoroughness, (4) documentation, (5) timeliness, (6) objectivity, and (7) whether there were any deficiencies or inconsistencies in the service investigation report, among other things.", "DODIG adheres to CIGIE standards, but the extent to which it incorporates these standards is unclear, and service IGs are not members of CIGIE. CIGIE’s Quality Standards for Investigations provide a framework to help ensure high-quality investigations are conducted by member IG offices. CIGIE’s general standards apply to investigative organizations and include investigator qualifications, independence, and due professional care. CIGIE’s qualitative standards relate to how the investigation is planned, executed, and reported, as well as how the investigative information is managed. As a CIGIE member, DODIG is expected to incorporate CIGIE’s quality standards into its operations manuals or handbooks. Table 4 highlights some of the CIGIE standards that DODIG has incorporated into its oversight worksheet that investigators use to review service IG investigations.\nWe found that DODIG’s attestation to CIGIE standards, which is part of its oversight review, was inconsistent. For example, DODIG has changed the language on versions of its oversight worksheet between 2012 and 2014, and DODIG oversight investigators did not always attest to whether the investigations in our fiscal year 2013 sample were conducted in accordance with CIGIE standards. As a member of CIGIE, DODIG must develop and document its quality-control policies and procedures in accordance with its agency requirements, then communicate those policies and procedures to its personnel, according to CIGIE standards.\nThe oversight worksheet that DODIG was using as of March 2015 did not contain a block for CIGIE attestation, to indicate whether the investigation was conducted in accordance with CIGIE standards, but the worksheet asks whether the investigator gathered all relevant evidence and whether the investigator demonstrated IG impartiality during interviews. In contrast, the oversight worksheet that DODIG oversight investigators used during the fiscal year 2013 time frame of our sample contained template language for the oversight investigator to indicate whether the service conducted the investigation in accordance with CIGIE standards, but the worksheets in our sample did not consistently attest to whether the approved investigation adhered to CIGIE standards, and the basis for the determination was unclear. Specifically, of the 89 service IG investigations in our sample, DODIG oversight investigators attested that 55 percent of them were conducted in accordance with CIGIE standards as reflected on the oversight worksheet.\nFurther, the service IGs are not members of CIGIE, and the service IG investigators are not subject or consistently trained to CIGIE standards. In 2012 DODIG hired a training officer and in 2013 developed a basic whistleblower reprisal investigations course for DODIG and service IG investigators. DODIG officials stated that they incorporated some CIGIE standards into this and other trainings as well as in their semiannual symposiums, but service IG officials stated that these DODIG-offered trainings do not reach all field-level investigators. A senior DODIG official stated that even though the service IGs are not subject to CIGIE standards, DODIG would not approve a service IG investigation that did not appear to adhere to CIGIE standards. Also, while DODIG’s Administrative Investigations manual directs DODIG investigators to follow CIGIE standards, none of the DODIG-conducted military reprisal investigations in our sample included an attestation similar to the statement on the oversight worksheet for service IG cases stating they adhered to CIGIE standards. DODIG officials stated that the attestation is not necessary for its own reprisal investigations because, as a CIGIE member, all of its investigations adhere to CIGIE standards.", "DODIG provided the oversight team with limited instructions on how to review service IG cases. We interviewed each member of DODIG’s oversight team to discuss their procedures for investigation review and found that they have different approaches for how they review investigations prior to completing the oversight worksheet. For example, some read the allegation of reprisal first, while others begin their oversight review by reading the service investigator’s report of investigation. According to the oversight investigators we spoke to, once they review the investigation documentation and complete the oversight worksheet, they are to forward the package to their supervisors for discussion and review. For some cases, before final approval, oversight investigators discuss the oversight review during regular meetings with other oversight investigators, and with Whistleblower Reprisal Investigation management, according to officials. Finally, officials stated that management reviews some case files before DODIG issues the approval memo back to the service IG. DODIG officials stated that they have informal weekly meetings with the oversight team to discuss cases and oversight processes; however, some of the oversight investigators we spoke with noted that they had not received any detailed guidance that was specifically focused on how to conduct oversight of service IG military reprisal cases.\nFor the 89 oversight files in our sample, DODIG rarely disagreed with the service IG’s final determination of whether to substantiate the reprisal allegation(s), even if the oversight investigator noted deficiencies in the investigation documentation. We estimate that DODIG sent the case back to the service IG for additional work in about 8 percent of service cases closed in fiscal year 2013. DODIG disagreed with the service determination of whether to substantiate the complaint, and took over the investigation, in 2 of the cases in our sample. DODIG officials stated that oversight investigators are in regular contact with the service IG headquarters to correct inadequacies in service investigations, but that these communications may not be documented in the case files.\nDuring our case file review, we identified examples of DODIG oversight investigators not consistently completing the oversight worksheet. Specifically, from the results of our case file review, we estimate that for about 45 percent of service investigations closed in fiscal year 2013, DODIG oversight worksheets were missing narrative that indicated the investigator had thoroughly documented all case deficiencies or inconsistencies, as required on the oversight worksheet. In those 45 percent of cases, we noted issues that include the following:\nCase deficiencies were not consistently documented: Some service investigation case files did not contain all DODIG required elements, such as required letters, interview transcripts or summaries, legal reviews, and other supporting documentation, but the oversight investigators did not note the missing documentation on the oversight worksheet. Specifically, we estimate that in 19 percent of service investigated cases, the oversight investigator indicated that there were adequate transcripts or summaries of testimony; however, documentation of those interview transcripts was not included in the case file.\nDODIG did not always note deficiencies that service IG headquarters identified: We found instances in which DODIG investigators did not document deficiencies that the service IGs had identified. For example, a service IG-completed oversight worksheet, included in the investigation case file the service IG forwarded to DODIG for review, noted that the investigators did not appear fair and impartial in the servicemember interview transcript. In this interview transcript the investigator stated that in the military nothing is unbiased because there is a chain of command; however, DOD oversight investigators attested that the investigative file did not contain evidence of bias on the oversight worksheet. DODIG officials stated that there is no written requirement for oversight investigators to note deficiencies identified by the service IGs; however on oversight worksheets for other cases, the oversight investigators did note service IG-identified deficiencies. Service IG officials also highlighted inconsistencies between the oversight investigators. For example, service IG officials stated that they prefer to work with certain DODIG oversight investigators because they know what to expect from those oversight investigators, and this speeds up the oversight review. In contrast, these officials stated that they receive more questions about cases from oversight investigators with whom they work less frequently.\nDODIG did not always explain why deficiencies did not affect the outcome of the service investigation: In the instances when the DODIG oversight investigator identified deficiencies with the service IG investigation, the oversight investigator typically included a statement indicating that the noted deficiencies did not have a material effect on the outcome of the investigation. However, the oversight investigators did not always explain why the deficiencies did not affect the outcome of the investigation. For example, on some oversight worksheets that we reviewed, the oversight investigators noted that the service IG investigator did not analyze a protected communication or a personnel action as part of the investigation, but that these items did not affect the outcome of the investigation.\nWe also found that the files in these cases lacked documentation of the oversight investigators’ analysis of the effect of noted deficiencies on the outcome of the investigation. Oversight investigators stated that when they note any deficiencies in investigations, they typically discuss those deficiencies with their supervisors in order to determine whether to approve the case. DODIG officials stated that there are several gray areas in reprisal investigations and that these types of discussions are common practice when DODIG is deciding whether to approve a case; however, we found in our case-file review that the results of these conversations are not always documented on the oversight worksheet. CIGIE standards state that reasonable steps should be taken to ensure that pertinent issues are sufficiently resolved and that the results of investigative activities should be accurately and completely documented in the case file. Further, Standards for Internal Control in the Federal Government provide that internal control and all transactions and other significant events need to be clearly documented, and the documentation should be readily available for examination.\nEnsuring that oversight investigators document the basis for their determinations regarding independent decision making enables reviewers to ensure that such determinations are appropriate.\nMoreover, DODIG does not have detailed guidance that specifies the steps and documentation requirements of the DODIG oversight investigators’ review of service reprisal investigations, and whether or how any noted investigation deficiencies would affect the outcome of the investigation. DODIG has focused on its October 2014 issuance of the updated Guide to Investigating Military Whistleblower Reprisal and Restriction Complaints, which details best practices for reprisal investigations, but does not specify the steps DODIG investigators are to follow when conducting oversight of service IG investigations. In addition, DODIG’s Administrative Investigations manual includes a 5-page overview of oversight reviews. However, the manual is not specific to oversight reviews of military whistleblower reprisal investigations and encompasses investigations of senior officials, and does not state what deficiencies are substantive and would affect the outcome of the investigation.\nFurther, part one of DODIG’s Administrative Investigations manual refers investigators to a forthcoming third portion of the manual for detailed guidance on conducting oversight of military whistleblower reprisal investigations, which has not been developed. However, as of January 2015, DODIG officials stated that they were no longer planning to issue the third part of the manual and that they plan to incorporate some additional oversight procedures into the existing manual. Officials did not provide details on what procedures they plan to incorporate or when they plan to make the changes. Without additional guidance for its oversight investigator team, which would help formalize the oversight process, DODIG will continue to face inconsistency in both its oversight documentation and its review of service IG investigation outcomes. CIGIE standards state that to facilitate due professional care, organizations should establish written investigative policies and procedures. The complexity of reprisal investigations paired with the decentralized service IG structure underscores the importance of clear and consistent oversight review procedures and documentation requirements to ensure consistency across the department and that each reprisal complaint receives due professional care.\nSenior DODIG officials stated that DODIG’s Administrative Investigations component is taking steps to implement quality-assurance processes and that these processes will help prepare the component for an eventual peer review. For example, a senior DODIG official said that on a quarterly basis, DODIG completes an internal control checklist for 20 DODIG whistleblower reprisal investigations and 20 oversight reviews of service IG military whistleblower reprisal investigations to assess the thoroughness of the case files and the completeness of the information in the case management system, among other things. This official also stated that they brief DODIG leadership on the results of these quarterly quality-assurance checks. The Whistleblower Reprisal Investigations directorate has undergone external reviews, but CIGIE has not established peer-review criteria for administrative investigations, such as whistleblower reprisal investigations, according to DODIG officials. Senior DODIG officials stated that, if established, they would like to participate in an eventual administrative peer review of their whistleblower reprisal investigations. However, without documentation of the steps it took to reach its case determinations and why any noted case deficiencies did not affect the outcome of the investigation, as well as consistent attestation of adherence to CIGIE standards, a third-party reviewer may find it difficult to assess the quality of DODIG’s oversight process for military whistleblower reprisal investigations.", "", "DODIG and the service IGs use different terms in their guidance to refer to their investigation stages. DODIG took a step to improve guidance by issuing an updated reprisal investigation guide for military reprisal investigations for both DODIG and service IG investigators in October 2014. The guide discusses DODIG’s four questions that investigators use to determine whether the four elements of reprisal are present; various investigative steps; and, provides sample interview questions, among other things. However, DODIG describes the guide as best practices for conducting military reprisal intakes and investigations and, according to DODIG officials does not explicitly direct the services to follow DODIG’s preferred investigation process and stages. DODIG officials stated that they have no role in the development of service IG regulations.\nDODIG guidance describes two investigation stages: (1) intake and (2) full investigation. During the intake process, the investigator is to determine whether the servicemember made a protected communication and a responsible management official took a personnel action against the servicemember. In addition, if the investigator determines that the allegation supports an inference that the responsible management official had knowledge of the protected communication as well as a causal connection between the protected communication and the personnel action, and the servicemember reported the alleged reprisal within 1 year, the case is to proceed to a full investigation. According to DODIG’s investigation guide, during the intake process an investigator is to review the complaint, personnel action, and timeline; and interview the servicemember to clarify the allegation. During a full investigation, investigators are to formally interview the servicemember (and provide a written record of the interview), obtain relevant documentation (of the protected communication and personnel action, among other things), interview knowledgeable witnesses, interview the responsible management official who took the personnel action, and obtain a legal review of the report of investigation.\nEach of the service IGs has a stage between intake and full investigation, commonly referred to as a preliminary inquiry or a reprisal complaint analysis. DODIG does not have a similar in-between investigation stage, and therefore DODIG officials stated that oversight investigators should classify preliminary inquiries conducted by the service IGs as intakes in the case management system, but there is no written guidance for reviewing preliminary inquiries. We found that the service investigators typically complete much more investigative work, such as interviewing witnesses, when conducting a preliminary inquiry than DODIG requires during the intake process.\nBased on our case file review, we found that DODIG oversight investigators were not consistently classifying the preliminary inquiries as intakes, and classified many preliminary inquiries as full investigations in the case management system. DODIG oversight investigators approved cases as full investigations when those cases did not contain all elements required for full investigations and approved the dismissal of cases that were preliminary inquiries coded as full investigations, on a basis that can only be determined by conducting a full investigation. Specifically, we estimate that in 38 percent of preliminary inquiries closed in fiscal year 2013, service IGs dismissed cases because they determined that the responsible management official would have taken the personnel action absent the protected communication. In contrast, DODIG guidance states that an investigator answers the question of whether the responsible management official would have taken the personnel action absent the protected communication during a full investigation, which requires an interview with the responsible official to determine his or her reasons and motive for taking the personnel action. In addition, a senior DODIG official stated that an investigator must interview the responsible management official to determine whether the personnel action would have occurred absent the protected communication. However, there was no evidence in these case files that the investigator interviewed the responsible management official, and instead, investigators determined that the responsible management officials took personnel actions as a result of the servicemembers’ performance histories.\nFurther, we found through our file review that the service IGs’ preliminary inquiry case files were less complete than the service IGs’ full investigation case files, although DODIG oversight investigators approved preliminary inquiries as full investigations. For example, based on our sample results, we estimate that at least 79 percent of service preliminary inquiries closed in fiscal year 2013 were missing at least one key element, such as interviews with the servicemember. We estimate that at least 23 percent of service full investigations closed in fiscal year 2013 were missing at least one element. Further, as previously discussed, DODIG’s guidance requires investigators to interview the servicemember for all complaints, during the intake process and if the case proceeds to a full investigations; however, we estimate that 59 percent of service preliminary inquiry case files compared to 10 percent of service full investigation case files were missing evidence of a servicemember interview.\nCIGIE quality standards for investigations state that to facilitate due professional care, organizations should establish written investigative policies and procedures that are revised regularly according to evolving laws, regulations, and executive orders. DODIG’s investigation guide does not discuss preliminary inquiries or define any requirements for this stage of investigation. DODIG officials have stated that they would like the service IGs to stop preparing preliminary inquiries and to use DODIG’s preferred investigation stages—intake and full investigation; however, DODIG guidance does not explicitly direct the services to use its preferred terms and stages. Additionally, a DODIG oversight investigator stated that the service IGs’ varying interpretations of DOD policy and inconsistent application of DODIG guidance makes it difficult for oversight investigators to systematically review reprisal cases. The oversight investigator also stated that DODIG should explicitly direct the services to follow certain procedures currently included in DODIG guidance, but DODIG officials stated the office does not have a role in the development of service IG regulations. Further, in the absence of standardized investigation stages, DODIG investigators miscoded investigations in fiscal year 2013. We estimate that about 43 percent of the cases that DODIG closed in fiscal year 2013 that staff coded as full investigations were not fully investigated, and were instead preliminary inquiries as indicated in the service report of investigation. DODIG officials stated that this miscoding was likely the result of oversight investigators wanting to recognize the amount of work that service IG investigators completed, since those investigators typically complete the steps of a full investigation, except for an interview with the responsible management official and a legal review.\nWithout directing the service IGs to follow standardized investigation stages and issuing guidance clarifying how the stages are defined, it will be difficult for DODIG to ensure consistent program implementation. For example, the service IGs may do more investigative work than DODIG requires by conducting a preliminary inquiry, when DODIG would dismiss the case at intake. On the other hand, the service IGs may dismiss cases after conducting a preliminary inquiry when a DODIG investigator would conduct a full investigation and collect additional testimonial evidence. The amount of investigative work is inconsistent across DOD and is dependent on which IG investigates the complaint, which could lead to the perception that not all servicemember complaints are treated equally. In addition, without standardized investigation stages and corresponding guidance, investigators may be unclear about what elements are required for each stage of investigation, resulting in incomplete reprisal case files. Finally, without standardized investigative stages and agreement among DODIG oversight investigators about how to classify preliminary inquiries, DODIG may continue to miscode service preliminary inquiries in its case management system. Since this system is the basis for DODIG’s semiannual reports to Congress, DODIG may mischaracterize the number of fully investigated complaints in these reports.", "DODIG has developed tools to assess service IG investigation quality and to note any case deficiencies, but DODIG does not consistently provide the service IGs with this feedback. As previously discussed, DODIG oversight investigators are to document their reviews of service IG investigations by completing an oversight worksheet. The worksheet contains the criteria against which the reports of investigation are to be evaluated to ensure that the investigations adhered to CIGIE professional standards, such as independence and thoroughness. The worksheet also includes spaces where the oversight investigator can include comments regarding any criteria the investigation did or did not meet.\nAccording to DODIG’s Administrative Investigations manual, which guides how DODIG investigators conduct and perform oversight of reprisal investigations, upon completion of the oversight review process, investigators are to provide the service IGs with copies of the oversight worksheet. The manual further states that this affords a good mechanism for feedback to the services on the quality of individual cases, in addition to valuable information on trends in systemic deficiencies in investigations within their service. However, according to DODIG officials, in 2012 DODIG stopped providing the service IGs with completed oversight worksheets. Instead, these officials stated that they provide summarized feedback in the closure memorandums that they send to the service IGs once they approve a case. According to DODIG officials, the oversight investigators complete the oversight worksheet when reviewing service IG cases, but the worksheet is now used as an internal tool for review.\nService IG officials stated that the primary feedback they receive is DODIG’s summarized case analysis on the closure memorandum, which discusses why it agreed with the service IG’s determination; however, the closure memorandum, unlike the worksheet, does not include the criteria against which the investigations are assessed. Further, service IG officials stated that they upload DODIG’s closure memorandums to their respective case management system, but they do not require the investigating officers to go into the case management system to review the closure memorandum. A DODIG oversight investigator noted that the feedback oversight investigators provide on the worksheet is more constructive than what they include on the closure memorandum, and a service IG official stated that what investigators need is constructive feedback, not just statements about what they did not do correctly. A senior service IG official stated that receiving copies of the oversight worksheets was beneficial to service investigators because the worksheets helped investigators understand what DODIG was looking for in its reviews of service investigations. Additionally, according to service IG officials, DODIG rarely sends cases back to them for additional work and rarely asks questions regarding cases they have sent to DODIG for review. Service IG officials indicated that this lack of case-specific feedback from DODIG is confirmation to them that they are meeting DODIG’s expectations for investigations; however, DODIG oversight investigators noted that the quality of service IG investigations could be improved. Further, through our review of cases closed in fiscal year 2013, after DODIG stopped providing copies of the oversight worksheets, we found examples where oversight investigators were providing case- specific feedback intended for the service IG investigators. For example, on some oversight worksheets the oversight investigator noted that the feedback provided on the worksheet was intended to be a teach-and-train vehicle to improve the quality and thoroughness of future reports; however, per DODIG’s new practice, it is unclear whether DODIG provided these oversight worksheets to the service IG investigators.\nDOD officials have noted that feedback to service IG investigators is important for various reasons. First, the DOD investigative process is decentralized and lacks continuity. Many offices at various levels of the service IGs investigate reprisal complaints. Further, in the Army and Air Force—which accounted for approximately 80 percent of the service investigative workload in fiscal years 2013 and 2014—military investigators typically rotate every 3 years, according to service IG officials. As such, these service IG military investigators may conduct few reprisal investigations and may not have the opportunity to develop experience, which according to DOD officials is essential to conducting high-quality reprisal investigations. The service IGs have taken steps to provide feedback to field-level investigators. For example, one service IG holds quarterly video-teleconferences with field-level investigators to share updates to reprisal policies and address any investigation trends. Second, according to service IG investigators, they receive some required training that is specific to conducting reprisal investigations when they are assigned to the IG, but there is no additional mandatory reprisal-specific training that investigators complete during the course of their careers. Additionally, these investigators may not have opportunities to apply lessons learned from that training immediately, and according to DOD officials there is often a gap of over a year between training and reprisal investigation assignment. According to CIGIE quality standards for investigations, organizations should establish appropriate avenues for investigators to acquire and maintain the necessary knowledge, skills, and abilities. Service IG investigators noted that in addition to offered training, case-specific feedback is a good way to learn skills for conducting reprisal investigations; however, three of six field-level investigators we interviewed stated that they had never received feedback from DODIG on their reprisal investigations.\nIf the service IG investigators do not receive copies of the oversight worksheet, they may not have knowledge of the criteria that DODIG uses to conduct its oversight reviews and whether their investigative reports are meeting the specific CIGIE standards that DODIG has incorporated into its oversight review. For example, three of six field-level investigators we interviewed had not seen a DODIG oversight worksheet, and two of those three investigators did not know that DODIG used a worksheet to conduct oversight. DODIG’s October 2014 guide for investigating reprisal complaints includes a quality-assurance review checklist, modeled after the DODIG oversight review worksheet, that investigators can use to perform a quality-assurance review of their investigation. However, as previously discussed, service IG investigators are not subject to or consistently trained to CIGIE standards and therefore may not know how to assess their investigations according to these standards. Without receiving case-specific feedback, which relates to the CIGIE standards against which DODIG assessed the investigation and notes any deficiencies, service investigators may not be able to assess their own subsequent investigations. Further, without coordination with the service IGs to ensure that service investigators are receiving case-specific feedback from DODIG, DODIG efforts to improve investigation quality may continue to face challenges. Finally, without case-specific feedback, service IGs may not be able to identify trends in systematic deficiencies or specific CIGIE standards not being met, which otherwise might be corrected in future investigations and incorporated into their feedback to field-level investigators.", "DODIG and the service IGs have processes for investigators to recuse themselves from investigations, but there is no process for investigators to document whether the investigation they conducted was independent and outside of the chain of command. CIGIE standards state that in all matters relating to investigative work, the investigative organization must be free, both in fact and appearance, from impairments to independence. Impairments to independence include professional or personal relationships that might weaken the investigative work in any way, and preconceived opinions of individuals or groups that could bias the investigation, among others.\nIn the absence of a process for investigators to certify their independence, DODIG has incorporated various questions into its oversight review in order to document the independence of the investigator and to determine whether the investigation was conducted in accordance with CIGIE standards. For example, DODIG oversight investigators indicate whether the investigator was outside the chain of command of the servicemember and responsible management official, which is statutorily required. DODIG’s oversight investigators—of which all but one has prior military experience—stated that they use their experience and knowledge of the service’s organizational structures to determine whether the investigator was outside the chain of command. Oversight investigators further determine on the current version of the oversight worksheet whether the investigator maintained professionalism and demonstrated IG impartiality during interviews. Oversight investigators stated that they can determine whether the investigator was impartial during interviews only if the case has interview transcripts, which the Administrative Investigations Manual instructs them to read if necessary; however, DODIG will accept summarized interviews and does not require that the service IGs provide verbatim transcripts for all interviews. Based on our sample, we estimate that 43 percent of cases closed in fiscal year 2013 have transcripts of interviews with the servicemember alleging reprisal and 26 percent of cases have transcripts of responsible management official interviews. In the absence of interview transcripts, oversight investigators have limited tools to determine whether the investigator demonstrated IG impartiality during interviews.\nDOD officials stated that their recusal policies and decentralized investigation structure, removing the investigator from the chain of command, adequately address independence and that no further documentation of independence is needed. However, during our case-file review we reviewed oversight worksheets where DODIG oversight investigators had noted potential impairments to investigator objectivity in the report of investigation. For example, on one oversight worksheet, the oversight investigator stated that the report gave the appearance of service investigator bias, and further clarified that the report should state whether the responsible management official’s actions were reasonable and supported by facts, not whether the investigator would have taken the same actions. In addition, on another oversight worksheet the DODIG investigator stated that the investigator’s narrative in the report of investigation contained comments that would bring into question whether the analysis was impartial and unbiased, further noting that there was evidence of bias. Further, one oversight worksheet stated that the investigator was not outside the chain of command, as statutorily required, but that it had no effect on the investigation. DODIG approved these cases without documenting how it reconciled these case deficiencies. We are not questioning DODIG’s judgment in these cases.\nWe noted that the files in these cases did not address the issues identified by the oversight investigator beyond the final approval of the case. However, Standards for Internal Control in the Federal Government provides that internal control and all transactions and other significant events need to be clearly documented, and the documentation should be readily available for examination. Without documenting the basis for their determinations regarding independent decision making, DODIG cannot ensure that such determinations are appropriate.\nOne oversight investigator we interviewed stated that DODIG has received investigations from the service IGs where the investigations show clear signs of bias, even though the investigator was outside the chain of command. According to this investigator, in these instances, DODIG’s options include returning the case for additional investigation, appointing a new investigator, or preparing additional case analysis addressing the bias. Further, some service IG reviews of investigations also noted potential impairments to objectivity. For example, a service IG forwarded a completed investigation to DODIG for approval, noting that the investigators did not appear fair and impartial in a servicemember interview transcript; however, the oversight investigator stated that there was no evidence of bias by the investigating officer. Service IG officials stated that their review of field-level investigations is important because they have received investigations that contain personal opinion and statements that make it appear that the investigator was not impartial. These officials stated that, through their review, they attempt to identify and correct these statements, and that DODIG’s subsequent review of the case should also catch any instances where an investigator did not appear impartial. Service IG officials noted that, because investigators are so close to the investigation, they can become invested in the investigation and that this investment is sometimes evident in reports of investigation.\nGuidance for documenting independence is included in generally accepted government auditing standards (GAGAS). While these standards apply to audits, they can also provide guidance to service IGs as a best practice on how to document decisions regarding independence when conducting reprisal investigations. Documentation of independence considerations provides evidence of the judgments in forming conclusions regarding compliance with independence requirements. Further, GAGAS notes that an organization should establish policies and procedures in its system of quality control that address independence. While GAGAS states that insufficient documentation of compliance with the independence standard does not impair independence, documentation of independence in a reprisal investigation could improve the quality of DODIG’s investigations. Without a process for investigators to document that the investigation was independent and outside the chain of command, DODIG and the service IGs will be hindered in their efforts to monitor the independence of investigations. DODIG oversight investigators are responsible for assessing the independence of the investigator and the investigation. Absent direction from DODIG to the service IGs to provide certifications that the investigator was independent and outside of the chain of command, DODIG oversight investigators have few mechanisms to determine whether the investigation was independent during the oversight process. With the pending expansion of DODIG’s case management system to the service IGs, the certification process could be incorporated, for example, into the case management system. Further, such a certification process would serve as an accountability mechanism for service IG investigators, should an oversight investigator or service IG official note any potential impairments to objectivity during their reviews of investigations. Finally, certification of investigator independence could decrease the potential for bias in military reprisal investigations and better ensure that servicemembers receive the whistleblower protections provided by law.", "Whistleblowers play an important role in safeguarding the federal government against waste, fraud, and abuse, and their willingness to come forward can contribute to improvements in government operations. As a result, it is important that DOD have a process for investigating whistleblower reprisal complaints that affected parties have confidence is timely, effective, and impartial. One way in which such confidence can be undermined is if investigations and related communications with the servicemembers are not timely and accurate. Reducing delays in investigations and notifications when the process will take longer than 180 days would provide servicemembers with information that may affect their immediate work environment or personnel actions, which are typically halted during an active investigation, since servicemembers generally do not receive relief from reprisal until DODIG has approved a substantiated investigation. Ultimately, the absence of regular status updates, such as revised case-completion estimates when time frames shift, may discourage servicemembers from coming forward to report wrongdoing.\nAnother area in which DODIG processes are lacking is in data collection and monitoring for oversight of investigations at the service IG level. DODIG has made progress in this regard since our February 2012 report by implementing a new case management system, but it remains under development and, as of March 2015, does not yet meet DODIG’s full reporting needs. Without additional internal guidance to staff on how to use the case management system for real-time case processing, DODIG cannot assure efficient reporting and that the data it collects are up to date and accurate. Absent these actions, along with developing an implementation plan for expansion of the case management system to the service IGs, DODIG will not have complete visibility of service IG workload and timeliness.\nDODIG also cannot ensure that all military whistleblower reprisal investigations adhere to quality standards. For instance, the complexity of reprisal investigations underscores the need for clear and consistent oversight review procedures and documentation requirements. DODIG took a positive step by establishing a team of investigators that is solely dedicated to the review of service IG investigations. However, without additional guidance regarding how to review service IG investigations, which would help to formalize the oversight process, DODIG cannot ensure that it treats reprisal complaints consistently and with due professional care. In addition, consistency across DODIG and service IG investigations, especially in regard to investigation stages, will be limited without guidance that clarifies the amount of investigative work an investigator is to conduct at each stage and leads to the perception that not all servicemember complaints are treated equally. Additionally, without providing case-specific feedback that includes the criteria DODIG oversight investigators use to assess service investigations, service investigators may be limited in their ability to improve the quality of subsequent investigations. Finally, DOD may not be able to enhance the perception of fairness and increase accountability without taking steps to develop and implement a process for investigators to certify their independence when conducting investigations. Absent these actions, DODIG will be limited in its ability to enhance the effectiveness of its oversight, prepare for the eventual peer review in which senior leadership would like to participate, and ensure that servicemembers receive the whistleblower protections provided by law.", "To improve the military whistleblower reprisal investigation process and oversight of such investigations, we recommend that the Secretary of Defense work in coordination with the Department of Defense Inspector General (DODIG) to take the following seven actions: develop an automated tool to help ensure compliance with the statutory 180-day notification requirement by providing servicemembers with accurate information regarding the status of their reprisal investigations within 180 days of receipt of an allegation of reprisal; issue additional guidance to investigators on how to use the case management system as a real-time management tool, and update and finalize the draft internal user guidance from 2012 as necessary until the case management system is complete; working in coordination with the service IGs, develop an implementation plan that addresses the needs of DODIG and the service IGs, and defines project goals, schedules, costs, stakeholder roles and responsibilities, and stakeholder communication techniques for expansion of the case management system; issue additional guidance to formalize the DODIG oversight process; direct the services to follow standardized investigation stages and issue guidance clarifying how the stages are defined; ensure that the mechanism it uses for feedback to service investigators includes the criteria against which the investigation was assessed and any deficiencies, and work with the service IG headquarters to ensure that feedback is shared with the service investigators; and develop and implement a process for investigators to document whether the investigation was independent and outside of the chain of command and direct the service IGs to provide such documentation for review during the oversight process.", "In commenting on a draft of this report, DODIG concurred with each of our seven recommendations. However, DODIG did not agree with the manner in which we presented the findings in the report and raised concerns that we did not include information relating to significant progress made by DODIG since our February 2012 report. DODIG’s comments are reprinted in appendix III. DODIG also provided technical comments, which we considered and incorporated where appropriate.\nWe disagree with DODIG’s characterization of our report’s findings because we included discussion of the improvements cited by DODIG throughout our report. For example, we noted increases in staff levels, DODIG’s development of a new case management system, DODIG’s October 2014 issuance of a military whistleblower reprisal investigations guide, and policy guidance to the service IGs regarding 180-day notification requirements, among others. Further, in its comments, DODIG stated that it takes its role in leading DOD’s whistleblower protection program seriously and has invested significant resources, more so than other federal agencies, to improve the timeliness and quality of its investigations. In addition, DODIG highlighted the volume of complaints that it processes. We agree that DOD’s program is large, and believe that our current recommendations are critical to aid DODIG in attaining its goal of being the model whistleblower protection program in the federal government. Our responses to additional comments made by DODIG on our report’s findings are included at the end of appendix III.\nIn concurring with our first recommendation that DODIG develop an automated tool to help ensure DOD compliance with the statutory 180- day notification requirement, DODIG stated it had already implemented a dashboard in its case management system that identifies investigations pending for 180 days and that it would work toward an even more automated notification process in the future. We believe that an automated tool to help ensure DOD compliance with statutory requirements is needed and that the dashboard alone does not serve this intended purpose. Based on our case file review, we found that in the estimated 53 percent of cases in which DOD sent the required 180-day notification letters for cases closed in fiscal year 2013, the notifications that DOD provided were sent after 180 days. Specifically, we estimated that DOD’s median notification time was on average 353 days after the servicemember filed the complaint, almost twice as long as the 180-day requirement. The dashboard that DODIG uses to track cases does not proactively alert DOD to send the 180-day letter. Importantly, as we stated in our report, DODIG’s case management system did not have record of at least 22 percent of service investigations both open as of September 30, 2014, and closed in fiscal years 2013 and 2014. Without knowledge of these cases, DODIG cannot ensure that the service IGs sent 180-day notification letters for cases taking over 180 days to complete. We believe that an automated tool that proactively alerts DOD to send the required 180-day notification letter for all cases taking longer than 180 day days could help to ensure DOD’s full compliance with statutory notification requirements.\nIn concurring with our second recommendation that DODIG issue additional guidance to investigators on how to use the case management system as a real-time management tool, DODIG stated that we misrepresented DODIG’s focused effort to migrate paper-based 2013 data into a new electronic system and correct data deficiencies in order to ensure data reliability. We disagree. In our report, we note that DODIG officials told us that the case management system is to serve as a real- time complaint tracking and investigative management tool for investigators. Further, in its comments, DODIG highlights the guidance and training it has implemented related to its case management system. During our case file review, we found that personnel uploaded key case documents to the case management system after DODIG had closed the case in 77 percent of cases closed in fiscal year 2013 and made changes to case variables in 83 percent of cases in 2014. DODIG staff made these changes at least 3 months after case closure and at least a year after DODIG implemented the database in December 2012, indicating that it was not being used for real-time case tracking for cases closed in fiscal year 2013. Further, despite DODIG’s stated efforts to train investigators and ensure data consistency, we found significant instances of coding errors where DODIG personnel were coding partially completed service investigations as full investigations. Specifically, we estimate that for cases closed in fiscal year 2013, 43 percent of cases that DODIG investigators coded as fully investigated were only partially investigated. As a result, we believe that additional guidance on how to use the case management system may help ensure that DODIG has awareness of the real-time status of cases and the reliability of DODIG’s data.\nIn concurring with our third recommendation that DODIG work in coordination with the service IGs to develop an implementation plan for the expansion of the case management system, DODIG stated that we did not acknowledge the steps it has already taken to develop an implementation plan. We disagree. As we note in the report, DODIG officials stated during our review that they were developing an implementation strategy for the expansion of the case management system, but that they did not have an implementation plan. DODIG stated that it has taken additional actions since January 2015 to plan for the expansion of the case management system, such as developing a demonstration environment to define the requirement gaps. We believe that these actions are positive steps and that they will provide a strong foundation for the development of an implementation plan, which could help position DODIG to monitor the case management system expansion and measure project success.\nIn concurring with our fourth recommendation that DODIG issue additional guidance to formalize the DODIG oversight process, DODIG stated that its investigations manual already provides formal guidance to DODIG investigators for conducting oversight reviews of service IG military reprisal investigations and that within the next 90 days it will develop additional guidance on conducting oversight reviews, such as how to evaluate and document deficiencies, including those that did not affect the overall outcome of the investigation. We disagree that DODIG’s investigations manual already provides formal oversight guidance. We reviewed the 5-page chapter in DODIG’s manual on oversight of service IG investigations, and we found that it does not detail the steps and documentation requirements of an oversight review, is not specific to military whistleblower reprisal investigations, and does not state what deficiencies are substantive and would affect the outcome of an investigation. We believe that DODIG’s stated plan to develop additional guidance, including how to evaluate and document deficiencies, could better ensure the consistency of DODIG’s oversight reviews and that all reprisal complaints receive due professional care.\nIn concurring with our fifth recommendation that DODIG direct the services to follow standardized investigation stages and issue guidance clarifying how the stages are defined, DODIG stated that its October 2014 military whistleblower reprisal investigations guide describes DODIG’s intake process and that its Directive 7050.06, which was reissued in April 2015, establishes a timeline for completing the intake process in 30 days. We disagree that the guidance provides the needed instructions for investigators. We acknowledged in the report that DOD’s issuance of updated guidance is a positive step; however, DODIG describes its guide as a best practice for conducting military reprisal intakes and investigations and does not explicitly direct the services to follow DODIG’s preferred stages. In addition, it does not discuss the service IGs’ use of preliminary inquiries to dismiss cases after only a partial investigation, a practice DODIG stated it ended 3 years ago. We believe that standardized investigative stages may better ensure consistent program implementation and that all servicemember complaints are treated equally.\nIn concurring with our sixth recommendation that DODIG ensure that feedback to service investigators includes the criteria against which the investigation was assessed and any deficiencies, and that feedback is shared with the service investigators, DODIG stated that within the next 60 days it will resume its prior practice of sending oversight worksheets to the service IGs. Those worksheets will include the criteria against which the service’s intake or investigation was reviewed as well as clear explanations of deficiencies and whether they affected the outcome of the case. DODIG also stated that it will work with the services to develop a mechanism by which results will be shared with service investigators. We believe that the steps DODIG noted in its response could improve the quality of future service IG investigations and better ensure that investigative reports meet the CIGIE standards that DODIG has incorporated into its oversight review.\nIn concurring with our seventh recommendation that DODIG develop and implement a process for investigators to document whether the investigation was independent and outside of the chain of command, DODIG stated that within the next 60 days it will develop and implement such a process. Specifically, it stated that the process will require service investigators to attest in writing that they are outside the immediate chain of command of both the servicemember alleging reprisal and the alleged responsible management officials. Although such an attestation is a positive step, we believe that the service investigators should also attest to whether the investigation was independent. DODIG oversight worksheets we reviewed noted impairments to investigator objectivity in reports of investigation even though the service investigator was outside of the chain of command. We believe that an attestation that the investigation is both independent and outside of the chain of command could help serve as an accountability mechanism for service IG investigators and decrease the potential for bias in military whistleblower reprisal investigations.\nWe are sending copies of this report to the Secretary of Defense; the Department of Defense Inspector General (DODIG); the Inspectors General (IG) of the Air Force, the Army, the Marine Corps, and the Navy; and appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3604 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.", "To address our objectives, we used two primary sources of data, including (1) closed military whistleblower reprisal case data from the Department of Defense Office of Inspector General’s (DODIG) case management system and (2) a randomly selected sample of DODIG’s closed military whistleblower reprisal case files. DODIG provided us with information for all military whistleblower reprisal cases closed from October 1, 2011, through September 30, 2014, and all cases open as of October 1, 2014. We were unable to report the fiscal year 2012 data because DODIG transitioned to a new case management system in December 2012, and data from fiscal year 2012 were not reliable as a result of the data migration, according to DODIG officials. In addition, DODIG officials told us that they verified and corrected data as necessary for all cases closed in fiscal years 2013 and 2014 because the case management system was new and investigators had not been consistently recording information. We assessed the reliability of DODIG’s fiscal years 2013 and 2014 data—by reviewing related documentation, interviewing knowledgeable officials, and comparing selected fields, such as open and closed dates, with case file records from our sample—and concluded that the data were sufficiently reliable for reporting the average lengths of investigations.\nFurther, we used the data for cases closed in fiscal year 2013 to select the sample for our case-file review, discussed below. We chose cases from this period for the file review because of DODIG’s case management system transition in December 2012 and statements from DODIG officials that data from cases closed in the old case management system were not as complete as data from cases closed in the new case management system. We also chose this period because the National Defense Authorization Act for Fiscal Year 2014, effective December 26, 2013, expanded the amount of time a servicemember has to report a reprisal allegation from 60 days to 365 days. We selected a stratified random sample of 135 cases from the 538 cases closed in fiscal year 2013. We stratified the population into six strata by combining three categories of case status and two categories of investigation status (see table 5 below). We calculated the sample sizes to achieve a desired precision of plus or minus 10 percentage points or fewer for a percentage estimate of the total population (N=538) at the 95 percent confidence level. We then adjusted the sample sizes to achieve a desired precision of plus or minus 10 percentage points or fewer for a percentage estimate at the 95 percent confidence level for DODIG Oversight cases (N=344, strata 3 and 4) and Fully Investigated cases (N=203, strata 1, 3, and 5).\nDuring the course of our review, we removed 11 out-of-scope cases, which reduced the original sample size from 135 to 124, because we found that 2 of the cases were open, 1 of the cases was classified and had limited documentation to review, and 8 cases were investigations of improper mental health examinations and not reprisal. This reduced sample of 124 cases is generalizable to the estimated population of in- scope cases. We generalized the results of our sample to the estimated population of 498 cases DODIG closed in fiscal year 2013. All estimates of percentages presented in this report have a margin of error of plus or minus 10 percentage points or fewer, unless otherwise noted. Further, all estimates of medians and averages presented in this report have a relative error of plus or minus 20 percent of the estimate, unless otherwise noted.\nTo determine the extent to which the Department of Defense (DOD) has met statutory notification requirements and internal timeliness requirements for completing military whistleblower reprisal investigations, we calculated the timeliness of cases using case data from DODIG’s case management system for military whistleblower reprisal cases closed in fiscal years 2013 and 2014 and compared the average timeliness to the regulatory 180-day requirement. We removed one closed case from the timeliness calculations because the record produced a negative case processing time because the closed date preceded the open date. In addition, for all cases that were open as of September 30, 2014, we analyzed how long the cases had been open, according to the fiscal year in which the complaints were received. To determine the extent to which DOD met the statutory requirement to notify servicemembers in cases lasting longer than 180 days about delays in the investigation in fiscal year 2013, we reviewed the 124 case files in our sample for evidence that DOD had sent the required letter in cases lasting longer than 180 days. For cases where there was evidence that DOD had sent the required letter, we recorded the reasons provided for the delay as well as the estimated completion date. We calculated the median estimated time frame in the letters and compared this to the median completion date for these cases to determine the accuracy of DOD’s estimated time frames. In order to assess the reliability of DODIG’s data, we used case file documentation to determine the open and close dates of the 124 cases in our sample and calculated total case time for each case. We then compared the total case time we recorded for the sample cases to the total case time for those cases in DODIG’s data and we found a mean difference of 2 days. We further assessed the data through discussions with officials responsible for the data and concluded that the data were sufficiently reliable for reporting the average lengths of investigations. Further, we reviewed relevant documents including 10 U.S.C. § 1034, as amended, and its implementing directive on military whistleblower protections, DOD Directive 7050.06, Military Whistleblower Protection (July 23, 2007). After we sent our draft report for comment, DODIG issued an updated Directive on April 17, 2015, which we also reviewed. Finally, we interviewed officials about methods for tracking investigations and processes for sending required notifications to servicemembers that allege reprisal. We also collected relevant documentation, such as standard operating procedures and investigative guidance from DODIG, and the service Inspectors General (IG) for the Air Force, the Army, the Marine Corps and the Navy. We also spoke with officials from DODIG’s Information Systems directorate to determine which variables to request from DODIG’s case management system.\nTo determine the extent to which DODIG’s whistleblower case management system supports oversight of the military whistleblower reprisal program, we obtained and analyzed closed case data from each of the service IGs for cases closed from fiscal year 2012 through fiscal year 2014. We assessed the reliability of service IG data from fiscal years 2013 and 2014—by reviewing related documentation and interviewing knowledgeable officials—and concluded that the data were sufficiently reliable for our purposes. We compared selected variables for all cases by matching DODIG’s data to the service IG data to identify duplicate cases and missing information, and to determine whether DODIG has visibility of all ongoing and closed military whistleblower reprisal cases. We selected the variables present in both DODIG’s and the service IGs’ data to compare for matching cases in consultation with DODIG and service officials, and those variables include servicemember name, case identifiers, open date, and closed date. Further, we interviewed DODIG officials responsible for the development of the case management system and the proposed expansion of the case management system to the service IGs and collected supporting documentation. We also reviewed DOD memorandums regarding the case management system expansion and cost information for the next phase of case management system development and compared these documents to relevant program management criteria. In addition, we interviewed officials from DODIG’s Administrative Investigations component as well as its Whistleblower Reprisal Investigations and Investigations of Senior Officials directorates, and service IG officials regarding the case management system expansion.\nTo determine the extent to which DOD has processes to ensure oversight of military whistleblower reprisal investigations conducted by the service IGs, we used our stratified random sample of 124 case files retained by DODIG for military whistleblower reprisal cases that DODIG closed from October 1, 2012, through September 30, 2013. Based on our review of whistleblower reprisal investigation policies and procedures and quality standards for investigations established by the Council of the Inspectors General on Integrity and Efficiency (CIGIE), we created a data-collection instrument to identify the key characteristics of whistleblower reprisal cases, determine the reliability of various fields in the case management system, and assess the completeness and quality of files. We also developed a standard approach to electronically review files, using DODIG’s new case management system, to ensure we reviewed all cases consistently. For example, for all cases, we reviewed the original complaint followed by the report of investigation and interview transcripts, among other things. We refined this data-collection instrument and our approach by first reviewing 12 pilot case files selected by DODIG that were not part of the 135 originally identified in the sample. Specifically, the pilot consisted of cases that DODIG approved in the first three quarters of fiscal year 2014, including 3 cases investigated by DODIG, 3 cases investigated by the Army, 2 cases investigated by the Air Force, 2 cases investigated by the Navy, and 2 cases investigated by the Marine Corps. Of those 12 cases, 11 were fully investigated and 6 were substantiated.\nAfter the pilot, our methodology for reviewing the randomly sampled cases required each case to be reviewed first by one analyst and then reviewed by a second analyst who noted any disagreement with the first analyst’s assessment. Analysts discussed the areas of disagreement and resolved any disagreement by identifying and reviewing supporting documentation in the case files. Further, two GAO investigators with professional investigative experience reviewed a portion of the sample and concurred with the analysts’ assessment of the cases, in accordance with CIGIE guidelines for quality-assurance reviews. We did not question DODIG’s judgment in these cases.\nTo assess case-file completeness, we reviewed DODIG’s process, 10 U.S.C. § 1034, directive, and other guidance and consulted with DODIG officials and identified 13 elements to include in our case-file review. These 13 elements support the conclusions reached in the case, indicate compliance with the law or directive, or manage the internal communication not specifically outlined by law or directive. The 13 elements we included for our case file review are the following: 1. notification to DODIG from the service IG that received the complaint, 2. evidence supporting the recommended outcome, 4. report of investigation or other written product, 6. interview with servicemember, 7. interview with responsible management official, 8. DODIG oversight worksheet, 9. correspondence between DODIG and the servicemember regarding investigations taking longer than 180 days, 10. correspondence between DODIG and the Secretary of Defense regarding investigations taking longer than 180 days, 11. record of corrective action taken, 12. correspondence between DODIG and the service IGs regarding the final case outcome, and 13. correspondence between DOD and the servicemember regarding the final outcome of the case.\nSome of these elements included specific documents. For example, the DODIG oversight worksheet (item 8 above) was a specific document. Other elements could be reflected in multiple documents. For example, the evidence supporting the recommended outcome (item 2 above) could be in a larger report, be in a summary, or be its own document. We determined the completeness of each case file selected in our sample individually since not all 13 elements were necessary in every case. For example, some of the 13 elements would only need to be present in a file if an investigation was conducted by a service IG or was a full investigation. We adjusted the required number of elements based on the specific circumstances of each case and calculated completeness based on that adjusted baseline. We categorized the case files by the average number of elements missing for each type of case, dismissed DODIG intakes, service IG preliminary inquiries, service IG full investigations, and DODIG full investigations.\nWe also interviewed investigators and supervisors on DODIG’s oversight team and officials at each of the service headquarters IGs. In addition, we interviewed six field-level investigators from the Army, the Navy, and the Air Force IGs regarding required training, available guidance, and investigative processes, including assessing independence. We used data provided by each of the services for cases closed in fiscal year 2014 to select investigators for interviews. We used a simple random sampling technique to select investigators for interviews. We selected 12 investigators from the 216 investigations closed by the Army, 10 investigators from the 35 investigations closed by the Navy, and 10 investigators from the 110 investigations closed by the Air Force. Since field-level service IG investigators typically rotate every 2 to 3 years, we were able to contact and speak with two investigators from each service IG. In addition, we reviewed training materials, guidance, and requirements for investigators from DODIG and each of the service IGs as well as their processes for assessing investigator independence. We also attended training sessions related to conducting military whistleblower reprisal investigations at DODIG and the Army IG as well as 2 DODIG Administrative Investigations training symposia, which contained sessions on whistleblower reprisal investigations, and interviewed an official from CIGIE’s Advanced Training Institute. Additionally, we compared DOD’s independence processes to CIGIE quality standards for investigations and Generally Accepted Government Auditing Standards (GAGAS).\nWe conducted this performance audit from April 2014 to May 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "This appendix provides information on the characteristics of military whistleblower reprisal cases based on our case file review of 124 cases closed from October 1, 2012, through September 30, 2013, as well as data from the Department of Defense Office of Inspector General’s (DODIG) case management system for cases closed in fiscal years 2013 and 2014.", "Generally, the service affiliations of the servicemembers that alleged reprisal did not match the overall proportions in the military population. See figure 3 for a comparison of the servicemember population proportion by service compared to the proportion of reprisal cases closed.\nThrough our file review of cases closed in fiscal year 2013, we estimate that the majority of servicemembers filed reprisal complaints with a service Inspector General (IG) (70 percent). Servicemembers also filed reprisal complaints with the DODIG Hotline (23 percent) and through Members of Congress (6 percent).", "According to Department of Defense (DOD) Directive 7050.06, a servicemember who makes or prepares to make a protected communication is a whistleblower. Based on our review of case files closed in 2013, we estimate that the primary reasons for making a protected communication are to report allegations of a violation of law or regulation (49 percent), abuse of authority (39 percent), or a general communication to the IG (23 percent). Other reasons for making a protected communication included funds or resource waste (14 percent), public health or safety danger (11 percent,) and sexual assault (8 percent), among others. DOD officials told us that regulations cover virtually every aspect of military life, including how to conduct personnel ratings, so servicemembers often cite violations of regulations in their complaints. About 40 percent of cases in our sample included a protected communication regarding a personnel regulation violation. Figure 4 shows the reasons servicemembers made protected communications by frequency.\nFurther, based on our case file review, we estimate that the primary authorized recipients of protected communications for cases closed in fiscal year 2013 were the chain of command (62 percent), Inspectors General (53 percent), and Members of Congress (18 percent). DOD officials told us that the inclusion of the chain of command in the list of authorized protected communication recipients has resulted in an increase in the number of servicemembers that qualify as whistleblowers because reporting issues to the chain of command is a standard military procedure. Figure 5 shows the authorized recipients to whom servicemembers made protected communications by frequency.", "A whistleblower reprisal complaint must also include an allegation that an action was taken in reprisal against a servicemember. DOD Directive 7050.06 defines reprisal as taking or threatening to take an unfavorable personnel action, or withholding or threatening to withhold a favorable personnel action, for making or preparing to make a protected communication. Based on our file review of cases closed in fiscal year 2013, we estimate that the most common forms of reprisal alleged by servicemembers were that they received a poor performance evaluation (44 percent), disciplinary action (39 percent), or an unfavorable assignment or reassignment (27 percent). Figure 6 shows the frequency of the various types of personnel actions.", "DODIG evaluates cases and generally closes them based on the answers to four questions, which investigators use to determine whether a case has all of the elements of reprisal. Specifically: (1) Did the servicemember make or prepare to make a protected communication, or was the servicemember perceived as having made or prepared to make a protected communication? (2) Was an unfavorable personnel action taken or threatened against the servicemember, or was a favorable personnel action withheld or threatened to be withheld following the protected communication? (3) Did the responsible management official have knowledge of the servicemember’s protected communication or perceive the servicemember as making or preparing to make a protected communication? (4) Would the same personnel action have been taken, withheld, or threatened absent the protected communication?\nBased on our review of randomly selected case files closed in fiscal year 2013, we estimate that the most common reason for closing a case was that DODIG determined that the responsible management official would have taken the personnel action absent the protected communication (question 4—37 percent), which means that the servicemember’s protected communication did not have an effect on the responsible official’s decision to take the personnel action. DODIG also closed cases because the servicemember did not make a protected communication (question 1—4 percent), there was no personnel action (question 2—9 percent), or the responsible management official who took the personnel action had no knowledge that the servicemember made or prepared to make a protected communication (question 3—3 percent). Additional reasons DODIG closed cases included timeliness—the servicemember did not file a reprisal complaint within 60 days of gaining knowledge of the personnel action—nonresponsive servicemembers, and withdrawals, See figure 7 for DODIG’s reasons for closing among other reasons.military reprisal cases by frequency.\nFurther, based on our case-file review of cases closed in fiscal year 2013, we estimate that the service IGs closed the majority of cases in fiscal year 2013 (70 percent) after conducting a preliminary inquiry and prior to a full investigation.", "Our analysis of DODIG data on military whistleblower reprisal cases closed in fiscal year 2014 shows that DODIG substantiated 9 percent of the cases that were fully investigated by DODIG investigators. In addition, our analysis shows that the service IGs substantiated 6 percent of cases that proceeded past the intake phase. DODIG officials stated that they calculate substantiation rates by the number of cases substantiated out of the number of cases fully investigated; however, as discussed in the report, we are unable to report on the total number of cases fully investigated by the service IGs because DODIG’s data were not reliable for this purpose. As such, we report the service IGs’ substantiation rates out of the number of cases that proceeded to further investigation after meeting the general intake requirements—a personnel action following a protected communication. See table 6 for fiscal year 2013 and 2014 substantiation rates.", "", "The following are GAO’s comments on the Department of Defense Inspector General’s (DODIG) letter dated May 1, 2015, in addition to our evaluation of agency comments on page 50. 1. We disagree with DODIG’s statement comparing the timeliness of its intake process because we were not able to compare the timeliness of cases by case type in our 2012 report with this report due to DODIG data limitations. Specifically, in our 2012 report, we found that DODIG’s data were not reliable for the purposes of reporting investigation lengths and therefore used sample data to report the timeliness of cases DODIG closed between January 1, 2009 and March 31, 2011. We reported on the number of cases closed before full investigation and cases that were full investigations, which we determined by reviewing the case file documentation. In this report, we found DODIG’s timeliness data reliable for our purposes of reporting the average lengths of investigations; however, we were not able, using DODIG’s data, to distinguish between the number of cases that were fully investigated by the service IGs and the number of cases that the services closed with some investigative work, but prior to a full investigation. DODIG’s data were not reliable for these purposes due to DODIG coding errors. 2. We disagree with DODIG’s statement that it met statutory notification requirements in the majority of closed cases because it did not always meet those requirements. Specifically, in 2012, we found that DOD had stopped providing any notifications to servicemembers. In 2015, we found that DOD notified servicemembers about the status of investigations that took longer than 180 days in an estimated 53 percent of the cases that required notification. In those instances where the letters were provided to servicemembers, we estimated that DOD’s median notification time was on average 353 days after the servicemember filed the complaint, almost twice as long as the 180-day requirement. We acknowledge that DOD’s decision to reestablish the practice of sending 180-day notification letters is a positive step; however, we continue to believe that notifying servicemembers about half of the time is not in accordance with statutory requirements and that DOD should send the letters within 180 days of receipt of an allegation of reprisal, not on average of 353 days after receipt. 3. We disagree with DODIG’s statements regarding our characterization of its case management system, because we concluded that DODIG does not have complete oversight of all service reprisal investigations. Specifically, a large amount of detailed information about the cases, such as investigative events, resides in the services’ case management systems. Further, we found that DODIG’s system did not have record of at least 22 percent of service investigations both open as of September 30, 2014, and closed in fiscal years 2013 and 2014. DODIG is responsible for the oversight of these cases. In addition, we believe that DODIG’s agile development of the case management system—and the large gaps between development phases—may be the cause of some of the issues we found. DODIG officials told us that the length between phases of development was longer than originally intended by DODIG, and the system still needs to refine some of its capabilities, such as aggregating and extracting data for reporting purposes. DODIG intended to complete the system in February 2014 and still has not done so over a year later.\nFurther, we found that DODIG made changes to its data in March and April of 2014, after it was notified of our audit. We believe that DODIG should have been making sure its data were reliable on an ongoing basis. DODIG also stated that we did not address its approaches for ensuring data reliability; however, we did include a discussion of some of these approaches in our report, such as its dashboards to identify errors, and its quarterly quality assurance processes, on pages 24 and 37. Finally, DODIG listed system capabilities, such as the ability to track overall case age, which we incorporated into the report and about which we noted limitations where relevant. 4. We disagree with DODIG’s statements regarding feedback it provides to service IG investigators because DODIG’s Council of the Inspectors General on Integrity and Efficiency (CIGIE) trainings do not reach all field-level investigators, as we stated in our report. In addition, the sample case-closure memorandum that DODIG provided to us did not contain such criteria. Further, in our report, we define the criteria against which DODIG oversight investigators assess service IG investigator independence. However, we found that in the absence of interview transcripts, which were present for servicemember interviews in only 43 percent of cases closed in fiscal year 2013, oversight investigators have limited tools to determine whether the investigator demonstrated IG impartiality during interviews. 5. We disagree with DODIG’s comment that we did not include information related to DODIG’s progress since 2012 because we addressed DODIG’s stated improvements on the following pages in our report: (1) DODIG’s staffing increases, p. 19; (2) new case management system, p. 21; (3) data clean-up to ensure data reliability, p. 25; (4) issuance of policy guidance to the service IGs regarding the 180-day notification requirements, p.11; (5) Administrative Investigations manual, pp. 42; (6) issuance of October 2014 military whistleblower reprisal investigations guide, p. 38; and (7) reissuance of DOD Directive 7050.06. The directive was issued on April 17, 2015, after we sent our draft report to DOD for agency comments, and we incorporated it into our final report as necessary, p. 52. However, the directive dated July 2007 was in place during the scope of our review and, as such, we used it for criteria where applicable.", "", "", "In addition to the contact named above, Lori Atkinson (Assistant Director), James Ashley, Tracy Barnes, Gary Bianchi, Molly Callaghan, Sara Cradic, Cynthia Grant, Robert Graves, Christopher Hayes, Erica Reyes, Mike Silver, Amie Steele, and Erik Wilkins-McKee made significant contributions to this report.", "Whistleblower Protection: Additional Actions Needed to Improve DOJ’s Handling of FBI Retaliation Complaints. GAO-15-112. Washington, D.C.: January 23, 2015.\nWhistleblower Protection Program: Opportunities Exist for OSHA and DOT to Strengthen Collaborative Mechanisms. GAO-14-286. Washington, D.C.: March 19, 2014.\nWhistleblower Protection: Actions Needed to Improve DOD’s Military Whistleblower Reprisal Program. GAO-12-362. Washington, D.C.: February 22, 2012.\nTax Whistleblowers: Incomplete Data Hinders IRS’s Ability to Manage Claim Processing Time and Enhance External Communication. GAO-11-683. Washington, D.C.: August 10, 2011.\nCriminal Cartel Enforcement: Stakeholder Views on Impact of 2004 Antitrust Reform Are Mixed, but Support Whistleblower Protection. GAO-11-619. Washington, D.C.: July 25, 2011.\nWhistleblower Protection: Sustained Management Attention Needed to Address Long-Standing Program Weaknesses. GAO-10-722. Washington, D.C.: August 17, 2010.\nDefense Contracting Integrity: Opportunities Exist to Improve DOD’s Oversight of Contractor Ethics Programs. GAO-09-591. Washington, D.C.: September 22, 2009.\nWhistleblower Protection Program: Better Data and Improved Oversight Would Help Ensure Program Quality and Consistency. GAO-09-106. Washington, D.C.: January 27, 2009.\nJustice and Law Enforcement: Office of Special Counsel Needs to Follow Structured Life Cycle Management Practices for Its Case Tracking System. GAO-07-318R. Washington, D.C.: February 16, 2007.\nU.S. Office of Special Counsel: Strategy for Reducing Persistent Backlog of Cases Should Be Provided to Congress. GAO-04-36. Washington, D.C.: March 8, 2004.\nThe Federal Workforce: Observations on Protections From Discrimination and Reprisal for Whistleblowing. GAO-01-715T. Washington, D.C.: May 9, 2001.\nWhistleblower Protection: VA Did Little Until Recently to Inform Employees About Their Rights. GAO/GGD-00-70. Washington, D.C.: April 14, 2000." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 2, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 1, 2, 1, 2, 2, 1 ], "alignment": [ "h3_title", "", "h3_full", "", "h0_full", "h0_full", "h0_full", "h1_title", "", "", "h1_full", "h2_full", "h2_title", "", "h2_full", "", "", "", "", "h0_full h3_full h2_full", "", "", "h3_full", "h3_title", "", "h3_full", "h3_full", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What requirements did the DOD fail to meet in 2013?", "What steps did DOD take to address this after GAO's 2012 report?", "What data did GAO find indicating DOD's failure to address internal issues?", "What could DOD do to address these issues?", "What limits DODGI's ability to provide oversight?", "What issues did GAO find with DODIG's case management system?", "How does DOD plan to improve DODIG's case management system?", "What issues did GAO find with DOD's plans for the expansion?", "What issues might the lack of an implementation plan cause?", "What does DOD lack formalized processes for?", "How has DODIG failed to ensure thorough documentation?", "What details does DOD's documentation lack?", "What issues might a lack of additional guidance cause?", "Why are whistleblowers important?", "How are whistleblowers expected to report wrongdoing?", "What risks do whistleblowers take in reporting wrongdoing?", "How does DODIG protect whistleblowers?", "What was GAO asked to examine?" ], "summary": [ "The Department of Defense (DOD) did not meet statutory military whistleblower reprisal 180-day notification requirements in about half of reprisal investigations closed in fiscal year 2013, and DOD's average investigation time for closed cases in fiscal years 2013 and 2014 was 526 days, almost three times DOD's internal 180-day requirement.", "In 2012, GAO made recommendations to improve investigation timeliness, and DOD has taken some actions to address those recommendations.", "However, based on a random sample of 124 cases, GAO estimated that there was no evidence that DOD sent the required notification letters in about 47 percent of the cases that DOD took longer than 180 days to close in fiscal year 2013. For cases in which DOD sent the required letter, GAO estimated that the median notification time was about 353 days after the servicemember filed the complaint, and on average the letters significantly underestimated the expected investigation completion date.", "DOD does not have a tool, such as an automated alert, to help ensure compliance with the statutory notification requirement to provide letters by 180 days informing servicemembers about delays in investigations. Without a tool for DOD to ensure that servicemembers receive reliable, accurate, and timely information about their investigations, servicemembers may be discouraged from reporting wrongdoing.", "DOD's Office of Inspector General's (DODIG) newly developed case management system, which it established to improve monitoring, is separate from the service IGs' systems, limiting DODIG's ability to provide oversight of all military reprisal investigations.", "GAO found that DODIG's system did not have a record of at least 22 percent of service-conducted reprisal investigations that were closed in fiscal years 2013 and 2014 and investigations open as of September 30, 2014.", "DODIG officials stated that they plan to expand DODIG's case management system to the service IGs by the end of fiscal year 2016 to improve DODIG's visibility over investigations.", "However, DODIG does not have an implementation plan for the expansion, and service IG officials stated that they have unique requirements that they would like to have incorporated into the system prior to expansion.", "Expanding the case management system to the service IGs without developing an implementation plan that, among other things, addresses the needs of both DODIG and the service IGs, puts DOD at risk of creating a system that will not strengthen its oversight of reprisal investigations.", "DOD does not have formalized processes to help ensure effective oversight of military whistleblower reprisal investigations conducted by service IGs.", "DODIG established an oversight investigator team to review service IG investigations, but it has provided oversight investigators with limited guidance on how to review or document service IG investigations. Specifically, GAO estimated that for about 45 percent of service investigations closed in fiscal year 2013, the oversight worksheets were missing narrative to demonstrate that the oversight investigator had thoroughly documented all case deficiencies or inconsistencies.", "GAO also found that these files did not include documentation of DOD's analysis of the effect of noted deficiencies on the investigation's outcome because DOD has provided limited instruction on how to review service IG cases.", "Without additional guidance on oversight review procedures and documentation requirements to formalize the oversight process, it will be difficult for DOD to ensure that reprisal complaints are investigated and documented consistently.", "Whistleblowers play an important role in safeguarding the federal government against waste, fraud, and abuse.", "However, reporting wrongdoing outside the chain of command conflicts with military guidance, which emphasizes using the chain of command to resolve problems.", "Whistleblowers who make a report risk reprisal from their unit, such as being demoted or separated.", "DODIG is responsible for conducting and overseeing military whistleblower reprisal investigations.", "GAO was asked to examine DOD's oversight of military whistleblower reprisal investigations." ], "parent_pair_index": [ -1, 0, 1, 0, -1, 0, 0, 2, 3, -1, 0, 0, 0, -1, 0, 0, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0, 0 ] }

{ "title": [ "Background", "BLM’s Mission and Organizational Structure", "BLM’s Process for Overseeing Federal Oil and Gas Resource Development and Mitigating Environmental Impacts", "BLM’s Best Management Practices Policy", "Exceptions, Waivers, and Modifications to Lease and Permit Requirements", "BLM’s Inspection and Enforcement Program", "Our Prior Work Related to BLM’s Management of Federal Oil and Gas Resources", "The Extent to Which BLM Approves Exception Requests Is Unknown, and BLM Field Office Processes for Considering These Requests and Documenting Decisions Vary", "The Extent to Which BLM Approves Requests for Exceptions to Lease and Permit Requirements Is Unknown", "BLM Field Office Processes for Considering Exception Requests and Documenting Decisions Vary", "BLM Has Involved the Public in the Development of Lease and Permit Requirements to Varying Extents but Not When Considering Exception Decisions", "BLM Consistently Involved the Public in Developing Lease Requirements", "BLM Involved the Public to Some Extent in the Development of Permit Requirements", "BLM Generally Did Not Involve the Public When Considering Exception Requests", "BLM Has Generally Implemented Its Best Management Practices Policy but Has Not Consistently Documented Inspections or Used Data to Assess the Policy’s Effectiveness", "BLM Has Generally Implemented Its Best Management Practices Policy by Including Key Practices As Permit Requirements", "BLM Has Not Consistently Documented Environmental Inspections Intended to Verify Required Best Management Practices Are Implemented", "BLM Has Not Effectively Used Monitoring Inspection Data to Assess the Effectiveness of Its Best Management Practices Policy", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Response", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Bureau of Land Management Environmental Inspection Forms", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "This section provides information on BLM’s mission and organizational structure for management of oil and gas development, BLM’s process for overseeing the development of federal oil and gas resources and mitigating environmental impacts, and our prior work on BLM’s management of federal oil and gas resources.", "BLM’s mission is to maintain the health, diversity, and productivity of public land for present and future generations. As part of this mission, BLM manages more than 245 million surface acres of federal land for multiple uses, including recreation; range; timber; minerals; watershed; wildlife and fish; natural scenic, scientific, and historical values; and the sustained yield of renewable resources. BLM oversees onshore oil and gas development on and under BLM-managed federal land, under other federal agencies’ land, and under private land for which the federal government has retained mineral rights—a total of about 700 million subsurface acres.\nBLM manages these responsibilities through its headquarters office in Washington, D.C.; state offices; district offices; and field offices. BLM’s headquarters office develops guidance and regulations, and the state, district, and field offices manage and implement the bureau’s programs. BLM’s oversight of oil and gas development is led by field offices located primarily in the Mountain West, the center of much of BLM’s onshore oil and gas development.", "BLM’s process for overseeing federal oil and gas resource development consists of three phases, each of which includes opportunities to mitigate impacts of development on the environment. These phases—land use planning, leasing, and permitting—incorporate mitigation through, for example, lease and permit requirements, including best management practices. BLM can grant exceptions to these requirements, and it conducts environmental and monitoring inspections intended, respectively, to verify operators have implemented the requirements and to assess the effectiveness of the requirements in mitigating environmental impacts of development. The process is illustrated in figure 1.\nFLPMA requires the Secretary of the Interior to develop land use plans and, when appropriate, revise them. The plans identify, among other things, federal land and mineral resources that will be available for oil and gas development and other activities. As part of developing or revising land use plans, BLM is required under the National Environmental Policy Act of 1969 (NEPA), as amended, to evaluate likely environmental impacts of proposed actions in the plan, such as developing oil and gas resources in certain areas. Generally, BLM prepares an environmental impact statement—a detailed analysis of the likely environmental effects of a proposed action—in preparing a land use plan. However, depending on the anticipated level of public interest and potential for significant impacts, BLM may instead develop an environmental assessment—a more concise analysis developed for an amendment to the plan. BLM officials said the agency uses the land use plans and environmental impact statements to (1) help develop reasonably foreseeable development scenarios to estimate outcomes, such as the number of wells to be involved and the surface disturbance that may occur under the land use plan; (2) identify land open and closed to leasing; (3) identify resource protection measures, such as lease requirements and environmental best management practices; and (4) establish monitoring protocols. BLM develops land use plans over several years. During a plan’s development, BLM coordinates with state and local governments and collaborates with stakeholders, including oil and gas operators, nongovernmental organizations, and state wildlife agencies, and provides multiple opportunities for comment by the public. Comments can address such topics as criteria for granting exceptions to lease requirements and the appropriateness of best management practices.\nOnce a land use plan is completed, BLM holds a lease sale. Operators may purchase a lease for land identified by the land use plan as available for oil and gas development. As part of this phase, BLM generally conducts an environmental assessment to determine whether the proposed development is likely to significantly impact the environment. In the assessment, BLM can propose applying lease requirements that were identified in the land use plan, where many of the requirements are intended to protect the environment. For example, a lease requirement may state that an operator cannot drill within a specified distance of a raptor’s nest during its breeding season. BLM allows the public to review and comment on draft environmental assessments for lease sales, including proposed lease requirements. In addition, the public may protest a lease before it is offered for sale. When a lease is offered for sale, the lease requirements identified through the environmental assessment are included as requirements for holding the lease.\nOperators that have obtained a lease must submit to BLM a drilling permit application and obtain BLM’s approval before drilling any new oil or gas wells. A complete drilling permit application must include, among other things, a “Surface Use Plan of Operations” that includes the operator’s plan for reclaiming disturbed land during production (known as interim reclamation) and upon final abandonment of the site (known as final reclamation). The reclamation plan outlines the specific steps the operator proposes to take to reclaim the well site, which may include recontouring the land to better match the surrounding landscape, redistributing the topsoil, and replanting the site with native plant species.\nAs part of the permitting phase, BLM generally conducts a NEPA analysis—that is, an environmental impact statement or an environmental assessment—to identify any site-specific environmental impacts from the proposed oil and gas activity. On the basis of this analysis, BLM may identify certain requirements to attach to the permit. According to BLM officials, these permit requirements are generally attached to ensure environmental protection, safety, or conservation of mineral resources and may be based on environmental best management practices, described below. While BLM notifies the public that an operator has submitted a drilling permit application, BLM may or may not require public comment on the associated NEPA analysis. According to BLM’s NEPA Handbook, the type of public involvement required when an environmental assessment is prepared is at the discretion of the decision maker and can include public notification before or during preparation of the environmental assessment, among other types of involvement. After BLM approves a drilling permit, the operator generally has a 2-year window to drill the well and begin production, subject to any lease or permit requirements. However, BLM may extend the drilling permit for up to 2 additional years if an operator requests an extension in writing.", "In 2004, BLM issued its best management practices policy, which defines environmental best management practices as innovative mitigation measures applied on a site-specific basis to prevent or reduce adverse environmental or social impacts. BLM can include best management practices as lease and permit requirements or, in some cases, operators may apply them voluntarily.\nBLM’s policy identifies four key practices that should be considered as lease or permit requirements in nearly all circumstances: (1) painting of facilities to blend with the surrounding environment, (2) design and construction of roads in accordance with BLM guidance, (3) interim reclamation, and (4) final reclamation. There are numerous additional best management practices that, according to the policy, BLM field offices should consider on a site-specific basis. Such practices may include installing raptor perch avoidance structures, placing wellheads underground, drilling multiple wells from a single pad, and screening facilities from view.", "To help BLM manage resources based on current conditions, BLM’s regulations and policies allow it to grant operators’ requests for exceptions, waivers, or modifications to lease and permit requirements. Exceptions are one-time exemptions for a particular site within a lease; waivers are permanent exemptions from a lease requirement; and modifications are changes to the provisions of a lease requirement, either temporary or for the term of the lease. BLM issued a policy in November 2007 providing guidance on (1) including exception, waiver, and modification criteria in BLM land use plans and (2) reviewing and approving exceptions, waivers, and modifications to lease and permit requirements. Criteria for considering exception requests are generally developed through the NEPA process as BLM develops its land use plans.", "To help ensure operators’ compliance with all lease and permit requirements, as well as with certain laws and regulations, BLM has an inspection and enforcement program, which comprises a variety of inspection types. Among these are environmental inspections, intended to verify operators’ compliance with certain lease and permit requirements, and monitoring inspections, intended to assess the effectiveness of lease and permit requirements in mitigating environmental impacts of development.\nEnvironmental inspections are BLM’s primary mechanism to verify operators’ compliance with lease and permit requirements, including best management practices, related to the surface environment and to initiate enforcement actions, if needed. For example, BLM may perform environmental inspections to help ensure that operators are adhering to lease and permit requirements designed to mitigate the impact of oil and gas development on sensitive species and their habitat. Environmental inspections typically are performed by BLM staff, such as natural resource specialists, environmental protection specialists, or other resource program specialists. These staff document the inspections using hard copy forms and BLM’s electronic system for oil and gas management, the Automated Fluid Minerals Support System (AFMSS).\nIn addition, BLM conducts monitoring inspections to collect quantitative or qualitative data for the purpose of assessing the effectiveness of lease and permit requirements in mitigating environmental impacts of development. BLM is required by Council on Environmental Quality (CEQ) regulations to establish a monitoring and enforcement program, where applicable, for any mitigation. To fulfill this requirement for oil and gas development, BLM issued a policy in 2009 to ensure adequate monitoring of oil and gas development and clarify how staff are to conduct and track monitoring inspections. Specifically, the policy requires that BLM field offices that have oil and gas programs conduct monitoring inspections to assess the effectiveness of lease and permit requirements in mitigating environmental impacts of development. BLM field offices are to independently track monitoring inspections and report via BLM’s PMDS the number of inspections completed.", "During the past 10 years, we have reported on various aspects of BLM’s management of federal oil and gas resources. In March 2007, as part of our work on major management challenges at the Department of the Interior, we reported that the numbers of oil and gas permit approvals had increased in recent years and that the effect of resulting development on surrounding communities and the environment would depend on BLM’s use and enforcement of lease and permit requirements. In March 2010, we found that Interior’s long-standing efforts to implement a mobile computing solution to allow BLM employees to document inspection results while in the field were behind schedule, and we recommended that the Secretary of the Interior direct BLM to implement such technology. In May 2014, Interior officials stated that BLM had issued policies related to allowing BLM staff, including staff conducting inspections in the field, to wirelessly connect to BLM’s information technology system via laptops when in the field. In July 2010, we found that BLM’s publicly available data related to lease protests (i.e., instances where the public challenged BLM’s leasing decisions) were incomplete and inconsistent, and we recommended that Interior determine and implement an agency-wide approach for collecting protest information that was complete, consistent, and available to the public. In 2016, BLM officials reported that the agency had issued guidance to standardize the collection and public display of data related to lease protests. In August 2013, we reviewed BLM’s processing of drilling permit applications and other efforts to protect the environment. Among other things, we found that BLM had increased the number of environmental inspections it conducted of federal oil and gas wells and facilities from 2007 through 2012, but that BLM’s methods for prioritizing inspections may not identify wells that pose the greatest environmental risk and that BLM’s documentation of enforcement actions was not consistent. We recommended that BLM improve its ability to prioritize environmental inspections and consistently document enforcement actions. Interior agreed with our recommendations but has not fully implemented them.", "The extent to which BLM approves requests for exceptions to environmentally related lease and permit requirements is unknown because BLM does not have comprehensive or consistent data on these requests. Additionally, BLM’s processes for considering exception requests and documenting its decisions vary across its field offices.", "BLM does not have consistent data on requests for exceptions to lease and permit requirements. BLM officials in headquarters stated that they did not consistently track data on operator requests for exceptions to lease and permit requirements or BLM’s decisions at a bureau-wide level. These officials further stated that BLM does not have a policy requiring its field offices to consistently track these exception data. As a result, the extent to which BLM approves exception requests is generally unknown.\nTo identify available exception data, we surveyed BLM officials at offices in the field and found that fewer than half of the field offices tracked data on operator requests for exceptions to either lease or permit requirements for fiscal years 2005 through 2015. Officials representing 42 BLM offices responded to our survey. Regarding exceptions to lease requirements, after excluding 6 offices because officials stated that they had received few or no exception requests, we found that 10 of the remaining 36 offices responded that they tracked these data, 24 responded that they did not track these data, and 2 responded that they were unsure whether they tracked these data. Regarding exceptions to permit requirements, after excluding data from 4 offices because officials stated that they had received few or no exception requests, we found that 16 of the remaining 38 offices responded that they tracked these data, 21 responded that they did not track these data, and 1 responded that it was unsure whether it tracked these data.\nFurther, we found that of the 6 BLM field offices we visited, 5 tracked exception data. However, officials from 3 of the 5 offices stated that the data were not consistently tracked, raising concerns about the data’s reliability. At one of these offices, officials told us that they tracked data only for requests to exceptions to requirements related to a single species. Officials stated that while they may have received exception requests for other environmentally related lease and permit requirements, they believed the number was low. An official from another office stated that while the office has a spreadsheet to track the data, the spreadsheet has been inconsistently updated. Officials from another office told us that the responsibility for tracking data had been left to employees who had inconsistently tracked the data and had since retired and that, for a period of time, they had not tracked exceptions. Officials at the single office that did not track exception data at the time of our visit subsequently told us that they planned to start tracking these data. When asked to estimate the number of exceptions approved per year at this office, officials offered widely varying estimates. One official estimated that the office might receive 10 requests per year, while other officials within the same office estimated they have had years with more than 100 requests.", "BLM field office processes for considering exception requests and documenting decisions on them varied from fiscal years 2009 through 2015, and the reasons for the decisions were not always clear from the documentation. In November 2007, BLM issued a policy on reviewing and approving exceptions. BLM included as an attachment to the policy written instructions on how field offices were to review and approve exceptions. The written instructions state that an exception decision should be fully documented in the case file with an appropriate level of environmental review. The written instructions state that BLM field office staff’s review and recommendations should be documented along with any necessary mitigation and provided to the authorized officer for approval or disapproval.\nOverall, BLM officials told us that the general process is that an exception request is made in some written format, such as a sundry notice (a standardized form for submitting information to BLM), e-mail, or BLM form. Upon receiving the request, BLM field office staff are to assess the request, review decision criteria, and make a decision. The decision is then to be communicated back to the operator as per BLM’s November 2007 guidance. Within this general process, our review of the 6 BLM field offices we visited found significant variation in how BLM officials consider exception requests and document decisions. We found that BLM field office processes for considering exception requests and documenting decisions varied in the following ways.\nStandardized request form. We found that 2 of the 6 field offices required operators to use a standardized form when requesting an exception, while the remaining offices received requests via a letter or sundry notice. In reviewing files, we found that there was more complete information about the request in offices using a standardized form for exception requests. For example, one of the forms required information on the permit or lease requirement involved, a description of the proposed exception to the requirement, and the justification for the request. In other offices that did not have a standardized form, information on the operator requests varied. In some cases the operator provided a detailed explanation of the request, whereas in other instances little information was provided other than that an exception was requested.\nLease versus permit requirements. BLM officials in all 6 field offices told us that they make minimal distinction between lease and permit requirements when reviewing exception requests. Knowing which requirement is at issue is necessary to determine the applicable exception criteria. When reviewing BLM files, we found that sometimes documentation in the file clearly indicated the exception request was related to a permit requirement, whereas other times it was unclear whether the request related to a permit or lease requirement. Without clear documentation in the file indicating whether the request is for a permit or lease requirement, it may be difficult to identify what exception criteria, if any, apply to the request.\nWritten exception policy. We found that 3 of the 6 BLM field offices had a written policy for processing exception requests. These policies, according to BLM officials, were developed to provide greater specificity about the exception process. According to BLM officials at 1 of the offices with a written policy, having a written policy helps them communicate expectations to operators for how exception requests will be considered.\nInternal checklist. We found that 2 of the 6 field offices employed an internal checklist for processing exceptions, though an official in 1 of the offices stated that staff used it inconsistently. In 1 of these offices, the checklist details a sequential review process where signatures and comments are made by the relevant decision makers. Specifically, the form requires input from BLM’s project lead and wildlife biologist, state fish and game officials, and the BLM field office manager. In completing the checklist, officials are to identify the applicable criteria for considering the request and describe whether there is any biological benefit for the proposed action. The field office manager receives the checklist after relevant input has been made by BLM staff and then completes a signature box on the form for granting, denying, partially granting, or not concurring. Space is also provided for the field office manager to provide an explanation of the decision. In contrast, other offices did not have a standardized form for considering the request and approved or denied the request via sundry notice without an explanation. In these instances, BLM’s actual process for considering the request was unclear.\nCompensatory mitigation. We found that 1 of the 6 field offices frequently requires compensatory mitigation when approving an exception. This means that if the field office grants an exception, it requires the operator to take some other action to mitigate the environmental impacts of the exception. According to BLM officials, the office has developed a standard practice of requiring operators to improve 25 acres of habitat for each approved month of an exception to a wildlife-related seasonal drilling limitation. According to these officials, this practice was developed over time. BLM officials also told us that allowing year-round drilling for certain projects could minimize disturbance to wildlife by allowing drilling to be completed sooner. For example, a project might have taken 3 years to complete if seasonal permit drilling requirements were in effect, whereas it might take 1 1/2 years to complete if BLM approves an exception to seasonal drilling permit requirements.\nResource management plan exception criteria. We found that the primary resource management plan for all 6 BLM field offices we visited had generally identified criteria for granting exceptions, in accordance with BLM’s November 2007 policy. However, the specificity of the criteria varied. One of the resource management plans we reviewed included very specific exception criteria for a number of lease and permit requirements. For example, the plan describes lease requirements related to a type of habitat used by birds for mating. It specifically states that surface disturbance is prohibited or restricted within a 1/4 mile perimeter of the habitat, if occupied. The plan then identifies the particular conditions under which BLM may approve an exception request. Specifically, the plan states that BLM may approve the exception if it is determined that the “action is of a scale, sited in a location, or otherwise designed so that the action will not impair the function and suitability of sharp-tailed grouse breeding habitat.” In contrast, another resource management plan includes less specific criteria for granting exceptions. The plan states that exception requests from seasonal lease and permit requirements will be coordinated with the state wildlife agency and that requests are to be analyzed and documented individually for compliance with the resource management plan and NEPA. However, the plan further states that “there is no clear formula” for arriving at these biological recommendations. In addition, the plan does not include specific information on any particular lease or permit restriction; rather, the plan lays out a variety of factors to consider, such as weather.\nIn reviewing a nongeneralizable sample of 54 exception decisions made in fiscal years 2009 through 2015 at the 4 field offices that could provide us with data, we found that documentation of exception decisions varied. We examined each file for a range of information, including (1) documentation on the operator’s request for the exception, (2) whether the exception request related to a lease or permit requirement, (3) whether the exception criteria were specified, (4) the basis for the field office’s decision, and (5) how the decision was communicated to the operator. We found that of the 54 exception decisions reviewed, 27 were well documented, 20 were partially documented, and 7 were not well documented. While BLM has some written guidance on considering and documenting exception requests, it may not result in BLM staff documenting exception decisions fully or clearly because the November 2007 guidance does not specify the format for documenting the exception requests and decisions. We found that the checklist used for considering and documenting exception decisions employed in 1 of the field offices provided an effective means to consistently and clearly document the decision making process. In other offices that did not employ such a checklist, the reasons for the exception decisions were not always clear. Standards for Internal Control in the Federal Government states that agencies are to clearly document transactions and other significant events and that documentation should be readily available for examination. Without consistent and clear documentation of exception decisions, BLM may not be able to justify its decisions and provide reasonable assurance that its decisions were consistent with its responsibilities under NEPA.", "BLM consistently involved the public when developing lease requirements and to some extent when developing permit requirements. However, BLM generally did not involve the public when considering an operator’s request for an exception to a lease or permit requirement.", "In 2010, BLM introduced bureau-wide reforms to the oil and gas leasing process, and since the implementation of these changes, it has consistently involved the public in the development of lease requirements, as part of the lease sale process. As part of the leasing reforms, most parcels that field offices determine should be available for lease are subject to a site-specific NEPA analysis, generally in the form of an environmental assessment, and lease requirements are identified as part of this process. Such lease requirements are often developed through BLM’s land use planning phase and applied to specific leases during the leasing phase. Officials from environmentally related nongovernmental organizations, state wildlife agencies, and the oil and gas industry stated that they comment on the initial development of lease requirements during the planning phase. In addition, the public has formal opportunities to comment on land use plans, including lease requirements, as described in the background section of this report. During the leasing phase, field offices are required to provide a 30-day public review and comment period for the environmental assessment before forwarding their lease recommendations to the BLM state office. In addition, state offices must provide a 30-day public protest period prior to the lease sale date.\nWe reviewed 35 lease sales that occurred from calendar years 2012 through 2015 at the 6 field offices we visited. In all cases the field offices provided the public with an opportunity to review and comment on the environmental assessment associated with parcels to be offered for sale, and some of the comments provided by the public pertained to proposed lease requirements. For example, in some cases the public commented that additional, or changes to, lease requirements would better protect environmental resources from the effects of proposed development. As part of the lease sale process, BLM reviews and responds to comments on draft environmental assessments. The agency may make changes to the environmental assessment if it determines changes are appropriate. BLM includes these comments and its response in the final version of each environmental assessment. We also found that, in all cases, BLM provided the public with an opportunity to protest the lease sale.", "BLM involved the public to some extent when developing drilling permit requirements, but the level of involvement varied depending on the field office and characteristics of the permit. BLM’s Onshore Order 1 requires BLM field offices to notify the public of all drilling permit applications received. Officials at all of the 6 field offices we visited stated that their offices follow this requirement by posting information identifying the proposed development—often the cover page of the drilling permit application—in an area of their office that is available to the public, such as a reading room. Members of the public then have the opportunity to review this information and submit comments. However, the field offices generally do not post the information electronically on BLM’s public website. According to representatives of environmentally related nongovernmental organizations, when BLM does not make this information available on a website, it is difficult for the public to track potential drilling activities and comment.\nOnce a drilling permit application is received, BLM field offices complete an environmental assessment to assess the potential environmental impacts of the proposed development. As part of this process, the agency can develop permit requirements, which are intended to mitigate environmental impacts. In 2014, BLM began implementing a website called ePlanning through which BLM field offices are required to make environmental assessments associated with drilling permits (among other documents) available to the public. Prior to the use of ePlanning, the public could not access drilling permit environmental assessments on a centralized site, although officials from 2 of the field offices we visited stated that they previously posted some limited information about the environmental assessments on their individual field office websites. According to BLM policy, BLM’s ePlanning website is intended to standardize the agency’s land use planning documents and allow public access to NEPA documents, including environmental assessments completed as part of the oil and gas permitting process. According to BLM’s ePlanning implementation plan, when the plan is fully implemented, BLM offices will be required to post all NEPA documents on the site within 1 week of completion and must include all associated draft and final documents. Documents posted to ePlanning must be updated within 1 week of any status change. According to a BLM official responsible for overseeing the implementation of ePlanning, while the agency expects the site to be fully implemented by late 2017, the remaining implementation steps involve internal, technical changes to the system. The official stated that the aspects of the site that are accessible to the public are “fully functional” at this time, meaning that BLM offices are currently posting all NEPA-related documents to the site.\nOfficials from all of the 6 field offices we visited stated that their office posts environmental assessments related to oil and gas permits to ePlanning when they are final. However, officials from only 1 of the 6 field offices stated that their office makes a draft version of the environmental assessment available online; officials from the other 5 stated they post a draft version of the environmental assessment only sometimes. Officials from 4 of these offices explained that they would post a draft if development in the area was likely to be of substantial public interest. For example, BLM officials stated that proposed development near a national park or a populated area may warrant increased public involvement. Again, representatives of environmentally related nongovernmental organizations stated that, in some cases, it is difficult to identify and comment on proposed drilling activities. While BLM’s ePlanning policy requires that all draft and final versions of environmental assessments be posted to the site, BLM’s NEPA Handbook states that CEQ regulations do not require agencies to make environmental assessments available for public comment and review, and that public involvement is at the discretion of the decision maker. According to the handbook, such public involvement may include external scoping, public notification before or during preparation of an environmental assessment, public meetings, or public review and comment of the completed environmental assessment and unsigned “Finding of No Significant Impact.” BLM field offices are not required to produce a draft environmental assessment in all cases, but if a draft is produced, the offices are required to post the document for public review on ePlanning.", "BLM officials stated that they have generally not involved the public when considering operator requests for exceptions to lease and permit requirements. According to BLM’s policy, public notification is not required unless granting an exception would result in a substantial modification or waiver of a lease requirement. According to BLM officials, this is seldom the case, particularly if the exception criteria are outlined in the land use plan. According to a BLM official, one circumstance in which the public could be involved is when an operator requests an exception at the time a drilling permit is requested. In this circumstance, the public may be able to submit comments on BLM’s environmental assessment for the permit, depending on the scale of the proposed drilling project. However, BLM officials from all 6 offices we visited stated that public involvement in exception requests was infrequent. BLM officials stated that in many cases public involvement may not be practical. For example, an operator may experience drilling complications and need an exception to drill 1 or 2 additional days beyond a seasonal deadline. BLM officials stated that in such cases, it would be impractical to solicit public input given the need to respond to the operator’s request promptly. Additionally, BLM officials stated that if they are making a decision in accordance with exception criteria in the lease or permit developed through the NEPA process, public involvement is not required.\nRepresentatives of environmentally related nongovernmental organizations told us that they typically do not comment on exception request decisions because BLM generally does not notify, or solicit input from, the public when determining whether to grant an exception. Several representatives told us their organizations focus their efforts on providing comments related to lease and permit requirements early in the oil and gas development process. For example, several representatives told us their organizations provide the majority of their input when BLM is developing its resource management plans or identifying lease parcels for sale. One representative said that the organization rarely finds out when operators have been granted exceptions and so at times believe incorrectly that lease and permit requirements are in effect. One representative told us that the representative’s organization attempted to develop informal agreements with certain BLM field offices whereby BLM staff would notify the organization when an exception request was submitted. However, according to the representative, the organization was unable to develop such agreements. Another organization’s representative stated that BLM and operators often agree to an exception verbally and document the decision afterwards, precluding any opportunity for public comment. This representative noted that some exceptions, such as those that allow an additional 1 or 2 days of work, might not warrant comments. However, the representative stated that if an exception request were made for a more significant activity, such as a road proposal for an area that has a no surface occupancy requirement, the organization would like the opportunity to provide comments. A representative of an oil and gas industry association stated that operators make requests in accordance with criteria laid out in leases and permits and that the exception process is a key part of BLM’s adaptive management policy, which attempts to provide for a flexible management approach based on current resource conditions.\nOf the 6 BLM field offices we visited, only 1 made information about exception decisions available to the public, both in the office and on its website. The Office of Management and Budget issued a memorandum in December 2009 directing agencies to publish government information online with the goal to increase accountability, promote informed participation by the public, and create economic opportunity. Also, Standards for Internal Control in the Federal Government state that information should be recorded and communicated to those who need it, which can include external stakeholders, in a form and within a time frame that enables them to carry out their internal control and other responsibilities. NEPA and BLM regulations and guidance provide multiple opportunities for public involvement during BLM’s land use planning process. The substance of this involvement could be dependent on the effects of BLM’s past decisions in implementing aspects of its resource management plans, including those related to exceptions. However, BLM does not require that its field offices make the results of exception decisions available to the public. Without access to information on how often exception requests are made and approved and the reasons for the decisions, the public may not have the information necessary to provide substantive input into BLM’s land use planning process.", "BLM has generally implemented its best management practices policy by including key practices as permit requirements. However, BLM has not consistently documented environmental inspections, which are intended to verify that operators have implemented permit requirements. Moreover, BLM has not effectively used data from monitoring inspections, which are intended to assess the effectiveness of lease and permit requirements in mitigating environmental impacts of development.", "BLM has generally implemented its best management practices policy by including key practices as permit requirements. As described previously, BLM’s policy on best management practices states that there are four key practices, described in table 1 that should be considered for inclusion as permit requirements in nearly all circumstances. Our review of 109 randomly selected well files at six BLM field offices found that at least one of the four key practices had been included as a permit requirement in nearly all of the files we reviewed. Specifically, of the 109 files we reviewed, 108 (99 percent) included at least one of the four key practices, 105 (96 percent) included at least three of the four practices, and 82 (75 percent) included all four of the key practices as permit requirements.\nBLM’s policy states that field offices should consider requiring other best management practices, such as those described on BLM’s website, on a site-specific basis. BLM field office officials we interviewed stated that all drilling permits include best management practices, though field offices generally do not track this information. Officials described the best management practices policy as being flexible to accommodate a wide range of site-specific conditions found across the areas where BLM oversees oil and gas development. Officials told us that BLM does not have a nationally approved list of best management practices but stated that suggested best management practices can be found in its Surface Operating Standards and Guidelines for Oil and Gas Exploration and Development and on a BLM webpage discussing best management practices.\nDuring our site visits to the six BLM field offices, officials described and demonstrated a variety of best management practices that they frequently consider for inclusion as permit requirements, including the following.\nSegregation of topsoil. Retaining topsoil (the outermost layer of soil) separately from the lower levels of soil when clearing an area for development can preserve the quality of the soil until reclamation activities occur. Topsoil generally contains the highest concentration of organic matter and is critical for successful plant growth.\nErosion control. Various erosion control methods, such as putting stones in culverts or straw matting on steep slopes, can help prevent soil erosion.\nBird cones. Installing wire mesh cones over exhaust pipes can prevent birds from nesting or becoming trapped in the pipes.\nCentralized liquid gathering. Using liquid gathering lines to move oil, gas, water, and condensate from well pads to centralized facilities placed offsite can reduce the need for truck traffic in areas of sensitive resources and habitat.\nAvian protection on power lines. Installing protective equipment on power lines can prevent birds from being electrocuted.\nProtective grates over pits and tanks. Covering production-related pits and tanks with nets or metal grates can prevent wildlife from drowning in contaminated water and other liquids.\nSecondary containment to prevent damage from leaks.\nSecondary containment around tanks on well pads can prevent damage to the environment in case of tank leakage.\nRadio telemetry. Placing radio telemetry equipment at wells and related production equipment to transmit data from the well site to an operator’s remote monitoring facility can reduce the number of maintenance and inspection trips made during critical periods for wildlife and result in less wildlife disturbance.\nFigure 2 illustrates a selection of best management practices we observed at drilling sites located on lands managed by the BLM field offices we visited.\nBLM field office officials generally stated that there is not a formal process for how a practice becomes a best management practice. According to officials, new practices can be identified and recommended by industry or BLM headquarters staff. Additionally, according to BLM field office officials, some field offices have developed their own best management practices. BLM officials told us that more recently issued resource management plans typically include an appendix listing best management practices. In examining the most recently issued resource management plans for the field offices we visited, we found that four of six field offices had plans that included a best management practices appendix. The other two field offices are in the process of updating their resource management plans. In reviewing the plans that contained best management practices appendixes, we found that the amount of information they contained varied. For example, one plan included over 80 pages of suggested best management practices, while another plan included information on best management practices that totaled fewer than 20 pages.\nBLM field office officials stated that the extent to which best management practices are attached as BLM permit requirements, or included in an operator’s plan, varies. Officials told us that some companies are more proactive and include best management practices in their plans, whereas other companies rely on BLM to identify such practices. BLM staff from one field office stated that discussion about best management practices typically occurs when BLM officials visit a proposed drilling site. During such visits, BLM officials and the operator will discuss the proposed plan, and BLM staff will highlight practices they anticipate would be effective in mitigating environmental impacts. The operator may then elect to voluntarily include these practices in the proposed plan, or BLM may include them as permit requirements.\nA representative from an association of oil and gas operators stated that BLM’s best management practices policy is generally successful because the BLM field offices have the flexibility to determine which practices to require. Additionally, the representative told us that many best management practices are initially developed by operators. The representative stated that operators may try various approaches for mitigating environmental impacts of oil and gas development, and when they identify a practice that works, BLM will often adopt it as a best management practice and require other operators to implement it as well. The representative cautioned that the feasibility and effectiveness of practices greatly depends on the local topography and geology. For example, one best management practice is to bury temporary liquid gathering lines used to transport fluids away from a drill site, thereby reducing visual impacts to the landscape. However, in certain areas, this is not an effective approach to protecting the environment because the area has very little topsoil and would require digging through rocks to bury the lines. Such digging, according to the representative, could result in longer-term impacts to the environment than leaving the gathering lines on the surface.\nRepresentatives from environmentally focused nongovernmental organizations offered a mixed view of best management practices. Some representatives stated that it was beneficial for operators to employ these practices. Another representative pointed out that the easier a best management practice is, the more likely it is to be implemented. For example, painting a storage tank to blend in with the environment is relatively easy and commonly implemented, whereas certain practices related to drilling—such as conducting horizontal or directional drilling to reduce surface disturbance—are more complex and may not be used as often. A representative from another environmental organization stated that BLM applies best management practices in a sporadic and nonrigorous manner and that the bureau appears to treat these practices as a menu from which operators can select the ones they would like to implement. Another representative stated that operators tend to make economically driven decisions and implement best management practices only when required to do so.", "BLM has not consistently documented environmental inspections, which are conducted to verify that operators have implemented permit requirements, including best management practices. BLM’s Inspection and Enforcement Documentation and Strategy Development Handbook states that documentation of all inspections must be clear, concise, and legible and provide an accurate description of what was inspected, including the findings. The handbook states that documentation should include, among other things, worksheets or checklists developed by field offices or other sources to document inspection results. According to the handbook, without clear and accurate documentation of existing conditions and activities, enforcement actions cannot be taken or decisions upheld if appealed by the operator.\nWe found that inspections were documented using different formats and that the inspection documents varied in the level of detail provided. During our file review, we examined 152 environmental inspection documents associated with our random sample of 109 files from the six field offices to determine whether the four key best management practices were verified during these inspections and found that 58 (38 percent) of the documents did not indicate that all four key practices were verified. The two most commonly used documents we observed were a “Surface Inspection Form” and a “Production/Interim Reclamation Inspection/Monitoring–Environmental” form. The “Surface Inspection Form,” which is generally completed using AFMSS (BLM’s data system for oil and gas management), uses a narrative format. It includes fields for basic identifying information about the well and type of inspection and fields for general remarks about the inspection and follow-up remarks, if applicable. The “Production/Interim Reclamation Inspection/Monitoring– Environmental” form, which was created in 2007 by BLM’s Washington Office but is not an official agency form, uses a checklist format.\nOur file review found that the narrative format, in some cases, resulted in inspection documents that did not contain sufficient detail to indicate whether permit requirements had been verified. For example, we observed some inspection documents using the narrative format that consisted of two lines of general remarks that did not identify whether implementation of the four key practices had been verified. In contrast, we found that the checklist format typically resulted in greater assurance that the four key practices were verified. For example, we found that the four key practices were verified in 64 of 65 (98 percent) inspection documents when the checklist format was used, versus 15 of 62 (24 percent) documents when only the narrative format was used. In some cases, we observed a version of the checklist format that included an additional check to indicate whether all permit requirements were verified during the inspection. The use of this check provided assurance that the inspector had verified all permit requirements that applied to that well, rather than only the requirements listed on the checklist. Appendix II contains templates of the three formats.\nBLM’s guidance for documenting inspections does not clearly indicate which forms are required to document environmental inspections. One part of the guidance identifies both the narrative and checklist formats in a list of forms that may be mandatory for completion, depending on the inspection type. However, at another point, the guidance states that only the narrative format must be used for environmental inspections.\nDuring interviews with BLM officials responsible for conducting environmental inspections, we found that officials did not have a common understanding of the requirements for documenting inspections. For example, an official at one field office stated that, when conducting environmental inspections, he uses the narrative format and does not use the checklist format. Officials at another field office stated that they complete both formats but do not always print a copy of the narrative format for the hard copy file, which is BLM’s official record. Officials at another field office stated they received conflicting instructions about which documentation format to use. According to the officials, at one point, the field office used a version of the checklist format and received guidance from BLM’s Washington Office that they should instead be using the narrative format in AFMSS. However, the officials stated that the following year, they received instruction from the Washington Office stating that both formats are required to document environmental inspections. As a result of the conflicting instructions, at the time of our visit, officials said they were unsure of the requirements for documenting environmental inspections.\nBLM is in the process of developing updates to its AFMSS database, which a BLM official stated will include more detailed forms for documenting environmental inspections and the ability to electronically document inspections from the field. Specifically, BLM officials stated that one planned update will replace the existing narrative format for documenting environmental inspections with a checklist format similar to the one described above. In addition, BLM is continuing its effort to develop a mobile computing solution as part of its AFMSS update. The mobile computing solution would allow BLM employees to remotely document environmental inspections when in the field. According to BLM’s lead point of contact for the development of these AFMSS updates, BLM is currently evaluating different devices to determine which one will best meet the agency’s needs. BLM officials stated that the updates are projected to be implemented by the end of 2017.\nWe also found that some BLM field office employees may not have received training on how to document environmental inspections. BLM offers a limited number of voluntary classroom training courses but does not require training for BLM officials responsible for conducting environmental inspections. Some officials responsible for conducting environmental inspections stated that they have been unable to attend the voluntary training because funding to travel to the training was not approved. Some BLM field office officials stated that, in the absence of required training or the necessary funds to attend voluntary training, they rely on on-the-job training. An official from one field office stated that new employees must rely on training received from a mentor, who may not have attended classroom training recently or at all. In our 2016 report on Interior’s human capital challenges, we found that Interior’s bureaus, including BLM, have not evaluated their oil and gas staff’s training needs or the effectiveness of the training provided to key oil and gas staff, and we recommended that Interior annually evaluate its bureaus’ training programs. Interior partially agreed with the recommendation, and the recommendation remains unimplemented. Standards for Internal Control in the Federal Government states that operational success is possible only when the right personnel for the job are on board and provided the right training, tools, structure, incentives, and responsibilities.\nBLM is in the process of redesigning the training it offers to officials responsible for conducting environmental inspections. A BLM official responsible for training stated that BLM’s redesigned training program would lead to a certification for officials conducting environmental inspections, similar to the training program BLM has in place to train those conducting other types of oil and gas inspections, including those related to drilling and measurement. Funding for the training is also under consideration. Currently, BLM headquarters funds training for the existing inspector certification courses, while funding for training those conducting environmental inspections is allocated by field office managers. The BLM official responsible for training stated that, as a result, funding challenges can impact the consistency of training across the agency. If BLM headquarters funded the new training, it could reduce the funding challenges field office managers currently face. The official further stated that if the training was successfully implemented, it should ensure greater consistency and thoroughness of environmental inspections. However, in December 2016, a BLM official stated that BLM does not have a policy that would require employees to attend the redesigned training. Instead BLM officials stated that they plan to start a training pilot project in the spring of 2017.\nThe steps BLM is taking to improve its training program and data system may help to improve the quality of environmental inspection documents, but these limitations in the agency’s inspection documentation guidance and training policies may continue to present challenges. Without clear guidance regarding which forms are required to document environmental inspections, BLM employees may continue to document the inspections in a manner that does not always indicate whether all requirements were verified. In addition, without a policy requiring employees responsible for conducting environmental inspections to complete formal training, BLM may be unable to ensure that its employees receive the training. Ensuring that BLM staff responsible for conducting environmental inspections receive the guidance and training they need to conduct and document environmental inspections could enhance the ability of BLM to mitigate the impacts of oil and gas development and to carry out its responsibilities for proper stewardship of the environment.", "BLM field offices conduct monitoring inspections but have not effectively used data collected during these inspections to assess the effectiveness of mitigation activities, such as those carried out under BLM’s best management practices policy. BLM requires field offices to conduct monitoring inspections; however, we found that field offices vary in their understanding of what qualifies as a monitoring inspection. In addition, not all field offices have been able to effectively use monitoring inspection data to assess the effectiveness of best management practices.\nIn fiscal year 2008, BLM conducted a self-assessment of its best management practices policy and found, among other things, that staff in field offices may not clearly understand how to monitor the effectiveness of these practices. As a result, a report on the self-assessment recommended that BLM update or issue policy about monitoring the effectiveness of best management practices. According to BLM officials, the agency implemented this recommendation by issuing a monitoring inspection policy in 2009. The policy requires BLM field offices with oil and gas management responsibilities to conduct monitoring inspections in accordance with CEQ regulations. BLM’s policy states that monitoring is conducted to assess actual or potential environmental impacts, determine whether BLM standards are being met, and evaluate whether permit requirements (which could include best management practices) are effective to achieve their desired intent. To ensure the agency’s compliance with the CEQ requirements, BLM’s policy requires BLM field offices to report the number of completed monitoring inspections.\nBLM officials from all of the six field offices we visited stated that their field office conducts some type of monitoring activities. However, during fiscal years 2010 through 2015, these activities were tracked in a variety of ways, and some field offices did not report the number of monitoring inspections completed, as required by BLM’s 2009 policy. Because BLM’s AFMSS database is unable to track monitoring inspections, the 2009 policy required officials to report the number of monitoring inspections in BLM’s PMDS. We found that two of the field offices we visited did not report numbers of monitoring inspections in the PMDS from fiscal years 2010 through 2015. Officials from one of these field offices explained that they require operators to conduct monitoring through third-party contractors, and the officials did not believe the activities should be reported because the monitoring was not conducted by BLM employees. Officials from the other field office stated that they conducted monitoring inspections and tracked these inspections using their own internal spreadsheets.\nBLM’s 2009 monitoring policy includes an attachment that provides guidance on how to interpret and implement the policy. The attachment provides examples of the types of activities that could be considered monitoring inspections, including conducting wildlife surveys, conducting habitat restoration surveys, and determining the status of interim reclamation. The attachment also explains how a monitoring inspection differs from an environmental inspection. For example, in assessing interim reclamation, an environmental inspection would verify whether the operator seeded a disturbed area according to permit requirements, while a monitoring inspection would collect data to assess whether the seeding was successful. The attachment states that, in some cases, a visit to a particular inspection site could count as both an environmental inspection and a monitoring inspection, depending on the activities completed.\nHowever, we found that despite this guidance, officials at the six field offices we visited varied in their approaches to conducting monitoring and did not share a common understanding of what types of activities constitute a monitoring inspection. For example, officials from one field office stated that they consider inspections related to air or water quality to be monitoring inspections, while officials from another field office stated that they consider inspections related to reclamation of plugged and abandoned wells to be monitoring inspections. Officials from a third field office stated that they plan to consider inspections of plugged and abandoned wells to be monitoring inspections, but in prior years, the field office had considered all environmental inspections as monitoring inspections. Some BLM field office officials stated they were unsure of the difference between a monitoring inspection and an environmental inspection. BLM employees responsible for conducting monitoring inspections are also responsible for conducting environmental inspections. As previously noted, BLM has only voluntary classroom training for these employees, and some employees have had only on-the- job training because of barriers to attending the voluntary training that BLM currently offers.\nWe also found that BLM field offices generally do not use the data collected from monitoring inspections to assess the effectiveness of lease and permit requirements, including best management practices, at mitigating environmental impacts. Although BLM’s 2009 monitoring policy requires that field offices track the number of monitoring inspections completed, it does not provide guidance on how data collected during monitoring inspections should be tracked or used. As a result, according to BLM officials, monitoring inspection data are captured in a variety of formats, including monitoring reports submitted by operators, agency databases, and spreadsheets. In addition, although officials from five of the six BLM field offices we visited stated that their field office has access to monitoring data, officials from four of the field offices stated they generally have not used the data to assess the effectiveness of mitigation measures. Officials at one field office stated that collecting and maintaining monitoring data is at the discretion of individual BLM employees, while officials from another field office stated that they were unaware of any efforts to use monitoring data to assess the effectiveness of mitigation. Officials from two field offices stated that while they have access to monitoring data, they are unable to analyze the data because of its format or the office’s system for tracking the data. Both of the two field offices where officials described using monitoring data described mechanisms for tracking the data, which included databases and a series of electronic spreadsheets. In particular, one of the two offices was using a database to track interim and final reclamation efforts and was able to generate reports based on a variety of criteria to assess the status of reclamation.\nRepresentatives from environmentally focused nongovernmental organizations and an association of oil and gas operators stated that, from their perspective, BLM may not fully assess the effectiveness of best management practices. For example, a representative from one nongovernmental organization stated that the analysis of the effectiveness of the best management practices is sometimes conducted by operators, so the quality of the data and the conclusions are questionable. In addition, he stated that he was unaware of any analysis comparing the environmental impact of projects that use best management practices with the impact of projects that do not. Another representative stated that from his perspective monitoring seemed to be a low priority for BLM. A representative from an association of oil and gas operators stated that in some instances BLM requires operators to conduct surveys and provide the agency with survey data, but the agency does not always use the data provided to assess the effectiveness of best management practices.\nWhen BLM field offices are unable to effectively use data collected during monitoring inspections, the agency cannot leverage these inspections to assess the effectiveness of its mitigation efforts, including its best management practices policy, in accordance with the purpose of its 2009 monitoring policy. Providing guidance to the field offices on how monitoring data should be used could enhance BLM’s ability to assess the effectiveness of its mitigation activities across the bureau. In addition, as previously discussed, although BLM is redesigning its training for employees responsible for conducting inspections, it does not currently have a policy that would require employees to take the redesigned training. Ensuring that staff have training could potentially improve BLM employees’ understanding of what types of activities should be included as part of the agency’s monitoring inspection program and improve the consistency of reporting and documenting inspections. Improving BLM’s monitoring inspection program could allow the agency to better assess environmental impacts of oil and gas development and the effectiveness of efforts to mitigate such impacts.", "BLM is responsible for managing oil and gas development on federal lands while also mitigating the environmental impacts of such development. BLM mitigates the impacts primarily through the requirements that it places on the leases and permits it issues to operators. It has also developed a best management practices policy, and best management practices may be included as lease and permit requirements. Operators can request exceptions to these requirements, and BLM can decide to approve requests if certain criteria are met.\nHowever, BLM field offices have not tracked exception data consistently, making it difficult to determine the extent to which they have approved exception requests. Additionally, BLM staff across field offices are not using a consistent process for considering and clearly documenting exception decisions. Although BLM issued a policy in November 2007 stating that exception decisions should be fully documented, it does not have documented procedures to ensure that field office decisions are consistently and clearly documented. BLM could better quantify the extent to which exceptions are approved and better ensure that such decisions are consistent with its responsibilities under NEPA if it tracked exception requests and had documented procedures for consistently considering and clearly documenting exception decisions across its field offices.\nIn addition, BLM does not currently require field offices to make the results of its exception decisions available to the public. Without access to this information, the public may not be able to provide substantive input into BLM’s future land use planning processes.\nMoreover, BLM field offices have generally implemented BLM’s best management practices policy but have not consistently documented environmental inspections to verify that operators have implemented the practices as required, in part because the guidance for documenting inspections is unclear. Without consistently documenting that all permit requirements are verified as implemented when conducting environmental inspections, BLM field offices cannot provide assurance that activities designed to mitigate environmental impacts have been carried out by operators as required. In addition, documentation of environmental inspections that is not sufficiently clear and accurate could limit BLM’s ability to take and uphold enforcement actions when needed.\nFurther, BLM field offices have not effectively used monitoring inspection data to assess the effectiveness of best management practices to mitigate environmental impacts of oil and gas development. Consequently, the agency may be limited in its ability to understand and demonstrate the extent to which its lease and permit requirements have successfully mitigated the environmental impacts of oil and gas development. The agency is in the process of implementing training for employees responsible for conducting environmental and monitoring inspections, but it has not established a policy requiring employees to complete this training. Without such a requirement, BLM cannot ensure that employees understand how to carry out monitoring inspections, that environmental inspection documents will be prepared consistently by field office staff, or that the data will be used to assess the effectiveness of best management practices.", "The Director of the Bureau of Land Management should take the following six actions. 1. Develop a policy to ensure that field offices consistently track exception data. 2. Develop bureau-wide written procedures for consistently considering and clearly documenting the information and processes used to make exception decisions. 3. Direct field offices to make the results of exception request decisions available to the public, such as on BLM’s public website. 4. Clarify guidance related to documentation of environmental inspections to ensure that inspections are documented in a manner that indicates whether all permit requirements were checked as part of the inspection. 5. Provide additional guidance to field offices on how to collect and use data collected during monitoring inspections and, in doing so, determine and implement an approach for using the data to assess the effectiveness of the agency’s mitigation efforts, including its best management practices. 6. Establish a policy requiring staff responsible for conducting environmental and monitoring inspections to take standardized training.", "We provided a draft of this report to Interior for review and comment. Interior concurred with five of our recommendations and partially concurred with one recommendation. Agency comments are reproduced in appendix III, and key areas are discussed below.\nInterior partially concurred with our recommendation that it direct field offices to make the results of exception request decisions available to the public, such as on BLM’s public website. According to an attachment to BLM’s 2007 policy on exceptions, it is to fully document exception decisions in the case file with the appropriate level of environmental review. Interior stated that it is required to document exception decisions in case files and that these files can be made available to the public upon request. Interior further stated that database upgrades will improve exception tracking and public posting in the future. In our review, we found that BLM offices did not always document exception decisions. We further found that these offices did not consistently track exception decisions. As a result, the public may not be aware of the extent to which exceptions are approved or the reasons for doing so. Because the public is an important stakeholder in the land use planning process, we believe that BLM should strive to make this information available to the public to enhance its ability to participate as BLM develops new land use planning documents.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "This appendix details the methods we used to assess the Department of the Interior’s Bureau of Land Management’s (BLM) efforts to mitigate environmental impacts from oil and gas activities. Specifically, this report examines the extent to which BLM (1) approved requests for exceptions from lease and permit requirements intended to mitigate environmental impacts, and how these decisions were made and documented; (2) involved the public in the development of lease and permit requirements and in the approval of exception requests; and (3) implemented its best management practices policy and assessed its effectiveness in mitigating environmental impacts. Because of availability of data and the issuance of policies, the time frames varied for each of the objectives.\nTo conduct our work, for all three objectives, we reviewed relevant laws, regulations, and BLM guidance. We also interviewed officials in BLM headquarters and officials from a nongeneralizable sample of eight BLM field offices (two of which were for scoping purposes to help formulate our audit approach and not included in our file reviews) and the corresponding four BLM state offices. We selected field offices based primarily on (1) geographic variability and (2) oil and gas leasing and permitting activity. Specifically, we visited and interviewed officials in two BLM state offices (Colorado and Wyoming) and interviewed officials by telephone in two additional offices (Utah and New Mexico). We also visited and interviewed officials in seven BLM field offices (Carlsbad and Farmington in New Mexico, Buffalo and Pinedale in Wyoming, White River and Colorado River Valley in Colorado, and Vernal in Utah) and interviewed an official by telephone in one additional office (Royal Gorge in Colorado). In fiscal year 2014, the four states we selected accounted for approximately 75 percent of producing federal leases and 85 percent of approved drilling permits.\nTo obtain additional perspectives on our three objectives, we interviewed by telephone representatives from an oil and gas association representing industry perspectives, seven environmentally related nongovernmental organizations, and four state wildlife agencies corresponding with the BLM state and field offices we visited.\nTo learn about available BLM data and BLM’s decision making related to exceptions, waivers, and modifications, we conducted a survey, interviewed agency officials, and completed a file review of a nongeneralizable sample of exception decisions. We electronically surveyed BLM officials responsible for 52 BLM offices with oil and gas activity to determine the extent to which BLM approved requests for exceptions to lease and permit requirements, and how these decisions were made and documented for fiscal years 2005 through 2015. We sent the questionnaire by e-mail in an attached Microsoft Word form that respondents could return electronically after marking checkboxes or entering responses in blank spaces. In an e-mail in advance of the questionnaire, we asked the official at each land unit if he or she was the correct respondent, and, if not, we asked for a referral to the official who was. We sent the questionnaire with a cover letter on March 1, 2016. We telephoned all respondents who had not returned the questionnaire after approximately 2 weeks and again after 4 weeks and asked them to participate. We received completed responses from officials responsible for 42 BLM offices in the field, which constituted an 81-percent response rate. The survey asked about available data on exceptions, waivers, and modifications from lease stipulations and drilling permit conditions of approval. In instances in which field offices had the data, we requested that they be e-mailed to us. Because the data were tracked inconsistently and BLM officials made statements indicating uncertainty about the completeness of the data, we determined the data were not sufficiently reliable for use to generate summary statistics on exception decisions across the bureau.\nAdditionally, to learn about the exception process, we used a semistructured interview guide to interview BLM officials in four state offices (Colorado, Wyoming, Utah, and New Mexico) and BLM officials in six field offices (Carlsbad and Farmington in New Mexico; Buffalo and Pinedale in Wyoming; Colorado River Valley in Colorado, and Vernal in Utah). To complete our file review, we used exception data provided by field offices to select a nongeneralizable sample of well files that included exception decisions. Specifically, at the six field offices included in our file review (Carlsbad and Farmington in New Mexico, Buffalo and Pinedale in Wyoming, Colorado River Valley in Colorado, and Vernal in Utah), we selected a nongeneralizable sample of approximately 10 files per office using the exception data field offices had sent to us as part of our survey. We selected these files based on fiscal year and the operator making the request to obtain a range of requests over time. Four of the six offices provided us data, while the remaining two were unable to do so. At the four offices that provided us data, we selected a nongeneralizable sample of 44 files from fiscal years 2009 through 2015. These 44 files included 54 exception requests. We then examined the files to see whether the decision was reasonably documented. This included examining (1) how the request was made; (2) who at BLM reviewed the request; (3) what the applicable BLM criteria were, if any; (4) whether BLM provided an explanation of its decision; and (5) how BLM communicated the decision to the operator. In many instances, the well files were not complete. The initial assessment on the reasonableness of the documentation was made by one analyst and subsequently reviewed and verified by a separate analyst. When a discrepancy occurred, source documents were examined, and the assessment was discussed. We determined that the process of assessing the reasonableness of the documentation of BLM’s exception decisions based on the available source documentation in the well file rendered the findings of the review to be sufficiently reliable for our purposes. Because we examined this issue at six field offices, our findings are not representative of all BLM field offices.\nTo examine the extent to which BLM involved the public in the development of lease and permit requirements and associated exception requests, we analyzed lease sale documents, conducted follow-up on our semistructured interviews with BLM field office officials, reviewed relevant BLM policies and guidance, and interviewed BLM’s program contact for its ePlanning initiative. Specifically, we reviewed environmental assessments and other lease sale documents obtained from BLM’s public website that were associated with lease sales held during calendar years 2012 through 2015 by the six field offices included our review. We reviewed the environmental assessments to determine whether public comments had been solicited and if any provided comments related to proposed lease requirements. We reviewed available documentation—for example, protest letters from the public or BLM’s responses to such letters—to determine whether an opportunity for public protest had been made available. To assess the reliability of the lease sale data used for this analysis, we confirmed with BLM state office officials the number of lease sales held by each office during the scope of our review. We determined the data were sufficiently reliable for our purposes. In addition, we conducted follow-up with BLM field office officials to clarify semistructured interview responses related to opportunities for public involvement at various stages of the development of permit requirements. To examine the extent to which the public was involved in BLM’s decisions to grant exceptions to lease or permit requirements, we interviewed BLM officials at the six BLM field offices we visited using our semistructured interview guide. We also asked questions related to this during our interviews with representatives from an oil and gas association, environmentally related nongovernmental organizations, and state wildlife agencies.\nTo examine the extent to which BLM implemented its best management practices policy and assessed its effectiveness to mitigate environmental impacts, we interviewed key program contacts regarding their roles in overseeing BLM’s oil and gas program, best management practices, and ongoing initiatives related to the Automated Fluid Minerals Support System (AFMSS) and employee training. We also used a semistructured interview guide to interview BLM officials in the selected four state offices and six field offices. We also conducted a file review at the six field offices we visited and reviewed monitoring inspection data from BLM’s Performance Management Data System (PMDS), both described in detail below. In addition, we reviewed relevant BLM policies and guidance. The purpose of our file review for this objective was to identify the extent to which selected BLM well files included best management practices as permit requirements and contained documentation that BLM had verified operators’ implementation of the requirements when conducting environmental inspections.\nTo design the methodology for our file review, we (1) identified best practices to include in the scope of our review, (2) developed a data collection instrument, and (3) identified a random sample of well files. Because many best management practices are site-specific, we chose to limit our review to four key practices, described in our report, that BLM policy states should be considered in nearly all circumstances. To develop a data collection instrument, we developed a hard copy form to be used when reviewing each file. This form included fields to document whether the team was able to review the file, whether the four key practices were identified as permit requirements, and whether the four key practices were verified as part of the environmental inspections documented in the file. Following our initial implementation of the file review during our first field office site visit, we confirmed that the data collection instrument functioned as designed. To identify a random sample of well files, we used data from BLM’s AFMSS on approved permits from fiscal year 2006 through 2015. To assess the reliability of the AFMSS data, we interviewed BLM officials and found that the data were sufficiently reliable for our purposes. Using these criteria, we generated a random sample of well files for each of the six BLM field offices included in our review. At each field office, we worked down the randomly ordered list of sampled files to review as many files as possible within the available time. In total, we reviewed 109 files, which included 152 inspection documents. Although this sample is not generalizable to BLM field offices as a whole, it is a statistically unbiased picture of the six field offices we visited.\nWhen conducting the file review at each office, two team members reviewed the files, using the prepared data collection instrument, for the allotted period of time. Next, the team members exchanged the files and completed data collection instruments to review the completed forms against the source material. To the extent that discrepancies were noted, the analysts consulted the source documentation onsite and came to agreement regarding the most accurate coding for that circumstance. In some cases, the underlying documentation was limited. For example, in some cases documentation of environmental inspections consisted of a short narrative, and the analysts were required to interpret the narrative to determine whether the four key best management practices were reviewed as part of the inspection. Consequently, there may have been some instances in which another person might have interpreted the source documentation to come to a different conclusion. While this is noted as a limitation, we determined that the process of verifying the file review data collection instruments against the source documentation rendered the findings of the file review to be sufficiently reliable for our purposes.\nWe also reviewed data from BLM’s PMDS related to monitoring inspections. We asked BLM headquarters to provide us with PMDS monitoring data for fiscal years 2010 through 2015. We chose this time frame to coincide with BLM’s monitoring policy, which was implemented in fiscal year 2010. The data indicated the number of monitoring inspections reported by BLM cost centers. BLM cost centers represent organizational units, such as field or district offices. We reviewed the PMDS data to determine whether the six field offices included in our review had reported monitoring inspections in fiscal years 2010 through 2015. In completing this review, we identified certain cost centers that were identified as a program division rather than a field or district office. As a result, it was unclear whether the inspections reported by such cost centers could potentially be associated with one of the offices included in our review. In order to ensure the accuracy of our analysis of the data, we conducted follow-up with officials from each of the six BLM field offices. We provided the PMDS data for all cost centers in the state appropriate for the field office and identified which lines of data we identified as having been reported by the field office. We asked the officials to confirm whether our interpretation of the data was accurate. Officials from four of the offices confirmed that our interpretation was accurate. Officials from one field office identified data reported by their office that we had not identified during our analysis. An official from the remaining office thought that the office had reported monitoring inspections during fiscal years 2010 through 2015 but could not identify inspections associated with the office in the provided data. On the basis of our analysis, we found the data to be sufficiently reliable for our purposes.\nWe conducted this performance audit from June 2015 to April 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence we obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the individual named above, Christine Kehr (Assistant Director), Richard Burkard, Mark Braza, Serena Epstein, Gustavo Fernandez, Glenn C. Fischer, Ellen Fried, and Sara Sullivan made key contributions to this report." ], "depth": [ 1, 2, 2, 3, 3, 3, 2, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title h3_title", "", "h0_full h2_title h3_title", "h3_full h2_full", "h0_full h3_full", "", "", "h0_full", "h0_full", "h0_full", "h1_full", "h1_full", "", "h1_full", "h2_full", "h2_full", "h2_full", "h2_full", "h3_full h2_full", "", "", "h3_full", "", "", "", "" ] }

{ "question": [ "Why is the extent to which BLM approved requests for exceptions to oil and gas permit requirements unknown?", "How does this approval process work?", "What issues did GAO find regarding this process?", "What problems might these issues cause?", "What has BLM consistently involved the public in?", "What data did GAO find to support his claim?", "What has BLM avoided involving the public in?", "In what cases is BLM required to notify the public upon the approval of an exception request?", "How has BLM implemented its best management practices policy?", "What are the policy's four key practices?", "How well has BLM implemented the requirement of these key practices?", "What issues did GAO find regarding BLM's implementation of this policy?", "What issues might this lack of guidance and documentation cause?", "What is BLM responsible for?", "How does BLM attempt to do this?", "How can operators circumvent these requirements?", "What was GAO asked to do?" ], "summary": [ "The extent to which the Bureau of Land Management (BLM) approved requests for exceptions to oil and gas lease and permit requirements is unknown, primarily because BLM's process for considering these requests and documenting decisions varied across field offices.", "Oil and gas operators may request exceptions to a permit requirement, such as prohibition of drilling in an area during times of the year when certain wildlife are present. BLM may approve such a request—allowing the operator to continue to drill during a portion of the normally prohibited time—if, for instance, no wildlife are present.", "GAO's survey of 42 BLM offices found that fewer than half tracked data on exception requests. Additionally, GAO found that the process for considering these requests and documenting decisions varied.", "BLM does not have a policy requiring field offices to consistently track exception data or documented procedures specifying how requests should be considered and documented. Because BLM does not consistently track exception request data or have a consistent process for considering requests and clearly documenting decisions, BLM may be unable to provide reasonable assurance that it is meeting its environmental responsibilities.", "BLM has consistently involved the public in developing lease requirements and, to a lesser extent, permit requirements.", "For example, GAO reviewed 35 lease sales that occurred from calendar years 2012 through 2015 at the six field offices visited and found that in all cases the field offices provided the public an opportunity to review and comment on lease parcels to be offered for sale.", "BLM has not generally involved the public in the approval of exception requests.", "According to BLM's policy, public notification of an exception is not required unless granting it would result in a substantial modification or waiver of a lease requirement, which, according to BLM officials, rarely occurs.", "BLM has generally implemented its best management practices policy by including key practices as permit requirements, but it has not consistently documented inspections or used inspection data to assess the policy's effectiveness.", "The policy identifies four key practices that should be considered for inclusion as permit requirements in nearly all circumstances: (1) painting facilities to blend with the environment, (2) constructing roads to certain BLM standards, (3) implementing interim reclamation, and (4) completing final reclamation.", "During file reviews at six BLM field offices, GAO found that at least one of the four key practices was included as a permit requirement in almost all of the 109 files reviewed.", "However, in reviewing documentation of inspections, GAO found that documents were not consistent and not always sufficient to determine whether BLM had verified key practices. GAO further found that BLM generally does not use data collected from inspections to assess the effectiveness of permit requirements in mitigating environmental impacts. BLM does not have guidance specifying how inspections should be documented and how inspection data should be used.", "Without sufficiently detailed documentation of inspections and effective use of data from inspections, BLM is unable to fully assess the effectiveness of its best management practices policy to mitigate environmental impacts.", "BLM is responsible for managing oil and gas development on federal lands while mitigating related environmental impacts.", "BLM seeks to do so, in part, by applying requirements to the leases and drilling permits it issues to operators. These requirements may include environmental mitigation practices outlined in BLM's best management practices policy.", "In some cases, operators may request exceptions to lease and permit requirements.", "GAO was asked to examine BLM's efforts to mitigate environmental impacts from oil and gas development." ], "parent_pair_index": [ -1, 0, 0, 2, -1, 0, -1, 2, -1, 0, 1, 0, 3, -1, 0, 1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4, 4, 0, 0, 0, 0 ] }

{ "title": [ "Background", "Clinical Trials Supported by NIH", "Overview of IOM Recommendations", "NIH Assessed the Applicability of the IOM Recommendations and Determined Not to Apply Them across ICs, but Developed Its Own Recommendations", "NIH Surveyed ICs to Assess the Applicability of the IOM Recommendations and Determined Not to Apply the Recommendations across ICs", "NIH Developed Its Own Recommendations That Aim to Enhance its Stewardship of Clinical Trials, Including Several to Improve Data Collection across its ICs", "NIH’s OD Reviews Some Data on Clinical Trial Activity across ICs, but Has Not Finalized What Additional Data it Needs or Established a Process for Using These Data", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Comments from the Department of Health and Human Services", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "NIH comprises 27 ICs and an OD and is headed by a presidentially appointed and Senate-confirmed director. NIH funds clinical trials through 24 of its 27 ICs. Each IC has its own mission and generally focuses on specific diseases, systems, organs, or stages in life (e.g., childhood). In addition, ICs each have their own director and staff, which help to support and oversee the IC’s work. The OD includes various offices responsible for issues, programs, and activities that span NIH components, such as research initiatives involving multiple ICs. By law, the OD has several responsibilities, including coordinating and overseeing the operation of the ICs and ensuring, in consultation with the ICs, that NIH’s research portfolio is balanced, not unnecessarily duplicative, and utilizes cross- cutting research.", "NIH’s ICs support clinical trials predominantly through extramural research—awarding funds to researchers at universities or other research entities through grants, contracts, and cooperative agreements. These ICs use a standard peer review process to help determine which clinical trials and other extramural research projects to fund. The size and composition of the ICs’ clinical trial portfolios vary substantially, depending on factors such as the IC’s budget and mission.\nOfficials at each IC oversee clinical trial activity within their IC through the review of various reports, correspondence, site visits, and other available information. For example, NIH requires that all grant recipients, including those conducting clinical trials, submit progress reports annually to ICs that describe the major goals of the trial and what activities have been accomplished and that provide financial information. According to NIH officials, IC staff generally use this information to identify potential problems and areas where assistance might be necessary for individual trials, and to help determine whether the IC will continue funding the trial.\nWhile ICs are responsible for determining which clinical trials to fund and for overseeing the progress of individual clinical trials, officials from the OD are responsible for overseeing the operations of the ICs and, in consultation with the ICs, ensuring that NIH’s research portfolio across the ICs is balanced, not unnecessarily duplicative, and utilizes cross- cutting research. For example, the OD has indicated that it aims for a balance of short- and long-term research activities across the agency, among other things.", "The 2010 IOM report to NCI made 12 recommendations across 4 goals to reduce redundancy and improve the effectiveness and efficiency of the clinical trials supported by the Cooperative Group Program. (See Table 1.)", "To assess the applicability of the IOM recommendations from a 2010 review of NCI’s Cooperative Group Program across the agency, NIH administered a survey to its ICs that fund clinical trials. While NIH decided not to apply the IOM recommendations across its ICs, NIH developed its own recommendations with an aim to enhance NIH’s stewardship of its clinical trials, including several recommendations to improve data collection across the ICs.", "In response to a conference report provision to review the applicability of the IOM recommendations, NIH administered a survey to all 24 of the ICs that fund clinical trials and then aggregated the results. NIH presented these results at an annual leadership forum in September 2012 and reported these results to Congress in March 2013. The survey results showed that over half of the ICs surveyed indicated that 7 of the 12 IOM recommendations were applicable to their IC. For example, 75 percent of the ICs surveyed indicated that the recommendation to increase the volume, diversity, and speed of accrual was applicable.\nSimilarly, stakeholders we spoke with also indicated that some of the recommendations, such as the ones relating to patient accrual and the development and evaluation of novel trial designs, may be relevant across NIH’s ICs, in addition to NCI. For example, one stakeholder we spoke with said that the recommendation to develop and evaluate novel trial designs is important because it could ultimately lead to trials that are not as costly or lengthy without compromising the information obtained from the trial.\nOD officials told us that NIH decided not to apply the IOM recommendations across all of its ICs that fund clinical trials because more analysis was needed before proposing any NIH-wide recommendations, given the variation across ICs. Officials explained that the IOM recommendations were designed for one program within NCI— the Cooperative Group Program—and most ICs do not support clinical trial networks that operate with the size and volume of NCI’s Cooperative Group Program, thus making the recommendations more pertinent to NCI. Leaders from NIH and the ICs indicated that more analysis was needed to account for the ICs’ portfolios and management activities.", "Through its CTWG, NIH developed recommendations that aim to enhance its stewardship of clinical trials, including several recommendations to improve NIH’s ability to collect data on clinical trial activity across its ICs. According to officials, the CTWG—a working group which included officials from NIH’s OD and the ICs—began in February 2013 in response to discussions among NIH officials at the agency’s annual leadership forum, where officials presented the results of NIH’s survey on the applicability of the IOM recommendations. Although it decided not to apply the IOM recommendations across ICs, NIH officials recognized that they could enhance aspects of NIH’s stewardship of clinical trials, and so they developed the CTWG to provide recommendations on how NIH could do so. In August 2013, the CTWG issued eight recommendations intended to enhance NIH’s stewardship of clinical trials. (See Table 2.)\nSeveral of the CTWG recommendations aim to improve the data NIH collects from across the ICs. For example, in developing the fourth recommendation to improve monitoring systems, tools, and processes, the CTWG concluded that there is a need for standardized data collected across NIH’s ICs that would help NIH identify the factors or characteristics that contribute to a successful clinical trial. The CTWG indicated that one type of additional data that could be collected across the ICs is accrual data—that is, information on the number of patients enrolled in a research study, such as a clinical trial. According to the CTWG, some ICs have their own systems for monitoring clinical trials, which could be used to collect accrual data, while other ICs do not have these systems and instead rely on communication with awardees and grant reports to monitor their clinical trials. The CTWG explained that these different monitoring practices result in variation in the types of clinical trial data currently collected at the IC level.\nTo implement the recommendations of the CTWG, NIH formed the Task Force in April 2015. Officials on the Task Force told us that they are taking steps to address the CTWG recommendations by developing policies and procedures. For example, officials stated that the Task Force is currently working on identifying a standard set of data on clinical trials that each IC would collect to respond to the CTWG’s fourth recommendation to improve monitoring systems, tools, and processes. NIH said that this could improve monitoring systems by ensuring that all ICs collect similar data on clinical trials, which could facilitate analysis of such data across ICs. NIH could not provide an expected date for when the Task Force would complete its work; however, officials expect that the Task Force will continue its efforts at least through July 2016.\nAlthough NIH officials said that the CTWG and the IOM recommendations are not related, we identified similarities between two of the CTWG recommendations and the IOM recommendations. Specifically, the CTWG recommendation to streamline Institutional Review Board review of multi-site studies aligns with the IOM recommendation to streamline and harmonize government oversight. Additionally, the CTWG recommendation to provide Good Clinical Practice training for investigators and staff is similar to the IOM recommendation to support clinical investigators through training and mentoring, paid protected research time, sufficient resources, and recognition.", "NIH’s OD reviews some data on clinical trial activity across the agency, but has not finalized what other data it needs to enhance its stewardship of clinical trials, as intended by the CTWG recommendations, or established a process for using these data. Specifically, the OD only reviews two types of data related to clinical trial activity on a regular basis: financial data and inclusion data. The OD collects financial data from its ICs to determine how much funding is allocated across all of NIH’s clinical research—which include clinical trials as well as other types of research. The OD reviews this information as part of the agency’s efforts to develop its annual budget. The OD also reviews inclusion data it collects from the ICs on the enrollment of minorities and women in clinical trials— information which NIH provides to the Congress in a biennial report required by law. However, as we have previously reported, the inclusion data the OD reviews is limited because the data only provide information on aggregate-level enrollment across NIH and for each IC, which may inadvertently mask low enrollment in clinical trials related to specific diseases or research areas.\nBeyond financial and inclusion data, OD and IC officials said that the OD does not routinely review additional data on clinical trial activity. Rather, OD officials review data from the ICs on clinical trial activity in response to specific inquiries. For example, OD officials reviewed information from the ICs on their clinical trial activities in India after regulatory requirements in India changed during the past two years and the officials received an inquiry about it. According to OD officials, ICs are responsible for overseeing the clinical trials they fund and for collecting data for this purpose. Officials from the four ICs we spoke with provided various examples of data on clinical trial activity reviewed at the IC level, such as data on the number of clinical trials funded by the ICs and the amount allocated for each clinical trial per year. While the frequency of these reviews varies, IC officials review these data at least once a year.\nWhile officials from the OD acknowledged that they do not regularly review much data specifically related to clinical trial activity, they are also considering changing this practice and reviewing additional data collected from the ICs to inform the OD’s stewardship of clinical trial activity across NIH. According to OD officials, the additional data that they could review may include the standardized data that NIH’s Task Force is responsible for identifying. As we previously mentioned, NIH’s Task Force is developing a set of standard data that the ICs would collect on the clinical trials they support. Some or all of these data could potentially be used by officials from the OD to review NIH’s clinical trial portfolio. For example, OD officials told us that one example of standard data could be accrual data, which could be used by the OD to determine whether or not clinical trials across NIH are enrolling patients according to proposed timelines.\nWhile OD officials have speculated about what additional data from the ICs they may review, the OD has not finalized which of these data the office needs. According to OD officials, they are waiting for the Task Force to complete its efforts to identify a standardized set of data to be collected across the ICs. In addition, the OD has not established a process that specifies how and when the OD will use the additional data it decides to review. As a result, it is unclear how often the OD will review the data, for what purpose, and what the product of its analysis will be.\nFederal Standards for Internal Control state that agencies need operational and financial data to determine whether they are meeting their goals for effective and efficient use of resources. Given that ICs oversee the clinical trials they award, the OD may not need the same data or level of detail collected by ICs, or need to review the data with the same frequency. However, until the OD determines which additional data it will review and the process it will use to review these data, NIH is limited in its ability to make data-driven decisions about the use of its roughly $3 billion annual investment in clinical trials. Furthermore, reviewing operational and financial data could help NIH reach its strategic plan goal of ensuring a continued high return on the public investment in research. Finally, reviewing standard data on clinical trials could help OD officials ensure that NIH meets its responsibility to ensure that its research portfolio is balanced, not unnecessarily duplicative, and utilizes cross-cutting research.", "As part of its mission, NIH is responsible for exercising good stewardship of its multi-billion dollar public investment in clinical trials. The outcomes of these trials are vital for improving public health and advancing science, as they are used to identify the effects of medications and other health care interventions on people, some with life-threatening illnesses and conditions. Although NIH’s ICs are responsible for the clinical trials they fund, federal law requires NIH’s OD, in consultation with the heads of the ICs, to coordinate NIH’s research portfolio to ensure that it is balanced, not unnecessarily duplicative, and utilizes cross-cutting research. NIH decided not to apply the IOM recommendations across its ICs; however, it does acknowledge the need for enhanced stewardship of its clinical trials and developed its own recommendations for this purpose. Consistent with our finding that NIH’s OD only uses some data to oversee clinical trial activity across the ICs, some of NIH’s own recommendations recognize the need for additional data. However, NIH’s OD has not determined which data it needs or how it will use the data to strengthen its stewardship of NIH’s clinical trials and research portfolio. Until the OD identifies what data to review, and how the data will be used and when, NIH is missing an opportunity to maximize the public investment in clinical trials.", "To enhance its stewardship of clinical trials across the ICs, we recommend that the Secretary of HHS direct the NIH OD to take the following two actions: 1. finalize data on clinical trial activity that the OD needs to collect from 2. establish and implement a process for using those data.", "We provided a draft of this report to HHS for comment. HHS provided written comments, which are reprinted in appendix I. HHS concurred with our recommendations and stated that the agency plans to complete its efforts to identify additional data that will be collected from the ICs on a regular basis. HHS indicated that these data will provide the OD with readily available information on the number, type, and progress of clinical trials funded across the ICs. Although HHS did not specify plans to establish and implement a process for using the data, it said its goal is to complete its current efforts during 2016 and to implement other strategies to enhance the quality and transparency of HHS-funded clinical trials.\nIn its comments, NIH also stated that the report over-emphasized NIH's decision to not apply the IOM recommendations across the ICs and under-emphasized the role and scientific expertise of the ICs in managing and overseeing clinical trials. We maintain that the report appropriately describes the steps taken by NIH to assess the applicability of IOM's recommendations and to enhance its stewardship of clinical trials. Further, the report notes that the ICs and the OD both play a critical, but different, role in ensuring the stewardship of clinical trials across the agency. In addition, HHS provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or at [email protected]. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix II.", "", "", "", "In addition to the contact named above, Tom Conahan, Assistant Director; Krister Friday; Q. Akbar Husain; Morgan Jones; Rebecca Rust Williamson; and Emily Wilson made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "", "", "h0_full h3_full h2_full", "h0_full h3_full h2_full", "h0_full", "h3_full h1_full", "h2_full", "", "", "", "", "", "" ] }

{ "question": [ "What set of recommendations did NIH assess?", "How did NIH assess these recommendations?", "What did this assessment reveal?", "Why did NIH decide not to apply the recommendations across its ICs?", "How did NIH respond to this decision?", "What does NIH's OD responsible for?", "What data does the OD review on a regular basis?", "What other data is the OD considering reviewing?", "Why is it unclear how OD will review additional data?", "What do Federal Standards for Internal Control state regarding use of data?", "What do these Standards imply about the OD's use of additional data?", "What did NIH spend $3.2 billion on in 2014?", "How is NIH's research portfolio monitored?", "How is IOM involved in NIH's clinical trials?", "What was GAO asked to review by a 2015 appropriations act?", "What does this report examine?", "How did GAO collect data for this report?" ], "summary": [ "Although the National Institutes of Health (NIH) assessed the applicability of recommendations made by the Institute of Medicine (IOM) in 2010 to improve clinical trials—studies involving human subjects that test the effects of interventions on health-related outcomes—within one of its Institutes and Centers (IC), NIH did not apply the recommendations across its ICs.", "In response to a conference report provision that it review the applicability of the IOM recommendations across its ICs, NIH administered a survey to all 24 of the ICs that fund clinical trials and presented the findings at a leadership forum and in a report to Congress.", "These findings showed that over half of the ICs surveyed indicated that the majority of the recommendations were applicable.", "NIH decided not to apply the recommendations across its ICs because more analysis was needed before proposing any NIH-wide recommendations, given the variation across ICs. Officials explained that the IOM recommendations were designed for one program within the National Cancer Institute (NCI) and that most ICs do not support clinical trial networks that operate with the size and volume of the program, thus making the recommendations more pertinent to NCI. Leaders from NIH and the ICs indicated that more analysis was needed to account for the ICs' portfolios and management activities.", "As a result, NIH developed its own recommendations that aimed to enhance its stewardship of clinical trials, including several to improve data collection across the ICs. For example, its recommendation to improve monitoring systems, tools, and processes could assist NIH in identifying additional data that could be collected across the ICs.", "NIH's Office of the Director (OD) reviews some data on clinical trial activity across NIH but has not finalized what additional data it needs or established a process for using these data to enhance its stewardship of clinical trials, as intended by NIH's own recommendations.", "The OD only reviews two types of data related to clinical trial activity on a regular basis: financial data and data on the inclusion of minorities and women. Beyond these data, OD officials review other data from the ICs on clinical trial activity if there is a specific inquiry.", "Officials from the OD acknowledged that they do not regularly review much data specifically related to clinical trial activity, but they are considering reviewing additional data collected from the ICs to inform the OD's stewardship of clinical trial activity across NIH. However, the OD has not finalized what data it needs from the ICs.", "In addition, the OD has not established a process that specifies how and when the OD will use the additional data it decides to review. As a result, it is unclear how often the OD will review the data, for what purpose, and what the product of its analysis will be.", "Federal Standards for Internal Control state that agencies need operational and financial data to determine whether they are meeting their goals for effective and efficient use of resources.", "Given that ICs oversee specific clinical trials, the OD may not need the same data or level of detail collected by ICs. However, until the OD determines which additional data it will review and the process it will use to review these data, NIH is limited in its ability to make data-driven decisions regarding the use of its roughly $3 billion annual investment in clinical trials.", "In fiscal year 2014, NIH spent nearly $3.2 billion on clinical trials as part of its research activities.", "NIH's OD oversees the operations of 27 ICs to ensure that NIH's research portfolio is balanced, not unnecessarily duplicative, and utilizes cross-cutting research.", "In 2010, IOM made recommendations for clinical trials supported by NCI, one of NIH's ICs. In 2012, NIH was directed to conduct a review of the applicability of IOM's recommendations across all NIH ICs that conduct clinical trials.", "A Joint Explanatory Statement accompanying a 2015 appropriations act included a provision for GAO to review how NIH applied the IOM recommendations.", "This report examines (1) the steps that NIH took, if any, to apply the IOM recommendations across its ICs other than the NCI, and (2) the extent to which NIH's OD uses data to oversee clinical trial activity across the ICs.", "GAO reviewed NIH documentation on the applicability of the IOM recommendations, data the OD uses to oversee clinical trial activity, and its process for using such data. GAO compared these to federal standards for internal control. GAO also interviewed NIH and IC officials, IOM officials, and stakeholders, such as a group representing researchers." ], "parent_pair_index": [ -1, 0, 1, 0, 3, -1, 0, 1, 0, -1, 4, -1, 0, 0, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "", "Overview of Recent Tariff Actions", "What are tariffs and what are average U.S. tariff rates?", "What are the goals of the President's tariff actions and why are these actions of note?", "What are Section 201, Section 232, and Section 301?", "What tariff actions has the Administration taken or proposed to date under these authorities?", "Which countries are affected by the tariff increases?", "Why is China a major focus of the Administration's action?", "Has the Administration engaged in negotiations with other countries with regard to these measures?", "Have U.S. trading partners taken or proposed retaliatory trade actions to date?", "Has Congress responded to the Administration's tariff actions?", "Has the United States entered into a \"trade war\" and how does this compare to previous U.S. trade disputes?", "When was the last time a President acted under these laws?24", "Have the tariff measures resulted in legal challenges domestically or with regard to existing international commitments?", "Do these actions have broader economic and policy implications?", "Is further escalation and retaliation possible?", "Scale and Scope of U.S. and Retaliatory Tariffs", "What U.S. imports are included in the tariff actions?", "What U.S. exports face retaliatory tariff measures?", "How do the U.S. tariff actions and subsequent retaliation compare?", "What share of annual U.S. trade is affected or potentially affected by the U.S. and retaliatory actions?", "What factors affect the products selected for retaliation?", "Once the President imposes tariffs, can the President change them?", "What exemptions are allowed from the tariffs imposed to date?", "Section 201", "Section 232", "Country Exemptions", "Product Exclusions", "Section 301", "How many product exclusion requests have been made?57", "Have Members of Congress and other stakeholders raised issues regarding the product exclusion process?", "Economic Implications of Tariff Actions", "What are the general economic dynamics of a tariff increase and who are the economic stakeholders potentially affected?", "What do economic studies estimate as the potential impacts of the tariff actions on the U.S. economy?", "What are some potential long-term effects of escalating tariffs between countries?", "Are there examples of U.S. producers benefitting or being harmed by the tariffs?", "How are Section 301 tariffs affecting global supply chains?", "Are there estimates of economic implications at the state level?", "Are there programs to aid farmers potentially harmed by the tariffs?", "How will the tariff actions affect the U.S. trade balance?", "Presidential Trade Authorities and Congress", "What are the steps involved in imposing increased tariffs pursuant to the current authorities?", "What legislation has been introduced to alter the President's current authority and how would it do so?", "Tariff Revenue Questions", "What additional U.S. revenue has been collected from the tariffs?", "What happens to the revenue collected from the tariffs?", "How does additional tariff revenue compare to the U.S. national debt?", "What are the economic implications of raising revenue through tariffs?", "Relation to WTO and U.S. Trade Agreements", "How do the Administration's unilateral tariff actions and other countries' retaliatory actions relate to existing commitments at the WTO and in bilateral and regional trade agreements?", "What dispute-settlement actions have U.S. trading partners taken?", "What dispute-settlement actions has the United States taken?", "Do the Administration's tariff actions potentially affect ongoing or proposed U.S. trade agreement negotiations?", "Why have some observers raised concerns over the potential impact of the Administration's actions on the global trading system?", "Additional Sources of Information", "What other CRS products provide further information on these issues?", "What official sources of information are publicly available regarding the U.S. and retaliatory tariff actions?", "The Department of Commerce (Section 232 Investigations)", "U.S. International Trade Commission (ITC) (Section 201 Investigations)", "Office of the U.S. Trade Representative (USTR) (Section 301 Investigations)", "The White House", "Customs and Border Protection (CBP)" ], "paragraphs": [ "", "", "Tariffs or duties are taxes assessed on imports of foreign goods, paid by the importer to the U.S. government, and collected by U.S. Customs and Border Protection (CBP). Current U.S. tariff rates may be found in the Harmonized Tariff Schedule (HTS) maintained by the U.S. International Trade Commission (ITC). The U.S. Constitution grants Congress the sole authority to regulate foreign commerce and therefore impose tariffs, but, through various trade laws, Congress has delegated authority to the President to modify tariffs and other trade restrictions under certain circumstances. To date, President Trump has proclaimed increased tariffs under three different authorities. The President has also proclaimed other import restrictions, including quotas and tariff-rate quotas under these authorities, but the majority of the actions are in the form of ad-valorem tariff increases.\nThe United States played a prominent role in establishing the global trading system after World War II and has generally led and supported global efforts to reduce and eliminate tariffs since that time. Through both negotiated reciprocal trade agreements and unilateral action, countries around the world, including the United States, have reduced their tariff rates over the past several decades, some by considerable margins. According to the World Trade Organization (WTO), U.S. most-favored-nation (MFN) applied tariffs, the tariff rates the United States applies to members of the WTO—nearly all U.S. trading partners—averaged 3.4% in 2017. Globally tariff rates vary, but are also generally low. For example, the top five U.S. trading partners all have average tariff rates below 10%: the European Union (EU) (5.1%), China (9.8%), Canada (4.0%), Mexico (6.9%), and Japan (4.0%). Despite these low averages, most countries apply higher rates on a limited number of imports, often agricultural goods.", "As discussed below (see \" What are Section 201, Section 232, and Section 301? \") the authorities under which President Trump has increased tariffs on certain imports allow for import restrictions to address specific concerns. Namely, these authorities allow the President to take action to temporarily protect domestic industries from a surge in fairly traded imports (Section 201), to protect against threats to national security (Section 232), and to respond to unfair trade practices by U.S. trading partners (Section 301). In addition to addressing these specific concerns, the President also states he is using the tariffs to pressure affected countries into broader trade negotiations to reduce tariff and nontariff barriers, such as the announced trade agreement negotiations with the EU and Japan, and to lower the U.S. trade deficit.\nPresident Trump's recently imposed tariff increases are of note because\nthey are significantly higher than average U.S. tariffs (most of the increases are in the range of 10-25%), and have resulted in retaliation of a similar magnitude by some of the countries whose exports to the United States have been subject to the tariff increases; they affect approximately 12% of annual U.S. imports and 8% of U.S. exports, magnitudes that could grow if additional proposed or pending actions are carried out, or decrease if additional negotiated solutions are achieved; they represent a significant shift from recent U.S. trade policy as no President has imposed tariffs under these authorities in nearly two decades; and they have potentially significant implications for U.S. economic activity, the U.S. role in the global trading system, and future U.S. trade negotiations.", "Section 201, Section 232, and Section 301 refer to U.S. trade laws that allow presidential action, based on agency investigations and other criteria. Each allows the President to restrict imports to address specific concerns. The focus of these laws generally is not to provide additional sources of revenue, but rather to alter trading patterns and address specific trade practices. The issues the laws seek to address are noted in italics below.", "The Trump Administration has imposed import restrictions under the three authorities noted above, affecting approximately $282 billion in U.S. annual imports, based on 2017 import values ( Figure 1 ). In addition, the President has initiated Section 232 investigations on U.S. imports of motor vehicles and uranium, which could result in increased tariffs on up to $361 billion and $2 billion of U.S. imports, respectively. The President has also suggested he may increase tariffs under Section 301 authorities on an additional $267 billion of U.S. imports from China, depending on the results of ongoing bilateral talks.", "The import restrictions imposed under Section 201 and Section 232 apply to U.S. imports from most countries. The Section 301 tariffs apply exclusively to U.S. imports from China.", "China is a major focus of a Section 301 investigation and related tariff measures largely due to concerns over its intellectual property rights (IPR) and forced technology transfer practices, and the size of its bilateral trade deficit with the United States. China's government policies on technology and IPR have been longstanding U.S. concerns and are cited by U.S. firms as among the most challenging issues they face in doing business in China. Moreover, China is considered to be the largest global source of IP theft. On March 22, 2018, President Trump signed a presidential memorandum on U.S. actions related to the Section 301 investigation. Described by the White House as a response to China's \"economic aggression,\" the memorandum identified four broad Chinese IP-related policies to justify U.S. action under Section 301, stating\nChina uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies; China uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies; China directs and facilitates investments and acquisitions, which generate large-scale technology transfer; and China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information.\nThe USTR estimated that such policies cost the U.S. economy at least $50 billion annually. During his announcement of the Section 301 action, President Trump also stated that China should reduce the bilateral trade imbalance (which at $376 billion in 2017 for goods trade was the largest U.S. bilateral trade imbalance) and afford U.S. \"reciprocal\" tariff rates.", "Yes. The Administration negotiated quota arrangements rather than imposing Section 232 tariffs on steel imports from Brazil and South Korea, and Section 232 tariffs on both steel and aluminum imports from Argentina. Although the steel and aluminum tariffs were not addressed in the proposed modifications to the North American Free Trade Agreement (NAFTA), renamed the U.S.-Mexico-Canada Agreement (USMCA), USTR Robert Lighthizer stated the three countries are discussing alternative measures. Side agreements to the USMCA include specific language exempting light trucks and 2.6 million passenger vehicle imports annually each from Canada and Mexico from future U.S. import restrictions under Section 232, as well as $32.4 billion and $108 billion of auto parts imports, respectively.\nThe Administration also informally agreed not to move forward with additional Section 232 import duties on U.S. motor vehicle and parts imports from the European Union (EU) and Japan while broader bilateral trade negotiations are ongoing. Discussions on the steel and aluminum tariffs are also to be part of both negotiations.\nAdditionally, the Administration has participated in talks with China regarding the trade practices that are the subject of the Section 301 tariffs. Negotiations in May 2018 initially appeared to resolve the trade conflict, but were ultimately unsuccessful. After further tariff actions by both sides, on December 1, 2018, Presidents Trump and Xi met at a private dinner during the G-20 Summit in Argentina. According to a White House statement, the two leaders agreed to begin negotiations immediately on \"structural changes\" with regard to IP and technology issues (related to the Section 301 case). The leaders also agreed to address agriculture and services issues. The parties set a goal of achieving an agreement in 90 days. In addition, the White House reported that President Xi agreed to make \"very substantial\" purchases of U.S. agricultural, energy, and industrial products. In exchange, President Trump agreed to suspend the planned Stage 3 Section 301 tariff rate increases that were scheduled to take effect on January 1, 2019, but stated that the increases would be implemented if no agreement was reached in 90 days (by March 1, 2019). High level talks continue, and on January 30-31, 2019, Chinese Vice Premier Liu met with President Trump and other U.S. officials, during which China pledged to purchase 5 million metric tons of U.S. soybeans. On January 31, President Trump indicated that a final resolution of the trade dispute would not be achieved until he met with President Xi. Reports suggest the trade talks may be extended beyond the March deadline.\nPresident Trump has made clear that the Administration is using these various import restrictions as a tool to get countries to negotiate on other issues. At the announcement of the proposed USMCA, the President stated \"without tariffs, we wouldn't be talking about a deal, just for those babies out there that keep talking about tariffs. That includes Congress—'Oh, please don't charge tariffs.' Without tariffs, you wouldn't be standing here.\"\nThe United States has also engaged or will engage in consultations at the WTO with some trading partners affected by the tariffs. Such consultations are a required first step in dispute settlement proceedings, which U.S. trading parties and the United States in turn, have initiated in response to the U.S. actions and trading partner retaliations. (See \" What dispute-settlement actions have U.S. trading partners taken? \" and \" What dispute-settlement actions has the United States taken? \")", "Yes. Some U.S. trading partners subject to the additional U.S. import restrictions have taken or announced proposed retaliations against each of the three U.S. actions. Since April 2018, a number of retaliatory tariffs have been imposed on U.S. goods accounting for $126 billion of U.S. annual exports, using 2017 export values ( Figure 2 ).", "Yes. The tariffs impact various stakeholders in the U.S. economy, prompting both support and concern from different Members of Congress. To date, Congress has conducted oversight hearings on the Section 232 and 301 investigations and examined the potential economic and broader policy effects of the tariffs. Many Members have expressed concern over what they view as an expansive use of the delegated tariff authority under Section 232, and some Members have introduced legislation in the 115 th and 116 th Congresses that would amend the current authority in a number of ways, including requiring a greater congressional role before tariffs may be imposed. All actions continue to be actively debated, as some other Members see a need for expanded presidential authority to ensure more reciprocal tariff treatment by U.S. trading partners and have introduced legislation in the 116 th Congress to that effect. Senator Grassley, chairman of the Senate Finance Committee announced that he intends to \"review the President's use of power under Section 232 of the Trade Act of 1962\" during the 116 th Congress.", "There is no set definition of what may constitute a trade war. Beginning in 2017, the United States and some of its major trading partners imposed escalating import restrictions, particularly tariffs, on certain traded products. Some contend that with these actions—or threat thereof—the United States has embarked upon a full-scale \"trade war.\" Although the scale and scope of these recent unilateral U.S. tariff increases are unprecedented in modern times, tensions in international trade relations are not uncommon. Over the last 100 years, the United States has been involved in a number of significant or \"controversial\" trade disputes. Past disputes, however, were more narrowly focused across products and trading partners, and generally temporary. Most were settled, and when unresolved, they were contained or defused through bilateral and multilateral negotiations. From the early 20 th century until this year, one dispute resulted in a worldwide tit-for-tat escalation of tariffs: the trade dispute ignited by the U.S. Tariff Act of 1930, commonly known as the \"Smoot-Hawley\" Tariff Act.\nThe United States has imposed unilateral, restrictive trade measures in the past, but rarely before attempting to resolve its trade-related concerns through negotiations. The United States has, for the most part, engaged with trading partners in bilateral and multilateral fora to manage frictions over such issues and to achieve expanded market access for U.S. firms and farms and their workers. In particular, the United States has generally sought dispute resolution through the multilateral forum provided by the General Agreement on Tariffs and Trade (GATT) and its successor, the WTO. As part of the dispute settlement process, WTO members may seek authorization to retaliate if trading partners maintain measures determined to be inconsistent with WTO rules.", "Presidential action under these trade laws has varied since Congress enacted them in the 1960s and 1970s, but since 2002 past Presidents generally declined to impose trade restrictions under these laws. The use of Sections 201 and 301, which address some issues also covered by trade rules established at the WTO, has decreased since the creation of that institution in 1995 and its dispute-settlement system, considered more rigorous and effective than the dispute-settlement system under its predecessor, the GATT. The use of Section 232, which focuses on national security concerns and was created during the Cold War, has also declined and has been infrequently used over several decades.", "Yes. The President's actions have resulted in legal challenges in the U.S. domestic court system and in the dispute settlement system at the WTO. Specifically, the Section 232 actions on steel and aluminum have been challenged in cases before the U.S. Court of International Trade. Severstal Export Gmbh, a U.S. subsidiary of a Russian steel producer, has challenged whether the Administration's actions were appropriately based on national security considerations, as required by statute. The American Institute for International Steel (AIIS), a trade association opposed to tariffs, has challenged the constitutionality of Congress' delegation of authority to the President under Section 232. Most recently, U.S. importers of Turkish steel have initiated a case arguing that the President's increase of the Section 232 steel tariffs from 25% to 50% on U.S. imports from Turkey did not have a sufficient national security rationale, did not follow statutory procedural mandates, and violates a due process law. At the WTO, U.S. trading partners have initiated dispute settlement proceedings with regard to the President's actions under Section 201, Section 232, and Section 301. For more information, see the section on \" What dispute-settlement actions have U.S. trading partners taken? \"", "Many analysts are concerned that the U.S. measures threaten the rules-based global trading system that the United States helped to establish following World War II. The Trump Administration argues that the unilateral measures are justified under existing multilateral trade rules and as a response to violations of existing commitments under the WTO by other trading partners, particularly China. In contrast, U.S. trading partners contend that the Administration's unilateral actions undermine these existing commitments. They argue that the United States should make use of existing multilateral dispute settlement procedures to address concerns in the trading system rather than resorting to unilateral action. Supporters of the Administration's tariff actions argue that the tariffs and other import restrictions are a useful tool to protect domestic U.S. industries and incentivize U.S. trading partners to enter negotiations, in which they would otherwise have little interest in engaging. Some, including the Administration, also argue that the Section 301 actions address issues not adequately covered by existing WTO rules.\nSome observers also raise concerns over the scale of the Administration's actions, which have led to import restrictions imposed on nearly all U.S. trading partners, including some close allies such as Canada, Japan, Mexico, South Korea, and the EU. These groups agree with the U.S. concerns over specific trade practices by China, but support a more targeted approach that includes cooperation between the United States and other countries that share U.S. concerns over violations to and shortcomings of the existing international trading system. While the United States is involved in multilateral discussions at various levels on potential reforms to the global trading system, specifically the WTO, some analysts argue ongoing tension resulting from the U.S. unilateral actions could hamper these efforts.\nThe complex nature of international commerce, including its highly integrated global supply chains, makes difficult the accurate prediction of the effects of broad tariff actions on specific industrial sectors or individual companies. For example, the Administration imposed Section 201 safeguard tariffs on washing machines to support domestic manufacturers of washing machines, but these same domestic manufacturers now argue that subsequent Section 232 tariffs on steel and aluminum have led to increases in their input costs and caused further economic harm. U.S. domestic auto production, which the Trump Administration may seek to encourage through additional Section 232 tariffs now under investigation, is similarly negatively affected by the existing steel and aluminum tariffs. Retaliation in the form of increased tariffs on U.S. exports further complicates the economic outcome of the unilateral U.S. actions. Many companies also report that uncertainty resulting from the unpredictable nature of the U.S. and retaliatory actions has made long-term planning difficult; this may be putting a drag on U.S. and global economic activity. Others, including some domestic producers, argue that action was needed to prevent more injurious trade practices from occurring and to eventually achieve broader agreement on reducing tariff barriers and establishing new trading rules.", "Yes. Two pending Section 232 investigations on U.S. motor vehicle and parts imports and uranium are underway, which could lead to future import restrictions. Additionally, the scheduled increase in the tariff rate on the third tranche of Section 301 tariffs on U.S. imports from China could occur in the near future, as well as potential new tariffs on additional U.S. imports from China, absent a trade agreement to resolve the core issues that are the subject of current bilateral trade discussions.\nU.S. motor vehicle and parts imports totaled $361 billion in 2017, according to the U.S. Census Bureau. These goods are among the top U.S. imports supplied by a number of U.S. trading partners, including Canada, Mexico, Japan, South Korea, and the EU, making an increase in U.S. tariffs that applies to these countries economically significant and likely to result in retaliatory action. Canada and Mexico are currently exempt from future auto 232 tariffs for a limited amount of imports under the proposed USMCA agreement. With respect to the EU and Japan, the Administration has notified Congress of its intent to negotiate bilateral trade agreements and informally agreed to refrain from imposing new auto tariffs while those talks progress. South Korea is the only major U.S. auto supplier without a formal or informal assurance from the Trump Administration that it will be exempt from Section 232 auto tariffs, despite recently implemented modifications to the U.S.-South Korea (KORUS) free trade agreement (FTA). A delay in ratification and implementation of the proposed USMCA, or a breakdown in talks with the EU and Japan could make an escalation on this front more likely.\nAs noted, President Trump has warned that he will follow through with his threat to increase Section 301 tariffs on $200 billion worth of products from China from 10% to 25% if a trade agreement is not reached by March 1, 2019, or potentially soon thereafter. He has also threatened increased tariffs on an additional $267 billion worth of imported Chinese products. China imports far less from the United States than it exports and therefore could not match U.S. tariffs on a comparable level of U.S. products, but it could increase the level of the tariffs on products that have already been impacted by retaliatory Section 301 tariffs, in addition to raising tariffs on U.S. products that have not yet been subject to retaliatory tariffs. Further, the Chinese government could take other retaliatory action, calling on its citizens to boycott the purchase of American goods and services in China, curtailing the operations of U.S. manufacturing firms in China, ordering Chinese firms to halt purchases of certain high-value U.S. products (e.g., Boeing aircraft) or restricting its citizens from traveling to, or investing in, the United States. The Chinese government could also choose to halt purchases of U.S. Treasury securities and possibly sell off some of its holdings.", "", "The Administration has imposed tariffs on U.S. goods accounting for $282 billion of U.S. annual imports, using 2017 trade values. Section 301 actions currently account for the greatest share (83%) of affected imports. U.S. annual imports of products covered under the Section 301 actions currently total $235 billion, compared with $40 billion (14%) under Section 232, and $7 billion (3%) under Section 201 ( Figure 3 ). The potential Section 232 actions on motor vehicles and uranium could cover an additional $361 billion and $2 billion, respectively in U.S. imports, depending on the countries and products included.\nThe scope of U.S. imports affected vary across the three different actions. Section 201 actions cover U.S. imports of washers, washing machine parts, and solar cells and modules. Section 232 actions cover U.S. imports of steel and aluminum products. Section 301 actions cover a broad range of U.S. imports from China. To date, the Administration has imposed increased tariffs under Section 301 on nearly 7,000 products at the 8-digit harmonized tariff schedule (HTS) level. Figure 4 below lists the top 15 products subject to the Section 301 import tariffs classified according to 5-digit U.S. end-use import codes. The major categories are telecommunications equipment, computer accessories, furniture, and vehicle parts.", "To date, U.S. trading partners have retaliated against U.S. Section 232 and Section 301 actions. China, Japan, and South Korea have also announced planned retaliation to U.S. Section 201 actions, but in line with WTO commitments on safeguard retaliations, they are not to be imposed until 2021. The total actions to date affect approximately $126 billion of annual U.S. exports, using 2017 trade values.\nThe retaliations against U.S. Section 232 actions affect U.S. exports to six trade partners: Canada, Mexico, the EU, China, Turkey, and Russia. The retaliation is similar to the U.S. actions both in terms of the tariff rates (most are in the range of 10%-25%) and the products covered (steel or aluminum are among the top products targeted). Other major products targeted include food preparations and agricultural products, yachts, motorcycles, whiskies, and some heavy machinery ( Figure 5 ). In total, approximately $25 billion of U.S. annual exports are potentially affected by trade partner retaliations against the U.S. Section 232 actions.\nRetaliatory tariffs imposed by China in response to U.S. Section 301 actions affect approximately $101 billion of U.S. annual exports, accounting for about 80% of U.S. exports subject to retaliatory tariffs currently in effect ( Figure 6 ). Like the retaliation in response to U.S. Section 232 actions, agricultural products are a main target. Soybeans, which accounted for $14 billion of U.S. exports to China in 2017, are the top overall export affected. Motor vehicles were the second-largest category of exports under the Section 301 retaliation, but these retaliatory tariffs have been temporarily suspended as part of the recent efforts at bilateral U.S.-China negotiations to resolve the trade conflict. The Chinese retaliatory tariffs, like the U.S. Section 301 tariffs, range from 10%-25% and cover thousands of tariff lines.", "U.S. and retaliatory tariffs differ in both scale and scope of products covered. The United States has placed increased tariffs on products accounting for approximately $282 billion of annual U.S. imports, while retaliatory tariffs cover approximately $126 billion of annual U.S. exports, using 2017 trade values. China, which is subject to the largest share of new U.S. tariffs and has imposed the largest share of new retaliatory tariffs, imports far less from the United States than the United States imports from China, limiting the amount of retaliatory tariffs China can impose on U.S. exports. (See discussion on \" Is further escalation and retaliation possible? \")\nIn terms of the products covered, the largest categories of U.S. imports affected by the tariffs are capital goods and industrial supplies ( Figure 7 ). This suggests that, to date, U.S. tariffs are concentrated on products primarily used as inputs in the production of other goods rather than on final consumption goods; therefore the effects of the tariffs may be most pronounced in increased costs for U.S. producers. Among U.S. exports, food and beverages is the second-largest category of goods facing retaliatory tariffs, suggesting that U.S. agriculture producers are among the groups most negatively affected by the retaliatory actions.", "As a share of overall U.S. trade, approximately 12% of annual U.S. goods imports ($282 billion of $2,342 billion total imports) are subject to increased U.S. tariffs under the Trump Administration's actions ( Figure 8 ). Approximately 8% of annual U.S. goods exports ($126 billion of $1,546 billion total exports) are subject to increased tariffs under partner country retaliatory actions. If the United States moves forward with additional tariffs under the two pending Section 232 investigations on U.S. imports of motor vehicles/parts and uranium, the share of affected U.S. imports could increase up to nearly 30%. U.S. motor vehicle and parts imports totaled $361 billion in 2017.", "A variety of factors likely go into a country's decision regarding which products to target for retaliation. Retaliatory tariffs are explicitly targeted to encourage the United States to remove its Section 232 and Section 301 tariffs, whereas the Trump Administration's enacted and proposed tariffs aim both to alter U.S. trading partners' practices more broadly, including reducing existing tariff and nontariff barriers, and to protect domestic industries. Retaliatory tariffs can have negative effects on both the exporting country (the United States) and the importing country imposing the retaliation. Therefore, retaliating countries are likely to target products that create the most pressure on the United States to change its policy while minimizing any negative effects on themselves. Some factors that may create greater pressure for U.S. policy change include (1) demand for the targeted product is price sensitive (i.e., demand is price elastic), therefore a small tariff increase will lead to a sharper decline in exports; (2) the retaliating country is a major world market for the product, in which case the exports may not be easily diverted to other markets; and (3) the producers of the targeted products in the United States (i.e., those negatively affected by the tariffs) have high levels of political influence (e.g., the product is made in congressional districts with Members on key committees).\nFactors that would decrease the negative effects on the importer (retaliating country) include (1) other countries competitively produce the product allowing for alternate sourcing; and (2) importers can easily substitute a different product for the targeted import (e.g., substituting wheat for corn for animal feed). Retaliating countries might also seek to impose similar tariffs as those against which they are retaliating (e.g., steel and aluminum are the top products subject to retaliation in response to the Administration's Section 232 steel and aluminum tariffs). Retaliating countries may also seek to lessen the negative impacts of the tariffs on certain segments of the population (e.g., a country might target luxury goods consumed by higher income groups rather than basic food and apparel products that account for a larger share of low-income household consumption).", "Yes. The President has the authority to reduce, modify, or terminate import restrictions imposed under Sections 201, 232, and 301. Certain limitations on the President's authority to modify the tariffs apply as specified in the relevant statutes. The President has adjusted several tariff increases since they were initially proclaimed. For example, the President increased the tariff on U.S. steel imports from Turkey under Section 232 from 25% to 50%. However, certain U.S. importers of Turkish steel have brought a challenge to this tariff increase at the U.S. Court of International Trade. Similarly, the President has modified actions taken under Section 301 by increasing the scope of imports from China that are subject to new tariffs. Some products have also received exemptions from the tariff measures, explained below.", "", "In Presidential Proclamation 9693, announcing the Section 201 action on solar products, the President gave the USTR 30 days to develop procedures for exclusion of particular products from the safeguard measure. On February 14, 2018, the USTR published a notice establishing procedures to consider requests for the exclusion of particular products. Based on that notice, the USTR received 48 product exclusion requests and 213 subsequent comments responding to these requests by the deadline, March 16, 2018. On September 19, 2018, the USTR announced a limited number of solar product exclusions, and indicated that additional requests received by the March 16, 2018 deadline remained under evaluation.\nCanada is excluded from the additional duties on washers. Certain developing countries were excluded, provided that they account for less than 3% individually or 9% collectively of U.S. imports of solar cells or large residential washers, respectively. All other countries are covered by the Section 201 trade actions.", "Individual countries and products may be exempted from the Section 232 tariffs.", "According to the initial presidential proclamation, countries with which the United States has a \"security relationship\" may discuss \"alternative ways\" to address the national security threat posed by imports of steel and aluminum and gain an exemption from the tariffs. To date four countries have reached agreements with the United States exempting them from part or all of the Section 232 tariffs:\n1. South Korea agreed to an absolute annual quota for 54 separate subcategories of steel in place of the steel tariffs. South Korea did not negotiate an agreement on aluminum and has been subject to the aluminum tariffs since May 1, 2018. 2. Brazil was permanently exempted from the steel tariffs, having reached final quota agreements with the United States on steel imports. Brazil, like South Korea, did not negotiate an agreement on aluminum and has been subject to the aluminum tariffs since June 1, 2018. 3. Argentina was permanently exempted from the steel and aluminum tariffs and agreed to absolute quotas for each. 4. Australia gained a permanent exemption from the tariffs without any quantitative restrictions.", "The 232 product exclusion process is administered by the Department of Commerce's Bureau of Industry and Security (BIS). Thousands of requests have been filed to date and the exclusion process has been the subject of criticism and scrutiny by several Members of Congress and other affected stakeholders. To limit potential negative domestic impacts of the tariffs on U.S. consumers and consuming industries, Commerce published an interim final rule for how parties located in the United States may request exclusions for items that are not \"produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.\" The rule went into effect the same day as publication to allow for immediate submissions.\nRequesters must complete the official response form spreadsheets for each steel and aluminum exclusion and submit the forms on regulations.gov, where both requests for exclusions and objections to requests are posted. There is no time limit for submitting an exclusion request. Each requester must complete a separate application for each product to be considered for exclusion. Exclusion determinations are to be based on national security considerations, but the specific nature of these considerations remain undefined. To minimize the impact of any exclusion, the interim rule allows only \"individuals or organizations using steel articles ... in business activities ... in the United States to submit exclusion requests,\" eliminating the ability of larger umbrella groups or trade associations to submit petitions on behalf of member companies. A parallel requirement applies for aluminum requests. Any approved product exclusion will be limited to the individual or organization that submitted the specific exclusion request. Parties may also submit objections to any exclusion within 30 days after the exclusion request is posted. The review of exclusion requests and objections will not exceed 90 days. Exclusions will generally last for one year.\nCompanies and some Members of Congress have criticized the intensive, time-consuming process to submit exclusion requests, the lengthy waiting period for a response from Commerce, what some view as an arbitrary nature of acceptances and denials, and the fact that all exclusion requests to date have been rejected when a U.S. steel or aluminum producer has objected to it. (See \" Have Members of Congress and other stakeholders raised issues regarding the product exclusion process? \") In response, Commerce announced a new rule to allow companies to rebut objections to petitions. The new rule, published September 11, 2018, includes new rebuttal mechanisms, more information about the exclusion submission requirements and process, and the criteria Commerce uses in deciding whether to grant an exclusion request.\nIn September, Commerce provided revised estimates of the anticipated number of exclusion requests (96,954) and objections (38,781). To streamline and increase the transparency of the process, Commerce developed an online portal for users to submit requests for exclusions, objections, rebuttals, or surrebuttals. Commerce began testing the portal in December 2018 with the goal of implementing it in early 2019.", "During the Section 301 notice and comment period on proposed Section 301 tariff increases, the USTR heard from a number of U.S. stakeholders who expressed opposition and/or concern about how such measures could impact their businesses, as well as U.S. consumers. In response, the USTR created a product exclusion process, whereby firms could petition for an exemption from the Section 301 tariff increases for specific imports. The USTR stated that product exclusion determinations would be made on a case-by-case basis, based on information provided by requesters that showed\nWhether the particular product is available only from China; Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests; and Whether the particular product is strategically important or related to ''Made in China 2025'' or other Chinese industrial programs.\nTo date, USTR has only created this product exclusion process for the first two stages of tariff increases under Section 301. Several Members of Congress have sent letters to the USTR calling for an exclusion process for stage three tariffs as well. The joint explanatory statement to the FY2019 appropriations law ( P.L. 116-6 ), enacted February 15, 2019, directs USTR to establish a product exclusion process for stage three tariffs within 30 days.", "", "Several Members of Congress have raised concerns about the Section 232 exclusion process. For example, in a letter to Commerce Secretary Wilbur Ross, and at a June 2018 hearing, then-Chairman of the Senate Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden urged improvements to the product exclusion procedures on the basis that the detailed data required placed an undue burden on petitioners and objectors. They also suggested that the process appeared to bar small businesses from relying on trade associations to consolidate data and make submissions on behalf of multiple businesses. The letter further stated that Commerce had not instituted a clear process for protecting business proprietary information. In a follow-up letter to the Secretary of Commerce in December, Senators Hatch and Wyden recognized that some improvements had been made to the exclusion process but identified further issues raised by stakeholders and U.S. businesses. They asked Commerce to address the concerns by adhering to the published timelines for reviewing requests and making specific changes to how the agency handles requests with technical defects.\nSome Members have used multiple channels to continue to raise issues. A bipartisan group of House Members articulated concerns about the speed of the review process and the significant burden it places on manufacturers, especially small businesses. The Members' letter included specific recommendations, such as allowing for broader product ranges to be included in a single request, allowing trade associations to petition, grandfathering existing contracts to avoid disruptions, and regularly reviewing the tariffs' effects and sunsetting them if they have a \"significant negative impact.\" In September 2018, during an oversight hearing, multiple Senators raised concerns directly to the Assistant Secretary for Export Administration, Bureau of Industry and Security at Commerce, about agency management of the Section 232 exclusion process, including staffing and funding levels, and the need for greater transparency, among other issues.\nSome Members have questioned the Administration's processes and ability to pick winners and losers through granting or denying exclusion requests. On August 9, 2018, Senator Ron Johnson requested that Commerce provide specific statistics and information on the exclusion requests and process and provide a briefing to the Committee on Homeland Security and Governmental Affairs. Senator Elizabeth Warren requested that the Commerce Inspector General investigate the implementation of the exclusion process, including a review of the processes and procedures Commerce has established, how they are being followed, and if exclusion decisions are made on a transparent, individual basis, free from political interference. She also requested evidence that the exclusions granted meet Commerce's stated goal of \"protecting national security while also minimizing undue impact on downstream American industries,\" as well as evidence that the exclusions granted to date strengthen the national security of the United States. In response to a formal request by Senators Pat Toomey and Tom Carper, the Government Accountability Office (GAO) announced on December 12, 2018, it will investigate the Section 232 product exclusion process in early 2019. Congress authorized additional funds for the Section 232 product exclusion process in the FY2019 appropriations law ( P.L. 116-6 ), and in the accompanying joint explanatory statement, stipulated that Commerce provide quarterly reports to Congress on its administration of the process.\nThe Section 301 exclusion process managed by USTR and effective for the first two tranches of Section 301 tariffs has not attracted the same level of attention from Congress as the Section 232 exclusion process. A bipartisan group of more than 160 Representatives, however, have urged the Administration to allow product exclusions on the third and largest tranche of Section 301 tariffs, and the joint explanatory statement to P.L. 116-6 , directs USTR to establish such an exclusion process within 30 days of the law's enactment.", "", "Changes in tariffs affect economic activity directly by influencing the price of imported goods and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (foreign producers of the goods subject to the tariffs, producers of domestic substitutes, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. Retaliatory tariffs, which U.S. trading partners have imposed in response to U.S. Section 232 and Section 301 tariffs, also affect U.S. exporters. The following outcomes (summarized in Table 1 ) are generally expected at the level of individual firms and consumers:\nU.S. consumers: Higher tariff rates generally lead to price increases for consumers of the goods subject to the tariffs and for consumers of downstream products as input costs rise. Higher prices in turn lead to decreased consumption depending on consumers' price sensitivity for a particular product. As one example, the monthly price of washing machines in the United States, which are currently subject to tariff increases under Section 201, has increased by as much as 12% compared to January 2018 before the tariffs became effective ( Figure 9 ). U.S. producers of domestic substitutes: U.S. producers competing with the imported goods subject to the tariffs (e.g., domestic steel and aluminum producers) may benefit to the degree they are able to charge higher prices for their domestic goods. However, in the short run, U.S. producers' ability to increase production may be limited. A broad index of U.S. steel producer prices was up 14% in December relative to March, when the Section 232 tariffs first took effect. A similar price indicator for aluminum refining and primary aluminum production shows more volatile prices, with the index down 6.2% between March 2018 and December 2018. U.S. producers in downstream industries: U.S. producers using goods subject to the additional tariffs as inputs may be harmed because the tariffs may cause their costs to increase. U.S. motor vehicle producers may be among the industries most hurt since they face: (1) higher input costs for steel; (2) tariffs on parts accounting for $20 billion of annual imports; and (3) retaliatory tariffs on assembled motor vehicle exports to China accounting for $13 billion of annual exports ( Figure 10 ).\nU.S. exporters subject to retaliatory tariffs: U.S. exporters facing retaliatory tariffs may be at a price disadvantage in export markets relative to competitors from other countries, which may decrease demand for U.S. exports to those markets. Since Section 232 retaliatory tariffs took effect in the EU, Canada, and Mexico in July, U.S. average monthly exports of the products subject to retaliation have been below their pre-tariff monthly 2018 average by 37%, 23%, and 10%, respectively ( Figure 11 ). China purchases such a large share of certain U.S. agricultural exports—China accounted for 57% of all U.S. soybean exports in 2017—its retaliatory tariffs and the subsequent decline in export sales may have contributed to depressed U.S. prices for some commodities. Foreign producers of the goods subject to the tariffs: Foreign producers can also be affected by tariff increases if consumer demand falls in response to rising prices. In some instances, typically when demand is very price sensitive, or highly elastic, foreign producers may choose to lower their prices and absorb a portion of the tariff increase. The degree to which foreign producers change their prices in response to tariff changes is known as the tariff pass-through rate. Over a longer time horizon, production may shift to other countries to avoid the increased tariffs imposed on products manufactured in the countries affected.\nIn addition to these microeconomic effects, tariffs can also affect macroeconomic variables. With regard to the value of the U.S. dollar, as demand for foreign goods may fall in response to higher tariffs, U.S. demand for foreign currency may also fall, putting upward pressure on the relative exchange value of the dollar. This in turn would reduce demand for U.S. exports and increase demand for foreign imports, partly offsetting the effects of the tariffs. Tariffs may also affect national consumption patterns, depending on how the shift to higher cost domestic substitutes affects consumers' discretionary income and therefore aggregate demand. In the current tight labor environment tariffs may have less impact on overall U.S. employment levels, but may result in some movement of workers between industries and potential industry-specific unemployment as labor demand rises in domestic industries benefitting from the tariffs and falls in industries harmed by increased input costs or retaliatory tariffs. Economists generally agree that a reallocation of resources, including capital and labor, based on price distortions such as tariffs reduces efficiency and productivity over the long run.", "U.S. government and international institutions, think tanks, and consulting groups have prepared estimates of the potential impacts of the tariffs by projecting trade values using historical trade data and various modeling techniques ( Table 2 ). These studies have produced a range of estimates, but generally suggest a moderately negative impact. The Congressional Budget Office, for example, estimates a 0.1% decline in the annual U.S. GDP growth rate resulting from the tariffs currently in place, while the International Monetary Fund (IMF) estimates approximately a 0.2% decline in the annual U.S. GDP growth rate. Most studies show slight employment gains and production increases in U.S. industries competing with the imports subject to additional tariffs and declines in sectors facing retaliation and heavily reliant on inputs subject to additional tariffs.\nThe net estimated effects are relatively modest, because approximately 10.5% of U.S. annual trade (12% of imports and 8% of exports) is affected by the tariff actions to date and trade represents a moderate share of total U.S. economic activity (27% of U.S. GDP in 2017). However, the effects may be substantial for individual firms reliant either on imports subject to the U.S. tariffs or exports facing retaliatory measures, as well as consumers for whom the affected products account for a large share of consumption.\nThe effects could grow if U.S. tariff actions and retaliation escalates. The IMF, for example, estimates that U.S. GDP growth could fall by approximately 1% and global growth could fall by 0.8% if the United States goes forward with an additional 25% tariff on imports from China and on motor vehicle imports from a number of countries, and partner countries retaliate. For context, in 2017 U.S. GDP was $19.5 trillion, making a 1% decline equivalent to a reduction in GDP of $195 billion. Staff from the Federal Reserve Board of Governors, recently noted that \"trade policies and foreign economic developments could move in directions that have significant negative effects on U.S. economic growth.\" Part of this decline in economic growth reflects concern that the tariff escalation also creates a general environment of uncertainty. Economic research on uncertainty suggests it may lead to lower investment and generally restrain economic activity, including trade .\nThese estimates, however, should be interpreted with caution because (1) they require various assumptions that can affect the predicted outcomes; (2) the extent of the U.S. tariffs and retaliation has fluctuated significantly in recent months and is subject to change; and (3) some of the studies were produced or sponsored by stakeholders advancing specific interests. Economists from the Federal Reserve Bank of Atlanta also note that because tariffs have decreased significantly over the past several decades, there is a dearth of recent empirical evidence to inform models on tariff increases.", "Most economists agree that the U.S. and global economies have benefitted significantly from the major reduction in global tariff rates that has taken place since the 1940s. If tariff rates were to increase for a significant period of time it could insulate domestic producers from foreign competition, and potentially lead to less efficient and competitive production. This in turn could lead to lower overall economic growth in the United States and abroad, since more closed economies are generally less dynamic, with less innovation and productivity growth. Furthermore, retaliatory tariffs are particularly damaging to U.S. exporters in foreign markets because, unlike multilateral tariffs, the retaliatory tariffs only target U.S. imports. Therefore, exporters from other countries that compete with U.S. firms are likely to be more competitive in the retaliatory markets. Recent trade agreements involving major U.S. trade partners, but not the United States, such as the new EU-Japan FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11) agreement, which consists of the 11 countries remaining in the TPP following the U.S. withdrawal, may likely compound this competitive disadvantage for U.S. exporters. Some argue it may be difficult for U.S. exporters to regain lost export opportunities in the future once importers establish relationships with suppliers from other countries.\nAnother potential long-term effect of the tariffs is a shift in the U.S. role in international economic policymaking. While some stakeholders question the benefits of the dominant U.S. role in global rules-setting, others argue this has generally been of benefit to the United States, allowing U.S. priorities to feature prominently in existing international trade obligations. There are also concerns over the potential geopolitical aspects of tariff escalation. Some argue that the highly integrated nature of the global economy today acts as a deterrent to military conflict. Conversely, if tariff escalation creates a more fragmented global economy or imposes significant costs on a particular economy, it may lessen this deterrent.", "In addition to studies on the potential macroeconomic effects of the tariffs, a variety of anecdotal information on the tariffs' impact on specific businesses can be found in press reports or quarterly or annual company reporting. The President's tariff actions and subsequent retaliatory tariffs are only one of many factors influencing economic conditions for U.S. companies, making it difficult to assess the tariffs' direct effects.\nIn general, this anecdotal information largely conforms to the theoretical effects of the tariffs outlined in this report. Companies stating they have benefitted from the tariffs are producers competing with the imported products subject to the tariffs, while many downstream manufacturers and retailers assert they have been harmed. Many U.S. exporters subject to retaliatory tariffs also argue that these trade policy actions have negatively affected their operations. For some U.S. producers, the effects of the tariffs have been more complex, including companies that are both benefitting from higher domestic prices due to the tariffs while also being harmed by higher input costs. Companies with major overseas operations argue they have been indirectly harmed through lower sales abroad resulting from an economic slowdown in the countries subject to the Administration's tariff actions. The text box below provides selected examples of companies in each of these four broad categories.", "China plays an important role for many U.S. multinational firms that rely on global supply chains to manufacture their products. In some cases, U.S. firms source production of parts and components around the world and use China as a final point of assembly for products (e.g., Apple Corporation's iPhone), which are then largely exported. In other instances, firms import parts and components from China to use them in manufacturing products domestically. The use of global supply chains often enables firms to concentrate more of their activities on higher value-added activities. Such factors enable firms to lower costs (making them more globally competitive) and reduce prices for consumers (increasing their purchasing power), which should boost economic growth. The extensive use of global supply chains also result in U.S. imports from China containing foreign-made intermediates, including from the United States. A study by the Organization for Economic Cooperation and Development (OECD) estimated that 40.2% of the value of China's manufactured gross exports in 2011 came from foreign inputs. Many U.S. firms have argued that imposing increased tariffs on imports from China will disrupt global supply chains and could undermine the competitiveness of U.S. firms. To illustrate in a July 27, 2018, letter to USTR Robert Lighthizer, forty-nine members of the Congressional Semiconductor Caucus stated that while the signers supported the Administration's goals of improving China's practices on intellectual property rights, forced technology transfer, and innovation, they opposed using tariff increases to obtain such results:\nTariffs on semiconductors will not impact Chinese companies since they export almost no semiconductors to the U.S. market. Instead these tariffs would harm U.S. companies and innovators. Most U.S. imports of semiconductors from China are designed and manufactured by U.S. firms, largely in the United States, then shipped to China for final assembly, test, and packaging. This step in the semiconductor manufacturing process comprises approximately 10 percent of the final value of the product and does not result in the transfer of valuable IP. Similarly, imports of finished semiconductor tools are essentially non-existent. Rather, imports of relatively low-value/low-IP components are incorporated into the high value-added tools made by the U.S. equipment makers and sold around the world.", "The U.S. Chamber of Commerce and the Brookings Institut ion have examined how the retaliatory tariffs could affect state and metropolitan economies by tallying the total exports subject to retaliation by location. The Chamber's website allows users to select a specific state for more information, while Brookings' website includes a downloadable dataset searchable by specific metropolitan area. According to Brookings, although major metropolitan areas Houston, Chicago, Los Angeles, Dallas, Seattle, and Detroit export the largest overall value of products subject to retaliatory tariffs, with over $2 billion of annual exports affected from each metropolitan area, some rural communities have a much larger share of their total exports subject to retaliation as their exports may be concentrated in certain industries.\nState-level trade data are also accessible directly from the Census Bureau at usatrade.census.gov.", "The U.S. Department of Agriculture (USDA) is making available about $12 billion in financial assistance to farmers and ranchers affected by the retaliatory tariffs in the form of direct payments, food purchases, and export promotion assistance. USDA expects that about $9.6 billion will be used for direct payments to qualifying agricultural producers of soybeans, corn, cotton, sorghum, wheat, hogs, dairy, fresh sweet cherries, and shelled almonds. Of those funds, more than three-fourths ($7.3 billion) of the payments are likely to go to soybean producers. To be eligible, a producer must have an ownership share in the commodity, be actively engaged in farming, and be in compliance with adjusted gross income restrictions and conservation provisions. Payments are capped on a per-person or per-legal-entity basis. The sign-up period to request assistance ended on February 14, 2019.\nThe Administration has also created a Food Purchase and Distribution Program that is to undertake $1.2 billion in government purchases of excess food supplies. USDA has targeted an initial 29 commodities for purchase and distribution through domestic nutrition assistance programs. Purchasing orders and distribution activities are to be adjusted based on the demand by the recipient food assistance programs geographically. The smallest piece of the trade aid package is an allocation of $200 million to boost the trade promotion efforts at USDA. U.S. trade partners have reportedly raised questions over the overall U.S. aid package at WTO Agriculture Committee meetings and are closely monitoring U.S. compliance with related WTO obligations on subsidies.", "President Trump has repeatedly raised concerns over the size of the U.S. goods trade deficit (i.e., the amount by which total U.S. goods imports exceed total U.S. goods exports), including making trade deficit reduction a stated objective in new U.S. trade agreement negotiations. While tariffs are expected to reduce imports initially, they are unlikely to reduce the overall trade deficit due to at least two indirect effects that counteract the initial reduction in imports. One indirect effect is a potential change in the value of the U.S. dollar relative to foreign currencies. A reduction in imports reduces demand for foreign currency, putting upward pressure on the foreign exchange value of the U.S. dollar, thereby making U.S. exports more expensive abroad and imports less expensive in the United States. Another potential effect of U.S. import tariffs is retaliatory tariffs, which are likely to reduce demand for U.S. exports. Recent empirical research studying tariff adjustments in a panel of countries supports this theoretical framework and finds no significant evidence of tariffs improving a country's trade balance.\nEconomists generally also argue that while tariffs placed on imports from a limited number of trading partners may reduce the bilateral U.S. trade deficit with those specific countries, this is likely to be offset by an increase in the trade deficit or reduction in the trade surplus with other countries, leaving the total U.S. trade deficit largely unchanged. This is because the trade deficit generally reflects a shortfall in national saving relative to investment, which tariffs do not address.\nThe U.S. goods trade deficit grew in 2018. From January to November 2018, the latest month for which trade data are available, the U.S. goods trade deficit totaled $806 billion, increasing from $731 billion for the same period in 2017. In every month except May, the goods trade deficit was larger in 2018 compared to the same month in 2017 ( Figure 12 ). This may reflect broader positive economic conditions: when the U.S. economy grows demand for both domestic and imported goods rises. It may also, in part, be a result of importers front-loading purchases of foreign goods in an attempt to avoid potentially higher tariffs in the future. Meanwhile, a trade-weighted index of the exchange value of the U.S. dollar against the currencies of a broad group of major trading partners increased by about 10% throughout 2018. The strengthening dollar counteracts the effect of the tariffs by making imports less costly in the United States and U.S. exports more costly in foreign markets.", "", "Through Section 201, 232, and 301, Congress has delegated to the President some of its constitutional authority to enact import restrictions, including certain tariff changes. Each of the authorities require an investigation and recommendations of appropriate actions by a key agency; the Department of Commerce and USTR have primary roles in Section 232 and 301 investigations, respectively, while the International Trade Commission (ITC), an independent agency with an equal number of Democratic and Republican commissioners, oversees Section 201 investigations.", "Multiple proposals have been introduced in both the 115 th and 116 th Congress to amend the President's trade authorities, particularly with respect to Section 232. The majority of these proposals would expand the role of Congress in determining whether or not to impose tariffs.\nIn the 116 th Congress, debate over congressional and executive powers to regulate tariffs has generated multiple proposals to limit the President's trade authorities, along with other reforms (see Table 3 ). Examples include measures that would\n1. Require congressional approval before certain Presidential trade actions would go into effect; 2. For the purposes of Section 232 investigations, explicitly define national security and related imports, and task the independent ITC with administering a product exclusion request process; 3. Transfer primary responsibility for Section 232 investigations to the Secretary of Defense from the Secretary of Commerce; 4. Provide an option for Congress to nullify Section 232 actions, by passing a joint disapproval resolution; and 5. Stall the current Section 232 investigation into auto imports.\nIn contrast to proposals to limit the President's trade authority, the White House is actively supporting a measure introduced by Representative Sean Duffy ( H.R. 764 ), that seeks to expand the President's authorities. H.R. 764 would grant the President additional authority to increase tariff rates to match the rates of foreign trading partners, on a country-by-country and product-by-product basis.\nIn the 115 th Congress, proposals to amend trade authorities varied, though most focused on potential modifications to Section 232. Some proposals sought to require additional consultations with Congress or require congressional approval or disapproval of certain trade actions. Other proposals sought to override or suspend specific trade actions by the Trump Administration. A nonbinding motion calling for a congressional role in Section 232 actions passed the Senate, but no other bills to amend the President's trade authorities passed in the 115 th Congress.", "", "U.S. Customs and Border Protection (CBP) assesses and collects duties on U.S. imports, including the additional duties imposed as a result of the President's tariff actions. According to information provided by CBP, the following revenue was assessed from the additional duties imposed by the President's tariff actions as of February 21, 2019 (note the tariffs were imposed at different times during 2018 and therefore the collected revenue does not represent a full calendar year):", "The tariffs collected are put in the general fund of the U.S. Treasury and are not allocated to a specific fund, but are available for appropriations.\nIn other more historical cases, revenue from duties on U.S. imports has been dedicated to specific uses. Examples include\nSection 32 of The Agriculture Adjustment Act provides for a permanent annual fiscal year appropriation to the U.S. Department of Agriculture (USDA) equal to 30% of \"the gross receipts from [all] duties collected under the customs laws\" during the calendar year preceding the beginning of the fiscal year for which they were appropriated. Section 203 of the Emergency Wetlands Resources Act of 1985 requires that quarterly payments of an amount equal to the amount of all import duties collected on arms and ammunition (HTSUS chapter 93) be used to partially fund a Migratory Bird Conservation Fund (MBCF), administered by the Department of the Interior. Section 3 of the Recreational Boating Safety and Facilities Act of 1980, as amended ( P.L. 96-451 ; 16 U.S.C. § 1606a), requires the Secretary of the Treasury to transfer, \"at least quarterly,\" to the Reforestation Trust Fund (RT) \"an amount equal to the sum of the tariffs received\" on imports of forest and wood articles classified under specified headings of the HTSUS, subject to a cap of $30 million each fiscal year. The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, (Title X of P.L. 106-387 ) known as the \"Byrd Amendment,\" amended existing antidumping and countervailing duty (CVD) laws by requiring that duties assessed pursuant to an AD or CVD order were to be deposited by CBP into special accounts and then distributed to \"affected parties\" (defined as a manufacturer, producer, farmer, rancher, worker representative, or association involved in or in support of an AD or CVD investigation) for certain \"qualifying expenditures\" (such as manufacturing facilities and equipment), as outlined in the act. In 2003, however, WTO dispute settlement and Appellate Body panels determined that the law violated U.S. obligations under the WTO Antidumping and Subsidies Agreements. Congress repealed CDSOA on February 8, 2006.", "On August 5, 2018, President Trump announced that the increased tariffs his Administration has imposed on steel, aluminum, washing machines, solar panels, and a variety of imported Chinese goods will begin to generate sufficient revenue to reduce the federal debt. The U.S. federal debt represents an accumulation of government borrowing over time, including as a result of annual budget deficits (i.e., when federal government outlays exceed revenue). In FY2018, the federal budget deficit was $779 billion and is projected by the Congressional Budget Office (CBO) to total $897 billion in FY2019, thus contributing to an increasing federal debt. The cumulative publicly held federal debt totaled $15.8 trillion at the end of FY2018, and is projected to increase to $16.6 trillion by the end of FY2019. To reduce the federal debt, the President's tariff actions would have to generate enough revenue to turn the projected budget deficit into a surplus, which could then be used to pay down the federal debt.\nAccounting for the additional tariffs imposed by the Administration to date, CBO projects that customs duties could generate additional revenue of approximately $34 billion in FY2019, or less than 4% of the projected FY2019 budget deficit. This suggests that at current levels, the President's tariff actions may slightly reduce the annual U.S. budget deficit, but will not generate a budget surplus and therefore will not reduce the annual U.S. debt, though they may result in the debt increasing at a slightly slower rate than would otherwise occur.\nMoreover, dynamic effects of the tariffs would be likely to reduce these revenues over time as price increases resulting from the tariffs are likely to shift consumption patterns toward less expensive alternatives (i.e. goods not subject to the tariffs). If the tariffs have a negative effect on economic growth, as most economists and CBO predict, they could also result in lower tax revenues more broadly as economic activity declines. In recent history, customs duties resulting from tariffs have not been a significant source of U.S. government revenue. In FY2018, individual income taxes generated more than half (50.6%) of U.S. government revenue, while tariffs or custom duties accounted for less than 2% of total receipts.", "Taxes create a distortion from market-based signals by altering the price of various economic activities. These altered prices can in turn alter economic outcomes more broadly as market actors make consumption and production decisions in response. Economists generally argue in favor of policies that minimize market distortions as much as possible, especially when they affect production and the allocation of resources. Tariffs or duties are a tax on imports, which raise the price of imports relative to domestic goods, encouraging consumption of domestic goods relative to foreign goods, and thereby potentially shifting production and diverting resources away from relatively efficient economic activities towards less efficient ones. Although there are instances in which economic theory suggests markets may not produce an optimal outcome, economists generally assert that tariffs are not the best tool to address these market failures.\nGovernments, however, must collect revenue in order to fund their services. From an economist's viewpoint, the best source of revenue is one that creates the least distortion of economic activity. Tariffs are generally not viewed as the least distortionary tax. A potential benefit of tariffs as a source of revenue for some countries is the relative simplicity of their collection, which may explain why they remain significant as a share of government revenue in some least developed countries. Economists, however, generally urge developing countries to lessen their reliance on tariffs as a revenue source due to concerns that tariffs may lead to an inefficient allocation of resources. Until the 1910s, custom duties or tariffs were the main source of revenue for the U.S. government; since the creation of the current federal income tax system in 1913, tariff revenue has become an increasingly smaller share of the federal government's total budget receipts, accounting for less than 2% of total receipts in FY2018.\nIn addition to tariffs possibly distorting the allocation of resources, they may also represent a less progressive form of taxation. As with other taxes, the burden of tariffs does not fall uniformly across goods or demographic groups; instead, it falls more heavily on traded goods and the populations that purchase them. Studies generally have found that, in the United States, tariffs harm low- and middle-income households more than high-income households, in large part because lower-income households spend more—as a proportion of their total expenditures—on tradable goods like food and apparel.", "", "Through multilateral (WTO) and bilateral and regional trade (FTA) agreements, the United States and its trading partners have committed not to raise tariffs above certain levels with limited exceptions. These exceptions include specific tariffs in response to unfairly traded goods that may cause or threaten to cause material injury, such as imports dumped on U.S. markets at below-production prices (anti-dumping duties) or imports benefitting from government subsidies (countervailing duties) as well as time-limited safeguard actions when a surge in fairly traded imports injures or threatens to injure a domestic industry. U.S. trade agreements also generally include broad exceptions for actions deemed necessary for \"essential security interests.\" The United States argues that its recent tariff actions are allowed under WTO and FTA rules, while U.S. trading partners allege the U.S. actions are inconsistent with these rules and have responded with retaliatory tariffs and initiated dispute settlement actions to resolve their concerns. The United States meanwhile alleges that these retaliatory tariffs are likewise inconsistent with WTO and FTA rules and has similarly initiated WTO dispute settlement procedures in response.", "Several countries allege that U.S. actions are inconsistent with WTO rules and have initiated complaints under the WTO dispute settlement system, over tariffs imposed under Section 201 (safeguards), Section 232 (national security), and Section 301 (\"unfair\" trading practices) ( Table 4 ). The first step in the dispute settlement process is to request consultations, which provides WTO parties the opportunity to discuss the complaint and seek to reach a negotiated resolution without proceeding to litigation. If consultations fail to resolve the dispute (or if a party denies the request for consultations), the complainant country may request adjudication of the dispute by a WTO panel. The panel issues a ruling on whether the offending measure is consistent with the relevant provisions under WTO agreements; panel decisions can be appealed.", "On July 16, 2018, the United States filed its own WTO complaints over the retaliatory tariffs imposed by five countries (Canada, China, the EU, Mexico, and Turkey) in response to U.S. tariffs on steel and aluminum imports under Section 232. In late August, the United States filed a similar case against Russia. The United States has invoked the so-called national security exception in GATT Article XXI in defense of the tariffs, stating that the tariffs are not safeguards as claimed by the other WTO members in their consultation requests. As of the end of January 2019, all of the disputes are in the panel phase ( Table 5 ).", "The Administration's tariff actions have likely affected U.S. trade agreement negotiations in a number of ways. On one hand, existing and threatened tariffs may have adverse economic implications for certain U.S. trading partners (e.g., new motor vehicle tariffs on the EU and Japan) and may have encouraged those countries to enter negotiations with the United States to remove this threat of new tariffs as part of broader FTA negotiations. The tariffs, however, may have created a more contentious and unpredictable environment for U.S. trade agreement negotiations, since trade agreement partners may be concerned new tariffs could be imposed after they have entered into new agreements with the United States. Perhaps as a result, the Administration has begun negotiating specific language in its trade agreements regarding exemptions from new potential tariffs. For example, the proposed USMCA (renegotiated NAFTA) provides a specific exemption from potential new Section 232 motor vehicle tariffs for a limited amount of auto trade among the parties. Other countries may seek similar assurances in future U.S. FTA negotiations, including the proposed U.S. FTA negotiations with the EU, Japan, and the United Kingdom. Such language is unprecedented in U.S. FTAs. Concerns over the Section 232 steel and aluminum tariffs, which were not addressed in the USCMA, may also affect congressional approval of the renegotiated agreement.", "The United States was a chief architect of the post-World War II global trading system, including the WTO's dispute settlement mechanism. Critics have expressed concerns that the unilateral tariff actions will cause the United States to lose its standing as the predominant global leader of an open and rules-based trading system and chief supporter of more liberalized trade. With regard to the Section 301 actions, China, in particular, may see this shift in U.S. approach as an opportunity to take a more prominent role in setting global trade rules and standards that benefit or promote its interests and that may undermine those of the United States. China's media increasingly touts its economic system as a model for other countries to follow. In addition, U.S. Section 301 tariffs could harm a number of economies that depend on trade with China, either directly or as part of global supply chains, thus damaging relations with the United States.\nRetaliatory actions may also heighten concerns over the potential strain the Section 232 tariffs place on the international trading system. Many U.S. trading partners view the Section 232 actions as protectionist and in violation of U.S. commitments at the WTO and in U.S. FTAs, while the Trump Administration views the actions within its rights under those same commitments. Others have followed suit with retaliatory actions, which may violate their WTO commitments. If the dispute settlement process in those agreements cannot satisfactorily resolve this conflict, it could lead to further unilateral actions and a tit-for-tat process of increasing retaliation. This potential strain comes at a time when the United States has called for broader reforms of the WTO dispute settlement process, specifically with regard to the appellate body mechanism.", "", "", "Official sources of information regarding the U.S. tariff actions are publicly available through the government agencies responsible for investigating imports or enforcing tariff laws. The following resources include embedded links to agency documents as well as footnotes with official links.", "The Department of Commerce is the agency responsible for investigating Section 232 cases. Commerce's Bureau of Industry and Security (BIS) has published investigation reports and relevant FAQs on its website. Notices and submitted public comments are available in the Federal Register and on Regulations.gov .\nFinal Investigation Reports on Section 232 Investigations (1981-2018) Compilation of BIS documents related to the steel and aluminum investigations and imposed tariffs FAQ on Product Exclusions for Section 232 Steel and Aluminum Tariffs Find Objections, Rebuttals, and Surrebuttals for Section 232 Product Exclusion Requests Commerce has published Federal Register notices announcing investigations, requesting public comment, and outline product exclusion procedures. Commerce has solicited and published public comments and product exclusion requests through Regulations.gov. The following dockets compile comments and related documents: Aluminum (Docket: BIS-2018-0002 ) Steel (Docket: BIS-2018-0006 ) Auto and auto parts (Docket: DOC-2018-0002 ) Uranium (Docket: BIS-2018-0011 )", "ITC, the agency responsible for investigating Section 201 cases, has compiled lists of relevant documents concerning the investigations into imports of solar panels and washing machines . These resources include investigation documents, final reports by the Commission, and the primary Federal Register notices. ITC also maintains the U.S. Harmonized Tariff Schedule (HTS), which provides tariff rates for all merchandise imported into the United States. The tariff actions currently imposed under Section 201, Section 232, and Section 301 are noted within Chapter 99 of the HTS, which documents temporary modifications to the tariff schedule.\nITC documents on safeguard investigation into solar panels ITC documents on safeguard investigation into washing machinesThe U.S. Harmonized Tariff Schedule (HTS) : Chapter 99", "USTR , the agency responsible for investigating Section 301 cases, has compiled relevant documents about the Section 301 tariffs against Chin ese intellectual property practices on its website. The following USTR resources include the official notices, hearing transcripts, final lists of products subject to additional tariffs, and information on product exclusions.\nFindings of the Investigation into China's Acts, Policy, and Practices (March 22, 2018) Section 301 Investigations and Related Documents Section 301 Hearings into Proposed Tariffs Section 301: How to Request an Exclusion USTR has solicited and published public comments and product exclusion requests on Regulations.gov . The following dockets compile comments on proposed regulations and related documents, by trade action: Stage 1 Tariffs Notice and comments ( Docket: USTR-2018-0005 )Product exclusions ( Docket: USTR-2018-0025 ) Stage 2 Tariffs Notice and comments ( Docket: USTR-2018-0018 )Product exclusions ( Docket: USTR-2018-0032 ) Stage 3 Tariffs Notice and comments ( Docket: USTR-2018-0026 )", "The President has announced these tariff actions through proclamation and presidential memorandum. Presidential documents are published in the Federal Register:\nPresidential proclamations on Section 201 (Donald J. Trump) Presidential proclamations on Section 232 (Donald J. Trump) Presidential documents on Section 301 (Donald J. Trump) Other presidential statements regarding tariff actions are posted on WhiteHouse.gov.", "CBP is the agency responsible for enforcing customs laws and collecting tariff revenue. The CBP website includes guidance on recent tariff actions for importers.\nDuty on Imports of Steel and Aluminum Articles under Section 232 of the Trade Expansion Act of 1962Section 301 Trade Remedies – Frequently Asked QuestionsQuota Bulletins , which track certain imports that are subject to quotas or quantitative limits." ], "depth": [ 0, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 3, 3, 4, 4, 3, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_title h2_title h1_title", "h0_full", "", "", "h0_full", "", "", "", "", "h2_full", "", "h0_full", "", "", "h1_full", "h1_title", "", "h1_full", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "h2_title h1_title", "h2_full h1_full", "h2_full", "", "", "", "", "", "", "h0_title", "", "h0_full", "h2_title", "", "", "h2_full", "", "h0_title h2_title", "h0_full", "", "", "h2_full", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What does the Constitution grant Congress sole authority over?", "How has Congress shared this authority with the President?", "How has President Trump made use of these authorities?", "Why have these tariffs been criticized?", "How has Congress addressed these tariffs?", "What Chinese products were most affected by the tariff increases?", "What American products are retaliatory tariffs affecting most?", "How large of an impact have these tariffs made on imports and exports?", "How could imports and exports be further impacted in the future?", "What is the consensus on these tariffs among most economists?", "How might the tariffs benefit the US economy?", "How might the tariffs negatively impact the US economy?", "How do economic analyses support this consensus?", "How might this negative effect affect the President's tariff authority?" ], "summary": [ "The Constitution grants Congress the sole authority over the regulation of foreign commerce.", "Over the past several decades, Congress has authorized the President to adjust tariffs and other trade restrictions in certain circumstances through specific trade laws.", "Using these delegated authorities under three trade laws, President Trump has imposed increased tariffs, largely in the range of 10% - 25%, on a variety of U.S. imports to address concerns related to national security, injury to competing industries, and China's trade practices on forced technology transfer and intellectual property rights, among other issues.", "Several U.S. trade partners argue that these tariff actions violate existing U.S. commitments under multilateral and bilateral or regional trade agreements and have imposed tariffs on U.S. exports in retaliation.", "Congress continues to actively examine and debate these tariffs, and several bills have been introduced either to expand, limit, or revise existing authorities.", "The products affected by the tariff increases include washing machines, solar products, steel, aluminum, and numerous imports from China.", "Retaliatory tariffs are affecting several U.S. exports, including agricultural products such as soybeans and pork, motor vehicles, steel, and aluminum.", "Using 2017 values, U.S. imports subject to the increased tariffs accounted for 12% of annual U.S. imports, while exports subject to retaliatory tariffs accounted for 8% of annual U.S. exports.", "A pending Section 232 investigation on motor vehicle and parts imports could result in increased tariffs on more than $360 billion of imports, and the President has stated that additional tariffs could be imposed on imports from China absent a negotiated agreement to address certain Chinese trade practices of longstanding concern to the United States.", "Although the consensus among most economists is that the tariffs are likely to have a negative effect on the U.S. economy overall, they may have both costs and benefits across different market sectors and actors.", "Import tariffs are effectively a tax on domestic consumption and thus increase costs for U.S. consumers and downstream industries that use products subject to tariffs. Retaliatory tariffs create disadvantages for U.S. exports in foreign markets, and can lead to fewer sales of U.S. products abroad and depressed prices.", "However, domestic producers who compete with affected imports can benefit by being able to charge higher prices for their goods. The Administration also argues the tariffs may have an indirect benefit if they result in tariff reductions by U.S. trading partners and lead to resolution of U.S. trade concerns affecting key sectors of the U.S. economy.", "Economic analyses of the tariff actions estimate a range of potential effects, but generally suggest a 0.1%-0.2% reduction in U.S. gross domestic product (GDP) growth annually owing to the actions to date.", "The economic effects of the President's actions are likely to be central to ongoing congressional debate on legislation to alter the President's tariff authority." ], "parent_pair_index": [ -1, 0, 1, 2, 2, -1, 0, 1, 1, -1, 0, 0, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 3, 3, 3, 3, 4, 4, 4, 4, 4 ] }

{ "title": [ "Background", "FLC Has Not Fully Communicated with and Obtained Feedback from Potential Customers when Designing and Implementing Clearinghouse Initiatives", "FLC Has Not Measured the Performance of Its Clearinghouse Initiatives", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Selected Technology Transfer Organizations with Technology Search Tools", "Appendix II: Comments from the Federal Laboratory Consortium for Technology Transfer", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Acknowledgments" ], "paragraphs": [ "Technology transfer (i.e., the process by which technology or expertise developed in federal labs for one purpose is used for another purpose) is a collaborative effort between the federal labs and outside organizations and traditionally includes:\nTechnology licensing—businesses can license federal technologies, such as patented inventions, in order to integrate them into their products; although not every new or improved technology developed through federal lab research can be commercialized.\nCooperative research and development agreements (CRADA)— under a CRADA, federal labs collaborate with nonfederal partners to carry out research projects that will directly benefit lab missions and the partners’ R&D goals, and a lab may contribute personnel, equipment, or other resources to a project, while its CRADA partners may contribute funds or resources, or both.\nWork for others—under a nonfederal work-for-others agreement, a federal lab is paid to conduct research on behalf of a nonfederal sponsor, such as a university or corporation.\nUser facility agreements—under a user-facility agreement, scientists or researchers from outside organizations can use federal lab equipment for their own research, sometimes in collaboration with federal lab staff.\nAccording to a report prepared by the Interagency Workgroup for Technology Transfer in response to the Presidential Memorandum of 2011, other important means of technology transfer include publishing scientific articles and other technical publications, as well as making software developed by federal researchers available for download.Figure 1 provides an example of how technology developed in a federal lab for one purpose may be transferred to the private sector for another purpose.\nSince the early 1980s, the federal government has enacted several laws related to technology transfer from federal labs. One of the first technology transfer laws, the Stevenson-Wydler Technology Innovation Act of 1980, articulated the need for a strong national policy supporting domestic technology transfer and required federal labs to establish an office of research and technology applications and devote budget and personnel resources to promoting technology cooperation and the transfer of federal technologies. These offices (which we refer to as technology transfer offices) are generally responsible for coordinating each lab’s efforts to identify technologies available for transfer, obtaining patents or other legal protections for lab technologies, and negotiating technology transfer agreements with outside parties. In addition, the administration has emphasized the importance of technology transfer from federal labs. For example, in his October 2011 memorandum, President Obama directed federal agencies to take actions to accelerate technology transfer and support private sector commercialization in an effort to promote innovation and increase the economic and societal impact of federal R&D investments. Moreover, President Obama’s fiscal year 2015 budget identified a new Lab-To-Market cross-agency priority goal to support innovation, economic growth, and job creation. Specifically, the goal outlines several actions to, over the next four years, accelerate and improve the transfer of technologies from federal labs to the commercial marketplace, including optimizing the management, discoverability, and ease-of-license of federally funded patents and increasing the utilization of federally funded research facilities by entrepreneurs and innovators.\nEven with this emphasis on technology transfer, we and others have identified a number of challenges associated with technology transfer from federal labs. These challenges include the following:\nTechnology transfer is often not a priority for lab managers and funding tends not to allow for widespread technology transfer outreach.\nScientists may not understand the potential commercial applicability of their innovations.\nRules and requirements that labs must follow in transferring technology, as well as a lack of standardization thereof, increase the complexity and length of time of the negotiation process with potential partners, and create a disincentive to working with the labs.\nLab technologies are often not well-developed enough for use in market-ready products and may require investment of additional time and money to develop.\nCompanies are often not aware of the potentially useful technologies being developed in federal labs.\nCompanies and entrepreneurs often prefer access to and personal contact with researchers to turn an early stage innovation into a market-ready product, and this may be difficult because conflict-of- interest rules that ensure that public employees do not unfairly benefit from federally funded inventions prevent scientists from being involved in business ventures.\nOne of the federal efforts to facilitate technology transfer from federal labs to the private sector and others was the creation of FLC. FLC was established by law in the Federal Technology Transfer Act of 1986 to, among other things, (1) develop training for federal lab employees engaged in technology transfer and (2) facilitate communication and cooperation between federal lab technology transfer offices and regional, state, and local technology transfer organizations. The Federal Technology Transfer Act also established requirements for FLC’s membership and funding.\nSince its establishment in 1986, FLC’s mission has evolved. Earlier in its history, FLC’s efforts, in large part, focused on providing training and networking for federal technology transfer staff. However, FLC has, in recent years, taken on more responsibility for helping federal agencies provide potential customers with information on available technology transfer opportunities and for functioning as a clearinghouse. These efforts were bolstered by the President’s 2011 memorandum calling for an online clearinghouse of federal technologies, and FLC took the lead role in establishing such a tool. Changes to how FLC defines its mission from being primarily focused on the federal labs to expanding its focus beyond the federal labs reflect this transition. For example, in FLC’s 2009 annual report to the President and Congress, FLC defined its mission as to help federal labs transfer technologies developed through the federal government’s R&D efforts. In FLC’s 2012 annual report to the President and Congress, FLC defined its mission as to promote and facilitate the rapid movement of federal lab research results and technologies into the mainstream of the U.S. economy.\nFLC’s standing committees include a state and local government committee and a communications committee, among others. NIST is the legislatively designated FLC host and handles FLC’s finances.\nExecutive Board. FLC is organized into six regions, and each region has a regional coordinator, its own website, social media outlets, regional newsletter, and can implement its own initiatives including training and information meetings for its members.", "FLC has taken steps to communicate with potential customers, including small business and entrepreneurs, but has not fully communicated with and obtained feedback from them to assess potential customers’ needs and incorporate leading practices when designing and implementing technology transfer clearinghouse initiatives, resulting in missed opportunities to better meet potential customer needs.\nAs stated in FLC’s 2012 annual report, FLC carries out its mission to promote and facilitate the rapid movement of federal lab research results and technologies into the mainstream of the U.S. economy by implementing two primary clearinghouse initiatives—the Technology Locator service and Available Technologies tool—that provide information on available technology transfer opportunities. Currently, FLC is developing a third initiative—FLCBusiness—to provide additional information on available technology transfer opportunities. While FLC officials said they view federal agencies and labs as FLC’s main clients for its training and other activities, the principal customers of the information provided through FLC’s clearinghouse initiatives include the private sector, and state and local government organizations, among others, specifically:\nTechnology Locator service. Since 1987, FLC has provided a Technology Locator service whereby an FLC staff member will try to connect customers with relevant labs based on technology needs submitted by customers through a phone call, e-mail, or online form. FLC’s online form provides a space for potential customers to explain their technology request or problem, desired results, and expectations of a federal lab, among other information. Using this information, FLC will identify laboratory resources and contacts that can respond to specific requests and will facilitate communication between the potential customer and the lab contacts. Once contact is made, further discussion or negotiation of a technology transfer agreement occurs between the potential customer and the lab representative. FLC officials said customers who submit requests usually receive a response within 48 hours.\nAvailable Technologies tool. In 2012, FLC released the Available Technologies tool to provide a web-based search tool for collecting and disseminating information on publicly available federally owned inventions and, when available, licensing agreements. The tool can help potential customers identify more than 20,000 available lab technologies across approximately 225 labs by searching the websites of 13 participating agencies. FLC reported spending approximately $30,000 for a contractor to develop the tool, which relies on a customized Google search tool to link potential customers to the existing information on agencies’ technology transfer websites based on key words the customer enters. The key word search can be refined to include or exclude certain words and may also be focused on technologies published within a certain time period. In addition, the Available Technologies tool webpage includes a listing of the latest technologies available for transfer from federal labs. According to FLC, it plans to continue to develop this tool as it gains access to additional data from federal labs through various government-wide initiatives.\nFLCBusiness. FLC is developing a new web-based search tool called FLCBusiness that is scheduled to become publically available in fall 2014, according to FLC officials, and is intended to allow potential customers to search for technology development programs, available funding, and to learn about the capabilities of federal lab facilities. The tool is designed to allow potential customers to perform key word searches for labs, or funding or technology development programs, and to refine searches to a specific agency, geographic location, or technology area. The tool also is to provide links to additional information on licenses, CRADAs, and other technology transfer methods. As of August 2014, FLC reported spending approximately $150,000 to develop the tool.\nIn addition, FLC has utilized various communication tools, such as social media, outreach by regional FLC members to local technology transfer organizations, its annual meeting, and an online newsletter and news forum, to communicate with potential customers and promote its clearinghouse initiatives and technology transfer success stories. For example, in 2013, FLC began providing an opportunity for industry representatives from large corporations to present their companies’ technology needs to participating federal lab officials as part of its annual meeting, according to an industry representative we interviewed. During the 2014 FLC annual meeting, we observed that industry representatives described technology needs ranging from advanced materials to robotics. FLC used the opportunity to do a presentation to publicize its clearinghouse initiatives and, after the presentation, industry representatives and agency members had an opportunity to interact and exchange contact information.\nFLC’s process to design and implement its primary clearinghouse initiatives involves FLC committees and regional coordinators annually proposing new ideas for consideration by FLC’s Executive Board. According to FLC officials, the Executive Board considers proposals in relation to available resources and conducts outreach to agency and lab members. For example, in 2012 when developing its Available Technologies tool, FLC reached out to its agency and lab members when considering possible options for designing a clearinghouse of available technology transfer opportunities. After receiving input from agency and lab members, including concerns about the burden, ability, or willingness to compile data on available technology transfer opportunities for FLC, FLC officials said they designed the Available Technologies tool to minimize the burden on agencies to collect and share their data. Specifically, rather than ask agencies to gather relevant data on federally owned inventions, which were not already centralized and did not exist in a standard format, FLC developed a web-based search tool that would direct potential customers to existing information on federal labs’ websites. FLC officials determined this tool (1) would not require FLC resources to manipulate agency data and (2) would not require agency members to update information separately from what they already planned to include on their websites. FLC officials said they considered FLC to be best-positioned to take the lead in developing the kind of clearinghouse tool described in the President’s 2011 memorandum because it was an interagency body, had already developed a clearinghouse tool when the memorandum called for the creation of a similar database, and because FLC’s funding for the clearinghouse tool was potentially more stable than if the tool were funded by a specific agency appropriation that needed to be approved each fiscal year.\nHowever, FLC did not assess the information needs of potential customers of federal lab technologies to ensure the Available Technologies tool would provide relevant information in a format that customers consider useful, as called for by leading practices. Federal leading practices outlined in Executive Order 12862 and HowTo.gov direct agencies to assess customer needs when designing and implementing initiatives. For example, Executive Order 12862 directs agencies to identify and survey customers to determine the kind and quality of services they want in an effort to develop and meet customer service standards. HowTo.gov also outlines the need to engage with customers to collect and address customer feedback through, for example, online surveys or focus groups, and indicates a need to conduct regular user testing of government websites with actual customers. In addition, according to federal standards for internal control, federal management should ensure that there are adequate means of communicating with and obtaining information from external stakeholders that may have a significant impact on an agency’s achieving its goals. FLC has not taken such steps as part of its approach to design and implement its clearinghouse initiatives. For example, FLC officials said that when designing the Available Technologies tool, they conducted testing to make sure searches on the site functioned as intended, but that potential customers were not involved in this testing. Moreover, after developing the tool, FLC did not communicate with potential customers to collect feedback from them consistent with leading practices regarding the extent to which the tool met customers’ needs or how it might be improved before implementing it. Similarly, we found that, while FLC is in the final stages of developing its new web-based search tool, FLCBusiness, FLC officials said potential customers had not seen early versions of the tool and had an opportunity to provide feedback. Instead, FLC officials said the tool was extensively tested by its web-design contractor and reviewed by members of its Executive Board. FLC officials told us that they demonstrated the tool for agency members and sent the early, or beta, version to laboratory representatives for user testing and data input. The tool was introduced at FLC’s 2014 annual meeting, although it was not clear whether any feedback was collected from potential customers based on our observation of the meeting. Without communicating with potential customers on FLC’s tools, allowing for customers to test them, and collecting feedback on their usefulness, FLC is not following internal control standards or leading practices and does not have assurance that its tools will meet customer needs.\nAccording to some representatives from customer groups and one technology transfer organization, federal lab patents may not afford adequate intellectual property protection to support commercialization because they sometimes protect only the specific version of the invention relevant to the lab’s mission from infringement, which would potentially allow a competitor to offer a similar product. across multiple labs, but these may be difficult to identify through FLC’s Available Technologies tool because labs and agencies describe technologies differently. For example, some technologies from NASA are presented as scientific research results, while technologies with similar search terms from DOD are presented as potential product components. A representative from one technology transfer organization we interviewed said that a small company he worked with would not have been able to identify relevant patents on its own because the company needed patents from 11 different federal labs to cover different components of a product it was developing to filter water used in oil and natural gas drilling. Other representatives of potential customer groups and technology transfer organizations said that while large companies have the time and money to search for technologies across numerous labs, smaller companies generally do not.\nLimited information on technologies’ market relevance: Customers may benefit from more information on the potential market relevance of technologies, which is not always provided in the agency and lab information available through FLC’s Available Technologies tool. For example, one representative from a technology transfer organization said that clearinghouse search results that are highly technical—as with those in FLC’s Available Technologies tool that are primarily based on patents—may make sense to research scientists who know relevant technical terms, but not necessarily to entrepreneurs who may not be aware of the technical key words relevant to a variety of potential solutions to their technology needs. In addition, some customer representatives said information on market relevance is useful because federally patented technologies are generally not close to being market-ready, and additional R&D is needed to bring products to market.\nWe observed a few of these limitations during a keyword search we conducted using FLC’s Available Technologies tool. In particular, when we attempted to identify similar technologies across agencies and labs based on a keyword search, the results were not standardized, and some results from some agencies offered different information than others. For example, a result from one agency provided a link to a 15-page research publication related to the technology, while a result from another provided a one-sentence overview of the technology’s potential market relevance. Moreover, not every result included contact information for researchers affiliated with the technology. For instance, one result provided a list of links to agency-wide opportunities for partnerships between the private sector and the agency, but this list did not include contact information for any researchers, nor was it clear which links on the page related to the original search term. Figure 2 shows the different types of information that may be included in FLC search results.\nFLC has taken steps that may help address some of the issues representatives of technology transfer organizations and other potential customer groups identified and that we observed. For example, in 2012, FLC began a systematic effort to identify potential customers of federal technology transfer opportunities, including entrepreneurs and small businesses, in different regions of the country. This effort started with an initial study conducted in FLC’s Midwest region that found a number of unmet customer needs related to technology transfer, including a need for technical and financial help for entrepreneurs and improved customer service and dissemination of information on available technologies. Although this effort represented an important step in engaging with potential customers, it did not focus on obtaining their input on what information they might want from an FLC clearinghouse tool and in what format. In addition, FLC’s clearinghouse tools, taken together when FLCBusiness becomes publically available, could provide potential customers with more information on available technology transfer opportunities than FLC currently provides through the Available Technologies tool. For example, FLC anticipates using FLCBusiness to provide information on lab facilities, which representatives of potential customer groups and other technology transfer organizations noted is generally missing from the Available Technologies tool. Moreover, if a potential customer is unable to find a facility or technology in FLCBusiness or the Available Technologies tool, the potential customer could contact the Technology Locator service to get in touch with a laboratory representative. Figure 3 depicts how FLC’s clearinghouse tools could work together to help potential customers identify technology transfer opportunities to meet their needs. However, since FLC has not fully communicated with and obtained feedback from potential customers in developing FLCBusiness, it lacks assurance that FLCBusiness or its suite of clearinghouse tools will meet customers’ needs.\nFLC faces challenges in its ability to more fully communicate with potential customers to facilitate technology transfer from federal labs without also engaging FLC’s agency and lab members. FLC’s web-based clearinghouse tools depend on information provided by agency and lab members to help build or update the databases on which the tools are based. For instance, FLC officials said the Available Technologies tool depends on information about agency technologies available to FLC through existing agency websites. As noted above, this information often varies across agencies and can present similar technologies differently or use different technical terminology, and representatives of potential customers said these differences could make it difficult for outside parties to find the most appropriate information to meet their needs. Agency officials from NIH, DOE, DOD, and NASA also told us that it could be challenging for them to justify gathering new or different information related to technology transfer opportunities until FLC demonstrated that customer needs would be better met with additional information presented in a different format. They also noted that FLC may not be well- positioned to conduct additional customer outreach to collect feedback without working with agency and lab members, making it difficult for the consortium to improve its existing search tools on its own. Some agency officials said that any improvements based on customer feedback would require a significant collaborative effort on the part of FLC and its agency and lab members, given the relatively small size of FLC’s annual budget and available staff. By working collaboratively with agency and lab members to collect feedback on its initiatives’ usefulness, FLC can take advantage of its members’ knowledge and expertise to better communicate with potential customers consistent with federal leading practices.\nEven with the challenges FLC faces, several FLC and agency officials as well as representatives of other technology transfer organizations supported FLC’s clearinghouse initiatives. Representatives from some other organizations that provide information on federal technology transfer opportunities said they only have information about technology at a small number of federal labs, and one organization said it charges users or labs a fee for use of its tools. In contrast, some FLC and lab officials said FLC’s clearinghouse initiatives serve an important function because they have the potential to provide more comprehensive information about technology transfer opportunities at federal labs at no cost to potential customers. One FLC official also noted that, while the Available Technologies tool has limited capability since the data it reports are unstructured and not standardized in any way, the relatively low cost of the tool and the quick time frame over which it was developed made it an important interim step to providing a global search capability for available federal technologies.", "Although FLC collects some data related to the use of its clearinghouse initiatives, it has not used performance goals and measures consistent with federal agency leading practices to measure results and does not have the information necessary to determine the extent to which its efforts help achieve FLC’s overall strategic goals.\nFLC tracks the number of requests for assistance it receives through its Technology Locator service by (1) the technology area the customer is interested in (e.g., energy, pharmaceutical, or manufacturing); (2) the nature of the customer’s interest (e.g., informational or technology need); and (3) type of customer that submitted the request (e.g., academic, investor, or small business). According to FLC officials, in 2013, the Technology Locator service received 172 requests for assistance. This number represented a decrease from the 203 requests for assistance FLC received in 2012. In addition, FLC collects success stories, which it posts on its website. For example, one of the success stories describes a business owner who placed a Technology Locator request to ask for help with software development—the Locator successfully put her in touch with relevant staff at federal labs who were able to offer assistance. FLC also collects data on the general use of the Available Technologies tool, such as the number of unique views of web pages and the average time spent on a web page. One report showed that, from January 1 through July 14, 2014, FLC’s Available Technologies tool had 2,010 page views from unique customers and 3,240 page views overall.\nFLC has developed a number of strategic goals over the years. The last strategic plan FLC developed was for 2009 and it contained three goals: (1) develop FLC members to be leaders in technology transfer; (2) foster an environment for technology transfer; and (3) enhance the professional organizational structure of FLC. More recently, in its 2012 annual report to the President and Congress, FLC identified four strategic goals for all FLC activities: (1) outreach/communication, (2) training/education, (3) networking, and (4) recognition. An FLC workgroup is currently working on a new strategic plan, which FLC reported will not be ready until the end of 2014.\nFLC has not, however, developed performance goals or measures to align its initiatives with its strategic goals, as recommended by leading practices to improve government performance and results. In particular, GPRAMA requires that agencies develop strategic plans that include general, long-term goals and objectives, along with an agency performance plan that describes how specific performance goals for the current and subsequent fiscal year contribute to an agency’s strategic goals and objectives. The performance plan should contain, among other things, a description of how the performance goals are to be achieved, including clearly defined milestones, and establish a balanced set of performance indicators, or measures, that will help demonstrate progress toward achieving the performance goals. We have found that these requirements also can serve as leading practices for strategic planning at lower levels within federal agencies, such as planning for individual divisions, programs or initiatives. Among these leading practices is developing and using performance measures, which allow an agency to track the progress it is making toward its mission and goals, provide managers information on which to base their organizational and management decisions, and create powerful incentives to influence organizational and individual behavior. Further, federal leading practices outlined by HowTo.gov state that agencies should use performance metrics to influence the design of and drive improvements for government websites.\nHowever, FLC did not translate the strategic goals identified in its 2012 annual report into performance goals and measures. In particular, FLC did not develop any performance goals or measures related to its strategic goals of outreach or networking, which are, as FLC officials stated, the current goals to which its clearinghouse initiatives would In addition, while FLC tracks usage of its clearinghouse contribute. initiatives, FLC has not established performance measures for these initiatives that would help it assess the extent to which the initiatives are achieving FLC’s goals of outreach and networking or how performance might be improved. For example, FLC does not collect information on the number of connections between lab staff and potential customers that resulted from use of the Available Technologies tool. As a result, some agency officials told us it was unclear how well the tool helps to facilitate technology transfer from federal labs. Working collaboratively with agency and lab members to develop and collect data on performance measures for FLC’s clearinghouse initiatives could help FLC demonstrate the usefulness of its tools to its members while also helping FLC measure progress toward achieving its own goals. Some representatives of other technology transfer organizations we interviewed said they measure the results of their efforts using performance measures, such as the number of companies formed, the number of joint investment agreements between labs and private companies, and the number of successful technology transfer partnerships they help to facilitate. Without some type of performance measures, FLC will be unable to assess whether its initiatives are meeting FLC’s goals of outreach and networking. Further, given that FLC has not developed such measures, its annual report to Congress does not contain information on the progress toward the achievement of FLC’s goals of outreach and networking, limiting the information that the administration and Congress receive on the effectiveness of FLC’s initiatives.", "Recognized as one of 15 cross-agency priority goals in the President’s 2015 budget, technology transfer has become an increasingly important strategy to support economic growth, create jobs, and increase the global competitiveness of U.S. industries. As FLC’s role in promoting technology transfer has expanded, particularly following the President’s 2011 memorandum, the consortium has launched important initiatives to make information about federal technology transfer opportunities more available to potential customers. FLC is uniquely positioned to contribute to the President’s goal of supporting innovation, economic growth, and job creation as the only interagency body federally mandated to facilitate technology transfer.\nHowever, FLC’s efforts to communicate with potential customers often are not consistent with federal standards for internal control on communicating with and obtaining information from stakeholders and do not incorporate leading practices that call for agencies to consider customer needs when designing and implementing government services. Without better communicating with potential customers during the design and implementation of clearinghouse initiatives, FLC may not be able to effectively assess customer needs, conduct user tests of its web-based initiatives, and collect customer feedback. As a result, FLC does not have assurance that its initiatives will meet customer needs, and representatives of potential customer groups indicated that there was a significant mismatch between the information that would allow them to identify opportunities and what FLC’s initiatives currently provide.\nWhile commercialization of technological innovations is a private sector role rather than a responsibility of the federal government, representatives of potential customer groups stressed that federal labs have extensive value and expertise that they find difficult to access. Officials from federal agencies told us that any improvements to FLC’s initiatives based on customer feedback would require a significant collaborative effort on the part of FLC and its agency and lab members, given the relatively small size of FLC’s annual budget and available staff. Also, because the information FLC provides through its initiatives depends on what is available from its agency and lab members, agency officials said that FLC would need to collaborate with them to help determine what additional or different information they could provide to help meet customers’ needs based on any feedback received. By working collaboratively with agency and lab members to collect feedback on its web-based initiatives’ usefulness, FLC can take full advantage of its members’ collective knowledge and expertise to better communicate with potential customers consistent with federal internal control standards and leading practices to determine those customers’ needs, enhancing the clearinghouse initiatives in achieving their technology transfer goals.\nIn addition, FLC has not established performance goals and measures that would help it assess the extent to which the initiatives are meeting FLC’s goals of outreach and networking or how performance might be improved. Working collaboratively with agency and lab members to develop and collect data on performance measures for FLC’s clearinghouse initiatives could help FLC demonstrate the usefulness of its tools to its members while also helping FLC measure progress towards achieving its own goals. Representatives of other technology transfer organizations we interviewed said they measure the results of their clearinghouse efforts using performance measures. Without performance measures, FLC cannot fully demonstrate in its annual report to Congress its progress toward the achievement of its goals of outreach and networking, limiting the information that the administration and Congress receive on the effectiveness of FLC’s initiatives.", "To more effectively fulfill its expanded role in providing a clearinghouse of information on available federal technology transfer opportunities, we recommend that the Chair of FLC, in coordination with the other members of the Executive Board, take the following four actions:\nWork collaboratively with agency and lab members to take steps to better communicate with potential customers during the design and implementation of FLC’s clearinghouse initiatives, including conducting customer needs assessments, conducting customer testing of current and future web-based initiatives, and collecting customer feedback on all FLC initiatives to make the initiatives more useful.\nOnce feedback is collected from potential customers, work collaboratively with agency and lab members to use this feedback to improve FLC’s initiatives to make them more useful to potential customers, including asking FLC members for additional or different information, as appropriate.\nWork collaboratively with agency and lab members to develop performance goals and measures for FLC’s clearinghouse initiatives and use the results to evaluate progress toward meeting FLC’s goals on outreach and networking.\nReport on FLC’s progress in these efforts in its annual report to the President and Congress.", "We provided a draft of this report to FLC, DOD, DOE, NIH, NASA, and OSTP for review and comment. In written comments, reproduced in appendix II, FLC concurred with our findings and recommendations, and noted that it will take steps to incorporate our recommendations as it plans, implements, and monitors its efforts to help improve how it performs outreach beyond its members to the potential end users of its products. FLC also stated that it is examining how it is organized and is considering making changes to better leverage government and industry best practices for the use of digital systems.\nIn its written comments, FLC also stated that although it generally agrees with the report’s findings, there are some areas that it believes require some additional clarification. First, FLC stated that the report implies that FLC recently assumed a clearinghouse function when it has been performing this function since its establishment and that it more recently began to provide digital-based services. We agree that the recent change in FLC’s clearinghouse efforts has been to provide web-based tools, and we acknowledged that FLC has offered one of its primary clearinghouse initiatives—the Technology Locator service—since 1987. In response to FLC’s comment, we clarified portions of the report to indicate that FLC has, over time, served as a clearinghouse, but has increased its efforts in this regard in recent years. Second, FLC noted that it developed the Available Technologies tool as an initial Phase I version, not as a final product and that it plans to continue to develop it as additional structured data from laboratories become available. We revised the report to acknowledge that FLC plans to further develop this tool. Moreover, our recommendation that FLC increase communication with potential customers to obtain feedback on how the tool might be improved will help ensure the effectiveness of FLC’s efforts. Third, FLC stated that we should include additional organizations in appendix I. We did not incorporate FLC’s comments in appendix I because the suggested additions would have been beyond the scope of the appendix, which was to provide information on other technology transfer organizations with technology search tools that we examined during the course of our review.\nDOD, DOE, NASA, and OSTP indicated by e-mail that they had no technical or written comments. NIH provided technical comments by e- mail but did not provide formal written comments. We incorporated these technical comments, as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Chair of the Federal Laboratory Consortium, the Secretary of Defense, the Secretary of Energy, the Secretary of Health and Human Services, the Administrator of NASA, the Director of OSTP, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov/.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "We identified a number of other organizations with technology search tools that had features consistent with some of the needs identified by the representatives of potential customer groups we interviewed. These are some features that representatives from other technology transfer organizations said they included in their technology transfer search tools based on their assessment of customer needs. Common themes among these tools include a collaborative interface and an ability to contact researchers affiliated with the technologies. We did not evaluate the content of any of these search tools, nor are we endorsing any of these tools or organizations. For more information on these organizations, see the links below.\nAutoHarvest Foundation – http://www.autoharvest.org/\nAccording to its website, AutoHarvest is an online meeting place that allows users of all types to showcase capabilities, technologies, and needs, then privately connect with other users to explore technology and business development opportunities of mutual interest.\nEntrepreneurs, industry representatives, and researchers from universities, federal labs, and private industry can interact with one another through virtual “collaboration rooms.” These virtual rooms allow two-way communication between registered users of the tool.\nIn addition to posting technologies available for licensing, federal laboratories and universities can also post facility capabilities to encourage cooperative research and development agreements and collaborative partnerships.\nCollective IP – https://www.collectiveip.com/\nAccording to its website, the Collective IP tool provides technology transfer staff with a technology marketing platform, while simultaneously providing a search tool for other users who focus on identifying opportunities from companies and technology transfer organizations.\nUsers can create and receive customized updates about organizations and researchers from universities, federal labs, or private industry working on specific technologies or in particular research areas.\nUsers can review data on technologies and technology transfer opportunities in a standardized format from across a variety of sources, including the U.S. Patent and Trademark Office, federal grant agencies, and academic literature. iBridge – http://www.ibridgenetwork.org/ (part of the Innovation Accelerator Foundation)\nAccording to its website, the iBridge Network serves as an online community for sharing ideas, research, and knowledge about early stage technologies and inventions.\nUsers can search for groups of related patents across multiple sources, mostly university labs.\nUsers can also post technologies they wish to license or receive personalized e-mail updates about technologies that interest them.\nTechnology Ventures Corporation – http://www.techwhiteboard.com/\nAccording to the Technology Ventures Corporation’s website, its Technology Whiteboard is a communication hub centered on Department of Energy (DOE) technology and intellectual property commercialization.\nUsers can collaborate and share ideas with entrepreneurs, university and federal researchers, and investors through social networking.\nUsers can search for technologies from a number of DOE laboratories by category, laboratory, or keyword.", "", "", "", "In addition to the individual named above, Chris Murray (Assistant Director), Antoinette Capaccio, John Delicath, Cindy Gilbert, Richard Hung, Rich Johnson, Mae Liles, Les Mahagan, Rob Marek, David Powner, Kiki Theodoropoulos, and Michelle Wong made important contributions to this report." ], "depth": [ 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "h0_full h3_full", "h1_full", "h0_full h3_full h1_full", "", "", "", "", "", "", "" ] }

{ "question": [ "What are the consequences of failing to obtain feedback when the Federal Laboratory Consortium for Technology Transfer (FLC) try communicate with potential customers?", "What is an example of FLC failing to obtain feedback from potential customers?", "How has the development of a web-based search tool in 2012 failed to satisfy the needs of potential customers?", "What are the reactions of the potential customers of FLC?", "What kind of data did FCL collect?", "How are the collected data underused?", "Why did FLC failed to determine whether its initiatives are performing as desired or how to improve their performance?", "What other consequence does the lack of performance measures have?", "How does the federal government support federal agency labs?", "In what way is the technology generated by this research useful?", "How are the technology transferred to private sector?", "What has FCL created in recent years?", "How did FLC's efforts to provide information on technology transfer opportunities evaluated?", "What does the report demonstrate?", "What information did GAO used to review FLC's efforts to provide information on technology transfer opportunities?" ], "summary": [ "This resulted in missed opportunities to better meet potential customer needs.", "For example, in 2012, when developing a web-based search tool to help potential customers identify relevant federal technology transfer opportunities across federal laboratories (labs), FLC discussed how to implement the tool with its federal member labs and agencies.", "However, FLC did not assess the information needs of potential customers to ensure the tool would provide relevant information in a format that customers consider useful, as called for by leading practices and federal internal control standards on communicating with and obtaining information from stakeholders. FLC officials said they conducted testing to ensure the new website functioned as intended before launching it, but did not involve potential customers in these tests. Moreover, after developing the tool, FLC did not communicate with potential customers to collect feedback from them consistent with leading practices regarding the extent to which the tool met their needs or how it might be improved before implementing it.", "Potential customers of FLC's initiatives expressed concerns about the extent to which FLC's recent web-based search tool would meet their needs, specifically noting that the tool:", "For example, FLC collects data on the general use of its clearinghouse initiatives, such as the number of technology transfer inquiries it receives, the number of unique views of its web pages, and the average time spent on a web page.", "FLC collects data on the use of its clearinghouse initiatives but has not developed and used performance goals and measures consistent with federal agency leading practices.", "However, FLC has not developed performance goals or measures related to the key strategic goals to which its clearinghouse initiatives contribute. Without performance measures, FLC is unable to determine whether its initiatives are having their desired effect or how their performance might be improved.", "FLC also cannot fully demonstrate in its annual report to Congress its progress toward the achievement of its relevant strategic goals, limiting the information that the administration and Congress receive on the effectiveness of FLC's initiatives.", "The federal government spends about one-third of its annual $145 billion research and development budget at hundreds of federal agency labs.", "Technology generated by this research may have application beyond agencies' immediate goals if commercialized by the private sector. For example, federal research has contributed to innovative products, including antibiotics and the Internet.", "FLC—a nationwide consortium of federal labs—helps labs transfer technology to the private sector.", "In recent years, FLC created new initiatives to provide a clearinghouse—a central point for collecting and disseminating information—for technology transfer opportunities.", "GAO was asked to review FLC's efforts to provide information on technology transfer opportunities.", "This report assesses (1) the extent to which FLC has communicated with potential customers when designing and implementing its clearinghouse initiatives, and (2) how FLC measured the results of those initiatives.", "GAO reviewed relevant laws and FLC guidance, and interviewed a nonprobability sample of officials from four federal agencies with the highest research budgets, and a spectrum of eight customer groups, among others." ], "parent_pair_index": [ -1, 0, -1, 2, -1, 0, -1, 2, -1, -1, 1, 1, -1, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 5, 5, 5, 5, 0, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "", "Introduction", "Estimating Employment Effects of Trade Agreements", "Trade and Employment in the U.S. Economy", "Jobs Gained and Lost for the Economy as a Whole", "Benefits and Costs of International Trade", "Benefits of Trade", "Impact of Trade on the Composition of Employment in the Economy", "Adjustment Costs of Trade", "Issues Involved in Quantifying the Employment Effects of Trade", "Estimates of Employment Effects of the KORUS FTA", "The USITC Estimate", "The University of Michigan Estimate", "Associated Estimates", "Additional Estimates", "U.S.-Korea Business Council Estimate19", "Economic Policy Institute Estimate", "Additional Problems Involved in Linking Changes in Production with Changes in Employment", "Conclusion" ], "paragraphs": [ "", "Congress plays a major role in formulating and implementing U.S. trade policy through its Constitutional role in regulating foreign commerce. This role includes providing authority to the President to conclude trade agreements to eliminate and reduce tariff and non-tariff barriers to U.S. trade with other countries. For Members of Congress, trade can be a difficult issue, because decisions that liberalize trade flows have mixed effects on U.S. domestic and foreign interests, both economic and political. Historically, Congress has supported policies to open international markets to U.S. goods, services, and agriculture. It also has weighed carefully the economic impact of trade agreements to asses their benefits and costs. Congress also has enacted targeted adjustment assistance programs to provide training and other assistance to help workers and firms that may be dislocated by greater market opening adjust to new economic opportunities.\nAnticipating congressional consideration of a free trade agreement between the United States and South Korea (KORUS FTA), a number of groups offered estimates to quantify potential effects of the FTA on U.S. employment. This report discusses the models used to estimate the employment effects of the agreement and their various assumptions, necessary in order for the model to generate results. Invariably, these assumptions determine to some extent the results that are generated and, therefore, limit their representation of the real world economy. The models also are highly sensitive to assumptions used to establish the parameters of the models and are hampered by a lack of data in some areas.\nIn general, the various economic models provide differing estimates of the magnitude of changes in U.S. employment that could arise from a trade agreement with South Korea, reflecting different assumptions and conditions. Both advocates and opponents of the KORUS FTA cite results of these studies to support their position. Each of these models has strengths and weaknesses and varies in the degree to which it reflects economic reality. These models are discussed at greater length in the analyses that follow. In addition, the potential job effects need to be viewed in terms of their relative share of U.S. employment.\nEstimates from the studies range from as many as 280,000 jobs potentially gained to 159,000 jobs potentially lost over the ten-year implementation period of the KORUS-FTA. Middle-range estimates include one often cited by the Obama Administration, which suggests that the KORUS FTA would support 70,000 export jobs. At the other end of the spectrum, other estimates suggested that the United States could lose 345,017 jobs over ten years if the United States did not approve and implement the KORUS-FTA but the European Union (EU) and Canada implemented their FTAs with South Korea. None of these estimates, which represent gains or losses in employment over a ten-year period, account for more than 1.4% of total goods-producing employment, or 0.26% of total employment in the U.S. economy in 2009.\nNone of these studies, however, draws a direct link between any expected changes in trade from a change in tariffs and subsequent changes in employment. These estimates reflect different methodologies and assumptions, and a partial accounting of the total economic effects of such agreements. For instance, the agreement includes provisions on trade in goods, services, and investment. Due to the complexities involved and a lack of data, nearly all estimates focus only on changes in goods-producing employment. As a result, they do not serve well as an indicator of the overall impact of the agreement on the economy. The estimates selected for analysis are the following.\nU.S. International Trade Commission (USITC): U.S-Korea Free Trade Agreement Potential Economy-wide and Selected Sectoral Effects The University of Michigan: Economic Effects of a Korea-U.S. Free Trade Agreement U.S.-Korea Business Council: Failure to Implement the U.S.-Korea Free Tr ade Agreement: The Cost for American Workers and Companies Economic Policy Institute (EPI): Trade Policy and Job Loss: U.S. Trade Deals with Colombia and Korea Will be Costl y\nIn addition, two other estimates, derived by the USITC and released by the Obama Administration and the Majority Staff of the Senate Finance Committee Trade Subcommittee, are reported.\nCongress has demonstrated an ongoing interest in concluding trade agreements to eliminate and reduce barriers to U.S. trade in goods, services, and agriculture, and it has assumed a direct role in assessing the impact of trade agreements on the U.S. economy. This report provides background and context for the analyses of the various estimates. It summarizes congressional interest in the issue and then examines the specific estimates—their findings, assumptions, methodologies, and the limitations of those methodologies. Finally, it explains the broader macroeconomic and microeconomic context in which the composition of employment within the economy is affected by a new trade agreement.", "Although discussions of trade agreements often focus on potential employment gains or losses, most economists argue that such employment estimates represent a partial accounting of the total economic effects of trade agreements and, therefore, do not perform well as an indicator of the overall impact of the agreement on the economy. As this report attempts to explain, estimating such employment effects is imprecise and highly sensitive to the assumptions that are used. In addition, while trade agreements generally are comprehensive in nature and cover goods, services, and investment, most employment estimates focus narrowly on the goods sector and do not adequately represent the total impact of the agreements. It is difficult to estimate precisely the employment effects associated with liberalizing trade in services and reducing or eliminating barriers to investment flows. Trade in services, in particular, is characterized by a broad array of formal and informal barriers that challenge efforts to translate the barriers into tariff-equivalent values. Negotiations to reduce barriers to trade in services, however, potentially could have a very large and positive effect on the U.S. economy, since the United States is highly competitive in a number of services sectors and U.S. direct investment abroad often spurs exports.\nFinally, estimates of employment arising from FTAs, by themselves, do not account for a broad range of benefits for the economy as a whole. For example, FTAs may provide individual consumers and firms with broader economic benefits and yield broad productivity and efficiency gains for the economy over the long run that may enhance employment. While most economic trade models attempt to model consumer and corporate behavior associated with changes in income, the results of the models depend on a number of factors, including the way changes in prices are passed along to consumers. Most estimates generally assume that the changes in tariffs and, therefore, changes in the prices of goods, will be adopted at the time the agreement is signed and then the annual changes in traded goods are aggregated over ten years. In fact, in the KORUS-FTA, some tariffs will drop to zero immediately, while others will be implemented in tariff reduction stages over ten years, with the impact on prices accruing over time. In the models, expected changes in the trade in services generally are treated as exogenous factors and must be specified outside the model itself.\nA key assumption used in generating a number of the estimates of the impact of the KORUS-FTA is the level of employment in the U.S. economy during the ten-year period required to phase in the agreement. None of these estimates, however, generate precise estimates of the exact number of jobs to be gained or lost, but generate estimates that reflect the relative magnitude of changes in employment that could be expected over ten years, provided that all other things remain constant. One approach assumes that the U.S. economy operates at a level of full employment over the next decade and holds the level of employment in the economy stable while wage rates are allowed to adjust. A second approach, and one that has been used extensively to derive many of the estimates evaluated in this report, assumes that the economy is marked by a rate of unemployment that reflects current economic conditions, or an economy that is operating at less than full employment. This assumption, more than any other, seems to be the most important factor generating estimates of employment effects under the KORUS-FTA. While the U.S. economy currently is operating at less than full employment, it seems reasonable to assume that over the next ten years the economy will return to its long-term trend that is closer to full employment as the economy recovers from the most severe economic recession in the post-World War II period.\nTrade models of the type used in the analysis of free trade agreements are part of a class of economic models referred to as computable general equilibrium models (CGE) that incorporate data on trade and a range of domestic economic variables on nearly 100 countries. As a result of this large number of countries, and the vast amounts of data that are a part of the model, the models can provide important insights into the mechanisms by which changes in tariffs or other parameters can affect a range of countries. For practical reasons, however, the data in the models must be limited, so the models necessarily must sacrifice some level of precision in their estimating abilities. Since such trade models originally were developed with the intent of analyzing the economic effects of multi-country trade agreements such as the Uruguay Round, this lack of precision was not considered to be an important drawback. However, this lack of precision may be an issue when the models are used to estimate the effects of bilateral trade agreements where the overall amount of trade and, therefore, the impact of the agreement, is expected to be less than that of a comprehensive multilateral agreement. In addition, such models do not account for changes in exchange rates, since such effects were considered to be neutral in a large multi-country trade agreement. Movements in exchange rates, however, could have an important impact on trade patterns that involve countries that are parties to a bilateral trade agreement.\nWith floating exchange rates, movements in those rates can have an important effect on the prices of internationally-traded goods. Figure 1 shows the movement of the internationally trade value of the won relative to the dollar and the Euro and movements in the dollar-Euro relationship, indexed to January 2005. In this presentation, a rise in the index indicates a depreciation in the value of the won relative to the dollar and the euro and the depreciation of the dollar relative to the euro between January 2006 and January 2011. Between January 2008 and January 2009, the won depreciated about 44% against the dollar and 30% against the euro largely due to a flight to the dollar during the financial crisis, a sharp drop in capital inflows to South Korea, and the largest annual drop in South Korean exports on record. After recovering somewhat between January 2009 and mid-2010, the won experienced another bout of depreciation relative to the dollar and the euro as international markets became more cautious as a result of financial problems in Greece, Ireland and other European countries and concerns over political developments in neighboring North Korea. By February 2011, the won remained 19% and 10% below its value in January 2008 relative to the dollar and the euro, respectively. Such changes in the value of the won relative to the dollar and the euro would have a significant impact on the prices of goods to and from South Korea and possibly eclipse the relatively small changes in tariff rates included under the respective FTAs.\nSince the KORUS FTA was signed in 2007, a number of estimates of the potential effects of the KORUS FTA have been released that attempt to estimate the effect of the trade agreement on U.S. employment. The estimates range from 280,000 jobs gained to a loss of 159,000 jobs if the United States does adopt the agreement. Two of the estimates are based on standard economic modeling, two others were developed by the USITC, and two represent estimates derived from unique approaches. Table 1 summarizes all six estimates. These estimates will be discussed in greater detail below. The two standard model estimates were undertaken by the USITC and the University of Michigan. Neither of these efforts estimated the total number of U.S. jobs created or lost by the KORUS FTA. but focused instead on potential economy-wide trade effects and sectoral shares of those effects. In contrast, two other approaches by the U.S.-Korea Business Council and the Economic Policy Institute, attempted to estimate employment effects of the KORUS FTA indirectly.", "In a dynamic economy such as the United States, jobs are constantly being created and replaced as some economic activities expand, while others contract, reflecting broad macroeconomic developments. In this process, various industries and sectors evolve over time at different speeds, reflecting differences in technological advancement, productivity, and efficiency. Those sectors that are the most successful in developing or incorporating new technological advancements generate greater economic rewards and are capable of attracting greater amounts of capital and labor. In contrast, those sectors or individual firms that lag behind are less capable of attracting capital and labor and confront ever-increasing competitive challenges. Indeed, depending on the overall state of the economy, some sectors may need to relinquish some capital and labor in order for others sectors to grow to avoid economic stagnation. Also, advances in communications and technology have facilitated a global transformation of economic production into sophisticated supply chains that span national borders and defy traditional concepts of trade that potentially could involve a greater share of the labor force in trade-related activities. How firms respond to these challenges likely will determine their long-term viability in the market place.\nAt the plant level, job openings may come from new business openings or from expansions at existing facilities, including those that are used to support increased exports. Job losses may come from voluntary departures, involuntary discharges, or from business closures for any reason, including bankruptcy, personal choice, inability to compete in the domestic market, import competition, or production shifts. The Bureau of Labor Statistics, Business Employment Dynamics (BED) Report tracks gross jobs gained and lost in the economy as a whole and in specific sectors and reveals the dynamics underlying gross changes in employment. As Appendix A shows, 15% of total U.S. employment in 2010 was in the goods-producing industries, while the services-producing industries accounted for 68% of the employed population. The remaining 17% of employment was in the government sector, with employment at the State and Local government level accounting for 15% and the federal government sector accounting for 2%", "Table 2 shows the gross number of jobs gained and lost for the economy as a whole for the goods- and services-producing sectors, and for the number of jobs related to exports, during the period 2006-2009. This process of job turn-over typically affects 18-20% of the jobs in the total economy each year (when percentages of gross jobs gained and gross jobs lost are combined). This process is stronger in the goods-producing sector of the economy, where a number equivalent to 24%-27% of the jobs are typically gained or lost each year, compared with the services sector, where the comparable share is 17%-18%. Such job turn-over is amplified by economic expansions or recessions, as was the case in 2008-2009, when the economy experienced the most severe recession in the post-World War II period.\nThe data in Table 2 also indicate that\n1. Jobs supported by exports represent a small share of the total number of jobs in the economy and are equivalent to about one-third of the total number of jobs gained or lost in the economy as a whole during a year. Jobs supported by exports were equivalent to a small share of the annual turn-over in jobs, ranging from 6% to 8% of the annual turnover of jobs in the economy between 2006 and 2009. 2. Within the goods-producing sector, however, such export-related jobs were equivalent to 29% to 35% of total jobs, and within the services sector they averaged about 2%. Similar to overall job gains and losses for the total economy, jobs supporting exports are sensitive to the business cycle. 3. Business cycle effects were particularly apparent between 2008 and 2009, when the global economic recession and financial crisis sharply reduced global trade. As a result, jobs in the economy supported by trade fell by about 1.8 million jobs, or from 8% of total employment to 6% of total employment, or by about one-fourth of its share of total employment.\nSome would argue that the data on jobs gained and lost throughout the whole economy do not adequately reflect the concern of workers about job losses. According to data published by the Bureau of Labor Statistics, during the last two years of the most recent economic expansion (2005-2007), 3.6 million workers were displaced from jobs they had held for at least three years. Of those workers, by the end of January, 2008, only 67% had been re-employed in full-time jobs and only 22% were in jobs where their salaries matched their previous income level.", "In the current highly globalized economy, international trade has come to represent a complex set of transactions. Nations not only trade goods and services, but they also trade a broad range of financial products. In addition, liberalized capital flows and floating exchange rates have greatly expanded the amount of capital that flows between countries. Basically, trade represents an exchange of goods or services between two or more willing parties. Such trade allows nations to use their resources more efficiently in order to maximize the total amount of goods and services that are available to their citizens, a common definition of a nation's standard of living. As a result of this maximization process, nations trade because it serves their national interests. In the same way that individuals gain by specializing in activities that use their strongest skills and then trade with others, nations specialize in the production of certain goods and then trade with other nations for the goods they do not produce. Essentially, nations export in order to import goods and services they do not produce, or cannot produce efficiently.", "Both the benefits and the costs of trade have become well-publicized. These benefits are categorized as one-time, or static, benefits, which include gains for consumers and gains for producers, and dynamic benefits that accrue over time and can positively affect the long-term rate of growth of a country. While it is not always possible to measure these effects precisely, most economists believe that the net effect of international trade on the national economy as a whole is positive, that is, that the total gains exceed the total costs. By reducing foreign barriers to U.S. exports and services and by removing U.S. barriers to foreign goods and services, trade liberalization helps to strengthen those industries that are the most competitive and productive and to reinforce shifts in labor and capital from less productive endeavors to more productive economic activities.", "An important issue in estimating employment effects from increased trade and trade agreements is the difference between the microeconomic viewpoint and the macroeconomic viewpoint. In a dynamic economy such as the U.S. economy, the composition of jobs is constantly changing as some sectors grow and other sectors decline. This constant churning would continue even in the complete absence of international trade. International trade adds to the myriad of factors that determine the composition of output and jobs within the economy. From the microeconomic perspective, or the viewpoint of the individual firm, competitive pressures from international trade, as well as a broad range of other factors, determine the viability of individual plants or firms. Given these competitive pressures, firms face a number of choices. How such firms choose to respond to the competitive pressures likely determines the overall viability of the firm in the marketplace. As a result of these actions, some firms expand, while others contract.\nIn contrast, the macroeconomic viewpoint focuses on the net overall direct and indirect economic effects of trade. Direct effects include changes in the composition of employment and production for the economy as a whole. Indirect effects can include secondary and tertiary effects in industrial sectors that may be more difficult to estimate. It is assumed that trade agreements affect production and consumption as a result of the impact of the agreements on the prices of goods. Presumably, trade agreements lower the tariffs on imported goods, which result in lower prices on imported goods and shift domestic production in ways that make the economy more efficient. Consumers benefit directly from the lower prices of imported goods to the extent that they shift their consumption in favor of the lower-priced imported goods. They also benefit from an increase in their real incomes as a result of the lower prices of imported goods. Consumers may benefit further from lower domestic prices to the extent that domestic producers lower their prices in response to the competition from imports.\nThroughout this process, however, the total number of jobs in the U.S. economy is not affected, that is, trade agreements do not affect the total number of jobs in a large open economy such as the U.S. economy, but can affect the composition of employment. This result becomes more binding as the economy approaches full employment. Since the KORUS-FTA is expected to be implemented over a 10-year period, it seems reasonable to assume that the U.S. economy will revert to its long-term trend toward full employment, rather than remain at the current level with underutilized resources that reflect the 2008-2009 recession. The total number of jobs in the U.S. economy is determined by such macroeconomic factors as productivity growth, the growth rate of the population, and the pace of technological innovation. Changes in any of these \"structural\" factors, together with short-term fluctuations in the business cycle and shifts in the relative value of the dollar against other currencies, may overwhelm effects of any industry-wide job \"gains\" or \"losses\" from trade and trade agreements.\nAs the U.S. economy shifts the composition of production from labor-intensive, import-competing products to capital-intensive, export-oriented products, more labor than capital is released. Because those displaced from labor intensive jobs may not have the skills to immediately become employed in more capital intensive jobs, labor dislocations in the economy may result.", "Economists have long recognized, however, that the long-term production gains associated with greater specialization in the economy create a wide range of adjustment costs as labor and capital are shifted from less efficient industries and activities into more efficient industries and activities. These adjustment costs are difficult to measure, but they are potentially large over the short run and can entail significant dislocations for some segments of the labor force, for some companies, and for some communities. In negotiating trade agreements, governments are most mindful of the adjustment costs involved and, at times, are constrained in their ability to fashion such agreements because of opposition by groups within the economy that would bear heavy costs from trade liberalization. These costs are especially acute for labor groups within the economy that lack advanced education and training skills that provide them with the means necessary to be redeployed in other sectors of the economy.", "Quantifying the relationship between international trade and the composition of employment in the economy is problematical and complex. For the United States, international trade is not the primary force creating employment in the economy. While trade agreements with specific countries may well benefit certain sectors of the economy, their effect is dubious as an employment program for the economy as a whole. In addition, changes in exchange rates and in the business cycle can affect the overall state of the economy in ways that can outweigh the effects of trade agreements, given the already highly open state of the U.S. economy. In addition, significant gaps in data, particularly relative to the services sector, hinder the ability to model the effects of trade agreements that lower barriers to trade in services. These gaps are important, because the services sector accounts for 69% of output and 68% of full- and part-time employment in the U.S. economy and increased trade in services offer potentially large gains for the U.S. economy.\nIn addition, concerns over the impact of a trade agreement on employment often focus on a comparison of labor compensation rates between countries. For instance, some groups in the United States are concerned that U.S. employment could be negatively affected because labor compensation rates, in general, are lower in South Korea. Measures of competitiveness, however, reflect not only the rate of labor compensation, but the rate of compensation relative to the level of productivity. Rates of labor compensation in the United States could be many multiples of that in South Korea, but as long as U.S. workers remain more productive than workers elsewhere, U.S. goods would continue to be competitive in the global marketplace. In general, most estimates of employment effects do not incorporate measures of productivity in their analysis.\nVarious approaches typically have been used to estimate the employment effects of trade agreements, including the KORUS FTA. In most cases, these approaches share some common features. Similar to other free trade agreements, the KORUS FTA is a comprehensive agreement that includes provisions to: (1) lower tariffs and non-tariff barriers on trade in goods and agriculture; (2) reduce barriers to trade in services; and (3) encourage increased flows of investment. Formal and informal barriers to trade in services, however, are extremely difficult to quantify in monetary terms, and it is equally difficult to estimate the impact of an agreement on potential flows of investment. As a result, most approaches derive their estimate of changes in employment almost exclusively from estimated changes in the value of exports and imports of goods under the agreement. Even these estimates, however, are imprecise and sensitive to the assumptions that are used. Appendix B explains some of the most common assumptions used in economic models.", "", "The USITC used a standard approach and analysis by addressing the issue of how U.S. exports to and imports from South Korea would be affected by the FTA with South Korea that lowered tariffs on a set of traded goods. This approach attempted to measure the long-term trade (but not employment) effects of a one-time full implementation of the KORUS FTA after the full implementation period of 10 years on U.S. exports and imports. The ITC used an economic model known as the Global Trade Atlas Project (GTAP), located at Purdue University to estimate changes in trade (exports and imports) from changes in tariff rates and tariff rate quotas. The results are expressed as proportional effects (percentage increases or decreases in trade) for various sectors, relative to the projected 2008 economy. According to this estimate, if the KORUS FTA were to go into effect, U.S. merchandise exports to South Korea likely would increase by an estimated $9.7 billion to $10.9 billion over the first decade after enactment, while merchandise imports from South Korea likely would increase by an estimated $6.4 billion to $6.9 billion over the first decade. This would result in an estimated net increase in U.S. exports of $3.3 billion to $4.0 billion during the first decade after enactment.", "In a slightly different approach, economists at the University of Michigan used a similar world trade model to estimate the effect of a negotiated reduction in tariff rates on export and import prices and then estimated changes in the volumes of goods exported and imported arising from those change in prices, as indicated in Table 3 . They estimated, using 2006 data, that U.S. bilateral exports to Korea would increase by $9.2 billion and that U.S. imports from Korea would increase by $6.9 billion during the first ten years after implementation of the agreement. The total number of jobs gained or lost in the economy is assumed to be zero, because the model begins with the assumption of full employment. Given this constraint of no changes in the overall number of jobs gained or lost, the estimates represent expected changes in the composition of employment among sectors in the economy. As a result, the estimates should not be viewed as projections of the exact number of jobs gained or lost by sector, but as estimates of the magnitude of the changes that could occur. Given this caveat, the estimates indicate that 85% of the projected job gains would be in the agricultural sector, and 90% of projected job losses would be in six industrial sectors: government services, trade and transportation services, manufactured textiles and apparel, transportation equipment, metal products, and machinery equipment.\nStandard economic theory provides some insight into which sectors may be expected to gain, and which sectors may be expected to lose employment as a result of increased trade. Accordingly, those sectors that represent areas of greatest comparative advantage based on the economy's endowment of the factors of production (land, labor, capital, technology, and entrepreneurial ability), are the ones most likely to gain employment. Compared with other countries, the United States has a comparative advantage in capital-intensive products, many services, and agricultural products that characterize U.S. exports. This is in contrast to most developing countries, that have a comparative advantage in more labor-intensive products that characterize U.S. imports.", "Two additional estimates of the employment effects of the KORUS FTA are based on the data developed by the ITC on the number of U.S. jobs supported by exports.\nIn one estimate, the White House apparently used the ITC data to estimate that an additional 70,000 U.S. workers would be supported by new exports under the KORUS FTA. This estimate appears to be based on data developed by the ITC regarding the amount of additional exports that would be created by lowering tariff rates, combined with the data on the number of U.S. jobs supported by exports. As indicated below, the ITA has stated that the data developed on the average number of jobs in the economy that are supported by exports should \"not be used to estimate the net change in employment that might be supported by increases or decreases in total exports, in the exports of selected products, or in the exports to selected countries or regions.\" Some could argue, however, that the White House estimate honored this caution by stating only that the proposed KORUS FTA \"would support\" (not create) 70,000 U.S. jobs.\nAnother estimate developed at the request of the Majority Staff of the Senate Trade Subcommittee by the ITC using the GTAP model indicated that the KORUS FTA has the potential to create about 280,000 American jobs. The Subcommittee asked the USITC staff to \"examine the agreement based on current data and economic conditions.\" The Trade Subcommittee staff modeled two scenarios with differing assumptions. In the first scenario, the staff assumed that labor and capital in the economy were held fixed, representing an economy close to full employment and full capacity utilization. Since the scenario assumes that labor is fixed, there would be no net change in employment, but labor and capital from other industries would need to be reallocated from other sectors as a result of the KORUS-FTA. This scenario estimates slightly lower percentage increases in output and employment as a result of the FTA, since it assumes that the economy is fully employed.\nIn the second scenario, it is assumed that wages and capital rentals are held constant, but that there is underutilized labor and capital, similar to an economy that is operating at less than full employment and that it has excess capacity. The results of this scenario indicated that, \"in an economy with substantial unemployment and underused capital, the agreement has the potential to expand employment by 0.16%, or approximately 280,000 American jobs.\" In this scenario, labor and capital would be drawn from sectors with unemployed labor and capital and from other sectors. In both scenarios, U.S. exports to South Korea would increase by 4.4% and imports from South Korea would increase by 1.3%.\nThe differences between the two scenarios offer a clear example of the importance of the assumptions that are used to generate estimates of the KORUS-FTA from the economic models. In this case, the importance of the assumption that the U.S. economy will operate at less than full employment during the ten-year period of full implementation drives the estimate of employment gains. It seems reasonable to assume, however, that during the next ten years the U.S. economy will return to its long-term trend of operating closer to full employment than to remain at the current levels of underutilization as the economy recovers from the most severe recession in the post-World War II period.", "", "The U.S.-Korea Business Council estimated the employment effects of the KORUS-FTA using a slightly different approach. This approach does not attempt to model the impact of the KORUS-FTA on the U.S. economy, but addresses a different, but related issue: What would be the impact on U.S. trade with South Korea if the proposed FTAs between South Korea and the Europe Union and Canada were implemented, but the South Korea-U.S. FTA were not implemented? This question was rendered moot when Congress passed the KORUS FTA.\nNevertheless, according to the Council, they also used the GTAP model to derive their result. The Council's approach involved a number of steps and assumptions. Most importantly, the Council's approach assumed that there were underutilized capital and labor in the economy. This assumption is consistent with an assumption that the U.S. economy operates at less than full employment during the duration of the ten-year phase-in period. The Council also assumed that the Canadian and EU FTAs with South Korea would result in a 5% reduction in barriers to trade in services and that there would be a reduction in trade facilitation costs.\nThe Council's first scenario modeled the impact on U.S. output and trade if the three FTAs involving Canada, the EU, and the United States with South Korea were fully implemented. Next, the second scenario modeled the impact on U.S. output and trade if the Canadian and EU FTAs with South Korea were fully implemented, but the U.S.-South Korea FTA were not implemented. Next, the council derived the difference in the impact on U.S. output and trade by subtracting the data from the first scenario from the second scenario. As a result of this process, the Council estimated that the United States would experience a potential loss of 345,000 goods and services export jobs if the KORUS FTA is not implemented, but the EU and Canadian FTAs with South Korea are implemented. The estimate assumes that exports to South Korea primarily from Canada and the EU would be substituted for a certain share of U.S. exports of goods and services, in an amount equal to $35.1 billion.\nThis scenario has a number of strengths and weaknesses, although the final estimate appears to be within the same general level of reliability as the other estimates that are analyzed in this report. The attempt to model the impact of not implementing the KORUS-FTA is a departure from the other approaches and highlights the fact that a large number of FTAs are being negotiated by a broad range of countries with potentially far-reaching impact on the patterns of international trade. Since the approach used by the Council does not estimate directly the negative impact on U.S. output and employment of not implementing the KORUS-FTA, this approach can introduce potential distortions into the estimates. For instance, trade agreements involve both trade diversion, or shifting trade among competing countries, and trade creation, or new trade possibilities as a result of changes in trading relationships. Although the model does not capture the possible trade-creating effects of the FTAs, which would offset some of the trade diversion effects, the trade-creating effects likely would be small relative to the trade diversion effects. This estimate is the only one of the current estimates that imposes an assumption of the net impact of a change in the trade in services.", "The Economic Policy Institute estimated that the KORUS FTA would result in a loss of 159,000 U.S. goods-producing jobs stemming from a projected increase in the trade deficit with South Korea. This estimate was derived using an unconventional approach. The EPI did not derive its estimate directly from estimated changes in trade or the potential employment effects from a free trade agreement between South Korea and the United States. Instead, the EPI derived its estimate by averaging the changes that occurred in U.S. trade with Mexico between two different periods: the two seven-year periods immediately before and after the North American Free Trade Agreement (NAFTA) went into effect in 1993; and the two seven-year periods immediately before and after China joined the World Trade Organization in 2001. It then used the average rate of growth in exports and imports between these periods to estimate percentage changes in U.S. trade with South Korea under the proposed KORUS FTA. This estimate suggested that the KORUS FTA would result in a net increase in imports (a trade deficit) rather than net increase in exports. Next, the EPI study used an estimate of jobs associated with trade to estimate the number of jobs that would be lost in the United States as a result of a projected increase in the U.S. trade deficit with Mexico. The EPI approach made a number of assumptions, including\n1. T rade proxies . This approach uses a non-trade-weighted average of U.S. trade with Mexico and China as a proxy for estimated U.S. trade with South Korea with no clear explanation of why these two cases match the Korea case. Data on U.S. trade with South Korea are readily available, so it is not clear why these data are not used to estimate potential changes. Also, U.S. trade with South Korea is about one-fourth that of U.S. trade with Mexico, and the United States and South Korea do not share a common border as is the case between the United States and Mexico. 2. Exchange rates . There are numerous differences between the movement in exchange rates among the three countries considered in this analysis: China, Mexico, and South Korea. For Mexico, the second seven-year period following adoption of NAFTA coincided with the devaluation of the peso. This boosted U.S. imports from Mexico and likely contributed to a decline in U.S. exports there. Unlike the peso, China's currency is linked primarily to the value of the U.S. dollar. The South Korean won is determined mainly by market forces. 3. Trade and jobs . The EPI estimate also uses some form of an estimate of jobs related to trade similar to that developed by the ITA on exports supporting U.S. jobs to estimate the number of U.S. jobs that would be lost as a result of a projected increase in the U.S. trade deficit with South Korea. As previously indicated, the ITA has warned that this approach to estimating jobs gained or lost from trade is not reliable.", "In a joint project, the Department of Commerce (DOC), Bureau of Economic Analysis (BEA), and the Bureau of Labor Statistics (BLS), estimated the average number of jobs supported by exports in the U.S. economy based on the dollar value of output relative to the average number of jobs required to produce that output for each industry. As a result of this joint effort, the Commerce Department determined in its 2010 update that on average $166,000 in goods exports, $216,000 in services exports, or a weighted average of $180,000, supported one job in each respective sector.\nAt times, some estimates of the employment effects of FTAs have been derived from this DOC report on employment in the economy supported by exports. In some cases, the data have been used in reverse to argue that if a certain number of jobs were supported by a billion dollars of exports, then that same number could be used to argue that a certain number of jobs would be \"lost\" by a billion dollars of imports, so that any net increase in imports associated with a trade agreement would necessarily result in a loss of employment for the economy. The composition of U.S. imports, however, is fundamentally different from U.S. exports. While some imports and exports represent clearly substitutable items, other imports represent inputs to further processing, or are items that are not available in the economy. The ITA has issued various statements indicating that using the data in this manner is not appropriate. As the ITA has indicated, the employment estimate is not a multiplier and should not be used to estimate jobs that are associated with exports or imports in a multiplier fashion. In addition, the ITA estimates relate to the average number of jobs supported by exports across a broad section of the economy and should not be used in conjunction with trade agreements where the approach should more appropriately focus on estimating the change in the composition of employment that are associated with a change in trade as a result of a trade agreement.\nThe International Trade Administration (ITA) argues, however, that the job estimates should not be used with projected changes in trade to estimate potential employment effects from trade agreements. It says:\nAverages derived from IO [input-output] analysis should not be used as proxies for change. They should not be used to estimate the net change in employment that might be supported by increases or decreases in total exports, in the exports of selected products, or in the exports to selected countries or regions. (Emphasis added.)\nThe averages are not proxies because the number of jobs supported by exports usually does not change at the same rate as export value. The rate is not the same because other factors, such as prices, resource utilization, business practices, and productivity, do not usually change at the same rate. In addition, the material and service inputs and the labor and capital inputs differ significantly across types of exports. For example the labor requirements for an exported aircraft are significantly different from those of an exported agricultural product or an educational service.\nIdeally, estimates of trade changes from tariff reductions would be multiplied by figures which reflect actual changes in employment (based on the mix of goods traded) that would occur at the margin as a result of changes in the volume of goods traded. According to the ITA, though, such data do not exist. The only data that are available reflect the estimated average number of jobs supported across the U.S. economy by a given level of exports. According to the ITA, \" As a result, multiplying trade estimates from the computable general equilibrium (CGE) models by employment averages would tend to overestimate the actual number of jobs potentially lost to trade changes.\" (Emphasis added.)\nThe ITA also indicated that\nIn addition, estimates of the average number of jobs associated with exports cannot be adjusted for fluctuations in manufacturing capacity over the course of the business cycle. As explained by the USITC, the more slack there is in the U.S. economy, the more potential there would be for job creation:\nDuring periods of slack business activity, increased output, such as exports, would tend to increase employment, to lower unemployment, and to increase labor force participation. Conversely, during periods of high business activity, when industry operates at or near full capacity and employment, increased output, including output for exports, tends to raise employment less—if at all—and instead mainly shifts employment to industries that pay higher wages.", "The 112 th Congress passed legislation implementing the KORUS FTA. Part of the debate surrounding the agreement focused on the potential impact the agreement could have on U.S. employment, particularly employment in certain sectors of the economy. Given the current high rate of unemployment, it is not uncommon for communities or workers to raise concerns over the impact of a new FTA. Indeed, for some communities that already are affected by high rates of unemployment or have experienced plant closings due to foreign competition, the KORUS FTA could pose additional challenges.\nAn analysis of the available estimates of the potential effects of the KORUS FTA on U.S. employment, however, raises a number of questions concerning the usefulness of the estimates. Economic modeling naturally incorporates various assumptions and entails differing methodologies that can have a profound effect on the estimates that are generated, even when the estimates are derived from the same economic model. Standard models incorporate standard assumptions and approaches that generally are well explained. The mark of a good economic model often is one that uses assumptions and methodologies that seem reasonable and are not geared toward generating any particular result. In contrast, some models use non-standard assumptions and approaches that may be difficult to justify and seem to have been chosen in order to generate pre-determined results. Given the current state of economic modeling and data availability, the most accurate models likely can provide only rough estimates of the magnitude of the potential changes in employment in certain sectors, but cannot offer estimates of the precise size of the shifts in employment.\nAs this reports indicates, the most important assumption involved in generating estimates of the impact of the KORUS-FTA on employment appears to be the expected level of labor utilization in the U.S. economy over the ten-year phase-in period expected to be required to fully implement the KORUS-FTA. The existence of unutilized labor and capital make it possible for the models to generate long-term estimates of output and employment gains for the fully-implemented KORUS-FTA and losses, in case the agreement had not been adopted. It seems reasonable to assume, however, that the U.S. economy will return to its long-term trend approaching full employment during the ten years following the adoption of the KORUS-FTA. Another major qualification for the estimates may be that they do not account for changes in exchange rates, which can have a wide-ranging effect on the prices of internationally traded goods and may overwhelm changes in prices of goods that arise from changes in tariff rates.\nEstimates of employment effects of new FTAs often tend to be highly subjective and can be misleading, because they represent a partial accounting of the total economic effects of new FTAs. In most cases, FTAs are comprehensive agreements that include provisions for goods, services, and investment. With few exceptions, estimates of employment effects of the KORUS FTA focus narrowly on employment effects in the goods sectors and neglect the potential effects in the services and investment areas. In addition, the estimates neglect a broad range of benefits for the economy as a whole that potentially can provide consumers with large economic benefits and that can yield broad productivity and efficiency gains for the economy and may enhance employment. As a result, estimates of the employment effects of new FTAs may serve poorly as an indicator of the total impact of a new FTA on the economy as a whole.\nAs policymakers considered the KORUS FTA and consider other FTAs, they likely will continue to weigh the results of a range of estimates of the employment effects of the FTAs to gauge the impact of the agreements. In this process, policymakers likely would be aided by estimates that clearly state the assumptions that are used and that inform policymakers about the broad implications of such agreements for the economy as a whole. In addition, policymakers likely would benefit from more reliable data on the potential magnitude of such agreements on specific sectors that would allow policymakers to craft programs that could assist those most directly affected by the agreements. As a result, policymakers may benefit from a number of initiatives to improve information and data on the impact of international trade on the economy. These might include\nincreased information and data on services in the economy, including the shifting of in-house services from the manufacturing sector to the services sector and the formal and informal barriers to U.S. services posed by major trading partners; better data on worker dislocations including the reasons for those closings; better understanding of the development of global supply chains and the role they are playing in the U.S. economy.\nAppendix A. Employment Population and Shares of the Economy, by Major Industry and Sector, 2010\nAppendix B. Standard Assumptions of Economic Models\nIn order to assess the validity of the various estimates of the employment effects of the KORUS FTA, it is first necessary to understand how the economic models work and the assumptions that are made. The standard approach to estimating the effects on U.S. employment associated with trade agreements follows a number of steps, although most of these steps are not included in the discussion of the estimates. In general, these steps include the following:\n1. Estimating the impact a change in the tariff rate would have on a change in the prices of goods. For instance, if tariff rates are lowered by 10%, would goods prices also fall by 10%? Are the changes in tariff rates accomplished at once, or are they reduced slowly, according to a set schedule? If tariff rates are adjusted over time according to a set schedule how does that affect the rate at which goods prices adjust? 2. Estimating the impact a change in goods prices would have on a change in sales of those goods. This estimate attempts to quantify the responsiveness of consumers to changes in prices. In markets with a number of close substitutes, the consumer response could be strong with consumers buying less of a particular product as its price rose relative to those of similar products. For goods with few substitutes, consumers would be less responsive to changes in prices. 3. Estimating the impact a change in sales would have on a change in output or a change in employment. A change in employment associated with a change in sales would depend, at the very least, on the level of plant utilization, the level of productivity, and the availability of labor.\nIn attempting to estimate these intermediary steps, most models incorporate a number of assumptions to reduce the high level of variability that is intrinsic in such estimates. Often these additional assumptions are not well explained. In general, these basic assumptions are:\n1. Changes in Tariff Rates Will Translate Directly into Price Changes. Most models assume that any change in the tariff rate will be passed along completely to the change in the prices of traded goods. In most cases, however, tariff rates are not adjusted completely at the time of implementation, but are adjusted over a set schedule that can encompass a decade or longer. Also, there is no guarantee that the prices of traded goods would adjust at exactly the same rate as tariff rates are adjusted. They may be passed along at a differential rate or simply absorbed by the exporter. 2. Exchange Rates Will Remain As They Are. In most cases, the estimates do not make any assumptions concerning potential changes in the exchange rate of the dollar as a result of a trade agreement. In addition, the exchange value of currencies of competitors could affect the expected change in exports or imports associated with a trade agreement. 3. Consumer Purchases Will Follow Tariff Reductions. Most of the estimates on changes in employment are based on the assumption that reductions in the prices of goods associated with a drop in the rate of tariffs would result in a complete substitution of goods toward the FTA countries and away from other foreign suppliers. In general, there may be some goods within the total basket of traded goods that consumers consider easily substitutable (such as steel and fasteners), but consumer choices often are predicated on more than relative prices (such as brand names and quality) and, therefore, the rate of substitution overall may be quite low. To the extent that consumers do not shift their purchases based on changes in prices, the change in employment would be blunted. In addition, standard economic theory argues that trade agreements generally entail both trade diversion, or the substitution of lower-priced goods among the parties to the agreement for the now higher-priced goods from other suppliers, and trade creation. Trade agreements can create trade by increasing efficiency in production and by increasing the real incomes of consumers that, in turn, leads to a greater level of consumption of both domestic and imported goods. To the extent that a trade agreement creates additional trade, it could have a positive effect on employment. 4. Employment or Wages Will Not Change. Another assumption that often is made is whether employment or wages should be held constant. Such an assumption often is necessary in order to generate results from the economic models. By holding employment constant, the model is attempting to estimate the change in the composition of employment that would be associated with a trade agreement. This assumption would allow wages to change, although most models do not attempt to estimate changes in wages. As a result, these models generally attempt to highlight the magnitude of the impact of an agreement on various sectors in the economy, rather than attempting to generate precise estimates of the actual number of jobs that may be gained or lost by individual sectors. In contrast to these assumptions, models that hold wages constant allow employment to change in an effort to estimate changes in the number of jobs in various economic sectors. Since changes in wages often lead to changes in employment, this assumption is questionable. In either case, the estimates usually attempt to aggregate the total cumulative effects over a number of years, often a decade, in order to derive an estimate of the overall change in employment. While such an assumption is a necessary condition for generating results, the assumptions compromise the validity of the results, since the composition of employment in the economy over a decade can change quite noticeably, even in the complete absence of international trade, due to business cycle effects and the constant churning that occurs. Currently none of the estimates of the employment effects of trade agreements incorporate either business cycle or other transformational effects into the estimates.\nKey Steps in Converting Changes in Tariffs to Changes in Employment\nIn general, there are a number of steps involved in converting changes in tariffs into changes in employment. In most cases, these steps are not explicitly explained. The chart below summarizes these three steps." ], "depth": [ 0, 1, 1, 1, 2, 1, 2, 3, 2, 2, 1, 2, 2, 2, 2, 3, 3, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full h1_full", "h2_full h1_full", "", "", "h0_title h1_title h3_title", "h3_title", "h3_full", "h3_full", "h0_full h3_full h1_full", "h0_title", "", "", "", "h0_title", "", "h0_full", "", "h2_full" ] }

{ "question": [ "What were negotiations finalized in early December 2010 about?", "Why was Congress so important in this event?", "Why does this agreement have important economic implications for both the U.S. and South Korea?", "How does the economic relationship between the U.S. and South Korea look like?", "What is KORUS FTA about?", "Why do people support this agreement?", "What are the downsides of this agreement?", "Why is estimating the economic impact of trade agreements a daunting task?", "What is this report about?", "Why are these studies chosen?", "How are the approaches useful?", "How does international trade affect large open economies?", "How is the perspective of a large economy applicable for bilateral trade agreements with individual countries?", "What interest has Congress demonstrated?" ], "summary": [ "The Obama Administration finalized negotiations with South Korea in early December 2010 on a bilateral free trade agreement.", "Congress not only plays a direct role in approving legislation that implements the provisions of free trade agreements, but also authorizes and appropriates funding for programs that are meant to provide special assistance to firms and workers that are dislocated as a result of lower barriers to trade.", "Since the agreement with South Korea covers a wide range of trade and investment issues, it could have substantial economic implications for both the United States and South Korea.", "South Korea is the seventh-largest trading partner of the United States, and the United States is South Korea's third-largest trading partner.", "Similar to other trade agreements, the U.S.-South Korea Free Trade Agreement (KORUS FTA) attracted both supporters and detractors, primarily over the impact the agreement could have on employment in the economy.", "Supporters argued that the agreement could create as many as 280,000 jobs in the economy.", "Others, however, argued that the agreement could lead to an overall loss of up to 159,000 jobs in various sectors of the economy. Still others contended that the United States could stand to lose exports, employment, and extended economic opportunities if it failed to sign a trade agreement, while the European Union and other nations were lining up to finalize similar agreements with South Korea.", "Estimating the economic impact of trade agreements, however, is a daunting task, due to a lack of data and important theoretical and practical matters associated with generating results from economic models.", "This report assesses the results of a number of models used to generate estimates of the effect of the KORUS FTA on employment.", "These studies were chosen specifically because they estimate (or can be used to estimate) data on employment effects of the trade agreement.", "All economic models incorporate various assumptions that are necessary in order for the model to generate results. Invariably, these approaches determine, to some extent, the results that are generated and, therefore, limit their representation of the real world economy.", "From the perspective of a large open economy such as the U.S. economy, international trade is not a major determinate of total employment in the economy, real wages in the economy, or the overall level of production.", "From the perspective of a large open economy such as the U.S. economy, international trade is not a major determinate of total employment in the economy, real wages in the economy, or the overall level of production. This is especially true for bilateral trade agreements with individual countries where the impact on the economy as a whole is expected to be small.", "Congress has demonstrated an ongoing interest in assessing the economic impact of trade agreements and, at times, has provided assistance to those workers and firms that are disproportionately affected." ], "parent_pair_index": [ -1, -1, -1, 2, -1, 0, 0, -1, -1, 1, 1, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3 ] }

{ "title": [ "", "Introduction", "Foreign Corrupt Practices Act of 1977", "Criticisms of the Foreign Corrupt Practices Act of 1977", "Foreign Corrupt Practices Act Amendments of 1988", "Foreign Corrupt Practices Act Amendments of 1998", "Continuing Congressional Concerns", "Executive Branch Enforcement" ], "paragraphs": [ "", "During the mid-1970s investigations and administrative and legal actions against numerous domestic corporations revealed that the practice of making questionable or illegal payments by United States corporations to foreign government officials existed to some extent within the American business community. The legal and regulatory mechanisms for dealing with these payments had involved actions by the Securities and Exchange Commission (SEC) against public corporations for concealing from required public disclosure substantial payments made by the firm, including to foreign government officials. There was also the potential for an antitrust action for restraints of trade or fraud prosecutions by the Department of Justice (DOJ).\nGovernment officials and administrators contended that more direct prohibitions on foreign bribery and more detailed requirements concerning corporate recordkeeping and accountability were needed to deal effectively with the problem. The revelations of slush funds and secret payments by American corporations were stated to have affected adversely American foreign policy, damaged abroad the image of American democracy, and impaired public confidence in the financial integrity of American corporations.", "Congress responded with the passage of the Foreign Corrupt Practices Act (FCPA) of 1977. The principal purpose of the 1977 Act was to prevent corporate bribery of foreign officials. It had three major provisions to attempt to accomplish this purpose.\nThe first major provision amended Section 13(b) of the Securities Exchange Act of 1934 to require issuers which must register their securities with the SEC to keep detailed books, records, and accounts which accurately record corporate payments and transactions.\nThe second major provision required SEC registered issuers to institute and maintain an internal accounting control system to assure management's control, authority, and responsibility over the firm's assets.\nThe third major provision of the original 1977 Foreign Corrupt Practices Act prohibited domestic corporations, whether or not registered with the SEC, from corruptly bribing a foreign official, a foreign political party, party official, or candidate for the purpose of obtaining or maintaining business. Two provisions of the 1977 Act made it a crime for any American business to use the mails or interstate commerce to offer or pay money or anything of value to a foreign official or to a foreign political party, party official, or candidate for foreign political office in order to influence the person in his decisionmaking or to use his influence to assist the firm in obtaining or retaining business.\nThe 1977 Act also prohibited the payment of money to any person by a business if the business knew or had reason to know that the payment was to be used to bribe a foreign official for his influence in obtaining or retaining business. Congressional intent appeared to place an affirmative responsibility on the corporation to exercise control over its officers, directors, and employees, and to take steps to assure that its foreign agents did not use corporate assets or payments to make other payments to bribe foreign officials.\nUnder the 1977 Act not all payments to employees of foreign governments were intended by Congress to be considered illegal bribes. For example, the definition of \"foreign official\" excluded employees of a foreign government \"whose duties are essentially ministerial or clerical.\" Also, the legislative history of the act specifically stated that it was not intended to cover \"grease payments\" to foreign officials, explained as payments for expediting shipments through customs or placing a transatlantic telephone call, securing required permits, or obtaining adequate police protection, transactions which may involve even the proper performance of duties. The legislative history also suggested that extortions of money by foreign officials might be used as a defense against bribery charges by a business if its property or lives of its employees were threatened. An example used to illustrate acceptable payments was the payment to a foreign official to prevent the dynamiting of an oil rig.", "Almost since passage of the 1977 Act, frequent criticism of the operation of the act occurred. Opponents argued that the act had a chilling effect upon United States export trade and that many companies ceased foreign operations rather than face the uncertainties and the burdens of the act.\nCritics of the 1977 Act also argued for removal of the \"reason to know\" standard concerning liability for actions of a firm's agent in a foreign country. This would eliminate the legal responsibility of the management of a domestic firm over the unauthorized and undirected actions of an agent without the necessity of management's also showing that it had no \"reason to know\" that the agent was using corporate funds, payments, or commissions to bribe foreign officials. These critics argued that American firms should not have to bear the responsibility of playing detective concerning the independent actions of persons that they retained as agents in foreign countries.\nCritics also contended that the internal accounting controls required by the 1977 Act were too costly and burdensome upon domestic firms, especially when potential criminal penalties within the act for failure to institute adequate controls arguably made officials of firms overly and unnecessarily cautious in implementing costly accounting controls. The public recordkeeping requirements were also criticized as unduly burdensome. Critics of the act argued for a materiality standard for public recordkeeping in which a firm would be required to report only expenditures and outlays deemed material to the profits and revenues of the firm.\nAnother frequent criticism of the 1977 Act was that the United States was more interested in exporting its cultural biases than its products. It was argued that, in nations in which acceptance of a fee or payment by a government official from one doing business with the government is customary and not unlawful under the laws of that nation, no violation of a United States law should occur. Critics also argued that an international agreement among the world's industrialized nations prohibiting businesses of all those countries from bribing foreign officials was necessary to prevent businesses of other countries from gaining an unfair and harmful competitive advantage over American businesses.", "In response to these criticisms, Congress for a number of years considered amending the 1977 Foreign Corrupt Practices Act. After considerable debate through at least three Congresses, the Foreign Corrupt Practices Act Amendments of 1988 were signed into law as Title V of the Omnibus Trade and Competitiveness Act of 1988 on August 23, 1988. Although the amendments maintained the three major parts of the 1977 Act discussed above—the accounting standards, the requirements of SEC registered issuers, and the anti-bribery provisions—the 1988 amendments made some significant changes to the 1977 Act.\nSection 5002 of the Trade Act amended Section 13(b) of the Securities Exchange Act to provide that no criminal liability shall be imposed for violation of the accounting standards unless a person knowingly circumvents or knowingly fails to implement a system of accurate and reasonable accounting controls. According to the legislative history, this provision was intended to ensure that criminal penalties would be imposed where acts of commission or omission in keeping books or records or administering accounting controls have the purpose of falsifying books, records, or accounts or of circumventing accounting controls. This was also intended to include the deliberate falsification of books and records and other conduct calculated to evade the internal accounting controls requirement.\nSection 5002 of the Trade Act also added to Section 13(b) of the Securities Exchange Act a provision that an issuer holding 50% or less of the voting power of a domestic or foreign firm is required to use its influence only in good faith to cause the domestic or foreign firm to devise and maintain a system of acceptable accounting controls. The House report stated that this amendment was intended to recognize that it was unrealistic to expect a minority owner to exert a disproportionate degree of influence over the accounting practices of a subsidiary.\nFor purposes of the accounting standards, \"reasonable assurances\" and \"reasonable detail\" mean such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs. Thus, the prudent man qualification was adopted to clarify that the current standard does not require an unrealistic degree of exactitude or precision.\nSection 5003 of the Trade Act amended the provisions of the Foreign Corrupt Practices Act concerning the anti-bribery prohibitions by issuers and domestic concerns. The Foreign Corrupt Practices Act continued to prohibit any issuer; officer, director, employee, or agent of the issuer; any stockholder acting on behalf of the issuer; or, in fact, any United States concern to offer, pay, promise to give, or authorize the giving of anything of value to a foreign official, a foreign political party, party official, candidate, or to any person for the purpose of obtaining or maintaining business. Section 5003 amended the 1977 Act to prohibit payments to any foreign official for the purpose of \"influencing any act or decision of such foreign official in his official capacity, or inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official.\" This language was inserted so that the foreign bribery standard would conform to the domestic bribery standard found in 18 U.S.C. Section 201.\nThe \"knowing\" requirement was retained, and the \"recklessly disregarding\" standard was abandoned in conference. However, the \"knowing\" requirement was intended to encompass the \"conscious disregard\" and \"willful blindness\" standards, including a conscious purpose to avoid learning the truth.\n[T]he Conferees agreed that \"simple negligence\" or \"mere foolishness\" should not be the basis for liability. However, the Conferees also agreed that the so-called \"head-in-the-sand\" problem—variously described in the pertinent authorities as \"conscious disregard,\" \"willful blindness\" or \"deliberate ignorance\"—should be covered so that management officials could not take refuge from the act's prohibitions by their unwarranted obliviousness to any action (or inaction), language or other \"signalling device\" that should reasonably alert them of the \"high probability\" of an FCPA violation.\nThe major changes which Section 5003 of the Trade Act made in the 1977 Foreign Corrupt Practices Act had to do with when the bribery provisions apply to an American business or person acting on behalf of an American business. For example, the anti-bribery provisions under the 1988 Amendments did not apply to any facilitating or expediting payment to a foreign official, political party, or party official.\nFurther, an American business or individual may use one of the \"affirmative defenses\" in urging that no violation of the FCPA occurred. The first of these enumerated affirmative defenses is that the payment, gift, offer, or promise of anything of value that was made was lawful under the written laws and regulations of the foreign official's, political party's, party official's, or candidate's country. Another affirmative defense is that the payment, gift, offer, or promise of anything of value that was made was a reasonable and bona fide expenditure, such as travel and lodging expenses which were incurred by or on behalf of a foreign official, party, party official, or candidate, and was directly related to the promotion, demonstration, or explanation of products or services or the execution or performance of a contract with a foreign government or agency. This defense does not apply, however, if a payment or gift is corruptly made in return for an official act or omission because it is then not considered a bona fide, good faith payment.\nIn the definitional sections of the 1988 Amendments, the terms \"knowing\" and \"routine governmental action\" are especially important. A person's state of mind is \"knowing\" with respect to conduct, a circumstance, or a result if the person is aware of engaging in the conduct, that the circumstance exists, or that the result is substantially certain to occur or if the person has a firm belief that the circumstance exists or that the result is substantially certain to occur. When knowledge of the existence of a particular circumstance is required for an offense, the knowledge is established if a person is aware of a high probability of the existence of the circumstance, unless the person actually believes that the circumstance does not exist.\n\"Routine governmental action\" is only ordinarily and commonly performed by a foreign official in obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers, providing police protection, mail pickup and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; or providing phone service, power and water supply, loading and unloading cargo, or protecting perishable commodities or products from deterioration. The term does not include any decision by a foreign official whether or on what terms to award new business to or to continue business with a particular firm.\nCriminal penalties for violations of the Foreign Corrupt Practices Act were increased. The maximum anti-bribery fine for a firm or domestic concern was raised from $1 million to $2 million and for individuals set at $100,000. The maximum imprisonment for bribery for an individual remained five years. For willful violations of the accounting provisions the fine for a corporation may not exceed $25 million and for an individual not more than $5 million and/or imprisonment of up to 20 years. The act also provides for civil penalties of up to $10,000 for violations of the bribery provisions.", "In 1998 the Foreign Corrupt Practices Act was again amended in order to implement the Organization of Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Officials in International Business Transactions. The 1998 Amendments expanded the scope of persons covered to include certain foreign nationals, such as any officer of a public international organization. The 1998 Amendments also extended the act's jurisdiction beyond the borders of the United States.", "Criticisms of the Foreign Corrupt Practices Act have continued over the years, ranging from its putting American businesses at a competitive disadvantage in the global marketplace to its permitting unethical forms of payment tantamount to bribery. There appear to have been more bills in the 111 th and 112 th Congresses to amend the Act than in the 113 th and 114 th Congresses. For example, during the 111 th Congress, there was interest in prohibiting businesses convicted of violating the Act from receiving government contracts. H.R. 5366 would have, unless waived by the head of a federal agency, permitted any person found to have violated the FCPA to be proposed for debarment from any contract or grant awarded by the federal government. On September 15, 2010, the House passed the bill. The House report stated the following need for the legislation: \"Federal government contractors have used bribes in the past to influence the actions of foreign governments. The source of these bribes in part is American tax dollars paid by the federal government to contractors. This bill seeks to root out companies which tarnish the image of the United States of America by engaging in illegal activities.\"\nH.R. 5837 , 111 th Congress, would have prohibited an executive agency from entering into a contract for goods or services unless that person or entity had certified that it and each of its officers, employees, and agents had not violated the FCPA or any comparable law of any other country. A contractor awarded a contract by a federal agency would have been prohibited from entering into any subcontract at any tier with any person or entity which had not made this certification.\nAnother bill in the 111 th Congress would have addressed the criticism that the act does not allow a private right of action. H.R. 2152 would have amended the FCPA to authorize a private right of action against a company for violation of the Act. Lawsuits have been brought to urge allowing a private right of action, but the Sixth Circuit in 1990 found that the act does not allow a private right of action.\nIn the 112 th Congress, H.R. 3531 would have authorized a private right of action under the FCPA against foreign businesses that have damaged U.S. businesses by bribing foreign officials. H.R. 3588 would have debarred persons found guilty of violating the FCPA from contracting with the federal government.\nH.R. 4178 in the 113 th Congress and H.R. 616 in the 114 th Congress would provide that the FCPA shall apply to any immigrant visa application under Section 203(b)(5)of the Immigration and Nationality Act.", "The executive branch has conducted oversight of American businesses for alleged violations of the act. Both the DOJ and the SEC have brought actions under their shared enforcement authority. DOJ is responsible for enforcing the Act when violations are of a criminal nature. The SEC is responsible for enforcing the Act when violations are of a primarily civil nature.\nIt has been reported that DOJ is intensifying its efforts to find violators of the FCPA. There are a number of recent actions that indicate DOJ concerns with FCPA violations. For example, in a 2014 case, United States v. Esquenazi , the U.S. Court of Appeals for the Eleventh Circuit agreed with the DOJ that two employees of a U.S. company who had made payments to what the court determined was an instrumentality of a foreign government were guilty of bribery under the FCPA. The case is important for being the first federal appellate court decision to provide guidance for and flesh out the definition of the term \"foreign official\" under the FCPA. Other DOJ actions have involved executives and employees in the military and law enforcement products industry who have been indicted for engaging in schemes to bribe foreign government officials to obtain and retain business.\nThe government has had varied results in its FCPA actions. Some cases have been resolved by plea deals or settlements, such as a case involving Mercator Corporation, which pled guilty to charges that it had made an illegal payment to a senior government official in Kazakhstan in violation of the act. In another example, the DOJ's Criminal Division announced that Marubeni Corporation had agreed to pay a $54.6 million criminal penalty to resolve charges for violating the FCPA during a 10-year-long scheme of bribing the Nigerian government for engineering, procurement, and construction contracts.\nAt times, the government has launched investigations of companies for FCPA violations but has not brought charges. For example, both the DOJ and the SEC have looked into whether Merck, a pharmaceutical company, has violated the act in multiple foreign countries. Merck has stated that DOJ has ended this investigation. Similarly, there were reports in 2010 that federal investigators looked into the possibility that Blackwater (renamed Xe) may have violated the FCPA, but a 2012 report states that the investigation was closed with no charges brought.\nOther cases have gone to trial. For example, a jury acquitted two businessmen charged by the DOJ with violating the FCPA involving a fake deal for the sale of goods to Gabon. In 2012, a judge declared a mistrial involving three other businessmen in the same FBI sting case involving a military equipment contract for Gabon.\nThe SEC has also brought actions, often resulting in settlements rather than court decisions. For example, in its list setting forth its FCPA actions since 2009, the SEC noted that VimpelCom, the Dutch-based telecommunications provider, had agreed to a $795 million global settlement to resolve its violations of the FCPA to win business in Uzbekistan. In 2015, the SEC received a $14 million settlement from Bristol-Myers Squibb for charges that employees of its China-based joint venture had made improper payments to obtain sales; a $19 million settlement from Hitachi for charges that it had inaccurately recorded improper payments to South Africa's ruling party in order to obtain contracts for building power plants; and a $14.8 million settlement from BNY Mellon for charges that it had provided student internships to family members of foreign government officials associated with a Middle Eastern sovereign wealth fund." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "", "", "", "h0_full", "", "h1_full", "h2_full" ] }

{ "question": [ "How has the 1977 Act amended?", "What is the purpose of this standard?", "How did the amendments enhance this act?", "How is this act criticized?", "What were done to amend this act?", "What's one example of the amendments?", "What has the executive branch done for alleged violation of the Act?", "What are the results of the actions?", "How does DOJ enforce this act?" ], "summary": [ "The amendments maintained the three major parts of the 1977 Act, but significant changes were made. One of these changes enacted a \"knowing\" standard in order to find violations of the act.", "This standard was intended to encompass \"conscious disregard\" and \"willful blindness.\"", "The amendments provided certain defenses against finding violations of the act, such as that the gift is lawful under the laws of the foreign country and that the gift is a bona fide and reasonable expenditure or for the performance or execution of a contract with the foreign government.", "There have been, for example, suggestions that businesses convicted of violating the FCPA should be debarred from receiving federal government contracts.", "Bills specifically amending the FCPA were introduced in the 111th and 112th Congresses. In the 113th and 114th Congresses, there appear to be bills only tangentially mentioning the act.", "For example, H.R. 616, 114th Congress, would provide that the FCPA shall apply to any immigrant visa application under Section 203(b)(5) of the Immigration and Nationality Act.", "The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) share enforcement authority—DOJ, primarily enforcement of criminal provisions; SEC, civil provisions.", "There have been a number of settlements and indictments, resulting in both successes and losses for the federal government.", "It has been reported that DOJ is intensifying its efforts to prosecute violators of the FCPA." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 1, -1, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 4, 4, 4, 5, 5, 5 ] }

{ "title": [ "", "Introduction", "Health Effects", "Human Exposure", "Current Federal BPA Regulation", "Events Surrounding the Current Controversy", "National Toxicology Program", "Food and Drug Administration", "State Government Actions", "Selected International Actions", "Private Sector Actions", "Congressional Actions", "Conclusion" ], "paragraphs": [ "", "Bisphenol A (BPA) is a synthetic chemical compound produced in the United States in large quantities, approximately 2.3 billion pounds annually. BPA is not found in nature. Two notable uses are in manufacturing certain forms of plastic: relatively hard, clear polycarbonate (PC), and epoxy resins that are used to line food cans. Under certain conditions, BPA may migrate or leach (i.e., be released) from PC containers and plastic-lined cans into the food or liquids they contain.\nThe widespread use of BPA and the potential for human exposure, together with accumulating scientific evidence about possible BPA toxicity, led the National Toxicology Program (NTP) at the National Institutes of Health (NIH) to select BPA for a comprehensive review. NTP released a draft \"brief\" on BPA in April 2008, and a final monograph in September 2008. NTP's conclusions prompted some to call for federal restrictions on certain BPA uses, and sparked congressional and media interest in the past and current positions of the Food and Drug Administration (FDA). FDA regulates BPA and other chemicals used in food containers, and until recently maintained that current uses of BPA are safe. In August 2008, FDA reiterated this finding in a published risk assessment. The finding prompted criticism from an agency advisory committee and others. FDA is now reviewing its BPA risk assessment for food exposures, and considering exposures from other products it regulates (such as drugs and medical devices), in response to the committee's critique. In January 2010, FDA announced that it is evaluating recent scientific evidence and conducting additional studies. FDA has announced no further subsequent action.", "Exposure to large amounts of BPA is acutely toxic to humans and animals, but typical levels of BPA exposure from plastics are low. The possibility of human health effects from exposure to low doses of BPA is controversial, although animal evidence of possible harmful effects has been mounting for about 10 years.\nIt is clear that BPA is capable of interfering with the action of estrogen, an important regulator of reproduction and development. (Interference with hormonal action is often referred to as endocrine disruption .) Therefore, many recent studies have focused on the potential effects of low levels of BPA exposure on fetal or newborn rats or mice. Some of the developmental effects seen among rodents exposed to low doses of BPA include changes in brains and behaviors; precancerous lesions in the prostate and mammary glands; altered prostate and urinary tract development; and early onset of puberty.\nThese low-dose experiments are difficult to conduct, in part because BPA is ubiquitous in the environment. Thus, different studies have produced different results. Scientists employed by BPA manufacturers and some independent contractors argue that the hundreds of studies conducted so far have produced inconsistent results and are insufficient justification for more stringent BPA regulation. Other scientists maintain that well-designed and executed studies of sufficient statistical power on sensitive strains of laboratory rodents have clearly demonstrated the toxicity of low doses of BPA in mammals, and justify actions to reduce exposure for potentially vulnerable human populations. In 2001, an expert workshop to evaluate the data on low-dose effects of endocrine disruptors concluded that biological effects have been shown to occur in rodents following exposure to some estrogenic compounds at very low levels. The question remains whether those effects would adversely affect rodent health and are a useful predictor of human health impacts.\nSome researchers have proposed that low levels of BPA exposure may interfere with functions other than reproduction and development, potentially causing additional types of health effects. The body of research in this area is less extensive than that into BPA's potential effects on reproductive hormones, but this appears to be an active field of investigation. Recent studies using animal models, human cells, or epidemiological data on humans have demonstrated effects on the regulation of insulin or other metabolic hormones, leading authors to posit that environmental BPA exposure may increase susceptibility to obesity and diabetes. Some investigators have called for long-term studies to determine whether high BPA levels are associated with specific health effects later on. Such long-term, prospective studies would provide stronger evidence, one way or the other, regarding a possible causal role of BPA on adverse health effects.\nThe so-called \"low-dose hypothesis\" is controversial because it appears to challenge a tenet of toxicology, that \"the dose makes the poison.\" That is, at some low level of exposure, any potentially toxic chemical is innocuous, and conversely, above some other level of exposure, any substance may be toxic. The low-dose hypothesis does not necessarily contradict the traditional tenet, but it states that some chemicals that are known to be toxic at high levels of exposure, and that may have no observable health effect (using traditional toxicological methods), may nonetheless harm health at a still lower level of exposure. In other words, endocrinologists argue, the relationship between the dose and effect is not always in the direction that more exposure is worse.\nMoreover, health effects from a low exposure may differ in type from effects observed at a higher dose. For example, some scientists who specialize in the study of hormones say that endocrine-disrupting chemicals like BPA have been shown to cause adverse developmental effects at a level of exposure lower than that at which no adverse effects have been identified using traditional high-dose test methods, particularly when the lower-level exposure occurred at a critical point during fetal development. Such effects are plausible, these scientists argue, because hormones work by regulating or modulating (i.e., by stimulating or dampening) responses of organs so as to maintain optimal physiological conditions that will vary depending on the tissue, dose, and timing in development. Normal responses of endocrine systems sometimes are regulated by very slight changes in hormone levels, and changes in these hormonal systems could be caused by low-dose exposure to external agents such as BPA.", "Bisphenol A exposure in the general population comes primarily from consumption of food and beverages. The latest national survey by the Centers for Disease Control and Prevention (CDC) found BPA in the urine of more than 90% of the people studied, which included children six years of age and older and adults. Among these people, the highest average concentrations were found in children. The NTP monograph estimates that the highest daily intakes of BPA occur in infants and children. BPA has been found in human breast milk; however, the NTP monograph estimates that infants who are formula-fed have higher daily BPA intake levels than those who are breast-fed, because there is more BPA in infant formula than in breast milk, and because BPA may increase when PC baby bottles are used for formula feeding, especially if the bottles are heated. These BPA exposure levels in humans \"are similar to levels of [BPA] associated with several 'low' dose laboratory animal findings of effects on the brain and behavior, prostate and mammary gland development, and early onset of puberty in females,\" according to the NTP monograph.\nMore recently, some scientists have concluded that sources of exposure other than food may be important. For example, there have been calls for assessments of human exposure from other FDA-regulated products such as drugs and medical devices. Some are especially concerned about medical devices, such as feeding and breathing tubes, that could leach the chemical into tissues, and, in particular, the possible health effects of such exposures in premature or critically ill infants, in whom such products may be used for long periods of time. Other potential sources of exposure are regulated by the Environmental Protection Agency (EPA). For example, in July 2010, several studies indicated that skin contact with BPA in thermal paper coatings (for example, the paper used for cash register receipts) may contribute significantly to human exposure.", "Depending on its use, BPA is potentially regulated by various regulatory agencies, including the Consumer Product Safety Commission (CPSC), the Occupational Safety and Health Administration (OSHA), EPA, and FDA.\nEPA is responsible for protecting public health and the environment from unreasonable risks associated with production, interstate commerce, and use of industrial chemicals, including BPA, when they are not specifically regulated under other federal laws, such as those covering alcohol, food, drugs, or consumer products. EPA has made BPA the focus of a \"chemical action plan\" to gather information and possibly to regulate the chemical. The plan was released in March 2010. It proposes to include BPA on a list of chemicals of concern, a list created under the authority of the Toxic Substances Control Act (TSCA), section 5(b)(4), \"on the basis of its potential for long-term adverse effects on growth, reproduction and development in aquatic species at concentrations similar to those found in the environment.\" A chemical of concern is \"a substance that may present an unreasonable risk of injury to the environment.\" Listed chemicals may be subject to additional rulemaking.\nIn addition, EPA sent an advance notice of proposed rulemaking to the White House Office of Management and Budget in December 2010. The notice requests comment on whether it should initiate rulemaking under section 4(a) of TSCA to develop data with respect to effects on the environment. Specifically, EPA intends\nto request comment on requiring toxicity testing to determine the potential for BPA to cause endocrine-related adverse effects in environmental organisms at low concentrations. The ANPRM will also seek comment on requiring sampling and monitoring of surface water, ground water, drinking water, soil, sediment, sludge, and landfill leachate in the vicinity of expected BPA releases to determine whether potentially sensitive organisms may currently be exposed to concentrations of BPA in the environment that are at or above levels of concern for adverse effects, including endocrine-related effects.\nFinally, EPA has initiated \"collaborative alternatives assessment activities\" under its Design for the Environment (DfE) program. These activities aim to reduce BPA releases and environmental exposures. The first partnership is searching for alternatives to BPA in thermal paper.\nThe safety of most foods, thought to be the primary source of human exposure to BPA, is the responsibility of FDA. Current BPA-containing PC polymers and epoxy resins used in food containers—such as baby bottles and infant formula cans, respectively—are regulated by FDA as food additives, based on approvals issued more than 40 years ago. Under this approach, any manufacturer may use BPA-containing packaging without notifying FDA of that use. In its January 2010 announcement, FDA said that it is considering regulating BPA-containing substances under its newer and more rigorous food contact notification program, under which manufacturers advise FDA of specific uses, giving the agency an opportunity to review and consider safety information. FDA also announced that its National Center for Toxicological Research was conducting additional studies on the effects of low-dose BPA exposure, to guide future regulatory efforts. FDA plans to complete a draft technical report on its research before the end of 2011. A final report is expected to be issued in 2012.\nFDA is also responsible for the safety of drugs and medical devices. In October 2008, FDA issued a request for information regarding BPA in all types of products it regulates. Subsequently, FDA has asked its Science Board, which advises the Commissioner, to review the agency's proposals to study the possible effects of exposure to BPA from drugs and medical devices, noting that there is limited information available at this time with which to balance possible BPA exposure risks against the therapeutic benefits provided by the drugs and devices.", "Although BPA has been in use in food contact substances and other applications for several decades, the debate among scientists, consumers, and government authorities about the safety of the chemical has escalated in recent years. Table 1 below provides a brief chronology of events, which are discussed in additional detail in this section.", "In early 2007, NTP convened an expert panel to conduct a comprehensive review of the scientific literature on BPA. The panel met during 2007 and issued its report on November 26, 2007. It concluded that animal studies were sufficient to elicit \"some concern\" about possible effects of BPA exposure on the neurological development of human fetuses and newborns, but \"minimal concern\" about effects on the early onset of puberty or development of mammary or prostate cancer. (The expression of \"some concern\" is midway in a qualitative scale used by NTP. In order, from greatest to least, the levels of concern are serious concern, concern, some concern, minimal concern, and negligible concern.) Some other scientists who reviewed the panel's conclusions disagreed.\nNTP's own scientists reviewed the panel report, as well as numerous studies that were not considered by the panel, many that were completed or published in late 2007 and early 2008. NTP then issued its draft BPA \"brief\" on April 14, 2008, which largely agreed with the panel report, but expressed a higher level of concern with respect to early puberty and effects on the mammary and prostate glands. The draft report concluded, \"the possibility that [BPA] may alter human development cannot be dismissed.\" Specifically, the NTP report concluded that there is \"some concern\" for neural and behavioral effects in fetuses, infants, and children at current levels of human exposure, and \"some concern\" in those same groups for effects on the prostate gland, mammary gland, and on earlier age of puberty in females. Public comment on the draft brief was invited through May 23, 2008.\nOn June 11, 2008, the NTP Board of Scientific Counselors met to review the draft report and public comments. The board voted to lower the level of concern for BPA's effects on the mammary gland and on the onset of puberty in females. This vote is reflected in the final version of the NTP brief, which was included in the NTP Monograph issued in September 2008. Thus, the official NTP view is that current levels of human exposure to BPA warrant \"some concern\" for possible effects on the brain, behavior, and prostate gland in fetuses, infants, and children; \"minimal concern\" for effects on the mammary gland and an earlier age for puberty in female fetuses, infants, and children, and for workers exposed occupationally; and \"negligible concern\" for all other current exposures and reproductive or developmental effects.", "During the week of April 14, 2008, in response to the release of the NTP draft BPA brief, FDA formed an agency-wide task force to review current information regarding BPA in all FDA-regulated products. In June 2008, FDA asked its Science Board, the advisory board to the FDA Commissioner, to establish a subcommittee to review research on BPA and exposures from food containers, and deliver its findings to the board's annual meeting that fall.\nOn August 14, 2008, FDA published a draft risk assessment of BPA in food contact applications, saying, \"FDA has concluded that an adequate margin of safety exists for BPA at current levels of exposure from food contact uses. At a later date, FDA will publish a separate document that provides a safety assessment of BPA exposure from other FDA-regulated products.\" Consumer groups and some Members of Congress questioned the finding, which appeared to contradict earlier findings by the NTP. Among other things, concerns were raised about whether FDA relied too heavily on industry-sponsored studies, and whether the agency should have considered more recent evidence of health effects other than the reproductive and developmental effects on which it focused. FDA said that it relied heavily on the industry-sponsored studies because they followed the agency's guidance for good laboratory practices (GLPs) and constituted robust evidence for that reason, but that other studies were also considered.\nOn October 15, 2008, FDA issued a notice in the Federal Register requesting information regarding types of FDA-regulated products that contain BPA, and any information relating to the leaching of BPA from packaging into a product, and/or leaching from a product during its use in humans. FDA said that its agency-wide task force had completed the assessment of the potential exposure to BPA from food-contact materials (published in August), and was interested in additional information on other types of products, specifically medical devices, biological products (including blood, blood products, vaccines, and cell and gene therapies), and drugs.\nOn October 31, 2008, the BPA Subcommittee of the FDA Science Board released its review of FDA's draft risk assessment. The subcommittee concurred with FDA's focus on food exposures and exposures in children. It differed with the agency on several other matters, however, urging, among other things, more emphasis on cumulative exposures; non-food exposures (especially in neonates); and evidence from non-GLP studies. Overall, the subcommittee determined that \"Coupling together the available qualitative and quantitative information (including application of uncertainty factors) provides a sufficient scientific basis to conclude that the Margins of Safety defined by FDA as 'adequate' are, in fact, inadequate.\"\nOn December 3, 2008, FDA provided an initial response to the subcommittee in a letter, saying that it generally agreed with the subcommittee's concerns and planned further assessments, including expanding its work to consider sources of exposure other than food.\nOne year later, in January 2010, FDA announced,\non the basis of results from recent studies using novel approaches to test for subtle effects, both the National Toxicology Program at the National Institutes of Health and FDA have some concern about the potential effects of BPA on the brain, behavior, and prostate gland in fetuses, infants, and young children. In cooperation with the National Toxicology Program, FDA's National Center for Toxicological Research is carrying out in-depth studies to answer key questions and clarify uncertainties about the risks of BPA.\nWhile awaiting research results, FDA is \"taking reasonable steps to reduce human exposure to BPA in the food supply,\" and adopting \"a more robust regulatory framework for oversight of BPA.\"\nFDA's struggles with BPA regulation would seem to illustrate a number of charges of systemic problems within the agency made by the FDA Science Board. In November 2007, the board issued a highly critical report finding that FDA's regulatory mission was severely compromised by inadequate and eroding scientific and technical resources, including the size and capability of its workforce, and its processes for risk assessment and related activities. The board said that the agency's food safety program, in particular, was \"in a state of crisis\" as a result of a constellation of problems that flowed from increasing scientific, technical, and regulatory demands, coupled with inadequate resources. Subsequently, Congress provided a 45% increase in FDA's food safety budget from FY2008 ($577 million) to FY2011 ($837 million). FDA has not announced any new findings or changes in its regulatory approach to BPA since its January 2010 announcement, although it has issued an information sheet aimed at parents of young children.", "Many states have considered or are considering legislation to restrict use of BPA in products intended for use by infants and children. Connecticut, Maryland, Massachusetts, Minnesota, New York, Vermont, Washington, and Wisconsin have enacted such legislation. North Carolina and New Mexico have authorized studies. Delaware stated its support for efforts to develop alternatives, and Pennsylvania passed legislation that \"[u]rges the Congress of the United States and the Food and Drug Administration to encourage the use of reduced bisphenol-A in the manufacture of plastic food containers and bottles.\" Legislation introduced to ban BPA in children's products has failed to advance in several other states.", "As with U.S. federal agencies and advisory boards and with the states, foreign governments and international advisory bodies have reached different conclusions and taken different approaches regarding the safety of low-level exposures to BPA.\nOn October 13, 2010, Canada became the first country to designate BPA as a toxic substance. According to the Canadian government, this enables the Minister of the Environment to propose a regulation or other instrument to manage human health and environmental risk posed by a listed chemical under the Canadian Environmental Protection Act. Officials may also choose to develop non-regulatory approaches to manage these risks. Canada has taken numerous intervening actions with respect to BPA. For example, in April 2008, it published a risk assessment finding that \"the main source of exposure [to BPA] for newborns and infants is through the use of polycarbonate baby bottles when they are exposed to high temperatures and the migration of [BPA] from cans into infant formula…. [BPA] exposure to newborns and infants is below levels that may pose a risk, however, the gap between exposure and effect is not large enough.\" The Canadian government said, in essence, that although exposure levels are below those that could cause health effects, they are close enough to those levels that the government wanted to be prudent and reduce exposures further. The government banned PC baby bottles in March 2010, saying, \"Given that toxicokinetic and metabolism data indicate potential sensitivity to newborns and infants, it is considered appropriate to apply a precautionary approach when characterizing risk.\"\nThe European Food Safety Authority (EFSA), a component of the European Union, has consistently reached a different conclusion regarding the safety of low-level BPA exposures. Most recently, on September 30, 2010, a panel of EFSA scientists announced that after a comprehensive scientific review, they could not identify any new evidence that would lead them to revise the current Tolerable Daily Intake (TDI) level for BPA, which the agency established in 2006. Reviewers stated that they\nacknowledge that some recent studies report adverse effects on animals exposed to BPA during development at doses well below those used to determine the current TDI. These studies show biochemical changes in the central nervous system, effects on the immune system and enhanced susceptibility to breast cancer. However, these studies have many shortcomings. At present the relevance of these findings for human health cannot be assessed....\nIn addition, according to the panel, available data on BPA do not provide \"convincing evidence that BPA has any adverse effects on aspects of behavior, such as learning and memory.\"\nIn November 2010, the World Health Organization (WHO), in conjunction with the U.N. Food and Agriculture Organization (FAO), held an expert meeting to assess the safety of BPA. The expert panel included representatives from the EFSA, Health Canada, and the U.S. National Institute of Environmental Health Sciences (NIEHS) and FDA. The experts concluded that:\nThere is insufficient evidence on which to judge the carcinogenic potential of BPA. There are no specific long-term toxicity studies with BPA other than those to examine carcinogenicity. There is considerable uncertainty as to whether BPA has any effect in rodents on conventional reproductive or developmental endpoints at very low doses by the oral or injected routes of exposure, or potential effects in humans at current exposure levels. Further investigation is necessary to address uncertainty regarding possible neurobehavioral effects of BPA exposure. Ongoing studies may clarify the effect of BPA on cardiovascular function and metabolic syndrome and diabetes. Existing animal studies are inadequate for human health risk assessment.\nNevertheless, the European Union announced that it would ban the use of BPA in plastic baby bottles early in 2011. Reportedly, this decision was \"the result of months of discussion and exchange of views between the [European] Commission's services, the EFSA, the member states and the industry.\" China and Malaysia reportedly have imposed similar bans.", "In April 2008, concerns raised by the NTP draft brief about the health effects of BPA prompted Wal-Mart, Playtex Infant Care, and Nalgene, among other companies, to stop allowing BPA in the beverage bottles they produce or sell. At the same time, the American Chemistry Council (ACC), which represents chemical manufacturing companies, called on FDA to update its review of the safety of BPA in food contact applications, saying, \"The extensive body of scientific study regarding [BPA] is well documented and well reviewed. Nevertheless, recent media reports have raised concerns about the safety and use of polycarbonate plastic and epoxy resins, unnecessarily confusing and frightening the public.\"\nIn March 2009, the six largest manufacturers of baby bottles announced that they would stop selling BPA-containing bottles in the United States, partly in response to growing numbers of retailers that would no longer carry the products. Noting the announcement, the ACC reiterated FDA's assessment, at that time, that currently approved uses of BPA were safe.\nThe market's response to concerns about BPA was apparently easier for plastic bottles, for which BPA-free alternatives are available, than for other types of containers. Although it is reported that many food companies are considering a switch to other forms of BPA-free food packaging, manufacturers of cans represented by the North American Metal Packaging Alliance maintain that suitable alternatives to BPA are not available, and in almost all cases are not likely to become available in the immediate future. Until alternatives for all uses are developed, they argue that BPA-containing linings will be necessary to ensure a tight seal on cans and lids, and thus to prevent food spoilage and food poisoning risks to consumers.\nIn September 2010, a \"green\" capital management company published its second annual report ranking companies that market packaged foods on their efforts to use BPA-free packaging. The authors report that \"notable progress has been made towards commercializing substitutes to BPA epoxy can linings.\"\nHowever, in 2009, Consumers Union found measurable amounts of BPA in two food brands labeled \"BPA-free.\" This prompted one of the manufacturers to suggest that the chemical may be ubiquitous, and could not be completely eliminated from the food supply.", "In the 112 th Congress, companion bills, H.R. 432 and S. 136 , would ban the use of BPA in food containers.\nThe 111 th Congress considered several bills that addressed BPA, but none was enacted. Companion bills ( S. 593 / H.R. 1523 ) would have prohibited the use of BPA in food and beverage containers regulated by the FDA. A second pair of bills ( S. 753 / H.R. 4456 ) would have required the CPSC to prohibit BPA use in children's food and beverage containers under the Federal Hazardous Substances Act. Another bill ( H.R. 4341 ) would have required a warning label on any food container containing BPA.\nAnother bill in the 111 th Congress, H.R. 5820 , would have placed BPA on a priority list of chemicals for which EPA would assess safety, authorize specific uses, and impose conditions under the Toxic Substances Control Act (TSCA). Activities under H.R. 5820 would have been required to ensure that a chemical would meet a stringent standard of safety, namely that the authorized use of the chemical under the conditions imposed \"is not reasonably anticipated to present a risk of injury to health or the environment, … provides a reasonable certainty of no harm, including to vulnerable populations,\" taking into account aggregate and cumulative exposure to the chemical, and \"protects the public welfare from adverse effects, including effects on the environment.\" For uses of BPA when no substitute was available, the bill would have allowed continued BPA use provided that conditions were imposed to reduce risk \"to the greatest extent feasible.\"\nThe House acted on another approach to BPA regulation on July 30, 2009, when it amended and approved H.R. 2749 , the Food Safety Enhancement Act of 2009. Section 215 of the bill would have required FDA to determine whether there was \"a reasonable certainty of no harm for infants, young children, pregnant women, and adults, for approved uses of polycarbonate plastic and epoxy resin made with bisphenol A in food and beverage containers ... under the conditions of use prescribed in current [FDA] regulations.\" FDA would have been required to notify Congress about any uses of BPA for which such a determination could not be made and how the agency would regulate such use to protect the public health. The Senate did not act on this bill.\nSenator Dianne Feinstein sought to amend comprehensive food safety legislation in the Senate ( S. 510 ) with an amendment that would have banned the use of BPA in baby bottles and sippy cups, but facing substantial opposition, she abandoned that effort prior to the final vote on the bill on November 30, 2010.", "There is scientific consensus that exposure to high levels of BPA can cause adverse reproductive effects in mammals. There is growing concern among the public, and among many scientists, about low-dose BPA exposures, sharpened by the fact that such exposures within the general population are, without question, highest in infants. The scientific debate about the safety of BPA is likely to continue, and further reaction in the policy, regulatory, and commercial arenas, as well as in Congress, is expected." ], "depth": [ 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "h0_full", "h0_full", "h2_full h1_full", "h0_title h1_title", "", "h1_full", "h1_full", "", "h0_full", "h3_full", "" ] }

{ "question": [ "What is BPA used for?", "What is the downside of BPA products?", "What are the main source of public exposure?", "What is the effect of public exposure on human?", "What is the debate on the effect of BPA exposure on human health like?", "What is the main controversy on this topic?", "Why is FDA's ability to conduct such assessment questioned?", "What effort did FDA make regarding the concern about possible health effects from BPA exposure?", "What is U.S. Environmental Protection Agency (EPA)'s job?", "What has EPA done regarding the concern about possible health effects from BPA exposure?", "What effort is EPA making to limit the use of BPA?", "What laws are made to regulate the use of BPA?", "What bills required labeling of products containing BPA, or required EPA or FDA to reassess risks?", "How were the laws carried out?" ], "summary": [ "Bisphenol A (BPA) is used to produce certain types of plastic, in thousands of formulations for myriad products.", "Products made with these plastics may expose people to small amounts of BPA.", "The most significant source of public exposure is thought to be through food, although other ubiquitous products such as thermal paper coatings, and for some individuals medical devices, such as feeding and breathing tubes, also may contribute significantly to human exposure.", "Some studies have found that fetal and infant development may be harmed by very small amounts of BPA, but scientists disagree about the amount of BPA that is likely to harm human health.", "In the United States and elsewhere, scientific disagreement about the possibility of human health effects that may result from BPA exposure has led to conflicting regulatory decisions by various advisory bodies and regulatory agencies.", "Controversy has centered on the safety of food containers, especially those intended for use by infants and children.", "A conclusion by the U.S. Food and Drug Administration (FDA) that BPA use is safe conflicted with earlier findings by a panel of scientific advisers, but other scientists who reviewed that panel's conclusions disagreed. These events prompted some to question FDA's process for the assessment of such health risks, and others to question the agency's fundamental ability to conduct such assessments competently.", "More recently, FDA expressed concern about possible health effects from BPA exposure and announced that it was conducting new studies on the matter, pending possible changes in its regulatory approach.", "The U.S. Environmental Protection Agency (EPA) is responsible for protecting public health and the environment from unreasonable risks associated with production, interstate commerce, and use of industrial chemicals, including BPA, when they are not specifically regulated under other federal laws.", "In March 2010, EPA released a \"chemical action plan\" for BPA that proposed to list BPA as a chemical of concern that may present an unreasonable risk to certain aquatic species at concentrations similar to those found in the environment; to consider rulemaking to gather additional data relevant to environmental effects; and to initiate collaborative alternatives assessment activities under its Design for the Environment (DfE) program to encourage reductions in BPA releases and exposures.", "EPA is evaluating alternatives to BPA for use in paper for thermal printing.", "In the 112th Congress, companion bills, H.R. 432 and S. 136, would ban the use of BPA in food containers.", "In the 111th Congress, a number of bills (S. 593/H.R. 1523, S. 753/H.R. 4456, H.R. 4341, H.R. 5820) were introduced that would have curtailed uses of BPA in certain products, required labeling of products containing BPA, or required EPA or FDA to reassess risks.", "None of these bills was enacted." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, 2, -1, -1, 1, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 4, 4, 4 ] }

{ "title": [ "", "Introduction", "At What Point Does the Public Debt Become Unsustainable?", "Are Financial Markets Treating the Debt as Unsustainable?", "Evidence from Abroad", "Will Future Budget Deficits Remain at Unsustainable Levels Under Current Policy?", "Sustainability and Foreign Holders of the Debt", "Economic Effects of a \"Debt Spiral\"", "Would a Failure to Raise the Debt Limit Cause a Debt Spiral?", "Would a Ratings Downgrade Cause a Debt Spiral?", "Is a Large But Manageable Deficit Harmful to the Economy?", "Will Large Deficits Lead to High Inflation?" ], "paragraphs": [ "", "The federal budget deficit totaled $1.4 trillion in FY2009, which was the first time it ever topped $1 trillion. It remained over $1 trillion for the next three fiscal years. The government's ability to finance a budget deficit depends on the size of the economy. For this reason, and to compare the deficit to historical or foreign deficits, it is more meaningful to measure the deficit relative to gross domestic product (GDP). By this measure, the deficits since 2009 are unusual but not unprecedented. The deficit was above 10% of GDP in 2009, 9% of GDP in 2010, 8% of GDP in 2011, and 7% of GDP in 2012. Seven previous times in U.S. history the federal budget deficit has exceeded 10% of GDP, these being during or following the Civil War (1865), World War I (1918, 1919), and World War II (1942-1945). Before 2009, it had not exceeded 7% of GDP since 1946.\nFederal budget deficits cause the publicly held federal debt to increase. The FY2009 deficit of 10% of GDP, in a year when GDP fell, caused the debt-to-GDP ratio to rise by 12.6 percentage points. The debt has increased from 41% of GDP in 2008 to 73% of GDP in 2012. This was the highest the debt has been relative to GDP since World War II, when it peaked at 109% of GDP.\nThe current policy debate on the \"fiscal cliff\" occurring at the end of 2012 has raised the question of whether a deficit of the current magnitude is manageable and what risks it poses to the economy. Since deficit reduction could have a contractionary effect on the economy in the short run at a time when the economy is still fragile, restoring fiscal sustainability poses another set of risks that must be balanced against the risks of continuing an unsustainably large deficit. This report will evaluate sustainability issues. For an overview of projected deficits under current policy and options for addressing them, see CRS Report R41778, Reducing the Budget Deficit: Policy Issues , by [author name scrubbed].", "Some economists worry that if the public debt keeps rising, it will become unsustainable. By definition, the debt becomes unsustainable when private investors are no longer willing to hold it, at least at normal interest rates. Private investors become unwilling to hold a nation's debt when they become convinced that the government will either default on (in other words, renege on promises to repay) or monetize the debt (in other words, finance it through money creation) in a way that would result in rapidly increasing price inflation that reduces the existing debt's relative value.\nAlthough it is not possible to establish a threshold level at which a country's debt becomes unsustainable, the trend that causes unsustainability is well known: a country cannot continually increase its debt at a rate that exceeds the growth rate of the economy. When it does, it causes debt service to absorb more and more of national income. As private investors observe that the government is unable or unwilling to make policy changes to prevent the debt burden from increasing, they will decide to flee the country's debt before the point where the government is forced to default or monetize. The decision by some investors to flee the debt will make it more onerous for the government to finance the debt, because it will now have to offer higher yields to attract new buyers, and higher yields will result in a larger deficit and more borrowing. This phenomenon is sometimes referred to as a \"debt spiral.\" Thus, unsustainability tends to be triggered rapidly, as no investor wants to be the one still holding the debt when eventual default or hyperinflation occurs. The exact point when investors choose to flee depends on psychological factors that are hard to predict and likely to vary by country.\nBecause it is the upward trend in debt that leads to unsustainability, investors may accept very large deficits for a few years, as long as they are convinced that in the future the government will reduce the deficit to a sustainable level before it is too late. For example, governments are often able to finance large deficits in wartime—the largest deficits relative to GDP in U.S. history occurred as a result of the Civil War, World War I, and World War II—because investors expect a rapid decline in the deficit once peacetime leads to a rapid decline in military spending.\nInvestors' willingness to accept large deficits for a time will depend in part on the current level of debt relative to GDP. In that regard, the 16 percentage point reduction in debt to GDP between 1993 and 2001 left the United States in a relatively good starting position to absorb the 30 percentage point increase in debt to GDP that has occurred since 2001. Although the increase in debt in 2012 brings the federal debt as a share of GDP to its highest level since 1950, it will remain at less than three-quarters of its World War II peak.", "Standard financial market measures currently do not suggest widespread concern about potential U.S. default. Although investors' views on the sustainability of the deficit cannot be observed directly, they are implicit in Treasury yields. If investors believed that the government would default on its debt or erode its value through inflation, they would demand higher yields to compensate against these risks. Yet Treasury yields have gone down, instead of up, as the deficit has increased. Since the financial crisis, long-term yields have been below 3% for the first time since the 1950s. Besides Treasury yields, another indicator of market fears of default are prices for credit default swaps, which can be thought of as a type of insurance against default. Although the cost of credit default swaps for U.S. Treasuries rose during the recent financial crisis to atypical levels, they still implied a very low probability of default and the rise was much less than in European countries affected by the sovereign debt crisis, discussed below. (They have fallen since.) These data strongly indicate that investors do believe that future deficits will be reduced to sustainable levels.\nThe ease of financing this year's historically large deficit is partly attributable to unique economic conditions. The United States entered its longest post-war recession in December 2007 (which ended in June 2009), featuring the most severe disruption to financial markets since the Great Depression. September 2008 saw a \"flight to quality\" by investors who shunned risky assets and sought to hold only the safest assets. Investors perceived Treasury securities to be the safest assets, partly because they are the most liquid (i.e., easily tradeable).\nWhile investors have not shown widespread concern about the sustainability of government borrowing so far, this does not prove that borrowing is on a sustainable path. Investor behavior is compatible with a belief that policy steps will be taken to reduce the deficit to a level that stabilizes debt compared to GDP, but there is no guarantee that the government will take those steps. There is nothing preventing investors from re-evaluating their views at any time, however. As long as federal deficits remain at unsustainable levels, there is the risk—however small—that interest rates could rise quickly as a result of a perceived rise in default risk. Waiting until investor confidence has fallen would require larger policy changes because higher interest rates would cause debt service costs to rise.", "A frequent question is whether one can predict when the United States will reach a \"tipping point\" where investors become unwilling to finance it. One way to answer that question is to look at whether there is a specific level of public debt that has become problematic for other countries. Different countries have different reputations, so an acceptable debt level is likely to vary from country to country. Because more developing countries have defaulted on their debt in recent decades, advanced economies are generally seen as more able to sustain higher debt levels than developing ones. Thus, in gauging how much higher the U.S. public debt could get before it faces sustainability concerns, it is more useful to compare the United States to other advanced economies.\nAll of the advanced countries that have experienced fiscal and financial crises (Greece, Iceland, Ireland, Italy, Portugal, and Spain) in recent years have high government debt levels in 2012. This would appear to offer evidence that high debt levels cause fiscal and financial crises, but for some of these countries, causality ran in the opposite direction—Iceland, Ireland, and Spain all had extremely low government debt levels (much lower than the United States) and were running budget surpluses before the crisis. Those three countries have high government debt levels only as a result of the crisis, notably as a result of declining revenue bases, higher social insurance outlays, and their governments taking on liabilities to shore up the banking system. In other words, looking at high public debt levels before the crisis would not have helped predict that those three countries would experience crises. Italy and Greece had unusually high debt levels before the crisis, supporting the idea that high debt can sometimes lead to crisis. On the other hand, Japan's public debt level was by far the highest among advanced countries in 2007, and its borrowing costs have remained unusually low. Japan's ability to finance debt at this level at low interest rates has been attributed to Japan's high overall rate of national saving, despite its large budget deficits, and its near-zero inflation rates.\nA comparison of the United States to other advanced economies reveals that the U.S. debt level was higher than average as a share of GDP in 2007, but there were six countries in the sample with debt levels that were higher still. In 2012, the U.S. debt to GDP ratio was higher than most other countries, but well below the ratio in the highest debt countries. The levels of debt to GDP in the United States and many other countries are higher today than any country in 2007 except Greece and Japan.\nThe concept of a debt spiral is well illustrated by the experience of the eurozone crisis countries. Before the crisis, none of these European countries paid significantly more than Germany to finance government debt. All except Iceland joined the euro area, and their interest rate differentials with Germany fell significantly after joining. This pattern of interest rates implies that markets perceived them as having little more sovereign risk than Germany until the financial crisis, but significantly more afterward. The experience of these countries demonstrates that a loss of confidence quickly leads to a vicious cycle—investors demand higher yields on government debt to compensate against the perceived higher risk of default, but these higher yields cause the deficit to spike suddenly, thereby undermining a government's ability to continue to service its debt. This dynamic causes a country to swing from stability to crisis relatively quickly. Restoring stability has been difficult, and since 2008 GDP has shrunk for three or more years for most of the countries. Falling GDP exacerbates the budget deficit, and vice versa.\nThese countries that have required assistance to finance their deficits have some commonalities with the United States—projections of unsustainably large budget deficits under current policy, a large net foreign debt (with the exception of Italy), asset price bubbles that led to large losses in the financial sector, and large subsequent government outlays to cope with financial sector turmoil. On the other hand, several factors differentiate the United States from most of these countries—a reputation of fiscal solvency based on a history of non-default, a large economy, a flexible exchange rate, and a status as the world's \"reserve currency\" and \"safe haven.\" The fact that Treasury securities are considered the riskless, \"safe haven\" asset internationally could mean that investors continue financing unsustainable deficits longer than they would for other countries, but it could also mean that if confidence were lost, the shift out of Treasury securities would be greater than in other countries since the original rationale for holding them was no longer valid.", "If the budget deficit were to remain near 2009 to 2012 levels, it would be unsustainable because it would cause the national debt to continually rise relative to GDP. But will deficits remain at elevated levels in future years, or return to more normal levels under current policy? In other words, are policy changes needed to return the budget to sustainability?\nThe deficit has already fallen from 10% to 7% of GDP, and there are reasons to believe that the deficit will continue to fall somewhat without any policy changes in the next few years. The recession caused certain outlays (such as unemployment insurance) to automatically rise and revenues to automatically fall. If business cycle conditions continue to improve, deficits will continue to decline. Furthermore, because of \"real bracket creep,\" the tax system tends to collect modestly more revenue each year without any changes to the tax code.\nCBO's projections of current law under the baseline show deficits falling to less than 3% of GDP after 2013. The projections would seem to indicate that the budget deficit is already on a sustainable path under current law. These projections assume four important differences from current policy, however. First, CBO assumes that all tax provisions, including the tax cuts enacted in 2001 and 2003, will be allowed to expire as scheduled. Second, CBO projections of the deficit are based on assumptions that the automatic spending reduction process under the Budget Control Act will proceed as scheduled beginning in January 2013. Third, CBO assumes that the routinely enacted one-year \"patches\" to adjust the alternative minimum tax (AMT) for inflation will not be extended, and as a result millions more taxpayers will pay the AMT each year. Fourth, the Medicare cuts required in law by the sustainable growth physician payment formula are assumed to be allowed to take place; Congress has enacted legislative overrides to prevent those cuts (popularly known as the \"doc fix\") each year since 2003. If any of these assumptions were altered, deficits would be much higher, all else equal.\nUnder its Alternative Fiscal Scenario, CBO modifies the baseline to assume that these four current policies stay in place. This causes the projected deficits to fall no lower than 4.2% of GDP, rising as a share of GDP after 2018. Deficits of this size would cause a persistent increase in the debt as a share of GDP; therefore, policy changes are required to put the projected budget deficit on a sustainable path. For illustrative purposes, CRS estimates that to stabilize debt as a share of GDP at its projected 2012 level would require annual budget deficits no larger than 3½% of GDP in 2015 and 2016, falling to 2¾% of GDP from 2019 on, based on CBO's projections of GDP growth and interest rates. Were GDP to grow more slowly or interest rates to be higher than projected, the deficit would have to be smaller to be sustainable, and vice versa. Compared with a current policy baseline where discretionary spending grows at the rate of inflation, this would require some combination of spending cuts and tax increases equivalent to roughly $800 billion in 2013, falling to $275 billion in 2015, and rising each year thereafter until it exceeds $900 billion in 2022. Thus, deficits do not fall enough under current policy, as defined in CBO's Alternative Fiscal Scenario, to stabilize the debt.\nMoreover, long-term projections of current policy estimate that a large increase in Social Security, Medicare, and Medicaid spending will cause the budget deficit to grow continuously following the retirement of the baby boomers. Although deficit projections show some improvement in the short run, the long-term projection estimates even larger deficits under current policy, assuming health care costs continue to rise more rapidly than output. In the long term, reducing the growth rate of health care costs below the growth rate of the economy would have the largest impact on the budget deficit; however, the effects of health care cost growth on the deficit are very gradual, and play little role in the sustainability of the deficit in the near term.\nBecause interest rates are currently so low, interest payments have been relatively low in recent years despite large deficits. For example, CBO recorded debt service payments of $187 billion for FY2009, the lowest level in dollar terms since 2005, even though the debt rose by more than $1.7 trillion that year. As discussed below, financing the deficit may become more costly once economic conditions normalize. Even if interest rates return only to average levels in recent years, the cost of debt service will rise significantly. CBO's projections assume a relatively low interest rate paid on government debt over the next 10 years, largely because the starting point for its projections is today's historically low rates. Some commentators have questioned whether this assumption is reasonable given the size of current and projected budget deficits. If investors respond to large deficits by demanding above-average interest rates, the cost of debt service would become large. CBO estimates that if interest rates rose to their average level from 1991 to 2000, the budget deficit would be an average of $100 billion higher per year over the next 10 years. If interest rates rose to their average level from 1981 to 1990, the budget deficit would be an average of $500 billion higher per year over the next 10 years.", "Some economists believe the government's reliance on foreign investors to finance the federal debt makes the United States more vulnerable to sudden shifts in investors' willingness to hold federal debt. Foreigners currently hold $5.3 trillion (more than half) of the total privately held federal debt. Foreigners are perceived as less willing to passively buy and hold federal debt, in part because they bear exchange-rate risk when holding federal debt. If so, their demand for federal debt could be more sensitive to perceptions of sustainability, since default or monetization typically leads to currency devaluation that would reduce the debt's value in foreign currencies. If foreigners were to become less willing to hold federal debt, presumably, significantly higher interest rates would be required for Americans to absorb such large sums. For example, J.P. Morgan estimates that a 20% decline in foreign demand for Treasury securities would raise Treasury yields by 0.5 percentage points. Furthermore, if debt service costs were to rise suddenly, higher debt payments to foreigners would result in a fall in U.S. income, while higher debt payments to Americans would transfer income with no net effect on overall U.S. income.\nIs foreign unwillingness to hold U.S. debt in the future a serious concern? Perhaps the strongest argument against it is the behavior of investors during the recent financial crisis. Although the crisis first emerged in U.S. subprime mortgage markets, foreigners increased their net purchases of Treasury securities from $155 billion in 2007 to $710 billion in 2008—a trend that continued even after financial conditions deteriorated in September 2008. These circumstances seem like a good test of whether foreigners would be willing to maintain their Treasury holdings in adverse circumstances, and they were.\nNevertheless, in the long run, the sustainability of foreign borrowing falls under the same mathematical rules as the sustainability of government borrowing—the net debt owed to foreigners cannot indefinitely rise faster than GDP, or else an ever-increasing share of national income will be needed to service it. The current account deficit has fallen significantly relative to GDP since 2007, but it remains to be seen whether this change is cyclical or longer lasting. Thus, independent of concerns about the size of the federal debt, the upward trend in the net debt owed to foreigners raises concerns about the long-term sustainability of large-scale borrowing from abroad.\nThe continued willingness of foreign investors to hold U.S. Treasury securities is further complicated by the role of foreign governments. From the end of 2001 to the second quarter of 2012, foreign official holdings of Treasury securities increased from $0.6 trillion to $3.9 trillion. While it can be reasonably assumed that private investors are purchasing Treasury securities because they are seen as good investments (and would sell them if they no longer were), foreign governments may have other motivations. Countries may have been accumulating official reserves in recent years (1) to prevent their currencies from appreciating against the dollar or against a major trading partner's (or competitor's) currency; (2) because the price of a major export, such as oil, had suddenly risen and the country decided to invest some of its windfall in foreign assets; (3) to guard their currency against a sudden withdrawal of investment from their country during a future downturn; or (4) to rebuild their reserves after a prior defense of their currency drained them away. None of these explanations would imply a permanent desire to continuously accumulate official dollar-denominated assets. Regardless of the motivation for initially purchasing Treasury securities, now that some foreign governments hold large portfolios of federal debt, they have an incentive to maximize their return. Collectively, this would call for governments to cooperate to avoid taking actions, such as large sales of holdings, that destabilize Treasury prices. But individually, any particular government has the incentive to sell its holdings before everyone else if it believes that the debt has become unsustainable; this incentive could hamper collective action.", "Policymakers are currently faced with a dilemma. Reducing the deficit too quickly could have a contractionary effect on the economy at a time when the economy is still far below full employment. But leaving the deficit at an unsustainable size retains the risk that the budget could at some point enter a debt spiral, in which Treasury yields rose sharply and suddenly. Whether this risk is worth taking depends on two factors—how great the risk is of entering a debt spiral (a risk considered by most to be very small), and how serious the economic effects would be.\nAssuming the government were to enter a debt spiral, the economic effects would be expected to be negative and potentially severe. How severe would likely depend on how much spillover there would be to other financial markets. Most economists believe that the 2007-2009 recession was the deepest and longest since the Great Depression because it was accompanied by a financial crisis. Moreover, financial crises seem to leave long-lasting effects after the initial crash—economists Reinhart and Reinhart find that in the decade following a financial crisis the median decline in annual GDP growth is one percentage point and unemployment often does not return to its pre-crisis level.\nThe direct effect of higher interest rates stemming from greater credit risk would be to reduce the market value of existing federal debt, as investors would be willing to pay a lower price (i.e., demand a higher yield) for Treasury securities to compensate for the greater credit risk. This would cause a negative \"wealth effect\" for debt holders, and debt holders would be expected to reduce their spending in response, although initially by a much smaller factor than the loss of wealth. Since the publicly held debt is projected to reach $10 trillion by the end of FY2011, the wealth effect could potentially be large. The fact that roughly half of this debt is held by foreigners or the Federal Reserve mitigates the wealth effect on domestic spending. The most potentially damaging wealth effects for the broader economy could come from financial institutions that hold Treasury securities. At the end of third quarter of 2012, commercial banks held over $300 billion of Treasury securities, while insurance companies, GSEs, and broker/dealers held over $400 billion. As demonstrated during the 2008 financial crisis, leveraged financial firms can potentially respond to losses that reduce their capital base by contracting credit by a multiple of the amount of losses, a process known as deleveraging. These \"leveraged losses\" can lead to a credit crunch that affects the economy as a whole.\nThe potential severity of the effects on the economy would come from indirect effects that are of a more uncertain nature. For example, money market mutual funds held about $450 billion of Treasury securities at the end of the third quarter of 2012. These funds are typically set up to mimic a bank account, in that account balances are quoted with a stable principal that never rises or falls. In the current low interest rate environment, capital losses on Treasury holdings, particularly for funds that are concentrated in Treasury securities, would not have to be that large to cause a fund to \"break the buck,\" meaning that principal would be reduced. When a money market fund broke the buck in September 2008, it set off a $250 billion run on money market funds that was viewed as a significant factor in the worsening of the financial crisis, and was only brought to an end by a temporary government guarantee of money market funds.\nTreasury securities are also widely used as collateral for short-term borrowing in the repurchase agreement (\"repo\") market. The Treasury Borrowing Advisory Committee estimated that Treasury securities are used as collateral for $4 trillion of borrowing, and that this market is an important source of liquidity for leveraged financial firms, such as investment banks. Were the creditworthiness of Treasury securities to be placed in doubt by a debt spiral, lenders could become less willing to accept them as collateral or reduce the amount they were willing to lend against them. Either way, credit would contract and firms' access to liquidity would be harmed if that borrowing could not be replaced in other markets.\nA key issue in determining the effects on the broader economy is whether a spike in Treasury yields spilled over into a spike in private yields on corporate bonds, bank lending rates, and consumer credit. Treasury yields are often considered a benchmark lending rate that other private rates are based on (albeit not on a one-to-one basis), although that does not guarantee that they would continue to be if perceptions of sovereign credit risk changed. If financial markets perceived that higher credit risk for the U.S. government did not alter the credit risk of U.S. corporations or households, then private yields would not necessarily rise with Treasury yields. On the other hand, investors may believe that government credit risk implies significant risk for private corporations, in terms of potential financial instability, exchange rate risk, and an inability of the federal government to provide obligated funds or indirect support (such as the resources necessary to maintain financial stability in the event of systemic risk). If so, private yields would rise with Treasury yields.\nA debt spiral could also result in the federal government undertaking a contractionary fiscal policy in the form of higher taxes or lower spending. In the mainstream economic model, the direct effects of such a policy would be to further reduce overall spending in the economy in the short run, although in a debt spiral some believe that it might improve confidence in financial markets that partly or wholly offsets the contractionary effects. This is the rationale for countries such as Greece to undertake austerity measures to restore stability.\nAn obvious limitation to estimating how serious the economic effects of a debt spiral would be is that the United States has not experienced one in modern times. There are examples of foreign countries that have recently become caught in debt spirals, however, and in those countries the contraction in output and employment has typically been deep. In Iceland, GDP fell 11% peak to trough, and in Greece, GDP has already fallen 18% from its peak and is projected to continue falling. By contrast, GDP fell by 2.6% in the United States in the recent recession, which was the deepest since the Great Depression. It is noteworthy that these economic effects have occurred before default occurred, and in cases where financing from neighbors or international institutions such as the International Monetary Fund has allowed the countries to avoid default altogether. Looking more broadly, an IMF study analyzed 148 sovereign defaults between 1824 and 2004, and found that GDP growth declines on average by 2.6 percentage points in the first year after a default. It also worth noting that, typically, countries have eventually bounced back economically—the negative effects have not been permanent. The IMF study found no statistically significant effects on GDP growth after the first year.\nTo gauge the likelihood of whether a sudden spike in Treasury yields would spill over to the broader economy, a useful analogy might be the recent financial crisis. While the crisis was complex and multi-faceted, the crisis was set off by the unexpected rise in mortgage default rates that caused a broad and widely held class of securities, AAA-rated mortgage-backed securities, to suddenly plummet in value and lose liquidity. The loss in value and liquidity was caused by a reassessment by investors that a security, previously believed to be very safe, in fact faced significant credit risk. The loss in value of these securities was significant enough that it caused financial markets to doubt the solvency of the firms holding the assets. This caused widespread illiquidity for financial firms, and ultimately, some failed. Before the crisis, most economists and policymakers assumed that monetary policy could be employed to contain any systemic risk event, but that proved not to be the case.", "The U.S. Treasury has announced that the statutory debt limit would be reached by the end of 2012 under normal operations. If extraordinary measures are taken, the debt limit would not be reached until early 2013. After that point, there would not be enough revenue available to Treasury to finance the spending obligations that have been authorized by Congress under current policy. This has raised the question of whether a failure to raise the debt limit would lead to a default on federal debt. The debt has come close to the statutory limit before, most recently in 2011, but the limit has always been raised before it has been reached. Some commentators have argued that more than enough revenue will be collected to meet interest payments on the debt, so default can be avoided indefinitely. Treasury has argued that it does not have the authority to prioritize between different types of payments, but must meet obligations on a \"first in/first out\" basis. If so, a failure to meet interest payments could not be avoided since revenue would be insufficient to prevent a backlog of unpaid obligations. A 1985 Government Accountability Office opinion argued that statute does not prevent Treasury from prioritizing and paying interest first.\nAssuming Treasury were able to prioritize, although revenues would be sufficient to meet interest payments at current interest rates, a debt spiral might still be unavoidable. As discussed above, investors will continue financing unsustainably large budget deficits as long as they believe that the government will eventually implement policy measures to reduce them to sustainable levels. Some investors might perceive a failure to raise the debt limit as a signal that the \"full faith and credit\" of the federal government no longer stood behind its obligations, even if the government continued to meet interest payments. This could occur for two reasons. First, if unable to borrow, it would be unlikely that the government would be able to meet all other legal obligations, such as contractual payments to private vendors. Debt holders might decide that if the federal government is unwilling to meet other legal obligations, they may eventually be treated similarly, and flee the debt to avoid that fate. Second, debt holders might decide that a scenario where popular federal programs went unfunded so that interest payments were met would be politically unsustainable, even if it were technically sustainable. Debt holders might conclude that political pressure would eventually cause policymakers to redirect revenues from interest payments toward popular programs, even if they did not. Debt holders might conclude that an unwillingness to raise the debt limit was a sign that policymakers had reached an impasse on fiscal issues that would prevent deficit reduction. (Debt holders might also reach the opposite conclusion—that a failure to raise the debt limit signaled that deficit reduction was more likely in the future.) If debt holders came to doubt the government's future willingness to make interest payments, interest rates would rise. If they rose high enough, revenues (which fluctuate significantly from month to month) would no longer be sufficient to continually meet interest payments even under prioritization.\nAs discussed above, a debt spiral would be expected to begin before a default, at the point when investors deemed the status quo untenable. If a failure to raise the debt limit led to a debt spiral, the economic effects would be expected to be as described above (see \" Economic Effects of a \"Debt Spiral\" ).", "On August 5, 2011, Standard & Poor's, a major ratings agency, downgraded U.S. federal debt from AAA to AA+ to\nreflect our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics. More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.\nTo date, other rating agencies have not downgraded U.S. debt, although Moody's and Fitch changed their ratings outlook to negative in 2011.\nIf the federal government debt were downgraded again, would that set in motion a debt spiral that could result in significantly higher interest rates and a potential default? Based on market reaction to the 2011 downgrade, the answer would appear to be no. Counterintuitively, Treasury yields fell in the week after the downgrade, and have remained lower since. It appears that Treasury yields fell following the 2011 downgrade because they are desirable to many investors because they are considered to be a \"safe haven\" asset, and play a central role in world financial markets because of their perceived riskless status, although one might have predicted a downgrade would undermine the \"safe haven\" status of Treasury securities.\nSince the last downgrade had the opposite effect on interest rates that many economists would have predicted, it is difficult to say whether the same pattern would occur in the event of a future downgrade. The answer would depend, in part, on how much the debt was ultimately downgraded. A one-step downgrade would leave U.S. debt several steps above \"junk\" status, and above many of its peers. A one-step downgrade in a U.S. private or municipal security is not typically a crisis-triggering event; issuers of such securities merely pay a \"risk premium\" in terms of higher yields than higher-rated peers or relative to what the issuer would have paid had a downgrade not occurred. Many foreign governments are able to issue debt at manageable interest rates, albeit generally higher than the United States, despite a lower credit rating. Japanese government debt, for example, has a lower credit rating than the United States, yet its yields have been consistently lower than U.S. government debt.\nOn the other hand, as discussed above, as long as the federal budget is on an unsustainable path, investor sentiment could deteriorate at any time. Future downgrades could alter the safe haven role of Treasury securities, although the last downgrade did not. It is hypothetically possible that a ratings downgrade could trigger a sudden deterioration in investor sentiment, similar to how the ratings downgrade of AAA mortgage-backed securities coincided with a fall in their value in 2007-2008. If a downgrade resulted in a debt spiral, the economic effects would be expected to be similar to those described above (see \" Economic Effects of a \"Debt Spiral\" ).\nThe impact on the broader economy will depend in part on how the downgrade affects broader financial markets. It does not necessarily follow that a lower credit rating for the federal government would automatically lead to broad rating downgrades for U.S. companies, but in 2011 Standard & Poor's downgraded the debt of several government sponsored enterprises and U.S. insurers from AAA to AA+ as a result of the federal debt downgrade.\nAnother factor to consider is that, historically, rating downgrades sometimes lag rather than lead market events. This section has implicitly assumed that a downgrade would occur in a scenario of normal financial conditions, similar to the present. Instead, a ratings downgrade could be triggered by some financial market disturbance. In other words, federal debt might not be downgraded until after Treasury yields or other measures of credit risk were already rising. Arguably, this pattern has occurred for the euro debt crisis countries.", "Assuming that the government is able to continue to finance the deficit smoothly, do large deficits have any effect on the economy? When the economy is at full employment (meaning practically all labor and capital resources are in use), government budget deficits \"crowd out,\" or compete with, private investment spending in the standard macroeconomic model. Setting aside foreign capital flows for the moment, borrowing can only be financed through saving, and government borrowing competes with business borrowing for the same pool of national saving. By increasing the demands on that pool of national saving, government borrowing pushes up the cost of all borrowing through higher interest rates, causing businesses to finance less capital spending than they otherwise would. Business borrowing finances capital spending on plant and equipment, and lower capital spending results in lower potential gross domestic product, and hence lower future national income, than would otherwise occur.\nIn the current context, the economy is not at or near full employment. In this context, government deficits are unlikely to significantly crowd out private business borrowing. On the contrary, business investment was contracting until the fourth quarter of 2009 and has remained low as a share of GDP since, either because investment demand declined or businesses are credit constrained. This greatly reduced the potential for large government deficits to crowd out private investment spending. As discussed above, low interest rates support the view that the deficit is currently causing little crowding out to occur. (Of course, this could change if investor concern about sustainability pushed up interest rates.) In this case, the decline in aggregate spending caused by falling investment spending can be offset, at least in part, by the rise in (deficit-financed) government spending, which directly increases GDP, and (deficit-financed) tax cuts, which directly increase after-tax income. Most economic forecasters projected that the rise in the budget deficit, on balance, increased GDP over the last few years, despite a possible crowding out effect. Indeed, it is the increase in the deficit that is the primary reason that the stimulus act ( P.L. 111-5 ) was projected to stimulate the economy in standard macroeconomic models.\nWith international capital mobility, borrowing can also be financed by foreign saving. In the standard macroeconomic model with perfect capital mobility, the boost in aggregate spending from the stimulus would cause the trade deficit to rise as foreign capital is attracted to higher domestic interest rates. The availability of foreign credit would avoid the crowding out of domestic capital investment. But the boost to aggregate spending from the budget deficit would be negated (or \"crowded out\") by the higher trade deficit. The United States relies heavily on foreign borrowing, and this is another reason that large budget deficits could be less effective at stimulating the economy. The lack of perfect capital mobility, and the large output gap at present, in the United States means that a larger trade deficit is unlikely to completely negate the stimulus as theory would suggest, but it is likely to make it less effective at boosting aggregate spending. Since the recession began, the trade deficit has fallen substantially, so a problem of crowding out from the trade deficit is not apparent at this time. It should also be noted that if capital spending is financed by foreigners, the income generated by that capital will accrue to foreigners instead of to Americans.\nAs the economy returns to full employment, large budget deficits will no longer stimulate aggregate spending. At that point, crowding out will become a more serious concern if the budget deficit is not reduced. By accounting identity, domestic investment must equal national saving plus net borrowing from abroad. In the years before the crisis (2000 to 2007), domestic investment averaged about 20% of GDP, as seen in Table 1 . Because national saving averaged about 15% of GDP, three-quarters of this investment was financed by national saving and one-quarter was financed by borrowing from abroad. The federal budget deficit modestly reduced national saving during most of that period. In 2008, national saving fell to 12.6% of GDP, in part because the budget deficit rose to 3.2% of GDP. Despite the fall in national saving that year, net borrowing from abroad remained relatively steady because investment spending fell to 17.5% of GDP.\nThe budget deficit averaged 9.3% of GDP from FY2009 to FY2011, more than half the size of total private saving, which is the sum of household and business saving. Although investment was low in 2009-2011 because of the recession and subsequent sluggish recovery, it can be expected to rebound when the economy recovers. At that point, even if the deficit were to fall by half as a share of GDP, either private saving would need to rise significantly above its average over the past 10 years or net borrowing from abroad would have to be significantly higher than the 2000 to 2007 average, which was already at a historical high. Private saving has risen from a range of 14% to 16% of GDP from 2000 to 2007 to an average of 18.9% of GDP in 2009 to 2011, some of which may prove lasting, but many economists question whether it would continue to rise enough to offset the rise in the budget deficit. In other words, even before the rise in the budget deficit, the combination of low rates of national saving and high rates of borrowing from abroad to finance domestic investment spending was unsustainable in the long run. If the budget deficit remains at elevated rates, national saving will be even lower, requiring either lower rates of domestic investment (that would reduce GDP from what it otherwise would have been) or higher rates of borrowing from abroad.\nThe willingness of private foreign investors to buy U.S. assets in the future will depend not only on the desirability of U.S. investment opportunities, but also on investment opportunities abroad. Here too, future trends may point to a shift away from U.S. assets. Even if foreign investors were unconcerned about the sustainability of U.S. debt, foreign countries may find more internal demand for their saving as the world economy recovers. U.S. public debt will also be competing to attract funds with a large increase in borrowing by foreign governments. The IMF projects that public debt in the advanced economies will rise from 80% of GDP in 2008 to 110% of GDP in 2012. As noted above, many U.S. assets have been bought by foreign governments in the past decade, which may have accumulated U.S. assets for political reasons that cease in the future.", "Another concern that has been raised is that large deficits will lead to high inflation. Inflation is related to changes in the money supply; the Federal Reserve controls the money supply independently of the Treasury and its financing needs. Large deficits would lead to higher inflation if the Fed finances unfunded government operations by increasing the money supply. Under current law, this is prevented by Section 14 of the Federal Reserve Act, which forbids the Federal Reserve from purchasing debt directly from the Treasury, and Section 2A, which mandates that the Fed keep inflation low, among other goals. In a well-known article, economists Thomas Sargent and Neil Wallace pointed out some \"unpleasant arithmetic,\" however. They observed that in order to avoid the economic effects of government default, a central bank might ultimately be forced to monetize the debt if private investors became unwilling to finance it and the government refuses to raise taxes or cut spending. Investors may perceive this future outcome and raise their inflationary expectations today. If investors anticipate that the debt will be monetized, they will require higher interest rates to finance it in the meantime, so inflation will ultimately be higher than if the deficit had been monetized from the outset. In that example, future inflation is a function of fiscal decisions as well as monetary decisions taken today. To date, there is no evidence that inflation expectations have risen significantly." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 1, 2, 2, 1, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full", "h0_full h2_title h3_title h1_full", "h2_full", "h1_full", "h2_full", "h3_full h1_full", "h2_title", "", "h2_full", "h3_full h2_full", "" ] }

{ "question": [ "Why is increased deficits bad?", "Why is high deficit not sustainable in the long run?", "What is the long term impact of high deficit?", "Why is debt dangerous?", "Is high-debt-ratio commonly seen in advanced economies?", "What is an exception of high dept-to-GDP ratio in advanced economy?", "What is the expectation if investors on balance deem the debt to be unsustainable?", "What is the belief on policy changes?", "What will happen if the belief changed?", "What does standard macroeconomic theory say about large deficits?", "How has the budget deficit changed over the last three years?", "How will the economy change to sustain large deficits?", "What are other opinions on this issue?" ], "summary": [ "Combined with a shrinking economy, deficits increased the publicly held federal debt by over 30 percentage points of GDP between 2008 and 2012. Deficits of this size are not sustainable in the long run because the federal debt cannot indefinitely grow faster than output.", "Deficits of this size are not sustainable in the long run because the federal debt cannot indefinitely grow faster than output.", "Over time, a greater and greater share of national income would be devoted to servicing the debt, until eventually the government would be forced to finance the debt through money creation or default.", "Although the debt cannot persistently rise relative to GDP, it can rise for a time. It is hard to predict at what point bond holders would deem it to be unsustainable.", "A few other advanced economies have debt-to-GDP ratios higher than that of the United States. Some of those countries in Europe have recently seen their financing costs rise to the point that they are unable to finance their deficits solely through private markets.", "But Japan has the highest debt-to-GDP ratio of any advanced economy, and it has continued to be able to finance its debt at extremely low costs.", "If investors on balance deemed the debt to be unsustainable, the yields and the cost of credit default swaps on Treasury securities would be expected to rise.This may seem surprising, given that the debt is currently growing more rapidly than output and is projected to continue to do so under current policy.", "The willingness of bond holders to finance the federal debt at low interest rates in light of these projections suggests that they believe that policy changes will eventually be made to place the federal debt on a sustainable path.", "This belief could change at any time; if it did, the experience of foreign countries suggests that the effects on the economy and financial markets could be severe.", "According to standard macroeconomic theory, large deficits have temporarily boosted overall spending at a time when there is significant slack in the economy.", "The budget deficit has been equal to about half of private saving over the last three years. Even before the increase in the deficit, national saving was insufficient to finance domestic investment spending, and the United States was borrowing from abroad at unprecedented rates, peaking at about 6% of GDP.", "To sustain large deficits, the economy will require some combination of higher private saving, lower investment, and higher borrowing from abroad.", "Some economists have argued that borrowing much more than 6% of GDP from abroad is unrealistic, and the already heavy U.S. reliance on borrowing from abroad makes the maintenance of a large budget deficit even less sustainable." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 1, -1, -1, 1, -1, -1, -1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4 ] }

{ "title": [ "Background", "Resources to Address Injured Children’s Unique Needs", "Trauma Centers", "Trauma Systems: Continuum of Trauma Care Activities and the Federal Role", "Over Half of the Nation’s Children Live within 30 Miles of a High-Level Pediatric Trauma Center, and Studies Differ on How Well Such Centers Work to Lower Mortality", "An Estimated 57 Percent of Children Lived within 30 Miles of a High-Level Pediatric Trauma Center during the Period 2011- 2015, Although the Percentage Varied by State", "Some Studies Suggest that Children Treated at Pediatric Trauma Centers Have a Lower Risk of Mortality, While Information on Other Outcomes Is Limited", "Two Agencies Support Hospital- Based Pediatric Trauma Care Activities and Coordinate Some Efforts through an Interagency Group", "Two Federal Agencies Support Hospital-Based Pediatric Trauma Activities Primarily through Grants, While Other Efforts Broadly Address Emergency Care", "Federal Activities Related to Hospital-Based Pediatric Trauma Care and Other Emergency Care Are Coordinated through an Interagency Group and Arrangements between Agencies", "Agency Comments", "Appendix I: Training and Resources Available to Physicians and Nurses for Pediatric Trauma Care", "Training", "Resources", "Appendix II: Location of High-Level Pediatric Trauma Centers, United States, 2015", "Appendix III: Estimated Percentage of Children Who Lived within 30 Miles of a High- or Mid-Level Trauma Center, Detailed Tables by State, 2011-2015", "Pediatric Trauma Center", "Pediatric Trauma Center", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Children who have suffered a severe and potentially life threatening physical injury as a result of an event such as a motor vehicle crash or a fall need specialized care because of their unique anatomical, physiological, and psychological characteristics. Trauma centers—a key part of a region’s trauma system—have specialized resources to care for traumatically injured patients, with pediatric trauma centers having dedicated resources specific to the treatment of traumatically injured children. Responsibility for developing and operating emergency care systems, including trauma systems, primarily rests at the state and local level, with some involvement at the federal level.", "Children typically require specialized resources—both equipment and personnel—wherever they receive care due to unique anatomical, physiological, and psychological needs. For example, the use of specially sized equipment or the adjustment of medication dosages based on a child’s weight are required when treating children with traumatic injuries. In its 2006 report on emergency care for children, the Institute of Medicine recommended that all emergency departments appoint certain personnel who would address the resources that children need. Specifically, it recommended that all emergency departments have two part-time pediatric emergency coordinators—one a physician—who would have a number of responsibilities, including ensuring that fellow emergency department and other providers have adequate skills and knowledge to treat children, overseeing pediatric care quality improvement initiatives, and ensuring the availability of pediatric medications, equipment, and supplies. Additionally, the National Pediatric Readiness Project found that emergency departments with a pediatric emergency coordinator were more than twice as likely to have important policies in place related to treating children.", "Trauma centers have specialized resources to care for traumatically injured patients. Most emergency departments across the United States do not qualify as trauma centers because they do not have the optimal resources to treat severely-injured patients.\nTrauma center levels. Trauma centers across the United States are designated as one of five levels, which refer to the kinds of resources available in the trauma center and the number of patients admitted yearly. Making this designation is the responsibility of state or sometimes local entities, such as a state’s office of emergency medical services. While the criteria used to designate a trauma center’s level can vary from state to state, most states have adopted guidelines that are either the same as or similar to the guidelines developed by the American College of Surgeons Committee on Trauma (ACS-COT). Table 1 summarizes the general criteria for trauma centers based on the ACS-COT guidelines.\nTypes of trauma centers. There are two types of trauma centers— pediatric and adult. Some trauma centers are only an adult trauma center, some are only a pediatric trauma center, and some are both. Pediatric trauma centers have dedicated resources to treat injured children and can be either stand-alone children’s hospitals or distinct units within larger hospitals.\nA pediatric trauma center must meet all the same requirements that an adult trauma center must meet, as well as additional requirements. For example, according to ACS-COT guidelines, a level I pediatric trauma center must have at least two surgeons who are board certified in pediatric surgery and must admit 200 or more injured children younger than 15 annually; and a level II pediatric trauma center must have at least one board- certified pediatric surgeon and must admit 100 or more injured children younger than 15 annually.\nPediatric trauma centers are expected to provide trauma care for the most severely injured children and have a leadership role in education, research, and planning with other trauma centers and non-trauma center hospitals in their geographic area with regards to care for injured children.\nACS-COT recommends that pediatric trauma centers be used to the fullest extent feasible to treat traumatically injured children; however, due to the limited number and geographic distribution of these centers, ACS- COT recognizes that adult trauma centers or non-trauma centers must provide initial care for injured children in areas where specialized pediatric resources are not available. Research shows that even in states that designate trauma centers, nearly half of injured children—45 percent— are treated at non-trauma centers. Many of these non-trauma centers where injured children receive treatment do not treat a high volume of pediatric patients and may not have the equipment recommended for treating children. The National Pediatric Readiness Project’s 2013 assessment of over 4,100 hospitals across the United States found that about 69 percent of hospitals see fewer than 14 children per day and that at least 15 percent of hospitals lacked one or more specific pieces of equipment recommended for treating children.", "Within trauma systems, coordinated trauma care activities occur across a broad continuum, ranging from injury prevention activities and pre- hospital care to hospital-based trauma care and rehabilitation (see fig. 1). Trauma care is an essential component of emergency care, which encompasses all services involved in emergency medical care—both injury and illness. A comprehensive trauma system may involve public health officials and departments, emergency medical services personnel, emergency departments and trauma centers, stakeholder and advocacy groups, and families, among others. Such a system typically organizes the delivery of trauma care across the continuum at the local, regional, state, or national level.\nResponsibility for developing and operating trauma systems and the broader emergency care efforts of which they are a part primarily rests at the state and local level, with some support from federal programs. Generally, federal involvement in trauma care has addressed trauma care system development or research. For example, the Department of Health and Human Services (HHS) Secretary can make grants and enter into cooperative agreements and contracts to conduct and support research, training, evaluations, and demonstration projects related to trauma care and to foster the development of trauma care systems. Additionally, in 2006, HHS’ Health Resources and Services Administration (HRSA) released the Model Trauma System Planning and Evaluation document, a guide for trauma system development across the United States. The guide has helped provide a foundation to create and maintain systems of trauma care for communities, regions, and states.", "We found that 57 percent of children in the United States lived within 30 miles of a high-level pediatric trauma center during the period 2011-2015. Some of the studies we reviewed suggest that children treated at pediatric trauma centers have a lower risk of mortality compared to children treated at other types of facilities, while other studies found no difference in mortality.", "Our analysis of data from the American Trauma Society and the Census Bureau’s American Community Survey shows that 57 percent, or 41.9 million, of the estimated 73.7 million children in the United States lived within 30 miles of a high-level pediatric trauma center during the period 2011-2015. These centers have the dedicated resources necessary to treat all injuries, regardless of severity. Among states, the proportion of children who lived within 30 miles of a high-level pediatric trauma center varied widely, ranging from no children in eight states to more than 90 percent of children in four states (see fig. 2).\nWhile an estimated 41.9 million children lived within 30 miles of a high- level pediatric trauma center, an estimated 31.8 million children did not. In areas without high-level pediatric trauma centers, children may have to rely on adult trauma centers with the resources to treat injured patients, even though these facilities are not specialized to treat children. When we consider both adult and pediatric trauma centers, the percentage of children living within 30 miles of the nearest high-level trauma center increases to 80 percent. When we consider all high- and mid-level trauma centers, the percentage of children living within 30 miles of one of these facilities increases to 88 percent, or 65.1 million. The proportion of children who lived within 30 miles of high- or mid-level trauma centers during the period 2011-2015 varied by state (see fig. 3).\nThe findings from our analysis of children’s proximity to trauma centers are similar to the findings from other assessments of access to trauma care for all U.S. residents (adults and children). For example, one study found that in 2005, about 84 percent of residents could reach a high-level trauma center within an hour, and about 89 percent could reach a high- or mid-level trauma center in this time.", "Five of the studies we reviewed, including studies based on national data, suggest that children treated at pediatric trauma centers have a lower risk of mortality compared to children treated at other types of facilities. Three studies, which each analyzed data from a different state, found no significant differences in mortality. In addition, seven studies examined other outcome measures, such as imaging use or the rates of certain surgical procedures for severely injured children. However, some of the studies we reviewed and stakeholders we interviewed suggested that data on pediatric outcomes is limited and that more information is needed on outcomes other than mortality for children treated at pediatric trauma centers. More information is needed, in part, because mortality can be a limited measure since overall mortality is low among severely injured children.\nMortality at pediatric trauma centers compared to other types of facilities. Five of the studies that we reviewed show that children treated at pediatric trauma centers had a lower risk of mortality compared with children treated at adult trauma centers or children transferred to a pediatric trauma center for treatment after initial treatment at another facility. For example, a 2015 study that examined hospitalizations nationwide among children ages 18 and under found that children treated at pediatric trauma centers had a lower risk of mortality compared with children treated at adult trauma centers or mixed trauma centers. Another study from 2016 that examined hospitalizations nationwide for injured adolescents aged 15 to 19 had a similar finding. A third study, from 2008, found that treatment in a pediatric trauma center compared to an adult trauma center was associated with an almost 8 percent reduction in the likelihood of mortality among pediatric trauma patients in Florida.\nFinally, two studies examined whether there were differences in outcomes based on whether children were transported directly to a pediatric trauma center following injury. Both studies found that after adjusting for injury severity, mortality was lower for children who were taken directly to a pediatric trauma center compared with children who were initially taken to a local hospital.\nIn contrast, three of the studies we reviewed did not find a significant difference in the risk of mortality for children treated at pediatric trauma centers compared to children treated at adult trauma centers. All three of these studies were state-level analyses rather than analyses based on a national sample. For example, two studies, which each examined data for adolescents from a single state, did not identify significant differences in mortality among adolescents treated at pediatric and adult trauma centers. While the third study found no difference in mortality among children treated at pediatric and adult trauma centers, it also found that children treated at trauma centers had a 0.79 percentage point decrease in mortality compared to children treated at non-trauma hospitals.\nData on other outcomes. Seven studies examined outcomes other than mortality, but according to some of the studies we reviewed and stakeholders we interviewed, more information is needed on outcomes other than mortality for children treated at pediatric trauma centers. Further, as some studies note, mortality can be a limited measure for determining quality of care or a trauma center’s contribution to survival, because overall mortality is low among severely injured children. One 2015 study found that adding a pediatric trauma center in Delaware decreased the frequency of pediatric splenectomies—a procedure that removes a child’s spleen. Another study found that pediatric trauma centers performed less imaging than adult trauma centers when treating severely injured adolescents.\nInformation on other outcomes was limited. One study from 2016 that we reviewed noted that in the pediatric trauma literature there are no longitudinal studies on the long-term effects—both physical and psychological—of trauma on children. In addition, another study we reviewed indicated that the selection of outcome measures for analysis was constrained by what was available in the dataset used for the study. One stakeholder we interviewed told us that mortality is one of the few outcomes related to pediatric trauma that is captured in databases, because most trauma registries and other databases were initially developed to capture data for adult patients. Moreover, a few stakeholders told us that the pediatric trauma system is not as well developed as the adult trauma system and that both pediatric trauma care and research have tended to occur in isolation. One of these stakeholders said that because of this fragmentation, it has been difficult for researchers to use or build on the outcome measures that other researchers have developed in their work.", "Hospital-based pediatric trauma care activities are supported primarily through grants from two agencies within HHS—HRSA and the National Institutes of Health (NIH). Officials from these agencies reported that activities related to pediatric trauma care are coordinated through an interagency group focused broadly on emergency care, as well as through arrangements between individual agencies.", "Two agencies within HHS—HRSA and NIH—have grant programs and other activities that support hospital-based pediatric trauma care (see table 2).\nWithin HRSA, the Emergency Medical Services for Children (EMSC) program, established in 1984, provides funding to states and academic medical institutions. It does so primarily through six grant programs and cooperative agreements that aim to enhance the capacity of emergency care—including hospital-based trauma care—to address the needs of children. The program’s annual appropriation is authorized at $20.2 million per fiscal year from fiscal years 2015 through 2019. According to HRSA officials, EMSC is the only federal program that focuses specifically on improving emergency care for children.\nWithin NIH, the Pediatric Trauma and Critical Illness Branch supports research and training focused on preventing, treating, and reducing all forms of childhood trauma, injury, and critical illnesses. According to NIH officials, the Branch—which is part of the Eunice Kennedy Shriver National Institute of Child Health and Human Development—was established in 2012 to help unify research in pediatric trauma. Our analysis of data on all NIH-funded research in fiscal year 2015 shows that the Branch provided nearly $9 million in funding for 32 grants related to injuries.\nBeyond these two agencies, a few other federal efforts more broadly address emergency care, including trauma care. While they are not focused on pediatric trauma care, these efforts may indirectly address the needs of pediatric populations. For example, the Emergency Care Coordination Center within the HHS Office of the Assistant Secretary for Preparedness and Response (ASPR) aims to strengthen the day-to-day emergency care system to better prepare the nation for times of crisis and to support the federal coordination of in-hospital emergency medical care activities. Agency officials reported that the Center was funded at $820,000 per fiscal year in fiscal years 2015 and 2016. According to officials, the Center recently worked on two initiatives related to trauma— preparing a report requested by Congress on the nation’s capacity to respond to mass casualty events and issuing a request for proposals to award a contract for the development of an inventory of emergency departments, trauma centers, and burn centers and their capabilities across the United States.\nRecent federal funding to specifically support hospital-based trauma care activities or to develop trauma care systems has been limited as well. The Patient Protection and Affordable Care Act both continued existing and established new discretionary trauma care grant programs to help develop trauma care systems. However, according to HHS officials, no appropriations were made for these new programs and no grants have been made under these new authorities.", "HRSA and NIH officials reported that activities related to hospital-based trauma care and other emergency care, including pediatrics, are coordinated through an interagency group and through arrangements between individual agencies (see table 3). Both HRSA and NIH representatives are executive committee members of the Council on Emergency Medical Care, a federal interagency group led by ASPR’s Emergency Care Coordination Center, a center specially created as the policy lead for emergency care activities across the federal government. ASPR officials told us that the Council on Emergency Medical Care is the central meeting place for agencies across the federal government on issues related to emergency care, including pediatric care. HRSA and NIH officials reported using a variety of arrangements to collaborate with other federal agencies on hospital based pediatric trauma, such as supporting a program liaison position within another agency, establishing interagency agreements, and presenting at conferences and meetings.", "We provided a draft of this report to HHS for comment. The department provided technical comments, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "Various types of training and resources are available for physicians and nurses on the delivery of pediatric trauma care. The training and resources are provided by stakeholder groups, such as professional, research and advocacy organizations. The training and resources from these groups supplement any training that physicians and nurses may receive during medical or nursing school or during any residencies or fellowships that may include or be completely focused on pediatric care. The available training includes standardized courses that stakeholder groups have developed as well as more ad-hoc training on pediatric trauma care topics of interest. Stakeholder groups also have developed resources on pediatric trauma care that physicians and nurses can access and consult when needed. The resources available include both policy statements that detail the infrastructure or resources needed to provide pediatric trauma care at the facility-level and other more individualized and clinical practice resources for physicians and nurses about the delivery of pediatric trauma care.\nTo identify examples of the training and resources available to physicians and nurses on the delivery of pediatric trauma care, we interviewed stakeholder group representatives or received written responses from the following stakeholder groups: the American Academy of Pediatrics, the American Association of Neurological Surgeons/Congress of Neurological Surgeons, the American College of Emergency Physicians, the American College of Surgeons, the Childress Institute for Pediatric Trauma, the Emergency Nurses Association, the Pediatric Orthopaedic Society of North America, the Pediatric Trauma Society, and the Society of Trauma Nurses. We selected the groups to represent the perspectives of trauma care physicians and nurses, pediatric specialists, and research and advocacy organizations involved in or focusing on hospital-based pediatric trauma care. We asked all stakeholder groups a series of open- ended questions and, to the extent possible, corroborated statements with information available on stakeholder group websites.", "Many of the stakeholder groups we interviewed have developed standardized training courses on the evaluation, management, and treatment of trauma patients. In addition to standardized courses, stakeholder groups also offer other training opportunities related to pediatric trauma care on an ad-hoc basis (see table 4).\nThese courses are generally available to all providers, but whether a provider must take any of these courses depends on the facility or system in which the provider works and its specific education or credentialing requirements. However, stakeholder representatives stated that these are all courses that any provider who treats trauma patients, including pediatric patients, generally should, and most likely will, take. For example, the American College of Surgeons Committee on Trauma (ACS-COT) publication, Resources for Optimal Care of the Injured Patient states that courses like the Advanced Trauma Life Support course, the Trauma Nursing Core Course, and the Advanced Trauma Care for Nursing course, among others, have become basic trauma education for providers. These courses have both classroom-based lectures and interactive components. Most of the courses are general trauma courses with pediatric elements rather than courses that are specific to pediatric trauma. One stakeholder representative noted that all providers should learn the baseline principles of trauma care from these courses and then build on that baseline to learn principles that are specific to pediatric trauma. Representatives from stakeholder groups said that these courses usually include a lecture and a trauma simulation exercise for a pediatric patient, even if the overall focus of the course is on emergency or trauma care for the general adult patient population. For example, representatives from the Emergency Nurses Association told us that the Trauma Nursing Core Course includes a participant skill station that is specific to pediatric trauma. In addition, the manual for this course includes a chapter on pediatric trauma.", "In addition to training, stakeholder groups have also developed resources for physicians and nurses related to pediatric trauma. The resources that these groups have developed, often in collaboration with each other, include 1) policy statements detailing the system-level infrastructure that must be in place to ensure that providers and facilities are prepared to care for injured children; and 2) other more individualized clinical resources, such as checklists, forums, and journal articles, that physicians and nurses can access to improve their individual knowledge and readiness to treat pediatric patients (see table 5).", "", "", "", "", "", "", "In addition to the contact named above, Karin Wallestad, Assistant Director, Alison Goetsch, Analyst-in-Charge, and Summar Corley made key contributions to this report. Also contributing were Leia Dickerson, Krister Friday, Giselle Hicks, Vikki Porter, and Jennifer Whitworth." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 2, 2, 1, 1, 2, 2, 1, 2, 2 ], "alignment": [ "h0_title", "", "h0_full", "", "h0_title h2_full", "h0_full h2_full", "h0_full h2_full", "h1_title", "h1_full", "h1_full", "", "h2_full", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "To what extent do children in the Uniter States have access to a pediatric trauma center?", "How does the lack of pediatric trauma centers affect injured children?", "What does GAO found out from reviewing studies?", "What did GAO suggest after review the studies and interviews with stakeholders?", "What agencies support hospital-based pediatric trauma care?", "How do these programs support hospital-based pediatric trauma care?", "What has GAO found about the care?", "How are these activities coordinated through an interagency group and arrangements among agencies?", "What does this report examine?", "What did GAO conclude from analyzing the data?", "What else did GAO review?" ], "summary": [ "GAO estimates that 57 percent of the 73.7 million children in the United States during the period 2011-2015 lived within 30 miles of a pediatric trauma center that can treat all injuries regardless of severity.", "In areas without pediatric trauma centers, injured children may have to rely on adult trauma centers or less specialized hospital emergency departments for initial trauma care.", "Some studies GAO reviewed, including nationwide studies, found that children treated at pediatric trauma centers have a lower mortality risk compared to children treated at adult trauma centers and other facilities, while other state-level studies GAO reviewed found no difference in mortality.", "Further, some studies GAO reviewed and stakeholders GAO interviewed suggest that more information is needed on outcomes other than mortality for children treated at pediatric trauma centers because mortality can be a limited outcome measure, as overall mortality is low among severely injured children.", "Two agencies within the Department of Health and Human Services (HHS)—the Health Resources and Services Administration (HRSA) and the National Institutes of Health (NIH)—have grant programs and other activities that support hospital-based pediatric trauma care.", "For example, HRSA's Emergency Medical Services for Children Program provides grants to integrate pediatric emergency care—which encompasses care for both traumatic injury and illness—into states' larger emergency medical services systems.", "GAO also found that federal activities related to hospital-based pediatric trauma care and other emergency care are coordinated through an interagency group and arrangements among agencies.", "For example, HRSA and NIH staff participate in the Council on Emergency Medical Care, an interagency group established to coordinate emergency care activities across the federal government by promoting information sharing and policy development.", "This report examines (1) what is known about the availability of trauma centers for children and the outcomes for children treated at different types of facilities, and (2) how, if at all, federal agencies are involved in supporting pediatric trauma care and how these activities are coordinated.", "GAO analyzed data on the number of pediatric and adult trauma centers in the United States relative to the pediatric population under 18 years of age. GAO used 2015 data on trauma centers from the American Trauma Society's Trauma Information Exchange Program and 5-year population estimates for 2011-2015 from the U.S. Census Bureau's American Community Survey, which were the latest available data at the time of GAO's analysis.", "GAO also reviewed the existing peer-reviewed, academic literature on outcomes for pediatric trauma patients, interviewed stakeholder group representatives and federal agency officials involved in activities related to hospital-based pediatric trauma care, and reviewed available agency documentation." ], "parent_pair_index": [ -1, -1, -1, 2, -1, 0, -1, 2, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 4, 4, 4, 4, 1, 1, 1 ] }

{ "title": [ "", "The Concept of Marine Protected Areas", "Definition", "Administrative Actions", "MPA Center Activities", "Other MPA Management and Coordination Efforts", "Potential Benefits, Issues, and Challenges", "Fisheries", "Challenges to MPA Siting and Design", "Marine Jurisdiction", "Zoning", "Other Issues", "National Reports", "Congressional Interest", "Appendix. Current Federal Laws and Programs" ], "paragraphs": [ "Many coastal and offshore ecosystems continue to be degraded by anthropogenic causes, despite efforts to control or limit them. The causes of degradation are numerous, and can include:\npollutants; runoff (carrying sediment and chemicals) from land; coastal development; introduction of non-native or invasive species; overfishing and bycatch; habitat alteration; and rising sea level and climate change.\nThe public is becoming aware of degraded marine areas because of widely publicized incidents and trends, including a large seasonal \"dead zone\" in the Gulf of Mexico, the environmental effects of oil spills, population declines of many popular fish species to levels that can no longer sustain commercial or even recreational harvests, and deteriorating coral reefs (reef bleaching). Current approaches to managing resources in the marine environment often appear to be ineffective because of continuing population and environmental quality declines, thus prompting a search for alternatives.\nMarine protected areas (MPAs) are generally defined as areas reserved by law or other effective means to protect part or all of the enclosed environment. Some observers, often including scientists and environmental advocates, recommend designating MPAs to achieve management and conservation goals. From their perspective, the designation of MPAs is not a panacea that responds to all causes of degradation, or leads to a quick recovery for all degraded environments, but in many cases they contend that MPAs are necessary for protecting and restoring the marine environment. Policy makers are looking at how this tool has worked, alternative ways that MPAs can be designed, and whether and how MPAs might be broadly applied. Little opposition has been expressed about the overall concept of establishing MPAs, but some of the more specific discussions about which uses would be limited or prohibited have been controversial. Oil and gas development, the fishing industry, and other marine industries have consistently expressed concerns with the use of MPAs. These industries question whether the use of MPAs would afford the proper balance between conservation and economic activities.\nThe 110 th Congress considered reauthorization of the National Marine Sanctuary Act (NMSA; 16 U.S.C. §§ 1431, et seq.) by introducing H.R. 6537 and by holding hearings, but no further action was taken. Many hold that NMSA comes closest to authorizing MPAs. It authorizes the National Oceanic and Atmospheric Administration (NOAA) to designate specific sites for comprehensive and coordinated management and conservation. However, some, especially environmentalists and many marine scientists, assert that a more comprehensive approach with stricter protection and more extensive protected areas is still needed.\nThis report identifies a number of issues related to establishing MPAs in the United States. It begins by defining the concept and administrative actions taken to provide spatial protection in marine areas. It then considers some of the key issues and potential benefits and costs of designating additional MPAs. It concludes by considering potential areas of congressional interest for the 111 th Congress. Existing federal laws related to the use of MPAs are summarized in the Appendix .", "The term MPA has been used to characterize spatial protection of marine resources, but ambiguities exist regarding the level of protection that qualifies an area as an MPA. Protection might be considered on a continuum—from no protection to complete protection where all human activities within an area are prohibited. Those areas afforded complete protection would certainly quality as MPAs, but areas closed to a specific use or to protect a species might not. Virtually all of U.S. waters are protected in some manner, but all U.S. waters are not considered MPAs. Often the definition depends on the context, such as the characteristics of the resources at risk and the extent of associated threats. The following section provides basic definitions of MPAs, but application of the concept is likely to evolve with improvements in scientific understanding of the marine environment and development of associated institutions.", "MPAs have been defined in many ways. Definitions usually include three criteria: (1) geographically defined and bounded places; (2) approaches that manage systems rather than individual resources or species; and (3) programs that take a long-term perspective on resource management. The definition currently being used in this country, found in Section 2 of E.O. 13158 on Marine Protected Areas, defines MPAs as \"any area of the marine environment that has been reserved by Federal, State, territorial, tribal, or local laws or regulations to provide lasting protection for part or all of the natural and cultural resources therein.\"\nThe E.O. 13158 definition is very similar to what is probably the most widely used definition in the world, developed by the International Union for the Conservation of Nature (IUCN). It states that an MPA is \"an area of intertidal or subtidal terrain, together with its overlying water and associated flora, fauna, historical and cultural features, which has been reserved by law or other effective means to protect part or all of the enclosed environment.\" Each designated area must be a minimum of 1,000 hectares (2,471 acres). This definition is then applied to distinct categories of areas that reflect a wide range of possible management objectives. The IUCN specifies that sites meet this definition only when at least three-quarters of a designated MPA is managed for the primary category and management of the remaining area is not in conflict. The IUCN categories are:\nCategory 1 : Strict Nature Reserve/Wilderness Area , managed mainly for science or wilderness protection. Category 1a : Strict nature reserve managed mainly for science. Category 1b: Strict nature reserve managed mainly for wilderness protection.\nCategory 2 : National Park , protected and managed mainly for ecosystem protection and recreation.\nCategory 3 : National Monument , managed mainly for conservation of specific natural features.\nCategory 4 : Habitat Species Management Area , managed mainly for conservation through management intervention.\nCategory 5 : Protected Landscape/Seascape , managed mainly for landscape/seascape conservation and recreation.\nCategory 6 : Managed Resource Protected Area , managed mainly for the sustainable use of natural ecosystems.\nAs one becomes more specific about possible goals and objectives for an MPA, the question of how MPAs would be defined quickly grows complex. They could involve state and federal jurisdiction, each with different goals and responsibilities. They could emphasize either some species (perhaps the commercially most valuable or the rarest ones) over others, or the general health of the entire ecosystem over individual components. Among the questions currently receiving the most attention are: (1) would certain activities or uses be automatically prohibited at all places designated as MPAs, such as automatically closing them to all resource extractive activities, or would a list of permitted and prohibited activities be developed for each designated area or category of areas; and (2) would environmental conditions or resource uses beyond the boundaries of MPAs be managed to limit adverse effects on resources within MPAs?\nDefinitions are one way to convey expectations about an MPA program. For example, one could conclude that most of the Gulf of Maine is protected by an impressive web of areas designated for a variety of reasons. However, a closer examination shows that most of these designations protect a single commercial fish species or group of species or limit a specified activity. Some want MPAs to be based on a broad definition to include designations where protections are limited to a few resources or uses, while others will want it to apply only to sites where resources are strictly protected. Between these two possibilities are many intermediate approaches. This debate over definition continues because the MPA concept has been used in many different ways. Several narrower terms are being used to describe types of places that provide high levels of protection, and they also have been used with different meanings. These places might also be called MPAs, although they are often expressed as if they were alternatives to MPAs. These terms include:\nmarine reserve , where uses that remove resources are generally prohibited (these areas may also be called ecological reserves); ocean wilderness , like the terrestrial concept for wilderness areas on federal lands where no alterations or activities that leave lasting impacts are permitted, but low-impact recreational activities may be permitted; fully protected marine area , generally a \"no-take\" area where a wide variety of extractive and consumptive uses/activities are prohibited; national marine sanctuary , a specific designation created in federal legislation more than 30 years ago to ensure conservation and management for areas of special national significance; marine managed area , managing for multiple objectives, where protection is not the only, and may not even be the main, objective; and marine park , similar to the terrestrial concept for a park where recreational activities are allowed and resource conservation is also a goal of the designation.", "According to the MPA Center inventory, approximately 1,700 MPAs are managed by federal, state, and territorial agencies in U.S. waters. These areas cover 34% of U.S. marine waters and vary widely in level of protection, restrictions on human uses, and overall purpose. Less than 30% of MPAs are managed by federal agencies, but because of the large size of several federal MPAs, nearly 85% of the total MPA area in U.S. waters is under federal jurisdiction. About 90% of MPAs permit access and multiple use, including fishing. Most are permanent, providing protection throughout the year, and most have been established since 1970. NOAA manages MPAs for fisheries management (National Marine Fisheries Service), units of the National Estuarine Research Reserve System (Coastal Programs in National Ocean Service), and the National Marine Sanctuary Program (National Ocean Service). The Department of the Interior manages marine areas that are part of the National Wildlife Refuge System (Fish and Wildlife Service), National Parks (National Park Service), and national monuments (Fish and Wildlife Service and National Park Service). A number of federal laws and programs already exist, and they have been summarized in the Appendix .\nIt is thus apparent that the protection of marine resource areas through MPAs is not a new concept, but what is relatively new is the increasing interest in developing a coordinated, nationwide system of marine protected areas. This interest has been heightened by actions initiated by the Clinton Administration and continued by the Bush Administration. This concept has diffuse roots and has been most evident among scientists and some nongovernmental organizations.\nPresident Clinton responded to growing concerns about marine resource degradation in several ways. He issued Executive Order 13089 on coral reef protection in June 1998 (1998 was also the internationally recognized \"Year of the Ocean\"). In 1999 and 2000, the Administration issued action plans calling for the federal government to work with state, territorial, and nongovernmental partners to expand and strengthen MPAs throughout the United States. On May 26, 2000, President Clinton issued the Marine Protected Areas Executive Order, E.O. 13158. This order called for \"strengthening and expanding the Nation's system of marine protected areas ... throughout the marine environment ... [to] enhance the conservation of our Nation's natural and cultural marine heritage and the ecologically and economically sustainable use of the marine environment for future generations.\" More specifically, this order:\naims to increase coordination and effectiveness of MPAs (but did not change existing MPAs or establish new MPAs); directs federal agencies to comply with existing regulations regarding MPAs (but did not alter existing regulations or authorities); and charges NOAA and the Department of the Interior with leading federal efforts by (1) creating a list of existing MPAs in the United States; (2) creating a national MPA webpage; (3) establishing a national MPA Center to provide tools and strategies for promoting MPA effectiveness; (4) establishing an MPA Advisory Committee to provide recommendations from stakeholders outside the federal government; and (5) consulting with governmental and non-governmental stakeholders.\nOn December 4, 2000, President Clinton issued E.O. 13178, creating the Northwestern Hawaiian Islands (NWHI) Coral Reef Ecosystem Reserve. This reserve, encompassing about 120,000 square miles (about 77 million acres), is the largest protected area ever established in the United States. Within the overall reserve, 15 reserve preservation areas encompassing about 6,200 square miles (nearly 4 million acres, or about 5% of the reserve) were designated where all consumptive or extractive activities are limited. NOAA managed the reserve under the authority of the NMSA.\nPresident Bush continued the initiatives started by the Clinton Administration, and has expanded on them in some cases. On June 4, 2001, after a review, Secretary of Commerce Donald L. Evans announced the retention of the Marine Protected Areas E.O. 13158. On June 15, 2006, President Bush established the Papahānaumokuākea Marine National Monument by proclamation under the Antiquities Act of 1906 (16 U.S.C. §§ 431-443) that encompasses the areas protected by the original NWHI reserve.\nOn September 26, 2008, President Bush amended E.O. 12962 to ensure that recreational fishing is \"managed as a sustainable activity in national wildlife refuges, national parks, national monuments, national marine sanctuaries, marine protected areas, or any other relevant conservation or management areas under any Federal authority, consistent with applicable law.\" According to recreational interests, this action allays their concerns of being excluded from marine protected areas.\nOn January 6, 2009, President Bush designated three marine national monuments in the Central and Western Pacific under the Antiquities Act of 1906. The three areas include:\nthe Marianas Trench Marine National Monument (includes the Marianas Trench, the coral reef ecosystem of the three northern most islands of the Mariana Archipelago, and a series of undersea volcanoes and thermal vents); the Pacific Remote Islands Marine National Monument (includes seven central Pacific Line Islands and adjacent waters); and the Rose Atoll Marine National Monument (the easternmost Samoan island consisting of pristine and diverse ecosystems).\nThe land areas of these monuments are managed as national wildlife refuges by the U.S. Fish and Wildlife Service, and the marine areas (50 miles from shore of the islands) will be managed by NOAA. The three areas total 195,274 square miles, an area larger than any existing marine protected area in the United States. Resources will be protected within the boundaries of these monuments, and scientific and recreational fishing many be permitted if consistent with the management of protected resources.\nOn June 12, 2009, President Obama issued a memorandum to the heads of executive departments and agencies to establish an Interagency Ocean Policy Task Force (IOPTF). The IOPTF is composed of senior policy-level officials from executive departments, agencies, and offices represented on the Committee on Ocean Policy and is led by the chair of the Council on Environmental Quality (CEQ). The IOPTF was charged with developing recommendations for a national ocean policy and a framework for coastal and marine spatial planning. The IOPTF was required to provide ocean policy recommendations within 90 days and coastal and marine spatial planning recommendations within 180 days.\nOn July 19, 2010, the CEQ released the Final Recommendations of the Ocean Policy Task Force. The recommendations are divided into four main sections that focus on the following areas:\na national policy for the ocean, the coasts, and the Great Lakes; a governance structure to provide sustained, high-level, and coordinated attention to ocean, coastal, and Great Lakes issues; a targeted implementation strategy that identifies and prioritizes nine categories for action; and a framework for coastal and marine spatial planning.\nThe coastal and marine spatial planning (CMSP) framework defines CMSP as a comprehensive, adaptive, integrated, ecosystem-based, and transparent spatial planning process based on sound science, for analyzing current and anticipated uses of ocean, coastal, and Great Lakes areas. The framework also provides national CMSP goals and guiding principles, and describes development and implementation of CMSP.\nOn July 19, President Obama also signed an executive order to establish a national policy for stewardship of the oceans, the coasts, and the Great Lakes. The executive order adopts the recommendations of the IOPTF to establish a National Ocean Council and provides for the development of coastal and marine spatial plans. This executive order revokes E.O. 13366, signed by President Bush in 2004. The National Ocean Council plans to hold its first meeting later this summer to begin implementing the national policy.", "In 2000, the National MPA Center was created to implement E.O. 13158 \"to develop a framework for a national system of MPAs, and to provide Federal, State, territorial, tribal, and local governments with the information, technologies, and strategies to support the system.\" In 2003, the center established a 30-member MPA Advisory Committee that has provided broad representation of marine regions, including the Great Lakes and the U.S. territories. The committee's main purpose is to provide advice to the Secretaries of Commerce and the Interior on developing a national system of MPAs. In 2008, the center released Framework for the National System of Marine Protected Areas of the United States of America , which provides a set of recommendations for developing a national system of MPAs. The framework, developed after numerous workshops and advisory committee meetings, provided guiding principles, goals and objectives, and definitions for a national system. The MPA Center is implementing the framework by soliciting nominations from current federal, state, and territorial programs to join the national system.\nThe MPA Center has built a domestic inventory of federal, state, local, and tribal MPAs to inform the development of the national system called for in E.O. 13158. The inventory may be used to provide information for environmental assessments; to lay a foundation for objective analysis in designing a national MPA system; and to provide a centralized source of information that can be used to help protect marine resources. The inventory contains information such as management authority, for nearly 1,600 sites.\nOther initiatives of the center include a virtual library and education projects to increase knowledge and awareness about MPAs. The center provides educators with materials about topics that are relevant to MPAs, such as marine habitats and fisheries, through the MPA website and workshops. It is also leading a multi-year pilot program in California, Oregon, and Washington to try to improve approaches for designing and managing a system of MPAs at a regional level.", "While the center has coordinated many aspects of the federal interest in MPAs, other federal bodies and state governments have been active in managing and coordinating activities related to MPAs. The National Park Service Ocean Park Stewardship Action Plan highlights the establishment, in partnership with NOAA, other relevant agencies, and public and private entities, of a seamless system of ocean parks, sanctuaries, refuges, and reserves. This plan also identifies actions related to mapping, enhancing protection, educating and engaging the public, and increasing the technical capacity for exploration and stewardship. These efforts are supported by a general agreement a between the Department of Commerce (National Marine Sanctuary Program and Estuarine Reserves Division) and the Department of the Interior (Fish and Wildlife Service and National Park Service) to collaborate on efforts to improve management efficiencies, increase joint planning efforts, enhance public education, and improve law enforcement and rescue capabilities.\nStates have also been engaged in developing and using MPAs, with California being perhaps the most active. California authorities have been working to reach consensus on a comprehensive program of MPAs in state coastal waters under the 1999 Marine Life Protection Act (Assembly Bill 993). In April 2007, the California Department of Fish and Game adopted regulations to establish 29 marine reserves along the central California coast from Pigeon Point in San Mateo County to Point Conception in Santa Barbara County. The central coast is the first of five regions to complete the planning and implementation process. The reserves include 204 square miles or approximately 18% of state waters with 85 square miles designated as no-take marine reserves. Recreational and commercial fishing interests opposed the proposal because of the reduced harvest opportunities it imposes, while environmental interests view this as a good start to more extensive protection. Other states have also taken action. For example, Hawaii enacted legislation (Act 306 in 1998) to establish a network of marine aquarium reserves along the Kona-Kohala coast of the Island of Hawaii.", "Motivation for designating MPAs appears to be generated by the expectation that the intensity of human activities in the marine environment will continue to grow, and that this growth will exacerbate use conflicts and further degrade ecosystems. The benefit most often cited by proponents of MPAs is protection and restoration of ecosystems generally, and more specifically, valued fish populations. Additional benefits may include new educational and recreational opportunities, expanded tourism, protection of cultural resources (shipwrecks, for example), and contributions to basic science and to improved environmental conditions.\nWhile debate about the benefits and costs of MPAs focuses most frequently on the role MPAs might play in the recovery of fish populations, they could provide other benefits.\nMPAs could be a source of baseline scientific data about current and changing conditions in the marine environment, and serve as a system so that baselines and changes could be compared among locations, particularly as climate change alters marine ecosystems. In this capacity, MPAs would provide a set of benefits not unlike one of the purposes that was articulated in legislation creating the National Estuarine Research Reserve System, a component of the federal Coastal Zone Management Program, discussed below . MPAs could serve as education destinations, providing opportunities for diving to observe the marine environment. Related on-shore support centers could be developed to inform a larger segment of the general public about resources protected in an MPA and the benefits that accompany the protected designation. MPAs could provide other environmental services, such as sequestering carbon, providing improved habitat for corals, and expanding mangroves that could dampen possible damages from hurricanes and other coastal storms. MPAs could protect cultural artifacts, such as shipwrecks and other places of historical significance, including places held sacred by native peoples. The first national marine sanctuary was designated to protect the site where the remains of the Civil War ironclad Monitor came to rest after sinking in 1862 off North Carolina. MPAs could become an attraction that makes them destinations for tourists and recreation activity. Activities may take place in MPAs or in nearby shore facilities, such as aquaria or museums. A unit in the National Park Service system, Buck Island Reef National Monument, with its snorkeling trail, is an example of such a place.\nCommercial interests have responded that many of these benefits can be generated under current laws and programs. These interests assert that new initiatives should not duplicate other marine related legislation such as the Magnuson Stevens Fishery Conservation and Management Act (MSFCMA) or the Coastal Zone Management Act (CZMA). They also maintain that the benefits of additional protection must be weighed against the costs of constraining or prohibiting commercial activities.", "The strongest and most vocal support of MPAs often is based on the potential role for MPAs in protecting and restoring fish populations by limiting the activities of commercial and recreational fishermen. Not only does overfishing reduce populations of desirable species, but interactions with fishing gear can result in the mortality of nontarget species (bycatch) and degrade habitat. The benefits of MPAs identified in these studies include:\nprotecting individual species and biodiversity more generally within MPA boundaries; managing fishery populations by controlling commercial and recreational harvest rates and protecting locations where populations congregate at critical points in their life cycles, such as spawning grounds and nursery habitats; reducing damage to habitat; protecting rare, threatened, or endangered species; preserving or restoring the viability of representative habitats, and protecting portions of larger ecosystems from over-harvesting.\nConsiderable scientific and social debate continues on the potential merits of MPAs. Some of the strongest opposition to MPAs is raised by fishing interests that could be hurt by a designation. In this debate, fishing interests question whether MPAs would have unacceptable socioeconomic consequences when compared to the benefits that would be generated. An important element in this discussion of possible tradeoffs is the recognition that MPA designations can displace resource use from protected areas to nearby areas, either transferring or raising new management issues by displacing fishing effort. MPA proponents assert that some fish are likely to stray into adjacent unprotected areas where they might benefit fishermen. However, without other management actions, protecting one area may lead to overuse or excessive harvest in other areas, moving or concentrating rather than resolving the biological management issues. Among the most contentious aspects of designating and managing MPAs for fishery management are:\ndeciding whether and where MPAs might be appropriate for restoring fish populations; deciding whether certain fishing techniques should be limited or prohibited because they capture nontarget species and damage marine habitat; determining how MPA protection would be integrated with other management measures both within and outside the MPA; and understanding the effects of MPAs on the economic, social, and cultural well-being of nearby coastal communities.\nFishing disproportionately removes larger and older fish—often because they are more highly valued by recreational and commercial fishermen, and because of regulations protect smaller and faster-growing fish to increase stock yields. Older females produce greater numbers of eggs than the same biomass of younger females because egg production is generally proportional to fish volume. For some species, larvae produced by older females are more likely to survive because older females produce eggs with a greater amount of food reserves. MPAs could be beneficial if fish remain in the protected area and grow to relatively larger sizes. Therefore, protected areas, such as MPAs, appear to be most beneficial to sedentary, reef-associated species or, more generally, to species which strongly associate with certain habitat features that cause these species to restrict their movement. In these situations, species would also benefit if unique habitat can be identified and protected.\nFor all the discussion of how protected areas would benefit fisheries, there remain large uncertainties about the effects of MPAs on the size and characteristics of fish populations and on ecosystem components more generally. Studies of MPAs show that population biomass, size of fish, density in a given area, and species diversity have increased within MPAs. Others counter that improvements were often inevitable because of previous management failures that resulted in extremely low population levels. Some fishery experts conclude that consistent use of traditional approaches to fisheries management, such as size limits, catch limits, or seasons, are more effective management tools than establishing places where all fishing is permanently prohibited.", "Translating the concept of MPAs into an extensive system would present multiple challenges. Many of these can be documented by tracking the experiences and issues addressed both at NOAA's MPA Center and at other organizations around the world charged with MPA-related responsibilities, or by reviewing the types of controversies that have been raised when national marine sanctuaries have been proposed. An initial set of challenges centers on selection of sites. The approach to establishing MPAs often reflects the answers to several questions.\nWhat criteria—representative habitats, ecological integrity, social acceptability, degree of degradation, diversity of species, presence of endangered species, and so forth—should determine MPA locations, sizes, and boundaries? Should particular species or ecosystems be protected? If protection is based on ecosystems, can only portions be protected, both because it is almost impossible to protect an entire ecosystem in such a dynamic setting, and because migratory species move across many ecosystems? Should boundaries of an MPA be decided based on geographic areas or on ecosystems, which are often fragmented? If an MPA is adjacent to the coast, could it also include waterways that drain into it or associated terrestrial areas? Should sites that are already protected under other designations with purposes that are similar to MPAs be given a higher priority to receive an MPA designation, or a lower one since they are already protected?\nThese challenges represent only a fraction of potential siting issues. Many of the areas that are likely to be considered for MPAs already have had extensive human use, and effects of this use are frequently the reason for proposing designation. Proposals to designate units under the federal National Marine Sanctuaries Program have generated controversy because of opposition from interests who may have their activities curtailed. The designation process, which has lasted several years in some cases, has resulted in protracted debates among interests, or stakeholders, and some proposals have been rejected because of an inability to resolve these conflicts.\nThe success or failure of MPA designations is far more likely to reflect socioeconomic, cultural, and political factors than to reflect biological considerations. Perceptions are likely to be positive for stakeholders (including resource users), if designations are viewed as based on a fair, equitable, and transparent process for establishing and managing sites; clearly stated goals for the site; and expanding benefits while containing costs. In one example, a study compared a successful national marine sanctuary designation in American Samoa with an unsuccessful one in Puerto Rico, and attributed much of the difference in outcomes to the attention given to local cultural, social, and economic circumstances and institutions. One such difference was that success required retaining a local voice in management decisions.", "MPAs of various sorts have been established in a range of aquatic habitats including open ocean, coastal areas, intertidal zones, estuaries, and the Great Lakes. In these areas, states and the federal government assert varying degrees of authority over activities affecting living and nonliving resources. Ownership and control also are viewed differently in marine areas, where there is little private ownership, although submerged lands, especially in nearshore areas, are sometimes leased. Generally the degree of control increases as one moves toward shore from the seaward extent of the Exclusive Economic Zone (EEZ), 200 nautical miles (nm) from shore, to the baseline, a line that generally follows the shoreline. Governments also protect environmental quality, and lease the surface and subsurface for numerous activities, most notably oil and gas extraction. Zones or areas defined in ocean and coastal areas include state waters (shoreline to 3 nm), territorial sea (shoreline to 12 nm), contiguous zone (12 to 24 nm), exclusive economic zone 12 to 200 nm) and the high seas (beyond 200 nm).\nThe range of marine organisms and associated ecosystems seldom conform to these political and national boundaries. This presents management challenges when activities harmful to an MPA occur outside jurisdictional boundaries of the agency managing the MPA or when organisms move into other jurisdictions. Potential benefits of MPAs are likely to be dissipated unless agreements can harmonize protection efforts beyond MPA and jurisdictional boundaries.", "An MPA designation might not require that an entire site be administered under one set of rules. Many proponents have advocated a zoning approach, subdividing a site into subunits with different levels of protection, or protection for different purposes. Zoning would allow managing agencies to achieve multiple policy objectives. Zoning of a protected marine area to provide different levels of protection was probably first implemented by the Great Barrier Reef Marine Park Authority in Australia in the early 1980s, and has more recently been adopted elsewhere, such as the Florida Keys National Marine Sanctuary. Subdividing designated areas may be especially useful in areas where use pressures and activities are most concentrated.\nThe notion of zoning is well-developed on land, but there is little experience with what adjustments might be needed to apply it effectively in an aquatic environment. One reason is that this concept is at odds with the traditional view that the ocean is \"free to all\" and \"boundless,\" able to accommodate all uses in its vast expanse. This view was more widely accepted when technology to gain access to deep water resources was limited and before claims of 200-mile EEZs become an accepted international practice. National management of areas beyond the relatively narrow territorial sea is a relatively recent development and is still evolving.\nIn recent years, zoning of ocean areas has been getting more attention. The goal of these efforts is to reduce spillover effects among competing uses that result in economic and environmental losses to society. This attention is a response to technological advances that permit greater access to and more intensive use of the marine environment, including the water column, ocean floor, and subsurface resources. At the same time, scientific research is developing a more accurate accounting of baseline conditions in the marine environment and effects of technologies on these conditions.\nMarine spatial planning (MSP) is a concept related to land use planning in terrestrial areas. It is gaining recognition because of increases in the number and intensity of marine-related activities and degradation of the marine environment, at least in some areas. The concept grew from the use of MPAs, such as the Great Barrier Reef and the Florida Keys National Marine Sanctuary. Many observers have recommended comprehensive spatial approaches that explicitly consider ecosystems and economic and social systems, while integrating management activities across government agencies and economic sectors.\nThe United Nations Educational, Scientific, and Cultural Organization (UNESCO) defines MSP as:\na process of analyzing and allocating parts of three-dimensional marine spaces (or ecosystems) to specific uses or objectives, to achieve ecological, economic, and social objectives that are usually specified through a political process. MSP is place- or area-based; integrated across economic sectors and among government agencies; adaptive; strategic, participatory, and balanced.\nFanny Douvere, one of the primary investigators for UNESCO's MSP efforts, further defines MSP as a continuous, iterative, and adaptive process that consists of three phases: (1) planning and analysis for developing comprehensive spatial plans for the protection, enhancement, and sustainable use and development of the sea and its resources; (2) implementing MSP through regulation, incentives, and enforcement; and (3) monitoring and evaluating to assess effectiveness and the need to adapt procedures. She adds that people are central to decision making and a public process is required because the use and allocation of resources are societal choices.", "Another widely discussed issue is the desire of some to limit or prohibit offshore energy activities, including extraction and transport. This issue is highly visible, because of marine damage from oil spills around the world, often accompanied by birds or animals soaked in oil. During the 1980s and early 1990s, oil and gas development interests stressed the need to recognize multiple uses of the marine environment. They expressed concern that attempts to designate national marine sanctuaries were being used to promote a political agenda directed toward prohibiting oil and gas development in offshore areas.\nSeveral recent proposals to locate wind farms in offshore areas have raised the same kind of \"not in my backyard\" (NIMBY) responses that have been voiced for decades in response to unpopular development (e.g., landfills, prisons, and transmission towers) in suburban areas. Use conflicts are not new to marine areas, and similar responses have been raised to confront proposed offshore energy development in \"frontier\" areas where there is little prior history of such activity. More generally, thinking about future activities in the marine environment raises questions about how uses should be monitored, whether new categories of use can be effectively addressed through existing laws and programs (an issue raised by wind farm opponents, for example), and how public and private interests should be considered in any decision process.", "A number of recent national reports have studied and made recommendations concerning marine conservation and the potential use of MPAs. In particular, the 2003 Pew Oceans Commission Report and the 2004 U.S. Commission on Ocean Policy Report provide recommendations on ocean policy issues intended for policy makers. These reports, as well as the 2001 report on MPAs from the National Research Council, view the current piecemeal approach to marine resource management as contributing to the decline in marine environmental health. Many supporters of the MPA concept draw from these reports as they encourage Congress to replace the current approach with a more systematic and coordinated response. Many of these supporters have endorsed the Pew Oceans Commission and U.S. Commission on Ocean Policy recommendations as a starting place for policy discussions.\nThe 2001 NRC report on MPAs did not make a recommendation about whether additional legislation might be desirable or whether a new law addressing MPAs is needed, although it did recognize the fragmented nature of current efforts. It discussed the costs and benefits of MPAs in comparison to more conventional management tools, explored the feasibility of implementation, and assessed the scientific basis and adequacy of techniques for the design of MPAs and marine reserves. Among its conclusions the report recommended that MPAs can be most successful if:\nall stakeholders are enlisted to participate in developing management plans; effective planning and design are provided; and integral components include regular monitoring, assessment, enforcement, and community education.\nThe NRC report endorsed using marine reserves as resource and fishery management tools in combination with traditional management measures. It asserted that federal and state agencies need to provide resources, expertise, and coordination for integrating individual MPAs into a framework to meet coastal and marine resource management goals established at state, regional, national, or international levels.\nThe Pew Oceans Commission report calls for establishing a system of marine reserves as an important component of efforts to restore and maintain healthy marine ecosystems. These reserves would play critical roles in \"zoning\" areas of the ocean under sovereign control based on desired patterns and intensities of uses. This report also recommends establishing regional ocean ecosystems councils and a new independent federal oceans agency. The Pew Commission viewed reserves as sites that would transcend federal-state boundaries. It calls on Congress to enact a mandate to establish such a system and provide the necessary institutional structure and legal authorities to implement it. It also recommends that federal agencies should use existing authorities to establish reserves within areas that have already been designated for protection until such a mandate is enacted.\nThe U.S. Commission on Ocean Policy also endorses MPAs, but its report is more wide-ranging than the Pew effort, and MPAs play a much smaller role in its recommendations. The report from the U.S. Commission on Ocean Policy may have the greatest impact on congressional considerations, since Congress created this commission in legislation and it reported to Congress and the Administration. The commission's recommendations include a reference to MPAs in the fisheries chapter that discusses coordinated management in federal waters and calls for a uniform process to designate, design, and monitor MPAs. The commission's recommendations also include an indirect reference to MPAs related to pursuing an ecosystem approach to identify and designate \"essential fish habitat\" that uses current efforts to \"identify important habitats and locate optimum-sized areas.\"", "Currently, the National Marine Sanctuary Program is the closest to providing a comprehensive approach to using MPAs. Administrative action to establish national monuments in marine areas is gaining greater attention, but these actions appear to be opportunistic rather than deliberate movement to a comprehensive approach.\nLegislation proposed during the 110 th Congress would have made incremental progress in this direction, but not on the scale that most MPA advocates would prefer. The most direct congressional action was introduction of the Sanctuary Enhancement Act of 2008, H.R. 6537 , which would have reauthorized the National Marine Sanctuary Act (NMSA). The NMSA was last reauthorized in 2000. Although funding authority for NMSA programs expired in FY2005, Congress continues to appropriate funds annually for these programs. Among the most important changes would have been elimination of constraints on designating new sanctuaries that were included in the 2000 reauthorization, clarification of the sanctuary program mission, and integration of national monuments within the system. Hearings were held by the House Natural Resources Subcommittee on Fisheries, Wildlife, and Oceans, but no further action was taken on the bill.\nSeveral bills have been introduced in the 111 th Congress to expand the boundaries of existing National Marine Sanctuaries (NMSs), to prohibit specific activities within NMSs, and to reauthorize the Northwest Straits Marine Conservation Initiative Act. H.R. 223 and S. 212 would expand the boundaries of Gulf of the Farallones (CA), and Cordell Bank (CA) National Marine Sanctuaries. The purposes of the legislation include:\nextending the boundaries of the two sanctuaries; strengthening protections that apply in the sanctuaries; providing for public education and interpretation of the ecological value and national importance of the sanctuaries; and managing human uses of the sanctuaries.\nH.R. 905 and S. 380 would expand the boundaries of Thunder Bay National Marine Sanctuary (MI), the only Great Lakes NMS. H.R. 790 and S. 851 would prohibit oil or natural gas development activities in any NMS or marine national monument, or on the fishing grounds of Georges Bank. H.R. 1672 and S. 668 would reauthorize the Northwest Straits Marine Conservation Initiative Act. H.R. 905 and H.R. 1672 have been passed by the House, and the Senate versions, S. 380 and S. 668 , have been reported by the Senate Commerce, Science, and Transportation Committee.\nCongressional consideration of new and more comprehensive approaches to protect marine areas is likely to pit economic interests, who oppose MPAs because designation would place limits on the use or extraction of ocean resources, against environmental and research interests, who would like to see more widespread or systematic protection of ocean resources. MPA advocates favor resource protection over revenue-generating activities, and believe that quick congressional action is needed to prevent further destruction or deterioration of living marine resources. MPA opponents respond that the benefits of such designations are far from proven, but limitations on commercial activities are almost certain to be costly. New industries such as aquaculture and alternative energy may be especially difficult to establish if environmental interests believe they threaten marine resources. One of the main challenges for policy makers is to balance the needs for profitable private commercial activities with public concerns related to environmental quality. It is still an open question as to whether more extensive use of MPAs will assist in achieving this balance.", "No current federal laws and programs protect marine areas as comprehensively as many of the proponents of MPAs envision for this concept. Others, especially commercial interests, counter that MPAs should be reserved for truly special areas and that current federal laws are sufficient for this purpose. Regardless, it appears that most of these laws could play significant roles if a more comprehensive effort is implemented. This discussion does not include state laws and programs, which vary widely, and would become important for MPAs that include nearshore areas or have some interaction with activities in areas under state jurisdiction.\nThe following laws allow designation of protected areas in the marine environment. Most apply to coastal sites, but they were enacted for different purposes and take different approaches. If Congress chooses to authorize an MPA system, it might conclude that one or some combination of these programs can provide the basis for such a system, or it might conclude that it should enact entirely new authorizing legislation.\nNational Marine Sanctuaries Act (NMSA)\nThe NMSA (16 U.S.C. §§ 1431, et seq.) comes closest to authorizing what many proponents envision as MPAs. It authorizes NOAA to designate specific sites for comprehensive and coordinated management and conservation. The broad NMSA mandate allows NOAA to designate areas to preserve or restore conservation, ecological, aesthetic, or recreational values of the designated areas. It requires the development and implementation of management plans, which serve as the basis for prohibiting or limiting incompatible activities.\nNOAA has designated 13 sanctuaries, ranging in size from less than a square nautical mile to more than 100,000 square miles. Each site was designated for a specific reason, ranging from protecting cultural artifacts to protecting entire ecosystems. At most of these sites, particularly contentious questions when developing or amending management plans have centered on which activities are incompatible with the purposes of the designation, and how incompatible activities will be limited. Since the management plans and regulations have been developed individually for each sanctuary and each sanctuary was established for a specified reason, they vary widely in how uses are managed and what uses are permitted. The Florida Keys Sanctuary is cited as one location where the MPA concept is being applied. Within this sanctuary, 24 sites amounting to 6% of the total area have been fully protected where harvesting marine life is greatly restricted. However, this is an exception, as few of the existing sanctuaries restrict fishing, shipping, or recreation, although most prohibit oil and gas exploration and development. This has led some to characterize sanctuaries as multiple-use areas rather than areas where uses that may damage the marine environment are prohibited.\nFishing can be regulated in sanctuaries, although this has rarely occurred. In considering whether to regulate fishing, the NMSA provides the appropriate Regional Fishery Management Council the opportunity to determine whether sanctuary fishing regulations are needed and to draft fishing regulations. The Secretary of Commerce must accept the Council's proposals or determinations unless they fail to fulfill the purpose and policies of the Magnuson-Stevens Fishery Conservation and Management Act (discussed below ). Regional Councils have supported only a few areas that have been closed to all fishing. As sanctuaries revise and update their management plans, whether and how to limit fishing is likely to receive more attention. In this setting, some MPA proponents do not view the sanctuary system, as it currently exists, as an effective approach for fish recovery efforts.\nCoastal Zone Management Act (CZMA)\nThe CZMA (16 U.S.C. §§ 1451, et seq.) established a coastal zone management program and an estuarine sanctuary program, now called the National Estuarine Research Reserve System, and made 35 coastal and Great Lakes states and territories eligible to participate. The coastal zone management program provides grants to these states and territories to develop and implement plans that address several broad categories of development and resource protection activities in a state's coastal zone. Incentives to participate also include a consistency provision that requires federal actions in or affecting the coastal zone to be consistent with the state's federally approved plans. These incentives appear to be sufficient, as only one of the 35 eligible states and territories, Illinois, has not participated in the national coastal zone management program.\nPlaces included in MPA inventories are concentrated in coastal and nearshore waters. These areas are among the most productive and diverse marine environments and are sites of the most concentrated and intensive uses and alterations. Therefore, protection efforts (including efforts to designate MPAs) also have been concentrated in these areas. Almost all coastal states have been addressing the pressures in or affecting state waters for many years, generally using their federally approved and funded coastal zone programs. A few states emphasize the marine side of their coastal zone, as management of ocean resources is one of the eight purposes for which states can receive \"enhancement grants\" under this program. However, most state coastal management programs generally concentrate their efforts on the land and shore side of the coastal interface.\nProtecting marine areas can be addressed by states using coastal zone enhancement grants. These grants are available to participating states and territories that are successfully implementing programs and wish to do more. These grants are available for nine program areas, one of which is \"planning for the use of ocean resources.\" NOAA reviewed activities under this program for 1992 through 1996, and found a majority of states had some level of activity. However, the organization of this study's findings makes it difficult to determine how designation and management of protected areas in state waters fit into the coastal zone management activities of these states.\nThe National Estuarine Research Reserve System is a component of the federal coastal zone management program. States identify research reserve sites in state waters and, after federal approval, manage them. States with research reserves have integrated them into their coastal management efforts, although the research reserves do not play identical roles. The 27 National Estuarine Research Reserves that have been designated were federally approved, in part because they each represent one of the diverse estuarine ecosystems of the marine coast (including the Great Lakes).\nThe system is viewed as both providing a laboratory for research and education programs, and creating a network that permits research for comparing biological or other characteristics across units of the system. Incompatible uses that would compromise the value of research reserves, such as more intensive development along the shore or major navigational improvements in the waters, are controlled or prohibited. Each research reserve operates under a management plan. The research reserves range in size from 571 acres to 365,000 acres.\nMagnuson-Stevens Fishery Conservation and Management Act (MSFCMA)\nThe MSFCMA (16 U.S.C. §§ 1801, et seq.) established federal fishery management authority in a zone extending from the outer boundary of state coastal waters to 200 miles from the U.S. coastline. In 1976, the Fishery Conservation and Management Act established eight Regional Fishery Management Councils to develop management plans for those fisheries that require active federal management. The fishery conservation zone was superceded by President Reagan's declaration of an Exclusive Economic Zone (EEZ) in March 1983 (Presidential Proclamation 5030). The EEZ applies to a broad range of resources and uses. In 1996 amendments to the act, Congress authorized the Councils to designate and manage essential fish habitat. It included the authority to regulate fishing effort up to and including closing areas to protect significant spawning and rearing habitats. Such closures, which are often a response to overfishing, may be of limited duration or permanent, and they may affect some or all fishing covered by federally approved fishery management plans. Closures are usually imposed by the National Marine Fisheries Service (NMFS) on the recommendation of a Regional Fishery Management Council. Since the overarching purpose of the MSFCMA is to promote sustainable commercial and recreational use of renewable fishery resources, permanent and complete area closures remain uncommon.\nImplementation of MPAs as an element of fishery management seems to be gaining interest among the Regional Fishery Management Councils. With the growing recognition that selective protection of unique habitats can benefit multiple species, Regional Councils are beginning to consider and create longer-term marine reserves (for examples, see \"Recent Administrative Actions,\") in lieu of temporary fishery closures for individual species or other gear or quota reductions. Partial closures, which might limit gear used, amount of fishing effort allowed, or times when fishing is allowed, are also becoming more common.\nFor example, the New England Regional Fishery Management Council and NMFS established closed areas on Georges Bank and adjacent areas off New England where all fishing is prohibited to foster groundfish recovery. The North Pacific Fishery Management Council has designated a marine reserve in Southeast Alaska, an Aleutian Islands Habitat Conservation Area, Aleutian Islands Coral Habitat Protection Areas, Alaska Seamount Habitat Protection Areas, a Bowers Ridge Habitat Conservation Zone, Gulf of Alaska Coral Habitat Protection Areas, and Gulf of Alaska Slope Habitat Conservation Areas.\nThe effectiveness of fishery controls, as measured by changes in fish populations, like the effectiveness of other MPA controls, has generated controversy among competing community stakeholders. With requirements in the MSFCMA for (1) recovery schedules for overfished stocks, (2) harvest of fish at sustainable levels, and (3) minimal bycatch of fish, birds, turtles, and marine mammals, the management of U.S. marine fisheries has become significantly more restrictive since 1996. Some critics of MPAs believe that these changes in the MSFCMA reduce the need for MPAs as a fishery management tool. In 2006, the 109 th Congress reauthorized the MSFCMA and included provisions to increase protection of deep sea corals as well as to provide greater emphasis on managing marine ecosystems as opposed to individual commercially valued species.\nThe Wilderness Act\nThis law (16 U.S.C. §1131, et seq.) established the National Wilderness Preservation System of congressionally designated areas of federally owned land where many activities are restricted or prohibited to minimize human alterations. Although the extension of this act's authority into marine waters is questioned by those who envision the ocean as common property, marine areas under federal jurisdiction beyond state boundaries but within 200 miles of the coastline could be eligible for designation as \"wilderness\" by Congress, although none has been designated to date.\nGoals of the Wilderness Act are to allow unfettered operation of natural processes and provide for only those human uses, such as primitive recreational activities, that do not affect those processes. The act generally prohibits commercial activities, permanent facilities, and use of motorized equipment or motorboats, landing of aircraft, unless the use had become established before the area was designated. However, Congress has also authorized activities that do not conform with these general prohibitions. For example, the act allows for commercial uses when they are necessary \"for realizing the recreational or other wilderness purposes of the area;\" the use of motorboats may be authorized where such use is already established, subject to \"desirable\" restrictions.\nThe prospects of establishing \"marine wilderness\" are being increasingly explored. Some interests who want the strongest possible protections in designated marine areas view this law as creating a model for the levels and kinds of protections that should be placed in MPAs, even if the law itself may not be readily transferred to marine areas for other reasons. A portion of these interests believe that the wilderness designation should be a starting point because too many incompatible uses are still allowed. Others counter that wilderness designations are too restrictive. Many of the terrestrial wilderness debates have focused on whether the Wilderness Act's allowances for recreation, boating, or commercial use will be incompatible with protections that proponents seek through a wilderness designation. If this concept is considered for marine areas, similar debates can be anticipated.\nNational Park Service Organic Act\nThis law (16 U.S.C. §§ 1, 2-4) created the National Park Service (NPS) to administer units of the National Park System, to preserve the lands and resources unimpaired, and to foster public use and enjoyment. Each unit has its own management structure; individual laws creating most of the units have placed limits on specified incompatible uses. A total of 39 NPS units in coastal areas have significant marine components. Many of these units are classified as National Seashores. Many National Park units permit recreational fishing, and a few even allow commercial fishing. The Park Service's dual mandate of preservation and public use and enjoyment has resulted in conflict between interest groups who debate the desirability of providing greater access and visitor facilities versus higher levels of protection.\nNational Wildlife Refuge Administration Act\nThis law (16 U.S.C. § 668dd) establishes the primary purpose of units of the National Wildlife Refuge System to be the conservation of fish and wildlife and their habitats, and allows other compatible uses if such uses are determined to be consistent with refuge goals. The refuges are administered by the Fish and Wildlife Service in the Department of the Interior. Recreational fishing, hunting, wildlife observation, environmental education and interpretation, and nature photography are priority public uses and are allowed on many refuges; and oil and gas extraction occurs on a few units. More than 140 refuges are located along the nation's coasts, and some include offshore areas. Important functions for refuges in marine areas are managing ecosystems and providing habitat for endangered species and migratory birds as well as nursery areas that support key components of coastal and marine ecosystems. However, many regard refuge system jurisdiction as limited in the marine environment.\nAntiquities Act of 1906\nThis law (16 U.S.C. §§ 431-443) allows the President to proclaim locations of scientific or historical interest as national monuments and has been used for several marine areas. Some have argued that the 1906 Antiquities Act should be used to designate protected areas in the marine environment because it can be used expeditiously. Yet it appears that applying the Antiquities Act to marine areas will still require \"negotiation, education, and consensus-building\" including congressional funding commitments and involvement of local committees representing interested and affected parties. Use of the Antiquities Act would likely raise the same type of objections that have been voiced over other unilateral actions without the opportunity for public input and debate. In the Papahānaumokuākea Marine National Monument (Northwestern Hawaiian Islands Marine Monument) case, it is likely designation was made easier because the public had already been involved during earlier consideration of the area as a national marine sanctuary.\nNorthwest Straits (NS) Marine Conservation Initiative Act\nThis law (Title IV of P.L. 105-384 ) established the Northwest Straits Advisory Commission, and authorized the Secretary of Commerce to provide assistance to be used in accordance with the Northwest Straits Citizen's Advisory Commission Report of August 20, 1998. The NS are the waters of northern Puget Sound and southern Georgia Strait in Washington State. The priorities of the Commission are to: (1) collect marine resources data in the NS; (2) coordinate federal, state, and local marine resource protection and restoration activities in the NS; and (3) carry out other activities identified in the Report as important to such protection and restoration. Under this authority, seven county Marine Resource Committees are advising the Commission in carrying out these priorities. The 2004 program evaluation found that the initiative has generated local support of projects and conservation, increased voluntary compliance with conservation goals, brought people together to work cooperatively and exchange innovative ideas on issues, and created a model of marine governance that may be adapted to other regions. Legislation to reauthorize the act has been introduced in both the House and the Senate. H.R. 1672 has been passed by the House, and the Senate version, S. 668 , has been reported by the Senate Commerce, Science, and Transportation Committee.\nOther Protection Efforts\nMany other federal laws affect the quality of the marine environment by regulating coastal and offshore activities. These laws typically set minimum environmental quality standards or protect certain elements of the marine environment rather than designate areas for use or protection. Particularly noteworthy laws in this group include the Endangered Species Act, the Clean Water Act, and the Marine Mammal Protection Act.\nCertain offshore areas in federal waters were protected specifically from oil and gas development activities for over two decades. Starting with the FY1982 Interior appropriations act ( P.L. 97-100 ), Congress annually prohibited these activities in certain areas, including waters off New England, the Mid-Atlantic states, portions of Alaska and California, the Pacific Northwest, and the Eastern Gulf of Mexico. In 1990, President Bush issued a directive limiting Outer Continental Shelf (OCS) activities to federal waters off Texas, Louisiana, Alabama, and portions of Alaska. In 1998, President Clinton extended this moratorium to OCS activities in other areas through 2012. The 109 th Congress enacted the Gulf of Mexico Energy Security Act of 2006 (Division C, Title I, of P.L. 109-432 ), which opened up a portion of the Eastern Gulf of Mexico that had previously been closed. On July 14, 2008, President Bush lifted the executive ban on OCS activities. Congress then allowed the ban on drilling in areas of the OCS to expire by not including the moratorium in the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 ) that was signed by the President on September 30, 2008.\nIn addition to the federal laws with authority over MPA designation and management, state and local laws as well as numerous international agreements and conventions have marine protection components. According to the MPA Center inventory, nearly 1,300 MPAs are managed by states and territories." ], "depth": [ 0, 1, 2, 1, 2, 2, 1, 2, 2, 2, 2, 2, 1, 1, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h1_title h3_title", "h3_full h1_full", "h2_full", "", "", "h0_title h1_full", "h0_full", "h1_full", "", "h1_full", "", "", "h0_full h3_full h2_title", "h0_full h2_full" ] }

{ "question": [ "Why is limiting human activity in certain areas important?", "What is the purpose of proposed additional limits?", "How could this concept be implemented?", "Why is translating the MPA approach into nation program difficult?", "What makes creating a program difficult?", "What is a possible way to overcome these difficulties?", "What problems does this face?", "How are marine sites protected?", "What is the National Marine Sanctuaries Act about?", "What is the Bush Administration's opinion on the MPA concept?", "What did President Bush do to show that he supported MPA?", "How difficult is it for Congress to create an MPA system?", "Why is it difficult?", "What efforts has Congress made related to MPAs?" ], "summary": [ "There continues to be congressional interest in limiting human activity in certain areas of the marine environment, as one response to mounting evidence of declining environmental quality and populations of living resources.", "The purposes of proposed additional limits would be both to stem declines and to permit the rehabilitation of these environments and populations.", "One method of implementing this concept is for Congress to designate areas where activities would be limited, often referred to as marine protected areas (MPAs).", "Translating the MPA approach into a national program, however, would require that Congress resolve many economic, ecological, and social dilemmas.", "The complexity of creating a program is compounded by controversy over the uses that would be allowed, curtailed, or prohibited in MPAs; the purposes of a system of MPAs; and the location, size, and distribution of MPA units.", "One possible way to get past some of these complexities is to think of MPA designations as a form of zoning in the ocean. Experiences related to designating MPAs in other countries also may be instructive.", "However, questions have arisen about the effectiveness of administration and enforcement, the benefits and costs of MPAs, and the evaluation of outcomes at some sites.", "Numerous marine sites have been designated by federal and state governments for some kind of protection.", "The National Marine Sanctuaries Act authorizes the Secretary of Commerce to designate areas of marine and Great Lakes environments to protect cultural and natural resources.", "The Bush Administration supported the MPA concept and it continued most of the Clinton Administration initiatives to coordinate protection of marine resources at designated sites, including implementing Executive Order 13158 (May 2000), which endorsed a comprehensive system of MPAs.", "President Bush designated the Papahānaumokuākea Marine National Monument (Northwestern Hawaiian Islands Marine National Monument) in 2006, and the Marianas Trench, Pacific Remote Islands, and Rose Atoll Marine National Monuments on January 6, 2009.", "Additional actions by Congress would be needed to create an MPA system that could be characterized as integrated or comprehensive.", "Some issues that would likely be raised in congressional discussions include whether a comprehensive system is desired or needed; what the basic characteristics of units in any MPA system should be; how MPAs might be used to resolve use conflicts; and whether adequate funding would be authorized and appropriated to both enforce the protected status and evaluate the ecological and social impacts of MPAs.", "In the 110th Congress, several bills related to MPAs were introduced, including a bill to reauthorize the National Marine Sanctuary Act, but none of the legislation was enacted. In the 111th Congress, bills have been introduced to expand boundaries for the Gulf of the Farallones (CA), Cordell Bank (CA), and Thunder Bay (MI) National Marine Sanctuaries." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 0, -1, 0, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3 ] }

{ "title": [ "", "Overview", "Bipartisan Budget Act of 2018", "Enduring vs. Overseas Contingency Operations Request", "Congressional Action", "Key Issues for Congress", "Department of State and Related Agency Funding6", "Overview", "Diplomatic Programs", "Personnel", "Diversity", "Overseas Programs", "Diplomatic Security", "Worldwide Security Protection", "Embassy Security, Construction, and Maintenance", "International Organizations", "Leadership and Modernization Impact Initiative", "Foreign Assistance50", "Overview", "Top Foreign Assistance Recipients", "Budget Highlights", "Global Health", "Humanitarian Assistance", "Security Assistance", "Economic Development Assistance" ], "paragraphs": [ "", "On February 12, 2018, the Trump Administration submitted to Congress its FY2019 budget request, which included $41.86 billion of base (or enduring) funds for the Department of State, Foreign Operations, and Related Programs (SFOPS). Of that amount, $13.26 billion would have been for State operations, international broadcasting, and related agencies and $28.60 billion for foreign operations. Comparing the request with the FY2018 actual SFOPS funding levels, the FY2019 request represented a 23.3% decrease in SFOPS funding. The proposed State and related agency funding would have been 18.7% below FY2018 funding levels, and the foreign operations funding would have been reduced by 25.2%. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), signed into law on February 15, included a total of $54.377 billion for SFOPS accounts, a 0.3% decrease over the FY2018 funding level and about 30% more than the Administration's request. An account-by-account comparison of the SFOPS request with the FY2018 actual funding and FY2019 enacted appropriation is provided in Appendix A . International Affairs 150 function funding levels are detailed in Appendix B . A chart depicting the components of the SFOPS appropriations bill is in Appendix C . A glossary is provided in Appendix D .", "The appropriations process for FY2019 was shaped by the Bipartisan Budget Act of 2018 (BBA, H.R. 1892 , P.L. 115-123 ), which Congress passed on February 9, 2018. The act raised the overall revised discretionary spending limits set by the Budget Control Act of 2011 (BCA, P.L. 112-25 ) from $1.069 trillion for FY2017 to $1.208 trillion for FY2018 and to $1.244 trillion for FY2019. The BBA increased FY2019 defense funding levels by $85 billion, from $562 billion to $647 billion, and nondefense funding (including SFOPS) by $68 billion, from $529 billion to $597 billion. It also extended direct spending reductions from FY2021 in the original BCA through FY2027, as amended.", "Every year since FY2012, the Administration has distinguished SFOPS spending as either enduring (base) funds or those to support overseas contingency operations (OCO). The OCO designation gained increased significance with enactment of the BCA, which specified that emergency or OCO funds do not count toward the spending limits established by the act. In early years of requesting OCO funds, the Obama Administration described OCO requests for \"extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan.\" Syria and other countries were added in later years, and the Trump Administration expanded OCO use in its first budget request in FY2018 to be available for longer-term, core activities and more countries. For FY2019, because the BBA raised spending limits, the Administration did not seek foreign affairs OCO funds, but requested the entire SFOPS budget within base funds. The final legislation, P.L. 116-6 , included $8.0 billion designated as OCO, or about 15% of enacted SFOPS funding. For funding trends, see Table 1 .", "House and Senate SFOPS Legislation . FY2019 SFOPS legislation was introduced and approved by the full appropriations committee in each chamber. The House legislation, H.R. 6385 , included total SFOPS funding of $54.18 billion, 0.6% lower than FY2018 funding and 29% more than requested. The Senate proposal, S. 3108 , would have provided $54.602 billion for SFOPS accounts, which is about 0.1% more than FY2018 funding and 30% more than requested. Neither bill received floor consideration in its respective chamber.\nContinuing Resolutions . On September 28, 2018, the President signed into law P.L. 115-245 , legislation which included the Continuing Appropriations Act, 2019 (CR) to continue funding for SFOPS accounts (among seven other appropriations that were not completed by the start of FY2019) at a prorated 2018 funding level through December 7, 2018. Funds designated as OCO in 2018 appropriations continued to be so designated for SFOPS in the CR. On December 3, 2018, Congress and the Administration extended funding through December 21, 2018 by enacting P.L. 115-298 . After December 21, funding lapsed and a partial shutdown of the government occurred. On January 25, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level ( P.L. 116-5 ).\nEnacted Legislation . On February 14 Congress passed, and the President later signed into law, a full year appropriation ( P.L. 116-6 , Division F) that included $54.38 billion in total SFOPS funding, a 0.3% decrease from the FY2018 funding level and about 30% more than the Administration's request. Of that total, $16.46 billion was for State Department operations and related agencies; $37.92 billion for foreign operations accounts. About 14.7%, or $8.0 billion, was designated as OCO.", "", "", "The State Department sought to cut funding for the Department of State and Related Agency category by 19% in FY2019 from FY2018 funding levels, to $13.26 billion. Conversely, both the House and Senate committee bills sought to maintain funding near previous fiscal year levels. The House committee bill would have increased funding in this category to $16.38 billion, or 0.4% above the FY2018 funding level. The Senate committee bill would have raised funding to $16.34 billion, around $40 million less than the House committee bill and approximately 0.1% more than the FY2018 funding level.\nSimilar to the House and Senate committee bills, the FY2019 enacted appropriation ( P.L. 116-6 ) maintained funding for the State Department and Related Agency category slightly above FY2018 funding level. It provided $16.46 billion for this category, or 0.9% more than the F2018 level.\nThe State Department's request sought to fund the entirety of this category through base (or enduring) funding. Following passage of the BBA and the resulting increase in discretionary spending cap levels for FY2018 and FY2019, the State Department moved the $3.69 billion request for Overseas Contingency Operations (OCO) in this category into the base budget request. Both the House and Senate committee bills sought to retain OCO funding within the Department of State and Related Agency category. The House committee bill would have provided $3.03 billion for OCO, or around 28% less than the FY2018 figure of $4.18 billion. The Senate committee bill would have provided $4.11 billion, which constituted about 2% less than FY2018 level. While the House committee bill would have afforded approximately $1.08 billion less for OCO than the Senate committee bill, the House committee bill provided around $1.12 billion more in enduring funding ($13.35 billion) than the Senate committee bill ($12.23 billion).\nAs with the House and Senate committee bills, P.L. 116-6 retained OCO funding for the Department of State and Related Agency category. The law provided a total of $4.37 billion for OCO, or 4.5% more than the FY2018 funding level. While the law provided more for OCO than either the Senate or House committee bills, it provided less in enduring funding ($12.09 billion).\nAreas where the State Department's proposed cuts were focused included the diplomatic security accounts (the Worldwide Security Protection programmatic allocation within the Diplomatic Programs account and, separately, the Embassy Security, Construction, and Maintenance account), Contributions to International Organizations, and Contributions for International Peacekeeping Activities. In most cases, P.L. 116-6 , in a manner similar to the House and Senate committee bills, maintained annual budget authority for these accounts closer to the FY2018 funding levels than the Administration requested (see following sections for more detailed analysis).\nThe State Department also requested $246.2 million to implement the Leadership and Modernization Impact Initiative, which serves as the implementation phase of the department's \"Redesign\" efforts. While neither the House nor the Senate committee bill directly addressed the Impact Initiative, both included provisions enabling Congress to conduct oversight of any broader reorganization efforts at the department. The enacted legislation, P.L. 116-6 , took the same approach.\nTable 3 provides an overview of proposed changes to selected accounts within the State Department and Related Agency category.", "Under the State Department's budget request, the Diplomatic Programs account, which is the State Department's principal operating appropriation, would have declined by 11% from the FY2018 funding level of $8.82 billion, to $7.81 billion. According to the State Department, this account provides funding for \"core people, infrastructure, security, and programs that facilitate productive and peaceful U.S. relations\" with foreign governments and international organizations. The House and Senate committee bills would have provided $8.80 billion and $8.92 billion, respectively, for Diplomatic Programs. For FY2019 enacted, P.L. 116-6 provided $9.17 billion, or 4% more than the FY2018 funding level and 17% more than the State Department's request.\nIn Section 7081 of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), Congress authorized the establishment of a new \"Consular and Border Security Programs\" (CBSP) account into which consular fees shall be deposited for the purposes of administering consular and border security programs. As a result, consular fees retained by the State Department to fund consular services will be credited to this new account. The State Department thus requested that Congress rename the former Diplomatic and Consular Programs account \"Diplomatic Programs.\" However, because many consular fees are generated and retained by the State Department to administer consular programs, they do not comprise part of the department's annual appropriations and therefore do not count against overall funds appropriated annually for this account. The FY2019 enacted legislation, P.L. 116-6 , authorized the renaming of Diplomatic and Consular Programs to Diplomatic Programs, as did the House and Senate committee bills.", "The Diplomatic Programs account provides funds for a large share of U.S. direct hire positions, including but not limited to State Department Foreign Service and Civil Service officers. Although the Trump Administration lifted the federal hiring freeze upon issuance of OMB M-17-22 on April 12, 2017, the State Department elected to keep its own hiring freeze in place. The Department of State released guidance in May 2018 lifting the hiring freeze and allowing the department to increase staffing to December 31, 2017 levels.\nSome Members of Congress expressed concern with the hiring freeze and the continued impacts of perceived personnel shortages at the Department of State. Both the House and Senate committee bills, and the committee reports accompanying those bills, included oversight provisions pertaining to State Department personnel levels. In this vein, Section 7073 of P.L. 116-6 required that no appropriated funds may be used to expand or reduce the size of the State Department and USAID's Civil Service, Foreign Service, eligible family member, and locally employed staff workforce from the on-board levels as of December 31, 2017 without consultation with the Committees on Appropriations and Foreign Relations of the Senate and the Committees on Appropriations and Foreign Affairs of the House of Representatives. Section 7073 also required the Secretary of State to submit reports to Congress, beginning 60 days after enactment of the law, and every 60 days thereafter until September 30, 2020, regarding the State Department's on-board personnel levels, hiring, and attrition of the Civil Service, Foreign Service, eligible family member, and locally employed staff workforce. These reports were also required to include a hiring plan for maintaining Foreign Service and Civil Service personnel numbers at not less than December 31, 2017, levels through FY2019. Among other personnel-related provisions, the joint explanatory statement accompanying this law noted that keeping personnel at these levels reflected \"minimum necessary hiring\" and encouraged the Secretary of State to work with Congress to increase hiring above such levels as appropriate.", "The Human Resources funding category within Diplomatic Programs provides funding for the Charles B. Rangel International Affairs and Thomas R. Pickering Foreign Affairs fellowship programs to promote greater diversity in the Foreign Service, as authorized by Section 47 of the State Department Basic Authorities Act (P.L. 84-885). While Congress required the State Department to expand the number of fellows participating in the Rangel and Pickering programs by 10 apiece pursuant to Section 706 of the Department of State Authorities Act, 2017 ( P.L. 114-323 ), it has provided the department the discretion to fund these programs at levels it deems appropriate from monies appropriated for Human Resources. P.L. 116-6 , like the House and Senate committee bills, continued to provide such discretion to the State Department. In addition, the House committee report indicated support for department efforts to increase diversity in hiring, including through the Rangel and Pickering programs. It also encouraged the Secretary of State to explore more opportunities to further the goal of increasing workforce diversity. The Senate committee report recommended the continued expansion of the department's workforce diversity programs and directed that qualified graduates of the Rangel and Pickering programs shall be inducted into the Foreign Service. While neither P.L. 116-6 nor the accompanying joint explanatory statement addressed the Rangel and Pickering programs specifically or Foreign Service diversity more generally, the joint explanatory statement did not negate any of the language in the House and Senate committee reports.", "The Diplomatic Programs account also provides funding for a number of overseas programs. These include programs carried out by the Bureau of Conflict and Stabilization Operations and the department's regional bureaus. Activities of the department's Bureau of Medical Services, which is responsible for providing health care services to U.S. government employees and their families assigned to overseas posts, are also funded through this account.\nPublic diplomacy programs are among the overseas programs funded through Diplomatic Programs, which include the Global Engagement Center's (GEC's) countering state disinformation (CSD) program. According to the State Department, planned CSD activities, for which $20 million was requested, included \"coordinating U.S. government efforts in specific sub-regions; enhancing the capacity of local actors to build resilience against disinformation, including thwarting attacks on their IT systems; providing attribution of adversarial disinformation; and convening anti-disinformation practitioners, journalists, and other influencers to exchange best practices, build networks, and generate support for U.S. efforts against disinformation.\" The House committee report registered concern regarding \"foreign propaganda and disinformation that threatens United States national security, especially as carried out by China, Russia, and extremists groups\" and asserted that the GEC \"is expected to use a wide range of technologies and techniques to counter these campaigns,\" consistent with its statutory mandate. The Senate committee report recommended up to $75.4 million for the GEC, including up to $40 million for countering foreign state propaganda and disinformation. The joint explanatory statement accompanying for the FY2019-enacted legislation ( P.L. 116-6 ) included up to $55.4 million for the GEC and up to $20 million for CSD, a funding level for CSD identical to the department's request. Section 1284 of the National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ) authorized the Department of Defense (DOD) to transfer not more than $60 million to the GEC for each of FY2019 and FY2020; DOD has previously transferred funds to the GEC under similar authorities.", "The State Department's FY2019 budget request sought to provide approximately $5.36 billion for the department's key embassy security accounts: $3.70 billion for the Worldwide Security Protection (WSP) programmatic allocation within the Diplomatic Programs account and $1.66 billion for the Embassy Security, Construction, and Maintenance (ESCM) account. The House committee bill would have provided $3.76 billion for WSP and $2.31 billion for ESCM, for a total funding level of $6.07 billion for these accounts. While the House bill would have funded the ESCM account exclusively through the base budget, it would have provided approximately $2.38 billion of overall funding for WSP through OCO. The Senate committee bill would have provided $3.82 billion for WSP and $1.92 billion for ESCM, for a total funding level of $5.74 billion. As with the House committee measure, the Senate committee bill would have funded the ESCM account with base budget funds only. For WSP, the Senate committee measure, like the House committee bill, would provide $2.38 billion of total account funds through OCO.\nThe FY2019 enacted appropriations provided a total of $4.10 billion for WSP and $1.98 billion for ESCM, for a total funding level of $6.08 billion in budget authority for these accounts. Like the House and Senate committee bills, P.L. 116-6 funded ESCM exclusively through the base budget. Of the $4.10 billion provided for WSP in the law, $2.63 billion was done so through OCO. Had the Administration's request been enacted, it would have marked a decline of 2% for WSP and 28% for ESCM relative to the FY2018 figures of approximately $3.76 billion and $2.31 billion, respectively. The enacted legislation provided 9% more funding for WSP and 15% less for ESCM relative to FY2018 levels.\nOver the past several years, Congress has provided no-year appropriations for both WSP and ESCM, thereby authorizing the State Department to indefinitely retain appropriated funds beyond the fiscal year for which they were appropriated. As a result, the department has carried over large balances of unexpired, unobligated funds each year that it is authorized to obligate for programs within both accounts when it deems appropriate to do so. For example, for FY2018, the State Department carried over more than $7.6 billion in previously appropriated funds for ESCM. Both the House and Senate committee bills would have continued this practice with respect to WSP, and the Senate committee bill would have continued with respect to ESCM, as well. The House committee bill, if enacted, would have provided that all funds appropriated for ESCM remained available until September 30, 2023, rather than indefinitely. P.L. 116-6 provided no-year appropriations for WSP. For ESCM, the law stipulated that while funds for worldwide security upgrades and for purposes of acquisition and construction would remain available until expended, all other monies within this account (such as funds for preserving, maintaining, repairing, and planning for real property that State Department owns) would remain available only until September 30, 2023.", "The Worldwide Security Protection (WSP) allocation within the Diplomatic Programs account supports the Bureau of Diplomatic Security's (DS's) implementation of security programs located at over 275 overseas posts and 125 domestic offices of the State Department, including a worldwide guard force protecting overseas diplomatic posts, residences, and domestic offices.\nThe State Department revisited previous assumptions for funding for the U.S. security presence, which prompted it to ask for a rescission of $301.20 million for WSP OCO funds provided through the Further Continuing and Security Assistance Appropriations Act, 2017 (SAAA) ( P.L. 114-254 ). State Department officials noted that this funding was \"intended to support diplomatic reengagements in Syria, Libya, and Yemen that were predicated on different security and political conditions.\" The department maintained that this proposed cancellation was based on evolving security and political conditions, and would not affect DS operations. While neither the House nor the Senate committee bill included a rescission, P.L. 116-6 provided for a rescission of $301.2 million of SAAA funds appropriated for Diplomatic Programs and designated them more generally for OCO.", "The Embassy Security, Construction, and Maintenance (ESCM) account funds the Bureau of Overseas Building Operations (OBO), which is responsible for providing U.S. diplomatic and consular missions overseas with secure, safe, and functional facilities.\nThe State Department's request included $869.54 million to provide its share of what it maintains is the $2.20 billion in annual funding that the Benghazi Accountability Review Board (ARB) recommended for the Capital Security Cost Sharing (CSCS) and Maintenance Cost Sharing (MCS) programs (the remainder of the funding is provided through consular fee revenues and contributions from other agencies). These programs are used to fund the planning, design, and construction of new overseas posts and the maintenance of existing diplomatic facilities. The House committee report maintained that funds the House bill made available for ESCM would allow for the State Department's CSCS and MCS contributions, when combined with those from other agencies and consular fees, to exceed the ARB's annual recommended funding and support \" the accelerated multi-year program to construct new secure replacement facilities for the most vulnerable embassies and consulates.\" The Senate committee bill stipulated that of funds made available for ESCM by it and prior acts making appropriations for SFOPS, not less than $1.02 billion shall be made available for the department's FY2019 CSCS and MCS contributions; the joint explanatory statement accompanying P.L. 116-6 indicated that Congress provided the same amount for this purpose for FY2019.\nIn FY2019, OBO intended to fund four CSCS projects and one MCS project (see Table 4 ). The House committee report noted concern with the cost of new embassy and consulate compound projects, including ongoing projects in Beirut, Lebanon; Mexico City, Mexico; New Delhi, India; Erbil, Iraq; and Jakarta, Indonesia. Like Section 7004(h) of the House bill, as noted in the joint explanatory statement accompanying P.L. 116-6 , Congress mandated that the State Department provide more detailed reports regarding the costs of these projects than previously required.\nThe State Department maintained that the \"construction of a new U.S. Embassy facility in Jerusalem is a high priority for the Administration ... planning and interagency coordination for the Jerusalem Embassy move is ongoing and the department intends to realign CSCS project funding, as necessary, to execute this project.\" It later attached a timeframe to its intent, and the United States opened a new U.S. embassy in Jerusalem in May 2018. This new embassy is located in a building that housed consular operations of the former U.S. Consulate General in Jerusalem. The State Department has said that one of its next steps would be to construct an embassy annex to the current building, while also considering options for a permanent embassy over the long term. The department could choose to draw upon the unexpired, unobligated funds previously appropriated by Congress to the ESCM account for any construction expenses related to interim and permanent embassy facilities in Jerusalem. The Senate committee report requires the Secretary of State to \"regularly inform the Committee\" on the status of plans for a permanent New Embassy Compound in Jerusalem. Neither P.L. 116-6 nor its joint explanatory statement addresses this issue or negates the Senate committee report language.", "The State Department's FY2019 budget request included a combined request of $2.29 billion for the Contributions to International Organizations (CIO) and Contributions for International Peacekeeping Activities (CIPA) accounts, a 20% reduction from the FY2018 funding levels for these accounts. The CIO account is the source for funding for annual U.S. assessed contributions to 45 international organizations, including the United Nations and its affiliated organizations and other international organizations, including the North Atlantic Treaty Organization (NATO). The State Department's FY2019 request for CIO totaled approximately $1.10 billion. Following passage of the BBA, the department increased its request for CIO by approximately $100 million to fund a higher U.S. contribution to the U.N. regular budget at a rate of 20% of the overall U.N. budget (the U.S. assessment is 22%). According to the department, U.N. assessments of U.S. contributions to the United Nations and its affiliated agencies exceeded the request for funds to pay these contributions. Therefore, if the department's request was enacted, the United States may have accumulated arrears to some organizations.\nThe Contributions for International Peacekeeping Activities (CIPA) account provides U.S. funding for U.N. peacekeeping missions around the world that the State Department says \"seek to maintain or restore international peace and security.\" The State Department's FY2019 request for CIPA totaled $1.20 billion. According to the department, this request \"reflects the Administration's commitment to seek reduced costs by reevaluating the mandates, design, and implementation of peacekeeping missions and sharing the funding burden more fairly among U.N. members.\" Under this request, no U.S. contribution would have exceeded 25% of all assessed contributions for a single operation, which is the cap established in Section 404(b) of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995 ( P.L. 103-236 ).\nThe State Department maintained that it expected that the \"unfunded portion of U.S. assessed expenses will be met through a combination of a reduction in the U.S. assessed rate of contributions, reductions in the number of U.N. peacekeeping missions, and significant reductions in the budgets of peacekeeping missions across the board.\" The department also requested that Congress provide two-year funds for CIPA (in other words, that Congress make funds available for both the fiscal year for which the funds were appropriated and the subsequent fiscal year) \"due to the demonstrated unpredictability of the requirements in this account from year to year and the nature of multi-year operations that have mandates overlapping U.S. fiscal years.\"\nThe House committee bill would have provided $1.36 billion for CIO and $1.59 billion for CIPA, for a combined total of $2.95 billion for these accounts, which was 29% higher than the department's request and 4% higher than the FY2018 funding levels. The Senate committee bill would have provided $1.44 billion for CIO and $1.68 billion for CIPA, for a combined total of $3.12 billion. This figure was 36% higher than the department's request and 9% higher than the FY2018 level. The Senate committee bill included a provision not present in recent appropriations laws mandating that funds appropriated for CIO \"are made available to pay not less than the full fiscal year 2019 United States assessment for each respective international organization.\" With regard to CIPA, both the House and Senate committee reports noted that appropriated monies were intended to support an assessed peacekeeping cost at the statutory level of 25% rather than the U.N. assessed rate for the United States of 28.4%. Both committee reports called on the department to review peacekeeping missions for cost savings and work to renegotiate rates of assessment.\nFor FY2019, P.L. 116-6 provided $1.36 billion for CIO and $1.55 billion for CIPA, for a total of $2.91 billion—slightly less than both the House and Senate committee bills. This figure was still 2% higher than the FY2018 figure and 27% higher than the department's request. While the law did not include the aforementioned Senate committee bill provision regarding payment of full U.S. assessments for organizations funded through the CIO account, the law's joint explanatory statement noted that it assumed the payment of the full United States assessment for each relevant organization (with some exceptions, including organizations from which the United States has withdrawn) and required the Secretary of State to consult with the Committees on Appropriations with respect to any decision not to provide the full assessment for any such organization. With respect to CIPA, the joint explanatory statement noted that sufficient funds are provided for contributions to peacekeeping missions at the statutory level of 25%. The enacted legislation, like the House and Senate committee bills, provided a share of CIPA funds as two-year funds, as requested by the department.", "The State Department requested $246.2 million for FY2019 to implement the Leadership and Modernization Impact Initiative (hereinafter, the Impact Initiative). The Impact Initiative constitutes the implementation phase of the State Department's \"Redesign\" project. Former Secretary Tillerson initiated the redesign in 2017 to implement Executive Order 13781 and Office of Management and Budget (OMB) Memorandum M-17-22, which aim to \"improve the efficiency, effectiveness, and accountability of the executive branch.\"\nThe Impact Initiative constitutes 16 keystone modernization projects in three focus areas: Modernizing Information Technology and Human Resources Operations; Modernizing Global Presence, and Creating and Implementing Policy; and Improving Operational Efficiencies (see Table 5 ). According to the State Department, these focus areas and modernization projects are derived from the results of the listening tour that former Secretary Tillerson launched in May 2017, which included interviews conducted with approximately 300 individuals that the department said comprised a representative cross-section of its broader workforce, and a survey completed by 35,000 department personnel that asked them to discuss the means they use to help complete the department's mission and obstacles they encounter in the process.\nOf the $246.2 million requested, $150.0 million was requested from the IT Central Fund (which is funded through funds appropriated by Congress to the Capital Investment Fund account and, separately, expedited passport fees) and $96.2 million from the D&CP account to implement modernization projects. Proceeds from the IT Central Fund were intended to implement projects focused on IT, including modernizing existing IT infrastructure, systems, and applications based on a roadmap to be created in FY2018 and centralizing management of all WiFi networks. Funds from the D&CP account were intended to implement modernization projects focusing on Human Resources issues, including leadership development, management services consolidation, data analytics, and workforce readiness initiatives.\nLike the House and the Senate committee bills and reports, neither P.L. 116-6 nor the joint explanatory statement accompanying the law specifically mentioned the Impact Initiative by name. However, both the law and the joint explanatory statement included provisions explicitly prohibiting the Department of State from using appropriated funds to implement a reorganization without prior consultation, notification, and reporting to Congress (for example, see Section 7073 of P.L. 116-6 ). Like the Senate committee bill, P.L. 116-6 stated that no funds appropriated for SFOPs may be used to \"downsize, downgrade, consolidate, close, move, or relocate\" the State Department's Bureau of Population, Refugees, and Migration.", "", "Foreign operations accounts, together with food aid appropriated through the Agriculture appropriations bill, constitute the foreign aid component of the international affairs budget. These accounts fund bilateral economic aid, humanitarian assistance, security assistance, multilateral aid, and export promotion programs. For FY2019, the Administration requested $28.60 billion for foreign aid programs within the international affairs (function 150) budget, about 28% less than the FY2018 actual funding level. None of the requested funds were designated as OCO. The FY2019 enacted appropriation provided $37.92 billion for foreign operations account, including $3.63 billion designated as OCO. Together with food aid accounts in the Agriculture appropriation, total enacted foreign aid within the international affairs budget was $39.85 billion, or 0.7% below the FY2018 actual funding level and 39% above the FY2019 request. Table 6 shows foreign aid funding by type for FY2017 and FY2018 actual, and the FY2019 request, committee-approved legislation, and enacted legislation.\nAccount Mergers and Eliminations . The Administration aimed to simplify the foreign operations budget in part by channeling funds through fewer accounts and eliminating certain programs. These account mergers and eliminations were also proposed in the FY2018 budget request\nUnder bilateral economic assistance, the Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia and Central Asia (AEECA) and Democracy Fund (DF) accounts were zero funded in the FY2019 request. Programs currently funded through these accounts would have been funded through a new Economic Support and Development Fund (ESDF) account. The proposed funding level for ESDF, $5.063 billion, was more than 36% below the FY2018 funding for the accounts it would have replaced. Fifteen countries that received DA, ESF, or AEECA in FY2017 would no longer have received funding from these accounts or from ESDF under the FY2019 request. Within multilateral assistance, the International Organizations & Programs (IO&P) account, which funds U.S. voluntary contributions to many U.N. entities, including UNICEF, U.N. Development Program, and UN Women, would also have been zeroed out. Budget documents suggested that some unspecified activities currently funded through IO&P could have received funding through the ESDF or other accounts. Related to humanitarian assistance, the P.L. 480 Title II food aid account in the Agriculture appropriation would have been zero-funded and all food assistance would have been funded through the International Disaster Assistance (IDA) account, which would have nevertheless declined by about 17% from FY2018 actual funding (see \" Humanitarian Assistance \" section below). The Emergency Refugee and Migration Assistance (ERMA) account would have been subsumed into the Migration and Refugee Assistance (MRA) account.\nCloseout of Inter-American Foundation and U.S.-Africa Development Foundation . The FY2019 request proposed to terminate the Inter-American Foundation (IAF) and the U.S.-Africa Development Foundation (ADF), independent entities that implement small U.S. assistance grants, often in remote communities. The Administration proposed to consolidate all small grant programs aimed at reaching the poor under USAID, as a means of improving their integration with larger development programs and U.S. foreign policy objectives, as well as improving efficiency. Funds were requested for IAF and ADF only for the purposes of an orderly closeout.\nDevelopment Finance Institution . The Administration requested, for the first time in FY2019, the consolidation of the Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority (DCA) into a new standalone Development Finance Institution (DFI). The request called for $96 million for administrative expenses and $38 million for credit subsidies for DFI, but assumed that these expenses would be more than offset by collections, resulting in a net income of $460 million (based on OPIC's projected offsetting collections). In addition, $56 million in ESDF funds would have been used to support DFI activities. The Administration sought congressional authority for the new standalone entity, which it described as a means of incentivizing private sector investment in development and improving the efficiency of U.S. development finance programs.\nBoth the House and Senate committee bills, as well as the enacted FY2019 appropriation, rejected these account changes, with the exception of the elimination of the ERMA account, which the House bill eliminated and the Senate and final bill funded with $1 million. All the FY2019 SFOPS legislation, including P.L. 116-6 , used the same bilateral account structure used for FY2018, not a new ESDF, and funded IAF and ADF at the FY2018 levels. Prior to enactment of the final FY2019 SFOPS appropriation, Congress passed the BUILD Act ( P.L. 115-254 ), which authorized the establishment of a new International Development Finance Corporation (IDFC), consistent with the Administration's DFI proposal. The IDFC is expected to become operational near the end of FY2019, and P.L. 116-6 made FY2019 appropriations for OPIC and DCA using the same account structure as in prior years, but authorized $5 million in the OPIC noncredit account to be used for transition costs.", "Top Country Recipients . Under the FY2019 request, top foreign assistance recipients would not have changed significantly, continuing to include strategic allies in the Middle East (Israel, Egypt, Jordan) and major global health and development partners in Africa (see Table 7 ). Israel would have seen an increase of $200 million from FY2017, reflecting a new 10-year security assistance Memorandum of Understanding. Zambia and Uganda would both have seen an 11% increase. All other top recipients would have seen reduced aid in FY2019 compared with FY2017 (comprehensive FY2018 country allocations were not yet available), though unallocated global health and humanitarian funds (added to the request after passage of the Bipartisan Budget Act of 2018) may have changed these totals.\nFigure 1 and Table 7 show the requested FY2019 foreign operations budget allocations by region and country.\nUnder the FY2019 request, foreign assistance for every region would have been reduced compared to FY2018 funding. The Middle East and North Africa (MENA) region and Sub-Saharan Africa would continue to be the top regional recipients, together comprising nearly 80% of aid allocated by region ( Figure 2 ). Proposed cuts ranged from 61% in Europe and Eurasia to 2% in the MENA. Aid to Sub-Saharan Africa would have declined by 31%, aid to East Asia and Pacific by approximately half (51%), aid to South and Central Asia by about 4%, and aid to Western Hemisphere by 35%.\nThe House bill ( H.R. 6385 ) and accompanying report did not provide comprehensive country and regional allocations, but did specify aid levels for some countries and regional programs, including Israel ($3.300 billion), Egypt ($1.457 billion), Jordan ($1.525 billion), Ukraine ($441 million), the U.S. Strategy for Engagement in Central America ($595 million), and the Countering Russian Influence Funds ($250 million).\nThe Senate bill ( S. 3108 ) and report specified aid allocations for several countries and regional programs, including Israel ($3.300 billion), Egypt ($1.082 billion), Jordan ($1.525 billion), Iraq ($429 million), West Bank & Gaza ($286 million), Afghanistan ($698 million), Pakistan ($271 million), Colombia ($391 million), Ukraine $426 million), U.S. Strategy for Engagement in Central America ($515 million) and the Countering Russian Influence Fund ($300 million).\nThe enacted legislation, P.L. 116-6 , and the accompanying explanatory statement, specified FY2019 aid levels for several countries, including Israel ($3.300 billion), Egypt ($1.419 billion), Jordan ($1.525 billion), Iraq ($407 million), Colombia ($418 million), Mexico ($163 million), and Ukraine ($446 million), as well as for the U.S. Strategy for engagement in Central America ($528 million) and the Countering Russian Influence Fund ($275 million).", "The budget submission did not identify any new foreign assistance initiatives. The FY2019 request called for decreases in foreign aid funding generally while continuing to prioritize the aid sectors that have long made up the bulk of U.S. foreign assistance: global health, humanitarian, and security assistance.", "The Administration requested $6.70 billion for global health programs in FY2019. This was a 23% reduction from the FY2018 funding level, yet global health programs would have increased slightly as a proportion of the foreign aid budget, from 22% of total aid in FY2018 to 23% in the FY2019 request, due to deeper proposed cuts elsewhere. HIV/AIDS programs, for which funding would have been cut about 27% from FY2018 actual levels, would have continued to make up the bulk (69%) of global health funding, as they have since the creation of the President's Emergency Plan for AIDS Relief (PEPFAR) in 2004. Family planning and reproductive health services (for which the Administration proposed no funding for FY2018) would have received $302 million, a 42% reduction from FY2018 funding. Assistance levels would have been reduced for every health sector compared to FY2018, including maternal and child health (-25%), tuberculosis (-31%), malaria (-11%), neglected tropical diseases (-25%), global health security (-0.1%, funded through a proposed repurposing of FY2015 Ebola emergency funds), and nutrition (-37%).\nThe House committee bill included $8.69 billion for global health programs, the same as FY2018 funding. While total funding would remain the same, the House proposal would have reduced funding for family planning and reproductive health by about 12% compared to FY2018, while slightly increasing funding for polio, nutrition, and maternal and child health, and more than doubling funding for global health security and emerging threats. The Senate committee bill would have funded global health programs $8.792 billion, 1.2% above the FY2018 level. No subsectors would have received reduced funding and allocations for tuberculosis, HIV/AIDS, family planning, nutrition, neglected tropical diseases and vulnerable children would all have increased slightly. While both bills included long-standing language preventing the use of appropriated funds to pay for abortions, the House bill, but not the Senate bill, also included a provision prohibiting aid to any foreign nongovernmental organizations that \"promotes or performs\" voluntary abortion, with some exceptions, regardless of the source of funding for such activities.\nP.L. 116-6 provides $8.84 billion for global health programs for FY2019, a 1.7% increase over FY2018 funding. Every health subsector was funded at the same or slightly higher level than in FY2018.", "The Trump Administration's FY2019 budget request for humanitarian assistance totaled $6.358 billion, which was roughly 32% less than FY2018 actual funding ($9.37 billion) and about 22% of the total FY2019 foreign aid request. The request included $2,800.4 million for the Migration and Refugee Assistance (MRA) account (-17% from FY2018) and $3,557.4 million for the International Disaster Assistance (IDA) account (-17%) ( Figure 2 ). As in its FY2018 request, the Administration proposed to eliminate the Food for Peace (P.L. 480, Title II) and Emergency Refugee and Migration Assistance (ERMA) accounts, asserting that the activities supported through these accounts can be more efficiently and effectively funded through the IDA and MRA accounts, respectively. (Congress did not adopt the proposed changes to Food for Peace for FY2018, appropriating $1.716 billion for the account through the Agriculture appropriation, but did appropriate only $1 million for ERMA, a 98% reduction from FY2017 funding.) The Administration also sought authority to transfer and merge IDA and MRA base funds (current authority only applies to OCO-designated funds).\nThe Administration described its IDA request as focused \"on crises at the forefront of U.S. security interests, such as Syria, Iraq, Yemen, Nigeria, Somalia, and South Sudan.\" The MRA request focused on \"conflict displacement in Afghanistan, Burma, Iraq, Somalia, South Sudan, Syria and Yemen,\" as well as strengthening bilateral relationships with \"key refugee hosting countries such as Kenya, Turkey, Jordan, Ethiopia and Bangladesh.\" Consistent with last year, the request suggested that the proposed funding reduction assumes that other donors will shoulder an increased share of the overall humanitarian assistance burden worldwide.\nThe House committee bills proposed $9.145 billion for humanitarian assistance accounts, about 2% less than FY2018 funding. The total included $1.5 billion for Food for Peace from the Agriculture appropriation but would not have funded the ERMA account. The Senate committee bills proposed $9.534 billion for humanitarian assistance, about 2% more than FY2018 funding. The total included $1.716 billion for Food for Peace and $1 million for the ERMA account. Neither bill included language authorizing broad transfers and mergers between the IDA and MRA base funding account, though both bills include provisions allowing for the transfer and merger of funds from several accounts, including IDA and MRA, as an extraordinary measure in response to a severe international infectious disease outbreak.\nAs in FY2018, Congress did not adopt the significant humanitarian aid changes proposed by the Administration. P.L. 116-6 provided a total of $9.534 billion for humanitarian assistance in FY2019, almost level with FY2018 funding (-0.5%), of which about 21% was designated as OCO. This total included $3.434 billion in MRA funds, $1 million for ERMA, and $4.385 billion for IDA in the SFOPS division of the bill, as well as $1.716 billion for Food for Peace in the Agriculture division.", "The FY2019 security assistance request within foreign operations accounts totaled $7.304 billion, a 19% reduction from the FY2018 actual funding level and about 26% of the total foreign aid request. Consistent with recent years, 63% of the entire security assistance request was for FMF aid to Israel and Egypt. However, six countries were identified in the request as joint Department of Defense (DOD) and State Department security sector assistance priorities: Philippines, Vietnam, Ukraine, Lebanon, Tunisia, and Colombia.\nThe International Narcotics Control and Law Enforcement (INCLE) account would have been reduced by about 36% from FY2018 actual levels, Nonproliferation, Antiterrorism, Demining and Related (NADR) by 21%, and International Military Education and Training (IMET) by about 14%. In each of these cases, the Administration described the proposed reductions as concentrating resources where they offer the most value and U.S. national security impact. As in the FY2018 request, the Peacekeeping Operations (PKO) account, which supports most non-U.N. multilateral peacekeeping and regional stability operations, including U.S. training and equipment for African militaries and funding for the U.N. Support Office in Somalia (UNSOS), would have seen the biggest reduction (-46%) under the FY2019 request. This is because Administrations generally request UNSOS funds through the CIPA account, while Congress usually funds the office through the PKO account.\nThe Foreign Military Financing (FMF) account would have been reduced by 13% compared to FY2018, with specific allocations for 11 countries and a proposed $75 million Global Fund to be allocated flexibly. This was a notable change from the FY2018 FMF request, in which funds were allocated to four countries and a larger global fund, and from FY2018-enacted funding, for which allocations were specified for more than 20 countries.\nThe House committee bill would have provided $9.274 billion for security assistance, a 3% increase over FY2018 funding, with funding increases proposed for the INCLE (+7%) and FMF (+4%) accounts and a reduction proposed for the PKO account (-9%). Consistent with the request, and in contrast to recent year appropriations, no security assistance funding in the House committee bill was designated as OCO.\nThe Senate committee bill included $8.789 billion for security assistance programs, a 2.6% total decrease from FY2018 funding. The INCLE account would have increased by 2.6% while the FMF and PKO accounts would be reduced by 3% and 11%, respectively. About 16% of the security assistance funding in the Senate bill was designated as OCO.\nIn the final FY2019 appropriation, P.L. 116-6 , security assistance funding totaled $9.153 billion, a 1.4% increase from FY2018. Of the total, $555 million within the PKO and FMF accounts (6% of total security funding) was designated as OCO. Funding provided for most accounts was similar to FY2018 levels, with the exception of INCLE, which increased by 9.4% in part to support increased efforts to address the flow of illegal opioids, and PKO, for which funding decreased by about 9.2%.", "Bilateral economic development assistance is the broad category that includes programs focused on education, agricultural development and food security, good governance and democracy promotion, microfinance, environmental management, and other sectors. While the majority of this aid is implemented by USAID, it also includes the programs carried out by the independent Millennium Challenge Corporation (MCC), Peace Corps, Inter-American Foundation and the U.S.-Africa Development Foundation. Excluding global health assistance, bilateral economic development assistance in the Administration's FY2019 request totaled $6.354 billion, a 33% reduction from FY2018 funding levels. Proposed FY2019 allocations for key sectors, compared with FY2018 levels prescribed in legislation, included the following:\nfood security, $518 million (-48% from FY2018); democracy promotion programs, $1,235 million (-47% from FY2018); and education, $512 million (-51% from FY2018).\nThe Administration requested $800 million for MCC and $396 million for Peace Corps, representing cuts of 12% and 3%, respectively. As discussed above, the budget request also proposed to merge I-AF and USADF into USAID, and requested only small amounts of funding to close out their independent activities.\nThe House committee bill would have provided $9.383 billion for economic development assistance and specified allocations for several development sectors, including education ($1.035 billion), conservation programs ($360 million), food security and agricultural development ($1.001 million), microenterprise and microfinance ($265 million), water and sanitation ($400 million) and democracy programs ($2.4 billion). The Senate committee bill would have provided $9.764 billion for economic development activities and specifies allocations for education ($750 million), environment and renewable energy ($943 million), food security and agricultural development ($1.001 billion), small and micro credit ($265 million), water and sanitation ($435 million), and democracy programs ($2.4 billion), among others. Both the House and Senate bills would have funded the I-AF, USADF, Peace Corp, and MCC at the FY2018 funding level, and both bills explicitly rejected the Administration's proposal to merge I-AF and USADF into USAID.\nThe enacted appropriation for FY2019, P.L. 116-6 , provided about $9.239 billion for nonhealth economic development aid. Minimum allocations specified for key sectors included $1.035 billion for education (basic and higher), $285 million for biodiversity conservation, $125 million for sustainable landscapes, $1.001 billion for food security and agricultural development, $265 million to support micro and small enterprises, $67 million to combat trafficking in persons, and $435 million for water and sanitation programs. The independent agencies were all funded at the same level as in FY2018.\nAppendix A. State Department, Foreign Operations, and Related Agencies Appropriations, by Account\nAppendix B. International Affairs Budget\nThe International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs appropriation: foreign food aid programs (P.L. 480 Title II Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations. In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account.\nAppendix C. SFOPS Organizational Chart\nAppendix D. 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{ "question": [ "What did the Trump Administration request on February 12, 2018?", "How will the requested budget distributed?", "How did the BBA regulate the funding?", "How does the FY2019 request impact SFOPS funding?", "How does this impact the state and related programs budget?", "How does this impact the foreign operations budget?", "How did the committees react to the FY2019 SFOPS bills?", "What is the H.R. 6385 about?", "What is S. 3108 about?", "How did fiscal year 2019 begin?", "What the reaction of Congress and the President to the fund?", "How has the SFOPS funding changed overtime?" ], "summary": [ "The Trump Administration submitted to Congress its FY2019 budget request on February 12, 2018. The proposal included $41.86 billion for the Department of State, Foreign Operations, and Related Programs (SFOPS).", "Of that amount, $13.26 billion was for State Department operations, international broadcasting, and related agencies, and $28.60 billion for foreign operations.", "With the enactment of the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123, February 9, 2018), which raised discretionary spending limits set by the Budget Control Act of 2011 (BCA; P.L. 112-25), the Administration's FY2019 foreign affairs funding request was entirely within enduring (base) funds; no Overseas Contingency Operations (OCO) funding was included the SFOPS request for the first time since FY2012.", "The FY2019 request would have represented a 23.3% decrease in SFOPS funding compared with FY2018 actual funding levels. The proposed State and related agency funding would have been 18.7% below FY2018 funding and the foreign operations funding would have been reduced by 25.2%.", "In the State and related programs budget, cuts were proposed for several accounts, including the diplomatic security accounts, contributions to international organizations, and contributions for international peacekeeping activities.", "In the foreign operations budget, cuts would have been applied across all accounts, with disproportionately large cuts proposed for humanitarian assistance, multilateral assistance, and funding for bilateral development programs focused on agriculture, education, and democracy promotion.", "Both the House and Senate appropriations committees approved FY2019 SFOPS bills that included funding at higher levels than the Administration requested and closer to FY2018 funding.", "H.R. 6385, approved by the House appropriations committee on June 20, 2018, would have funded SFOPS accounts at $54.177 billion.", "S. 3108, approved by the Senate appropriations committee on June 21, 2018, would have provided $54.602 billion for SFOPS accounts.", "FY2019 began with seven appropriations bills, including SFOPS, unfinished.", "Congress and the President approved continuing resolutions to fund the affected federal agencies through December 21, 2018 at the FY2018 level (P.L. 115-245, Division C and P.L. 115-298).", "After December 21, a partial shutdown of the government, including SFOPS funded agencies, occurred. On January 25, 2019, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level (P.L. 116-5). On February 14, Congress passed, and the President later signed into law, a full year omnibus appropriation that included SFOPS funding (P.L. 116-6, Division F)." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, -1, 0, 0, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 2, 2, 2, 3, 3, 3 ] }

{ "title": [ "", "Introduction", "Perspectives on the U.S. Role in International Climate Change Financial Assistance", "In Opposition", "In Support", "Cost Estimates for International Climate Change Activities", "Findings", "Methodology", "Mitigation Costs: Net Costs", "Mitigation Costs: Capital Intensity, or Up-Front Costs", "Adaptation Costs", "Total Costs for Mitigation and Adaptation Activities in Lower-Income Countries", "Sources for International Climate Change Financial Assistance", "Private Sector Sources", "Public Interventions to Stimulate Private Sector Investment", "Public Sector Sources", "Innovative Finance", "Voluntary Actions", "Caveats Regarding Sources", "Methods for Delivering International Climate Change Financial Assistance", "Private Sector Mechanisms", "Quasi-Private Sector Mechanisms", "Public Sector Mechanisms", "Bilateral: Official Development Assistance74", "Multilateral: International Financial Institutions", "Caveats Regarding Mechanisms", "U.S. Contributions to International Climate Change Financial Assistance", "Congressional Authority, Oversight, Appropriations", "Historical Contributions", "FY2011 Enacted Budget Authority and the FY2012 Budget Request" ], "paragraphs": [ "", "While some investigators disagree with the current risk assessments of climate science, most accept the findings of the U.S. National Academies that the Earth's climate has changed over the past century and that human activities—particularly emissions of greenhouse gases (GHG) through such activities as fossil fuel use, agricultural practices, and deforestation—have very likely caused most of the observed effects. Broadly agreed findings conclude that the world faces risks from the damaging effects of a changing climate unless GHG emissions are limited. There is some political consensus internationally to try to stabilize GHG concentrations in the atmosphere at approximately 450 parts per million by volume (ppm) carbon dioxide-equivalent (CO 2 e), a volume which is projected to limit global warming to around 2˚C above pre-industrial levels. Some people argue that a 2˚C target, if attained within a sufficient time frame, might prevent dangerous anthropogenic interference with the climate system, allow ecosystems to adapt naturally to climate change, ensure that food production is not threatened, and enable economic development to proceed in a sustainable manner. Others suggest different target levels of varying stringency.\nLarge-scale financial investments are projected to be needed to meet the global demand for energy, water, transportation, heating, and other infrastructure services in countries with growing populations and rising incomes. Financial requirements would be increased if countries made such investments with the additional consideration of addressing climate change. Proponents maintain that climate-relevant investments would promote low-emissions, high-growth economic development while simultaneously protecting the more vulnerable countries and communities from the effects of climate change. Some countries have begun to make moderate adjustments focusing, in particular, on energy efficiency strategies, low-emissions energy infrastructure, and sustainable land use, land use change, and forestry practices. However, despite expressions of concern and commitment, the shift toward climate-relevant investment has been deemed slow by many. Further, while industrialized countries continue to contribute a disproportionally large share of global GHG emissions, and historically have contributed most of the global GHG emissions over the past two centuries, future emission growth is projected to arise mostly from the developing world, whose populations and economic aspirations continue to grow. Thus, even if developed country emissions are significantly curtailed, climate targets may not be met without the deployment of similar abatement efforts in the developing world.\nWhile there is little doubt that the most efficient GHG reduction strategy would require efforts from all countries, a fundamental dispute centers upon who should pay for them and how. Most, if not all, low-income countries have argued that their success in abating GHG emissions and curtailing deforestation would depend critically on receipt of international financial and other support. They argue that reducing their share of GHG emissions and adapting to the effects of climate change would incur costs above and beyond their normal economic growth trajectories. These costs are particularly challenging to countries that have low incomes compared to industrialized nations, consider alleviating poverty as their first priority, and conclude that they have contributed only a minor share of the historical GHG emissions that force climate change.\nHigher-income countries, including the United States, have pledged financial assistance to lower-income countries in such fora as the United Nations Framework Convention on Climate Change (UNFCCC, 1992). While vaguely defined, the UNFCCC pledges are not voluntary commitments, but treaty obligations, signed and ratified by the U.S. government. More recently, the Copenhagen Accord (2009) stipulated—and the UNFCCC Cancun Agreements (2010) restated—that the wealthiest countries in aggregate would commit to provide up to $30 billion \"fast start\" financing in the 2010-2012 period and to mobilize $100 billion annually by 2020 to promote mitigation, adaptation, technology transfer, and capacity building efforts in lower-income countries. The funding is to come from \"a wide variety of sources, [both] public and private, bilateral and multilateral, including alternative sources of finance.\" The Copenhagen Accord is a non-binding political agreement among countries; the implementation of the Cancun Agreements, as a product of the UNFCCC Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA), is still under negotiation by Parties.\nThis report aims to inform congressional decision-making on U.S. provisions for financial assistance to low-income countries to address climate change. It proceeds by first framing some perspectives on the U.S. role in international financial assistance for climate change. It then addresses the following questions:\n1. How much funding might be needed to address the problem? 2. What might the funding be used for? 3. Where might the funding come from? 4. How might the funding be delivered?\nThe final section of the report summarizes past and current U.S. contributions to international climate change initiatives.", "Calls continue domestically and internationally for high-income countries to increase financial assistance to low-income countries to address climate change. Many in Congress and the public at large may question why the United States should help finance other countries' efforts to reduce GHG emissions or to adapt to climate variability and change. Some claim that international financing would incur costs to the United States, or redirect funds that could be used for domestic purposes and send them overseas. Others, however, contend that international financing may offer potential benefits to the United States in terms of environmental protection, expanded commercial markets, and national security.\nBelow is a brief outline of some of the arguments in support of and in opposition to the role of the U.S. government in foreign aid in general and international climate change assistance in particular.", "Fiscal Constraints: Some critics of international climate change assistance to lower-income countries argue that the United States needs to retain available funds for domestic priorities, such as fostering renewed economic growth and creating jobs. They contend that the United States should not be burdened with higher taxes or prices for investments abroad. The burden is exacerbated during times of economic downturns, when governments are hard-pressed to generate fiscal resources to adequately address domestic challenges and maintain basic levels of public services and quality of life. For those who support some form of international development assistance, they may argue that aid should be directed to country priorities other than climate change, such as improving public health systems, water and sanitation resources, or infrastructure.\nMisuse of Funds: Many critics have claimed that international financial assistance targeted to help average citizens in low-income countries often ends up supporting inefficient and bloated bureaucracies (e.g., recipient governments, donor-funded multilaterals, or non-governmental organizations). They argue that the national and international institutions that dispense financial assistance focus on \"getting money out the door\" to lower-income countries, rather than on delivering services; emphasize short-term outputs like reports and frameworks but do not engage in long-term activities like the evaluation of projects after they are completed; and put enormous administrative demands on lower-income country governments. Bilateral and multilateral development agencies have also been criticized for the fragmentation of foreign assistance across many small and uncoordinated bureaucracies, the lack of transparency about project procurement practices and operating costs, and the proportion of funds that is misused or lost through instances of graft, corruption, and other political inefficiencies.\nPoor Results: Some critics contest the overall effectiveness of foreign assistance in spurring economic development and reform in low-income countries. Many studies have examined the effects of international assistance provided to lower-income countries, including both bilateral and multilateral mechanisms, and have returned mixed results. Conclusions range from ineffective, to highly effective, to effective \"in some countries under specific circumstances.\" The divergent results of these studies may make it difficult to reach firm conclusions and support continued contributions. Further, some commentators find that international environmental assistance poses even greater uncertainties than other forms of aid due to difficulties in assessing, measuring, reporting, and verifying environmental indicators. Some statistics have confirmed these perceptions, as the success rate for environmental projects is often far below those of education, health, or infrastructure.\nDevelopment Inefficiencies: There is no satisfactory metric on the effectiveness of international financial assistance to lower-income countries. Some critics claim that it may do more harm than good. They assert that a reliance on foreign capital fosters an unhealthy economic dependence, making poor countries poorer and economic growth slower, and leaving recipients more debt-laden, inflation-prone, vulnerable to the vagaries of the currency markets, and unattractive to higher-quality investment. They claim that grant-based assistance as a platform for development is contradictory to sustainable economic growth and can squash private sector efforts in commercial markets. They claim debt-based assistance is worse, requiring loans to be repaid at the expense of recipient country's education, health, and infrastructure investments. Further, large inflows of foreign capital may have the effect of killing off a country's export sector by causing domestic currency to strengthen against foreign ones (referred to by economists as \"Dutch Disease\"). As a counter to the practice of international financial assistance, these commentators promote a strategy of development that emphasizes the role of entrepreneurship and private markets over an aid system based on cycles of transfer flows.\nLack of Consensus on Climate Science: Some critics point to scientific uncertainties and ambiguities within the fields of atmospheric chemistry and climatology as reasons to postpone and/or reconsider international climate change assistance policies and programs. They contend that the current scientific findings on climate change may not be sufficient to warrant government action, either domestic measures to mitigate GHG emissions and adapt to the effects of climate change or international policy actions and financial assistance to support other countries' efforts.", "Commercial In terests : Some advocates argue that international climate change assistance to lower-income countries to support low-emission economic growth could benefit U.S. businesses through increased trade, commerce, and economic activity in the global marketplace. They contend that American clean energy and environmental management companies are well positioned to provide the innovative technology and services needed to meet the rapidly growing demand in emerging economies. Increased financing would not only promote development in the host country, but allow U.S. industries to make competitive inroads into rapidly expanding markets, improve the advancement and commercialization of U.S. technologies, mobilize greater investment in domestic sectors, and enhance job creation in the United States. Decreased funding may cede American influence in global markets to other economic powers still engaged with lower-income countries on environmental and natural resource issues (e.g., the European Union, China).\nInvestment Efficienc ies : Some advocates claim that the costs of responding to tomorrow's climate-related catastrophes, instabilities, conflicts, and technological needs would be much higher than the costs of working today to prevent them through emissions reductions. \"Each year of delay will lock in an increased amount of old [i.e., high-emissions] technology,\" according to the United Kingdom's Secretary of State for Energy and Climate Change. Economists often note that lower-income countries account for nearly all of the recent growth in global emissions and represent the cheapest opportunity to mitigate GHG pollution as part of a cost-effective solution. Additionally, some are concerned that locking in the developing world to a reliance on older, more GHG-intensive technologies during economic development may limit their flexibility and increase their costs to respond efficiently to future pollution abatement or climate resilient strategies. (Sometimes this is called a problem of \"stranded capital.\") Economists view some level of early investment as efficient, to hedge against these future risks.\nNatural Disaster Preparedness: Some advocates point to international climate change assistance as a means to assist in global disaster preparedness. They claim that recorded natural disasters continue to increase each year resulting in more casualties and mounting economic losses. They assert that extreme weather events have lead to increased droughts, food shortages, and resource competition, which, in turn, has lead in some cases to population displacement and migration. Some have proposed that increased international assistance to climate change adaptation programs could help avoid capital and other losses (e.g., buildings, infrastructure, etc.), minimize the redirection of strategic resources to ad hoc disaster response and urgent humanitarian needs, and avoid chronic humanitarian crises, such as food shortages, particularly for the resource poor in the least developed countries.\nNational Security: Some advocates argue that international climate change assistance could help address risks to national security. According to a 2008 National Intelligence Assessment, the impacts of global climate change may worsen problems of poverty, social tensions, environmental degradation, and weak political institutions across the developing world. In October 2010, Chairman Mullen of the Joint Chiefs of Staff highlighted that climate change creates conditions \"that could lead to failed states and make populations vulnerable to radicalization.\" Combating environmental drivers such as climate change, desertification, biodiversity loss, and deforestation could reduce the instability caused by the scarcity of, and potential competition for, resources like water, food, and habitat. Some see international financial assistance for climate change as a means to help make lower-income countries less susceptible to these threats, for the benefit of both the lower-income country and the security interests of the United States.\nInternational Leadership: Some advocates contend that international climate change assistance to lower-income countries helps the United States improve its leadership in global environmental issues. Through leadership, the United States may be able to influence and set important international economic and environmental policies, practices, and standards. But leadership—apropos of voting share—is tied directly to the level of financial contribution in many multilateral organizations. Some believe that delivering on financial pledges is an important opportunity for the United States to demonstrate credibility and support negotiations not just on environment, but on economic and security issues as well. Withdrawing commitments may cede American influence in world affairs to other economic powers still engaged with lower-income countries on environmental and natural resource issues (e.g., the European Union, China). Weakened influence could manifest in challenges to political negotiations, economic relationships, trade preferences, and future collaborations.\nInternational Obligations: Many advocates stress that the commitment to international climate change assistance to lower-income countries is codified in current multilateral agreements. Under the United Nations Framework Convention on Climate Change (UNFCCC), signed in 1992, the United States and other industrialized countries listed in Annex II of the Convention committed to provide financial and technical assistance to help lower-income countries' efforts to meet their UNFCCC obligations. While these commitments are legally binding, they are vaguely defined, making them impractical to quantify and enforce. More recent negotiations have striven to produce more quantified figures, and the Copenhagen Accord of 2009 produced an agreement by the wealthiest countries to provide $30 billion of \"fast start\" financing in the period 2010 to 2012 and to seek $100 billion annually by 2020. However, these financial targets are not legally binding, and accounting and enforcement remain difficult.\nEquity Issues: Some advocates consider international climate change assistance to lower-income countries a moral responsibility and a matter of climate equity. Not only have today's high-income economies generated about 80% of past fossil fuel-based emissions, but those same emissions have helped carry them to high levels of social and economic well-being. Past behavior arguably calls for the industrialized countries to provide funding to reduce the current and future risks imposed on others.", "The financial costs of coping with climate change may reach trillions of dollars. These costs would aim to address some combination of mitigation activities (i.e., actions taken to eliminate or reduce the long-term risk and hazards of climate change) and adaptation activities (i.e., actions taken to adjust to climate change, moderate potential damage, or cope with the consequences). Estimates of the projected costs vary widely depending upon assumptions made about the accepted levels of pollution, the ambitiousness of the global response, its structure, timing, and implementation, the potential climate-related damages, the affected sectors, as well as the methods of sourcing and delivering the necessary funds. The stricter the emissions target, the higher the estimate. The longer the response is delayed, the more threatening the damages may be, and the greater the resources required to respond to the threats. Bearing the costs of action (or inaction) are individuals, firms, local communities, national governments, and/or the international community.", "A variety of international institutions and non-governmental organizations have used various climate change mitigation and adaptation analyses to estimate the climate-related financing needs for lower-income countries. Table 1 reports findings from a variety of studies on both the \"net costs\" and \"associated financing requirements\" for mitigation and adaptation efforts in lower-income countries. \"Mitigation costs\" refer to net incremental costs as factored over the lifecycle of the investment; and \"mitigation financing\" refers to the up-front capital investment needed over and above the business-as-usual (BAU) investment. Both mitigation costs and mitigation financing are estimated for stabilizing atmospheric concentrations at 450 ppm CO 2 e; adaptation investments are estimated for a variety of assistance categories for both 2010 and 2030.\nFocusing on the 450 ppm target, mitigation net costs in lower-income countries range between $150 billion and $190 billion a year by 2030. If the estimates for associated financing needs are included, the total costs increase to $287 billion to $614 billion a year. For adaptation, the most comparable estimates are the medium-term figures produced by the UNFCCC and the World Bank, which range from $30 billion to $110 billion annually.\nCurrently, resources committed to address mitigation and adaptation in lower-income countries cover approximately 5% of the aforementioned estimates. One recent study has contributions for mitigation-specific assistance at approximately $20 billion annually. Very few studies have addressed current contributions for adaptation assistance. Many claim that assessing climate-related financial and investment flows is a formidable challenge, given the inconsistencies across reporting systems, the many data gaps (with the further challenge of identifying the contributions of underlying finance, which unlike specific climate finance is not reported as such), and the complex web of flows (with the possibility of double counting).", "Estimates of the total net costs and financing requirements needed for mitigation and adaptation activities in lower-income countries are often based on economic models of pollution abatement costs and/or adaptation investments aggregated across sectors and regions. This section discusses in more technical detail the economic modeling behind the various cost estimates presented in the previous section. Due to characteristic differences, estimates of net costs and financing requirements are often differentiated between the costs of mitigation and the costs of adaptation.", "Mitigation costs refer to the costs of actions taken to reduce or reverse the forces that contribute to global climate change. In higher and lower-income countries alike, mitigation measures aim to reduce current levels of emissions and to emphasize low-GHG development. Strategies include transitioning to a low-emissions energy supply; capturing the opportunities in energy efficiency improvements in buildings, transportation, and industry; reducing deforestation and improving sustainable forest management to better serve as GHG emissions sinks; and employing more low-emissions and sustainable agriculture practices. In the future, it could also entail actions that remove carbon dioxide from the atmosphere and sequestering it permanently, or other geoengineering technologies.\nEstimates have been made of the incremental costs of various mitigation strategies. Figure 1 shows one example of what analysts refer to as an \"Emissions Abatement Cost Curve.\" The purpose of the curve is to summarize the many emission reduction strategies available, and to characterize their emission reduction potential as well as their net costs, if the strategy is \"pursued aggressively.\" The curve charts the amount of potential reductions (expressed along the horizontal axis in gigaton of CO 2 e abated per year) against the cost of specific measures (expressed along the vertical axis in cost per ton of CO 2 e abated). Of particular note, the curve shows that many abatement opportunities exist with net negative costs (approximately one-third of potential reductions), meaning that the measures may pay for themselves within the useful lifetime of the investment through efficiency savings (e.g., switching from incandescent light bulbs to LEDs would both reduce emissions and save money in the long run due to the extended product life and energy efficiency of LEDs). These negative cost options (shown on the left of the graph) are mainly found in energy efficiency measures in building, transportation, and industry as well as some fuel switching, recycling, and waste management practices. For emission reduction strategies in the agriculture and forestry sectors (e.g., improved agriculture practices, afforestation, reforestation), most options have low to moderate costs. Many of the low to moderate cost options fall within the curve's margin for error and are arguably breakeven estimates. Sectors with relatively high cost reduction opportunities are in some energy production options, with some emerging technologies having even higher costs than are represented on the graph given their nascent state of development.\nFigure 1 demonstrates that ideally if all possible mitigation measures were taken on the cost curve in strict order from lowest-cost to higher-cost in sequence (i.e., from replacing all residential incandescents with LEDs all the way up to retrofitting all coal-fired power generation with carbon capture and storage technologies), global emissions abatement of 38 GtCO 2 e could be achieved in 2030. At this rate, the average cost of the abatement opportunities would be $5 per tCO 2 e in 2030, and the total cost for realizing the whole curve would be $187.5 billion in the year 2030. Transaction and program costs—not represented on the curve—are often estimated at an average of between $1.25 and $6.25 per tCO 2 e abated, making the total annual global cost approximately $250 billion to $375 billion by 2030. While an abatement cost of $6 to $12 per tCO 2 e is reasonable in light of current economic discussions on climate change, many commentators stress that mitigation costs are extremely sensitive to policy choices. They increase steeply with the stringency of the emission reduction target and with the desired degree of certainty of reaching it. Global mitigation costs would likewise rise to the degree that the world deviates from a least-cost emission pathway (e.g., not tapping low cost reductions in lower-income countries in the initial mitigation effort would increase global costs significantly). Further, the failure to allow for all mitigation opportunities would likewise increase overall costs (e.g., only concentrating on energy efficiency measures and not on forest and agricultural management could increase overall costs).", "Many commentators note that low-emission investments for mitigation activities often have high up-front capital costs, followed later by overall savings in operating costs. Figure 2 charts the incremental capital needs, or \"capital intensity costs\" (i.e., the extra investment needed at the onset of a project over and above the business-as-usual (BAU) technologies), as an alternative metric to the net cost curve of Figure 1 (which charts the additional net costs of a low-emission project over its entire lifetim e ). Figure 2 shows that in some cases the difference between capital intensity costs and net costs can be as much as a factor of two to four, depending on the rate of opportunity costs assumed. The McKinsey & Company estimate concludes that the total global upfront investment needed for abatement measures would be $1,012.5 billion per year in 2030—incremental to BAU investments. For financially constrained countries, specifically many lower-income countries, these high up-front capital costs can be a significant disincentive to invest in low-emission technologies.\nThe McKinsey & Company estimate outlined above is just one of many assessments conducted on financial needs. See Table 1 above for other mitigation cost estimates from a variety of studies.", "Adaptation costs refer to the costs of adjustments made in natural or human systems in response to actual or expected climate change and its effects. Estimates of adaptation costs have focused on the additional amount of investment needed to reduce the impact of anticipated future damages caused by climatic trends or events, including measures to increase resilience, reduce the impacts of anticipated disasters, and cope with the aftermaths. Examples of adaptation measures include employing climate-resistant crop varieties, improving irrigation systems, integrating sustainable land management into agricultural planning, protecting water resources, managing coastal zones, designing infrastructure for extreme weather or for sea-level rise, and improving public health services.\nFrom a global perspective, the adaptation challenge may be greatest in the developing world. Lower-income countries are generally more vulnerable to climate change because their economies are more dependent on climate-sensitive sectors such as agriculture, fishing, and tourism. Further, with lower per capita incomes, weaker institutions, and limited access to technology, lower-income countries are considered to have less adaptive capacity. See Figure 3 for one analysis of vulnerability and social capacity by country and region. The figure shows that in many cases a lower social capacity (as measured by literacy, education, health, and governance indexes) may make countries more vulnerable to the impacts of climate change.\nEstimating the costs of adaptation with precision is difficult, not only because adaptation measures are widespread and heterogeneous, but also because the measures are embedded in the broader network of economic development strategies. While any investment in education, health, sanitation, and security, for example, may constitute good development, it also may help reduce socioeconomic vulnerability to both climactic and non-climactic stress factors. A variety of studies have tried to estimate the incremental costs of adaptation in low-income countries. Methods, definitions, and scopes of adaptation in these studies vary, accounting for many of the differences in cost estimates. In particular, many estimates assume that some portion of the incremental costs will be covered by the recipient countries themselves. Some studies attempt to consider \"all\" costs of adaptation to climate change and resulting damages (although none are comprehensive); some include just large-scale adaptation costs (i.e., not private measures taken by individuals); and some try to discern just the need for public financing for adaptation. The UNFCCC Secretariat estimates that the additional annual investment and financial flows needed worldwide would be on the order of $49 billion to $171 billion by 2030, with $30 billion to $73 billion needed for lower-income countries (the largest element of uncertainty in the UNFCCC estimate lies in the cost of infrastructure adaptation). Other sources have produced varying estimates. See Table 1 above for adaptation cost estimates from a variety of studies.", "A variety of international institutions and non-governmental organizations have used various climate change mitigation and adaptation analyses to estimate the climate-related financing needs for lower-income countries. One example by Project Catalyst ( Figure 4 ) sums the incremental costs for the period 2010-2020 to give an average total of $45 billion per year for mitigation needs in lower-income countries. Factoring in a higher rate of investment in lower-income countries and covering transaction costs and specific funding for emerging technologies brings the total financing requirement for abatement in lower-income countries to around $100 billion annually. Including projections for the additional costs of adaptation activities gives a final estimate of $126 billion per year for the period 2010-2020 in lower-income countries.", "As outlined in the previous section, trillions of dollars may be advocated over the coming decades to provide scaled-up, new, additional, predictable, and adequate financing for lower-income countries to enable and support their actions on climate change. These investments would aim to upgrade and expand energy, industry, and transport infrastructure; to manage land use, land use changes, and forestry practices; and to support the implementation of adaptation activities for reducing climate vulnerability and building climate resilience. Having estimated the potential financial costs for climate change investment, the next step in the process would be to consider the sources from which these funds may be generated. While markets that are privately constituted and self-regulated have delivered moderately to climate change investments world-wide, public institutions—including national governments, international organizations, and official financing mechanisms of the UNFCCC —continue to be key drivers for climate change investments, specifically in lower-income countries. In the past, these institutions have relied heavily on government revenues to finance their activities. But, with climate-related costs rising into the tens or hundreds of billions of dollars a year, it is unlikely that direct budget contributions from governments can meet the demand. Other sources of finance may be sought, and many proposals exist.\nPotential sources of international climate change financing for lower-income countries can be divided into five broad categories: (1) private sector; (2) public interventions to stimulate private sector investment; (3) public sector; (4) innovative finance; and (5) voluntary actions. Most potential sources of finance would require some measure of government action or oversight—either directly, through budget contributions or a transfer of funds, or indirectly, through state-sponsored regulations or other incentives to leverage private sector investment. See Appendix A for an extended glossary of terms related to the various sources of climate finance discussed in this section.\nEach of the categories identified above could potentially generate funds to address climate change in lower-income countries. Each has advantages and disadvantages. There is no single set of criteria for comparing these options. Some of the criteria employed by commentators include the potential magnitude of funds that could be generated by each source; the economic and/or the GHG-related efficiency of each source; the practicality and predictability of generating funds from each source; the plausibility of assessing the \"additionality\" of each source; the overall accessibility and transparency of the funds provided and their use; and the equity and incidence effects as expressed among countries or between higher and lower-income countries. A brief summary of some of the more significant outstanding issues regarding the choice of sources is included in a discussion at the end of this section \" Caveats Regarding Sources \"; and a tabulated comparison of the various sources is offered in Appendix B .", "Private capital markets can provide one source for mobilizing financing for low-emission investments in lower-income countries. Instruments such as foreign direct investment, portfolio investment, microfinance, and public-private partnerships could be promoted to scale up private financing for climate change mitigation and adaptation activities. Incentive structures may need to shift in order to favor such investment, and economic and/or regulatory policies may need to be implemented to define targets and raise the profitability of alternatives. The section below outlines possible sources for international climate change financing in a privately constituted and self-regulated market. Public sector interventions to stimulate private capital investments are addressed in the next section.\nForeign Direct Investment : Foreign direct investment is the long-term participatory investment in the ownership of productive assets—such as factories, mines, and land—by a multinational corporation in a developing country's energy, industry, or transport sector. It can be a relatively stable source of financing. It has the greatest advantages in mitigation activities, in terms of transferring technology and standards which could allow economic development to leapfrog into more climate-friendly sectors such as energy efficiency and renewable energy. Many high-emission sectors—such as road transport, metals, mining, chemicals, timber, and cement—are dominated by large multinational corporations, and their investments and practices may likely have a big influence on the timing of alternative development pathways in lower-income countries. However, given that foreign direct investment tends to lag rather than lead economic growth, it is unlikely to play a significant role in the early stages of a shift onto such a development pathway, particularly given the initial high degree of uncertainty and the absence of the in-country inputs that large international firms need in order to operate efficiently.\nPortfolio Investment : Portfolio investment is the purchase of stocks, bonds, and money market instruments by foreigners for the purpose of realizing a financial return but not resulting in foreign management, ownership, or legal control. It could also be a stable source of international climate change financing. Investment could be mobilized through venture capital funds or specific \"green\" funds. It could appeal to investors willing to allocate investments to options that might generate less return but have greater potential in terms of climate change mitigation and socially responsible business practices. Currently, almost all \"green\" investment opportunities are concentrated in the more industrialized countries or the countries with emerging economies. Funds made available through this channel to lower-income countries have been both limited and skewed in favor of one or two countries. Without other incentives, the amount of resources that can be raised is likely to remain quite small.\nMicrofinance : Microfinance is the provision of financial services, in the fora of small loans at market value, to lower-income country clients who traditionally lack access to banking and related services. It could serve as another vehicle for mobilizing local private resources for investments in climate-friendly development. Over the past three decades, microfinance has grown dramatically, with more than 7,000 microcredit institutions in 2006, serving about 80 million people in about 65 countries. Climate-relevant microfinance has expanded beyond merely encompassing programs of credit provisioning to include schemes of microsavings and microinsurance. Given the close links between poverty reduction and climate vulnerability, scaling up microfinance has been considered a possible source of finance for climate adaptation programs. However, observers note that scaling up microfinance for long-term investment in productive activities and sustainable development would require support through a broader development strategy, including investments in infrastructure and human capital.\nPublic-Private Partnerships : Public-private partnerships are business ventures funded and operated through a partnership between government and one or more private companies. They involve a contract between a public-sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. Public-private partnerships have helped stimulate private financing for energy efficiency and renewable energy projects in lower-income countries. Likewise, they have assumed a growing importance as a vehicle for financing climate change adaptation programs, in the form of infrastructure projects and the delivery of health services.", "Much of the economic policy debate on climate change has been dominated by the search for market-based solutions to the problem of market failure (i.e., the external costs of GHG pollution). Successful policy would address the externalities of GHG pollution in the market and reveal the costs of choosing high-emissions over low emissions technologies. Once determined, these costs could be internalized through economic incentives (e.g., setting emissions levels or compliance pricing, etc.) to help drive pollution abatement. Funds for public or private sector contributions to international climate change financial assistance for lower-income countries could be derived and transferred in any number of ways from the finances generated by the market-mechanism.\nIn general, market-based mechanisms to reduce GHG emissions specify either the acceptable emissions level (quantity) or the compliance costs (price) and allow the marketplace to determine the economically efficient solution for the other variable. For example, tradable permit programs set the amount of emissions allowable under the program (i.e., the number of permits available limits, or \"caps,\" allowable emissions), while allowing the marketplace to determine what each permit will be worth. Likewise, carbon fees set the maximum unit cost (per ton of CO 2 e) that one should pay for reducing emissions. Private decisions would determine how or how much pollution actually gets reduced. In one sense, preference for a carbon fee or a tradable permit system depends on how one views the uncertainty of costs involved and benefits to be received.\nTradable Permit Systems : Tradable permit systems—better known as \"cap and trade programs\"—set an overall cap on GHG emissions and then issue tradable permits to firms which would allow them to emit specified quantities of GHG. Firms are required to hold a number of permits equivalent to their level of pollution. Those firms that need to increase their permissible quantities would purchase permits on the market. Those that could reduce their emissions more cheaply could potentially sell their allowances on the market. Some cap and trade programs would auction all permits during the initial issuance. Some programs would phase in permits through a period of free or reduced price allocations of permits. Some programs include a mechanism whereby firms could gain emission credits through pollution reductions performed in economic sectors outside of the regulated market (e.g., agriculture, forestry, or in countries or regions not covered by the program). This is referred to as an \"offset\" market. In each case, revenue for international climate change assistance can be generated in a number of ways.\na. Revenues from domestic auctioning of emission allowances in domestic emission trading schemes : This would involve auctioning of domestic credits (as in the EU Emission Trading Scheme phase III, or any potential domestic cap and trade program) and transferring some part of associated revenues to international climate change financing. b. Revenues from international auctioning of emission allowances in international emission trading schemes (such as Assigned Amount Units under the Kyoto Protocol): An Assigned Amount Unit (AAU) is a tradable \"carbon credit\" representing an allowance to emit GHG under the UNFCCC Kyoto Protocol emissions trading market. AAUs are issued up to the level of initial \"assigned amount\" of an Annex 1 Party. Some countries support sourcing revenue for international climate change activities by retaining some allowances from the Annex I countries and then auctioning them. c. Revenues from offset levies : This would involve withholding a share of offset revenues from emissions trading markets—such as the Kyoto market or any domestic market—as an international source of climate change financing. This is currently done with the Kyoto Protocol's Clean Development Mechanism (CDM), which capitalizes the UNFCCC Adaptation Fund through a 2% levy on the proceeds from its certified emission reductions.\nEmission-Based Fees, and Other Levies : An emission-based fee is an environmental fee that is levied on the GHG content of fuels or other sources of emissions. By increasing the cost of emissions, emission fees raise public revenue, any or all of which could be transferred and used for international climate change assistance to lower-income countries. Emission fees are occasionally referred to as \"carbon taxes\"; under guidelines of the U.S. Office of Management and Budget, a \"tax\" is primarily for generating revenues, while a user (i.e., emissions) fee is primarily to charge for an entity's use of a resource (e.g., the atmosphere as a place to discharge waste emissions).\na. Revenues from GHG fees : This would involve a tax on GHG emissions in countries raised on a per ton emitted basis. b. Revenues generated from taxes on international aviation and shipping : This would involve either a levy on maritime bunker/aviation jet fuels for international voyages, or a levy on passenger tickets of international flights. c. Revenues generated by removing fossil energy subsidies : This would involve public funds made available by the removal of fossil energy subsidies which could be diverted towards international climate change financing. While not a levy per se, redirection of subsidy grants or increases in tax receipts by reducing credits and deductions would function in a comparable economic manner to an emission tax on consumers. d. Revenues from fossil fuel extraction royalties/licenses : This would involve a redirection of a portion of existing government receipts associated with domestic fossil fuel production for use in international climate change financing.", "Allocating resources in a national public budget directly to international climate change assistance is a straightforward way for governments to finance activities in lower-income countries, and historically public funding has played an important role in both mitigation and adaptation financing. In practice, public funds may be mobilized similar to, or as part of, official development assistance (ODA); or, public funds may flow through international financial institutions as grants or grant-equivalent (i.e., \"concessional\") loans. While some see public funds as a practical, equitable, and potentially predictable source of international climate change financing, political acceptability in the donor countries over the longer term may depend on national circumstances and on the size of the contribution. Further, global fiscal cycles can place public finances in many high-income countries under extreme pressures and could make it difficult to generate sufficient and reliable financial flows over the required period or in the required order of magnitude.\nVoluntary Budget Contributions: Voluntary contributions involve public revenues provided to recipient countries—either directly or by international financial institutions—through national budgetary decisions. Voluntary contributions have played—and likely may continue to play—the most important role in publically funded international climate change finance. Voluntary contributions may draw revenue from a domestic base (e.g., through taxes or fees) and allow for contributing governments to (1) pursue different options at different times as public opinion evolves, (2) divert only a portion of revenue from a particular source for international climate change financing, rather than the entire revenue flow, and (3) retain control over annual spending, rather than provide some kind of automated mechanism. But voluntary contributions in many countries are subject to legislative decision making and annual appropriations, making predictability and reliability difficult to ascertain.\nMandatory or Assessed Budget Contributions : Some lower-income countries have proposed that UNFCCC Annex I parties contribute from 0.5%-1.0% of their gross national income to climate change financing in non-Annex I countries, to be channeled through a multilateral fund under the authority of the Convention. This would generate approximately $150 billion to $300 billion per year at pre-crisis income levels of major Organization for Economic Cooperation and Development (OECD) economies. Others have proposed assessed contributions formulated on the basis of some combination of a contributing country's GHG emissions, population, and gross domestic product, in accordance with the principle of common but differentiated responsibilities and respective capabilities. Supporters propose that mechanisms should be put in place to make contributions legally binding. The source for these funds would be similar to voluntary contributions (i.e., domestic taxes or fees).\nPublic Debt Instruments: Public debt instruments raise money for public entities by borrowing from bond markets. Most high-income country governments can borrow money at a discount because their chance of default is considered low compared to privately held companies. Multilateral Development Banks (MDB) and other International Financial Institutions (IFI) use the same principle for raising capital for lower-income country governments. Using their good credit rating, which is based on the fact that they are backed by the capital subscriptions of developed country governments, IFIs and MDBs borrow money at favorable conditions to lend at a lower interest rate or accept a higher risk, a benefit that they can pass on to their clients in the interest of development and climate protection. Increased capital subscriptions from higher-income countries would allow these institutions to increase lending to lower-income countries.", "Despite the spectrum of sources available for international climate change financing, many observers consider current funding inadequate, and look to more innovative methods of finance. Various proposals have been made for raising revenues for climate action from sources not closely linked to GHG emissions. While these proposals have the capacity to generate large quantities of financial assistance, they may be perceived as arbitrary in their choices and by the numerous competing causes that could benefit from their financing. Two of the more heavily discussed proposals include a financial transaction tax and special drawing rights.\nFinancial Transaction Tax : A Financial Transaction Tax (FTT) is a levy on international financial transactions. The level of estimated revenues from the FTT is driven by the tax base, the tax rate, and the elasticity of the transaction volume to the tax rate. A global FTT, as currently debated, would be a new and additional source for climate finance. Strong international coordination and allowances for international implementation could increase the efficiency of such a source. However, critics point out that FTTs are unconnected to GHG emissions in any practical way, and the unresolved issues of incidence on both higher and lower-income countries would make it difficult to implement universally.\nSpecial Drawing Rights : Special Drawing Rights (SDRs) are an accounting mechanism—sometimes called \"virtual currency\"—typically held as a reserve asset in financial organizations such as the International Monetary Fund (IMF). SDRs supplement IMF member countries' official reserves and generate liquidity in the event of balance of payments difficulties. The value of an SDR is based on a basket of key international currencies. In some proposals to capitalize a fund for climate change financing, SDRs could be issued in exchange for real currency to generate revenues. In other proposals, bonds could be issued on the back of paid-in SDRs to generate liquidity and contributors would receive an equity stake in the fund proportional to their contribution. In either case, the IMF would not necessarily be the entity issuing these proposed SDRs or managing the system. Most policymakers have not supported the use of SDRs to capitalize resources for climate change finance because the effort would undermine the primary purpose of the SDR system, present legal and political/financial challenges in implementation, and offer few if any advantages over traditional capitalization.", "Some sources for international climate change financing may be found in philanthropic or voluntary markets. Proponents note that some companies and some consumers have already begun to implement voluntary changes and have already begun to make voluntary contributions in order to reduce GHG emissions. Many believe that absent more aggressive governmental intervention, it is unlikely that these trends would be quantitatively sufficient and timely enough to make a significant impact on climate change. Voluntary action may also hurt relative competitiveness and increase costs in the short term, reducing incentives to adopt more stringent standards in the future.\nPhilanthropy : Many philanthropic organizations already provide contributions to climate change mitigation or adaptation financing in lower-income countries. Many work closely with nongovernmental and civil society organizations to promote education, knowledge sharing, and human capital advancements to further climate change investment in lower-income countries.\nVoluntary Offsets : Voluntary offsets are \"carbon neutral\" certificates that are sold by some private entities in exchange for climate-related services (e.g., a contribution to an international climate change fund). Companies currently sell offsets in exchange for assurance that the funds will be used to reduce GHG emissions (e.g., by planting trees). This may differ from general philanthropy in the sense that funds are, in principle, directly in exchange for quantified emissions reduction performance and could be issued through aggregators of small, diversified projects or through brokers.", "The Role of Market s : The economic debate within international climate change policy has been dominated by assessments of market-based mechanisms aimed at changing price incentives so that investment in low-emissions development becomes more attractive (e.g., cap and trade, carbon fees, loan guarantees). Many agree that private investment will likely have a predominant role to play in any low-emissions economic future, and that establishing a price on GHG emissions will likely have a part in any effective policy agenda. However, concerns remain whether such mechanisms can induce the required shifts in production and consumption patterns and mobilize the necessary investment. Some assert that price mechanisms are unreliable guides in cases where investments are large, where returns are not immediately visible, and where conditions are dependent upon unpredictable policy initiatives. The uncertainties in investments are heightened when the climate and development challenge takes place against a backdrop of systemic financial market failure and natural resource price volatility. As such, some policymakers believe that market mechanisms would contribute only a partial role in a larger package of measures that includes a reliance on regulations and large-scale public investments.\nThe Role of Governments : Notwithstanding economic considerations, the \"private funding\" versus \"public funding\" debate also has political, legal, and equity components. For example, some recipient countries contend that donor governments should provide public funds as the main source of climate change assistance because they understand climate finance as an international equity issue, with contributions serving as reparation for past environmental loss or damage. Others assert that developed country governments—not private corporations—have signed onto legally binding international environmental agreements to provide assistance to lower-income countries. Some may believe public monies would be more direct and easier to generate, and therefore more predictable and sustained. They may not consider or recognize the challenges in some countries to appropriating federal funds for international purposes. Similarly, some recipient countries may be suspicious of foreign private investment and would prefer the funding to be under the control of local governmental decision-makers, hoping this would better reflect local priorities and indigenous cultures. Conversely, donor countries tend to underscore the costs of extending such financing, including the direct outlays of funds, the secondary costs to their domestic economies for investing abroad at concessional terms, and the losses accrued by passing funds through governments institutions or other intermediaries.\nThe Requirement for Scaled Up, New and Additional , Predictable and Adequate Financing : Most, if not all, low-income countries have stated that fulfilling their commitments under the UNFCCC would depend on financial and technical support from higher-income countries. As noted above, they seek resources that can be defined as \"scaled up, new and additional, predictable and adequate.\" While the term \"scaled up\" presumes an increase in funding from existing sources, the terms \"new,\" \"additional,\" and \"adequate\" are subject to diverse interpretations and controversy. \"New\" funds could signify entirely unique funding sources arising from new public levies, new international allocations, or new multilateral mechanisms; or, it could simply refer to funds from a new fiscal year, a new multilateral replenishment contribution, or a new domestic or international program that takes the place of an expiring one. Some are concerned that funding is not shifted merely from one type of development assistance to climate change assistance, with little or no increase comparable to the stated needs. \"Additional\" is meant to denote an increment above and beyond \"business-as-usual.\" However, speculating as to counterfactual development assistance trajectories that would have taken place if not for the \"additional\" funding is rife with debate. Finally, the term \"adequate,\" with respect to needs, is a wholly subjective quantity.", "The previous section outlined many of the existing and proposed funding sources for investment in climate change mitigation and adaptation activities in lower-income countries. The next step would be to consider the methods through which these funds could be transferred from contributing countries to their recipients. A variety of mechanisms, organizations, and institutions for disbursing international climate change financing already exists. All have a role in catalyzing climate action: mobilizing additional resources; reorienting public and private flows toward low-carbon and climate-resilient investments; supporting the research, development, and deployment of climate-friendly technologies; and strengthening the institutional capacities of recipient countries. Mechanisms can be divided into three broad categories: (1) private or quasi-private sector, (2) public sector bilateral, and (3) public sector multilateral. Foreign Direct Investment (FDI), Export Credit markets, non-concessional lending at the Multilateral Development Banks (MDB), and the various Kyoto Protocol market mechanisms at the UNFCCC (e.g., the Clean Development Mechanism (CDM)) would be classified as private or quasi-private sector mechanisms. Public sectors mechanisms would include contributing countries' Official Development Assistance (ODA) as well as many of the multilateral environment and development trust funds (e.g., the Global Environment Facility (GEF)) and the concessional lending windows housed at the various institutions at the World Bank Group.\nFigure 5 presents a comparison of the financial flows for energy and infrastructure development—including development specific to climate change mitigation—in low-income countries per annum (in this example, the analysis compares flows for the year 2007). The figure shows that total investment in all \"mitigation-relevant\" sectors (i.e., funding for economic development in all key sectors that shape future GHG emissions in developing countries, including energy, transport and water infrastructure, industry, waste management, agricultural, and forestry) amounted to an estimated $316 billion, of which over 80% was from private sector funds. It should be noted that \"mitigation-relevant\" investments need not be GHG reducing investments (e.g., both wind power generation and fossil fuel power generation are \"mitigation-relevant\" investments). \"Mitigation-specific\" investments (i.e., investments in which the primary objective is to reduce GHG emissions) amounted to $20 billion in 2007—or 6% of total key sector investment—of which approximately 60% was from private sector funds.\nAll of the mechanisms identified above could potentially deliver funds to address climate change in lower-income countries. Each has advantages and disadvantages, and there is no single set of criteria for comparing these options. Many critics contend that the overall architecture of financial mechanisms to address climate change is underfunded and unnecessarily complex. The array of funds and financial institutions lack both strategic mandate and adequate coordination, leaving many gaps, overlaps, and inefficiencies. Divisions have arisen over the proper financial instruments to employ in lower-income countries (e.g., grants or loans) as well as the role shared by the public and private spheres. A brief summary of some of the more significant outstanding issues regarding the choice of sources is included in a discussion at the end of this section under \" Caveats Regarding Mechanisms .\"", "The sheer magnitude of the required investment for climate change mitigation and adaptation activities necessitates capital flows from the private sector. Currently, the private sector accounts for over 85% of global investment in those economic sectors relevant to climate change mitigation and adaptation activities, although governments largely control the underlying infrastructure investments that affect the opportunities for low-emissions economic development. Similarly, public sector financing has been more prominent in low-income countries—particularly the least developed countries and the small island states—in which private entities are still reticent to invest. To this point, private capital markets have filled in the gaps in climate change financing in lower-income countries, and, in some cases, have taken the lead in market-ready mitigation investment to create a low-carbon economy, such as energy-efficient machinery, cleaner cars, and renewable energy.\nForeign Direct Investment : Over the past two decades, the international climate change agenda has shared a stage with an expanding global economy. As such, particular attention has been paid to foreign direct investment (FDI) in lower-income countries to address climate change. FDI has many potential benefits, including financing infrastructure expansion without contributing to public debt, supporting technology and knowledge transfer, and acting as a catalyst for further capital inflows. Despite considerable efforts to attract FDI in the last several years, actual levels of such investment into the energy and industry sectors in many countries with economies in transition have been moderate. Similarly, FDI tends to lag rather than lead economic growth, and, as such, is not likely to play a significant role in the early stages of a shift to lower-emission development trajectories. Mobilization of the necessary capital resources requires an attractive investment climate—a business-friendly environment, favorable macroeconomic performance, and a regulatory environment that is predictable, fair, transparent and efficient.", "Several mechanisms function predominantly in the private sector but were set up initially by public sector entities or are currently backed by guarantees (whether financial or institutional) from them.\nExport Credit Agencies: Export Credit Agencies (ECA) are private or quasi-governmental financial institutions or agencies that provide financing to domestic companies for their international trade activities. ECA services can include such instruments as direct loans, loan guarantees, and insurance for companies in order to help promote exports. These programs are implemented in cases where the private sector is unable or unwilling to provide financing to ensure equitable competition for U.S. exporters due to potential commercial, exchange rate, or political risks and uncertainties in overseas markets. The primary objective of ECAs is to remove the risk of repayment to exporters by shifting the financial burden of uncertainty onto themselves, for a premium. The U.S. Export-Import Bank and the Overseas Private Investment Corporation are two examples of export credit and overseas investment agencies connected to the United States government.\nDevelopment Banks: Non-Concessional Lending : The International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC) are the facilities within the World Bank Group that make non-concessional or \"hard\" loans to middle-income countries as well as provide services for private sector ventures and projects in developing countries. While similar in structure to a commercial lending facility, the IBRD focuses primarily on investments that support poverty reduction, economic development, and global public goods, including food security and climate change. The IBRD currently has plans to increase lending to support renewable energy and energy efficiency projects in lower-income countries, and it continues to serve as a center for research and knowledge-sharing on development practices, promoting lessons learned and identifying innovations to combat the effects of climate change. The regional banks in the World Bank Group have similar non-concessional lending windows. The United States supports the IRBD through its capital subscription to the IBRD General Capital Increase (GCI).\nUNFCCC Kyoto Protocol Mechanisms : The UNFCCC introduced three market-based mechanisms to assist countries with commitments under the Kyoto Protocol to limit or reduce greenhouse gas emissions. The mechanisms include International Emission Trading, the Clean Development Mechanism, and Joint Implementation. Most relevant to developing country assistance, the Clean Development Mechanism (CDM) allows entities with emission-reduction or emission-limitation commitments under the Kyoto Protocol to implement emission-reduction projects in lower-income countries in order to earn saleable certified emission reduction (CER) credits which can be counted towards meeting Kyoto targets. Though the CDM has been used far less than many had initially envisioned (in part because of slow processes and governance issues), its board says that it has issued more than 1.7 billion tons of CO 2 e GHG reductions ($2.9 billion expected by end of 2012), and has leveraged US$33 billion from investors in 2007 alone. Similar programs include the World Bank's Carbon Finance Unit, which uses donations from private and public entities to purchase GHG emission reductions in client countries.", "As a complement to private sector investment, many countries also contribute funds to climate change initiatives in lower-income countries through various public sector mechanisms, organizations, and institutions. Governments may choose to contribute these funds either directly to recipient countries (i.e., bilateral assistance) or in combination with other donors through an international institution (i.e., multilateral assistance). Bilateral assistance is often provided through a contributing country's development agency (e.g., U.S. Agency for International Development (USAID)). These direct and long-standing relationships between donor and recipient countries' development agencies can enable cooperative implementation plans with respect to environmental issues. Many climate change initiatives share a sensitivity to other development sectors (e.g., agriculture, biodiversity, health, and infrastructure) and provide an opportunity to implement innovative cross-sectoral programs. Further, bilateral assistance gives contributors more control over where the money goes and how the money is spent. For example, contributing countries may have more flexibility to allocate funds to countries that are of geopolitical strategic importance, but not facing the greatest development needs, than might be possible by providing assistance through a multilateral organization. By building a clear link between the contributing country and the recipient country, bilateral assistance may also garner more goodwill from the recipient country than if the funds had been provided through a multilateral organization.\nMultilateral organizations offer different benefits for contributing countries. Multilateral organizations pool the resources of several contributors, allowing countries to share the cost of development projects (often called burden-sharing). In this way, one country's multilateral assistance is said to \"leverage\" additional funds from other contributing countries, as well as from implementing agencies, non-governmental organizations, the private sector, and even the recipient countries themselves. Further, long-standing and established multilateral institutions dedicated to climate change initiatives and sustainable development practices may hold a level of expertise and may benefit from knowledge carry-overs that are not as prevalent in the smaller bilateral assistance agencies of some contributing countries. Additionally, contributing countries may find it politically sensitive to attach or enforce policy reforms to bilateral assistance, and multilateral organizations can usefully serve as a shield for imposing and enforcing conditionality that may be politically sensitive to attach bilaterally. Finally, many believe that providing funds to multilateral organizations plays a role in a contributing country's leadership in the world economy.\nTable 2 lists some of the most prominent bilateral and multilateral financing mechanisms for climate change activities in lower-income countries. Below are descriptions of the various public sector mechanisms currently employed by the United States. Commentary on the effectiveness of each mechanism can be found in the topical discussion at the conclusion of this section as well as in the respective CRS reports footnoted under each heading.", "Official Development Assistance: Official Development Assistance (ODA) programs, funded primarily through the U.S. Agency for International Development (USAID), aim to advance and sustain U.S. engagement with specific developing countries on critical global issues such as food security and climate change. ODA-funded programs are designed to support the efforts of recipient governments and their private sector and non-governmental partners to implement the political and economic changes needed for sustainable practice. USAID has targeted \"adaptation,\" \"clean energy,\" and \"sustainable landscape\" programs as the three pillars of the Obama Administration's Global Climate Change Initiative to assist vulnerable countries adapt to the impacts of climate change and reduce net GHG emissions in their economies. USAID estimates that approximately one-sixth of its agency-wide Development Assistance account is earmarked for the Administration's Global Climate Change Initiative programs.\nU.S. appropriations for bilateral climate change initiatives through USAID's or the Department of the State's ODA programs is subject to congressional approval. Congressional committees of jurisdiction include the U.S. House of Representatives Committee on Foreign Affairs, (various subcommittees); the U.S. House of Representatives Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs; the U.S. Senate Committee on Foreign Relations, Subcommittee on International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection; and the U.S. Senate Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs.\nODA is a significant component of international climate change assistance. The Organization for Economic Cooperation and Development (OECD) has estimated bilateral, climate-specific support to low-income countries at an annual average of about $3.4 billion from 2003-2007, as reported in their Creditor Reporting System. This climate-specific financing represented about 0.01% of contributing countries' Gross Net Income (GNI) for that period, and about 3.4% of contributing countries' total bilateral ODA for all purposes. Accordingly, the United States' contributions represented about 0.002% of GNI and about 0.1% of all bilateral ODA, in both instances below the international average. Given the vagaries of definitions and reporting, the OECD estimates that all bilateral financing support for climate mitigation represented about US$8 billion to $53 billion in 2007—no more than one-sixth of the total estimated flows of about US$314 billion going to the sectors relevant to climate mitigation actions (i.e., energy, transportation, agriculture, water supply, industry, minerals, and mining).", "International Financial Institutions: International Financial Institutions (IFI) are the primary multilateral mechanisms for climate change financing to lower-income countries. IFIs coordinate multiple donor country contributions and provide loans, grants, and investment services to developing economies to promote growth, alleviate poverty, and aid in targeted programs such as climate change and food security. IFIs were designed to provide professional advice and technical support to address the economic impediments to developing country investment. In the United States, climate-related funding for IFIs is managed primarily through the Office of International Affairs at the U.S. Department of the Treasury.\nU.S. appropriations for multilateral climate change initiatives through authorized International Financial Institutions are subject to congressional approval. Congressional committees of jurisdiction include the U.S. House of Representatives Committee on Financial Services, Subcommittee on International Monetary Policy and Trade; the U.S. House of Representatives Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs; the U.S. Senate Committee on Foreign Relations, Subcommittee on International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection; and the U.S. Senate Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs.\na. Development Banks: Concessional Lending: The International Development Association (IDA) is a facility within the World Bank Group that makes grants and highly concessional or \"soft\" loans to the world's 79 poorest countries. IDA remains the single largest source of development finance globally across a range of sectors, including climate change mitigation and adaption initiatives as well as climate-relevant programs in primary education, basic health services, clean water and sanitation, environmental safeguards, business improvements, infrastructure, and institutional reforms. The United States was a driving force behind the creation of IDA in 1960 and remains its largest shareholder. The United States currently supports IDA through appropriated contributions pledged to IDA's 16 th replenishment period. b. Tropical Forests Conservation Act: The Tropical Forest Conservation Act authorizes debt relief for low- and middle-income countries to support conservation of tropical forests. Under the program, treated debt is reduced and redirected to provide for grants to local non-governmental organizations and other entities engaged in forest conservation in the recipient country. The United States uses appropriated funds to pay for the budget cost of the debt restructuring. \"Debt-for-nature\" initiatives like the TFCA may be structured as either bilateral or multilateral programs and may employ third-party non-governmental organizations as brokers or rely on direct government-to-government agency coordination. To date, the United States has concluded 17 TFCA agreements in 14 countries, generating over $260 million for tropical forest conservation and the consequent GHG emission savings. c. Global Environment Facility: The Global Environment Facility (GEF) is an independent and international financial institution that provides grant-based financing to cover the additional or \"incremental\" costs associated with transforming projects with national development benefits into ones with global environmental benefits. GEF partners with international institutions, nongovernmental organizations, and the private sector to assist lower-income countries with environmental projects related to six areas: biodiversity, climate change, international waters, the stratospheric ozone layer, land degradation, and persistent organic pollutants. Since its inception, GEF has allocated $9.2 billion—supplemented by more than $40 billion in co-financing—for more than 2,700 projects in 165 countries. GEF estimates that approximately 50% of its implemented projects assist climate change activities. The United States currently supports GEF through appropriated contributions pledged to GEF's fifth replenishment period (2010-2014). d. Clean Technology Fund: The Clean Technology Fund (CTF) is one of two Climate Investment Funds administered by the World Bank Group that aim to help finance lower-income countries' transitions toward low-carbon and climate-resilient development. Implemented in 2008 by the United States, the United Kingdom, and Japan, and joined by several other donors in the international community, the CTF seeks to provide financing—principally to larger emerging economies and to regional groups—for demonstrating, deploying, and diffusing large-scale clean energy investments with the potential for long-term avoidance of GHG emissions. The fund promotes renewable energy and energy efficient technologies as well as energy efficiency strategies in the transportation, building, industry, and agricultural sectors. Eight contributing countries have pledged $4.4 billion to the CTF since September 2008 in support of programs in 18 lower-income countries. The U.S. pledge of $2 billion—split between the CTF and the SCF—is currently supported through annual appropriated contributions. e. Strategic Climate Fund: The Strategic Climate Fund (SCF), founded in conjunction with the CTF as the second of the World Bank's two Climate Investment Funds, supports three programs that aim to pilot new and scaled-up approaches to address climate change challenges in lower-income countries. The Pilot Program for Climate Resilience assists many of the poorest and most vulnerable countries prepare for and respond to the impacts of climate change by integrating climate adaptation measures into core development planning. The Forest Investment Program works to reduce deforestation in lower-income countries through improved forest management. The Program for Scaling-Up Renewable Energy in Low Income Countries supports a select number of the poorest countries in their efforts to expand energy access and stimulate economic growth through the deployment of renewable energy solutions. Ten contributing countries have pledged $2.5 billion to the SCF since September 2008 in support of programs in over 30 lower-income countries. The U.S. pledge of $2 billion—split between the CTF and the SCF—is currently supported through annual appropriated contributions. f. Green Climate Fund: The Green Climate Fund, currently under negotiation in the UNFCCC Ad Hoc Working Group on Long Term Cooperative Action as set forth by the Cancun Agreements in December 2010, is to be designated as the official financial mechanism of the Convention. Upon creation, it would support projects, programs, policies, and other activities in lower-income countries using thematic funding windows for mitigation, adaptation, forestry, capacity building, and technology transfer, among others. All program attributes have yet to be agreed upon by negotiating Parties, including provisions for its trustee, governance structure, administration, funding levels, and its official status under the Convention.", "The Debate between Bilateral and Multilateral: Contrasting models of foreign assistance have arisen through the years in programs like the Marshall Plan, involving bilateral aid arrangements between countries, and the Bretton Woods process, involving multilateral arrangements like the IMF, the World Bank, and others. Historically, bilateral assistance has dominated the foreign aid landscape, and it remains potentially the most direct and timely method of reaching a destination and working for a recipient government. Environmental contributions by multilateral organizations have been criticized for a lack of cost efficiency, a focus on economic development in lieu of the environment, and the imposition of requirements for global environmental benefits as opposed to local, environmentally sound development. But proponents stress that multilateral assistance tends to be less tied to the political self-interest of individual donor countries, allows for the efficient pooling of financial resources and the leveraging of additional monies, helps ensure that different bilateral arrangements do not work at cross-purposes, and serves to develop a sense of cooperation among nations with the additional advantage of reducing conflict.\nThe Complex Institutional Architecture : Whether it is the United Nations family of agencies, the World Bank Group, or any number of countries and their development agencies, the plethora of actors engaged in climate financing is unwieldy to many recipient countries. Larger bureaucracies tend to slow and dampen performance, reduce flexibility and transparency, and heighten transaction costs. As mechanisms for climate finance proliferate, each new or special-purpose fund carries with it a set of challenges, including redesigned institutional and governance functions, inefficient allocations, and limitations on scaling up. These challenges threaten to reduce the overall effectiveness of climate finance because as transaction costs increase, recipient country ownership lags and alignment with country development objectives becomes more difficult.\nThe Limitations of Current Market Mechanism s : The UNFCCC Clean Development Mechanism has demonstrated that markets can stimulate emission reductions, provide essential learning, and build capacity. But some attest that mechanisms such as the CDM contain inherent inefficiencies, including a relatively weak and inefficient UNFCCC governance structure, an inability to successfully generate local economic co-benefits, an uneven distribution of projects that is geared toward higher-income emerging economies, a weakness in incentives to foster real transformations to a low-carbon economy, and a debate over the additionality of a given project's reductions (i.e., a debate over if the enacted emission reductions paid for by the mechanism are additional to actions that otherwise would have occurred).\nThe Choice between Top-Down or Bottom-Up: Whether purposeful or not, the international community is currently operating under a disjointed set of mechanisms which encourages fragmentation of the global response to climate change. Some argue that the \"bottom-up\" approach offers competition for market share, flexibility in international commitments, and a greater leeway to manage climate change action on individual terms, including accounting for different views of national circumstances, domestic politics, legal backgrounds, economic costs, and competitiveness exposures. The United States and other higher-income countries, as well as some emerging economies such as China, often stress the bottom-up approach as a way to protect international political issues (such as sovereign rights) and international economic issues (such as the globalization of markets). Others find fragmentation to be a great detriment to effectiveness, efficiency, and equity at a time when the international community may wish to bring together a myriad of elements into a single, functioning, strategic framework. Most lower-income countries tend to support a centralized, top-down mechanism situated in the UNFCCC, or the United Nations at large. They may perceive a heightened sense of coordination, consistency, and transparency afforded by these institutions through their \"one country: one vote\" paradigm.", "", "The United States has relied mostly on direct budget appropriations to finance climate change actions internationally. Congress is responsible for several activities in this regard, including (1) authorizing periodic appropriations for federal agency programs and multilateral fund contributions, (2) enacting those appropriations, and (3) overseeing U.S. interests in the programs. Oversight may come in the form of guidance; please see box \"Some Examples of Legislative and Executive Branch Guidance\" in this section for examples. Currently, direct budget contributions from the U.S. government are appropriated to relevant federal agencies to support their bilateral and multilateral contributions to international climate change initiatives. These appropriations are requested on an annual basis by the Administration and enacted on an annual basis by the Congress.\nThe majority of bilateral and multilateral contributions to international climate change initiatives is funded through programs at the Department of State, the Department of the Treasury, and the U.S. Agency for International Development. Funds for these programs are appropriated in the Administration's Executive Budget, Function 150, for State, Foreign Operations, and Related Programs. Historical budget authority for these programs through 2009 is presented in Table 3 . The current Administration's budget authority and budget requests are presented in Table 4 .\nCongressional committees of jurisdiction for international climate change programs at the Department of State, the Department of the Treasury, and the U.S. Agency for International Development include\nthe U.S. House of Representatives Committee on Foreign Affairs, (various subcommittees); the U.S. House of Representatives Committee on Financial Services, Subcommittee on International Monetary Policy and Trade; the U.S. House of Representatives Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs; the U.S. Senate Committee on Foreign Relations, Subcommittee on International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection; and the U.S. Senate Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs.\nCurrently, no federally legislated system exists to require or assure future, predictable public financing for international climate change assistance (e.g., a mandated allocation of redirected fossil fuel subsidies). Similarly, no federally legislated market-based mechanism has been instituted that would contribute funds generated from the private sector for international climate change assistance (e.g., a GHG cap-and-trade program, which could incentivize international private capital investment through offset markets or provide internationally targeted funds through an allocation of auction or offset revenue).", "U.S. participation in international negotiations for global environmental assistance stretches at least back to the 1972 United Nations Conference on the Human Environment (UNCHE), the first concerted effort by the international community to focus on the environment as a major topic of concern and attention. Therein, discussions among representatives from both industrialized and lower-income countries gave rise to a compromise on a doctrine to address both environmental and developmental policy. Governments at the time agreed that (1) the environment and development are two mutually reinforcing sides of the same coin, and (2) that industrialized countries would accept the principle of \"incrementality\" by which they would pay some or all of the additional costs of environmental initiatives in the developing world above and beyond the basic costs of development. The relationship between the environment and development was further developed at the 1992 United Nations Conference on Environment and Development, in the document called Agenda 21 , wherein a blueprint was detailed for putting sustainable development into practice. Agenda 21 also doubled the pledge by the industrial world to assist lower-income countries in poverty alleviation and environmental protection. Although Agenda 21 was impressive in its scope and comprehensiveness, the policy was non-binding; and some observers note that \"the whole enterprise [was] heavily dependent on strong leadership from major countries, adequate financing, and effective institutional arrangements for follow-up ... none of which materialized.\"\nFinancial pledges were made to support climate change initiatives specifically under the 1992 United Nations Convention on Climate Change (UNFCCC). The United States, as a Party to the UNFCCC, has committed to providing financial and technical assistance to lower-income countries' efforts in meeting their respective obligations. Historically, some of this assistance has flowed through the Global Environment Facility—the official financial mechanism of the UNFCCC—to which the United States has contributed funding since 1993. Further, at the 2009 UNFCCC Conference of Parties (COP) in Copenhagen, Denmark, and at the 2010 COP in Cancun, Mexico, the United States helped negotiate a package that included developed country pledges of an aggregated $30 billion of \"fast start\" climate financing for the period 2010 to 2012 and $100 billion annually by 2020. This funding is to come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance, and be delivered through both new and existing fund arrangements, with governance structures providing for equal representation of developed and developing countries. These negotiations are still pending and are currently non-binding. The 2011 COP is scheduled to meet during December in Durban, South Africa to further negotiations toward a potentially binding treaty. The Obama Administration has not yet specified what share of pledges it envisions the United States providing, nor a strategy for how to fulfill the long-term pledge.\nHistorically, the United States' credibility on international climate change financing has been impaired by periodic under-funding. The United States is currently $217 million in arrears for its assessed contributions to the Global Environment Facility (i.e., 10% of the total U.S. pledge of $2,185 million since 1994). Also, though the Bush Administration helped establish the Clean Technology Fund in 2008 under the World Bank and pledged to help capitalize it, the U.S. Congress declined to appropriate the first U.S. payment of $400 million requested by the Administration for FY2009, and is far short of the $2 billion aggregated pledge the Bush Administration made for the period 2008-2012. Further, recent appropriations fall well below what many countries envisage for the U.S. share of the $30 billion UNFCCC \"fast start\" pledge.", "Based on provisions in H.R. 1473 , most FY2011 enacted funding for international climate programs at the Department of State, the Department of the Treasury, and USAID (Function 150) are drawn from larger line item agency categories. Allocations for these programs are at the discretion of the agency, in relation to its other programming, and have yet to be reported.\nThe Obama Administration's FY2012 budget request for international climate programs at the Department of State, the Department of the Treasury, and USAID (Function 150) would fund near-term climate financing of slightly over $1.3 billion across three areas: (1) clean energy ($652 million, up from $531 million enacted for FY2010) to reduce net GHG emissions from the energy sector, industry, and urban areas; (2) sustainable landscapes ($421 million, up from $169 million enacted for FY2010) to assist reduction of GHG emissions from deforestation and land degradation; and (3) adaptation ($256 million, up from $246 million enacted for FY2010) to focus on helping countries manage climate and weather-related risks and build resilience.\nTable 4 outlines recent U.S. budget authority and Administration requests for international climate change assistance programs by agency. For a more detailed description of the Obama Administration's Global Climate Change Initiative, its agencies, programs, funding, and purposes, please refer to Appendix C .\nAppendix A. Glossary of Options for Generating and Disbursing Financing to Address Climate Change\nAppendix B. Comparison of Sources of Climate Change Financing\nAppendix C. U.S. Global Climate Change Initiative\n\"Adaptation\" ($256 million FY2012 request, up from $246 million in FY2010)\nAssisting countries manage climate and weather-related risks and build climate resilience.\n\"Clean Energy\" ($652 million FY2012 request, up from $531 million in FY2010)\nMitigating net greenhouse gas emissions from energy sectors using energy efficiency and low-emission technologies.\n\"Sustainable Landscapes\" ($421 million FY2012 request, up from $169 million)\nReducing greenhouse gas emissions from deforestation and land degradation." ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 2, 3, 3, 3, 3, 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 3, 3, 2, 1, 2, 2, 2 ], "alignment": [ "h0_title h1_title", "h0_full", "", "", "", "", "", "", "", "", "", "", "h0_full", "", "", "", "", "", "h0_full", "h1_full", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What is the main debate in international financing for climate change?", "What has been one of the largest economic considerations?", "What will impact the future of emissions?", "What are concerns about the effect of these supposed shifts?", "What does this perspective mean about the impact of different types of funding?", "What financing for climate change currently exists?", "What effect on change do these current methods have?", "What kinds of private sector funding exist?", "How is the current opinion on climate change financing?", "What are some of the issues related to employing funding?" ], "summary": [ "The fundamental dispute concerning international financing for climate change centers upon who should pay for it and how.", "The debate has been dominated by economic assessments of market-based mechanisms aimed at changing price incentives so that investment in low-emissions development becomes more attractive (e.g., cap and trade, carbon fees, loan guarantees).", "Many agree that private sector investment will likely have a significant role to play in any low-emissions future, and that establishing a price on GHG emissions will likely have a part in any effective policy agenda.", "However, concerns remain whether such mechanisms can induce the required shifts in production and consumption patterns, mobilize the necessary investment, and contribute adequately to international financial assistance.", "From this perspective, public funds—including from national governments and international organizations—continue to be a key driver for climate change investment, specifically in low-income countries.", "Many methods for disbursing international climate change financing currently exist.", "All have a role in catalyzing climate action.", "They include private sector funding through such avenues as foreign direct investment (FDI), export credit markets, multilateral development banks and finance corporations, and the various U.N. Kyoto Protocol market mechanisms, as well as public sector funding through official development assistance (ODA), multilateral trust funds (e.g., the Global Environment Facility (GEF), Climate Investment Funds (CIF), Green Climate Fund (GCF)), and the concessional lending windows housed at the World Bank Group.", "Many contend that the financial architecture is underfunded, unnecessarily complex, and lacks both strategic mandate and adequate coordination.", "Debate has arisen over the proper financial instruments to employ in lower-income countries as well as the role shared by the public and private spheres." ], "parent_pair_index": [ -1, 0, -1, 2, 3, -1, 0, -1, -1, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2 ] }

{ "title": [ "Background", "EPA’s Process for Assessing Sites under the Superfund Program", "Approaches Identified by EPA for Conducting Long- Term Cleanups at Sites Eligible for the NPL", "EPA Defers Oversight of a Majority of Sites Eligible for the NPL to Approaches Outside of the Superfund Program", "EPA Regions Exercise Discretion in Selecting the Cleanup Approach for Sites", "EPA Defers Oversight of More Than Half the Sites Eligible for the NPL to Approaches Outside of the Superfund Program", "EPA Has Less Detailed Guidance for OCA Deferrals Than for Other Less Commonly Used Deferral Approaches", "Processes for Implementing the SA and NPL Approaches Differ in a Few Significant Ways", "The SA and NPL Processes Are Similar in Many Ways and EPA Has Accounted for Some Differences Between Them", "EPA’s Tracking and Reporting of Certain Aspects of the Process under the SA Approach Differ Significantly from That under the NPL Approach", "The SA Approach Has Potential Advantages for EPA, Some PRPs, and States, but Communities’ Views on its Benefits Are Mixed", "SA Agreement Sites Showed Mixed Results in Completing the Cleanup Process When Compared with Similar NPL Sites", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Long-Term Cleanup Approaches by EPA Region", "Appendix III: Data Analysis of SA Agreement Sites and Similar NPL Sites", "Median Length of Negotiations at SA Agreement Sites and Similar NPL Sites", "Median Length of Cleanup Activities at SA Agreement Sites and Similar NPL Sites", "Appendix IV: Comments from the Environmental Protection Agency", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "This section discusses EPA’s process for assessing sites under the Superfund program and the approaches identified by EPA for conducting long-term cleanups at sites eligible for the NPL under the Superfund program and under other available approaches.", "Under the Superfund program, EPA assesses hazardous waste sites for long-term cleanups through a specific process. At some point after a potential hazardous waste site is reported to the Superfund program and entered into CERCLIS, EPA regional officials, their contractors, or states acting under cooperative agreements with EPA evaluate the relative potential for a site to pose a threat to human health and the environment. EPA’s 10 regional offices each are responsible for implementing Superfund within several states and, in some cases, territories. Under CERCLA, EPA may only pay for a remedial action at a site if the relevant state agrees, among other things, to pay a portion of the cleanup expenses, as well as all operations and maintenance costs. In addition, under a cooperative agreement with EPA, a state may assume the lead oversight role at a site in the Superfund program. Figure 1 shows the states included in each of the 10 EPA regions.\nDuring the initial phases of the long-term cleanup process—known as preliminary assessment and site inspection—EPA regional officials or their counterparts evaluate the potential need for additional investigation or action in connection with a release of hazardous substances from a site. Specifically, the preliminary assessment phase involves an evaluation of readily available information about a site and its surrounding area to determine if the release or potential release poses enough of a threat to human health and the environment that further investigation is needed. If further investigation is needed, a site inspection is performed. During this phase, investigators typically collect environmental and waste samples to determine what hazardous substances are present. Information collected during the preliminary assessment and site inspection is used to calculate and document a site’s preliminary Hazard Ranking System score, which indicates a site’s relative threat to human health and the environment based on potential pathways of Sites with a Hazard Ranking System score of 28.50 or contamination.greater are eligible for listing on the NPL. Information collected from the initial assessment phases to develop Hazard Ranking System scores is not intended to be sufficient to determine either the extent of contamination or how to clean up a particular site. After a site is determined to be eligible for the NPL, EPA chooses which long-term cleanup approach is best suited to the site. In some cases, EPA may conduct a short-term cleanup known as a removal action or otherwise delay selection of a long-term cleanup approach.", "EPA may choose among several approaches to address sites with a relative threat to human health and the environment that is sufficiently severe to make them eligible for listing on the NPL. For long-term cleanups, EPA can retain oversight of sites under the Superfund program or defer the oversight of sites to other approaches, as shown in figure 2.\nUnder its Superfund program, EPA conducts long-term cleanups using three approaches. The first and most common approach under the Superfund program involves listing a site on the NPL. To do so, EPA first proposes the site for listing on the NPL in the Federal Register. EPA then accepts public comments on the proposal and responds to the comments in a second and final Federal Register listing announcement of the site; then the agency may place on the NPL those sites that continue to meet the requirements for listing. The second approach that EPA may use under the Superfund program is the SA approach, which began informally in the 1990s whereby some EPA regions negotiated site cleanup agreements with PRPs for sites that PRPs, states, or local government officials and communities did not want to have listed on the NPL. To promote consistency across regions, EPA issued guidance in 2002 formalizing the SA approach, which it subsequently updated in 2004 and 2012. According to EPA’s guidance, to qualify for the SA approach, (1) a site’s contamination must make it eligible for listing on the NPL; (2) EPA must anticipate a long-term cleanup at the site; and (3) there must be a willing, capable PRP who will negotiate and sign an agreement with EPA to perform the investigation or cleanup. The third approach EPA can use for long-term cleanup of sites is to address sites under the Superfund program but not list them on the NPL or address them through the SA These “Other” sites under the Superfund program can vary approach.widely and include, among others, some sites with cleanup agreements that preceded the SA approach. Under these older agreements, for which there was no guidance at the time they were negotiated, EPA agreed not to list the site on the NPL, and the PRPs agreed to conduct the cleanup, according to EPA officials.\nIrrespective of the approach chosen, all sites under the Superfund program approaches follow the same general phases for long-term cleanup, as shown in figure 3, and EPA officials oversee the cleanup at all of these Superfund sites.\nAfter the initial phases of the long-term cleanup process, EPA or a PRP conducts a two-part study of the site: (1) a remedial investigation to further characterize site conditions and assess the risks to human health and the environment, among other actions, and (2) a feasibility study to evaluate various cleanup options to address the problems identified in the remedial investigation. At the conclusion of these studies, EPA selects a remedy for addressing the site’s contamination and develops a cost estimate for implementing the remedy; both of these are included in a record of decision. According to EPA officials, the level of cleanup depends on site-specific conditions, not the particular approach selected. EPA or a PRP then develops the method of implementation for the selected remedy during the remedial design phase and implements it during the remedial action phase, when actual cleanup of the site occurs. Multiple cleanup activities can occur within a given phase at the same or different operable units at one site. For example, one remedial action at an operable unit may address soil contamination, while another remedial action at the same operable unit may address groundwater contamination. When EPA or a PRP finishes the cleanup remedy at a site, all immediate threats have been addressed, and all long-term threats are under control, EPA generally considers the site to be “construction complete.” For sites listed on the NPL, when EPA, in consultation with the state, determines that no further site response is appropriate, the agency may delete the site from the NPL. EPA reports achievements at NPL sites, including completion of some phases of the cleanup process, as part of the agency’s implementation of provisions under the Government Performance and Results Act of 1993 (GPRA). The act requires federal agencies to develop strategic plans with outcome oriented agency goals and objectives, performance measures to track the progress made toward achieving goals, annual goals linked to achieving the long-term goals, and annual reports on the results achieved. EPA does not report publicly the same achievements for sites that are not on the NPL.\nCERCLA § 122(a), 42 U.S.C. § 9622(a) (2012).\nDepartment of Justice in seeking an injunction to require PRPs to conduct cleanup.\nPub. L. No. 94–580, 90 Stat. 2795 (1976) (codified as amended at 42 U.S.C. §§6901- 6992k (2012)). Although RCRA amended the Solid Waste Disposal Act, Pub. L. No. 89– 272, Title II, 79 Stat. 997 (1965), the amended law is nonetheless sometimes referred to as RCRA, a convention we follow here. Subtitle C of RCRA, 42 U.S.C. ch. 82, subch. III (§§ 6921-6939f), governs hazardous waste management. Hereinafter, references are to RCRA as amended. formal state deferral approach, the EPA region still negotiates the level of oversight appropriate for the particular site.\nEPA may also defer oversight of the long-term cleanup of a site eligible for the NPL through the Other Cleanup Activity (OCA) approach. OCA deferrals go to one of four types of entities (described below): states, federal agencies, tribes, or private parties.\nOCA deferral to a state places a site under that particular state’s environmental regulations, as opposed to CERCLA authorities. In contrast to formal state deferrals, the OCA deferral to a state involves no formal EPA oversight other than periodic discussions between EPA regional officials and state officials. Since 2012, EPA guidance has indicated regions should have these discussions.\nOCA deferral to federal agencies places a site under that particular federal agency’s oversight and authorities, according to EPA. Certain federal agencies, such as the Department of Defense, have responsibility and authority for some or all cleanups at their facilities. EPA assigns a status of “Other Cleanup Activity: Federal Facility Lead” to federal facilities that EPA tracks in its CERCLIS database and are being cleaned up outside of the NPL approach (these sites are eligible for listing but are not listed on the NPL). EPA periodically checks in with other federal agencies on the status of cleanup work at these sites.\nOCA deferral to a tribe places the site under that tribe’s environmental regulations. EPA periodically checks in with tribal regulators on the status of cleanup work at these sites.\nOCA deferral to private parties applies to certain sites where the cleanup is conducted by a private party.", "EPA most commonly addresses the cleanup of sites eligible for the NPL by “deferring” oversight to approaches outside of the Superfund program. EPA regions select the cleanup approach and defer oversight of more than half the sites eligible for the NPL to approaches outside of the Superfund program, primarily through OCA deferrals. Though OCA deferrals include the majority of NPL eligible sites, EPA’s guidance on this approach is less detailed than guidance on other approaches.", "EPA provides regions with discretion in selecting the cleanup approach for a given hazardous waste site. According to the Superfund Program Implementation Manual—which lists EPA’s Superfund program management priorities, procedures, and practices—each region is to select an appropriate cleanup approach after determining a site is eligible for the NPL. Officials in all 10 regions said that when they select cleanup approaches they attempt to use the most appropriate cleanup approach for a given site. For example, complex sites, such as contaminated waterways, may be more suited to the NPL approach than to deferral to a state cleanup program because EPA typically has more resources to oversee and manage such complex cleanups. Officials in four regions noted that states will sometimes request the NPL approach for large or complex sites.\nEPA regions can establish their own processes for selecting a cleanup approach for a given site. Three of the 10 regions have some type of regional guidance related to their decision-making process. For example, Region 7 has guidance for its regional decision team that outlines the stakeholders within the region who will participate, when the team will meet, and how decisions are to be made at the meeting. Region 10 has guidance that focuses on how the region will prioritize sites that are eligible for the NPL. All of the regions may consult with relevant stakeholders across EPA programs about a given site, whether the regions have written guidance or not. These stakeholders might include staff from the office of regional counsel or the removal program. Five of the 10 regions use regional decision teams to evaluate sites that have been found eligible for the NPL and select which approach should be used to clean up the site. The other 5 regions do not use regional decision teams, opting instead for more informal decision-making processes or meetings on an as-needed basis. For example, in Region 5 there is a practice of coordinating between the region’s long-term cleanup and removal programs on sites that may be of interest to both programs.\nEPA officials said the regions consider many potentially relevant factors to select the appropriate approach for each site. The major factors influencing regional officials’ choice of cleanup approach at a site include the preferences of the state regarding how the site will be addressed and the existence of a PRP that is willing to and capable of addressing the site. Specifically, officials in all 10 regions highlighted state preference as a factor they consider. State preference can be particularly important because EPA has a policy of obtaining state concurrence before listing a site on the NPL. According to Region 5 officials, if a state opposes an NPL listing, they will typically give preference to other approaches, such as an OCA deferral to the state or the SA approach. In addition to state preference, officials in 9 of 10 regions said that the existence of a willing and capable PRP can be a factor in determining the cleanup approach. For example, a willing and capable PRP is necessary for the SA approach, which requires the PRP to conduct the cleanup under an agreement with EPA. EPA officials in one region said that the existence of a PRP can also be important for cleanups under state cleanup programs because states can have very limited funding to conduct cleanups on their own. State environmental officials from four states we contacted confirmed that they had limited or, in some cases, no state funding to conduct their own long-term cleanups.\nRegional officials also identified other factors that can sometimes influence what cleanup approach the region will select. For example, officials in Region 5 noted that if the contamination presents an immediate threat to health and safety, they may use the Superfund removal program, which is more suited to a quick response than long- term cleanup approaches. Depending on the circumstances at a site, the removal program may be sufficient to deal with all of the contamination, or the site may need to be referred to a long-term cleanup approach for further work. Regional officials can also consider other relevant legal authorities that could apply to a site, such as RCRA. When a site is eligible for cleanup under both RCRA and Superfund, EPA policy provides that the agency generally will defer the site to the RCRA program for cleanup.", "Among the 3,402 sites reported to the Superfund program in CERCLIS that EPA has identified as having contamination making them eligible for EPA deferred 1,984 sites to cleanup approaches outside of the the NPL,Superfund program (see fig. 4). Sites under the Superfund program make up the 1,418 sites that remain, with the vast majority of those sites being addressed through the NPL.\nEPA addresses more sites eligible for the NPL through the OCA deferral approach than any other cleanup approach: 1,766 of the 3,402 sites (52 percent). Moreover, because EPA deferred most of these 1,766 sites to states, OCA deferrals to states account for about 47 percent of all identified eligible sites. EPA regions’ use of OCA deferrals to states ranges widely, from 7 sites in each of three regions (6, 7, and 8) to 470 sites in Region 1 (see app. II for a breakdown of cleanup approaches by region). According to officials in Region 1, states in the region have mature environmental programs willing and capable of overseeing many sites, which makes the OCA deferral to states well suited to that region. In contrast, officials we spoke to in some regions noted that they needed to consider states’ capacity to oversee a site before using the OCA deferral to states. Nine states have no OCA deferrals, and other states oversee hundreds of these sites, with the most in Massachusetts (247 sites), New Jersey (221), and California (180). Environmental officials in several states we contacted confirmed that states’ use of and experience with OCA deferrals can differ substantially. One state official noted that these differences are likely related to how industrialized a state may be and the extent of cleanup programs in a given state. OCA deferrals to federal agencies, private parties, and American Indian tribes account for an additional 181 sites. OCA deferrals to federal agencies primarily involve military sites: 76 percent of these deferrals were to the Army, Navy, or Air Force. In addition, a majority of OCA deferrals to private parties come from Florida where, on the basis of a state law, PRPs can conduct cleanup without any formal agreement or order from the state, according to Region 4 officials. PRPs conducting such cleanups must submit regular reports to the state on their progress, and the state reserves the right to take the PRP to court, if necessary.\nEPA currently addresses 1,418 sites (42 percent of those identified as eligible for listing on the NPL) through approaches under the Superfund program—most commonly, through listing the sites on the NPL. Specifically, sites listed on the NPL account for 1,313 sites, over 90 According to officials in percent of sites under the Superfund program.one region, EPA has access to more resources than states and typically addresses sites that require greater or more specialized resources through the NPL approach. For example, regional officials noted, states face different limitations that can prevent them from pursuing cleanup under their programs including: technical capacity, legal resources, and financial resources. In addition, EPA officials in four regions noted examples where a state environmental program requested that the Superfund program pursue NPL listing because the state was having trouble getting a PRP to cooperate or the PRP went bankrupt.\nIn addition to listing sites on the NPL, EPA also oversees the long-term cleanup of sites through two other approaches under the Superfund program. First, the Superfund program currently oversees 67 sites under the SA approach. Second, EPA oversees at least 38 other sites with long-term cleanups under the Superfund program for which EPA has no documented definition and no consistently applied method of counting. EPA officials provided different estimates of the number of such sites. One EPA official provided a method to identify these sites based on a code in CERCLIS, which resulted in the 38 sites listed above. However, another EPA official provided us a list of 35 such sites that had reached the remedial action phase. Of these 35 sites, 12 matched the 38 sites identified by the code in CERCLIS. In addition, 16 of the sites on the list of 35 had a code of “status undetermined” or had no code at all. EPA regional officials also identified other specific sites under the Superfund program, but some of those sites could not be identified by the code in CERCLIS, were not on the list of 35, or had no code at all. As of December 2012, 270 sites had the “status undetermined” code, and 101 had no such code in CERCLIS, making it impossible to determine the exact number of sites that EPA oversees under the Superfund program that are not being addressed under either the NPL or SA approaches. Tracking of these sites is discussed later in this report.\nEPA addressed the remaining sites eligible for the NPL through different deferral approaches, primarily through deferrals to the RCRA program. Specifically, deferrals to the RCRA program account for 193 of these remaining sites (89 percent).program and a few deferrals to NRC, EPA deferred 21 sites to state programs using the formal state deferral approach in 4 of its 10 regions. EPA officials said that the OCA deferral to states approach has largely replaced the formal state deferral approach, and EPA does not anticipate using the formal deferral approach much in the future.", "As discussed above, EPA addresses more sites through OCA deferrals than any other approach but has less guidance to define this approach or how deferral decisions should be documented than for its other deferral approaches. Unlike OCA deferrals, EPA has guidance or other documents outlining the process for deferrals to the RCRA program, deferrals to the NRC, and formal state deferrals. These documents clearly define or provide mechanisms to define the roles of the Superfund program and the entity that will conduct oversight at the site. For example, guidance for the formal state deferral approach specifies that the EPA region and the state should enter into a memorandum of agreement in which they clarify mutual expectations for their interaction and each party’s responsibilities at deferred sites. After the deferral, the region continues to review the state’s progress and conduct any other activities required by its individual agreements with the state in each case.\nIn contrast, EPA has not issued guidance focused on OCA deferrals that clearly defines the different types of OCA deferrals or what detail would be sufficient or appropriate to support its decisions at these sites. Instead, EPA describes OCA deferrals in the Superfund Program Implementation Manual (which is updated annually). EPA recently added to its instructions in the manual regarding sites with OCA deferrals. Specifically, in its 2012 version of the manual, EPA added more language explaining that there is to be no continuous and substantive involvement on EPA’s part while cleanup work is ongoing at OCA deferral sites. In addition, in this version of the manual, EPA added an instruction for regions to check on the status of OCA sites periodically. Officials in EPA regions noted that they use different approaches for tracking OCA sites; for example, for an OCA deferral to states, EPA regions’ tracking activities range from checking state websites to meeting with states to receive status updates every 3 months. Officials in some regions noted that they will need to modify their processes to meet this new instruction.\nEven with EPA’s additions to the manual, the available instruction does not clearly define each type of OCA deferral, particularly OCA deferrals to private parties, which has resulted in inconsistent identification of those OCA deferrals by different regions. While the manual defines OCA deferrals generally, it does not define each type of OCA deferral. When asked to define OCA deferrals to private parties, Superfund program officials in headquarters referred us to EPA regional officials for more information, and officials in 6 of 10 EPA regions were unsure about how to define OCA deferrals to private parties or how they should be used.\nMoreover, officials in another 6 regions confirmed that some sites identified as OCA deferrals to private parties in CERCLIS should have been identified as OCA deferrals to states. Without clearer guidance defining the different OCA deferrals, EPA cannot be reasonably assured that it is consistently tracking its OCA deferral sites in CERCLIS, which can make it difficult to identify what entity is responsible for conducting oversight at the site.\nThe completion of cleanup date at an OCA deferral site is the date of the determination that cleanup was successfully completed, that cleanup was not necessary, or that the other entity will not complete cleanup and the site will be referred back to the Superfund program. regions collect to support OCA deferrals covers a broad range, including no written documentation, an e-mail from a state official, letters from state officials attesting to the cleanup, or a copy of the legal order or agreement between the state and PRP. Similarly, regions relied on different forms of documentation, including various e-mails, letters, or reports from state officials to document the completion of cleanup at OCA deferral sites. Officials in three regions reported that there was no consistent standard for documentation within their region. Moreover, Region 9 officials noted that the region had not tracked the completion of cleanups at OCA deferrals in CERCLIS in the past and may have no documentation for some of its older OCA deferral sites. Without guidance that details the documentation needed to support regions’ OCA deferral decisions, EPA cannot be reasonably assured that its regions’ documentation will be appropriate or sufficient to verify that these sites have been deferred or have completed cleanup. EPA officials noted they were working on additional guidance for OCA deferrals. However, these officials said that development of the guidance was in the planning stage; therefore, a draft of this guidance, detailed information on what will be included in the guidance, or a planned issuance date for the guidance, were not yet available.\nEPA provides the least detailed guidance for the small number of sites that are undergoing long-term cleanup under the Superfund program outside of the SA and NPL approaches. Such sites do not have specific guidance at the program level, regional level, or a section in the Superfund Program Implementation Manual describing how they should be defined or tracked. In contrast, EPA has developed instructions in the manual for how to track sites cleaned up under the SA approach. EPA also has guidance for the NPL approach, such as how the agency should propose, list, and delete sites from the NPL. EPA officials noted that sites that are cleaned up under the other Superfund program approach often involve unique situations, making it difficult to establish any guidance that would cover all possible situations. For example, one of these sites is using a hybrid approach under both RCRA and CERCLA authorities, according to an EPA official. However, in 10 cases, regional officials described these sites as standard cleanups under CERCLA authority that used standard procedures. While there are unique and standard cases among sites being cleaned up under the other Superfund program approach (i.e., outside of the SA and NPL approaches), EPA officials could not provide a reliable estimate of these other sites because the agency has no consistently applied method for counting them. Without a method to identify and track such sites, EPA headquarters has no way to determine the extent to which regions use this approach or evaluate regions’ use of this approach. As a result, it will be difficult for EPA headquarters to hold regions accountable for using the approach.", "The processes for implementing the SA and NPL approaches have similarities, but also several differences, some of which EPA has accounted for through specific provisions in its agreements with PRPs at SA agreement sites. However, some sites may not benefit from EPA’s efforts to account for these differences. Furthermore, the agency’s tracking and reporting of SA agreement sites differs significantly from its tracking and reporting of NPL sites. Using the SA approach at sites has certain potential advantages for EPA and some PRPs and states, but communities’ views on this approach are mixed.", "The processes for implementing the SA and NPL approaches have many similarities. According to the agency’s SA guidance, at its SA agreement sites, EPA is to generally act in accordance with the practices normally followed at sites listed on the NPL. For example, according to EPA guidance, SA agreement and NPL sites should follow the same investigation and cleanup processes, including the phases and milestones of long-term cleanups shown earlier in figure 3. EPA regions should also use the same response techniques, standards, and guidance for SA agreement sites as they do for NPL sites. According to EPA’s guidance, SA agreements should eventually achieve cleanup levels that are comparable to those required at NPL sites. EPA regions should also take steps to ensure equivalency between the SA and NPL approaches in the absence of NPL listing.\nDespite these similarities, there are certain differences in the overall processes and EPA’s authority under the NPL and SA approaches. Through specific provisions in its SA agreements with PRPs, EPA has sought to make the two approaches comparable by accounting for the following four key differences:\nFirst, EPA has the authority to pay for remedial actions only at sites listed on the NPL.include a provision to help ensure cleanups are not delayed by a loss of funding if the PRP ceases work during the remedial action phase of cleanup. Specifically, this provision requires the PRP to obtain a readily available source of funds that the agency can use if it needs to take over the cleanup work. EPA can use those funds to continue the work while the agency lists the site on the NPL, if necessary.\nTo account for this difference, SA agreements\nSecond, EPA is authorized to provide technical assistance grants that help communities participate in decision making only at sites that are listed or proposed for listing on the NPL. An initial grant of up to $50,000 is available to qualified community groups so they can contract with independent advisors to help the community understand technical information about the site. EPA includes a provision in SA agreements to help ensure that a community’s opportunity to receive technical assistance at an SA agreement site is comparable to that at an NPL site. This provision requires the PRPs, with EPA oversight, to administer and fund a technical assistance plan, under which a qualified community group can receive up to $50,000 for the same purposes as a technical assistance grant from EPA.\nThird, if a PRP were to clean up an SA agreement site to the extent that it no longer scored at least 28.50 on the Hazard Ranking System, according to EPA, it might lose the option of listing the site on the NPL, a concern that is not present when a site is listed on the NPL. To prevent this, SA agreements state that the PRP will not challenge listing the site on the NPL if a partial cleanup of the site results in changed site conditions. EPA officials noted that this provision gives the agency assurance that it can step in and clean up the site under the NPL approach if the PRP were to default on the SA agreement.\nFourth, CERCLA states that an action for natural resource damages (NRD) at NPL sites must start within 3 years after completion of the remedial action. This period is longer than the general statute of limitations for NRD claims, which states that an action must start within 3 years after the discovery of the loss and its connection with the contamination. SA agreements contain a provision that clarifies that the longer statute of limitations for NPL sites also applies to SA agreement sites.\nEven with EPA’s efforts to achieve equivalence of SA agreement and NPL sites through these provisions, some sites may not benefit from these efforts because EPA regions have entered into agreements with PRPs at sites that they said were likely eligible for the SA approach without following the SA guidance. Agreements at such sites may not, for example, ensure that a community has access to funds to pay for technical assistance or that remedial action can continue if a PRP stops cooperating. Officials from some EPA regions told us they have continued to enter into agreements with PRPs since 2002 without following the SA guidance. We identified six sites where this has occurred as follows: In Region 7, officials entered into an agreement with a PRP to conduct remedial design and remedial action at a site. Regional officials stated that the SA approach, which can be suggested for a site by the PRP or the region, never came up during their discussions with the PRP. In Region 10, officials stated that the agreements they had entered into with PRPs at five sites might qualify for the SA approach but that, at the time they entered into the agreements, the officials had not focused on whether the agreements met the SA criteria; rather, they were focused on obtaining enforceable agreements.\nAccording to EPA headquarters officials, if regions are going to conduct a long-term cleanup under the Superfund program at a site, but not list it on the NPL, the agency prefers regions to use the SA approach. EPA headquarters officials said that they believed this preference was implicit in the agency’s SA guidance and stated they discussed this preference with regional officials at periodic meetings; however, they also acknowledged that this preference is not stated explicitly anywhere in guidance for the regions. If regions continue to enter into agreements for some sites without following the SA guidance, these sites may be denied some of the advantages built into the SA agreements to ensure that the cleanups will be comparable to those under the NPL approach.", "Some differences remain between the way EPA tracks sites under the SA and NPL approaches. In CERCLIS, EPA tracks sites’ status in relation to the NPL regardless of any changes in cleanup approach. Specifically, sites that have been proposed for listing on the NPL, are currently on the NPL, have been deleted from the NPL, or have been removed from proposal can always be identified as such in CERCLIS, which allows EPA to accurately identify sites that are or have been on the NPL. In contrast, EPA cannot similarly track an SA agreement site as such if it is subsequently listed on the NPL. Specifically, EPA currently tracks SA agreement sites through a single database code identifying only that a site has an SA agreement, and the identifying code is not maintained in the database if the site is later added to the NPL. The agency has not clarified in its guidance when to leave this SA identifying code in place, and when to remove it, even though the EPA IG recommended in a 2007 report that EPA develop specific instructions on when to use the SA designation and update the Superfund Program Implementation Manual (which is updated annually) to incorporate these instructions. According to the IG report, these instructions should specify that the SA code should not be removed even if the site is cleaned up or proposed for the NPL, so that controls over documentation of sites with SA agreements can be maintained. As the EPA IG pointed out, absence of guidance can result in poor quality data on the SA universe. While EPA indicated in 2010 that it would implement this recommendation, the 2012 manual does not include any instructions about maintaining the SA code. Because EPA has not implemented the IG’s recommendation, the manner in which the agency tracks the identity of SA agreement sites in CERCLIS is incomplete. For example, while an EPA website identifies all sites that have or have had SA agreements, three sites that had SA agreements and were later added to the NPL cannot be identified in CERCLIS as having had SA agreements. As a result, all sites that have had SA agreements are not identifiable in CERCLIS, which may hamper EPA’s ability to effectively manage long-term cleanups and track outcomes at SA agreement sites.\nFurthermore, the standards for specifying what documentation is sufficient to support the Hazard Ranking System score of SA agreement sites are less clear than those for NPL sites. When sites are proposed for listing on the NPL, EPA procedure requires they have a Hazard Ranking System documentation record—a specific document that includes detailed justification for the Hazard Ranking System score. In contrast, both the 2004 and 2012 SA guidance state that EPA should have “adequate documentation” supporting a Hazard Ranking System score of 28.50 or higher but do not define what is meant by “adequate” documentation or provide criteria for assessing adequacy. The guidance documents specify that regions may rely on a draft Hazard Ranking System documentation record or “other adequate documentation,” but do not provide an explanation of what other documentation might be adequate. EPA headquarters officials told us that documentation of a preliminary calculation of the Hazard Ranking System score during the initial assessment phases would qualify as adequate, and said that this has been discussed with regional officials during periodic meetings. EPA officials acknowledged, however, that this interpretation of the guidance has not been included in any written guidance to the regions. As the EPA IG pointed out in its 2007 report, consistent and reliable documentation of Hazard Ranking System scores at SA agreement sites is an internal control to ensure compliance with the SA guidance and approach. Under the federal standards of internal control, agencies are to clearly put in writing (i.e., in management directives, administrative policies, or operating manuals) internal controls, such as this interpretation of the guidance, and have them readily available for examination. Without more specific written guidance, EPA regional officials may not develop adequate documentation of Hazard Ranking System scores at SA agreement sites.\nIn addition to the differences in its tracking, EPA has not reported the agency’s performance on the progress of cleanup at SA agreement sites as it has for NPL sites. EPA reports achievements at NPL sites, including completion of some phases of the cleanup process, as part of the agency’s implementation of provisions under GPRA, which generally aims to hold federal agencies accountable for using resources wisely and achieving program results. Two of the Superfund program’s three GPRA performance measures—sites where human exposure is under control and sites that are ready for their anticipated use—refer only to NPL sites. One additional performance measure tracks the completion of the initial assessment phases, which generally precede EPA’s decision about which cleanup approach to use at a site, including the SA or NPL approach. EPA’s Office of Solid Waste and Emergency Response, which manages the Superfund program, reports these performance measures for NPL sites in several annual reports available on EPA’s website. However, EPA does not include in these reports the cleanup milestones reached at SA agreement sites, such as how many SA sites have human exposure under control. The EPA IG recommended in 2007 that EPA track and report the same GPRA performance measures at SA agreement sites as it does at NPL sites. As the IG reported, by measuring and tracking all performance measures at SA agreement sites, EPA could demonstrate the outcomes of the Superfund program’s work and provide an incentive to regions by more thoroughly accounting for their performance. In 2010, EPA indicated that it would implement the IG’s 2007 recommendation to track and report all Superfund GPRA performance measures at SA agreement sites using an annual report. EPA officials noted that the agency has begun tracking Superfund performance measures for SA agreement sites, but they acknowledged that EPA is not reporting these results publicly. Until the agency reports performance information on the progress of cleanup at SA agreement sites as it does for NPL sites, EPA is not providing the public and Congress with a full picture of SA agreement sites. Without such information, Congress lacks complete information on the progress of the Superfund program to inform its legislative actions, including appropriations.", "Using the SA or the NPL approach can have advantages or disadvantages for the parties involved, including EPA, PRPs, states, and communities. Specifically, using the SA approach generally allows EPA to avoid at least some of the cost and time associated with listing a site on the NPL. For example, NPL listing requires preparation of a Hazard Ranking System documentation record, which is not required for sites with SA agreements. EPA officials estimated each such record costs an average of about $65,000 to prepare. In addition, when EPA decides to propose a site for listing on the NPL, the agency sometimes conducts an expanded site inspection if further information is necessary to document a Hazard Ranking System score. EPA officials estimated this step costs about $92,000 on average. In addition, to list a site on the NPL, EPA has to work through the formal listing process, including issuing notices in the Federal Register with a public comment period. This process takes time to complete, which may affect the progress at the site. In Region 3, EPA officials stated that the volume of comments received on a particular site proposed for the NPL, in addition to the likelihood of litigation from one or more parties if the site were finalized on the NPL, led the region to address the site through the SA approach.\nSome EPA regions have seen the advantages of using the SA approach more than others. As shown in figure 5, of the 67 SA agreement sites, 57 sites, or 85 percent, are in EPA Regions 4 and 5.\nDifferences in usage of the SA approach among regions relate to a region’s specific circumstances and preferences. According to EPA headquarters officials, Regions 4 and 5 had early experience with SA agreements and may have been more comfortable in starting new ones as a result. These two regions have also listed many sites to the NPL since the SA approach was formalized in 2002. Region 4 officials told us that they have found that the SA approach is best suited to sites with one or two PRPs and no questions about the PRPs’ liability or ability to conduct the investigation or cleanup. They said they have also found that it is helpful when a PRP has a financial interest in finishing the cleanup quickly, as in the case of a potential redevelopment project at a site. Other regions have used the SA approach in limited circumstances. For example, officials in Region 9 described one case in which they pursued the SA approach because the state did not want a particular site listed on the NPL. Two regions—Regions 1 and 2—have never used the SA approach. Officials in Region 1 explained that few sites that have willing and capable PRPs and are eligible for the NPL come to the region’s attention because state programs prefer to take on oversight of such sites. Region 2 officials said they did not see a reason to use the SA approach—if a site’s contamination is severe enough, the region will propose the site to the NPL, unless the state is addressing the site.\nUsing the SA approach allows PRPs to avoid the perceived stigma associated with an NPL site, according to EPA officials. Sites with SA agreements have to meet all of the qualifications of NPL sites, and thus may have contamination that is just as severe, but the potential stigma of NPL listing appears to influence PRPs. Officials in 7 of 10 regions mentioned the stigma of an NPL site as a concern for PRPs. Concerns about this stigma may also arise when a company is to be sold and does not want to list an NPL site as part of its liabilities, according to EPA regional officials. Related to this stigma, EPA officials said they believed that avoiding listing on the NPL may help local government officials and PRPs in some cases, such as facilitating a site’s redevelopment or its financing. Previous reports have also pointed to the potential stigma of NPL listing as motivation for pursuing a different cleanup approach. For example, an assessment of the effectiveness of the SA approach in Region 4 (hereafter referred to as the Region 4 study) found that sites using the SA approach may have a higher potential for redevelopment than comparable NPL sites if avoiding this stigma increases PRPs’ financing options and their willingness to redevelop.\nIn addition, some states generally prefer that EPA not list sites on the NPL, according to EPA officials, which makes the SA approach more appealing. According to EPA policy, EPA typically obtains a state’s concurrence before listing a site on the NPL. Officials in all 10 EPA regions mentioned the states’ views as one of the factors they used to determine whether to pursue an NPL listing or other approaches. Moreover, officials in 4 of 10 regions said there were states in their region that were generally reluctant to have EPA list sites on the NPL. For example, Region 9 officials said two of their states generally do not want EPA to list sites on the NPL; specifically, one of these states wanted to avoid the associated stigma of having NPL sites in the state.\nThe SA approach also has advantages and disadvantages for communities. According to an EPA official, it may be easier for communities to obtain technical assistance funds from PRPs at SA agreement sites than to obtain the equivalent funds from EPA at NPL sites. This official said obtaining funds from PRPs at SA agreement sites often involved the absence of a “match” requirement as well as fewer paperwork requirements for the communities because the technical assistance plans do not have to follow federal grant requirements. However, under the SA approach, communities have no opportunity for a formal comment process on EPA’s selection of the SA approach itself, as they do under the NPL approach. Specifically, when EPA proposes a site for the NPL in the Federal Register, the public has 60 days to comment on the proposed listing. EPA then responds in writing to significant public comments in conjunction with the final Federal Register listing announcement of the site. No such opportunity exists when EPA decides to enter into an SA agreement at a site, although EPA provides numerous opportunities under the SA approach for communities to comment on the cleanup process.\nCommunities also may have mixed reactions to the SA approach for other reasons as well. According to EPA officials, communities may have concerns about the SA approach and may require outreach from the agency to explain the approach. For example, at one site in Region 5, the region expanded its outreach efforts after some community members protested the use of the SA approach at the site. A regional official explained that some individuals in the community believed the site would not follow the same cleanup process as an NPL site. Some community members may support listing on the NPL over the SA approach to bring increased attention to a site, helping to ensure its cleanup. Other regional officials said other community members may be more open to the SA approach and oppose listing on the NPL for fear of its effect on property values. The Region 4 study confirmed that the SA approach is often considered advantageous by community members and leaders concerned about property values and stigma. However, this report also found that other community members require confirmation that the process will not result in more limited resources or reduced remediation compared to listing on the NPL.", "For sites with agreements from June 2002 through December 2012, SA agreement sites and similar NPL sites we selected showed mixed results in the time needed to complete negotiations for agreements, specific cleanup activities, and achieving the construction completion milestone (see app. I for more details on our objectives, scope, and methodology and app. III for more information on our results). Specifically, SA agreement and NPL sites in our analysis showed mixed results in the average time to complete negotiations with PRPs and for specific cleanup activities, such as remedial investigation and feasibility studies, remedial designs, and remedial actions. In addition, a lower proportion of SA agreement sites have reached construction completion compared with similar NPL sites. SA agreement sites tend to be in earlier phases of the cleanup process because the SA approach began more recently than the NPL approach.\nFor agreements finalized from June 2002 through December 2012 at sites in our analysis, SA agreement and similar NPL sites showed mixed results in the length of time to complete negotiations, with SA agreement sites taking about as long as similar NPL sites for remedial investigation and feasibility study negotiations and less time for remedial design and remedial action negotiations. EPA regional officials confirmed that negotiations can be faster at SA agreement sites because the PRPs are more cooperative. For example, Region 4 officials highlighted one SA agreement site where the PRP pushed for a quicker negotiation process by turning in documents ahead of deadlines, unlike many other PRPs. In another case, Region 5 officials said they negotiated three SA agreements for remedial investigations and feasibility studies covering 19 sites of a similar nature with the same PRP. Region 5 officials noted that these negotiations were particularly smooth and cooperative. Moreover, the Region 4 study also found, based on interviews with PRPs and EPA officials, that the tone of SA negotiations is more productive than at NPL sites. However, given the relatively limited number of negotiations for both NPL and SA agreement sites in our analysis, the differences in the average length of negotiations cannot be attributed entirely to the type of approach used at each site.\nThe SA agreement and similar NPL sites in our analysis showed mixed results in the length of time it took to complete specific cleanup activities, remedial investigations and feasibility studies on average and about the same time for remedial designs and remedial actions. While SA agreement sites took substantially longer on average than NPL sites to complete remedial investigations and feasibility studies, these differences do not appear to be exclusively attributable to the SA and NPL approaches. For example, several remedial investigations and feasibility studies at SA agreement sites took a long time to complete due to individual circumstances at the site, such as dealing with a proposal to sell on-site materials to a manufacturing company, late participation from PRPs in the process, or coordination with other cleanup efforts. SA agreement sites and NPL sites in our analysis took about the same time on average to complete remedial designs and remedial actions. with SA agreement sites taking substantially longer for A lower proportion of SA agreement sites have reached construction completion compared with similar NPL sites in our analysis (see fig. 6).\nMultiple cleanup activities can occur within a given phase at the same or different operable units at one site. Completion of one cleanup activity, such as a remedial investigation and feasibility study, does not necessarily mean all work in that phase has been completed. Our analysis looks at individual activities within given phases.", "EPA regional officials are responsible for choosing the appropriate long- term cleanup approach for sites with contamination that makes them eligible for the NPL. To do so, they select from among several approaches, including deferring responsibility for the oversight of site cleanup outside of the Superfund program. Of these sites deferred outside of the Superfund program, EPA has deferred about 1,800 sites through OCA deferrals—more sites than any other approach—but the agency has not issued guidance focused on this long-term cleanup approach. Instead, EPA describes OCA deferrals in the Superfund Program Implementation Manual, which does not clearly define each type of OCA deferral, particularly OCA deferrals to private parties. This has led to inconsistent coding of OCA deferrals in CERCLIS by different regions. Moreover, EPA’s guidance does not specify in detail the documentation regions should have to support their decisions on OCA deferrals or completion of cleanup at these sites. As a result, EPA regions collected varying types and amounts of documentation—including, in some cases, no documentation—to support OCA deferrals. EPA officials noted they were currently working on additional guidance for OCA deferrals, but they had not set an issuance date for this guidance. Without clearer guidance on OCA deferrals, EPA does not have reasonable assurance that it can consistently track its OCA deferral sites in CERCLIS or that its regions’ documentation will be appropriate or sufficient to verify that these sites have been deferred or have completed cleanup. In addition, EPA officials could not provide a reliable estimate regarding the number of sites with long-term cleanups under the Superfund program that are being cleaned up through approaches other than the NPL and SA approaches—the “other” Superfund program sites—because there is no consistently applied method for tracking them. While the agency’s estimates of the number of such sites is relatively small, without a method to identify and track such sites, it is difficult for EPA headquarters to determine the extent to which regions use this other approach under the Superfund program, evaluate regions’ use of this approach, or hold regions accountable for using this approach.\nFurthermore, EPA guidance has made clear since 2002 that the agency should try to make SA agreement sites equivalent to NPL sites in terms of the level of cleanup achieved, among other things. EPA has largely accomplished this through adherence to the Superfund cleanup process and by adding certain provisions to SA agreements to address key differences between the NPL and SA approaches. The agency has not clarified to regions in its guidance that the SA approach is the preferred approach for long-term cleanup of sites under the Superfund program not listed on the NPL. Without clear guidance, agreements at such sites may be denied some of the advantages built into the SA agreements to ensure that the cleanups will be comparable to those under the NPL approach. Also, while EPA accurately identifies NPL sites in CERCLIS, the agency cannot do the same for SA agreement sites because it has not clarified in writing when the database code that identifies sites with SA agreements should remain in place and when it should be removed. In addition, EPA’s standards for specifying what documentation is sufficient to support the Hazard Ranking System score at SA agreement sites are less clear than those for NPL sites. Unless EPA improves its tracking of SA agreement sites and clarifies its policies, its ability to effectively track outcomes of the SA approach at these sites and manage long-term cleanups at sites under the Superfund program may be hampered. Finally, while EPA reports performance information for NPL sites under GPRA, it does not report performance information on the progress of cleanup at SA agreement sites in an equivalent manner. Without such information on SA agreement sites, Congress lacks complete information on the progress of the Superfund program to inform its legislative actions, including appropriations.", "To improve the Superfund program’s management of sites with contamination that makes them eligible for the NPL, including management of the SA approach and deferrals of cleanup oversight to other entities, we recommend that the Administrator of EPA take the following four actions:\nProvide guidance to EPA regions that defines each type of OCA deferral and what constitutes adequate documentation for OCA deferral and completion of cleanup.\nDevelop a method for EPA headquarters to identify and track other sites with long-term cleanups under the Superfund program (i.e., those that are outside of the NPL and SA approaches).\nUpdate EPA’s written policies on SA agreement sites, including taking steps such as clarifying whether the SA approach is EPA’s preferred approach for long-term cleanup of sites under the Superfund program and outside of the NPL, specifying what documentation is sufficient to support the Hazard Ranking System score at SA agreement sites, and defining when the database code that identifies sites with SA agreements should remain in place.\nReport performance information on the progress of cleanup at SA agreement sites in a manner that is equivalent to such reporting for NPL sites.", "We provided a draft of this report to EPA for review and comment. In written comments, which are included in appendix IV, EPA agreed with the report’s recommendations and stated that it believes the report contains substantial useful information. Regarding the first recommendation, EPA stated that it added more detail on OCA tracking in its fiscal year 2012 Superfund Program Implementation Manual, but it acknowledged that more guidance is needed. Regarding the second recommendation, EPA stated that it agreed with the recommendation without further comment. Regarding the third recommendation, EPA said that it will clarify that the SA approach is generally the agency's preferred enforcement approach for CERCLA non-NPL sites that are “NPL-caliber,” where feasible and appropriate. Finally, regarding the fourth recommendation, EPA stated that it agrees with this recommendation as it pertains to reporting under GPRA and provided further information on how EPA reports measures at SA agreement sites. EPA also provided technical comments on the draft report, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Administrator of the Environmental Protection Agency, the appropriate congressional committees, and other interested parties. In addition, the report will also be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "This appendix provides information on the scope of the work and the methodology used to examine (1) how the Environmental Protection Agency (EPA) addresses the cleanup of sites it has identified as eligible for the National Priorities List (NPL), (2) how the processes for implementing the Superfund Alternative (SA) and NPL approaches compare, and (3) how SA agreement sites compare with similar NPL sites in completing the cleanup process.\nTo examine how EPA addresses the cleanup of hazardous waste sites with a level of contamination that makes them eligible for the NPL, we analyzed applicable federal statutes and EPA regulations and guidance to determine the available approaches to address sites that are reported to the Superfund program. We then obtained and analyzed data from EPA’s Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS), the Superfund program’s database, as of December 2012. Specifically, we analyzed EPA’s CERCLIS database to determine how many sites EPA currently classified as undergoing long- term cleanup under each approach, both nationally and by each of EPA’s According to EPA officials, sites under each of the long-term 10 regions.cleanup approaches would have a Hazard Ranking System score of at least 28.50, otherwise the site would have been classified as “no further remedial action planned.” Thus, all sites identified as being under a long- term cleanup approach were considered to have contamination making them eligible for the NPL. This analysis involved the review of EPA’s non- NPL status code, NPL status code, and SA code. In addition, we conducted semistructured interviews with officials in all 10 EPA regions to understand each region’s processes for selecting among long-term cleanup approaches and why regions used the various approaches. We also obtained relevant supporting documentation from these regional officials. In addition, we interviewed EPA headquarters officials about the assessment process and cleanup approaches. Finally, we interviewed a nonprobability, convenience sample of officials from 13 state cleanup programs who were familiar with available cleanup approaches. The convenience sample consisted of representatives from state environmental departments taking part in an Association of State and Territorial Solid Waste Management Officials conference call who agreed to speak with us. Because this was a nonprobability sample, the results of our analysis cannot be generalized to all states; however, these officials provided important information about the cleanup process.\nTo compare the processes for implementing the SA and NPL approaches, including the cleanup process and EPA’s oversight, we analyzed available documentation on the two approaches, including guidance and prior reviews. These reviews included an EPA Inspector General (IG) report on the SA approach, as well as several reports on the approach by EPA. We reviewed key findings and recommendations from the IG’s report, as well as the evidence provided by EPA to demonstrate its implementation of the report’s recommendations. We found the evidence to be sufficient to assess whether EPA had implemented these recommendations. In addition, we interviewed officials in all 10 EPA regions to determine how each region implemented the SA approach and obtained relevant supporting documentation. Finally, we interviewed EPA headquarters officials knowledgeable about the SA approach.\nTo compare how SA agreement sites and similar NPL sites complete the cleanup process, we identified SA agreement sites and constructed a comparison group of 74 NPL sites with agreements between EPA and potentially responsible parties (PRP) similar to those at SA agreement sites as follows:\nWe identified 67 SA agreement sites using the SA code and added to that 3 SA agreement sites with their SA code removed after the site was listed on the NPL for a total of 70 SA agreement sites; we identified these three sites through our interviews with EPA officials. We then obtained data on the legal actions taken at these sites from EPA officials in the Office of Site Remediation Enforcement, which included all agreements at these sites. Based on discussions with EPA officials and the SA guidance, we isolated agreements at SA agreement sites by selecting: (1) agreements entered into between June 2002 (the date of the issuance of the first SA guidance) and December 2012; (2) administrative orders on consent or consent decrees; and (3) agreements involving a PRP-led combined remedial investigation and feasibility study, remedial design, or remedial action. After excluding four sites with SA codes that had SA agreements that were not relevant to our study, we had 66 SA agreement sites for our analysis.\nWe constructed our comparison group of 74 NPL sites starting with the approximately 1,300 sites on the NPL. Specifically, we identified the 702 sites with (1) a combined remedial investigation and feasibility study, (2) remedial design, or (3) remedial action led by a PRP. We requested data on the legal actions taken at these sites from EPA officials and identified agreements similar to SA agreements based on the date the agreement was entered into, the type of agreement, and whether it included PRP-led long-term cleanup actions. In addition, we dropped any NPL sites from Regions 1 and 2 from the analysis because neither region has used the SA approach.\nTo more precisely align the NPL comparison group with SA agreement sites, we analyzed, for SA agreements, the number of PRPs involved and estimated costs for PRP-led actions. According to EPA officials, SA agreement sites generally tend to have fewer PRPs. Based on this analysis and EPA’s comments, we established thresholds for different variables that agreements in our NPL comparison group could not exceed. Specifically, NPL agreements could have: (1) no more than seven PRPs involved and (2) administrative orders on consent with estimated values between $100,000 and $5,000,000 or consent decrees with estimated values between $125,000 and $30,000,000.ranges covered the vast majority of SA agreements.\nAfter we identified the NPL sites with agreements similar to SA agreement sites, we merged the data on the legal actions with cleanup action data for NPL and SA agreement sites. We kept (1) combined remedial investigation and feasibility studies, (2) remedial designs, and (3) remedial actions at sites if the action was explicitly listed as a remedy in an SA agreement or an SA-similar agreement (for NPL sites). We identified negotiations related to cleanup actions of interest by comparing the completion date of the negotiation with the completion date of the agreement in EPA’s legal action data. For remedial investigation and feasibility study negotiations, we kept any negotiation with a completion date up to 180 days before the date of an administrative order on consent for that site. For remedial design and remedial action negotiations, we kept any negotiation with a completion date up to 2 years before the date After keeping these cleanup actions of interest, we of a consent decree.computed the durations of specific cleanup activities by calculating the difference in months between the start and completion dates of identified actions included in CERCLIS. We then calculated the mean and median durations for the SA and NPL groups, as well as related ranges. We compared the means and medians of the durations to assess whether reported results are affected by a possible skewed distribution. We decided to report the median because it is less sensitive to extreme values and provides a better estimate of the “average” duration for this analysis. Because only three SA agreement sites had reached the construction completion milestone, we were unable to compare the groups across the entire cleanup process; instead, we compared completion of specific activities, such as remedial designs. The results of our analysis cannot be generalized to all NPL sites because the 74 sites were a subset of all NPL sites selected to be as similar as possible to SA agreement sites based on key characteristics related to cleanup durations such as having a PRP that agreed to conduct at least some part of the cleanup. The comparison group was created for purposes of assessing whether alternative approaches for addressing the long-term cleanup of hazardous waste sites under the Superfund program can make a difference in cleanup durations and not for making generalizations about the larger universe of all NPL sites.\nWe conducted additional analyses on our SA and NPL groups to determine if there were any unaccounted distributional differences within each group that would materially affect our results. Specifically, we examined the sensitivity of our results to differences in regional distribution because the SA approach has different regional usage patterns than the NPL approach. While 85 percent of SA agreement sites are in Regions 4 and 5, only 34 percent of the similar NPL sites are in Regions 4 and 5. In one analysis, we restricted SA agreement and similar NPL sites to Regions 4 and 5, and the results were generally similar to the analysis using the full set of SA agreement and similar NPL sites. In addition, we examined the sensitivity of our results to differences in the complexity of SA agreement sites and similar NPL sites measured through the distribution of megasites and single operable unit sites in each group. The results for length of negotiations were not sensitive to differences between SA agreement sites and similar NPL sites in the distribution of megasites, though the results for the length of cleanup activities were somewhat sensitive to distributional differences. The results for length of negotiation and cleanup durations were, in general, not sensitive to differences in the distribution of sites with one or more operable units.\nTo assess the reliability of the data from EPA’s CERCLIS database used in this report, we analyzed related documentation, examined the data for errors or inconsistencies, and interviewed agency officials about any known data problems and to learn more about their procedures for maintaining the data. Where there were discrepancies in the data, we worked with EPA officials to clarify. For example, we identified certain SA agreement sites that did not appear to have agreements with long-term cleanup actions and reviewed these with EPA officials. Miscoded data were corrected, and EPA officials provided explanations for unique circumstances with certain agreements. We determined the data to be sufficiently reliable for calculating durations for completing different cleanup activities, including negotiations, at SA and NPL sites.\nWe conducted this performance audit from November 2011 to April 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Tables 1 and 2 provide a breakdown of cleanup approaches by region. Table 1 shows the number of sites within each region that are being cleaned up under the various cleanup approaches. Table 2 shows each region’s percentage of the total number of sites cleaned up under each approach.", "In this appendix, we discuss the results of our analysis of the median length of negotiations and the median length of cleanup activities at SA agreement sites and similar NPL sites, which consisted of NPL sites with agreements similar to SA agreements. Appendix I includes more information on our methodology.", "As shown in table 3, for agreements with PRPs finalized from June 2002 through December 2012, SA agreement sites and similar NPL sites in our analysis showed mixed results in the length of time to complete negotiations, with SA agreement sites taking about as long as similar NPL sites for remedial investigation and feasibility study negotiations and less time for remedial design and remedial action negotiations.\nGiven the relatively limited number of negotiations for both NPL and SA agreement sites in our analysis and the effect of unique sites, the differences in the median length of negotiations cannot be attributed entirely to the type of approach used at each site. Unique conditions at each site have the potential to affect negotiations between EPA and the PRP beyond the cleanup approach selected.", "As shown in table 4, the SA agreement sites and similar NPL sites in our analysis showed mixed results in the length of time it took to complete specific cleanup activities, with SA agreement sites taking longer for remedial investigations and feasibility studies on average and about the same time for remedial designs and remedial actions on average.\nTwelve of the 14 remedial investigations and feasibility studies at SA sites took longer than 50 months to complete, which is greater than the median for NPL sites in our analysis, as well as the median of 51 estimated by EPA for PRP-led remedial investigation and feasibility studies that began after June 2002. However, given the relatively small number of cleanup activities for both NPL and SA agreement sites in our analysis and differences at the site level, the differences in the median length of cleanup activities cannot be attributed entirely to the type of approach used at each site. For example, several remedial investigations and feasibility studies at SA sites took a long time to complete due to individual circumstances at the site, such as dealing with a proposal to sell on-site materials to a manufacturing company, late participation from PRPs in the process, or coordination with other cleanup efforts. SA agreement sites and NPL sites in our analysis took slightly less than 2 years on average to complete remedial designs and slightly less than 3 years on average to complete remedial actions.", "", "", "", "In addition to the individual named above, Vincent P. Price, Assistant Director; Elizabeth Beardsley; Eric Charles; Pamela Davidson; Armetha Liles; Cynthia Norris; and Nico Sloss made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1, 1, 2, 2 ], "alignment": [ "", "", "", "h0_full h3_full", "h3_full", "h0_full", "h0_full", "h3_title h1_full", "h3_full h1_full", "", "", "h2_full", "h0_full h1_full", "", "", "h3_full", "", "h2_title", "h2_full", "h2_full", "", "", "", "" ] }

{ "question": [ "What does the Environmental Protection Agency (EPA) address?", "How has the EPA delegated the 2012 eligible sites?", "How has the EPA guided the OCA?", "How does this lack of guidance leave room for error?", "How has the EPA documented their deferral of sites to the OCA?", "What does the EPA oversee under the Superfund program?", "How does the implementation of the SA and NPL compare?", "How are the differences between the implementation of the SA and NPL accounted for?", "How do these provisions cover unfinished cleanups?", "How have SA approaches been unfulfilled?", "How do these agreements perform?", "How does the EPA deal with such sites?", "How is the EPA's treatment of SA sites potentially detrimental?", "What is the outcome if these issues continue?", "How does the SA compare the NPL in the cleanup process?", "How did time factor into the differences?", "How does the proportion of sites cleaned compare?", "Why is the SA often in the earlier parts of cleanup compared to NPL?", "How can the differences between SA and NPL be accounted for?", "How can the EPA facilitate cleanup of hazardous materials?", "What allows the EPA to place sites on NPL?", "How can EPA address site cleanup aside from the NPL?", "What other approach may be taken?", "What approaches can be taken outside of Superfund?", "What was the GAO asked to review?", "What key points does this report address?", "What material did the GAO review for the report?" ], "summary": [ "The Environmental Protection Agency (EPA) most commonly addresses the cleanup of sites it has identified as eligible for the National Priorities List (NPL) by deferring oversight of the cleanup to approaches outside of the Superfund program.", "As of December 2012, of the 3,402 sites EPA identified as potentially eligible, EPA has deferred oversight of 1,984 sites to approaches outside the Superfund program, including 1,766 Other Cleanup Activity (OCA) deferrals to states and other entities.", "However, EPA has not issued guidance for OCA deferrals as it has for the other cleanup approaches.", "Without clearer guidance on OCA deferrals, EPA cannot be reasonably assured that its regions are consistently tracking these sites or that their documentation will be appropriate or sufficient to verify that these sites have been deferred or have completed cleanup.", "Moreover, EPA's program guidance does not clearly define each type of OCA deferral or specify in detail the documentation EPA regions should have to support their decisions on OCA deferrals.", "Under the Superfund program, EPA oversees the cleanup of 1,313 sites on the NPL, 67 sites under the Superfund Alternative (SA) approach, and at least 38 sites under another undefined approach.", "The processes for implementing the SA and NPL approaches, while similar in many ways, have several differences. In addition, EPA's tracking and reporting of certain aspects of the process under the SA approach differs from that under the NPL approach.", "EPA has accounted for some of these differences in its SA guidance by listing specific provisions for SA agreements with potentially responsible parties (PRP), such as owners and operators of a site.", "One such provision helps ensure cleanups are not delayed by a loss of funding if the PRP stops cleaning up the site.", "However, some EPA regions have entered into agreements with PRPs at sites that officials said were likely eligible for the SA approach without following the SA guidance.", "Such agreements may not benefit from EPA's provisions for SA agreements.", "EPA headquarters officials said the agency prefers regions to use the SA approach at such sites, but EPA has not stated this preference explicitly in its guidance.", "As a result, EPA's tracking of SA agreement sites in its Superfund database is incomplete; the standards for documenting the NPL eligibility of SA agreement sites are less clear than those for NPL sites; and EPA is not publicly reporting a full picture of SA agreement sites.", "Unless EPA makes improvements in these areas, its management of the process at SA agreement sites may be hampered.", "The SA agreement sites showed mixed results in completing the cleanup process when compared with 74 similar NPL sites GAO analyzed.", "Specifically, SA agreement and NPL sites in GAO's analysis showed mixed results in the average time to complete negotiations with PRPs and for specific cleanup activities, such as remedial investigation and feasibility studies, remedial designs, and remedial actions.", "In addition, a lower proportion of SA agreement sites have completed cleanup compared with similar NPL sites.", "SA agreement sites tend to be in earlier phases of the cleanup process because the SA approach began more recently than the NPL approach.", "Given the limited number of activities for both NPL and SA agreement sites in GAO's analysis, these differences cannot be attributed entirely to the type of approach used at each site.", "Under the Superfund program, EPA may address the long-term cleanup of certain hazardous waste sites by placing them on the NPL and overseeing the cleanup.", "To be eligible for the NPL, a site must be sufficiently contaminated, among other things.", "EPA regions have discretion to choose among several other approaches to address sites eligible for the NPL.", "For example, under the Superfund program, EPA regions may enter into agreements with PRPs using the SA approach.", "EPA may also defer the oversight of cleanup at eligible sites to approaches outside of the Superfund program.", "GAO was asked to review EPA's implementation of the SA approach and how it compares with the NPL approach.", "This report examines (1) how EPA addresses the cleanup of sites it has identified as eligible for the NPL, (2) how the processes for implementing the SA and NPL approaches compare, and (3) how SA agreement sites compare with similar NPL sites in completing the cleanup process.", "GAO reviewed applicable laws, regulations, and guidance; analyzed program data as of December 2012; interviewed EPA officials; and compared SA agreement sites with 74 NPL sites selected based on their similarity to SA agreement sites." ], "parent_pair_index": [ -1, -1, 1, 2, 1, -1, -1, -1, 1, -1, 3, 3, -1, 6, -1, 0, 0, 0, -1, -1, 0, -1, 2, 2, -1, 5, 5 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 0, 0, 0, 0, 0, 0, 0, 0 ] }

{ "title": [ "Background", "Selected Characteristics of U.S.-China Cooperative Education Institutions", "Role of the U.S. Government in U.S. Higher Education Arrangements in China", "Academic and Other Key Freedoms Related to U.S. Universities in China", "U.S. Universities Reported Receiving Support from Chinese Universities and Government Entities, with Limited Support from the U.S. Government", "Chinese Universities and Government Entities Provided Support to U.S. University Institutions We Reviewed", "Universities Reported Sometimes Substantial Material Support and Funding from Chinese Universities and Government Entities", "Funding from Private Sources in China Appears Limited", "Fewer Than Half of the Universities Reported Receiving Funding from the U.S. Government", "Five of 12 U.S. Universities in China Reported that U.S. Students Received Federal Financial Aid", "Universities Reported Limited Funding from U.S. State Governments and Private Donors", "Almost All Universities Reported Their China Institutions Generated Net Revenue or Had Neutral Impact", "Agreements between U.S. and Chinese University Partners and Other Policies Generally Outline Protections for Academic Freedom, but Fewer Address Internet Access or Other Freedoms", "Most Universities Include Provisions Intended to Uphold Academic Freedom or U.S. Academic Standards in Their Written Agreements or Other Policies", "About Half of Universities Address Access to Information, but Few Agreements and Other Policies Include Internet Protections", "About Half of Universities Address at Least One of the Freedoms of Speech, Assembly, and Religion or Worship", "U.S. University Members Generally Indicated They Experienced Academic Freedom, but Internet Censorship and Other Factors Posed Constraints", "Faculty, Students, and Administrators Generally Indicated They Experienced Academic Freedom at U.S. Universities in China", "Faculty and Student Perspectives on Academic Freedom", "Administrator Perspectives on Academic Freedom", "Internet Censorship, Self- Censorship, and Other Factors Create Obstacles to Learning at Some Universities", "Fewer than Half of Reviewed Universities Have Uncensored Internet Access", "Self-Censorship and Other Factors Create Obstacles to Learning", "Universities’ Legal Status May Be Correlated with Academic Freedom", "Universities Indicated They Will Monitor Impact of Chinese Law and May Take Different Actions Should Academic Freedom Be Impaired", "Concluding Observations", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: U.S. University Cooperative Education Institutions and Programs in China", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The Chinese Ministry of Education requires that U.S. universities seeking to establish an education arrangement in China partner with a Chinese university. The Chinese government also requires the U.S. universities to establish written agreements with the Chinese university defining the academics, governance, operations, finances, and other key aspects of the arrangement. The Chinese Ministry of Education reviews each U.S. university’s written agreement along with other application materials and authorizes approved universities and their Chinese partners to establish:\nCooperative education institutions: degree-granting institutions that can be granted independent legal status.\nCooperative education programs: activities take various forms and can include joint and dual degree programs.\nAppendix II provides a complete list of U.S. universities that have been approved to establish cooperative education institutions and cooperative education programs in China. As figure 1 shows, the number of U.S. universities that have partnered with Chinese universities to establish cooperative, degree-granting institutions has increased since 2011.\nJust as the number of U.S. universities operating cooperative institutions in China has grown, for the past 6 years China has been the leading country of origin for international college students in the United States, according to the Institute of International Education, with double-digit percentage increases in the past 8 years. In academic year 2014-2015, more than 300,000 students arrived in the United States from China, representing almost a third of all international students in the United States.", "We reviewed 12 U.S. universities that have partnered with Chinese universities to establish degree-granting institutions in China: six public universities and six private, nonprofit universities. The curriculum at each institution is taught in English, with the exception of foreign language courses.\nAdditional information about these institutions’ students, faculty, and degree offerings is as follows.\nMore than 6,500 total students were enrolled in the 2014-2015 academic year.\nEnrollment ranged from fewer than 40 to more than 3,000 students across the different universities, with about half of the institutions enrolling between 150 and 900 students.\nMore than 90 percent of these students are Chinese, and less than 6 percent are U.S. citizens.\nAbout 60 percent of faculty, in the 2014-2015 academic year, were U.S. citizens, about 16 percent were Chinese, and the remainder were from other countries.\nUniversities include both faculty sent from the U.S. universities’ home campus to teach at the institution in China and faculty hired specifically to teach at the institution in China.\nThe 12 universities offer various undergraduate and graduate degrees in China, including bachelor’s degrees in accounting, business administration, computer science, engineering, English, finance, graphic design, organizational leadership, and supply chain management; master’s degrees in computer graphics and animation, engineering, global health, international studies, management studies, and medical physics; and a doctorate of engineering.", "Education and State are involved in different aspects of higher education arrangements in China. Education provides federal student loans, grants, and other financial aid each year through programs authorized under Title IV of the Higher Education Act of 1965, as amended. U.S. students in overseas programs are eligible for this federal financial aid under some circumstances, but Chinese and other non-U.S. students are generally not eligible.\nState supports various international educational grants and scholarships, some of which apply to U.S. students studying in China. In addition, State monitors and reports on human rights conditions around the world. State annually publishes country reports on global human rights practices, including academic freedom.", "State has reported that China’s human rights record, which has been a long-standing concern, has deteriorated in recent years, with participation in civil society curtailed and academic freedom on Chinese university campuses restricted. State’s Country Reports on Human Rights Practices for 2015 reported that Chinese government officials have instructed professors at Chinese universities to avoid discussing freedom of the press, civil rights and society, and other subjects, and have cautioned universities against using textbooks that promote Western values. In addition, the report notes that the Chinese government has increased efforts to monitor Internet usage and control Internet content, while also taking measures to restrict freedoms of speech, religion, and assembly. The Chinese government regulates the Internet by censoring or restricting access to many websites, including search engines, news outlets, and social media.\nIn April 2016, the Chinese government passed a law regulating the activities of foreign nongovernmental organizations. According to State, this new law requires foreign nongovernmental organizations operating in China to be sponsored by a Chinese organization, to report funding and event information to the Chinese government, and to report directly to the Ministry of Public Security. In a letter to the Chinese government, a group of U.S. universities voiced their concerns regarding a previous draft version of the law, stating that the draft law was ambiguous in defining what types of foreign nongovernmental organizations would be subject to the law. The extent to which the law may impact universities remains to be determined.\nAcademics and researchers, among others, have expressed concerns that, given these conditions, faculty, students, and others at U.S. universities in China may face constraints to their academic freedom and other key freedoms. For the purpose of this report, we define these freedoms as follows:\nAcademic freedom: includes the ability to teach or study what one chooses, ask any questions, or freely express views in the classroom.\nFreedom of speech: includes the ability to express one’s opinion in print, video, in person, or through other means without interference.\nFreedom of information: includes the ability to access information and ideas through any medium, including the Internet, libraries, and databases.\nFreedom of assembly: includes the ability to gather with students and others.\nFreedom of worship or religion: includes the ability to practice one’s religion, read religious texts, and share one’s beliefs.", "The 12 U.S. universities we reviewed generally reported receiving support for their institutions in China from their Chinese partner universities and from Chinese government entities, with limited funding from U.S. government agencies and private donors. Universities reported contributions from their partner universities and from Chinese provincial and local governments for land, building construction, and use of campus facilities. Almost all of the universities said their institutions in China generated net revenue or had neutral impact on their budget.", "", "The universities we reviewed generally reported receiving material support and funding from their Chinese partner universities or from provincial and local governments to help establish and operate their institutions in China. In interviews and questionnaire responses, most universities reported being granted land, resources for construction of new buildings, and the use of the Chinese university’s campus facilities.\nThe amount of support reported by the universities varied widely and was in some cases substantial.\nOne university reported receiving nearly 500 acres of land and a commitment from the Chinese provincial and local governments to spend about $240 million for construction and development of facilities. The U.S. university said its Chinese partners were covering all direct expenses for the institution, including paying directly for maintenance, capital expenses, faculty and staff salaries, housing subsidies, and travel allowances. According to university administrators, in academic year 2016-2017, the institution in China will begin reimbursing the U.S. university for curriculum development, which university officials said could amount to almost $1 million in the first year.\nOne university stated that 25 percent of the budget for its institution in China came from the government of the city where it was located, including subsidies for Chinese students’ tuition.\nSome U.S. universities noted that their institutions in China are entirely owned and operated by the Chinese universities, which have assumed financial responsibility, and that the U.S. universities provide primarily academic guidance to the institutions. One of these U.S. universities said its Chinese university partner committed to invest nearly $40 million to construct and equip a new building to house the institution. Another said that all costs incurred by the U.S. university during the institution’s establishment—including faculty and staff time and travel—were covered by the Chinese partner university.\nIn their questionnaire responses, two universities reported receiving financial support from Chinese government entities ranging from $1.5 million to over $15 million. Several other universities described the support provided, including classroom space, campus facilities, and student scholarships, but they did not report its monetary value. Figure 2 shows examples of facilities at the U.S. universities with institutions in China.\nThree universities also reported receiving nonmaterial support such as guidance and introductions to contacts in the Chinese government. For example, one university said its Chinese partner university provided assistance in obtaining the Chinese government approvals needed to establish the institution. Another university said the provincial government’s education bureau provided advice, introductions, and occasional facilitation support. Finally, two universities said the Chinese national government provided advice and introductions to help establish and maintain their institutions in China.", "A few universities told us they received funding from private sources in China, such as donors, to operate their institutions in China. For example, one university responding to our questionnaire reported receiving less than $100,000 from private sources in China in academic year 2014- 2015. Another reported that 15 percent of its China institution budget came from private philanthropy and programs for executives but did not specify whether the private sources were U.S. or Chinese. Several universities said they were not aware of the sources of financial aid that their Chinese students may have received. A few universities reported receiving nonmaterial support, such as advice, from Chinese private sources; one university noted that private individuals in China serve on its advisory board, and another said several Chinese companies host students from its institution in China and provide career assistance.", "", "Education does not provide funding or guidance to help U.S. universities establish institutions overseas, including in China, but U.S. students may use federal financial aid for their studies in China under some circumstances, according to Education officials. As figure 3 shows, 4 of the 12 universities reported in their questionnaire responses the total amounts of federal financial aid that U.S. students at their institutions in China received in academic year 2014-2015, ranging from $1,800 to about $870,000. One additional university said its U.S. students received federal financial aid, but the university did not report the amount. Most of the remaining universities reported that only Chinese and international students are enrolled, with no U.S. students who could be eligible for federal financial aid.\nTwo of the universities that reported that some of their U.S. students in China received federal financial aid from Education also received funding from the U.S. Agency for International Development and State. The U.S. Agency for International Development’s Office of American Schools and Hospitals Abroad provided funds totaling more than $12.5 million over a number of years to one of the universities for its library, according to agency officials. In addition, State officials said that although they do not provide funding to help U.S. universities establish institutions in China, a small number of their grants may go toward these institutions. For example, State reported that its Gilman program for undergraduates funded five U.S. students to study at a U.S. university institution in China in academic year 2014-2015. In addition, two universities responding to our questionnaire reported that the U.S. embassy and consulates in China provided nonmaterial assistance, including advice, introductions, occasional facilitation support, and career assistance to students.", "Most U.S. universities we reviewed reported contributing their own funds and resources to establish and operate their institutions in China, such as funds to pay for staff time, travel costs, and legal expenses, and material resources such as classroom equipment. However, although the six public universities we identified as having institutions in China receive ongoing state funding for their domestic campuses, most of these universities told us they require their institutions in China to be self- sufficient and not rely on state government resources. For example, one public university said its board of governors approved the use of state funds to establish the China institution with the understanding that all funds used would be reimbursed, and the university reported that the initial investment has been recaptured several times over. Another reported that its institution was funded strictly through tuition and fees paid by students in China. Nonetheless, two universities reported receiving some funding from their respective state governments in academic year 2014-2015.\nFour universities reported receiving funding for their institutions in China from U.S. private sources in academic year 2014-2015, including for financial aid. One university reported receiving more than $1 million from these sources, and another stated that 15 percent of its China institution’s budget came from private philanthropy and programs for executives. A few of these universities also noted that U.S. private sources provided nonmaterial support such as advice and student career assistance, including internships and job recruitment.", "Half of the universities we reviewed reported that their institutions in China generated, or they expected them to generate, net revenue for the U.S. university. Of these, four universities reported that on net, their institutions in China had provided funds to the U.S. university. Two additional universities reported that they expect net gains in future years. However, some universities noted that they did not view the net gains as profits. As one university explained, it did not consider its institution in China to be a moneymaking operation because it reinvests net revenue in its programs in China rather than in its campuses in the United States. In addition, four other universities said their institutions in China had neutral impact on their budgets.\nOf the 12 universities we reviewed, only 1 university reported that its campus in the United States provided net revenue to its institution in China to cover, for example, ongoing programmatic and oversight costs to ensure quality and architectural standards during construction. Officials said that the university agreed to proactively invest in its institution in China to ensure that it conformed to university standards and ensure its success. As such, officials considered these expenses to be worthwhile investments. Figure 4 shows the reported impact of U.S. universities’ institutions in China on the universities’ budgets.\nAlmost all of the universities that responded to our question about student tuition said it was an important source of revenue for their institutions in China, and several said their China institutions relied on tuition to a greater extent than their programs in the United States. The extent of reliance on tuition varied. Some universities said their China institutions’ operating budgets were entirely or almost entirely supported by tuition, while another university stated that about 60 percent of its budget came from tuition.", "Most U.S. universities we reviewed include provisions in written agreements with their Chinese partners or other policies intended to uphold academic freedom or U.S. academic standards. In addition, we found that a few universities’ written agreements and other policies include language indicating that the members of the university community will have access to information, which may suggest protections for Internet access, while about half include language addressing access to physical and online libraries. About half of the universities that we reviewed address at least one of the freedoms of speech, assembly, and religion or worship in university policies.", "Most universities we reviewed include language in their written agreements or other policies that either embody a protection of academic freedom or indicate that the institution in China will adhere to academic standards commensurate with those at their U.S. campus. Table 1 displays the extent to which the written agreements or other policies of universities in our review include language related to protections of academic freedom for their institutions in China.\nSix universities in our review include language in either their written agreements or other university policies that indicates a protection of academic freedom, such as permitting students to pursue research in relevant topics and allowing students to freely ask questions in the classroom. For example, one university’s agreement states that all members of and visitors to the institution in China will have unlimited freedoms of expression and inquiry and will not be restricted in the selection of research, lecture, or presentation topics. Another university’s agreement states that the institution will be centered on open inquiry and flow of information, while a third university’s student handbook states that the university will guarantee the right to pursue academic topics of interest. One additional university has language in a faculty handbook that indicates both a protection of and potential restriction to academic freedom. This institution’s faculty handbook includes language that protects academic freedom but also encourages self-censorship to prevent externally imposed discipline.\nAnother three universities’ written agreements include language indicating that the institution in China will adhere to academic standards commensurate with either the U.S. campus or the university’s accrediting agency or other authoritative bodies. For example, one university’s agreement states that the academic policies and procedures at the institution in China shall comply with those of the U.S. university, while another university’s agreement states that the institution in China will conform to the requirements of the accreditation commission with jurisdiction over the university. The accrediting agencies responsible for the universities in our review all have language in their standards regarding academic freedom. Finally, one university’s written agreement does not mention academic freedom.", "About half of the universities we reviewed have agreements or policies that address access to information by outlining responsibilities for themselves and their Chinese partners for providing access to physical or digital libraries. In addition, universities’ documents vary in whether the U.S. or Chinese university partner will provide access to this information. Chinese university partners that provide access to the library or Internet and other technological resources may be subject to Chinese government restrictions. For example, one university’s student handbook affirms that the U.S. university will provide on-campus access to digital libraries and computers for homework and academic use. Another university’s written agreement states that the Chinese partner will provide requisite learning resources, such as textbooks, classrooms, computer labs, and library facilities.\nA few universities’ written agreements and other policies include language indicating that members of the university community will have full or complete access to information. Such language may suggest protections for Internet access. For example, one university’s student handbook states that students will be active learners guaranteed the right to pursue academic topics of interest, with full access to information and relevant scholarship. However, these universities do not discuss in written agreements or other policies if Internet access on campus is subject to Chinese government censorship. Moreover, through our visits to universities in China, we found that one of the universities that include language suggesting uncensored Internet access would be provided did not have such access on campus.\nA few universities’ documents include language that indicates possible Internet constraints. For example, one university’s student handbook outlines student responsibilities such as appropriate use of the Internet according to the regulations of the institution in China, further stating that browsing illegal websites is forbidden. In addition, a few universities include language that prohibits the use of technology and resources for activities prohibited by law. Such provisions are a reminder that university students may face difficulty when conducting academic research in China due to government censorship on search engines, news outlets, and social media websites.", "About half of U.S. universities address at least one of the freedoms of speech, assembly, and religion or worship at their institutions in China. Written agreements and policies for about half of the universities we reviewed include language that suggests a protection of at least one of the freedoms—speech, assembly, and religion or worship—though the number of universities addressing each freedom varies. One other university includes language that suggests a possible restriction on speech. Table 2 shows examples of statements included in written agreements or other policies to illustrate either protections or restrictions of these freedoms.\nRegarding freedom of speech, student and faculty handbooks at a few of these universities contain language indicating that students have the ability to discuss sensitive topics. Regarding freedom of assembly, a few U.S. universities state in policy documents that faculty or students may form unions or other groups, but one of these universities specifies that the student union will coordinate with, or be administered by, the Chinese partner university. Regarding freedom of religion or worship, none of the university’s agreements or policies contains language indicating a restriction on individuals’ ability to practice their religion. Moreover, several of the universities include language in their policy documents indicating that religious practices will be protected. For example, one university’s student handbook states that the institution in China recognizes the importance of spiritual life for members of the community and will assist members in locating a place of worship off campus. In contrast, one university’s faculty handbook notes that faculty should proceed carefully when broaching the subject of religion in the classroom.", "Faculty, students, and administrators we interviewed generally indicated that they experienced academic freedom at U.S. universities’ institutions in China, but they also indicated that Internet censorship, self-censorship, and other factors presented constraints. The institutions’ legal status may be correlated with greater academic and other freedoms experienced on campus. Universities have indicated they are monitoring a new Chinese law regulating foreign non-governmental organizations and have outlined varying approaches to address possible infringements to academic freedom at the institutions.", "", "The more than 130 faculty and students we interviewed from seven universities’ institutions in China generally reported that academic freedom has not been restricted (see app. I for more information on the numbers and types of faculty and students we interviewed). Faculty we interviewed told us they did not face academic restrictions and could teach or study whatever they chose. For example, several faculty members asserted that neither they nor their colleagues would tolerate any academic restrictions, and one faculty member told us he and his colleagues intentionally introduced class discussions on politically sensitive topics to test whether this would trigger any complaints or attempted censorship. Other faculty members told us that they had never been told to teach or avoid certain subjects or that their experiences of teaching in China and the United States were comparable. Several faculty members who had also taught at Chinese universities not affiliated with a U.S. university noted that students and teachers could not talk as freely at the Chinese university, with one faculty member noting he had specifically been told not to discuss certain subjects while at the Chinese university.\nStudents also generally indicated that they experienced academic freedom and could study or discuss any topic. Similar to faculty we interviewed, some students who had also studied or knew others who studied at Chinese universities contrasted their experiences. For example, students noted that they could have interactive dialogue with faculty, discuss sensitive topics, and freely access information at the U.S. institution in China but not at a Chinese university. In addition, potentially sensitive topics seemed to be freely discussed at some of the institutions we visited, based on our meetings with students and faculty. The topics included Tiananmen Square, protests in Hong Kong, Taiwan, abortion, prostitution in China, and legalization of drugs. We also observed classes at one institution where students and teachers discussed ethnic minorities in Chinese society, U.S.-China relations, the U.S. military presence in the South China Sea, and China’s increasing use of ideological and information controls.", "Through interviews and responses to our questionnaire, university administrators reported that academic freedom was integral to their institutions in China. Administrators at several universities told us that academic freedom was nonnegotiable, while others noted that the same curriculum used in the United States also applied to their institution in China. Most universities reported that academic freedom was not at all restricted for faculty or students. Several, however, reported that they either did not know the extent of academic freedom at their institution in China or that it was slightly restricted. For example, administrators from one university, which reported that students’ academic freedom was slightly restricted and freedoms of speech, assembly, and religion or worship were moderately restricted, noted that its students were Chinese citizens and subject to all applicable rules and regulations intended for Chinese students.\nIn addition, U.S. universities reported that they generally controlled curriculum development and led or influenced faculty hiring. All 12 universities we reviewed reported that they led or played a leading role in curriculum development, with most reporting that they effectively controlled this process. Several universities noted that the curriculum used for their institution in China was the same as the curriculum used on their U.S. campus, while several others noted that they designed and developed a new curriculum or modified their existing curriculum specifically for the institution in China. At several universities we visited, selected courses addressed the U.S. Constitution’s relevance to China, comparative Chinese-American legal cultures, American foreign policy in Asia, and the Cultural Revolution. With regard to faculty hiring, most universities indicated that they either exerted more authority than their Chinese partner over faculty hiring, including in some cases recruiting, vetting, and recommending candidates for hire, or played a collaborative role in the process. For example, administrators from one university told us that faculty candidates were interviewed first by a committee at the university’s U.S. campus and again at the institution in China, while administrators from another university told us that they entirely controlled faculty recruitment. Administrators from several universities noted, however, that while they controlled or influenced processes related to faculty hiring, an official from their Chinese partner university technically had final faculty-hiring authority.\nMore broadly, administrators identified various goals related to establishing their institution in China. For example, administrators from at least half of the universities we reviewed reported that goals included providing U.S. students with an international education experience, providing Chinese students with an American education experience, enhancing U.S.-Chinese research collaboration and knowledge exchange, strengthening U.S.-Chinese relations, attracting Chinese students to further studies at the U.S. university’s U.S. campus, and providing faculty additional locations for teaching and research.", "", "Five of the 12 U.S. universities in China that we reviewed reported uncensored Internet access, generally through use of a virtual private network. As figure 5 shows, the remaining universities reported that they do not have complete access to uncensored Internet content in China.\nWe visited universities that had uncensored Internet access and universities that did not. Correspondingly, as is shown in figure 6, we observed university members accessing search engines, newspapers, and social media sites that have been blocked in China—such as the New York Times, Google, and Facebook—at some universities but not others.\nAdministrators at the three universities we visited that have uncensored Internet access told us that uncensored access was available to all university members throughout campus and was an integral aspect of their institution in China. An administrator at one of these universities, however, told us that the university is required by the Chinese government to track and maintain records for several months of faculty, student, and staff Internet usage, including the Internet sites visited by faculty and staff. The administrator added that, to date, no Chinese government official had asked for these records. Administrators at other universities we visited told us that they were either not required to track Internet usage of faculty or students or that they were unaware of any such requirement.\nInternet Search Results in China May be Filtered by Language Search results can also be filtered depending on the language used. An English language search of “Tiananmen Square” on one search engine references what the State Department has characterized as the Chinese government’s violent suppression of protests in and around Tiananmen Square in1989, as shown above; however, an image search in Chinese language on the same search engine instead provides mostly tourist images about Tiananmen Square.\nAt several universities that lacked access to uncensored Internet content, students and faculty told us that, as a result, they sometimes face challenges teaching, conducting research, and completing coursework. For example, one faculty member told us that she sometimes asks others outside of mainland China to conduct Internet research for her because they can access information she cannot. A student at one university told us she needed to access a certain scholarly database typically blocked in China, while several students at another university told us their ability to conduct academic research was constrained by the Internet limitations. Students at one university told us that the educational software used in some classes relied on tools developed by a search engine provider blocked in China and that this software would therefore sometimes not function. Individuals at several other universities noted that faculty had to adapt to the Internet restrictions, for example, by accessing websites comparable to those censored in China, such as sites comparable to YouTube for sharing videos or to Gmail for sending email. Administrators, faculty, and students at several of these universities told us that individuals often used virtual private networks to mitigate Internet restrictions, but some students and faculty told us that these networks had limitations. For example, students and faculty at one university in China told us that the U.S. university provided access to its virtual private network but that it was not always reliable. Some students and faculty noted that they had purchased access to their own virtual private networks. At the time of our visit, however, some students told us that some of these commercial networks were operating poorly, causing them to revert to using the university’s network.\nSeveral universities we reviewed not only faced Internet censorship but also experienced restricted service. For example, at one university Internet service is unavailable in certain buildings, and some students cannot use the Internet in dormitories after 11 p.m, according to university administrators. In addition, several individuals told us that Internet access is sometimes blocked or significantly slowed at night, speculating that this was due to the university network’s bandwidth being taxed by the number of students playing video games during those hours.\nUniversity library services may offset Internet restrictions to some degree. All five universities we visited provided university members access to the university’s main online library, which included access to research journals and other publications that may otherwise have been blocked in China. Universities’ on-campus libraries varied in size and offerings. Two universities we visited featured libraries that were recently built or renovated and that enabled students to browse or select books directly from the shelves. As figure 8 shows, one of these libraries contained books on topics such as Taiwan, Tibet, and Tiananmen Square, which may be banned or difficult to obtain in China. The other library had more than 120,000 books, including both English and Chinese.\nAdministrators at both of these universities told us that no book had ever been removed from the library by Chinese government officials, though one of them noted that, in the past, Chinese Customs officials confiscated some books intended for the library. To compensate, faculty traveling from the United States to China had occasionally brought books for the library in their personal luggage. In contrast, a former student at another university we visited told us the only library available was that of the Chinese university and said a study room intended for U.S. students contained a limited number of English language titles.", "We found that several factors can create obstacles to learning at universities we reviewed, including self-censorship, constraints specific to Chinese students, and restrictions beyond campus borders.\nSelf-censorship: While we were told of examples of self-censorship— choosing to not express an idea or thought that may offend others or cause other problems—at universities we reviewed, it is difficult to assess the extent to which this occurs. Several faculty members we interviewed noted that it is ultimately not possible to know whether, when, or the extent to which self-censorship takes place. For example, individuals may self-censor unconsciously or may knowingly self-censor but not acknowledge doing so. Moreover, self-censorship can occur in any number of settings and with different motivations. Nonetheless, administrators, faculty, and students representing more than half of the universities we reviewed gave examples of self- censorship, including some cases where individuals were advised by their teachers or others in positions of authority to avoid certain topics. For example, an administrator at one university noted that he believed it was advisable, as a guest of China, to refrain from insulting China, while an administrator at another university noted that the university advises teachers to avoid discussing sensitive subjects in class. Several professors at one university told us that they avoid certain political topics or topics that may make others uncomfortable. At another university, faculty told us they try to be respectful of the host country in treating certain academic subjects, and one professor told us he believes he should not discuss Tiananmen Square. One professor told us he advised students to avoid presentations on sensitive topics, while a few students from a few universities told us they had been advised to avoid certain sensitive topics, such as Tiananmen Square or China’s relationship with Taiwan. Other students at several universities told us they avoided certain topics for various reasons—for example, to avoid starting arguments with their Chinese classmates or out of concern that raising certain topics may cause other problems. Several other students reported to us that they specifically avoided discussing religion or political topics because they thought it might be inappropriate or cause trouble. In addition, several faculty members noted that self-censorship may affect research efforts given that publishing articles on certain topics may jeopardize the researcher’s ability to obtain a visa to visit or work in China.\nConstraints specific to Chinese students: Some conditions specifically affecting Chinese students may constrain their academic experience. Faculty and students from various universities observed that in general Chinese students participated in classroom discussions less often than students from other countries. Some suggested that Chinese students may be uncomfortable with Western teaching methods or inhibited by language limitations; however, some noted that Chinese students may know or suspect that their Chinese classmates are government or Communist Party monitors and will report on whatever the students say. Moreover, an administrator at one university told us that he assumes there are Chinese students and faculty in the institution who report to the government or the Communist Party about the activities of other Chinese students. Faculty members at several universities also told us that they understood there were Chinese students in class who intended to report on the speech of faculty or Chinese students. Several faculty members told us they had adopted various teaching approaches to circumvent these constraints and encourage greater participation among Chinese students. One professor told of constructing classroom debates in which students were required to argue both sides of a sensitive political issue regardless of their nationality or belief; he believed that this enabled Chinese students to speak more freely about these topics. We found other examples of certain conditions Chinese students face that could constrain their academic experience. For example, one university provides only non-Chinese students access to its main university web portal, which provides uncensored Internet access. In addition, according to university administrators, only Chinese students must complete military training and take certain courses, such as on Chinese political thought. A student at one university told us Chinese students had a curfew and Internet restrictions while international students did not.\nRestrictions off campus: Administrators, faculty, and students at several universities emphasized that they have certain freedoms on campus, such as the ability to teach or discuss whatever they want, but not off campus. They offered examples of how some typical activities in an American college setting are not possible in China. For example, a faculty member at one university told us she once brought her class to a coffee shop adjacent to campus, but the public location stifled discussion. Students at another university told us that they ended a classroom discussion that had been continued on a social media site because some classmates believed the discussion was inappropriate. One student noted that one Chinese student considered reporting the discussion to Chinese censors.", "The three universities we reviewed that are approved by the Chinese Ministry of Education as having independent legal status share characteristics that may be correlated with greater academic and other freedoms on campus. We found that these universities had campuses built specifically for the joint institution that were located relatively far away from their Chinese university partner’s campus, generally controlled their own day-to-day operations, had uncensored Internet access, offered extensive campus and student life programs, and sought to engage with Chinese entities beyond campus. In contrast, as table 3 shows, the other nine universities we reviewed did not consistently share these characteristics. Moreover, we found various examples from these other universities indicating that Chinese entities exert a greater degree of influence over their institutions than over institutions with independent legal status.", "University administrators told us they are aware of, and monitoring, a new Chinese law regulating foreign non-governmental organizations. After the law’s passage, the U.S. Secretary of State issued a statement noting that, while the final version of the law included improvements from prior drafts, it could nonetheless negatively impact foreign non-profit non- governmental organizations, and their Chinese partners. We asked universities we reviewed to comment on the law and its potential impact on their institutions in China. The six universities that responded indicated either that they believed the law would not have an impact or that it was unknown or too early to tell, while several noted that they would continue to monitor the law’s implementation. According to a State official, it is too soon to tell what, if any, impact the law may have on universities.\nUniversities may take different actions if Chinese law or other factors create infringements to academic or other freedoms. University administrators and faculty members have outlined ways individuals could raise concerns to respond to potential infringements on academic and other freedoms, such as by contacting university administrators based in the United States or China, speaking directly with institution directors, or raising concerns through the student government or academic senate. Administrators at several universities asserted that they would discontinue their institution and leave China if they encountered problems related to academic freedom that they were unable to resolve. Academics have made other recommendations to protect academic freedom, including that universities make public their agreements with Chinese partners, ensure these agreements state that cooperative education institutions will be terminated if academic freedom is compromised, and establish an office to investigate and report on academic freedom infringements.", "In recent years, a growing number of U.S. universities have established degree-granting institutions with Chinese partners in an environment, as characterized by the Department of State, of worsening human rights and academic freedom conditions in China. We found that universities generally emphasize academic freedom at their institutions in China and, in most cases, include language seeking to protect these or other freedoms in written agreements and other documents. Nonetheless, the environment in which these universities operate presents both tangible and intangible challenges. In particular, Internet censorship presents challenges to teaching, conducting research, and completing coursework. However, it is much more difficult for universities to know the degree to which faculty or students self-censor or how this may affect academic freedom. Moreover, given that motivations to self-censor can be deeply rooted in individual concerns and shaped by long-established conditions in China, universities have limited ability to prevent self-censorship in the classroom or on campus.\nMembers of universities we reviewed indicated they have freedoms on campus that do not exist beyond it, suggesting that they operate within a protected sphere in China. But the universities clearly vary in this regard, with a few seeming to be less subject to influence from Chinese entities than others. As Department of State officials have noted, it is too soon to tell whether the recent passage of a Chinese law regulating foreign nongovernmental organizations could signal tightening restrictions on universities.", "We are not making recommendations in this report. We provided a draft of this report to the Departments of Education and of State for comment. The agencies responded that they had no comments.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report’s date. At that time, we will send copies to the appropriate congressional committees and to the Secretaries of Education and State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at [email protected] or 202-512-3149. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "In this report, we reviewed (1) funding and other support provided by the U.S. government and other sources to U.S. universities to operate in China; (2) the treatment of academic and other key freedoms in arrangements between U.S. universities and their Chinese partners; and (3) the experience of academic and other key freedoms by faculty, students, and staff at selected U.S. universities in China.\nTo address these objectives, we reviewed the 12 U.S. universities that we identified as having partnered with Chinese universities to establish degree-granting institutions in China: Carnegie Mellon University, Duke University, Fort Hays State University, Johns Hopkins University, Kean University, Missouri State University, New York Institute of Technology, New York University, Northwood University, Rutgers University, the University of Michigan, and the University of Pittsburgh. To identify universities, we reviewed several information sources, including the Department of Education’s list of U.S. universities with locations in China and the Chinese Ministry of Education’s data on U.S. universities approved to operate cooperative education institutions and cooperative education programs in China. (See app. II for these Ministry of Education lists.) We determined that we did not intend to review the more than 130 U.S. universities that have established individual education programs in China but rather the universities that, at the time of our review, were approved to operate cooperative institutions. The results we report are therefore not necessarily generalizable to all U.S. universities that have partnered with Chinese universities to establish cooperative education programs. During our review, two other universities were also approved to operate cooperative education institutions in China. Because of the status of and extent of completed work for our review of the 12 universities, we did not include these universities in our review. In addition, we reviewed documents of independent organizations that list, review, and outline standards for higher education partnerships abroad and interviewed officials from several of these organizations. One of these organizations maintains a list of “international branch campuses.” We reviewed this list, discussed it with its authors, and found that it was generally consistent with the Chinese Ministry of Education’s list of approved cooperative education institutions. In addition, we interviewed university administrators to better understand the characteristics of their institutions in China. As a result of these interviews, we decided to include in our review one additional university that was not included on the Chinese Ministry of Education’s list of approved cooperative education institutions. We also interviewed officials from several organizations associated with international higher education to better understand types of overseas higher education programs, including those in China; trends in U.S.- Chinese educational cooperation; standards for international higher education; and academic freedom protections at such programs, among other topics. In our reporting information about the 12 universities, we did not attribute information or statements to them by name. We used the following terms to report the results of our review of these universities: “most” represent 8 to 11; “about half” represent 5 to 7; and “several” or “a few” represent 2 to 4.\nWe sent a questionnaire to administrators of all 12 universities in our sample asking about a variety of topics. As part of the questionnaire development, we submitted the questionnaire for review by a GAO survey specialist. To minimize errors that might occur from respondents interpreting our questions differently than we intended, we pretested our questionnaire with administrators from three universities. During the pretests, conducted by telephone, we asked the administrators to read the instructions and each question aloud and to tell us how they interpreted the question. We then discussed the instructions and questions with them to determine whether (1) the instructions and questions were clear and unambiguous, (2) the terms we used were accurate, (3) the questionnaire was unbiased, (4) the questionnaire did not place an undue burden on the officials completing it, and (5) the identification of potential solutions to any problems detected was possible. We noted any potential problems. We modified the questionnaire based on feedback from the pretests and internal GAO review as appropriate. We sent the Microsoft Word form questionnaire and a cover email to the universities on February 26, 2016, and asked them to complete the questionnaire and email it back to us within 2 weeks. We closed the questionnaire on June 3, 2016. Eleven universities provided detailed responses on the questionnaire form; one university provided useful narrative responses but did not answer the questionnaire itself. Therefore, the overall response rate for the questionnaire was 92 percent. Some universities declined to answer some questions, especially about financial information, so the item-level response rate varies by question. Because we are not trying to generalize the results of the questionnaire to other universities outside that sample, there was no questionnaire sampling error. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, differences in how a particular question is interpreted, the sources of information available to respondents, how the responses were processed and analyzed, or the types of people who do not respond can influence the accuracy of the questionnaire results. We took steps in the development of the questionnaire, the data collection, and the data analysis to minimize these nonsampling errors and help ensure the accuracy of the answers that were obtained. For example, a social science survey specialist designed the questionnaire in collaboration with GAO staff with subject matter expertise. Then, as noted earlier, the draft questionnaire was pretested to ensure that questions were relevant, clearly stated, and easy to comprehend. The questionnaire was also reviewed by an additional GAO survey specialist, as mentioned above. Data were manually entered from the Word questionnaires into an Excel spreadsheet that was then imported into a statistical program for analyses. All data entry was checked and any errors corrected. We examined the questionnaire results and performed computer analyses to identify missing data, inconsistencies, and other indications of error and addressed such issues as necessary, including through follow-up communications with the universities. Quantitative data analyses were conducted by a GAO survey specialist using statistical software, and a review of open-ended responses was conducted by the GAO staff with subject matter expertise. An independent GAO data analyst checked the statistical computer programs for accuracy.\nTo identify funding and other support the U.S. government and other sources have provided to U.S. universities to operate in China, we analyzed responses to the questionnaire we sent to administrators, interviewed administrators from all 12 universities, and reviewed university documents. The questionnaire included questions about the sources of funding and nonmaterial assistance used to establish and operate the institutions in China, about financial aid to students, and about the financial relationship between the U.S. university and the institution. We also interviewed university administrators about the funding and other support their institutions in China received. Because of differences in the ways universities tracked and reported on their funding sources, we were not able to report funding amounts for each university or to calculate the percentage of each university’s institution budget funded by Chinese government entities, private donors, and other sources. However, by combining information we obtained from the questionnaire, interviews, and university documents, we were able to identify the types of support provided. We also obtained information and interviewed officials from the Department of Education (Education) and reviewed relevant federal laws and regulations, including those related to financial aid under Title IV of the Higher Education Act of 1965, as amended.\nTo determine the treatment of academic and other key freedoms — specifically freedoms of speech, information, assembly, and religion or worship—in arrangements between U.S. universities and their Chinese partners, we reviewed written agreements and university policies submitted by the U.S. universities. University policies include faculty and student handbooks as well as other planning documents for the institutions in China. Of the 12 U.S. universities that participated in our review, 9 provided either all or a part of the written agreement with their Chinese partner universities, and 8 provided university policies. In total, 11 of the 12 universities we reviewed submitted either their written agreement or other university policies pertaining to their programs in China. We conducted a content analysis of the written agreements and other policies to identify instances in which the U.S. universities address academic freedom and other key freedoms. To define academic freedom, we derived our definition from the American Association of University Professors’ 1940 Statement of Principles on Academic Freedom and Tenure, to which hundreds of U.S. universities adhere. We also identified freedoms of information, speech, assembly, and religion or worship as other key freedoms relating to universities operating in China given the significance of these freedoms to universities in the United States and reported restrictions related to these freedoms in China. We derived our definition for freedom of information from the United Nations’ 2011 Report of the Special Rapporteur on the Promotion and Protection of the Right to Freedom of Opinion and Expression, which designates Internet freedom as a basic human right. In addition, we derived definitions for the freedoms of speech, assembly, and religion or worship from the United Nations’ 1948 Universal Declaration of Human Rights, which outlines these freedoms as basic human rights. In addition, in our questionnaire we asked university administrators to identify the extent to which their universities’ written agreements or other policies address academic freedom and other key freedoms. We also interviewed administrators from all 12 U.S. universities that participated in our review to learn how these U.S. universities developed written agreements with their Chinese partner universities. For the content analysis, we compared the definitions of each freedom with all the agreements, handbooks, and other official publications provided by the universities to assess whether and how the freedom was referenced in those documents. One GAO analyst conducted this analysis, coding the information based on how universities referenced the freedom and entering it into a spreadsheet, and another GAO analyst checked the information for agreement. Any initial disagreements in the coding were discussed and reconciled by the analysts.\nTo learn about the experiences of academic freedom and other key freedoms by faculty, students, and administrators at selected U.S. universities in China, we interviewed administrators from all 12 universities. We also visited five universities in China, where we met with administrators, faculty, and students. In addition, we interviewed faculty and students who had previously studied or taught at six of the universities and were currently living elsewhere. All interviews were conducted in English. Overall, we interviewed more than 190 administrators, faculty, and students, including the following:\nMore than 70 administrators from 12 universities, including university presidents and other executive officials as well as staff from various offices such as those supporting student life and other student services, libraries, and information technology.\nMore than 35 faculty members from seven universities, including more than 30 U.S. citizens, several Chinese citizens, and one citizen from another country. The faculty members we interviewed included both those sent from the U.S. campus to teach at the institution in China on a temporary basis and those hired specifically to teach at the university institution in China.\nMore than 95 students from six universities, including interviewing roughly an equal mix of U.S. and Chinese citizens on campuses in China, and several students from other countries. Our interviews with students included a mix of one-on-one interviews and discussion groups. In addition, nearly 40 of these students that we interviewed from two universities also completed a written questionnaire. We asked them to complete the questionnaire because we believed some students might be more willing to answer candidly on an anonymous questionnaire than during an oral interview. To maintain their anonymity and to encourage candid responses students were instructed not to write their names on the questionnaire. The questionnaire was in English, and students were asked to respond in English, as they were enrolled in courses taught in English. The questionnaire addressed the same general topics that were used to guide our student interviews and discussion groups. We analyzed responses to the written student questionnaires alongside our analysis of student interviews and discussion groups.\nIn selecting universities to visit, we included both public and private universities; universities with institutions in different locations within China; universities that established institutions in China at different points in time; and universities with institutions having varying student demographics, including several with predominantly Chinese student bodies and several with a mixture of students from the United States, China, and other countries. We also planned to visit two additional institutions, but our visits were declined by, in one case, the Chinese university partner and, in the other case, by the provincial ministry of education with jurisdiction over the institution. In addition to conducting interviews during our visits to these universities, we also reviewed campus facilities including classrooms, libraries, cafeterias, and dormitories.\nIn our discussions with faculty members and students, we addressed topics such as the reasons they chose to work or study at the programs in China, the extent to which they may be constrained from teaching or studying certain topics, their experience of Internet access in China, campus life and student activities, any differences they have perceived or experienced between U.S. and Chinese faculty and students, and other topics relating to their experience at the program particularly as it relates to academic and other freedoms. To mitigate possible limitations of testimonial evidence from individuals in China regarding their experience of academic and other freedoms, we interviewed both U.S. and Chinese students and faculty; interviewed faculty and students currently in China as well as faculty and students currently in the United States who had formerly taught or studied at the university in China; requested that faculty and students participate in our interviews on a voluntary basis; and offered students the option of completing an anonymous written questionnaire.\nWe also analyzed university administrator responses to our questionnaire applicable to their university in China, including questions relating to curriculum and faculty hiring; faculty and student experiences of academic freedom, freedom of information, freedom of speech, freedom of assembly, or freedom of religion or worship; and how, if at all, standards and protections for these freedoms differ between U.S. and Chinese students or in comparison with those to the university’s U.S. campus, among others. The information on foreign law in this report is not the product of GAO’s original analysis but is derived from interviews and secondary sources.\nWe conducted this performance audit from September 2015 to August 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The Chinese Ministry of Education has approved 13 U.S. universities to operate 16 cooperative education institutions, according to the ministry. Table 4 provides a full list of these 13 U.S. universities and their institutions. As the table indicates, two universities operate more than one cooperative education institution. We did not review the cooperative education institutions approved for the University of Illinois and the University of Miami, as these two institutions were approved subsequent to the start of our review. Although we reviewed Johns Hopkins University’s institution in China, it is not included in table 4 because it was established before the Chinese Ministry of Education established its approval process for Sino-Foreign cooperative institutions and programs.\nAccording to the Chinese Ministry of Education, 133 U.S. universities have been approved by the ministry to operate 225 cooperative education programs in partnership with Chinese universities. Such cooperative education programs can take various forms, such as joint or dual degree programs. Table 5 provides a full list of these programs. This list is based on information taken directly from the Chinese Ministry of Education’s website. We did not review these programs or verify that all of them are currently operating.", "", "David Gootnick, (202) 512-3149, or [email protected].", "In addition to the contact named above, Melissa Emrey-Arras (Director), Jason Bair (Assistant Director), Meeta Engle (Assistant Director), Joe Carney, Marissa Jones, Sean Manzano, James Bennett, Jessica Botsford, Mark Dowling, Mary Moutsos, Reid Lowe and Michael Silver made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 2, 1, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "", "", "h3_full", "h0_full", "h0_title", "h0_full", "h0_full", "", "", "", "", "h1_full", "", "", "h1_full", "h2_full", "h2_title", "", "h2_full", "h2_title", "h2_full", "h2_full", "h2_full", "", "", "h4_full", "h3_full h4_full h1_full", "", "", "", "" ] }

{ "question": [ "How did the chosen US universities receive support?", "What support was provided by China?", "How often did one of the universities receive federal funding?", "How did the US university programs in China perform?", "What freedoms do US universities usually protect?", "How often was protection of information addressed?", "How often was protection of language addressed?", "What restraints did university members indicate?", "What level of control and freedom was given to university members?", "How is internet restrained?", "What issues did censored internet present?", "What specific restraints did classes face?", "How does freedom vary between the China-supported universities?", "How has academic freedom changed in China?", "How has US university partnership with Chinese universities changes?", "What questions have been raised by these partnerships?", "What main points does this report cover?", "What did the GAO review to make this report?", "What additional work did the GAO perform to make this report?", "What recommendations did GAO make in this report?", "How does Education and State respond to this report?" ], "summary": [ "The 12 U.S. universities GAO reviewed generally reported receiving support for their institutions in China from Chinese government entities and universities, with limited funding from U.S. government agencies and other donors.", "Universities reported contributions from Chinese provincial and local governments and from partner universities for land, building construction, and use of campus facilities.", "Fewer than half of the universities reported receiving federal funding.", "Almost all of the U.S. universities said their programs in China generated net revenue for the university or had a neutral impact on its budget.", "Universities' agreements with their Chinese partners or other policies that GAO reviewed generally include language protecting academic freedom or indicating their institution in China would adhere to U.S. standards.", "About half of universities GAO reviewed address access to information, such as providing faculty and students with access to physical or online libraries, though few universities' agreements and policies include language protecting Internet access.", "About half of the universities' policies include language indicating protection of at least one other key freedom—speech, assembly, or religion.", "University members generally indicated that they experienced academic freedom, but they also indicated that Internet censorship and other factors presented constraints.", "Administrators said they generally controlled curriculum content, and faculty and students said they could teach or study what they chose.", "However, fewer than half of the universities GAO reviewed have uncensored Internet access.", "At several universities that lacked uncensored Internet access, students and faculty told us that, as a result, they sometimes faced challenges teaching, conducting research, and completing coursework.", "Administrators, faculty, and students also cited examples of self-censorship, where certain sensitive political topics—such as Tiananmen Square or China's relationship with Taiwan—were avoided in class, and of constraints faced by Chinese students in particular.", "Universities approved by the Chinese Ministry of Education as having independent legal status share characteristics—such as campuses located away from their Chinese university partner's campus and extensive student life programs—that may be correlated with greater academic freedom and other key freedoms.", "In its Country Reports on Human Rights Practices for 2015, the Department of State (State) concluded that academic freedom, a longstanding concern in China, had recently worsened.", "At the same time, the number of U.S. universities establishing degree-granting institutions in partnership with Chinese universities—teaching predominantly Chinese students—has increased.", "While universities have noted that these institutions offer benefits, some academics and others have raised questions as to whether faculty, students, and staff may face restricted academic freedom and other constraints.", "This report reviews (1) funding and other support provided to U.S. universities to operate in China; (2) the treatment of academic and other key freedoms in arrangements between U.S. universities and their Chinese partners; and (3) the experience of academic and other key freedoms by faculty, students, and staff at selected U.S. universities in China.", "GAO reviewed 12 U.S. universities that have established degree-granting institutions in partnership with Chinese universities; interviewed and obtained university documents and questionnaire responses; interviewed faculty and students; and visited the campuses of 5 institutions selected on the basis of their location, student demographics, date of establishment, and other factors.", "GAO also interviewed officials and obtained information from the Departments of Education (Education) and State.", "GAO makes no recommendations in this report.", "Education and State had no comments on a draft of this report." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, 0, -1, 0, -1, 2, -1, -1, -1, -1, 1, -1, -1, 1, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4, 4, 4, 0, 0, 0, 1, 1, 1, 1, 1 ] }

{ "title": [ "", "Introduction", "Types of P3s", "P3 Implementation", "Benefits of P3s", "Limitations of P3s", "Federal Role in P3s", "Transportation Infrastructure Finance and Innovation Act (TIFIA) Program", "Private Activity Bonds and Tax Issues", "State Infrastructure Banks", "Build America Bureau", "Policy Issues and Options", "Protecting the Public Interest", "Evaluation", "Transparency", "Asset Recycling", "Incentive Grants", "Infrastructure Banks", "Equity Investment Tax Credits", "Private Activity Bonds", "Changes to TIFIA Program", "P3s and Interstate Highway Tolls" ], "paragraphs": [ "", "Growing demands on the transportation system and constraints on public resources have led to calls for more private-sector involvement in the provision of transportation infrastructure through what are known as \"public-private partnerships\" or \"P3s.\" As defined by the U.S. Department of Transportation (DOT), \"public-private partnerships (P3s) are contractual agreements between a public agency and a private-sector entity that allow for greater private-sector participation in the delivery and financing of transportation projects.\" Typically, the \"public\" in public-private partnerships refers to a state government, local government, or transit agency. The federal government exerts influence over the prevalence and structure of P3s through its transportation programs, funding, and regulatory oversight, but is usually not a party to a P3 agreement.\nThis report discusses the benefits and limitations of P3s that involve long-term private financing, the experience with these types of P3s in the United States, and current federal policy. The report outlines a number of issues and policy options that Congress might consider: project evaluation and transparency, asset recycling, incentive grants, infrastructure banks, tax credits for equity and debt, Interstate highway tolling, and changes to an existing federal loan program.", "With the traditional method of providing transportation infrastructure, known as \"design-bid-build,\" the public sector is in charge of building, financing, operating, and maintaining a facility, although construction and other activities are typically contracted out to the private sector. By contrast, a public-private partnership may involve private-sector participation in any or all phases of development and operation of a new facility or the operation and maintenance of an existing facility. The many different forms P3s can take are characterized by the extent of the private sector's participation: design-build; design-build-finance; design-build-operate-maintain; design-build-finance-operate-maintain (DBFOM); and long-term lease agreements.\nIt is these last two types of P3s, DBFOM and long-term lease agreements, which generate the most interest and discussion. These P3s are also known as concession agreements, as they involve the ongoing participation of a private partner, termed the concessionaire, in managing the facility as a business.\nDBFOM P3s involve the private sector in most facets of constructing, operating, and maintaining a new facility, including long-term financing. The private-sector partner is repaid by facility users, through fares or tolls, or by payments from state or local government over the life of the contract. Known as \"availability payments,\" these payments from the government are contingent on the \"availability\" of the facility consistent with agreed performance standards, such as snow removal times, but do not depend on facility demand. Figure 1 depicts the relationships between the public and private partners in a toll road DBFOM P3, such as the $2 billion Capital Beltway (I-495) High Occupancy Toll (HOT) Lanes project that opened for traffic in Northern Virginia in 2012. The parties are Capital Beltway Express, LLC (a joint venture of Fluor, a construction and engineering company, and Transurban, an Australian firm specialized in managing toll roads) and the Virginia Department of Transportation. Long -t erm l ease a greement s involve the operation and maintenance of an existing facility by a private concessionaire for a specified amount of time. The private partner pays the public sector a concession fee and agrees to operate and maintain the facility to prescribed standards. In return, the private company typically collects tolls or other user fees to pay lenders and debt holders and to generate a return on equity investment. Many cargo terminals in U.S. ports are operated by for-profit firms under contracts with the public port agencies that own the underlying land. A prominent example of this type of P3 is the 75-year lease concession of the Indiana Toll Road that was awarded in 2006 to the Indiana Toll Road Concession Company (ITRCC), a partnership between Cintra, a Spanish developer of transportation infrastructure, and Macquarie Infrastructure Group, then a subsidiary of an Australian investment bank, for a single lump-sum payment of $3.8 billion. Ownership of the lease was transferred to IFM Investors after the bankruptcy of ITRCC in 2014.", "Implementing the procurement of infrastructure projects through P3s typically requires the public sector to establish a legal and policy framework through a state enabling statute. These laws provide the authority for state and local government agencies to establish P3s and typically include provisions that limit the types of P3 arrangements allowed, how projects are to be selected and approved, how proposals are reviewed, the involvement of the public, and requirements for the release of information. According to DOT, 35 states, the District of Columbia, and Puerto Rico currently have general P3 enabling legislation.\nThe implementation of a P3 typically entails complex and costly legal, financial, and technical issues that require public oversight over the course of a long-term contract. This may require extensive staff time and hiring of outside experts. An important aspect is the evaluation of projects. This may involve traffic and revenue studies, risk assessment, studies of project costs and financial feasibility, and value-for-money analysis that compares the proposed P3 with delivery of the project by the public sector.\nTo date, the number of transportation P3s in the United States is relatively small, as is the amount of long-term private financing provided. According to one source, from 1993 through September 2017 there were 32 transporta tion P3s involving long-term financing, with total project costs totaling $45 billion. This includes the 99-year lease of the Chicago Skyway; the I-595 managed lanes project in Florida; the Purple Line light rail transit project in Maryland; and the first large airport P3, the $5 billion renovation of Terminal B at LaGuardia Airport in New York, agreed to in June 2016. Other possible airport P3s include Los Angeles, San Diego, and Denver.\nAlthough the pace of P3 deals has accelerated over time, P3s remain a very small percentage of investment in transportation. The Congressional Budget Office estimated that the value of contracts involving privately financed roads over 20 years through 2012 was less than 1% of government highway spending. Others have noted that P3s currently account for about 2% of public infrastructure outlays. P3s and private investment in surface transportation are relatively larger in many other countries, including Portugal, Spain, Australia, and the United Kingdom.\nThere are a number of possible reasons for the limited use of P3s in the United States. Among them are the following:\nMunicipal bonds, long-term debt instruments that receive preferential income tax treatment, allow state and local governments to borrow at lower cost than private investors. P3s are more widely used in many other countries, where there is no similar tax preference for state or local government borrowing. P3s are a source of financing, not a source of funding. They require some type of revenue stream, such as a toll, fare, or tax, to service debt and provide a return on private equity, and such measures can be unpopular. While the federal government can encourage the development of P3s, decisions are taken at the state and local level. Many states have very limited experience with P3s. Fifteen states do not have enabling statutes.", "There are three main potential benefits of P3s. First, P3s are a way to attract private capital to invest in transportation infrastructure. This can be particularly important when public-sector budgets are heavily constrained. P3s, therefore, can spur the building of transportation facilities earlier than would be the case if left to the public sector alone. The opportunity to invest in equity or taxable debt may lure pension funds and foreign investors, which generally are not subject to U.S. federal income tax and thus do not benefit from the tax exclusion of interest on municipal bonds.\nSecond, P3s may be able to build and operate transportation facilities more efficiently than the public sector through better management and innovation in construction, maintenance, and operation. Private companies may be more able to examine the full life-cycle cost of investments, whereas public agency decisions are often tied to short-term budget cycles.\nThird, through P3s the public sector can transfer to the private-sector partner many of the risks of building, maintaining, and operating transportation infrastructure ( Table 1 ). One major risk is that a facility will cost more to operate and maintain than budgeted, particularly if initial construction is poor. Another is that a facility to be financed by tolls will have less demand than estimated, and will fail to generate the expected revenue. Transferring these and other risks to the private sector may not save money, as the private partner requires compensation for assuming them, but the risk transfer may provide greater certainty for the public sector.", "Concerns with P3s include the types of projects involved, the risks retained by the public sector, and transportation planning. Private-sector investors are drawn to projects that have the greatest potential financial returns, adjusted for risk. P3s that are reliant on tolls or other user fees, therefore, are unlikely to address transportation issues in rural areas or on lightly traveled routes. However, P3s in these areas may be viable if based on state and local government availability payments.\nAlthough some risks are typically transferred to the private sector in a P3, the public sector may retain significant risk. In some P3s, the public sector retains revenue risk, thus putting itself on the line to repay creditors if the project fails to generate anticipated revenue. Poorly written contracts, weak private-sector partners, and external events may force the public sector to renegotiate the P3 contract or to assume project ownership. And many transportation P3s involve federal loans through the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, exposing federal taxpayers to losses if project revenue is insufficient to service the loans.\nP3s may have longer-term effects on the transportation system insofar as they influence decisions about what to build and where. Unsolicited project proposals may not reflect the priorities of the state, region, or locality as incorporated into short- and long-range transportation plans. Noncompete clauses in P3 contracts may restrict public improvements near a privately operated facility or require the payment of compensation. Such restrictions may impede the ability of public agencies to increase capacity and to devise coordinated congestion management policies. The exceedingly long terms of some concession agreements, 99 years in some cases, tie the hands of planners and policymakers years into the future, when conditions may be very different.\nMost transportation P3s to date have involved highways or marine cargo terminals. Only a few have involved public transportation, intercity passenger rail, or airports. User fees (fares) collected by public transportation agencies make up less than one-third, on average, of the funding used to provide transit service, and rail projects are similarly challenged. Private-sector entities are unlikely to initiate projects in such situations, and the public sector has sought to finance only a few transit projects through availability payments. Airport P3s have been inhibited by a number of factors including restrictions on the use of lease proceeds for airport purposes, cheaper financing for public airport operators through tax-exempt bonds, and regulatory conditions such as the necessity for 65% of air carriers serving an airport to approve a lease or sale.", "", "The main way in which the federal government has encouraged P3s and private financing in surface transportation is through the TIFIA program, which provides long-term, low-interest loans and other types of credit to project sponsors. Loans can be provided up to a maximum of 49% of project costs. Projects eligible for TIFIA assistance include highways and bridges, public transportation, intercity passenger bus and rail, intermodal connectors, and intermodal freight facilities.\nSeveral features of TIFIA financing make it attractive to project sponsors, including private-sector partners. Federal credit assistance provides funds at the same fixed interest rate at which the U.S. Treasury borrows, a lower rate than would be available to any private borrower. Loans are available for up to 35 years from the date of substantial completion, repayments can be deferred for up to 5 years after substantial completion, and amortization can be flexible. TIFIA financing is also available with a senior or subordinate lien, but is typically used as subordinate debt, meaning it is in line to be repaid after the project's operational expenses and senior debt obligations. However, the TIFIA statute includes a provision requiring that in the event of a project bankruptcy, the federal government will be made equal with senior debt holders. This is referred to as the \"springing lien,\" and has led some to ask whether TIFIA financing is truly subordinate. The springing lien issue notwithstanding, TIFIA financing is generally thought to reduce project risk, thereby helping the partners in a P3 to secure private financing at rates lower than would otherwise be possible.\nThere are a number of eligibility criteria for TIFIA assistance. One is creditworthiness: to be eligible, a project's senior debt obligations and the borrower's ability to repay the federal credit instrument must receive investment-grade ratings from at least one nationally recognized credit rating agency. Generally, a project must cost $50 million or more to be eligible for assistance, but the threshold is $15 million for intelligent transportation system projects and $10 million for transit-oriented development projects, rural projects, and local projects. One further eligibility requirement is that loans must be repaid with a dedicated revenue stream. Limiting the federal share of project costs, encouraging private finance, and insisting on creditworthiness standards are ways in which the program attempts to rely on market discipline to limit the federal government's exposure to losses.\nOne attraction of TIFIA from the federal point of view is that a relatively small amount of budget authority can be leveraged into a large amount of loan capacity. Because the government expects its loans to be repaid, an appropriation need only cover administrative costs and the subsidy cost of credit assistance. According to the Federal Credit Reform Act of 1990 (2 U.S.C. §661(a)), the subsidy cost is \"the estimated long-term cost to the government of a direct loan or a loan guarantee, calculated on a net present value basis, excluding administrative costs.\" A typical rule of thumb is that the average subsidy cost of a TIFIA loan is 10%, meaning that $1 million of budget authority can provide $10 million of loan capacity.\nThe Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ) reduced the direct authorization of funding for TIFIA to an average of $285 million per year from FY2016 through FY2020 from $1 billion per year in FY2014 and FY2015. Seen in isolation, this reduces DOT's capacity to issue loans by approximately $7.25 billion in FY2016, assuming a 10% subsidy cost and excluding administrative costs. However, the FAST Act also allows states to use funds from two federal highway grant programs to pay for the subsidy and administrative costs of credit assistance. This has the potential to increase TIFIA financing much above the $275 million direct authorization, but at the discretion of state departments of transportation.", "Private activity bonds (PABs), a type of municipal bond issued for transportation and secured by revenue generated by the project financed with the bonds, have been an important financing mechanism for P3s. Congress has approved limited use of tax-exempt PABs for selected transportation projects, as outlined in Section 142 of the Internal Revenue Code. These include airports, docks and wharves, mass commuting facilities, high-speed intercity rail facilities, and qualified highway or surface freight transfer facilities. The Secretary of Transportation must approve the use of PABs for qualified highway or surface freight transfer facilities, and the aggregate amount allocated must not exceed $15 billion. As of January 23, 2017, $10.9 billion of the $15 billion had been allocated. Examples of P3s partially financed with PABs are the Capital Beltway (I-495) High Occupancy Toll (HOT) Lanes project in Northern Virginia and the Gold Line transit rail project in Denver.\nOther aspects of federal tax law also affect P3s, such as depreciation. Businesses are allowed to claim a deduction from their reported income for the depreciating value of their physical assets. The rate at which the private partners in a P3 may depreciate their assets for tax purposes can have a significant effect on the rate of return of a project. Under current law, for example, roads and bridges are generally depreciated over 15 years using the Modified Accelerated Cost Recovery System's (MACRS's) Alternative Depreciation System (ADS), if utilizing tax-exempt bond financing. If this period is less than the expected life of the asset, the short depreciation period represents a form of government subsidy to the project. Different depreciation schedules may apply for other types of transportation assets and in other situations. Reducing the depreciation period (or allowing the entire investment to be subtracted from income in the first year, known as \"expensing\") effectively reduces the marginal tax rate on income from the investment, which increases the after-tax rate of return to the investors.", "Another source of financing for P3 projects is state infrastructure banks (SIBs). Most of these were created in response to a program originally established by Congress in 1995 ( P.L. 104-59 ). According to the Federal Highway Administration, 32 states and Puerto Rico have established a federally authorized SIB. Several states, among them California, Florida, Georgia, Kansas, Ohio, and Virginia, have SIBs that are unconnected to the federal program. Local governments have also begun to embrace the idea. For example, the City of Chicago has established a nonprofit organization, the Chicago Infrastructure Trust, as a way to attract private investment for public works projects, and Dauphin County, PA, has established an infrastructure bank to loan funds to the 40 municipalities within its borders and to private project sponsors. Funds for the loans are derived from a state tax on liquid fuels.\nFederal law allows a state to use some of its share of federal surface transportation funds to capitalize a SIB. The FAST Act also provides authority for a TIFIA loan to a state infrastructure bank (SIB) to capitalize a \"rural project fund\" within the bank. There are some requirements in federal law for SIBs connected with the federal program (23 U.S.C. §610), but for the most part their structure and administration are determined at the state level. Most SIBs are housed within a state department of transportation, but at least one (Missouri) was set up as a nonprofit corporation, and another (South Carolina) is a separate state entity.\nMost SIBs function as revolving loan funds, in which money is directly loaned to project sponsors and its repayment with interest provides funds to make more loans. Some SIBs, such as those in Florida and South Carolina, have the authority to use their initial capital as security for issuing bonds to raise further money as a source of loans, with loan repayments then used to service the bonds. SIBs also typically offer project sponsors other types of credit assistance such as letters of credit, lines of credit, and loan guarantees.\nIn general, state infrastructure banks have not been significant participants in financing transportation projects. Moreover, most of their credit assistance is provided to local governments rather than private participants in P3s. According to one survey, between 1995 and 2012 federal and nonfederal SIBs entered into about 1,100 agreements worth a total of $9 billion, an average of about $8 million per agreement. About 70% of the projects helped by SIBs were highway projects, with aviation, water, transit, rail, and other types of projects accounting for the remaining activity. However, SIB activity has varied widely from state to state. Eight states—Pennsylvania, Ohio, California, Texas, Florida, Kansas, Missouri, and Arizona—account for three-quarters of SIB loans, and five states—South Carolina, Florida, Arizona, Texas, and California—account for three-quarters of the agreement value.\nSeveral factors may explain the generally low level of activity of state infrastructure banks and the dominance of public projects. Capitalization of the banks has typically lagged because the federal funds that could be used have already been committed to traditional projects. Moreover, there are relatively few small, local projects that have the ability to generate sufficient revenue to repay a loan. Tolling, for example, is often infeasible (due to low traffic volumes) or unpopular. Moreover, P3s rarely work for smaller projects because of the costs of procurement and oversight. Because projects funded by a federally authorized SIB must comply with federal regulations on matters such as environmental review and prevailing wages, project sponsors may decide it is cheaper and quicker to use funding from another source. Other concerns include how a SIB may affect a state's debt limit and credit rating and objections to creating an independent entity that can engage in off-budget financing.", "DOT has also been mandated to support P3s by compiling and making available best practices in the use of P3s, developing model contracts, and providing technical assistance. The FAST Act authorized the creation of a new bureau within DOT to consolidate federal transportation financing programs and support for P3s. To fulfill this mandate, DOT established the Build America Bureau in July 2016.\nThe Build America Bureau is responsible for administering TIFIA, the Railroad Rehabilitation and Improvement Financing (RRIF) program, the state infrastructure bank program, the allocation of PABs, and the Nationally Significant Freight and Highway Projects Program (23 U.S.C. §117). It is also responsible for providing help to project sponsors with other DOT grant programs; establishing and disseminating best practices and providing technical assistance with innovative financing and P3s; ensuring transparency of P3 agreements; developing procurement benchmarks; and working with project sponsors to navigate environmental reviews and permitting to reduce uncertainty and delays.", "P3 agreements are typically negotiated between a private company and a state or local government, the owners of most transportation infrastructure; the federal government is not directly involved. However, the federal government can pursue policies to encourage P3s or not, and it can implement regulations on the way in which P3s are formed, particularly when federal funding, financing, and tax incentives are involved in the project. Limiting the formation of P3s would predominantly entail restricting federal benefits to such projects. Two broad policy options for expanding use of P3s would be to actively encourage P3s with program incentives, but with regulatory controls to protect the public interest, or to aggressively encourage the use of P3s through program incentives and deregulation.", "P3s offer a number of potential benefits for states and localities, but they also present a number of trade-offs and potential problems. Skeptics emphasize that P3s sometimes involve little private money or are subsidized by the public sector, that risk transfer from the public to the private sector can be illusory, and that P3 contracts may constrain government decisions about the transportation system. Proponents of this view tend to be cautious about the benefits of P3s and favor regulations designed to protect the public interest. Two aspects of protecting the public interest are the evaluation of P3 projects and the transparency of the negotiations and agreement between the public and private sectors.", "Concerns about undervaluing public assets and windfall private profits are common with P3 deals. An often cited example is the 75-year lease of parking meters in Chicago that the city's inspector general argued was undervalued by 46%. For this reason, the Government Accountability Office and others have proposed requiring rigorous up-front analysis of the costs and benefits of a P3. One such approach is a value-for-money analysis that compares a traditional public-sector procurement with a P3 on the basis of projected risk-adjusted life-cycle costs. This may inform decisions about \"which procurement approach to use, which risks to allocate to the private sector, and which private sector bid to accept.\"\nSuch analyses are not without their own problems because they rest on a host of estimates and assumptions, including project costs, the valuation of risks, and future interest rates. Nevertheless, Congress could require the use of value-for-money analysis or a similar analysis tool for proposed P3 projects using federal funding or financing. This was one recommendation of the House Transportation and Infrastructure Committee's Special Panel on Public-Private Partnerships (T&I Special Panel), which met in 2014.", "Disclosure of information to the public, especially at an appropriate time in the decisionmaking process, is another issue in the development of P3 agreements and throughout the contract period. The T&I Special Panel noted that \"when federal funds are proposed to be included in a P3 agreement, the federal government should ensure that the project sponsor develops the agreement through a transparent process, the parties are held accountable, and there is an accurate accounting of the total federal investment.\" The information disclosed in highway P3s might include the proposed contract, current and future toll rates, the use of toll revenue for other investments, noncompete clauses, and administrative costs incurred by the public sector. In terms of the federal investment, the T&I Special Panel recommended that federal agencies should provide detailed information including tax benefits deriving from tax-preferred financing and asset depreciation allowances. A tradeoff to consider, however, is that the private sector may be less willing to enter into partnerships without confidentiality of certain aspects of a project, such as innovations and cost structures.", "The federal government could offer financial incentives for state and local governments to enter into long-term lease concessions of public assets and to \"recycle\" the proceeds from these deals into other infrastructure investments. Assets with the potential for leasing are those with user-fee revenue streams, such as toll roads and airports. New investments in infrastructure could involve facilities with or without such revenue streams, such as rural roads and transit systems. In Australia, the national government paid an incentive grant of 15% of the value of the asset to state and territorial governments to enter into such agreements. For example, the State of Victoria leased the Port of Melbourne for 50 years for nearly $10 billion, with those funds to be spent on removing highway-rail grade crossings and other regional infrastructure projects.\nThis asset recycling program was active from 2014 until 2016. Criticisms of the Australian program included that the public sector loses control of income-producing assets for a one-time infusion of funds; that the incentive payment may lead to poor decisions by state and local government to privatize assets; and that the incentive funding favors states and localities that have large assets to privatize.", "Federal grants also could be made available to encourage the development of P3 projects for new projects. One option would be to set up a program of $2 billion per year to provide grants of up to 20% of costs for projects that would require life-cycle costing of capital, operations, and maintenance. These grants would be available to both government and P3 projects, but the expectation would be that a significant number of projects would be implemented with a P3. Canada has implemented a similar program with incentives provided by the P3 Canada Fund.", "A national infrastructure bank could be designed to promote development of P3s. The central idea of a national infrastructure bank, or \"I-bank,\" would be to provide low-cost, long-term loans on flexible terms, much like the TIFIA program. However, an I-bank might have more independence than TIFIA, which is controlled by DOT, and as a separate organization might be able to build up a specialized staff, including expertise on the creation and oversight of P3s. Funding could come from an appropriation to pay for administrative costs and the subsidy cost of credit assistance, although in some formulations an I-bank would raise its own capital through bond issuance.\nMany different formulations of an I-bank have been proposed over the past few years. Three I-bank proposals introduced in the 115 th Congress are the National Infrastructure Development Bank Act of 2017 ( H.R. 547 ) by Representative DeLauro, the Partnership to Build America Act of 2017 ( H.R. 1669 ) by Representative Delaney, and the Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act ( S. 1168 ) by Senator Warner.\nA related idea is the formation of a federal financing fund, most likely in the Department of the Treasury, which could administer all federal credit programs. This would improve consistency and use of best practices across infrastructure sectors, and would avoid the conflict of interest within federal agencies of promoting projects and providing credit.\nAn alternative to creating a national infrastructure bank could be enhancing state infrastructure banks that already exist in many states. Although they tend to provide credit assistance to small projects that do not involve a P3, an expansion of their role may make them more supportive of projects involving a private partner. One of the biggest stumbling blocks to federally authorized SIBs has been capitalization. This is because federal grant funds that could be used to capitalize a SIB have typically been committed elsewhere. A FAST Act provision provides authority for a TIFIA loan to a SIB, but to date none have been made. Other ideas that have been proposed but not enacted include dedicating federal funds to SIBs ( H.R. 7 , 112 th Congress) and authorizing SIBs to issue a type of tax credit bond ( H.R. 2534 ; S. 1250 , 113 th Congress).", "To encourage the development of P3s, the federal government could provide a tax credit for equity investment in infrastructure projects. A recent tax credit proposal is the Move America Act of 2017 ( S. 1229 ; H.R. 3912 ), introduced by Senators Hoeven and Wyden and Representative Jackie Walorski. The act would provide a 5% tax credit on investment in a qualified fund or project for 10 years. Qualified funds would include state infrastructure banks and water pollution and drinking water revolving loan funds. An investment in a fund or a project eligible for the tax credit could take the form of equity, a loan, or a loan guarantee. A criticism of equity investment tax credits is that they could be a windfall for equity investors and would not produce any new infrastructure investment. However, others argue that a well-designed tax credit for investors \"should generate incremental tax-oriented equity augmenting (not displacing) the level of financial equity justified by project cash flows.\"", "Private activity bonds (PABs) provide P3 projects access to municipal bond market rates available to government project sponsors. Under current law, the use of tax-exempt, qualified PABs for transportation projects is limited to a fixed $15 billion for the life of the program. About $11 billion of the $15 billion has been allocated. Several proposals have sought to raise the cap. For example, the Obama Administration's FY2017 budget proposal included a provision to increase this amount to $19 billion. Another proposal is to standardize the tax rules for different types of projects and to uncap the volume. A more limited proposal, part of the Move America Act of 2017, is for the establishment of a new type of PAB known as Move America Bonds. These bonds would have some features to encourage P3s.", "Another option for Congress is to increase direct funding for or otherwise adjust the TIFIA program. The FAST Act cut direct funding to the TIFIA program, while allowing states to trade formula grant funding for a larger loan. At the moment states do not have to make that trade because the TIFIA program is not in danger of running out of budget authority. In October 2017, unobligated budget authority in the TIFIA program amounted to about $1.5 billion. If the TIFIA program does exhaust its direct funding in the future, an unanswered question is whether states will voluntarily choose to use grant funding to pay the subsidy and administrative costs of a loan. Streamlining the application process to speed up approvals is another possible option for improving the use of TIFIA financing in P3 projects.", "User fees such as vehicle tolls provide a revenue stream to retire bonds issued to finance a project and to provide a return on investment. Many parts of the Interstate Highway System, those in urban areas and some in rural areas, have traffic levels that would make it financially viable to have toll-supported P3s. The need for reconstructing Interstates is likely to accelerate in the years ahead, as many reach their approximately 50-year design life. Many of these projects are likely to be very expensive \"mega-projects,\" running into the hundreds of millions of dollars. Although imposing tolls on \"free\" roads is likely to be unpopular, Congress could allow states to impose tolls on an Interstate after its reconstruction as a way to facilitate P3 involvement in financing such projects." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 1, 2, 3, 3, 2, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h1_title", "h0_full h1_full", "h0_full", "h1_full", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What are Public-private partnerships (P3s) in transportation?", "What do these relationships provide?", "What are parts of P3s does this report focus on?", "Why have P3s emerged?", "How common are P3s?", "Why are P3s so limited?", "How have transportation P3s been used to date?" ], "summary": [ "Public-private partnerships (P3s) in transportation are contractual relationships typically between a state or local government, who are the owners of most transportation infrastructure, and a private company.", "P3s provide a mechanism for greater private-sector participation in all phases of the development, operation, and financing of transportation projects.", "Although there are many different forms P3s can take, this report focuses on the two types of agreements that generate the most interest and discussion: (1) design-build-finance-operate-maintain (DBFOM); and (2) long-term lease.", "P3s have emerged, in part, because of the growing demands on the transportation system and constraints on public resources.", "To date, however, the number of transportation P3s in the United States is relatively small, as is the amount of long-term private financing provided.", "Among the reasons for this are the availability to state and local governments of tax-preferred municipal bonds; the need for some kind of revenue stream, such as a toll, fare, or tax, to provide funding; and the fact that many states have very limited experience with P3s.", "Most transportation P3s to date have been in highways or marine cargo terminals; only a few have involved public transportation, intercity passenger rail, or airports." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1 ] }

{ "title": [ "", "Introduction", "Fundamentals of Regulatory Exclusivity", "Data Exclusivity Versus Market Exclusivity", "New Chemical Entities", "Clinical Investigations", "Orphan Drugs", "Biologics", "Pediatric Studies", "Qualified Infectious Disease Products", "Enantiomers", "Antibiotics", "Generic and Follow-On Exclusivity", "Competitive Generic Therapies", "Transitional Exclusivity", "Proposed Reforms in the 115th Congress", "Duration of Protection", "Entitlement to the Three-Year Clinical Investigation Exclusivity", "Termination of Regulatory Exclusivities", "Abuse-Deterrent Opioids", "Orphan Drugs", "Scope of the Clinical Investigational Exclusivity", "Concluding Observations" ], "paragraphs": [ "", "Congress has established regulatory exclusivities to encourage different activities within the pharmaceutical and biotechnology industries. Regulatory exclusivities consist of a period of time during which the Food and Drug Administration (FDA) protects an approved drug from competition in the marketplace. In combination, the Federal Food, Drug, and Cosmetic Act, P.L. 75-717 (as amended), and Public Health Service Act, P. L. 78-410 (as amended), require the FDA to enforce 16 different regulatory exclusivities:\nTwelve-Year Biologics Exclusivity, Ten-Year Transitional Exclusivity, Seven-Year Orphan Drug Exclusivity, Five-Year New Chemical Entity Exclusivity, Five-Year Enantiomer Exclusivity, Five-Year Qualifying Infectious (QI) Disease Product Exclusivity, Five-Year QI Act Antibiotic Exclusivity, Four-Year Biologics Exclusivity, Three-Year QI Act Antibiotic Exclusivity, Three-Year Clinical Investigation Exclusivity for an Original NDA, Three-Year Clinical Investigation Exclusivity for a Supplemental NDA, Two-Year Transitional Exclusivity, One-Year Interchangeable Biologics Exclusivity, Six-Month Pediatric Exclusivity, 180-Day Generic Exclusivity, and 180-Day Competitive Generic Therapy Exclusivity.\nThis report introduces the various regulatory exclusivities and then describes pertinent legislation in the 115 th Congress addressing them.", "The U.S. government regulates the marketing of pharmaceuticals in the interest of public health. The developer of a new drug—known as its \"sponsor\"—must demonstrate that the product is safe and effective before it can be distributed to the public. This showing requires a sponsor to conduct both preclinical and clinical investigations of drugs that have not been previously tested. In deciding whether to issue marketing approval or not, the FDA evaluates the test data that the sponsor submits in a so-called New Drug Application (NDA).\nThe FDA maintains the test data incorporated into an NDA in confidence. In addition, because the required test data is usually quite costly to generate, sponsors of new pharmaceuticals ordinarily do not disclose them to the public. Otherwise the sponsor's competitors could file their own NDAs using that test data, and thereby avoid the expenses of developing the information themselves.\nUntil 1984, federal law contained no separate provisions addressing lower-cost generic versions of brand-name drugs that the FDA had previously approved for marketing. The result was that a would-be generic drug manufacturer had to file its own NDA in order to market its drug. Some generic manufacturers could rely on published scientific literature demonstrating the safety and efficacy of the drug. Because these sorts of studies were not available for all drugs, however, not all generic firms could file these so-called \"paper NDAs.\" Further, at times the FDA would request additional studies to address safety and efficacy questions that arose from experience with the drug following its initial approval. The result was that some generic manufacturers were forced to prove independently that their pharmaceuticals were safe and effective, even though their products were chemically identical to those of previously approved drugs.\nSome commentators believed that the approval of a generic drug was a needlessly costly, redundant, and time-consuming process under this system. These observers noted that although patents on important drugs had expired, manufacturers were not moving to introduce generic equivalents for these products due to the level of resource expenditure required to obtain FDA marketing approval. As the introduction of generic drugs often causes prices to decrease, the interest of consumers was arguably not being served through these observed costs and delays.\nIn response to these concerns, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxman Act. This legislation created a new type of application for marketing approval of a generic drug. This application, termed an \"Abbreviated New Drug Application\" (ANDA), may be filed at the FDA. An ANDA may be filed if the active ingredient of the generic drug is the bioequivalent of the approved drug. An ANDA allows a generic drug manufacturer to rely upon the safety and efficacy data of the original manufacturer. The availability of the ANDA mechanism often allows a generic manufacturer to avoid the costs and delays associated with filing a full-fledged NDA. ANDAs also allow a generic manufacturer, in many cases, to place its FDA-approved bioequivalent drug on the market as soon as any relevant patents expire.\nThe Hatch-Waxman Act also modified the FDA's earlier \"paper NDA\" practice by establishing a \"section 505(b)(2)\" application. A section 505(b)(2) application is, in a sense, a hybrid application that falls somewhere between an ANDA and a full NDA. More technically, a section 505(b)(2) application is one for which one or more of the investigations relied upon by the applicant for approval \"were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.... \" A section 505(b)(2) application differs from an ANDA in that it includes full reports of investigations of the safety and efficacy of the proposed product. However, a section 505(b)(2) NDA is distinct from an NDA in that the section 505(b)(2) application relies upon data that the applicant did not develop itself.\nThe Hatch-Waxman Act placed certain limits upon the ability of generic competitors to sell their own versions of brand-name drugs. These limitations—termed regulatory exclusivities—consist of a period of time during which a competitor's ability to obtain FDA permission to sell a generic version of a previously approved brand-name drug is restricted. The federal food and drug laws establish several different sorts of regulatory exclusivities relating to new chemical entities, new clinical studies, orphan drugs, pediatric studies, generic drugs, antibiotics, qualified infectious disease products, enantiomers, and biologics. This report will describe each of these regulatory exclusivities below.", "Regulatory exclusivities are not subject to a standard terminology. Some commentators employ terms such as \"statutory exclusivity,\" \"data protection,\" and \"marketing exclusivity\" synonymously with the term \"regulatory exclusivity.\" This report will instead follow the approach of a second group of writers who ascribe distinct meanings to these terms. Under this latter approach, \"regulatory exclusivity\" is an umbrella term that refers to any FDA-administered proprietary right. Regulatory exclusivities may in turn be divided into two categories: (1) those that provide data exclusivity, alternatively known as data protection, and (2) those that provide marketing exclusivity.\nThe distinction between data and marketing exclusivity lies in the scope of protection that each proprietary right affords. Data exclusivity protects the safety and efficacy information—often termed the \"data package\"—submitted by the brand-name firm from use by generic firms. As a result, a generic firm may not rely upon that data in support of its own application for FDA marketing approval for a period of years. Data exclusivity does not prevent a generic firm from submitting its own data package. In contrast, a marketing exclusivity prevents a competing firm from obtaining FDA approval whether or not it has generated its own safety and efficacy data.\nFor many firms the distinction between a data exclusivity and marketing exclusivity may be more apparent than real. The expense of generating clinical data and other information needed to obtain marketing approval from the FDA is prohibitive for many firms. The difference between data and marketing exclusivity is of greater importance to firms that can afford to generate their own data packages for submission to the FDA.", "The Hatch-Waxman Act established a five-year data exclusivity that is available to drugs that qualify as a new chemical entity (NCE). The purpose of this \"NCE exclusivity\" is to encourage the development of innovative drug products that include an entirely new active ingredient (commonly termed the \"active moiety\"), in contrast to \"me-too\" drugs that incorporate chemical variants of previously known compounds. NCE exclusivity prevents a subsequent generic applicant from relying upon the data submitted by the innovative drug company during a five-year period. As a result, generic firms are precluded from relying upon this data for five years from the date of the marketing approval of the NDA for that active moiety.\nA drug is judged to be an NCE if the FDA has not previously approved that drug's active ingredient. During that five-year period of NCE exclusivity, the FDA may not accept a generic drug company's application to market a drug product containing the same active moiety protected under the NCE exclusivity. This prohibition holds even if these applications are directed toward a different use, dosage form, or ester or salt of the active ingredient.\nAs noted, NCE exclusivity acts as data exclusivity. It therefore does not preclude the FDA from accepting an application submitted by an entity that has performed all the required preclinical and clinical studies itself.\nThe Hatch-Waxman Act allows the five-year term of NCE exclusivity to be decreased to four years under one circumstance. If the NDA holder owns or licenses patents that the generic applicant believes are invalid or not infringed, then the generic applicant is allowed to file its application one year early—upon the expiration of four, rather than five years from the date the NDA was approved.\nThe practical effect of this arrangement is to restrict a potential generic manufacturer from bringing a product to market for the NCE exclusivity—either four or five years—plus the length of the FDA review of the generic application. If, for example, the FDA requires two years to approve a particular generic application, the real-world impact of the NCE exclusivity has been seven years of protection. In this respect NCE exclusivity operates differently from other forms of FDA-administered exclusivities. Other exclusivities generally prevent the FDA from approving applications, rather than accepting them in the first instance.", "In order to encourage improvements upon drugs that are already in use, the Hatch-Waxman Act also provided for a three-year clinical investigation exclusivity period. Clinical investigation exclusivity may be awarded with respect to an NDA that contains reports of new clinical studies conducted by the sponsor that are essential to FDA approval of that application. The FDA has granted clinical investigation exclusivity for such changes as new dosage forms, new indications, or a switch from prescription to over-the-counter status for the drug.\nThe Hatch-Waxman Act imposes four requirements that an investigation must fulfill in order to qualify for clinical investigation exclusivity. First, the study must be new, in that it could not have been previously used for another FDA drug approval proceeding. Second, the study must be a clinical study on humans, as compared to a preclinical or other sort of study. Third, the study must have been \"conducted or sponsored\" by the applicant.\nFinally, the study must be \"essential to the approval\" of the application. The FDA has defined the term \"essential to approval\" as meaning \"that there are no other data available that could support approval of the application.\" A study that provides useful background information, but is not essential to approving the change in the drug, does not provide sufficient basis for an FDA award of clinical investigation exclusivity.\nAs with NCE exclusivity, clinical investigation exclusivity acts as data exclusivity. It therefore does not preclude the FDA from approving a full NDA. If the sponsor of a subsequent NDA has performed all the required preclinical and clinical studies itself, the FDA may approve the NDA without regard to the new clinical trial exclusivity.\nIn contrast to NCE exclusivity, clinical investigation exclusivity does not prevent the FDA from accepting a generic application with respect to the drug. If the clinical investigation exclusivity continues to bar the issuance of marketing approval at the close of FDA review, the FDA will issue a tentative approval for the generic product that will become effective once the clinical investigation exclusivity has run its course.\nIn addition, clinical investigation exclusivity only applies to the \"conditions of approval\"—that is to say, the use of the product that was supported by the clinical investigation. If, for example, the new studies support a new indication or dosage form of the previously approved ingredient, then the three-year exclusivity applies only to that particular use or dosage form. The FDA is not barred from approving generic drugs for other indications or dosage forms.\nA drug product may be subject both to NCE exclusivity and clinical investigation exclusivity during the life of that product. Commonly, a new drug will initially enjoy a five-year NCE exclusivity. Later in the life of that product, the sponsor of the drug may perform additional clinical trials to qualify the drug for additional three-year data exclusivities that apply only to those new, specific uses.", "In 1982, Congress enacted the Orphan Drug Act in order to encourage firms to develop pharmaceuticals to treat rare diseases and conditions. Such drugs are called \"orphan drugs\" because firms may lack the financial incentives to sponsor products to treat small patient populations. The Orphan Drug Act provides several incentives, including FDA protocol assistance, tax breaks, and a clinical trial grants program.\nThe most commercially significant of all of these benefits is a seven-year term of marketing exclusivity. This period commences from the date the FDA issues marketing approval on the drug. The original version of the Orphan Drug Act extended marketing exclusivity only to drugs that were not patented. However, Congress amended the statute in 1985 to provide for regulatory exclusivity for both patented and unpatented products.\nBecause it acts as a marketing exclusivity, orphan drug exclusivity blocks competitors from obtaining FDA approval whether or not they have generated their own data. However, orphan drug regulatory exclusivity applies only to the indication for which the drug is approved. As a result, the FDA could approve a second application of the same drug for a different use. The FDA cannot approve the same drug made by another manufacturer for the same use, however, unless the original sponsor approves or the original sponsor is unable to provide sufficient quantities of the drug to the market.\nAs originally enacted, the Orphan Drug Act defined an orphan drug as one for which there was no \"reasonable expectation that the cost of developing ... will be recovered from sales in the United States of such drug.\" In 1984, Congress changed the definition to its present form. Currently, in order to qualify for orphan drug status, the drug must treat a rare disease or condition (1) affecting less than 200,000 people in the United States, or (2) affecting more than 200,000 people in the United States, but for which there is no reasonable expectation that the sales of the drug would recover the costs. The effect of this change was to allow drug sponsors to avoid making a showing of unprofitability if the target population consisted of fewer than 200,000 persons.", "The Biologics Price Competition and Innovation Act of 2009 (BPCIA), which was enacted as Title VII of the Patient Protection and Affordable Care Act, P.L. 111-148 , introduced new regulatory exclusivities for a category of biologically derived preparations known as \"biologics.\" Biologics consist of such products as vaccines, antitoxins, blood components, and therapeutic serums. For the most part, the FDA regulates biologics under Section 351 of the Public Health Service Act, as compared to the Federal Food, Drug, and Cosmetic Act which applies to small-molecule, traditional pharmaceuticals.\nThe BPCIA established two periods of regulatory exclusivity applicable to brand-name biologics, one with a duration of 4 years and the other with a duration of 12 years. The BPCIA specifically provides\n(7) EXCLUSIVITY FOR REFERENCE PRODUCT.—\n(A) EFFECTIVE DATE OF BIOSIMILAR APPLICATION APPROVAL.—Approval of an application under this subsection may not be made effective by the Secretary until the date that is 12 years after the date on which the reference product was first licensed under subsection (a).\n'(B) FILING PERIOD.—An application under this subsection may not be submitted to the Secretary until the date that is 4 years after the date on which the reference product was first licensed under subsection (a).\nSome discussion has occurred about whether the 12-year regulatory exclusivity period identified in the statute operates as a data or marketing exclusivity. In the FDA's public hearing notice, the agency referred to a \"12-year period of marketing exclusivity.\" Several Members of Congress drafted letters to the FDA explaining that the 12-year period instead acted as a data exclusivity. One letter explained\nThe Act does not provide market exclusivity for innovator products. It provides data exclusivity, which prohibits FDA from allowing another manufacturer of a highly similar biologic to rely on the Agency's prior finding of safety, purity and potency for the innovator product for a limited period of time. It does not prohibit or prevent another manufacturer from developing its own data to justify FDA approval of a full biologics license application rather than an abbreviated application that relies on the prior approval of a reference product.\nSimilarly, other Members of Congress explained that the 12-year regulatory exclusivity acts as data exclusivity that \"only protects the FDA from allowing another manufacturer to rely on the data of an innovator to support another product. Importantly, it does not prohibit or prevent another manufacturer from developing its own data to justify FDA approval of a similar of competitive product.\" A third letter from some Members of Congress stated their belief that \"the statute is clear that the FDA can begin reviewing biogeneric applications during the 12 year exclusivity period.\" The FDA subsequently issued a draft guidance document that appeared to align the agency's view with that of the congressional correspondents.", "Brand-name firms may qualify for a six-month pediatric exclusivity upon the completion of studies on the effects of a drug upon children. This six-month period begins on the date that the existing patent or data exclusivity protection on the innovator drug would otherwise expire. Pediatric exclusivity extends to any drug product with the same active ingredient. The purpose of the pediatric regulatory exclusivity is to improve the availability of appropriate pediatric labeling on drug products.\nCongress first established pediatric regulatory exclusivities with the Food and Drug Administration Modernization Act of 1997 (FDAMA). Although the FDAMA included a sunset provision, Congress subsequently reauthorized these provisions. In the 112 th Congress, the Food and Drug Administration Safety and Innovation Act, P.L. 112-144 , made the pediatric exclusivity permanent.\nIn establishing pediatric exclusivity, Congress responded to concerns that many FDA-approved drugs had not yet been clinically tested upon children. Investigations upon a pediatric population tends to raise a number of complexities, including issues of informed consent, the changes that occur in children as they grow, and the inability of children to describe accurately the effect of a medication. As a result, most drugs are tested solely upon adults. By establishing a pediatric regulatory exclusivity, Congress hoped to encourage additional pediatric testing, which in turn could allow medications to be labeled for use by children.\nPursuant to its statutory authority, the FDA issues written requests to NDA applicants and holders of approved NDAs to perform pediatric studies with respect to the drug. An FDA written request contains such information as the indications and the number of patients to be studied, the labeling that may result from such studies, the format of the report to be submitted to the FDA, and the timeframe for completing the studies. Response to this written request is wholly voluntary. If the innovative drug company submits a report to the satisfaction of the FDA, however, then it will be awarded the six-month regulatory exclusivity.\nNotably, the food and drug laws do not condition pediatric exclusivity upon the success of the study. The six-month regulatory exclusivity period may be obtained whether or not the study successfully demonstrates safety and effectiveness in children. Thus, the pediatric exclusivity is intended to create incentives for drug sponsors to conduct research and submit their results to the FDA.\nThe effect of a pediatric exclusivity is to extend the approved manufacturer's existing regulatory exclusivity or patent protection for an additional 6 months. If the pediatric exclusivity applied to an orphan drug, for example, the result would be 7 years and 6 months of marketing exclusivity; if applied to an NCE exclusivity, the drug's sponsor would obtain 5 years and 6 months of data protection. If applied to a patent, that pediatric exclusivity does not actually extend the term of a patent; rather, it is a regulatory exclusivity administered by the FDA.", "Congressional concern over the spread of antibiotic-resistant \"superbugs\" led to the enactment of the Generating Antibiotic Incentives Now (GAIN) Act, enacted as Title VIII of the FDA Safety and Innovation Act, P.L. 112-144 . That statute allows the FDA to designate a drug as a \"qualified infectious disease product\" (QIDP) if it consists of an antibacterial or antifungal drug intended to treat serious or life-threatening infections. The GAIN Act stipulates that QIDPs include drugs that address drug-resistant tuberculosis, gram negative bacteria, and Staphylococcus aureus.\nAlong with other measures intended to provide pharmaceutical and biotechnology companies with incentives to develop innovative antibiotics, the GAIN Act adds five years to the term of the new chemical entity, clinical investigation, and orphan exclusivities for any QIDP. The statute stipulates that the five-year QIDP extension is cumulative with the pediatric exclusivity. As a result, a QIDP that qualified as a new chemical entity, and was also awarded a pediatric exclusivity, would be entitled to a data exclusivity period of 10 years and 6 months.", "Enantiomers are molecules that possess the same molecular formula but are mirror images of each other—like left and right hands. Frequently, only one of a pair of enantiomers is pharmacologically active, while the other is inactive or nearly so. Sometimes only one member of a pair of enantiomers will demonstrate toxicity. The term \"racemate\" refers to a compound that has equal amounts of the two sorts of enantiomers.\nThe FDA traditionally held the view that the single enantiomer of a previously approved racemate contained a previously approved active moiety and was not a new chemical entity. This situation changed with the enactment of the FDA Amendments Act (FDAAA) of 2007. This legislation incorporated provisions that allowed the FDA to grant new chemical entity (NCE) exclusivity to enantiomers of previously approved racemates if the NDA applicant so elects. Under the FDAAA, enantiomer exclusivity only applies where the applicant seeks approval for an indication in a different therapeutic class from that of the previously approved racemate.\nIn addition, approval of the non-racemic drug must be based upon different studies than the racemic one for exclusivity to be awarded. Finally, in the event of applicant election for enantiomer exclusivity, the labeling of the non-racemic drug \"shall include a statement that the non-racemic drug is not approved, and has not been shown to be safe and effective, for any condition of use of the racemic drug.\" The FDAAA limits the availability of enantiomer exclusivity to applications submitted to the FDA after September 27, 2007, and before October 1, 2017.", "An antibiotic is \"any drug … composed wholly or partly of any kind of penicillin, streptomycin, chlortetracycline, chloramphenicol, bacitracin, or any other drug intended for human use containing any quantity of any chemical substance which is produced by a micro-organism and which has the capacity to inhibit or destroy micro-organisms in dilute solution (including a chemically synthesized equivalent of any such substance) or any derivative thereof.\" Prior to 1997, the FDA reviewed most applications for antibiotic drug marketing approval under section 507 of the Federal Food, Drug, and Cosmetic Act (FFDCA).\nThe FDA Modernization Act of 1997 repealed section 507 and instead required agency to review antibiotic drugs under section 505 of the FFDCA. Stated differently, antibiotics were no longer covered by a distinct statute, and instead were brought into the mainstream of pharmaceutical regulation. The FDA Modernization Act considered the ramifications for intellectual property rights in so-called \"old antibiotics\"—that is to say, antibiotics that were subject to applications for marketing approval prior to the statute's enactment. Under that legislation, marketing applications for drugs containing an antibiotic that the FDA received on or before November 20, 1997, were exempted from certain patent listing, patent certification, and regulatory exclusivity provisions of the Hatch-Waxman Act. These provisions essentially maintained the status quo with respect to the expectations of antibiotics manufacturers who had sought marketing approval prior to the enactment of the FDA Modernization Act.\nCongress revisited the issue in 2008 with the QI Program Supplemental Funding Act of 2008. This legislation introduced changes to the Medicare and Medicaid programs, but also altered the rules pertaining to patents and regulatory exclusivities for antibiotics. The QI Act clarified that antibiotic drugs approved before November 21, 1997, may obtain a three-year exclusivity for a new condition of use for an \"old antibiotic.\" The statute also stipulated that marketing approval applications for antibiotic drugs submitted before November 21, 1997, but not yet approved by the FDA, may elect to become eligible for three-year clinical investigation exclusivity, five-year NCE exclusivity, or a patent term extension under section 156 of the Patent Act. Should this election be made, the other features of the Hatch-Waxman Act, such as its patent dispute resolution system, apply to that \"old antibiotic.\"", "Most of the regulatory exclusivities operate in favor of brand-name firms. However, federal law also establishes regulatory exclusivities designed to encourage generic and follow-on firms to market their products. The Hatch-Waxman Act allows generic firms to obtain a 180-day period of \"generic exclusivity\" if they are the first to file an ANDA challenging a brand-name firm's patents. Generally speaking, this regulatory exclusivity precludes the FDA from approving another ANDA for the same product for the 180-day period.\nIn addition, the Biologics Price Competition and Innovation Act of 2009 (BPCIA) establishes a regulatory exclusivity that operates in favor of manufacturers of follow-on biologics. Under the BPCIA, the first follow-on product deemed to be \"biosimilar\" to or \"interchangeable\" with the brand-name product is entitled to a period of exclusivity before the FDA will make a determination for a competing product. Follow-on exclusivity ends at the earlier of one year after first commercial marketing, 18 months after a final court decision in a patent infringement action against the applicant or dismissal of such an action, 42 months after approval if the applicant has been sued and the litigation is still ongoing, or 18 months after approval if the applicant has not been sued.", "Under the Hatch-Waxman Act as originally enacted, the first generic drug company that challenges patents relating to a brand-name drug may obtain a 180-day period of regulatory exclusivity. The FDA could not award a generic exclusivity when patents on the brand-name drug have already expired, however. Some observers believed that this circumstance discouraged generic drug companies from offering products to compete with drugs that were off-patent.\nTo address this concern, the FDA Reauthorization Act of 2017, P.L. 115-52 , established a 180-day \"competitive generic therapy\" exclusivity period in circumstances of \"inadequate generic competition.\" The FDA Reauthorization Act defines \"inadequate generic competition\" to exist where no generic competition exists for a particular drug, or where a single generic drug has been approved but the brand-name drug is no longer marketed. In addition, the \"competitive generic therapy\" must not be subject to relevant patents or regulatory exclusivities. The \"competitive generic therapy\" exclusivity blocks competing generic applications from initial FDA approval for 180 days. It is forfeited if its holder does not market its generic drug within 75 days from the date of FDA approval.", "The Hatch-Waxman Act established two \"transitional\" exclusivities for applications for marketing approval, other than ANDAs, that the FDA approved between January 1, 1982, and September 24, 1984. These periods of exclusivity expired some years ago and are of historical interest today.", "Legislation introduced in the 115 th Congress would modify the current system of regulatory exclusivities. None of this legislation has been enacted as of the publication of this report.", "The Improving Access to Affordable Prescription Drugs Act, introduced as both H.R. 1776 and S. 771 , would modify the NCE exclusivity period. Under current law, the FDA may not accept an ANDA proposing to market a generic version of a brand-name drug subject to NCE exclusivity for five years from the date the brand-name drug was approved for marketing. This period may be reduced to four years if the ANDA applicant challenges patents pertaining to the brand-name drug.\nH.R. 1776 and S. 771 would instead allow the FDA to accept a generic drug application for the brand-name product three years after the brand-name product was approved. This earlier date would apply whether or not the ANDA applicant challenges any relevant patents. However, under this proposed legislation, the agency may not approve the ANDA until five years have passed since the brand-name product's approval date.\nAs noted earlier in this report, in select instances the practical effect of NCE exclusivity is to restrict a potential generic manufacturer from bringing a product to market for the period of NCE exclusivity—currently either four or five years—plus the length of the FDA review of the generic application. By reducing the period during which generic firms must wait before filing ANDAs, H.R. 1776 and S. 771 would potentially allow the FDA to approve generic drugs pertaining to NCEs more quickly.\nThis legislation would also reduce the regulatory exclusivity period for biologics from 12 to 7 years. This proposal is consistent with those previously made by the Obama Administration and in legislation introduced in the 114 th Congress.", "This report previously described the four requirements that the Hatch-Waxman Act imposes upon an investigation for it to qualify for clinical investigation exclusivity. In particular, the study must be new; consist of a clinical study on humans; been \"conducted or sponsored\" by the applicant; and be \"essential to the approval\" of the application. H.R. 1776 and S. 771 would also limit the award of the three-year clinical investigation exclusivity to drugs that show \"a significant clinical benefit over existing therapies manufactured by the applicant in the 5-year period preceding the submission of the application.\" This proposed additional requirement appears to address concerns that brand-name firms have obtained multiple awards on three-year clinical investigation exclusivity with respect to variations upon the same drug in order to thwart generic competition.", "H.R. 1776 and S. 771 would also call for the termination of a regulatory exclusivity if its proprietor engages in one of certain specified activities, including adulteration, misbranding, illegally marketing a drug, making false statements to the FDA, or entering into an anticompetitive settlement of patent infringement litigation.", "The Abuse-Deterrent Opioids Plan for Tomorrow Act of 2017, H.R. 2025 , would limit the scope of the three-year clinical investigation exclusivity with respect to section 505(b)(2) applications that relate to abuse-deterrent opioids. Firms have begun to market opioid formulations that deter abuse through physical or chemical barriers; antagonists that reduce the euphoria associated with abuse; additional substances that produce an unpleasant effect, such as nasal irritation, if the dosage is manipulated; and other techniques. Often these products involve the use of newer abuse deterrent technologies applied to a previously marketed opioid. In such circumstances, firms have used the section 505(b)(2) pathway to obtain FDA marketing approval. Under this approach, they rely upon the safety and efficacy studies associated with the old opioid, and then conduct additional clinical trials with respect to the newer abuse-deterrent formulation. If approved, the product includes labeling describing its specific abuse-deterrent properties.\nObservers have criticized the impact of the three-year clinical investigation exclusivity in these circumstances. An example illustrates concerns that this exclusivity may be too generously awarded with respect to abuse-deterrence labeling. Suppose that Company A files a 505(b)(2) application with respect to the combination of an old opioid in a nasal abuse deterrence formulation. Company A relies upon the safety and efficacy data generated years ago by sponsor of the old opioid and also conducts its own clinical trials with respect to its in-house nasal abuse deterrence technology. If the FDA approves the 505(b)(2) application, then it will award a three-year clinical investigation exclusivity with respect to the \"condition of approval\"—namely, the nasal abuse deterrence labeling.\nCompany B later also files a 505(b)(2) application with respect to the combination of the same old opioid and its distinct nasal abuse deterrence technology. In doing so, Company B relies upon the old opioid's safety and efficacy data, along with its own clinical trials with respect to its abuse-deterrent formulation. Because the FDA has already approved Company A's application with nasal abuse deterrence labeling, then the clinical investigation exclusivity owed to Company A would bar Company B's application from FDA approval for three years. The clinical investigation exclusivity would apply even though the two abuse deterrence technologies may differ, and even though Company B did not in any way reference or otherwise rely upon Company A's application.\nTo address this issue, H.R. 2025 would add the following language to the Federal Food, Drug, and Cosmetic Act:\nA drug for which [a section 505(b)(2)] application ... is submitted shall not be considered ineligible for approval under this subsection on the basis that its labeling includes information describing the abuse-deterrent properties of the drug ... that otherwise would be blocked by [three-year clinical investigation] exclusivity ... if—\n(I) the investigation or investigations relied upon by the applicant for approval of the labeling information were conducted by or for the applicant or the applicant has obtained a right of reference or use from the person by or for whom the investigation or investigations were conducted; and\n(II) the drug has meaningful technological differences compared to the drug otherwise protected by exclusivity....\nThis amendment would affect any 505(b)(2) application filed on or after January 1, 2017.", "The Orphan Products Extension Now Accelerating Cures and Treatments Act (OPEN ACT) of 2017, S. 1509 , would build upon the incentive structure of the Orphan Drug Act. The bill endeavors to encourage drug companies to repurpose existing medications in order to address rare diseases. That statute would require the FDA to extend by six months each existing exclusivity period for an approved drug or biological product when the product is additionally approved to prevent, diagnose, or treat a new indication that is a rare disease or condition. The six-month extension would be cumulative with other sorts of regulatory exclusivity, such as pediatric or qualified infectious disease product exclusivity, that might apply to the product.\nS. 1509 would also modify the Orphan Drug Act in one respect. The current statute explains that when a drug is subject to an orphan drug exclusivity, the FDA cannot approve the same drug made by another manufacturer for the same use, unless the original sponsor approves or the original sponsor is unable to provide sufficient quantities of the drug to the market. S. 1509 would clarify that the orphan drug exclusivity also does not bar the FDA from approving a new, clinically superior drug with the same active ingredient that will be marketed for treatment of the same disease or condition.", "Congress placed one limitation on the three-year exclusivity, as well as patents, that relate to the use of a drug in pediatric populations. As provided by 21 U.S.C. §355a(o)(1)\nA drug for which an [ANDA] application has been submitted or approved ... shall not be considered ineligible for approval ... or misbranded ... on the basis that the labeling of the drug omits a pediatric indication or any other aspect of labeling pertaining to pediatric use when the omitted indication or other aspect is protected by patent or by three-year exclusivity.\nStated differently, the statute permits generic drugs to omit pediatric labeling and therefore bypass relevant patents and the three-year clinical investigation exclusivity. The statute further requires the labels of generic drugs to indicate that they are not approved for pediatric use and provide a statement of any contraindications, warnings, or precautions that the FDA deems necessary.\nUnder current law, this possibility of a \"labelling carve out\" for pediatric indications applies only to ANDA applications. The OPEN ACT, S. 1509 , would extend the scope of this exemption to include section 505(b)(2) applications.", "Congress has increasingly turned to regulatory exclusivities in order to encourage the development and distribution of new drugs. In comparison with the broadly oriented patent system, which pertains to virtually every innovative industry in the United States, regulatory exclusivities allow Congress to direct attention to more focused issues. This shift holds a number of implications for innovation and public health policy. In particular, the growing number of regulatory exclusivities has caused the FDA to move beyond its traditional focus upon food and drug safety, and instead become an agency that must administer numerous intellectual property rights. They have also created a more complex landscape of proprietary rights in the area of pharmaceuticals and biologics.\nThe ultimate assessment of regulatory exclusivities depends upon whether they have encouraged the discovery and public availability of new medicines. Orphan and pediatric drug exclusivity have been widely lauded as successful programs, although some observers have expressed concern over their operation. More recently established exclusivities, such as those pertaining to enantiomers and qualified infectious disease products, have arguably not attracted the same level of interest from industry. Continued congressional monitoring may help ensure that regulatory exclusivities provide appropriate incentives for innovation in the crucial area of public health." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full", "h0_full", "", "", "", "", "", "h0_full", "", "", "", "", "", "", "h2_title h3_title h1_full", "h2_full h1_full", "h1_full", "h2_full", "h2_full", "h3_full", "h3_full", "" ] }

{ "question": [ "Why must the FDA enforce regulatory exclusivities?", "What general exclusivities exist?", "What specialized regulatory exclusivities exist?", "What would the Improving Access to Affordable Prescription Drugs Act do?", "What restriction applies to this rule?", "What limit would be applied to the application drugs?", "How might the regulatory exclusivity period for biologics change?", "Why would a regulatory exclusivity be terminated?", "What other bill would affect regulatory exclusivity?", "Why would the OPEN ACT apply to an approved drug or biological product?", "How does OPEN ACT specifically apply to pediatric use?", "Why would S. 1509 and S. 934 apply?" ], "summary": [ "Between them, the Federal Food, Drug, and Cosmetic Act, P.L. 75-717 (as amended), and the Public Health Service Act, P. L. 78-410 (as amended), require the FDA to enforce 16 different regulatory exclusivities.", "They include exclusivity terms of 12 years for biologics, 7 years for orphan drugs, 5 years for drugs that qualify as a new chemical entity (NCE), 3 years for certain clinical investigations, and 180 days for generic drug companies that challenge relevant patents under certain conditions.", "Other, more specialized regulatory exclusivities pertain to antibiotics, enantiomers, and qualifying infectious disease products.", "Other legislation has been introduced but not enacted. The Improving Access to Affordable Prescription Drugs Act, introduced as both H.R. 1776 and S. 771, would modify the NCE exclusivity period to allow FDA to accept a generic drug application for the brand-name product after three years rather than five.", "However, the agency may not approve the generic application until five years have passed since the brand-name product's approval date.", "This legislation would also limit the award of the three-year clinical investigation exclusivity to drugs that show significant clinical benefit over existing therapies manufactured by the applicant in the five-year period prior to the application.", "H.R. 1776 and S. 771 would also reduce the regulatory exclusivity period for biologics from 12 to 7 years.", "The two bills would also call for the termination of a regulatory exclusivity if its proprietor engages in one of certain specified activities, including adulteration, misbranding, illegally marketing a drug, or making false statements to the FDA.", "In addition, the Abuse-Deterrent Opioids Plan for Tomorrow Act of 2017, H.R. 2025, would limit the scope of regulatory exclusivities with respect to so-called \"505(b)(2) applications\" that relate to abuse-resistant opioids.", "Finally, the Orphan Products Extension Now Accelerating Cures and Treatments Act (OPEN ACT) of 2017, S. 1509, would require the FDA to extend by six months the exclusivity period for an approved drug or biological product when the product is additionally approved to prevent, diagnose, or treat a new indication that is a rare disease or condition.", "As well, the OPEN ACT would extend a \"labelling carve out\" to section 505(b)(2) applications with respect to pediatric uses.", "S. 1509 and another bill, S. 934, the FDA Reauthorization Act, would also clarify that the orphan drug exclusivity does not bar the FDA from approving a new, clinically superior drug with the same active ingredient that will be marketed for treatment of the same disease or condition." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, -1, 1, -1, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 3, 3, 3, 4, 4, 4, 5, 5, 5 ] }

{ "title": [ "", "Status of Available Economic Studies", "Trends in Agricultural Trade Under NAFTA", "Assessing Potential Impacts of Higher MFN Tariffs", "Available Trade and Tariff Data", "Imposition of MFN Tariffs", "MFN Tariffs on Agricultural Imports to the United States", "MFN Tariffs on U.S. Agricultural Exports in Canada and Mexico", "Reduction in U.S. Agricultural Market Share", "U.S. Market Share of Canada's Agricultural Imports", "U.S. Market Share of Mexico's Agricultural Imports", "Agriculture Industry Opposition to Withdrawal" ], "paragraphs": [ "T he North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, establishing a free trade area as part of a comprehensive economic and trade agreement among the United States, Canada, and Mexico. Currently, the United States is renegotiating the agreement. However, repeated threats from President Trump to abandon NAFTA and other actions by the Administration as part of ongoing efforts to \"modernize\" NAFTA have raised concerns that the United States could withdraw from the agreement altogether. Although some U.S. agricultural industries support NAFTA renegotiation and efforts to address certain outstanding trade disputes—especially regarding milk, potatoes, some fruits and vegetables, cheese, and wine—many continue to express strong support for NAFTA and oppose outright withdrawal. Possible disruptions in U.S. export markets and general uncertainty in U.S. trade policy also continue to be a concern for U.S. food and agricultural producers. Similar concerns have been raised by some in Congress who have oversight authority on industry and trade activities and who continue to monitor the ongoing NAFTA renegotiations.\nThis report examines some of the potential consequences to U.S. agricultural markets of a U.S. withdrawal from NAFTA, focusing on the possibility that higher tariffs could be imposed on U.S. imports and exports. In particular, under a NAFTA withdrawal, it is likely that most-favored-nation (MFN) tariffs would be imposed on agricultural products traded among the NAFTA countries instead of the current zero tariff (i.e., duty-free trade) for most agricultural products. In general , MFN tariffs on U.S. agricultural imports would likely raise prices both to U.S. consumers and other end users, such as manufacturers of value-added food products.\nApplying general principles of supply and demand, it is possible to anticipate the effect that sustained higher prices due to higher MFN tariffs could have on the volume (quantity) of goods traded. Specifically, as prices increase, the quantity demanded for a product tends to decrease. Assuming MFN tariffs could apply in the event of a U.S. NAFTA withdrawal, imported products could become more expensive, which could lower the demand for some U.S. agricultural imports. Similarly, if higher MFN tariffs were applied to U.S. goods exported to Canada and Mexico, this could make some U.S. agricultural products more costly to buyers in those markets, which could lower U.S. exports—such as meat products, grains and feed, and processed foods.", "As part of a formal free trade agreement (FTA) negotiation, the Office of the United States Trade Representative (USTR) will often request a \"probable economic effects\" study of a trade agreement, which is usually conducted by the United States International Trade Commission (USITC). The Administration has asked USITC to conduct only an investigation into the probable economic effect of eliminating tariffs on certain dutiable NAFTA imports currently under a tariff rate quota (TRQ). This analysis was expected to have been completed in August 2017 but is confidential and not publicly available. USTR has confirmed that, to date, a comprehensive review of a possible U.S. withdrawal from NAFTA has not yet been conducted.\nComprehensive analysis of a possible U.S. NAFTA withdrawal focused exclusively on agricultural markets is also not available. Researchers at the U.S. Department of Agriculture (USDA) have not yet conducted such an analysis. University researchers often also contribute to studies of the effects of a range of market and trade policy actions. CRS communications with researchers that typically conduct such studies indicate that an assessment of a possible U.S. NAFTA withdrawal on agricultural markets has not been initiated at this time. An extensive amount of data would be needed to conduct such an analysis, including quantity produced and traded for a wide range of products, domestic and international prices, production costs and inputs, measures of price response by product and market, and other modeling data.\nThe text box below provides a qualitative summary of some of the potential ways that U.S. agricultural markets could be affected if the United States were to withdraw from NAFTA.\nA recent economy-wide study by a private research firm, ImpactECON, concluded that a \"NAFTA reversal\" would likely raise U.S. tariffs on Canada and Mexico imported products to current MFN rates, which could cause all NAFTA parties to experience declines in real gross domestic product (GDP), trade, investment, and employment. The study examined trade and economic changes assuming both reciprocation and no reciprocation in terms of Canada's and Mexico's applied tariffs. According to the study, if Canada and Mexico were to also impose higher MFN tariffs, this could result in additional overall trade declines among the NAFTA countries, resulting in the loss of 256,000 low-wage workers in the short term (three to five years) as well as additional relocation of workers throughout the United States. The ImpactECON study concluded that a NAFTA reversal could especially impact the meat, food, textiles, auto, and services sectors. Impacts are likely to be greatest for those industries where production is highly integrated.\nThe ImpactECON study and its conclusions regarding the potential impacts to the food and agricultural sectors have been highly commended and cited by some agricultural economists. For example, Dermot Hayes of Iowa State University notes that imposing MFN duties will have a price effect on traded goods that will lead to eventual market adjustment, forcing the United States to seek alternative export markets or be forced to downsize the domestic industry. For example, he estimates that MFN duties of 20% on U.S. pork exports to Mexico could cause a 5% contraction of the U.S. pork sector and stimulate additional production in Mexico and/or require Mexican buyers to find additional suppliers outside the United States. Contraction in the U.S. pork industry would result in a loss of U.S. jobs and have a disproportionate effect on specific counties that are dependent on farming, input markets, and value-added production in the sector.", "Trade under NAFTA underpins an important market for U.S. food and agricultural producers. Canada and Mexico are the United States' two largest trading partners, accounting for 28% of the total value of U.S. agricultural exports and 39% of its imports in 2016.\nOver the past 25 years under NAFTA, the value of U.S. agricultural trade with Canada and Mexico has increased sharply. Exports rose from $8.7 billion in 1992 to $38.1 billion in 2016 ( Figure 1 ), while imports rose from $6.5 billion to $44.5 billion over the same period ( Figure 2 ). Adjusted for inflation, the value of agricultural exports and imports between the United States and its NAFTA partners has increased roughly threefold since 1990, growing at an average rate of about 5%-6% annually. This growth resulted in a $6.4 billion trade deficit for U.S. agricultural products in 2016, reversing the trend in previous years when there was a trade surplus.\nIn 2016, U.S. agricultural exports to Canada were valued at $20.2 billion. The leading exports were grains and feed, animal products, fruits and vegetables and related products, nuts and other horticultural products, sweeteners, oilseeds, beverages (excluding fruit juice), and essential oils.\nU.S. agricultural exports to Mexico were valued at $17.8 billion in 2016. The leading exports were animal products, grains and feed, oilseeds, sweeteners, fruits and vegetables and related products, nuts and other horticultural products, cotton, seeds, and nursery crops. Mexico is also the largest or second-largest market for U.S. beef, pork, poultry, dairy, wheat, and corn exports.\nFor more information about U.S. agricultural trade under NAFTA, see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture , and CRS In Focus IF10682, NAFTA Renegotiation: Issues for U.S. Agriculture .", "Under NAFTA, tariffs and quantitative restrictions were eliminated on most agricultural products, with the exception of some that may be subject to TRQs and high out-of-quota tariff rates. Under NAFTA, Canada excludes dairy, poultry, and eggs for tariff elimination. The United States excludes dairy, sugar, cotton, tobacco, peanuts, and peanut butter. Because Canada was able to exclude certain products from tariff elimination in NAFTA, Canada is able to limit imports through restrictive TRQs. For example, according to USTR, imports of U.S. products above quota levels may be subject to out-of-quota tariffs as high as 245% for cheese and 298% for butter under NAFTA. Aside from these exempted products, most agricultural products are traded duty-free (i.e., zero tariff) and receive other types of trade preferences intended to facilitate trade.\nUnder an FTA, preferential tariffs are charged to member countries and are lower than a country's MFN tariff rates. MFN rates generally reflect the highest (most restrictive) rates that World Trade Organization (WTO) members can charge each other on imported goods and services. The text box below describes the different types of tariffs.", "Trade data presented here are by selected agricultural commodity groupings, as defined by USDA. In some cases, trade data are grouped according to tariff chapters under the Harmonized Commodity Description and Coding System (HS). The HS refers to a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes. The primary two-digit HS product categories are further subdivided into four-digit HS product categories. The first 24 chapters of most tariff schedules worldwide cover most agricultural and fisheries products. Product groupings by HS chapter exclude some agricultural commodities including cotton, essential oils, starches, hides, and skins.\nMFN tariffs presented here for all NAFTA countries were compiled by CRS from WTO's database and summarize available country tariff information at the HS-2 and HS-4 levels. WTO's tariff database includes MFN tariffs for products at the HS-2, HS-4, and HS-6 levels for all traded goods for most countries. This database documents both ad valorem (AV) tariffs—or the rate charged as a percentage of the price—and non-AV tariffs, such as specific tariffs. WTO's database does not extend beyond the HS-6 level. Average MFN tariffs reported by the WTO include tariffs expressed as AV. Tariffs expressed in terms of AV facilitate a comparison across different countries and are also useful for interpreting potential economic effects. For example, in general, a 10% tariff on a traded product roughly translates into a 10% price increase for that product, often paid for by the buyer of that product.\nHowever, average MFN tariff rates reported by the WTO do not include non-AV tariffs, such as specific tariffs or tariffs charged as a fixed amount per unit of quantity (e.g., $7 per 100 kg). It is important to note that the WTO tariff database does not translate non-AV tariffs to an ad valorem equivalent (AVE) basis. Accordingly, non-AV tariffs are not included as part of the WTO database's calculation of average AV tariff rates. This may exclude tariffs for certain agricultural products under a TRQ or where seasonal tariffs might apply (e.g., higher import tariffs for certain fruits and vegetables imported during U.S. peak season). Tariffs for agricultural products under a TRQ or where seasonal tariffs apply are often expressed as specific tariffs and/or at the HS-6 level or higher (HS-8 or HS-10 level) and are excluded from most reported average tariff rates. For reasons described in the text box below, WTO-reported average AV tariffs may therefore provide an incomplete picture of MFN duties for certain types of agricultural products.\nDespite these data limitations, tariff data provided in this report cover the WTO-reported average AV duties for each of the NAFTA partner countries at the HS-4 level only. As this provides for a subset of all MFN tariffs for agricultural products—excluding non-AV rates for some products—it provides an incomplete picture of actual tariff rates for some agricultural imports. Since average AV tariffs for agricultural products may be lower than actual applied rates, tariff rates discussed in this report likely understate actual applied rates for some agricultural imports. Accordingly, MFN rates described in this report are intended to provide an initial glimpse of the types of potential impacts in the event of a possible U.S. NAFTA withdrawal.\nFigure 3 summarizes the agricultural and fisheries tariffs by country for each of the 24 HS chapters at the HS-2 level. Figure 3 shows the minimum and maximum AV MFN tariffs (gray bar) and the average AV MFN tariff (red marker) for selected products (expressed at the HS-2 level) for the United States, Canada, and Mexico. Appendix A provides more detailed tariff information at the HS-2 level for each of the three NAFTA countries. Appendix B summarizes nearly 200 categories of agricultural and fisheries tariffs at the HS 4- level for each of the three countries.\nAdditional analysis is needed to fully capture the full extent of the potential market impacts of possibly higher MFN tariffs rates, especially for products under a TRQ or seasonal tariff. Ideally, such an analysis would be conducted in conjunction with economic modeling to simulate potential changes of higher tariffs on the quantity of products traded among the NAFTA countries under different scenarios. Such an analysis would also need to fully account for all other non-AV tariff rates that have not been converted to AVE. Calculating AVE rates for each of the roughly 2,700 individual tariff lines at the HS-6 level for each of the NAFTA partner countries is beyond the scope of this analysis due to time and resource constraints. Complete tariff information is further not readily available to calculate AVE tariffs for each of the individual tariff lines for products at the HS-8 and HS-10 levels for each country.", "Following is a discussion of possible tariff changes to both U.S. agricultural imports and exports in the event of a possible U.S. NAFTA withdrawal. With few exceptions, under NAFTA, agricultural products are imported duty-free (zero tariff), and U.S. agricultural products also generally face zero tariffs when exported to Canada and Mexico. In lieu of preferential trade policies under NAFTA, tariffs charged on U.S. imports and exports could revert to generally higher MFN tariffs.\nOther types of trade effects are not examined, such as the effects of trade on the possible removal of other types of NAFTA-related trade preferences (e.g., policies regarding SPS measures, customs charges, permits, quotas, trade regulations, import licenses, and border restrictions).", "Figure 3 shows MFN tariffs on U.S. agricultural imports. As shown, while the minimum MFN tariff on U.S. imports can be zero for many agricultural products, the maximum AV tariff varies widely and can be prohibitively high for some products, such as tobacco, oilseeds, and some processed fruit and vegetable products.\nAs noted previously, in general, higher MFN tariffs on U.S. agricultural imports would likely raise prices both to U.S. consumers and other end users, such as manufacturers of value-added food products. Accordingly, if higher MFN tariffs apply, some U.S. imports could become more costly to U.S. end users. For example, the maximum MFN tariff is 29.8% for certain tropical fruit imports, which could raise the cost of some products to U.S. consumers ( Appendix B , see HS 0804). Applying MFN tariff rates could also raise the cost to food processors who import cereal flours for use in further value-added food production. The maximum MFN tariff is 12.8% on cereal flour imports to the United States ( Appendix B , see HS 1102).\nAlternatively, some U.S. imports that currently compete with U.S.-produced products might experience a reduction in trade as imported products drop in response to higher U.S. tariffs. This could create a competitive advantage for U.S. producers as potential domestic suppliers. For example, tariffs for U.S. melon and watermelon imports carry a relatively high maximum MFN tariff of 29.8% ( Appendix B , see HS 0807), suggesting that imports could slow given higher prices due to possible prohibitive tariff rates, thus giving U.S. producers a competitive advantage. However, not all imported products would face higher tariffs if MFN tariffs were imposed. Some produce imported from Mexico that has been of concern to U.S. producers —such as tomatoes (HS 0702) and berries (HS 0810)—carries a zero to low MFN tariff ( Appendix B ). In this case, a possible NAFTA withdrawal might not slow imports from Canada and Mexico on the basis of price changes based on changes in import tariffs.", "Figure 3 shows MFN tariffs on Canadian and Mexican agricultural imports that could be charged on U.S. products if these countries were to reciprocate and charge MFN tariffs in the event of a possible NAFTA withdrawal. Similar to in the United States, while the minimum MFN tariff on imports to these countries can be zero or low for many agricultural products, the maximum AV tariff varies widely and can be prohibitively high for some products. For example, in Canada, the maximum AV tariff is 27% for some meat products and 95% for some imported grains. In Mexico, the maximum AV tariff is 75% for some meat products and 20% for some imported grains. Again, the maximum AV tariff varies widely depending on the product ( Figure 3 ).\nAs noted previously, in general, the imposition of higher MFN tariffs on U.S. agricultural exports would likely make U.S. products in those markets less price-competitive and more costly to foreign buyers, which could result in reduced quantities sold. Accordingly, if higher MFN tariffs apply, some U.S. products could become more costly to Canadian and Mexican end users. For example, Mexico's maximum MFN tariffs on its corn (maize) imports can be as high as 20% ( Appendix B , see HS 1005). This suggests that certain U.S. corn exports to Mexico could become up to 20% more expensive for buyers in that market. This could give other global corn suppliers an opportunity to gain additional import share in Mexico. Similarly, the maximum MFN tariff for pork meat imports to Mexico could raise tariffs on some pork products from current duty-free levels under NAFTA to a maximum MFN tariff of 20% ( Appendix B , see HS 0203). This could give an advantage to other global suppliers. MFN tariffs on U.S. corn and pork meat imports would remain duty-free (i.e., zero tariff).", "As higher MFN tariffs in Canada and Mexico could make U.S. agricultural products relatively more costly compared to other competing global suppliers, this could impact U.S. market share for some agricultural products in these two markets. Figure 4 and Figure 5 illustrate the importance of Canada and Mexico to U.S. agricultural trade for selected agricultural commodity groupings, as defined by USDA. Figure 6 and Figure 7 illustrate the importance of products from the United States to Canada's and Mexico's agricultural markets.", "Figure 4 shows selected U.S. agricultural exports to Canada and Mexico compared to exports to all other non-NAFTA countries in 2016. While Canada and Mexico accounted for 28% of the value of total U.S. agricultural exports, NAFTA countries accounted for a larger share of some U.S. exports—for example, 62% of U.S. sugar and tropical products and 51% of fresh and processed vegetables. Figure 5 shows selected U.S. agricultural imports from Canada and Mexico compared to imports from all other non-NAFTA countries in 2016. As shown, while Canada and Mexico accounted for 39% of total U.S. agricultural imports, NAFTA country suppliers account for a larger share of total imports for some commodities—for example, 58% of U.S. grains and feeds and 70% of fresh and processed vegetables.", "Figure 6 shows the U.S. market share of Canada's agricultural imports as a share of the value of total imports from all countries. In 2016, U.S. agricultural products accounted for 59% of the value of all Canadian agricultural imports. Some U.S. products, such as grains/feed and meat products, account for a larger share of total imports (more than 70%, on average). Figure 7 shows the U.S. market share of Mexico's agricultural imports in 2016 as a share of total imports from all countries. In 2016, U.S. agricultural products account for 72% of the value of all of Mexico's agricultural imports. Some U.S. product categories, however, account for an even greater share of total imports, such as grains and feed, meat products, sugar and related products, and processed foods, which accounted for more than 80% of the total value of Mexico's imports in 2016.\nThese market share data highlight those U.S. agricultural products that may be considered more heavily reliant on NAFTA trade, suggesting the importance of the agreement to U.S. sales of grains and feed, oilseeds, meat and dairy products, processed foods, fresh and processed fruits and vegetables, tree nuts, and sugar products. These market share data—together with MFN tariff information—further suggest that these products may become more costly and less competitive in these markets as higher tariffs, mostly duty-free access, and other types of trade preferences are removed under a possible U.S. NAFTA withdrawal.", "When President Trump announced in April 2017 that he was considering withdrawing the United States from NAFTA, many U.S. agricultural groups expressed strong opposition to withdrawal. Many in Congress also voiced opposition to outright withdrawal from NAFTA. The National Pork Producers Council stated that NAFTA withdrawal could be \"cataclysmic\" and \"financially devastating\" to U.S. pork producers. The National Corn Growers Association said that \"withdrawing from NAFTA would be disastrous for American agriculture\" and would disrupt trade with the sector's top trading partners. The American Soybean Association said withdrawing from NAFTA is a \"terrible idea\" and would hamper ongoing recovery in the sector. The U.S. Grains Council highlighted that withdrawal would have an \"immediate effect on sales to Mexico.\" The National Association of Wheat Growers (NAWG) noted that Mexico is the largest U.S. wheat buyer and claimed that NAFTA withdrawal would be a \"terrible blow to the U.S. wheat industry and its Mexican customers.\" Cargill, Inc., a major privately held U.S. grain distributor and global agricultural supplier, claims that sales to Canada and Mexico account for an estimated 10% of the company's annual revenues. Most fruit and vegetable growers did not support NAFTA withdrawal, citing the benefit of exports to Mexico.\nThe Administration did not withdraw from NAFTA at that time, deciding instead to formally renegotiate and \"modernize\" NAFTA. Although many in Congress and in the U.S. agricultural sectors support NAFTA renegotiation and efforts to address certain outstanding trade disputes—such as disputes involving milk, potatoes, some fruits and vegetables, cheese, and wine—most U.S. agricultural groups are unified in their opposition to outright NAFTA withdrawal. An October 2017 letter from nearly 90 farm and agriculture groups states that \"NAFTA withdrawal would cause immediate, substantial harm to American food and agriculture industries and to the U.S. economy as a whole.\" Agriculture groups also remain concerned about growing uncertainty in U.S. trade policy and its potential to disrupt U.S. export markets. Some also worry that the Administration is actively seeking to exit NAFTA.\nAmong the concerns of U.S. agricultural groups related to a withdrawal is fear that the nation's NAFTA trading partners could seek alternative markets for U.S. corn, soybean, dairy, pork, beef, and rice. For example, media reports indicate that Mexico is looking to find alternative suppliers for some imported products, such as rice (which could be supplied by Vietnam and Thailand), corn and soybeans (Argentina and Brazil), wheat (Argentina and the Baltic States), and dairy products (New Zealand and Europe). The U.S. pork industry continues to claim that a NAFTA withdrawal would be catastrophic to the sector. Meanwhile, reports also indicate that Mexico is not worried about finding alternative consumer markets for some of its exported products, such as avocados, which are now mostly sold to the United States. Other reports suggest that Mexico's efforts to diversify its agricultural suppliers and markets may be in retaliation for certain U.S. proposals tabled during the NAFTA renegotiation. Others suggest that the general tone of the ongoing renegotiation has had a negative impact on the relations among the NAFTA partners.\nAn economy-wide survey of investors by the industry-supported Trade Leadership Coalition reports that 72% of agricultural investors surveyed believe that the near-term (one to two years) business impacts of ending NAFTA would be negative (56% of businesses surveyed) or very negative (16%). Also, 78% of agricultural investors surveyed believe that the risks of NAFTA withdrawal have not been fully priced into stock valuations. Members of the International Chamber of Commerce have also warned that U.S. withdrawal from NAFTA or other critical changes to the agreement would \"greatly restrict, rather than enhance, cross-border commerce.\"\nThe Trump Administration has generally downplayed these types of concerns. However, USDA is reportedly developing a contingency plan to protect against potential agricultural losses if the United States withdraws from NAFTA. Again, in August 2017, President Trump and other Administration officials suggested the United States would likely withdraw from the agreement.\nMost states continue to express their support for NAFTA. The National Association of State Departments of Agriculture and the American Farm Bureau Federation, among other industry coalition groups, also continue to emphasize the importance of NAFTA to the U.S. agricultural sectors and the need to maintain a preferential trade relationship with Canada and Mexico.\nMany in Congress representing states with agricultural interests continue to express opposition to NAFTA withdrawal. In November 2017, the leadership of the House Agriculture Committee, Chairman K. Michael Conaway and Ranking Member Collin C. Peterson, joined several U.S. agriculture groups in opposing withdrawal and supporting a quick end to the ongoing NAFTA renegotiations. In October, 2017 Chairman Pat Roberts of the Senate Agriculture Committee expressed support for NAFTA and emphasized the need for industry leaders to present their support to the Administration. Senator Debbie Stabenow, Ranking Member of the Senate Agriculture Committee, has also expressed support for NAFTA. Reportedly, some agricultural groups believe that Congress has the ability to intervene, if President Trump withdraws the United States from NAFTA.\nCongress maintains oversight authority on industry and trade activities and has continued to monitor and conduct hearings on the ongoing NAFTA renegotiations. For additional information on the role of Congress in the ongoing negotiation, see CRS Report R44981, NAFTA Renegotiation and Modernization . For additional information on the legal aspects of congressional action in this area, see CRS Legal Sidebar WSLG1724, Renegotiation of the North American Free Trade Agreement (NAFTA): What Actions Do Not Require Congressional Approval?\nAppendix A. Most-Favored-Nation (MFN) Tariff, HS-2, Agricultural and Fisheries Products (United States, Canada, Mexico)\nAppendix B. Most-Favored-Nation (MFN) Tariff, HS-4, Agricultural and Fisheries Products (United States, Canada, Mexico)" ], "depth": [ 0, 1, 1, 1, 2, 2, 3, 3, 2, 3, 3, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h2_full", "h1_full", "h2_full h3_title", "", "h3_full h2_full", "h3_full", "h3_full", "h3_full", "", "", "h0_full" ] }

{ "question": [ "What is the North American Free Trade Agreement (NAFTA)?", "How is NAFTA currently changing?", "Why are there concerns about this renegotiation?", "What support exists for keeping NAFTA?", "How does this concern regard the larger US market?", "How is this concern regarded by Congress?", "How does NAFTA affect the agricultural market in the US?", "How do Canada and Mexico contribute to the US agricultural market?", "How has NAFTA affected this trading?", "How were agriculture imports and exports changing from 1992 to 2016?", "How does this information translate into percentage growth of the US market?", "What type of evaluation of US NAFTA withdrawal is unavailable?", "What does this report look at?", "What is the importance of the MFN rates?", "What would likely be the impact of MNF tariffs on US agricultural imports?", "What would likely be the impact of MNF tariffs on US agricultural exports?", "What products are likely to be negatively affected by MNF tariffs?", "What could this mean for the US?", "How does this report evaluate MFN tariffs?" ], "summary": [ "The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, establishing a free trade area as part of a comprehensive economic and trade agreement among the United States, Canada, and Mexico.", "Currently, the United States is renegotiating the agreement.", "However, repeated threats by President Trump to abandon NAFTA and other actions by the Administration as part of ongoing efforts to \"modernize\" NAFTA have raised concerns that the United States could withdraw from NAFTA.", "Although some U.S. agricultural sectors support NAFTA renegotiation and efforts to address certain outstanding trade disputes—regarding milk and dairy products, potatoes, some fruits and vegetables, and wine—many continue to express strong support for NAFTA and oppose outright withdrawal.", "Possible disruptions in U.S. export markets and general uncertainty in U.S. trade policy also continue to be a concern for U.S. food and agricultural producers.", "Similar concerns have been raised by some in Congress who have oversight authority on industry and trade activities and who continue to monitor and conduct hearings on the ongoing NAFTA renegotiations.", "Trade under NAFTA provides an important market for U.S. agricultural producers and a broader choice of food products for U.S. food processors and consumers.", "Canada and Mexico are the two largest U.S. agricultural trading partners (combining imports and exports), accounting for 28% of the total value of U.S. agricultural exports and 39% of U.S. imports in 2016.", "Under NAFTA, U.S. agricultural trade with Canada and Mexico has increased significantly.", "Agricultural exports rose from $8.7 billion in 1992 to $38.1 billion in 2016, while imports rose from $6.5 billion to $44.5 billion over the same period.", "Adjusted for inflation, growth in the value of total U.S. agricultural exports and imports with its NAFTA partners has increased roughly threefold, growing at an average rate of 5%-6% annually.", "To date, comprehensive quantitative analysis of a possible U.S. NAFTA withdrawal focused exclusively on agricultural markets is not yet available.", "This report looks at the potential economic effects to agricultural markets of a possible U.S. NAFTA withdrawal assuming the application of most-favored-nation (MFN) tariffs on traded agricultural products instead of the current zero tariff (i.e., duty-free trade) for selected agricultural products.", "MFN rates generally reflect the highest (most restrictive) rates that World Trade Organization (WTO) members can charge each other on imported goods and services.", "In general, the application of MFN tariffs on U.S. agricultural imports would likely raise prices both to U.S. consumers and other end users, such as manufacturers of value-added food products.", "MFN tariffs on U.S. agricultural exports would, in turn, likely make U.S. products in those markets less price-competitive and more costly to foreign buyers, which could result in reduced quantities sold.", "Given that certain agricultural products dominate U.S. trade with Canada and Mexico—such as meat products, grains and feed, and processed foods—these products could become more costly and less competitive as MFN tariffs are imposed and other trade preferences are removed under a NAFTA withdrawal.", "This could result in reduced market share for U.S. products in these markets.", "This report looks at a subset of MFN tariffs for certain products that could impact U.S. agricultural markets in the event of a possible U.S. NAFTA withdrawal." ], "parent_pair_index": [ -1, 0, 1, -1, 3, 3, -1, -1, 1, -1, 3, -1, -1, 1, -1, -1, -1, 2, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3, 3 ] }

{ "title": [ "", "Introduction", "On Whom Is the Medical Device Excise Tax Imposed?", "What Is a \"Taxable Medical Device\"?", "Medical Devices Exempted from the Excise Tax", "The Retail Exemption", "The Retail Exemption's Safe Harbor Provisions", "Examples of How the Retail Exemption Is Applied", "The Future of the Medical Device Tax", "Frequently Asked Questions About the Medical Device Excise Tax", "What is the text of the law that imposes the medical device tax?", "What is the taxable amount?", "What is the effective date for the medical device tax?", "Can the tax be imposed on a contract to purchase a medical device that was agreed to prior to January 1, 2013?", "Where do the funds that are collected go as a result of the medical device excise tax?", "Is there a complete list of taxable medical devices?", "Is there a complete list of medical devices that are not subject to the tax?", "Are there reporting requirements for entities that have to pay the tax?", "Will the medical device tax appear on a line item on a consumer receipt?", "Did HCERA, in addition to imposing a medical device tax, also impose excise taxes on other items, such as sporting equipment?", "What bills have been introduced to repeal the medical device excise tax?" ], "paragraphs": [ "", "As part of recent health care reform efforts, Congress, in t he Affordable Care Act, imposed a 2.3% excise tax on the sale of certain medical devices by device manufacturers, producers, or importers. The excise tax is effective on sales of devices made after December 31, 2012. The implementation of the medical device tax has prompted some Members of Congress to seek a delay of the enforcement of the tax out of a concern that the \"uncertainty and confusion\" regarding compliance with the medical device excise tax will harm the medical technology industry. Others in Congress have sought an outright repeal of the tax. While December 31, 2012, passed without Congress changing or repealing the medical device excise tax, congressional interest remains. On December 7, 2012, the Department of the Treasury (Treasury) issued its final regulations that provide guidance on both who must pay the excise tax and the scope of products encompassed by the excise tax. This report provides a brief overview of the regulations, discusses the extent to which the rules have clarified the excise tax imposed on the sale of medical devices, and answers frequently asked questions about the medical device tax.", "Pursuant to §4191(a) of the Internal Revenue Code (IRC), a \"manufacturer, producer, or importer\" making the sale of a taxable medical device is liable for a tax of 2.3% of the price for which the device was sold. Treasury, in the newly released regulations on the medical device excise tax, states that the \"existing chapter 32 rules,\" including the definitions for \"manufacturer,\" \"producer,\" and \"importer,\" apply with respect to the medical device excise tax. In turn, the general chapter 32 rules define the term \"manufacturer\" as \"any person who produces a taxable article ... by processing, manipulating, or changing the form of an article or by combining or assembling two or more articles.\" Moreover, the general definition for a manufacturer necessarily includes the terms \"producer\" and \"importer.\" While courts have interpreted the term \"manufacturer\" within the general chapter 32 rules to encompass a range of activities where a person physically changes a taxable article, the medical device excise tax, by definition, is not directly levied upon a consumer of a medical device.", "The medical device excise tax created by the ACA is imposed on the sale of \"taxable medical device[s].\" The statute defines that term by incorporating the definition of \"medical device\" from the Federal Food, Drug and Cosmetic Act (FFDCA), as that term pertains to a device \"intended for humans.\" Courts have recognized that Congress defined the term \"medical device\" in the FFDCA \"very broadly,\" as the Food and Drug Administration (FDA) regulates a range of devices from tongue depressors to artificial hearts. As such, the Health Care and Education Reconciliation Act of 2010 (HCERA) casts a wide net with the term \"taxable medical device.\" In line with the broad scope of the term \"taxable medical device,\" the December 7, 2012, Treasury Regulations explain that a \"taxable medical device\" is a device that has been registered with the Food and Drug Administration pursuant to Section 510(j) of the FFDCA and 21 C.F.R. Part 807. Importantly, Treasury resisted efforts by commenters to narrow the scope of the general term \"taxable medical device,\" by limiting, for example, the term to devices that could exclusively be used by humans or could only be used for a medical purpose, preferring instead to maintain a broad reading of what devices are subject to the excise tax. As a result, devices like infusion pumps, which can be used on both humans and animals, and latex gloves, which can be used for both medical and non-medical purposes, fall within the broad definition of a \"taxable medical device.\"", "In an effort to limit the ambit of the excise tax imposed on medical device manufacturers, Congress explicitly excluded three types of devices from the term \"taxable medical device\" in IRC §4191(a). Specifically, Congress exempted eyeglasses, contact lenses, and hearing aids from the excise tax. Moreover, the statute empowers the Secretary of the Treasury under the \"retail exemption\" to exempt \"any other medical device\" which is determined to be of a \"type which is generally purchased by the general public at retail for individual use\" from the 2.3% excise tax.", "The regulations issued by Treasury on December 7, 2012, provide a broad framework as to which medical devices fall within the \"retail exemption\" to the excise tax under IRC §4191(b)(2)(d). Specifically, the new Treasury regulations provide a two-prong test to resolve whether a device should fall within the residual exception to the excise tax. First, the device in question should be \"regularly available for purchase and use by individual consumers who are not medical professionals.\" Second, the device's design should \"demonstrate[] that it is not primarily intended for use\" in a medical institution, office, or by a medical professional. Neither prong is dispositive to the determination, as the regulations caution that an analysis of whether a device fits within the retail exemption is dependent on \"all\" \"relevant facts and circumstances.\"\nTo guide the analysis of whether a particular device meets the relevant requirements for the retail exemption, the new Treasury regulations provide a host of factors to examine. Factors implicating the question of whether a device is regularly available for purchase by individual consumers include (1) the ability of end consumers to purchase the device in person through a drug store or other retailer that primarily sells a particular device; (2) the need of a consumer to seek help from a medical professional to use the device safely and effectively; and (3) whether the device has been classified by the Food and Drug Administration as a \"physical medicine device\" for human use. To illustrate, with respect to adhesive bandages, an application of the multi-factor test would conclude that the device is regularly available for purchase by individual consumers. Specifically, while adhesive bandages are not a \"physical medicine device,\" the product can be readily purchased at various retail stores and can be properly used without formal training from a medical professional.\nTreasury also issued a list of factors to aid the determination of whether a device is designed primarily for use in a medical institution or office or by a medical professional. Relevant factors include (1) whether the device must be implanted, inserted, operated, or administered by a medical professional; (2) the cost of obtaining and using the device; (3) how the device has been classified by the FDA; and (4) whether the device is one for which payment is available \"exclusively on a rental basis\" and is an item requiring \"frequent and substantial servicing\" as those terms are defined under Medicare Part B payment rules. Returning to the example of adhesive bandages, the multi-factor test counsels that the product is not primarily intended for use in a medical institution, office, or by a medical professional. Specifically, using adhesive bandages does not require the aid of a medical professional, and bandages are inexpensive to obtain and use. Moreover, adhesive bandages are not classified as a complex medical device or a device needing frequent and substantial servicing. Coupled with the earlier conclusion that adhesive bandages are regularly available for purchase by individual consumers, the totality of the circumstances indicates that \"adhesive bandages are devices that are of a type that\" should fall within the retail exemption to the medical device excise tax.\nNotably, Treasury explained in issuing the medical device excise tax regulations that two potential factors—the packaging or labeling of a medical device and the nature of documents submitted to the FDA in obtaining approval of a device—are irrelevant in assessing whether a device should fall within the retail exemption to the excise tax. As a consequence, a medical device manufacturer cannot hope to escape the excise tax, for example, by labeling that its product is \"intended for retail use only.\"", "In contrast to the malleable multi-factor test that outlines the limits to the retail exemption, the December 7, 2012, Treasury regulations also include a list of \"safe harbor\" devices that necessarily fall within the retail exemption. The purpose of the safe harbor provisions is to \"provide greater certainty\" with respect to which devices are subject to the retail exemption. The safe harbor includes medical devices, like pregnancy test kits, that are described as \"over-the-counter\" (OTC) devices in the FDA's online database for in vitro diagnostic tests, the FDA's classification regulations, or the FDA's device registration and listing database. In addition, the safe harbor includes certain devices that qualify as \"durable medical equipment, prosthetics, orthotics, and supplies\" for which payment is available on a purchase basis under Medicare part B payment rules, such as therapeutic shoes.", "The Treasury regulations conclude by providing 15 different examples of how the retail exemption to the medical device excise tax would be applied in practice. The examples range from the aforementioned \"adhesive bandages\" to \"blood glucose monitors\" to \"magnetic resonance systems.\" Examples of devices that Treasury concludes \"based on the totality of the facts and circumstances\" fall within the retail exemption include \"absorbent tipped applicators,\" \"adhesive bandages,\" \"snake bite suction kits,\" \"denture adhesives,\" \"mechanical and powered wheelchairs,\" \"portable oxygen concentrators,\" and \"therapeutic AC powered adjustable home use beds.\" Treasury also concludes that \"pregnancy test kits,\" \"blood glucose monitors, test strips, and lancets,\" \"prosthetic legs and certain prosthetic leg components,\" and \"urinary ileostomy bags\" fall within the regulations' safe harbor provisions. In contrast, Treasury, in its examples, finds that the following devices, based on the totality of the circumstances, are not exempt from the medical device excise tax: \"mobile x-ray systems,\" \"nonabsorbable silk sutures,\" \"nuclear magnetic resonance imaging systems,\" and \"powered floatation therapy beds.\"", "Whether the new Treasury regulations provide the needed clarity to alleviate the \"uncertainty and confusion\" that some Members of Congress have feared that the new tax would engender within the medical technology industry remains to be seen. To be sure, the medical device tax regulations, with their safe harbor provisions, clarify that generally devices recognized as over-the-counter devices will not be the subject of the tax, providing an easy to understand exemption to manufacturers, importers, and producers of such products. However, the safe harbor provisions are narrow, and the regulations open-ended two-part test defining the limits of the retail exemption, while providing flexibility as to the scope of the exemption, naturally creates ambiguity with respect to which products are exposed to the excise tax, save those specifically exempted under the regulations. Moreover, the limits of the retail exemption, which are based, in part, on regulations that were not crafted with the retail exemption in mind, could prove to be either over or under inclusive of Congress's original intent in enacting the medical device excise tax. Treasury, in the release of the final regulations, identified several issues raised by the medical device tax regulations that warranted the agency issuing separate clarifying guidance, including the treatment, for purposes of the medical device excise tax, of licensing software and \"kits.\" Given the wide variety of items that are categorized as medical devices, some may see a need for further clarification with respect to other medical devices, including potentially expanding the safe harbor provisions. As a result, the December 7, 2012, regulations could be only the first step in clarifying the application of a tax that the Treasury Department acknowledges \"may present certain implementation challenges.\"\nMoreover, looming over all the questions about the implementation and enforcement of the medical device tax is whether Congress will repeal the tax. On March 21, 2013, the Senate voted 79-20 on an amendment to the Senate's 2014 budget to repeal the medical device excise tax. Nonetheless, in 2012 the White House threatened to veto a repeal of the medical device tax, and in the wake of recent debates over the federal budget, the majority leader of the Senate expressed doubts with respect to the likelihood of an outright repeal of the tax. In short, the future of the medical device tax is at best uncertain.", "", "The excise tax on medical devices has been codified in the United States Code in section 4191 of Internal Revenue Code. That section reads:\n(a) In general. There is hereby imposed on the sale of any taxable medical device by the manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which so sold. (b) Taxable medical device. For purposes of this section— (1) In general. The term \"taxable medical device\" means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans. (2) Exemptions. Such term shall not include— (A) eyeglasses, (B) contact lenses, (C) hearing aids, and (D) any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use.", "The tax is 2.3 percent of the price for which a manufacturer, producer, or importer sold the taxable medical device.", "The medical device tax applies to sales made after December 31, 2012.", "The regulations provide some transition relief with respect to certain long-term contracts. Specifically, payments made on or after January 1, 2013 for contracts entered into before March 30, 2010 are not subject to the medical device excise tax unless the contract was materially modified on or after March 30, 2010.", "The funds from the medical device tax go into the general treasury. The law that created the medical device excise tax, HCERA, did not contain any language regarding the disposition of the funds collected from the tax. Without any specific overriding language governing with respect to the disposition of the funds, the Miscellaneous Receipts Statute would control. That statute provides that generally \"an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim.\" As such, without any other authorization, the Internal Revenue Service, upon collecting the medical device tax, must deposit all funds received in the general fund of the Treasury as a miscellaneous receipt.", "The medical device tax is imposed on manufacturers, producers, or importers of a medical device that is intended for humans. The Treasury's regulations interpret such medical devices as those that are listed with the FDA under section 510(j) of the FFDCA and 21 CFR part 807. This list is quite broad and open-ended, and, as such, the tax applies generally to all devices intended for humans subject to certain exemptions and exclusions, such as the retail exemption.", "The statute imposing the medical device tax lists three specific devices that are not subject to the tax: eyeglasses, contact lenses, and hearing aids. The statute also exempts \"any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use.\" Treasury regulations have provided examples of devices that would generally fall into the open-ended retail exemption. Examples that Treasury has provided with respect to devices that are exempt from the tax are: absorbent tipped applicators, adhesive bandages, snake bite suction kits, denture adhesives, pregnancy test kits, blood glucose monitors, test strips, and lancets, prosthetic legs, endoskeletal shin systems, mechanical and powered wheelchairs, portable oxygen concentrators, urinary ileostomy bags, and powered adjustable home use beds. In addition, the FDA has provided a list of certain \"safe harbor\" items that fall within the retail exemption. Nonetheless, because of the malleable nature of the retail exemption, there is no complete list of medical devices that are not subject to the excise tax.", "Just as with other excise taxes, in order to report the tax liability to the government and pay the tax, those that are required to pay the medical device tax generally must file a quarterly return with the Internal Revenue Service using form 720. In addition, section 40.6302(c)-1(a) of the Excise Tax Procedural Regulations generally requires entities that are liable for excise taxes to make semimonthly deposits of tax during the period in which the tax liability is incurred. Generally under section 6656 of the Internal Revenue Code, failure to deposit the requisite tax subjects delinquent taxpayers to certain penalties. However, the Internal Revenue Service has waived such penalties for the first three quarters of 2013.", "The medical device tax does not regulate what can or cannot appear on a consumer receipt for a medical device. Nonetheless, because of the retail exemption to the medical device tax, it would be unlikely for the medical device tax to be imposed on a good that is sold to the general public at retail. In recent months, customers of the sporting goods chain Cabela's have circulated images of a receipt indicating that the company was imposing an additional charge on customer receipts for a \"medical excise tax.\" The charge imposed by Cabela's was reportedly the result of a software glitch and was not the product of any mandate imposed by HCERA's imposition of the medical device excise tax.", "E-mails have been circulated suggesting that HCERA also imposed excise taxes on hunting and fishing equipment, gas guzzler automobiles, vaccines, tires, and coal. HCERA imposed two main excise taxes, the medical device excise tax and, beginning in 2018, a forty percent excise tax on the value of health insurance benefits exceeding a certain threshold. These excise taxes were added to the list of excise taxes that already existed under subtitle D of the Internal Revenue Code. The origins of several of the excise taxes that have been confused for originating in HCERA are summarized in Table 1 .", "Table 2 contains a list of major bills and resolutions in the 112 th and 113 th Congresses to fully repeal the medical device excise tax." ], "depth": [ 0, 1, 1, 1, 1, 2, 2, 2, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h1_title", "h1_full", "", "h0_full", "h1_title", "h1_full", "h1_full", "", "h0_full", "h0_title h1_title", "", "", "", "h0_full", "", "", "h1_full", "", "", "", "" ] }

{ "question": [ "How was the medical device excise tax regulated after creation?", "How did the new regulations compare to the timeline of the excise tax?", "What does this report cover?", "What was the purpose of the new regulations?", "How did the regulations apply to retail medical devices?", "How did the regulations intend to provide certainty and flexibility?", "How do the regulations intend to provide flexibility?", "How do the regulations intend to provide certainty?" ], "summary": [ "On December 7, 2012, the Department of the Treasury and the Internal Revenue Service issued final regulations explaining the scope of the medical device excise tax created by the Health Care and Education Reconciliation Act of 2010 (HCERA), which modified the Patient Protection and Affordable Care Act of 2010.", "The new regulations were issued less than a month before the 2.3% excise tax took effect on January 1, 2013.", "This report provides a brief overview of the recently enacted Treasury regulations, analyzes the legal implications of the regulations, and answers frequently asked questions about the medical device tax.", "Furthermore, the regulations attempt to clarify the limits to the medical device excise tax.", "Beyond the statutory exemptions created for eyeglasses, contact lenses, and hearing aids, the law created a \"retail exemption\" to the excise tax, excluding from the tax medical devices that are \"generally purchased by the general public at retail for individual use.\"", "The Treasury regulations attempt to simultaneously provide certainty to potential taxpayers as to which devices are subject to the retail exemption, while allowing the government the flexibility to properly apply the retail exemption to the variety of devices that could be exposed to the excise tax.", "The regulations provide a flexible two-prong test to determine whether a device should fall within the retail exemption, applying the exemption when the device is (1) regularly available for purchase by non-professional consumers and (2) not primarily intended for use by medical professionals. The regulations provide several factors to consider when applying the two-prong test.", "To provide some certainty to the scope of the retail exemption, the regulations also included several \"safe harbor\" provisions, explicitly acknowledging that certain devices, such as \"over-the-counter\" devices, fall within the retail exemption." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 2, 2 ], "summary_paragraph_index": [ 0, 0, 0, 2, 2, 2, 2, 2 ] }

{ "title": [ "", "FY2019 Consideration: Overview of Actions", "Status of FY2019 Appropriations: Dates and Documents", "Submission of FY2019 Budget Request on February 12, 2018", "Timing of the FY2019 Budget Submission Prior to the Enactment of FY2018 Funding: Implications", "Senate and House Hearings on the FY2019 Budget Requests", "House Appropriations Committee Subcommittee on the Legislative Branch Markup", "House Appropriations Committee Legislative Branch Markup", "House Consideration of a Special Rule", "House Floor Consideration and Passage", "Senate Appropriations Committee Legislative Branch Markup and Reporting", "Senate Floor Consideration and Passage", "Conference Report Agreed to and Enactment of Funding Law", "Funding in Prior Years: Brief Overview and Trends", "Legislative Branch: Historic Percentage of Total Discretionary Budget Authority", "FY2018", "FY2017", "FY2016", "FY2015", "FY2014", "FY2013", "FY2012 and Prior", "FY2019 Legislative Branch Funding Issues", "Senate", "Overall Funding", "Senate Committee Funding", "Senators' Official Personnel and Office Expense Account15", "Administrative Provisions", "House of Representatives", "Overall Funding", "House Committee Funding", "Tom Lantos Human Rights Commission", "Members' Representational Allowance20", "Administrative Provisions", "Support Agency Funding", "U.S. Capitol Police (USCP)", "Office of Compliance", "Congressional Budget Office (CBO)", "Administrative Provisions", "Architect of the Capitol (AOC)", "Administrative Provisions", "Library of Congress (LOC)", "Administrative Provisions", "Government Publishing Office (GPO)29", "Government Accountability Office (GAO)", "Open World Leadership Center", "John C. Stennis Center for Public Service Training and Development", "General Provisions", "Introduction to Summary Tables and Appendix", "Appendix. Fiscal Year Information and Resources" ], "paragraphs": [ "", "The first section of this report provides an overview of the consideration of FY2019 legislative branch appropriations, with subsections covering each action to date, including\nthe initial submission of the request on February 12, 2018; hearings held by the House Legislative Branch Subcommittee in April 2018 and hearings held by the Senate Legislative Branch Subcommittee in April and May 2018; House subcommittee markup held on April 26, 2018; House full committee markup on May 8, 2018; the May 24, 2018, inclusion of a modified text of the legislative branch bill ( H.R. 5894 ) in a print issued by the House Rules Committee; meetings of the House Rules Committee on June 5 and 6, 2018, to consider rules providing for the consideration of H.R. 5895 , which included legislative branch funding as Division B; House consideration of a special rule for H.R. 5895 on June 6, 2018, and consideration of a special rule for further consideration for H.R. 5895 on June 7, 2018; House floor consideration of H.R. 5895 on June 7 and 8, 2018, followed by House passage on June 8, 2018; Senate full committee markup and reporting of its version of the legislative branch appropriations bill ( S. 3071 ) on June 14, 2018; Senate consideration of H.R. 5895 , beginning June 18, 2018, and the agreement to S.Amdt. 2910 , an amendment in the nature of a substitute, on June 18, 2018, followed by Senate passage of H.R. 5895 , as amended, on June 25, 2018; and conference report ( H.Rept. 115-929 ) agreed to by the Senate on September 12, 2018, by the House on September 13, 2018, and signed into law on September 21, 2018 ( P.L. 115-244 ; the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019).\nIt is followed by a section on prior year actions and funding, which contains a historical table and figure.\nThe report then provides an overview of the FY2019 budget requests of individual legislative branch agencies and entities.\nTable 5 through Table 9 list enacted funding levels for FY2018 and the requested and House-passed, Senate-passed, and enacted levels for FY2019, while the Appendix lists House, Senate, and conference bills and reports; public law numbers; and enactment dates since FY1998.", "", "The Budget for Fiscal Year 2019 was submitted on February 12, 2018. It contains a request for $4.960 billion in new budget authority for legislative branch activities. By law, the legislative branch request is submitted to the President and included in the budget without change.", "In general, FY2019 legislative branch budget requests had already been developed and submitted to the Office of Management and Budget (OMB) prior to the enactment of full-year funding for FY2018, which occurred on March 23, 2018.\nAccounts in the Budget therefore include the following disclaimer:\nNote.—A full-year 2018 appropriation for this account was not enacted at the time the budget was prepared; therefore, the budget assumes this account is operating under the Continuing Appropriations Act, 2018 (Division D of P.L. 115–56, as amended). The amounts included for 2018 reflect the annualized level provided by the continuing resolution.\nAgency assessments for FY2019 may subsequently have been revised following the enactment of the FY2018 Consolidated Appropriations Act—for example, to account for items funded or not funded in that act. Subsequent discussions may vary from the levels or language included in the budget request due to this timing. For purposes of this report, however, FY2019 requested levels refer to the requested levels originally submitted unless otherwise noted.", "Table 2 lists the dates of hearings of the legislative branch subcommittees in April and May 2018. Prepared statements of witnesses were posted on the subcommittee websites.", "On April 26, 2018, the House Appropriations Committee Subcommittee on the Legislative Branch held a markup of the FY2019 bill. The subcommittee recommended $3.811 billion, a $133 million increase (+3.6%) from the comparable 2018 enacted level, not including Senate items, which are historically considered by the Senate and not included in the House bill.\nNo amendments were offered.", "On May 8, 2018, the House Appropriations Committee met to mark up the FY2019 bill reported from its legislative branch subcommittee. The following amendments were considered:\na manager's amendment, offered by Chairman Yoder of Kansas, which was agreed to by voice vote, with technical and other changes, including (1) the repeal of authorizations for office space, office expenses, franking and printing privileges, and staff for former Speakers of the House; and (2) directing the Chief Administrative Officer (CAO) to hire an external contractor to conduct a House employee salary study; an amendment offered by Representative Wasserman Schultz of Florida, related to the House historical buildings revitalization trust fund, which was not agreed to; and an amendment offered by Representative Kilmer of Washington and Representative Cuellar of Texas, containing language expressing the sense of Congress that the Comptroller General should present an annual report on the fiscal state of the nation, which was withdrawn.\nThe bill, as amended, was reported out of committee by roll call vote of 47-0 ( H.R. 5894 , H.Rept. 115-696 ).", "On May 24, 2018, the text of H.R. 5894 was included in a print issued by the House Rules Committee entitled \"Text of Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act 2019\" (Committee Print 115-71, which also contained the text of H.R. 5895 and H.R. 5786 along with modifications). An announcement regarding the amendment process was issued.\nThe House Rules Committee met on June 5 and 6, 2018, to consider a special rule for the consideration of H.R. 5895 , which included legislative branch funding as Division B. The House Rules Committee met to consider a special rule providing for the further consideration of H.R. 5895 on June 7, 2018. A total of 33 proposed amendments to the legislative branch section of the bill were considered by the committee (including 9 that the committee considered late or late revised and 2 that were withdrawn). Seven amendments to Division B were made in order under the rule reported by the House Rules Committee ( H.Res. 918 , amendments printed in H.Rept. 115-712 ).\nH.Res. 918 was agreed to in the House on June 6, 2018 (223-175, Roll N o. 235 ; see also H.Res. 923 ).", "The House proceeded to consideration of H.R. 5895 on June 7, 2018, and continued consideration on June 8. Of the seven amendments to Division B made in order by H.Res. 918 , six were offered and four were agreed to:\nH.Amdt. 758 , agreed to by voice vote, increasing funding for the House Wounded Warrior Program by $250,000 (offset by a decrease in funding for the AOC's Capital Construction and Operations account); H.Amdt. 759 , agreed to by voice vote, increasing funding for the House Office of Employee Assistance by $500,000 (offset by a decrease in funding from the AOC's Capitol Grounds account); H.Amdt. 760 , agreed to by roll-call vote ( Roll No. 254 ), reestablishing a semiannual GAO financial review of obligated expenditures from the Independent Counsel; and H.Amdt. 762 , agreed to by voice vote, prohibiting funds made available in the bill from being used to purchase plastic drinking straws.\nH.R. 5895 was passed in the House on June 8, 2018, by a vote of 212-179 ( Roll N o. 257 ).", "On June 14, 2018, the Senate Appropriations Committee met to mark up its version of the FY2019 bill. One amendment was agreed to via unanimous consent related to providing funds to pay interns in Senators' offices.\nThe committee recommended $3.367 billion, a $55.5 million increase from the FY2018 enacted level (+1.7%). This total does not include funding for House items, which are historically considered by the House. One amendment was offered as part of a manager's package, which was agreed to by unanimous consent, and the bill was ordered reported ( S. 3071 , S.Rept. 115-274 ).", "The Senate began its consideration of FY2019 legislative branch appropriations on June 18, 2018, as part of a \"minibus\" appropriations package that also included the text of the energy and water and military construction and veterans affairs appropriations bills. An amendment in the nature of a substitute ( S.Amdt. 2910 ) was made to the related House-passed appropriations bill ( H.R. 5895 ). Four amendments addressing the legislative branch portion of the bill were agreed to:\nS.Amdt. 2953 , designating $250,000 for the Library of Congress's Surplus Books Program to promote the program and donations for it; S.Amdt. 3051 , designating $2,383,000 for the Library of Congress's Veterans History Project to continue digitization efforts for its collections, engage in outreach with veterans, and promote public access to the project; S.Amdt. 3053 , designating a maximum of $5,000 for the Architect of the Capitol to spend working with contractors to eliminate or reduce the use of plastic drinking straws in facilities under the Architect's care; and S.Amdt. 3057 , requiring that the Congressional Budget Office use at least $500,000 to improve the transparency of budgetary effects scoring and improve the availability and replicability of models and data.\nH.R. 5895 , as amended, was passed in the Senate on June 25, 2018, by a vote of 86-5 (Rollcall Vote No. 139 Leg.).", "On September 10, 2018, a conference report ( H.Rept. 115-929 ) was filed on H.R. 5895 , the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019.\nThe conference report was agreed to in the Senate on September 12 (92-5, Record Vote Number 207) and in the House the following day (377-20, Roll No. 399).\nThe President signed the bill on September 21 ( P.L. 115-244 ). It provides $4.836 billion for the legislative branch for FY2019 (Division B).\nThe FY2019 funding level represents an increase of $136.0 million (+2.9%) from the FY2018 level.", "", "The percentage of total discretionary budget authority provided to the legislative branch has remained relatively stable at approximately 0.4% since at least FY1976. The maximum level, 0.48%, was in FY1995, and the minimum, 0.31%, was in FY2009.", "FY2018 funding was provided in Division I of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), which was enacted on March 23, 2018. The $4.700 billion provided by the act represented an increase of $260.0 million (+5.9%) from the FY2017 enacted level.\nIn addition, P.L. 115-123 , enacted February 9, 2018, provided $14.0 million to the Government Accountability Office \"for audits and investigations relating to Hurricanes Harvey, Irma, and Maria and the 2017 wildfires.\" (Title IX of Division B)", "FY2017 funding was provided in Division I of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which was enacted on May 5, 2017. The $4.440 billion provided by the act represented a $77.0 million increase (+1.7%) from the FY2016 enacted level.", "FY2016 funding was provided in Division I of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which was enacted on December 18, 2015. The $4.363 billion provided by the act represented a $63.0 million increase (+1.5%) from the FY2015 enacted level.", "FY2015 funding was provided in Division H of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), which was enacted on December 16, 2014. The $4.300 billion provided by the act represented an increase of $41.7 million (+1.0%) from FY2014.", "Neither a legislative branch appropriations bill nor a continuing appropriations resolution (CR) containing FY2014 funding was enacted prior to the beginning of the fiscal year on October 1, 2013. A funding gap, which resulted in a partial government shutdown, ensued for 16 days. The funding gap was terminated by the enactment of a CR ( P.L. 113-46 ) on October 17, 2013. The CR provided funding through January 15, 2014. Following enactment of a temporary continuing resolution on January 15, 2014 ( P.L. 113-73 ), a consolidated appropriations bill was enacted on January 17 ( P.L. 113-76 ), providing $4.259 billion for the legislative branch for FY2014.", "FY2013 funding of approximately $4.061 billion was provided by P.L. 113-6 , which was signed into law on March 26, 2013. The act funded legislative branch accounts at the FY2012 enacted level, with some exceptions (also known as \"anomalies\"), not including across-the-board rescissions required by Section 3004 of P.L. 113-6 . Section 3004 was intended to eliminate any amount by which the new budget authority provided in the act exceeded the FY2013 discretionary spending limits in Section 251(c)(2) of the Balanced Budget and Emergency Deficit Control Act, as amended by the Budget Control Act of 2011 ( P.L. 112-25 ) and the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). Subsequent to the enactment of P.L. 113-6 , OMB calculated that additional rescissions of 0.032% of security budget authority and 0.2% of nonsecurity budget authority would be required. The act did not alter the sequestration reductions implemented on March 1, which reduced most legislative branch accounts by 5.0%. The accompanying OMB report indicated a dollar amount of budget authority to be canceled in each account containing nonexempt funds.", "Division G of the FY2012 Consolidated Appropriations Act ( P.L. 112-74 ) provided $4.307 billion for the legislative branch. This level was $236.9 million below (-5.2%) the FY2011 enacted level. P.L. 112-10 provided $4.543 billion for legislative branch operations in FY2011. This level represented a $125.1 million decrease from the $4.668 billion provided in the FY2010 Legislative Branch Appropriations Act ( P.L. 111-68 ) and the FY2010 Supplemental Appropriations Act ( P.L. 111-212 ). The FY2009 Omnibus Appropriations Act provided $4.402 billion. In FY2009, an additional $25.0 million was provided for the Government Accountability Office (GAO) in the American Recovery and Reinvestment Act of 2009. P.L. 111-32 , the FY2009 Supplemental Appropriations Act, also contained funding for a new Capitol Police radio system ($71.6 million) and additional funding for the Congressional Budget Office (CBO) ($2.0 million).\nAs seen in Table 3 , legislative branch funding decreased each year from FY2010 through FY2013. Funding did not exceed the FY2010 level until FY2018 (+0.7% in current dollars).\nFigure 1 shows the same information graphically, while also demonstrating the division of budget authority across the legislative branch in FY2018.\nFigure 2 shows the timing of legislative branch appropriations actions, including the issuance of House and Senate reports, bill passage, and enactment, from FY1996 through FY2019. It shows that fiscal year funding for the legislative branch has been determined\non or before October 1 six times during this period (FY1997, FY2000, FY2004, FY2006, FY2010, and FY2019); twice during the first month of the fiscal year (FY1998 and FY1999); twice in November (FY1996 and FY2002); six times in December (FY2001, FY2005, FY2008, FY2012, FY2015, and FY2016); and eight times in the next calendar year (FY2003, FY2007, FY2009, FY2011, FY2013, FY2014, FY2017, and FY2018).\nFY2017 funding, enacted on May 5, 2017, represented the latest date of enactment during this period.\nFY2019 funding, enacted on September 21, was the first time funding had been enacted at or before the start of the fiscal year since the enactment of FY2010 funding.", "The following sections discuss the various legislative branch accounts.\nDuring consideration of the legislative branch bills, the House and Senate conform to a \"longstanding practice under which each body of Congress determines its own housekeeping requirements and the other concurs without intervention.\"\nAs stated above, FY2019 legislative branch budget requests were generally developed and submitted to OMB prior to the determination of FY2018 funding, which was enacted on March 23, 2018.", "", "The Senate requested $990.1 million for FY2019, a 7.6% increase over the $919.9 million provided in FY2018. The Senate-passed bill ( H.R. 5895 , as amended) would have provided $933.5 million, a $13.5 million increase from the FY2018 enacted level (+1.5%). The FY2019 law provided $934.8 million for the Senate, a $14.9 million increase from the FY2018 enacted level (+1.6%).\nAdditional information on the Senate account is presented in Table 6 .", "Appropriations for Senate committees are contained in two accounts.\nThe inquiries and investigations account contains funds for all Senate committees except Appropriations. The Senate requested $135.8 million, an increase of $2.5 million (+1.9%) from the $133.3 million provided in FY2018. The Senate-passed bill and FY2019 act continued the FY2018 level. The Committee on Appropriations account contains funds for the Senate Appropriations Committee. The Senate-requested level of $15.5 million, which was provided in the FY2019 act, represents an increase of $354,000 (+2.3%) from the $15.1 million provided each year since FY2015.", "The Senators' Official Personnel and Office Expense Account (SOPOEA) provides each Senator with funds to administer an office. It consists of an administrative and clerical assistance allowance, a legislative assistance allowance, and an official office expense allowance. The funds may be used for any category of expenses, subject to limitations on official mail.\nThe Senate requested $474.6 million, $50.6 million above (+11.9%) the $424.0 million provided in FY2018. The FY2019 Senate-passed and enacted level of $429.0 million represents an increase of $5 million (+1.2%). The $5 million was added by an amendment at the Senate Appropriations Committee markup for the purpose of providing compensation to interns working in Senators' offices.", "The Senate-passed bill contained the following three administrative provisions:\n1. One provision, which was first included in FY2016, would require amounts remaining in the Senators' Official Personnel and Expense Account (SOPOEA) to be used for deficit reduction or to reduce the federal debt. 2. One provision would continue the freeze on Member salaries at the 2009 level. Member salaries are funded in a permanent appropriations account, and the legislative branch bill does not contain language funding or increasing Member pay. A provision prohibiting the automatic Member pay adjustments could be included in any bill, or be introduced as a separate bill. 3. One provision would amend the Federal Election Campaign Act of 1971 to require all designations, statements, and reports required to be filed under the act to be filed directly with the Federal Election Commission (FEC).\nThe SOPOEA and FEC provisions were included in the FY2019 act as administrative provisions, along with a provision extending an authorization for committee expenditures. The provision freezing Member salaries was included in the act as a general provision (§212).\nThe conference report also provided for two studies regarding Senate administrative operations. First, the Government Accountability Office (GAO) was directed to review the current operations of the Senate Employees' Child Care Center (SECCC). Second, the Secretary of the Senate was directed to carry out a study of salaries and benefits for Senate personal office and committee staff.", "", "The House requested $1.257 billion for FY2019, a 4.7% increase from the FY2018 enacted level of $1.199 billion. The House-passed bill and the act included $1.233 billion, an increase of $32.7 million (+2.7%) over FY2018.\nAdditional information on headings in the House of Representatives account is presented in Table 7 .", "Funding for House committees is contained in the appropriation heading \"committee employees,\" which typically comprises two subheadings.\nThe first subheading contains funds for personnel and nonpersonnel expenses of House committees, except the Appropriations Committee, as authorized by the House in a committee expense resolution. The House requested $126.9 million (-0.1%), a slight decrease from the FY2018 and FY2017 enacted level and an increase of 2.4% from the level provided in FY2014, FY2015, and FY2016. The House-passed and enacted level of $127.9 million provides an increase of $850,000 (+0.7%) over the level provided in FY2018 and FY2017.\nThe second subheading contained funds for the personnel and nonpersonnel expenses of the Committee on Appropriations. The House-passed and enacted level is $23.1 million (-0.5%), a slight decrease from the level provided in FY2017 and FY2018.", "The House-reported version of H.R. 5894 would have provided $230,000 for FY2019 for the Tom Lantos Human Rights Commission. The commission was established in the 110 th Congress ( H.Res. 1451 , agreed to September 24, 2008) and continued in the House rules packages adopted for subsequent Congresses. Following a point of order during consideration of H.R. 5895 in the House, this funding provision was not included in the FY2019 House-passed bill or in the act.", "The Members' Representational Allowance (MRA) is available to support Members in their official and representational duties.\nThe House-requested level of $573.6 million, also included in the House-passed bill and the act, represents an increase of $10.998 million (+2.0%) from the level provided in FY2017 and FY2018.", "The House requested the continuation of several administrative provisions from prior years related to\n1. unexpended balances from the MRA; 2. limiting amounts available from the MRA for leased vehicles; and 3. limiting or prohibiting the delivery of copies of bills and resolutions, the Congressional Record , the U.S. Code , the Statement of Disbursements , the Daily Calendar , and the Congressional Pictorial Directory .\nThe House-passed bill contained these provisions, as well as additional administrative provisions related to\n1. repealing the authorizations for former Speakers' office space, office expenses, franking and printing privileges, and staff; 2. prohibiting a cost-of-living adjustment to the salaries of Members of Congress in FY2019; and 3. authorizing transfer authority among House leadership offices.\nAll of these provisions were included in the act, along with an administrative provision establishing an allowance for interns in Member offices (up to $20,000 per office during any calendar year; $8.8 million was provided in the FY2019 act). The provision freezing Member salaries was included in the act as a general provision (§212).\nAnother requested provision, amending the House Services Revolving Fund to allow for the collection of a fee from vendors for failure to abide by and maintain House security policies, had previously been included in the FY2018 Consolidated Appropriations Act.\nThe House also requested additional administrative provisions that were not included in the House-passed or the enacted versions of the bill\nlimiting or prohibiting the delivery of copies of the President's budget and the Federal Register ; and relating to the provision of cybersecurity assistance to the House by other federal entities.", "", "The U.S. Capitol Police (USCP) are responsible for the security of the Capitol Complex, including, for example, the U.S. Capitol, the House and Senate office buildings, the U.S. Botanic Garden, and the Library of Congress buildings and adjacent grounds.\nThe FY2018 level was $426.5 million. In comparison, levels considered for FY2019 include the following:\nrequested: $456.4 million (+7.0%) House-passed: $456.4 million (+7.0%) Senate-passed: $453.0 million (+6.2%) enacted: $456.3 million (+7.0%)\nAdditional information on the USCP is presented in Table 8 .\nAppropriations for the police are contained in two accounts—a salaries account and a general expenses account.\n1. Salaries—the Capitol Police requested, and the House-passed bill and FY2019 act included, $374.8 million for salaries, an increase of $23.1 million (+6.6%) from the $351.7 million provided in FY2018. The Senate-passed bill would have provided $371.5 million, an increase of $19.8 million (+5.6%) from the FY2018 level. 2. General Expenses—the Capitol Police requested, and the House- and Senate-passed bills would have provided, $81.55 million for general expenses, an increase of $6.75 million (+9.0%) from the $74.8 million provided in FY2018. The FY2019 act provides $81.50 million, an increase of $6.70 million (+8.96%).\nAnother appropriation relating to the Capitol Police appears within the Architect of the Capitol account for Capitol Police buildings and grounds. The FY2018 level was $34.2 million. In comparison, levels considered for FY2019 include the following:\nrequested: $59.3 million (+73.2%) House-passed: $52.5 million (+53.4%) Senate-passed: $54.7 million (+59.7%) enacted: $57.7 million (+68.5%)", "The Office of Compliance is an independent and nonpartisan agency within the legislative branch. It was established to administer and enforce the Congressional Accountability Act, which was enacted in 1995. The act applies various employment and workplace safety laws to Congress and certain legislative branch entities.\nThe Office of Compliance requested $4.6 million for FY2019, $406,000 (-8.2%) less than the FY2018 enacted level. As with all legislative branch requests, however, the Office of Compliance request was developed prior to the enactment of the FY2018 Consolidated Appropriations Act. The FY2018 act provided $4.96 million, an increase of $1.0 million (+25.3%) from the $3.96 million provided each year since FY2015. The increased funding followed heightened attention beginning in late 2017 to sexual harassment policies in Congress and discussions related to potential future changes to the Congressional Accountability Act.\nThe House-passed bill would have provided $5.4 million (+9.1%). The Senate-passed level of $6.3 million (+27.7%) was included in the FY2019 act.", "CBO is a nonpartisan congressional agency created to provide objective economic and budgetary analysis to Congress. CBO cost estimates are required for any measure reported by a regular or conference committee that may affect revenues or expenditures.\nThe FY2018 level was $49.95 million. In comparison, levels considered for FY2019 include the following:\nrequested: $50.7 million (+1.6%) House-passed: $50.7 million (+1.6%) Senate-passed: $50.3 million (+0.7%) enacted: $50.7 million (+1.6%)\nThe FY2019 act also states that the Director shall use not less than $500,000 to increase transparency of estimates and increase the availability of models, economic assumptions, and data (see also S.Amdt. 3057 ).", "CBO requested two administrative provisions, which would\n1. apply certain provisions of the Federal Acquisition Regulation (FAR) to CBO, which were enacted in the FY2018 Consolidated Appropriations Act, but included in the FY2019 budget request due to timing; and 2. authorize CBO to reimburse new employees for relocation expenses.\nThe House-passed bill included the relocation expense reimbursement language. The Senate-passed bill and the FY2019 act did not include either provision.", "The Architect of the Capitol (AOC) is responsible for the maintenance, operation, development, and preservation of the U.S. Capitol Complex, which includes the Capitol and its grounds, House and Senate office buildings, Library of Congress buildings and grounds, Capitol Power Plant, Botanic Garden, Capitol Visitor Center, and Capitol Police buildings and grounds. The Architect is responsible for the Supreme Court buildings and grounds, but appropriations for their expenses are not contained in the legislative branch appropriations bill.\nThe FY2018 level was $712.1 million. In comparison, levels considered for FY2019 include the following:\nrequested: $768.4 million (+7.9%) House-passed: $721.8 million (+1.4%) Senate-passed: $701.1 million (-1.5%) enacted: $733.7 million (+3.0%)\nOperations of the Architect are funded in the following 10 accounts: capital construction and operations, Capitol building, Capitol grounds, Senate office buildings, House office buildings, Capitol Power Plant, Library buildings and grounds, Capitol Police buildings and grounds, Capitol Visitor Center, and Botanic Garden. Additional funding information on the individual AOC accounts is presented in Table 9 .", "The AOC also requested four administrative provisions:\n1. a provision prohibiting the use of funds for bonuses for contractors behind schedule or over budget, first included in appropriations acts in FY2015; 2. a provision prohibiting scrims containing photographs of building facades during restoration or construction projects performed by the Architect of the Capitol, first included in FY2015; 3. a provision related to AOC's small purchase contracting authority, which would increase the threshold from $100,000 to $150,000; and 4. a provision amending authority related to AOC's Office of Security Programs, including interagency transfers of appropriations.\nThe House-passed bill contained these four provisions, with a modification to the small purchase contracting authority that would raise the threshold from $100,000 to $250,000. The House-passed bill also contained two other administrative provisions:\n1. a provision that would authorize the AOC to enter into a joint agency agreement to provide for interagency employee detailees; and 2. a provision that would permit the AOC to accept payment on the office's behalf from nonfederal sources for travel and related expenses for meetings related to employees' duties.\nThe Senate-passed bill contained the first two administrative provisions requested by the AOC, pertaining to the use of funds for bonuses and the prohibition of scrims.\nThe FY2019 act contained all six of these administrative provisions.", "The Library of Congress serves simultaneously as Congress's parliamentary library and the de facto national library of the United States. Its broader services to the nation include the acquisition, maintenance, and preservation of a collection of more than 164 million items in various formats; hosting nearly 1.8 million visitors annually; service to the general public and scholarly and library communities; administration of U.S. copyright laws by its Copyright Office; and administration of a national program to provide reading material to the blind and physically handicapped. Its direct services to Congress include the provision of legal research and law-related services by the Law Library of Congress, and a broad range of activities by the Congressional Research Service (CRS), including in-depth and nonpartisan public policy research, analysis, and legislative assistance for Members and committees and their staff; congressional staff training; information and statistics retrieval; and continuing legal education for Members of both chambers and congressional staff.\nThe FY2018 level was $669.9 million. In comparison, levels considered for FY2019 include the following:\nrequested: $672.7 million (+0.4%) House-passed: $709.9 million (+6.0%) Senate-passed: $687.4 million (+2.6%) enacted: $696.1 million (+3.9%)\nThese figures do not include additional authority to spend receipts. As stated above, the budget request levels were developed prior to the enactment of full-year appropriations for FY2018.\nThe FY2019 budget contains four headings:\n1. Salaries and expenses —The FY2018 level was $470.7 million, not including authority to spend receipts ($6.35 million in FY2018, $6.0 million in FY2019). In comparison, levels considered for FY2019 include the following: requested: $469.2 million (-0.3%) House-passed: $487.8 million (+3.6%) Senate-passed: $468.4 million (-0.5%) enacted: $474.1 million (+0.7%) 2. Copyright Office —The FY2018 level was $28.4 million, not including authority to spend receipts and prior year unobligated balances ($43.6 million in FY2018 and $49.8 million in FY2019). In comparison, levels considered for FY2019 include the following: requested: $38.6 million (+35.9%) House-passed: $43.6 million (+53.2%) Senate-passed: $42.6 million (+49.9%) enacted: $43.6 million (+53.2%) 3. Congressional Research Service —The FY2018 level was $119.3 million. In comparison, levels considered for FY2019 include the following: requested: $113.6 million (-4.7%) House-passed: $125.7 million (+5.4%) Senate-passed: $123.8 million (+3.8%) enacted: $125.7 million (+5.4%) 4. Books for the Blind and Physically Handicapped —The FY2018 level was $51.5 million. In comparison, levels considered for FY2019 include the following: requested: $51.2 million (-0.6%) House-passed: $52.8 million (+2.5%) Senate-passed: $52.5 million (+2.0%) enacted: $52.8 million (+2.5%)\nThe Architect's budget also contains funds for the Library buildings and grounds . In FY2018, $74.9 million was provided. In comparison, levels considered for FY2019 include the following:\nrequested: $113.4 million (+51.5%) House-passed: $70.2 million (-6.2%) Senate-passed: $64.1 million (-14.4%) enacted: $68.5 million (-8.5%)", "The Library requested\n1. authority to obligate funds for reimbursable and revolving fund activities ($194.6 million); and 2. language related to the operations of the Copyright Office in the event of a lapse in annual appropriations.\nThe House- and Senate-passed bills and the FY2019 act included the reimbursable and revolving fund language, but not the Copyright Office language.", "The FY2019 enacted level of $117.0 million is equivalent to the funding requested by GPO and included in the House-passed and Senate-passed versions of the FY2019 bill. The level is $68,000 (-0.1%) less than the level provided in FY2018 and FY2017.\nGPO's budget authority is contained in three accounts:\n1. Congressional publishing—The FY2019 enacted level of $79.0 million (a decrease of $528,000, or -0.7%, from FY2018) is equivalent to the funding requested by GPO and included in the House-passed and Senate-passed versions of the FY2019 bill. 2. Public Information Programs of the Superintendent of Documents (salaries and expenses)—The FY2019 enacted level of $32.0 million (an increase of $3.0 million, or +10.3%, from FY2018) is equivalent to the funding requested by GPO and included in the House-passed and Senate-passed versions of the FY2019 bill. 3. Government Publishing Office Business Operations Revolving Fund —The FY2019 enacted level of $6.0 million (a decrease of $2.5 million, or -29.7%, from FY2018) is equivalent to the funding requested by GPO and included in the House-passed and Senate-passed versions of the FY2019 bill.", "GAO responds to requests for studies of federal government programs and expenditures. GAO may also initiate its own work.\nThe FY2018 level was $578.9 million. In comparison, levels considered for FY2019 include the following:\nrequested: $616.1 million (+6.4%) House-passed: $578.9 million (0.0%) Senate-passed: $589.8 million (+1.9%) enacted: $589.8 million (+1.9%)\nThese levels do not include offsetting collections ($23.8 million in FY2018; $24.2 million in the request; $23.8 million in the House-passed bill; and $35.9 million in the Senate-passed bill and law).", "The Open World Leadership Center administers a program that supports democratic changes in other countries by inviting their leaders to observe democracy and free enterprise in the United States. The first program was authorized by Congress in 1999 to support the relationship between Russia and the United States. The program encouraged young federal and local Russian leaders to visit the United States and observe its government and society.\nEstablished at the Library of Congress as the Center for Russian Leadership Development in 2000, the center was renamed the Open World Leadership Center in 2003, when the program was expanded to include specified additional countries. In 2004, Congress further extended the program's eligibility to other countries designated by the center's board of trustees, subject to congressional consideration. The center is housed in the Library and receives services from the Library through an interagency agreement.\nThe legislative branch bills have included a provision since FY2016, also contained in the FY2019 act, stating\nThat funds made available to support Russian participants shall only be used for those engaging in free market development, humanitarian activities, and civic engagement, and shall not be used for officials of the central government of Russia.\nOpen World requested $5.8 million for FY2019, an increase of $200,000 (+3.6%). The FY2019 act included the House-passed and Senate-passed level of $5.6 million, the same as the enacted level for FY2018, FY2017, and FY2016.\nThe location and future of Open World, attempts to assess its effectiveness, and its inclusion in the legislative branch budget have been discussed at appropriations hearings and in report language for more than a decade. The funding level for Open World has also varied greatly during this period. For additional discussion, see the \"Prior Year Discussion of Location and Funding of Open World\" section in CRS Report R44899, Legislative Branch: FY2018 Appropriations , by Ida A. Brudnick.", "The center was created by Congress in 1988 to encourage public service by congressional staff through training and development programs. The FY2019 act provides $430,000, which is approximately the same level provided since FY2006.", "As in past years, Congress considered a number of general provisions related to the legislative branch. These provisions and their status are listed in Table 4 .", "Table 5 through Table 9 provide information on funding levels for the legislative branch overall, the Senate, the House of Representatives, the Capitol Police, and the Architect of the Capitol.\nThe tables are followed by an Appendix , which lists House, Senate, and conference bills and reports; public law numbers; and enactment dates since FY1998.", "" ], "depth": [ 0, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 3, 3, 3, 3, 2, 3, 3, 3, 3, 4, 2, 3, 3, 3, 4, 3, 4, 3, 4, 3, 3, 3, 3, 2, 2, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_title h1_full", "", "", "", "", "h0_full h1_full", "", "h0_full", "h0_full", "", "h1_full", "", "h2_title", "", "h2_full", "h2_full", "", "h2_full", "", "h2_full", "h2_full", "h1_title", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What was printed on May 24, 2018?", "What is the \"minibus\" appropriations package to be considered?", "How did the rules proceed in the House?", "What parts of H.Res. 918 were accepted?", "How did H.R. 5895 pass overall in the House?", "What amount did the House pass?", "How were the FY2019 legislative branch requests considered?", "How was S. 3071 reported?", "Why did the Senate begin consideration of FY2019 appropriations?", "What amendments were agreed on for the bill?", "What amount would the Senate-passed bill provide?", "How did the provided amount change from FY2018 to FY2017?", "How did the provided amount change from FY2017 to FY2016?", "How did the provided amount change from FY2016 to FY2014?", "How did the provided amount change from FY2013 to FY2012?", "How did the provided amount change from FY2012 to FY2010?" ], "summary": [ "On May 24, 2018, the text of H.R. 5894 was included in a print issued by the House Rules Committee entitled \"Text of Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act 2019\" (Committee Print 115-71, which also contained the text of H.R. 5895, H.R. 5894, and H.R. 5786).", "On June 5 and 6, the House Rules Committee met to consider rules for the consideration of H.R. 5895, which included legislative branch funding as Division B; the bill has sometimes been referred to as a \"minibus\" appropriations package.", "The rule for consideration (H.Res. 918, H.Rept. 115-711) was agreed to in the House on June 6, 2018.", "Of the seven amendments to Division B made in order by H.Res. 918, six were offered and four were agreed to (three by voice vote and one by roll call vote).", "H.R. 5895 passed in the House on June 8, 2018, by a vote of 212-179 (Roll No. 257).", "The House-passed total for legislative branch activities, excluding Senate items, was $3.811 billion (H.R. 5894, H.Rept. 115-696).", "The Senate Appropriations Committee's Legislative Branch Subcommittee held hearings in April and May of 2018 to consider FY2019 legislative branch requests.", "On June 14, the Senate Appropriations Committee held a markup of its version of the FY2019 bill and reported S. 3071 (S.Rept. 115-274), which proposed $3.367 billion for legislative branch activities, excluding House items.", "The Senate began consideration of FY2019 legislative branch appropriations on June 18, 2018, agreeing to an amendment in the nature of a substitute (S.Amdt. 2910) that was made to H.R. 5895.", "Four amendments were agreed to for the legislative branch section of the bill, which is in Division B. H.R. 5895, as amended, was passed in the Senate on June 25, 2018, by a vote of 86-5 (Rollcall Vote No. 139 Leg.).", "The Senate-passed bill would have provided $4.796 billion for the legislative branch, including House items.", "The FY2018 Consolidated Appropriations Act (P.L. 115-141) provided $4.700 billion, an increase of $260.0 million (+5.9%) from FY2017.", "The FY2017 level of $4.440 billion was an increase of $77.0 million (+1.7%) from FY2016.", "The FY2016 level of $4.363 billion represented an increase of $63 million (+1.5%) from the FY2015 level of $4.300 billion, and the FY2015 level represented an increase of $41.7 million (+1.0%) from the FY2014 funding level of $4.259 billion.", "The FY2013 act funded legislative branch accounts at the FY2012 enacted level, with some exceptions (also known as \"anomalies\"), less across-the-board rescissions that applied to all appropriations in the act, and not including sequestration reductions implemented on March 1.", "The FY2012 level of $4.307 billion represented a decrease of $236.9 million (-5.2%) from the FY2011 level, which itself represented a decrease of $125.1 million (-2.7%) from FY2010." ], "parent_pair_index": [ -1, -1, 1, 2, 1, -1, -1, -1, -1, 2, -1, -1, -1, -1, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 6, 6, 6, 6, 6 ] }

{ "title": [ "Background", "The CFATS Regulation and Process", "ISCD Has Taken Steps to Identify Chemical Facilities but Used Unverified Data to Categorize Thousands of Facilities", "ISCD Has Identified about 37,000 Chemical Facilities, but Plans Additional Identification Efforts", "ISCD Used Self-Reported Data That Is Not Verified to Categorize Thousands of Facilities", "ISCD Has Made Substantial Progress Approving Site Security Plans and Conducting Compliance Inspections but Does Not Consistently Ensure Compliance and Effectively Measure Program Results", "ISCD Has Substantially Reduced the Time Needed to Approve Remaining Site Security Plans", "ISCD Is Conducting Compliance Inspections but Does Not Have Documented Processes and Procedures for Managing Facilities That Are Noncompliant with Security Plans", "DHS’s Performance Measure for CFATS Does Not Accurately Reflect Program Results", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: GAO Summary of Department of Homeland Security (DHS) Plans to Implement the Protecting and Securing Chemical Facilities from Terrorist Attacks Act of 2014", "Appendix II: Scope and Methodology", "Appendix III: Comments from the Department of Homeland Security", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "The CFATS program is intended to ensure the security of the nation’s chemical infrastructure by identifying, assessing the risk posed by, and requiring the implementation of measures to protect high-risk chemical facilities. Section 550 of the DHS Appropriations Act, 2007, required DHS to issue regulations establishing risk-based performance standards for chemical facilities that, as determined by DHS, present high levels of risk, and required vulnerability assessments and the development and implementation of site security plans for such facilities.the CFATS interim final rule in April 2007 and appendix A to the rule, DHS published published in November 2007, lists 322 chemicals of interest (COI) and the screening threshold quantities amount for each. According to DHS and subject to certain statutory exclusions, all facilities that manufacture chemicals of interest as well as facilities that store or use such chemicals as part of their daily operations may be subject to CFATS. In general, however, only chemical facilities determined to possess a requisite quantity of COI (that is, the screening threshold quantity) and that are subsequently determined to present high levels of security risk—that is, covered facilities—are subject to the more substantive requirements of the CFATS regulation. The Protecting and Securing Chemical Facilities from Terrorist Attacks Act of 2014, enacted in December 2014, amended the Homeland Security Act of 2002 by adding the Chemical Facility Anti- Terrorism Standards as Title XXI and, in effect, authorizing the program for an additional 4 years. Among other things, the Act expressly repeals DHS’s authority to implement the program under section 550 of the DHS Appropriations Act, 2007, but also expressly provides that the CFATS regulation promulgated under that authority shall remain in effect unless otherwise amended, consolidated, or repealed. Consequently, while the Act imposes new and additional responsibilities on DHS to implement the CFATS program, the program continues to be implemented by ISCD under the existing regulatory framework.\nIn addition to implementing the CFATS program, ISCD is also to manage the Ammonium Nitrate Security Program—a program DHS is to establish pursuant to section 563 of the DHS Appropriations Act, 2008. While the CFATS program covers facilities with certain thresholds of ammonium nitrate, the Ammonium Nitrate Security Program is to regulate the sale and transfer of ammonium nitrate by an ammonium nitrate facility for the purpose of preventing the misappropriation or use of ammonium nitrate in an act of terrorism. Among other things, the statute authorizing the ammonium nitrate program authorizes DHS to require individuals who purchase, sell, or transfer ammonium nitrate to register with DHS and submit to vetting against the Terrorist Screening Database, and requires the owners of ammonium nitrate facilities to maintain records on each sale or transfer of ammonium nitrate and to report any identified theft or loss of ammonium nitrate to appropriate federal authorities. DHS issued a proposed rule for the Ammonium Nitrate Security Program in August 2011 and, as of July 2015, has yet to establish the program.", "The CFATS regulation outlines how ISCD is to administer the CFATS program. Specifically, any facility that possess any of the 322 chemicals of interest (COI) in quantities that meet or exceed the screening threshold quantities established by DHS for those COI are required to use ISCD’s Chemical Security Assessment Tool (CSAT)—a web-based application through which owners and operators of facilities with COI are to provide information about the facility—to complete a Top-Screen. The Top- Screen is the initial screening tool whereby a chemical facility in possession of a COI at the requisite thresholds is to provide ISCD data, including the name and location of the facility and the chemicals and their quantities at the site.\nISCD’s risk assessment approach, which relies on data from the Top- Screen, among other sources, is based on three security issues: (1) release (toxic, flammable, and explosive) chemicals with the potential for impacts within and beyond a facility; (2) theft or diversion; and (3) sabotage, depending on the type of risk associated with the COI.\nRelease: For the release threat, ISCD’s approach assumes that a terrorist will release the COI at the facility and then estimates the risk to the facility and surrounding population. Facilities with toxic release chemicals are to calculate and report in their Top-Screen submission the Distance of Concern—which represents the radius of an area in which exposure to a toxic chemical cloud from a release event could cause serious injury or fatalities from short-term exposure. ISCD uses the Distance of Concern to estimate the number of fatalities from an intentional toxic release and to categorize the risk posed by this facility. The Top-Screen directs respondents to use an online tool called RMP*Comp to calculate the Distance of Concern.RMP*Comp takes inputs such as the quantity of chemical that could be released and the surrounding terrain type to determine the Distance of Concern.\nTheft or diversion: For theft or diversion, the approach assumes that a terrorist will steal or have the COI diverted to him or herself and then estimates the risk of a terrorist attack using the COI to cause the most harm at an unspecified off-site location.\nSabotage: For sabotage, the approach assumes that a terrorist will cause water to be mixed with a COI that is shipped from the facility, creating a toxic release at an unspecified location, and then estimates the risk to a medium-sized U.S. city.\nIf, according to ISCD’s automated assessment of information provided via the Top-Screen, the facility is preliminarily categorized to be high-risk it becomes a “covered chemical facility,” and ISCD is to notify the facility of its preliminary placement in one of four risk-based tiers—tier 1, 2, 3, or 4. If ISCD does not categorize the chemical facility as high-risk, ISCD does not assign the facility to one of these four risk-based tiers and the facility is not subject to additional requirements under the CFATS regulation.Facilities that ISCD preliminarily categorizes to be high-risk—covered chemical facilities—are required to then complete the CSAT security vulnerability assessment, which includes the identification of potential critical assets at the facility, and a related vulnerability analysis.to review the security vulnerability assessment to confirm and notify the facility as to whether the facility remains categorized as high-risk and, if so, about its final placement in one of the four tiers.\nOnce a covered chemical facility is assigned a final tier, the facility may use CSAT to submit a site security plan (SSP) or submit an Alternative Security Program in lieu of the CSAT SSP. The security plan is to describe the existing and planned security measures to be implemented to address the vulnerabilities identified in the security vulnerability assessment, and identify and describe how existing and planned security measures selected by the facility are to address the applicable risk-based performance standards. To meet risk-based performance standards, covered facilities may choose the security programs or processes they deem appropriate to address the performance standards so long as ISCD determines that the facilities achieve the requisite level of performance on each of the applicable areas in their existing and agreed-upon planned measures.\nTo determine whether facilities achieve the requisite level of performance for each of the applicable areas, ISCD is to conduct a preliminary review of the facility’s security plan to determine whether it meets the risk-based regulatory requirements. If these requirements appear to be satisfied, ISCD is to issue a letter of authorization for the plan, and conduct an authorization inspection of the facility to determine whether to approve the plan. Upon inspection of the facility, if ISCD determines that the plan satisfies the CFATS requirements, it will issue a letter of approval to the facility, which is to then implement the approved SSP. If ISCD determines that the plan does not satisfy CFATS requirements, ISCD then notifies the facility of any deficiencies and the facility must submit a revised plan for correcting them.\nSee 6 C.F.R. § 27.250. in compliance with their approved SSP or whether to take enforcement actions. Figure 1 illustrates the CFATS regulatory process.", "", "Since 2007, when ISCD began identifying chemical facilities to determine which facilities present a high risk and therefore should be subject to further regulation under CFATS, about 37,000 facilities have submitted a Top-Screen but ISCD officials acknowledged some facilities may have failed to do so. According to these officials, as of April 2015, ISCD had received most Top-Screens within the first 3 years of the program; specifically, ISCD received about 88 percent of Top-Screens from 2007 through 2009. ISCD officials told us they believe the 37,000 facilities that have submitted Top-Screens represent most facilities subject to CFATS. However, as we previously reported, ISCD officials have acknowledged some facilities may not comply with the requirement to submit a Top-Screen and therefore some facilities may not be included in ISCD’s data, but the magnitude of potential Top-Screen noncompliance is not known.\nIn response to Executive Order 13650, in May 2014, ISCD outlined a number of efforts it had taken and planned to take to identify potentially noncompliant chemical facilities. These efforts included comparing facilities data from relevant federal partners and from state entities against ISCD’s current database of chemical facilities to identify potentially noncompliant chemical facilities, among others. ISCD officials told us ISCD consulted with the Occupational Safety and Health Administration; the Department of Transportation; the Department of Agriculture; the Bureau of Alcohol, Tobacco, Firearms and Explosives; and the Environmental Protection Agency (EPA) to determine the extent to which ISCD could identify all chemical facilities using data held by those agencies. According to ISCD officials, ISCD also reached out to all 50 states’ Homeland Security Advisors to request lists of chemical facilities maintained by the states.\nAccording to ISCD officials, as of April 2015, ISCD completed some of these efforts, such as conducting cross-agency compliance analysis with EPA and analyzing facility lists provided by New York, New Jersey, and Texas. Although these efforts resulted in the identification of chemical facilities subject to CFATS that had not submitted a Top-Screen, ISCD officials told us the work resulted in few new covered facilities. For example, in 2013, after conducting cross-agency compliance analysis with EPA, ISCD identified and notified about 3,300 chemical facilities as potentially noncompliant with the requirement to submit a Top-Screen. As shown in figure 2, in response to notification by ISCD 1,571 facilities reported they had previously submitted a Top-Screen and another 361 claimed they are not currently subject to the requirement to submit a Top- Screen. An additional 374 facilities have not submitted a Top-Screen for other reasons such as the facility closed or the facility does not have chemicals of interest above the screening threshold quantity. Of the 1,056 facilities required to submit a Top-Screen as a result of ISCD’s notification, representing approximately 30 percent of all facilities notified, ISCD categorized 2.3 percent, 24 facilities, as high-risk.\nISCD officials told us that although the effort to compare EPA and CFATS facility data did result in more than 1,000 chemical facilities submitting Top-Screens, they noted that efforts to identify chemical facilities have resulted in few new covered facilities. Because of this, ISCD officials are reevaluating how ISCD conducts federal-and state-level cross-agency compliance analysis as a method for identifying chemical facilities. While they plan to continue these efforts and the California Environmental Protection Agency recently provided ISCD with information on over 46,000 facilities regulated by the state, ISCD is currently assessing which approaches for identifying potentially noncompliant facilities will result in a high return on investment. The officials cited two challenges to cross- agency matching. First, while other federal agencies collect some information on chemical facilities, differing program goals and data formats may limit the utility of these data in identifying chemical facilities for the CFATS program. Second, according to ISCD officials, 14 of 50 states responded to ISCD’s request for facility lists. To continue identifying chemical facilities for which the submission of a Top-Screen is required, ISCD plans to designate a lead staff member to oversee efforts to identify such facilities, measure effectiveness of efforts relative to the costs and benefits, and recommend a long-term future strategy. ISCD officials told us they also have hired a third-party vendor to pilot an effort to analyze supply-chain data to identify noncompliant facilities.", "ISCD has used self-reported and unverified data to determine the risk for facilities with a toxic release threat. As described earlier, approximately 37,000 facilities have submitted Top-Screens to ISCD. Of these facilities, we estimate that more than 6,400 facilities hold a chemical at or above the screening threshold quantity that could pose a toxic chemical release threat. As part of the Top-Screen, ISCD requires these facilities to self- report the Distance of Concern, which represents the radius of an area in which exposure to a toxic chemical cloud from a release event could cause serious injury or fatalities from short-term exposure. As part of its risk assessment of facilities with toxic release chemicals, ISCD uses the Distance of Concern to determine the consequences from an intentional toxic release. Using DHS guidance and Top-Screen information stored in a DHS database—which contains facility-reported information such as chemicals and quantities in their possession, and the Distance of Concern—we recalculated the Distance of Concern for a generalizable sample of facilities and compared these results to what facilities reported. On the basis of these results, we estimate more than 2,700 facilities, or at least 44 percent of facilities with a toxic release chemical, misreported the Distance of Concern. We further estimate that at least 1,200 of the 2,700 misreporting facilities, or about 43 percent, underestimated the Distance of Concern. Figure 3 depicts an example of 1 facility with more than 200,000 pounds of anhydrous ammonia that reported a Distance of Concern of 0.9 miles compared to a minimum possibly correct Distance of Concern of 2.4 miles.\nISCD officials acknowledged that some facilities may have erred when reporting the Distance of Concern. However, ISCD officials told us that they do not verify the Distance of Concern on the Top-Screen because they believe that most facilities with toxic release chemicals above the screening threshold quantities would be familiar with RMP*Comp. According to ISCD officials, chemical facilities use the RMP*Comp for purposes of meeting EPA regulatory requirements. However, guidance published on the DHS web-site directs facilities to calculate the Distance of Concern in a manner that is different from EPA reporting requirements. For example, to satisfy EPA reporting requirements, facilities can include in their Distance of Concern calculation information about passive mitigation systems (such as dikes, enclosures, berms, and drains) that may reduce the output RMP*Comp generates. Conversely, according to DHS guidance, because the Top-Screen is evaluating an intentional release rather than an accidental release, facilities are not to include passive mitigation systems to calculate the Distance of Concern. ISCD officials stated that because RMP*Comp is outside the domain of ISCD oversight, they cannot say with full certainty that the information facilities use to generate the Distance of Concern is accurate. Nevertheless, ISCD has retained all Top-Screen data, including the necessary information that can be used to verify the accuracy of Distances of Concern provided by relevant facilities. ISCD officials also stated that they plan to develop a new model that will incorporate a Distance of Concern calculation into the next iteration of the Top-Screen, originally scheduled to be operational by September 2015, which will not require facilities to calculate and provide a Distance of Concern using RMP*Comp. Instead, the new Top-Screen will calculate the Distance of Concern using chemical information, such as the quantity of chemicals, reported by facilities. However, officials stated ISCD has not yet decided whether to re-screen facilities that hold toxic release chemicals that have already submitted a Top-Screen. As of May 2015, ISCD officials stated that implementation of the new Top- Screen is delayed, and ISCD officials did not have a timeline for implementation.\nAs described earlier, the Distance of Concern is one key input in the risk assessment approach that ISCD uses to preliminarily categorize facilities that could pose a toxic chemical release threat. Facilities ISCD categorizes as high-risk are covered facilities subject to additional requirements under the CFATS regulation, while facilities not categorized as high-risk are, in general, not subject to additional requirements under the CFATS program. According to ISCD officials, ISCD only verifies information in the Top-Screens reported by high-risk facilities, including the Distance of Concern. ISCD officials also told us that because ISCD takes other factors into account, errors in the Distance of Concern may not necessarily result in changes in ISCD’s risk-assessment of facilities that misreport the Distance of Concern. According to ISCD, within our sample 1 high-risk facility could be miscategorized based upon an erroneous Distance of Concern. On the basis of ISCD’s finding of 1 potentially miscategorized facility within our sample, we estimate that ISCD could have miscategorized 85 high-risk facilities, but potentially up to 543 high-risk facilities that have previously submitted Top-Screens.Additionally, because implementation of the new Top-Screen is delayed, ISCD cannot provide reasonable assurance it will categorize facilities with release toxic chemicals using reliable Distance of Concern data as these facilities submit new Top-Screens.\nStandard project management practices include activities such as developing a schedule with milestone dates to identify points throughout the project to reassess efforts under way to determine whether project changes are necessary. Practices such as developing a new target schedule with a forecasted finish date would provide ISCD a more realistic plan to guide the implementation of the new Top-Screen.Additionally, the NIPP risk management framework calls for risk assessment approaches—such as ISCD’s risk-based implementation of CFATS—to be reproducible and defensible. Specifically, the NIPP states the risk assessment methodology must produce comparable, repeatable results free from significant errors or omissions. In the interim, before ISCD implements the new Top-Screen and determines whether to re- screen facilities that have already submitted a Top-Screen, identifying potentially miscategorized facilities that may pose a significant security risk and verifying the Distance of Concern these facilities report is accurate could help ensure that ISCD has accurately categorized facilities with the potential to cause the greatest harm. Moreover, ISCD could provide more reasonable assurance it has identified the nation’s high-risk chemical facilities and, subsequently, that these facilities take actions to address potential terrorist threats.", "", "ISCD has taken actions to improve its processes for reviewing and approving site security plans, which have reduced the amount of time needed to resolve the backlog of unapproved plans. On the basis of ISCD’s pace of site security plan approvals in calendar year 2014— between 80 and 100 plans per month—as of April 2015, we estimate that it could take between 9 and 12 months for ISCD to review and approve site security plans for the 929 facilities currently awaiting approval. This represents a substantial improvement over our previous estimates, in April 2013, when, we reported that, based upon ISCD’s estimated approval rate of between 30 and 40 security plans per month, it could take between 7 and 9 years for ISCD to complete reviews of the approximately 3,120 plans in its queue at that time. Figure 4 shows our revised estimate for the time needed to approve plans for unapproved final-tiered facilities as of April 2015—assuming approval rates of 80, 90, and 100 plans per month—as compared to our original April 2013 estimates.\nISCD officials attributed the increased rate of approvals and reduction in the backlog of facilities awaiting approval to a number of improvements in ISCD’s processes. These improvements included new steps ISCD has taken since our last report and planned actions we previously reported in April 2013 and May 2014, but could not assess at that time because they had not yet been fully implemented. For example, ISCD has continued the revised site security plan review process implemented in July 2012 in which teams of ISCD headquarters officials review plans by assessing how layers of security measures meet the intent of each of the performance standards; issued updates to the online Chemical Security Assessment Tool (CSAT) beginning in March 2014 to make the system more user- friendly and improve facility data collection; distributed updated internal guidance and lessons learned on plan approvals to inspectors and plan reviewers; transitioned to a new internal case management system in December 2013 that provides improved program and facility management capabilities; begun using inspectors alongside ISCD headquarters officials to review site security plans in order to leverage inspectors’ knowledge of facility security and role conducting CFATS inspections; implemented changes to inspection processes, such as employing smaller inspection teams, conducting preinspection phone calls with facilities to help them prepare for inspections, and enabling inspectors to help facility personnel edit their site security plans during inspections; distributed updated guidance to facilities to help them improve their site security plans and worked to expand the use of alternative security programs; and worked with corporations that have multiple covered chemical facilities to leverage inspection documents and security procedures that are standard across corporations to expedite the inspection process.\nWhile ISCD has taken actions to reduce the backlog of site security plans, our estimate that ISCD could complete its approval of all current site security plans within 9 to 12 months does not take into account the potential impact of other tasks central to the CFATS program and additional compliance activities for which ISCD is responsible. Specifically, our estimate does not include the time required to: identify, categorize, review, and approve site security plans for facilities that have not yet submitted Top-Screens or those that ISCD previously did not categorize as high risk but may now qualify as high- risk in light of the aforementioned errors in the Top-Screen submissions we identified related to toxic release Distance of Concern calculations, and review approved site security plans to resolve issues relating to one requirement of the personnel surety performance standard, under which covered facilities are to perform background checks and ensure appropriate credentials for personnel and visitors at their facilities. As part of the personnel surety standard, DHS plans to check for terrorist ties by comparing certain employee information against the Terrorist Screening Database. ISCD currently has measures in place for other screening requirements under the personnel surety standard, and as of May 2015, ISCD was determining how the terrorist screening requirement will be implemented.\nIn addition, our estimate assumes that the pace of site security plan approvals will not be affected by ISCD’s implementation of the Ammonium Nitrate Security Program. As described earlier, ISCD released a proposed rule on August 3, 2011, for how it plans to implement the program. According to ISCD officials, the final rule was initially scheduled to be released in April 2015; as of May 2015, the rule had not been released but, according to the DHS semiannual regulatory agenda published in June 2015, a final rule for the program is anticipated in October 2015. Although the rule has not yet been released, DHS has stated that development and implementation of the ammonium nitrate requirements would be resource-intensive and require trade-offs with ISCD’s responsibilities under the CFATS program. For example, ISCD officials estimated that approximately 1,000 or more ammonium nitrate facilities would need to be inspected annually, which would likely increase ISCD’s inspectors’ workload since they would be responsible for both the CFATS program and the Ammonium Nitrate Security Program. According to ISCD officials, it will take at least 1 year from issuance of the final rule to establish the ammonium nitrate regulatory program. As a result, we could not assess the impact of the pending ammonium nitrate regulations on ISCD’s approval of site security plans or on the CFATS program as a whole.", "The CFATS regulation, consistent with the program’s underlying statutory authority, authorizes ISCD to take enforcement action, such as issuing orders to assess civil penalties or to cease operations, against a covered chemical facility if, for example, a compliance inspection finds a facility to be noncompliant with its approved site security plan. The regulation also provides, however, that if a facility is found to be noncompliant, the facility shall be provided written notification, an opportunity for consultation, and time frames within which the facility is to ensure compliance. According to ISCD officials, based on the nature of the violations found thus far, it has been ISCD practice to exercise the discretion afforded to it under law and regulation and not to take enforcement actions but to instead work with noncompliant facilities on a case-by-case basis to ensure compliance. However, ISCD does not have documented processes and procedures to track facilities that are noncompliant with their approved site security plans and ensure facilities implement planned measures to become compliant.\nISCD standard operating procedures for inspections of covered facilities provide that inspectors are to report to ISCD, among other things, any recommended enforcement actions resulting from a compliance inspection. The CFATS regulation also provides that if a facility is in violation of any part of the regulation, appropriate action may be taken, including the issuance of an order, compelling a facility to take actions necessary to become compliant. For example, if a compliance inspection determines that a facility does not fully implement security measures as outlined in its site security plan, an order may be issued specifying actions the facility must take to remedy the instances of noncompliance, along with timeframes for coming into compliance. If a noncompliant facility does not comply with such an order, an order assessing a civil penalty of up to $25,000 per day for as long as the violation continues or, if warranted, an order to cease operations may be issued. ISCD officials stated that they consider an approved site security plan to be a contract between a facility and ISCD and a facility is therefore required to implement planned security measures by the deadlines specified in its site security plan—commonly between 6 and 12 months after plan approval. According to ISCD officials, facilities that do not implement planned measures by these deadlines are noncompliant with their requirements under CFATS.\nISCD began conducting compliance inspections in September 2013 and as of April 2015 had conducted 83 compliance inspections out of 1,727 facilities with approved site security plans. Our analysis of these compliance inspections found that nearly half of facilities did not fully implement security measures needed to satisfy the risk-based performance standards—as required by the CFATS regulation—and therefore were not fully compliant with their approved site security plans. Specifically, 34 of 69 facilities that underwent compliance inspections and had completed compliance inspection reports as of February 2015 had not implemented one or more planned measures by deadlines specified in their approved plans.\nAccording to ISCD officials, ISCD has not exercised its authority to issue orders and take enforcement actions based on the nature of violations identified through compliance inspections it has conducted as of May 2015. Instead, ISCD officials told us they track noncompliant facilities individually and work with the facilities on a case-by-case basis to help ensure compliance. According to ISCD officials, as part of ISCD’s review process following compliance inspections, officials track noncompliant facilities on a case-by-case basis using individual compliance inspection reports and do not close out a facility’s report until issues of noncompliance are resolved. ISCD officials stated that, thus far, they have provided additional time to noncompliant facilities and conducted follow-on inspections to ensure implementation of planned measures. ISCD officials also stated that, thus far, it has been more productive to work with facilities on a case-by-case basis to ensure compliance than to use enforcement actions. However, we found that ISCD does not have documented processes and procedures for how officials and inspectors are to track noncompliant facilities and ensure that they take actions towards compliance when ISCD exercises its discretion not to take enforcement actions. According to ISCD officials, ISCD provided written guidance on this issue to inspectors in the March 2015 update to ISCD’s inspections and approvals lessons-learned guidance. However, this guidance outlines requirements for the proper submission of compliance inspection reports by inspectors but does not provide documented guidance for how officials and inspectors are to ensure noncompliant facilities take actions to become compliant, such as how much additional time to provide to facilities to implement planned measures.\nOur analysis of compliance inspections conducted by ISCD as of February 2015 indicated that inspectors made varying recommendations relating to the 34 facilities that inspectors found had not implemented planned measures as outlined in their site security plans by deadlines and therefore were not fully compliant with their approved site security plans: Inspectors recommended both a follow-on compliance inspection and an enforcement action for 1 of the 34 noncompliant facilities. However, ISCD officials later elected not to take an enforcement action in that instance and determined that they would instead work with the facility to ensure it implemented planned measures.\nInspectors recommended a follow-on compliance inspection to verify the implementation of planned measures for 12 of the 34 noncompliant facilities.\nInspectors did not recommend an enforcement action or follow-on compliance inspection for the remaining 21 of 34 noncompliant facilities.\nInspectors reported that the 34 noncompliant facilities required additional time, beyond their compliance inspection date, to implement planned measures that were not implemented by deadlines in their site security plans. Among the 34 noncompliant facilities, additional time to implement these planned measures as intended ranged from 3 weeks to another year.\nFigure 5 summarizes our analysis of compliance inspections conducted by ISCD.\nCompliance inspections—after which ISCD makes compliance determinations to either mitigate or accept risk at facilities—are a critical stage in ISCD’s risk management approach to implementing the CFATS program. The NIPP risk management framework states that risk assessment approaches should be documented, reproducible, and defensible—common principles that are broadly applicable to all parts of a risk methodology. Specifically, the NIPP calls for risk assessment approaches to clearly document what information is used, and that subjective judgments need to be transparent to minimize their impact and help ensure comparable results. In addition, Standards for Internal Control in the Federal Government states that all organizational transactions—which can include processes and procedures for dealing with regulated entities—need to be clearly documented and that this documentation should be readily available for examination in administrative policies or operating manuals. According to ISCD officials, ISCD’s processes and procedures—although not documented— track noncompliant facilities through the compliance process and ensure they implement planned measures. According to ISCD officials, ISCD’s current method of tracking noncompliant facilities on a case-by-case basis using individual compliance inspection reports is sufficient. ISCD officials also stated that inspectors and ISCD headquarters officials evaluate the significance of security gaps and facilities’ ability to implement planned measures when working to bring facilities into compliance.\nBy documenting its processes and procedures for tracking noncompliant facilities and ensuring planned measures are implemented, ISCD could better ensure consistency in how officials and inspectors address noncompliance in the CFATS program. Variations in the process for addressing noncompliant facilities—such as facilities having widely varying amounts of time to implement measures—may be warranted on a case-by-case basis. However, according to ISCD officials, facilities that do not implement planned security measures in accordance with their approved site security plans remain vulnerable to security threats until such measures are implemented. Such vulnerabilities could increase over time as the CFATS program matures and ISCD conducts compliance inspections for the approximately 2,900 additional facilities that, as of April 2015, had an approved site security plan or were assigned a final tier and awaiting approval of the site security plan. Documented processes and procedures that prescribe how to address noncompliance in lieu of taking enforcement actions, including the establishment of time frames to implement planned measures, would better position ISCD to achieve its broader mission of securing chemical facilities in a consistent and timely manner.", "DHS’s performance measure for the CFATS program, which was developed by ISCD and is intended to reflect security measures implemented by facilities and the overall impact of the CFATS regulation on facility security, does not solely capture security measures that are implemented by facilities and verified by ISCD. Instead, DHS’s performance measure reflects both existing security measures that were in place when facilities completed their site security plans and planned security measures approved by ISCD that facilities intend to implement within the fiscal year. DHS reported this performance measure for the CFATS program in its Annual Performance Report for Fiscal Years 2013- 2015 as the percent of performance standards implemented by the highest risk chemical facilities and verified by ISCD. According to ISCD, the performance measure reflects the value of the CFATS program and its impact on reducing risk at facilities.\nISCD officials stated that they calculate the performance measure based on existing and planned measures identified in each facility’s site security plan rather than based on the results of compliance inspections, at which ISCD verifies that facilities have implemented planned measures as intended. According to ISCD officials, they count the planned measure as having been implemented once the implementation date listed in a facility’s site security plan has passed. However, according to ISCD officials, ISCD does not adjust the performance measure if it later determines that a facility did not implement a planned measure on time. In our analysis of compliance inspections conducted as of February 2015, we identified that 34 of 69 facilities did not implement one or more planned measures by intended deadlines. As a result, ISCD may have improperly counted some planned measures as implemented in the performance measure and therefore overstated the CFATS program’s progress in reducing risk.\nAccording to ISCD officials, when ISCD developed the performance measure, in fiscal year 2013, it had not yet begun conducting compliance inspections, at which ISCD verifies that facilities have implemented planned measures as intended. As a result, the performance measure does not take into account information gathered during compliance inspections, such as if facilities had implemented planned measures by the intended date. Since developing the performance measure, ISCD began conducting compliance inspections in September 2013, but ISCD officials stated that they did not begin verifying that planned measures had been implemented before including them in the performance measure at that point because they had conducted too few compliance inspections to produce meaningful performance data. ISCD officials also told us that the performance measure includes existing measures that were in place when facilities completed their site security plans because the goal of the performance measure is to capture the overall extent of security implemented by facilities. According to ISCD officials, it is difficult to assess the source of existing security measures because facilities could anticipate CFATS requirements and make enhancements prior to becoming a covered facility under CFATS. As a result, ISCD officials stated that it is a challenge to assess the baseline security measures already in place at facilities and therefore the impact of the CFATS program on improving those security measures. However, while it may be illustrative to report the overall extent of security implemented, including all existing measures does not reflect the value of the CFATS program and its impact on reducing risk at facilities, as ISCD’s current performance measure is intended to do.\nThe NIPP calls for evaluating the effectiveness of risk management efforts by collecting performance data to assess progress in achieving identified outputs and outcomes. In addition, the purpose of CFATS, as stated in its regulation, is to enhance national security by furthering DHS’s mission and lowering the risk posed by certain chemical facilities. Measuring the effectiveness of the CFATS program requires that facilities implement planned security measures identified as necessary to address vulnerabilities and that DHS evaluate implementation of these measures against CFATS performance standards. However, because ISCD’s performance measure reflects both existing security measures that had not necessarily been implemented in response to CFATS and planned security measures that have not yet been verified as implemented, ISCD’s performance measure does not reflect the value of the CFATS program and its impact on reducing risk at facilities, as stated in performance reports. As the CFATS program matures and ISCD conducts compliance inspections in greater numbers, revising current performance measures or adding new ones to accurately reflect only security measures that have been implemented and verified would help provide a more accurate picture of ISCD’s progress and help ISCD ensure that the program is meeting its goals.", "Individuals intent on using or gaining access to hazardous chemicals to carry out a terrorist attack continue to pose a threat to the security of chemical facilities and surrounding populations. DHS, through the CFATS program overseen by ISCD, has made progress in identifying chemical facilities that pose the greatest risks and in expediting the time it takes to approve security plans. However, DHS has not taken steps to mitigate errors in some facility-reported data and does not have reasonable assurance that it has identified all of the nation’s highest-risk chemical facilities. Additionally, DHS cannot ensure consistency in how it addresses noncompliance in the CFATS program because it does not have documented processes and procedures. Finally, DHS’s CFATS performance measure does not reflect security measures that facilities have implemented and that ISCD has verified, thus not accurately reflecting the value of the CFATS program and its impact on reducing risk at facilities.", "We recommend that the Secretary of Homeland Security direct the Under Secretary for NPPD, the Assistant Secretary for the Office of Infrastructure Protection, and the Director of ISCD to take the following two actions to ensure the accuracy of the data submitted by chemical facilities: provide milestone dates and a timeline for implementation of the new Top-Screen and ensure that changes to this Top-Screen mitigate errors in the Distance of Concern submitted by facilities, and in the interim, identify potentially miscategorized facilities with the potential to cause the greatest harm and verify the Distance of Concern these facilities report is accurate.\nIn addition, to better manage compliance among high-risk chemical facilities and demonstrate program results, we recommend the following two actions: develop documented processes and procedures to track noncompliant facilities and ensure they implement planned measures as outlined in their approved site security plans, and improve the measurement and reporting of the CFATS program performance by developing a performance measure that includes only planned measures that have been implemented and verified.", "We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reproduced in full in appendix III, and technical comments, which we incorporated as appropriate. DHS concurred with all four recommendations and outlined steps that the National Protection and Programs Directorate (NPPD), Office of Infrastructure Protection (IP), Infrastructure Security Compliance Division (ISCD) will take to address them.\nWith respect to the first recommendation that NPPD provide milestone dates and a timeline for implementation of the new Top-Screen and ensure that changes to this Top-Screen mitigate errors in the Distance of Concern submitted by facilities, DHS noted that NPPD is developing a revised Top-Screen to eliminate the need for facilities to calculate and self-report Distances of Concern. In the interim, NPPD will verify the accuracy of Distances of Concern submitted in new Top-Screens. These actions, if fully implemented, should address the intent of the recommendation.\nRegarding the first recommendation, DHS indicated in its letter that the impact from the erroneous Distance of Concern data is likely extremely minimal because only 85 of approximately 37,000 facilities that submitted Top-Screens were likely to have been assigned a lower risk status had they correctly reported their Distances of Concern, with potentially as few as two facilities actually having been impacted. However, as stated in our report, we based our estimates on a simple random sample and followed a probability procedure based on random selections. Our sample is only one of a large number of samples that we might have drawn, each of which could have provided different estimates. Therefore, the number of facilities affected by this issue may be as low as two or as high as 543.\nDHS also stated that the erroneous Distance of Concern data impacts only preliminary tiering (categorization) results and additional information submitted through a security vulnerability assessment will affect the final tiering decision. As stated in our report, according to DHS data, 80 percent of facilities were determined not to be high-risk based upon information provided in the Top-Screen, which made those facilities not subject to additional requirements under the CFATS regulation. Thus, only a minority of facilities that submitted a Top-Screen were ultimately required to submit a security vulnerability assessment.\nRegarding the second recommendation that NPPD identify potentially miscategorized facilities with the potential to cause the greatest harm and verify the Distance of Concern these facilities report is accurate, DHS stated that NPPD will review facilities that submitted Top-Screens with release-toxic chemicals of interest. NPPD will determine which facilities are most likely to potentially cause the greatest harm and will verify the Distances of Concern reported by the facilities. These actions, if fully implemented, should address the intent of the recommendation.\nIn response to the third recommendation that NPPD develop documented processes and procedures to track noncompliant facilities and ensure they implement planned measures, DHS stated that NPPD was in the process of developing and documenting such procedures. DHS also stated that NPPD has drafted requirements to update its case management system to separately track noncompliant facilities, a function not currently available in the system. According to DHS, in the interim, NPPD will monitor noncompliant facilities through a function in the case management system that keeps compliance inspection reports open until a facility implements all aspects of its site security plan. These actions, if fully implemented, should address the intent of the recommendation.\nFinally, for the fourth recommendation that NPPD improve the measurement and reporting of the CFATS program performance by developing a performance measure that includes only planned measures that have been implemented and verified, DHS stated that NPPD will develop a performance measure that will provide an additional means to evaluate and illustrate the value of the CFATS program. According to DHS, the new measure will be included in ISCD’s Fiscal Year 2016 Annual Operating Plan. These actions, if fully implemented, should address the intent of the recommendation.\nWe are sending copies of this report to the Secretary of Homeland Security, the Under Secretary for the National Protection Programs Directorate, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have questions about this report, please contact me at (404) 679-1875 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.", "Required elements Section 2. Chemical Facility Anti-Terrorism Standards Program The Secretary of Homeland Security’s (Secretary) efforts to identify facilities, require the submission of Top-Screen and other information, establish risk-based performance standards, and require each covered facility to submit a security vulnerability assessment and to develop, submit and implement a site security plan. (6 U.S.C. § 622)\nContent of site security plans and employee input. (§ 622(b))\nIn August 2014, DHS’s Infrastructure Security Compliance Division (ISCD) initiated a rulemaking process through an Advance Notice of Proposed Rulemaking to identify ways to make the Chemical Facility Anti-Terrorism Standards (CFATS) program more effective in achieving its regulatory process. The rulemaking process comment period closed in October 2014, and ISCD is reviewing comments. According to ISCD officials, the rulemaking was included in the latest unified agenda, but it was listed as a long term item and thus did not have an expected timeframe associated with it. ISCD is considering requiring that facilities validate that employee input has been obtained to the greatest extent practicable in the development of their site security plans.\nApproval and disapproval of site security plans, approval of alternative security programs, risk assessment policies and procedures for site security plan assessments. (§ 622(c)(1)-(3))\nISCD does not expect its review process to change.\nExpedited approval program for site security plans, including guidance issued by the Secretary within 180 days of enactment (enacted December 18, 2014). (§ 622(c)(4))\nThe expedited approval process is the biggest change from the original statute, according to ISCD. DHS issued guidance for the expedited removal program in May 2015.\nAudits and inspections by the Secretary, including (1) requirements for individuals working for nondepartmental or nongovernmental entities, who conduct audits or inspections, to report to a regional supervisor and (2) standards for training and retaining auditors and inspectors. (§ 622(d)(1))\nISCD is not planning to make any changes to its audits or inspections. Third party inspectors could be considered at a later date as appropriate, but ISCD did not have plans to use them as of June 2015. In terms of training, ISCD officials stated that in February 2015, they re-instituted a training task force to assess the effectiveness of ISCD’s training efforts. As part of this effort, ISCD developed a statement of work to hire a contractor to analyze inspectors’ training competencies.\nThe Secretary’s establishment and carrying-out of a personnel surety program. (§ 622(d)(2))\nISCDs personnel surety program is awaiting Office of Management and Budget approval and ISCD did not have an estimate on when it will be finalized.\nDHS plans according to officials political subdivisions, relevant business associations, and public and private labor organizations to identify all chemical facilities of interest; (§ 622(e)(1)) 2. Develop a security risk assessment approach and corresponding tiering methodology for covered chemical facilities; (§ 622(e)(2)) 3. Document each instance where tiering for a covered facility changes or a covered facility is no longer subject to the requirements; (§ 622(e)(3)) 4. Submit semiannual reports, beginning not later than 6 months after enactment, that includes for the period covered the number of covered facilities in the United States, changes in tiering, metrics addressing reviews and inspections, among other information. (§ 622(e)(4))\nISCD completed this requirement in response to Executive Order 13650 and is documented in the report of the Executive Order 13650 working group. ISCD intends to continue consulting with stakeholders as appropriate to identify chemical facilities of interest. In response to GAO recommendations to incorporate additional threat information into the risk tiering methodology, ISCD is updating how it addresses consequence, vulnerability and threat in its risk approach and corresponding tiering methodology. The risk methodology will be subject to a peer review when completed. ISCD currently documents each instance where a previously assigned tier changes and is modifying its case management system to facilitate required reporting on the number of such instances and the rationale for each. ISCD has drafted the first semi-annual report, which is currently in the DHS review and clearance process. ISCD is on schedule to submit the report to Congress in June 2015.\nProtection and sharing of information. (§ 623)\nISCD does not plan to make changes to the protection and sharing of information. ISCD is working to share permissible information with certain partners through Infrastructure Protection Gateway, a DHS portal containing tools and information to help partners prepare vulnerability assessments and risk analysis.\nCivil enforcement, including providing notices of noncompliance and addressing circumstances of continued noncompliance; use of civil penalties and emergency orders. (§ 624)\nISCD has assessed the new statutory language and believes that some minor changes are necessary to make existing procedures conform to the new statutory language. These modifications are expected to be procedural in nature (i.e., do not require industry notification and an opportunity to comment) and ISCD is in the process of developing them.\nWhistleblower protections, including: the establishment of procedures within 180 days of enactment for reporting violations to the Secretary. (§ 625)\nProcedures for reporting violations already exist and are being expanded with the ability to submit reports by e-mail. In addition, ISCD is refining outreach materials to promote the availability of these mechanisms, and is working closely with the Department of Labor’s Occupational Safety and Health Administration to establish mechanisms to enforce the whistleblower retaliation protections should they ever be invoked.\nThe Secretary’s efforts to promulgate regulations or amend the existing CFATS regulations to implement provisions of the Act and, within 30 days of enactment, whether the Secretary repealed any existing CFATS regulation that the Secretary determines is duplicative of, or conflicting with, the act. (§ 627)\nThis is a challenging deadline for DHS to meet, because repealing any of this without including any pending program changes resulting from the rulemaking process would not make sense. Therefore, as a matter of policy, DHS is going to miss these deadlines and continue to work through the rulemaking process.\nEfforts undertaken by the Secretary, if any, to provide guidance and other support to “small covered chemical facilities” (as that term is defined in the Act) and whether the Secretary submitted the requisite report on best practices that may assist small covered chemical facilities in development of physical security best practices. (§ 628)\nISCD is developing guidance as part of its 18-month reporting requirement, but this may result in a separate deliverable to the small covered chemical facilities. No additional activities are anticipated.\nRequired elements Establish an outreach implementation plan to identify chemical facilities of interest and make available compliance assistance materials and information on education and training, not later than 90 days after the date of enactment of the act. (§ 629)\nDHS plans according to officials ISCD completed this plan on March 18, 2015, and shared it with federal, state, local, commerce, and other stakeholders for comments in advance of completion.\nThis third party assessment is under development.\nThis report is under development. the CFATS program that includes certification by the Secretary that significant progress in identifying all chemical facilities of interest under 6 U.S.C § 622(e)(1) has been made; (§ 3(c)(1)(A)) b. certification by the Secretary that a risk assessment approach and corresponding tiered methodology under 6 U.S.C § 622(e)(2) has been developed; (§ 3(c)(1)(B)) the Secretary’s assessment of implementation by DHS of recommendations by the Homeland Security Studies and Analysis Institute; (§ 3(c)(1)(C)) and d. a description of best practices that may assist small covered chemical facilities in the development of physical security best practices. (§ 3(c)(1)(D))", "This appendix provides details of our scope and methodology to answer each objective. For both objectives, we reviewed applicable laws, regulations (including proposed rules), Department of Homeland Security’s (DHS) Chemical Facility Anti-Terrorism Standards (CFATS) program policies and procedures, and our prior reports on the CFATS program. We also identified various criteria relevant to this program and compared the results of our analyses with these criteria, including the CFATS statute and rule, internal control standards, project management guidance, and policies and procedures outlined in the National Infrastructure Protection Plan (NIPP) risk management framework, which calls for risk assessments to be documented, reproducible, and defensible in order to generate results that can support investment, planning, and resource prioritization decisions.\nTo address our first objective, on the extent to which the DHS’s Infrastructure Security Compliance Division (ISCD) has identified and categorized facilities subject to the CFATS regulation, we reviewed laws applicable to facilities that possess chemicals, including the statutes authorizing and regulations governing the CFATS program and Executive Order 13650. To address how ISCD has identified facilities that could potentially be subject to CFATS but have not yet self-identified or been identified by ISCD as being required to submit information to ISCD pursuant to CFATS, we reviewed and analyzed ISCD documentation related to its efforts to identify facilities, including documentation on coordinating with other federal agencies that regulate chemical facilities, and the Executive Order 13650 Report for the President: Actions to Improve Chemical Facility Safety and Security—a Shared Commitment. To address how ISCD has categorized chemical facilities, we reviewed and analyzed documentation ISCD provides to facilities intended to guide them in submitting data that ISCD uses to preliminarily categorize facilities as high-risk, which renders them subject to additional requirements under the CFATS regulation during its preliminary screening We reviewed ISCD applications and documents including web- process.based Chemical Security Assessment Tools (CSAT) applications—such as the Top-Screen—used to collect security information from facilities, the ISCD risk assessment approach used to determine a facility’s preliminary risk tier, and policies and procedures on preliminary tiering. As part of this effort, we obtained and analyzed data submitted by facilities to ISCD as required by CFATS. First, to assess the reliability of data we obtained from CSAT, we reviewed system documentation, compared similar data sets for consistency, and interviewed knowledgeable ISCD officials about system controls and determined that CSAT data were sufficiently reliable for the purposes of this report. Second, we outlined the CFATS risk assessment approach and the three security issues upon which it is based—release-toxic/flammable/explosive, theft or diversion, and sabotage.\nFinally, we analyzed a sample of ISCD data and compared it to criteria in the National Infrastructure Protection Plan (NIPP), Supplemental Tool: Executing a Critical Infrastructure Risk Management Approach, to determine the extent to which ISCD used facility-reported data to make categorization decisions that are documented and reproducible. Specifically, we selected a simple random sample of 475 facilities from the population of 36,811 facilities that submitted Top-Screens since the inception of the CFATS program in 2007 through January 2, 2015. During our review we identified 91 facilities from among the sample of 475 facilities that indicated that their facility had toxic release chemicals of interest above the screening threshold quantity. For these 91 facilities we tested the reliability of the Distance of Concern reported in Top-Screens. To determine how DHS intended respondents to calculate the Distance of Concern, we reviewed DHS guidance that directs facilities to use an online tool, RMP*Comp. We also reviewed instructions for using this tool. Using RMP*Comp, DHS guidance, and data from their most recently submitted Top-Screen (the type and quantity of chemical that could be released and terrain type surrounding facility), we calculated the Distance of Concern for the 91 facilities and compared these results to what facilities reported.\nBecause we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the lower of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. For our determination of facilities potentially at risk of being missed by DHS because of errors in their RMP*Comp calculations we provide the 95 percent confidence interval associated with each estimate.\nTo corroborate and confirm our understanding of ISCD’s approach to identify and categorize chemical facilities, we also interviewed ISCD officials knowledgeable about the processes to identify and categorize chemical facilities to corroborate our understanding of the program.\nTo address our second objective, on the extent to which DHS has approved site security plans, conducted compliance inspections, and measured results, we reviewed laws and regulations on how DHS is to approve site security plans and ensure compliance with the CFATS program. We analyzed ISCD data to identify the number of site security plans approved per month, and used the results of our analysis to estimate the number of months it could take ISCD to approve remaining site security plans. To assess the reliability of data we obtained from ISCD’s case management system, we reviewed system documentation, conducted data and logic testing, and interviewed knowledgeable ISCD officials about system controls and determined that the data were sufficiently reliable for the purposes of this report. We note limitations in our analysis, including that our estimate does not take into consideration resource constraints ISCD may face as it implements the pending We analyzed 69 of 74 compliance Ammonium Nitrate Security Program.inspection reports completed as of February 2015 to identify the extent to which the reports identify noncompliance among facilities that have reached the compliance inspection phase of the CFATS program. When we conducted our analysis, in February 2015, ISCD inspectors had not completed compliance inspection reports outlining the results of the inspections for 5 of the 74 facilities, so we did not include these facilities in our analysis. We compared ISCD’s processes and procedures for tracking and monitoring noncompliant facilities to criteria in the NIPP for documented, reproducible, and defensible risk assessment approaches and Standards for Internal Control in the Federal Government for documenting transactions and significant decisions. To determine how DHS has measured results, we compared ISCD’s performance measure with criteria in the NIPP for evaluating the effectiveness of risk management efforts by, among other things, collecting performance data to assess progress in achieving outputs and outcomes. We also interviewed ISCD headquarters officials regarding their processes and systems for authorizing, approving, and inspecting facilities for compliance. Finally, we conducted four site visits to observe (1) two authorization inspections and (2) two compliance inspections. We selected inspection locations in California, Oregon, Maryland, and Texas based on geographic dispersion and to cover different types of chemical facilities regulated by the CFATS program. While the information obtained from these inspections cannot be generalized to all inspections, it provides insight and context on how ISCD conducts CFATS inspections.\nWe conducted this performance audit from September 2014 to July 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above Ben Atwater, Assistant Director, and Joel Aldape, Analyst-in-Charge, managed this assignment. Carl Barden, Andrew Curry, Kathleen Donovan, Michele C. Fejfar, Eric D. Hauswirth, Susan Hsu, Thomas F. Lombardi, and Kelly Snow made significant contributions to the work.", "Critical Infrastructure Protection: DHS Action Needed to Enhance Integration and Coordination of Vulnerability Assessment Efforts. GAO-14-507. Washington, D.C.: September 15, 2014.\nChemical Safety: Actions Needed to Improve Federal Oversight of Facilities with Ammonium Nitrate. GAO-14-274. Washington, D.C.: May 19, 2014.\nCritical Infrastructure Protection: Observations on DHS Efforts to Implement and Manage Its Chemical Security Program. GAO-14-608T. Washington, D.C.: May 14, 2014.\nCritical Infrastructure Protection: Observations on DHS Efforts to Identify, Prioritize, Assess, and Inspect Chemical Facilities. GAO-14-365T. Washington, D.C.: February 27, 2014.\nCritical Infrastructure Protection: DHS Efforts to Assess Chemical Security Risk and Gather Feedback on Facility Outreach Can Be Strengthened. GAO-13-353. Washington, D.C.: April 5, 2013.\nCritical Infrastructure Protection: An Implementation Strategy Could Advance DHS’s Coordination of Resilience Efforts across Ports and Other Infrastructure. GAO-13-11. Washington, D.C.: October 25, 2012.\nCritical Infrastructure Protection: Summary of DHS Actions to Better Manage Its Chemical Security Program. GAO-12-1044T. Washington, D.C.: September 20, 2012.\nCritical Infrastructure Protection: DHS Is Taking Action to Better Manage Its Chemical Security Program, but It Is Too Early to Assess Results. GAO-12-567T. Washington, D.C.: September 11, 2012.\nCritical Infrastructure: DHS Needs to Refocus Its Efforts to Lead the Government Facilities Sector. GAO-12-852. Washington, D.C.: August 13, 2012.\nCritical Infrastructure Protection: DHS Is Taking Action to Better Manage Its Chemical Security Program, but It Is Too Early to Assess Results. GAO-12-515T. Washington, D.C.: July 26, 2012.\nCritical Infrastructure Protection: DHS Could Better Manage Security Surveys and Vulnerability Assessments. GAO-12-378. Washington, D.C.: May 31, 2012.\nCritical Infrastructure Protection: DHS Has Taken Action Designed to Identify and Address Overlaps and Gaps in Critical Infrastructure Security Activities. GAO-11-537R. Washington, D.C.: May 19, 2011.\nCritical Infrastructure Protection: DHS Efforts to Assess and Promote Resiliency Are Evolving but Program Management Could Be Strengthened. GAO-10-772. Washington, D.C.: September 23, 2010.\nCritical Infrastructure Protection: Update to National Infrastructure Protection Plan Includes Increased Emphasis on Risk Management and Resilience. GAO-10-296. Washington, D.C.: March 5, 2010." ], "depth": [ 1, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_title h2_full", "h0_full", "h0_title", "", "h0_full", "h1_title", "h1_full", "h1_full", "", "", "", "", "h0_full h1_full", "h0_full h2_full", "", "", "", "", "" ] }

{ "question": [ "What is a main function of the Office of Infrastructure Protection's Infrastructure Security Compliance Division (ISCD)?", "How is the ISCD information invalid?", "What is a toxic release threat?", "How are toxic release threats determined?", "How is this distance measured?", "How does ISCD verify their information?", "How could verifying this data be beneficial?", "What inconsistency did the GAO find in toxic release threat reporting?", "How has the ISCD ensured security?", "What plans exist for future security?", "How will the ISCD approve the security plans according to the GAO?", "How has the shortening of the approval rate happened?", "How has the ISCD regarded compliance inspections in these plans?", "How is noncompliance currently dealt with?", "What history of noncompliance exists?", "How had the ISCD addressed this noncompliance?", "How does this support the creation of noncompliance guidelines?", "How can checking noncompliance benefit the ISCD?", "What was the GAO responsible for assessing?", "What did the GAO review to assess?" ], "summary": [ "Since 2007, the Office of Infrastructure Protection's Infrastructure Security Compliance Division (ISCD), within the Department of Homeland Security (DHS), has identified and collected data from approximately 37,000 chemical facilities under its Chemical Facility Anti-Terrorism Standards (CFATS) program and categorized approximately 2,900 as high-risk based on the collected data.", "However, ISCD used unverified and self-reported data to categorize the risk level for facilities evaluated for a toxic release threat.", "A toxic release threat exists where chemicals, if released, could harm surrounding populations.", "One key input for determining a facility's toxic release threat is the Distance of Concern (distance) that facilities report—an area in which exposure to a toxic chemical cloud could cause serious injury or fatalities from short-term exposure.", "ISCD requires facilities to calculate the distance using a web-based tool and following DHS guidance.", "ISCD does not verify facility-reported data for facilities it does not categorize as high-risk for a toxic release threat.", "By verifying that the data ISCD used in its risk assessment are accurate, ISCD could better ensure it has identified the nation's high-risk chemical facilities.", "However, following DHS guidance and using a generalizable sample of facility-reported data in a DHS database, GAO estimated that more than 2,700 facilities (44 percent) of an estimated 6,400 facilities with a toxic release threat misreported the distance.", "ISCD has made substantial progress approving site security plans but does not have documented processes and procedures for managing facilities that are noncompliant with their approved site security plans.", "Site security plans outline, among other things, the planned measures that facilities agree to implement to address security vulnerabilities.", "As of April 2015, GAO estimates that it could take between 9 and 12 months for ISCD to review and approve security plans for approximately 900 remaining facilities—a substantial improvement over the previous estimate of 7 to 9 years GAO reported in April 2013.", "ISCD officials attributed the increased approval rate to efficiencies in ISCD's security plan review process, updated guidance, and a new case management system.", "Further, ISCD began conducting compliance inspections in September 2013, but does not have documented processes and procedures for managing the compliance of facilities that have not implemented planned measures outlined in their site security plans.", "According to the nature of violations thus far, ISCD has addressed noncompliance on a case-by-case basis.", "Almost half (34 of 69) of facilities ISCD inspected as of February 2015 had not implemented one or more planned measures by deadlines specified in their approved site security plans and therefore were not fully compliant with their plans.", "GAO found variations in how ISCD addressed these 34 facilities, such as how much additional time the facilities had to come into compliance and whether or not a follow-on inspection was scheduled.", "Such variations may or may not be appropriate given ISCD's case-by-case approach, but having documented processes and procedures would ensure that ISCD has guidelines by which to manage noncompliant facilities and ensure they close security gaps in a timely manner.", "Additionally, given that ISCD will need to inspect about 2,900 facilities in the future, having documented processes and procedures could provide ISCD more reasonable assurance that facilities implement planned measures and address security gaps.", "GAO was asked to assess the CFATS program. This report addresses, among other things, the extent to which DHS has (1) categorized facilities as subject to the CFATS regulation, and (2) approved site security plans and conducted compliance inspections.", "GAO reviewed laws, regulations, and program documents; randomly selected data submitted to ISCD by facilities from 2007 to 2015, tested the data's reliability; and generated estimates for the entire population of facilities, and interviewed officials responsible for overseeing, identifying, categorizing, and inspecting chemical facilities from DHS headquarters and in California, Maryland, Oregon, and Texas (selected based on geographic location and other factors)." ], "parent_pair_index": [ -1, -1, -1, 2, 3, -1, 5, -1, -1, -1, 1, 2, 1, 4, -1, 6, 7, -1, -1, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 1, 1 ] }

{ "title": [ "", "Introduction", "Open Government and Rulemaking", "The Rulemaking Process", "Importance of the Pre-NPRM Period", "The Unified Agenda as a Possible Vehicle for Pre-NPRM Transparency and Public Participation", "Agencies' Use of Unified Agenda Before Proposed Rules Varied", "Discussion", "Policy Options" ], "paragraphs": [ "", "The Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda) is compiled and published twice each year by the Regulatory Information Service Center (RISC) within the General Services Administration (GSA), and provides the public with information about regulations that federal agencies are considering or reviewing. The Obama Administration has launched an initiative to make the policymaking process more transparent, participatory, and collaborative, and has specifically requested suggestions from the public regarding the rulemaking process. With entries designed to alert the public about upcoming proposed rules and commenting opportunities, the Unified Agenda appears uniquely suited to the Administration's effort. However, it is unclear how well the Unified Agenda currently performs this task—i.e., how often agencies' proposed rules are preceded by \"proposed rule\" entries in the Agenda (indicating that agencies are preparing a proposed rule). This report examines that issue and discusses options that Congress or the President can use to improve transparency and participation via the Unified Agenda or other means. First, however, the report discusses the Obama Administration's open government initiative, the rulemaking process, and the potential value of comments prior to the publication of a proposed rule.", "On January 21, 2009, his first full day in office, President Barack Obama issued a memorandum to the heads of executive departments and agencies in which he directed the Chief Technology Officer, in coordination with the Director of the Office of Management and Budget (OMB) and the Administrator of GSA, to coordinate recommendations for an \"Open Government Directive.\" The memorandum said that the directive (which is to be issued by the Director of OMB) would require agencies to take specific actions to make the federal government more transparent, participatory, and collaborative. For example, with regard to transparency, the memorandum said that the agencies should \"harness new technologies to put information about their operations and decisions online and readily available to the public.\" It also said that agencies should \"offer Americans increased opportunities to participate in policymaking and to provide their Government with the benefits of their collective expertise and information,\" and \"should solicit public feedback to assess and improve their level of collaboration and to identify new opportunities for cooperation.\"\nOn May 21, 2009, the Director of the Office of Science and Technology Policy within the Executive Office of the President published a notice in the Federal Register inviting the public to offer comments and suggestions about how to increase openness and transparency in government. The notice said that, with \"twenty-first century tools,\" the federal government can take advantage of information that is currently dispersed among the nation's citizens to improve the policy process, and said \"Our goal is to use the principles of open government to obtain fresh ideas about open government itself.\" One area in which comments were specifically requested was rulemaking—the process by which federal agencies develop and promulgate regulations.", "Federal regulations implement statutes and establish specific requirements. One observer described rulemaking as \"the single most important function performed by agencies of government,\" noting that it is \"to rules, not statutes or other containers of the law, that we turn most often for an understanding of what is expected of us and what we can expect from government.\" Federal agencies issue 3,000 to 4,000 final rules each year on topics ranging from the timing of bridge openings to the permissible levels of arsenic and other contaminants in drinking water.\nThe rulemaking process is governed by the Administrative Procedure Act (APA, 5 U.S.C. §551 et seq. ) and numerous other statutes and executive orders. Figure 1 below shows the process that most federal agencies are generally required to follow in developing or revising significant regulations. In brief, an agency develops a draft proposed rule based on congressional requirements or authority and, after review and approval within the agency, sends the draft rule to the Office of Information and Regulatory Affairs (OIRA) within OMB for review under Executive Order 12866. After OIRA review, the agency publishes a notice of proposed rulemaking (NPRM) in the Federal Register , obtains comments on the proposed rule, and responds to those comments in developing a draft final rule. The draft final rule is then reviewed in sequence by the agency and OIRA, and the final rule is published in the Federal Register . The APA generally requires that final rules take effect no less than 30 days after publication. The rulemaking process varies somewhat depending on the agency issuing the rule, its significance, and whether the rule must be issued quickly. For example, agencies sometimes issue final rules without a prior NPRM, and OIRA only reviews regulatory actions that are \"significant\" and from agencies other than independent regulatory agencies.", "In a 2006 congressional hearing commemorating the 60 th anniversary of the APA, Professor William F. West of Texas A&M University's George Bush School of Government and Public Service said that the part of the rulemaking process that precedes the publication of the NPRM frequently lasts for several years, and \"is where the most critical decisions often occur.\" Similarly, a 2009 report by the Government Accountability Office (GAO) noted that \"much of the resource investment in a rulemaking occurs prior to the publication of the proposed rule.\" GAO said that the rulemaking process officially commences no later than when a Regulation Identifier Number (RIN) is assigned (i.e., when the agency is either preparing its first Unified Agenda entry for a rule, or when it is preparing its submission to OIRA for review). GAO also said that during an \"initiation\" phase, agencies gather information to determine whether to issue a rule, identify needed resources, and may draft concept documents for agency management. During the development of proposed rules, agencies draft the rule and the preamble (which describes why the rule is being developed), and begin to address analytical and procedural requirements. GAO reported that for 10 of 12 rules that had been developed by the Department of Transportation (DOT), the Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA), the agencies took at least two years to issue an NPRM. Two of the FDA rules that GAO examined were under development for at least six years before they were published as proposed rules, and four EPA rules each took more than three years.\nAlthough federal agencies sometimes make significant changes to their proposed rules as a result of public comments, some observers have concluded that such changes become less likely after the draft proposed rules have been reviewed and approved within the agencies and OIRA, and after they have been published for comment in the Federal Register . A December 2006 report prepared for CRS by the East West Research Group at Texas A&M University concluded that the changes to proposed rules in response to comments from the public \"do not tend to be of a fundamental nature for at least two reasons.\"\nPerhaps the more obvious has to do with the sunk costs in organizational resources and psychological commitments. In addition, agencies may feel compelled to invite a second round of public comment on important changes in the interest of due process. This can be an unattractive option, especially given that rulemaking is already often a protracted process and given that agencies are often under pressure from Congress or the courts to issue rules in a timely fashion. One might add that the difficulty of changing proposals also increases the incentive to develop proposals that will not need to be changed, thus reinforcing sunk costs in proposal development.\nGiven the number of important decisions that are made while proposed rules are under development at the agencies, and the understandable reluctance of agencies to make fundamental changes to those rules after the NPRMs are published, comments and suggestions from the public may arguably be most effective while proposed rules are still under development at the agencies. The importance and potential efficacy of pre-NPRM consultation with the public underlies current statutory requirements for advance notices of proposed rulemaking (ANPRMs), negotiated rulemaking, and advocacy review panels at the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA). Agencies also sometimes hold public hearings in advance of the publication of a proposed rule, occasionally as a result of congressional requirements.\nThe value of early involvement in the rule-development process also underlies efforts by OIRA to review certain rules before they are formally submitted pursuant to Executive Order 12866. John Graham, OIRA Administrator during most of the George W. Bush Administration, said that\nonce a regulatory proposal is formally submitted to OMB, there is already powerful organizational momentum behind the proposal. Not only have agency staff devoted potentially years of work to data collection and analysis; policy officials at agencies may have managed delicate relationships among stakeholders. At this stage, any changes suggested during OMB review are destined to make waves and bruise egos, which means that they will be resisted, sometimes fiercely and effectively.\nSimilarly, Sally Katzen, OIRA Administrator during most of the Clinton Administration, said that by the time an agency issues an NPRM, \"the agency is invested. By that time, the agency has its own strongly held view of how it wants this thing to look. And OMB changes at that point are, I think, really at the margin rather than going to the heart of the matter.\" Both former administrators have said that OIRA often has its most significant effect on draft rules before they are formally submitted to OIRA for review.\nPre-NPRM public participation in rulemaking has also been advocated as part of the Obama Administration's transparency and open government initiative. At a June 2009 conference sponsored by the American Bar Association, Beth Noveck, the White House's deputy chief technology officer, said that the Obama Administration planned to use blogs and other \"social media\" to generate public input regarding agencies' proposed rules, even before they are drafted. Ms. Noveck was quoted as saying that \"Instead of starting with a finished draft of a rule, we're co-creating from the get-go and asking people what should be in such a rule before we write it.\" An editorial in Federal Times indicated that the potential benefits of this approach include expansion of the scope of government's engagement with its citizenry and better regulations.", "In order for the public to participate in rulemaking before proposed rules are published, the public must first know that agencies are developing such rules. For more than 30 years, federal agencies have been required to notify the public about upcoming regulatory actions. For example, Section 2 of Executive Order 12044, issued by President Jimmy Carter in March 1978, stated the following:\nTo give the public adequate notice, agencies shall publish at least semiannually an agenda of significant regulations under development or review. On the first Monday in October, each agency shall publish in the Federal Register a schedule showing the times during the coming fiscal year when the agency's semiannual agenda will be published. Supplements to the agenda may be published at other times during the year if necessary, but the semiannual agendas shall be as complete as possible. The head of each agency shall approve the agenda before it is published. At a minimum, each published agenda shall describe the regulations being considered by the agency, the need for and the legal basis for the action being taken, and the status of regulations previously listed on the agenda. Each item on the agenda shall also include the name and telephone number of a knowledgeable agency official and, if possible, state whether or not a regulatory analysis will be required.\nThe executive order went on to say that agencies should \"give the public an early and meaningful opportunity to participate in the development of agency regulations. They shall consider a variety of ways to provide this opportunity, including (1) publishing an advance notice of proposed rulemaking; (2) holding open conferences or public hearings; (3) sending notices of proposed regulations to publications likely to be read by those affected; and (4) notifying interested parties directly.\"\nIn a 1979 report on the implementation of this executive order, OMB said that the semiannual agendas \"provide the first systematic look at an agency's regulatory activities,\" and \"[a]rmed with this early warning, the public now has more time to prepare its views on upcoming regulations.\" However, the report also noted that some agencies had not published their agendas on schedule (making it difficult for the public to find them), and that some of the descriptions of the regulatory actions were not as helpful as others.\nSince 1983, the Regulatory Information Service Center (RISC) within GSA has published a semiannual Unified Agenda of Federal Regulatory and Deregulatory Actions that compiles the individual agencies' agendas. Although agencies can use a variety of other methods to alert the public about their upcoming rules, the Unified Agenda is the most systematic and widely-used vehicle to accomplish that purpose. RISC compiles the Unified Agenda for OIRA, and publication of entries in the Agenda helps agencies fulfill two current transparency requirements:\nThe Regulatory Flexibility Act (5 U.S.C. § 602) requires that all agencies publish semiannual regulatory agendas in the Federal Register describing regulatory actions that they are developing that may have a significant economic impact on a substantial number of small entities. Section 4 of Executive Order 12866 on \"Regulatory Planning and Review\" requires that all executive branch agencies \"prepare an agenda of all regulations under development or review.\" Each agenda entry is required to contain \"a regulation identifier number [RIN], a brief summary of the action, the legal authority for the action, any legal deadline for the action, and the name and telephone number of a knowledgeable agency official.\" The stated purposes of this and other planning requirements in the order are (among other things) to \"maximize consultation and the resolution of potential conflicts at an early stage\" and to \"involve the public and its State, local, and tribal officials in regulatory planning.\"\nUnified Agenda entries are organized by agency, and each entry is associated with one of five rulemaking stages: (1) prerule stage (indicating actions agencies will take to determine whether or how to initiate rulemaking); (2) proposed rule stage (indicating that the agency plans to issue an NPRM, or to close an existing comment period); (3) final rule stage (indicating that the agency plans to issue a final rule); (4) long-term actions (indicating items under development, but that are not expected to result in a regulatory action in the next 12 months); and (5) completed actions (e.g., reflecting the publication of a final rule, or the withdrawal of a rule). Therefore, a \"proposed rule\" entry in the Unified Agenda alerts the public that the agency is in the process of developing an NPRM. The RIN is assigned before the regulatory action first appears in the Agenda, and follows the rule throughout the rulemaking process.\nFor example, the May 2009 edition of the Unified Agenda contained the following narrative regarding a forthcoming EPA proposed rule on \"NPDES Program Management Information Rulemaking\" (RIN 2020-AE47):\nThe U.S. Environmental Protection Agency (EPA) has responsibility to ensure that the Clean Water Act's (CWA) National Pollutant Discharge Elimination System (NPDES) program is effectively and consistently implemented across the country. This regulation would identify the essential information that EPA needs to receive from NPDES agencies (NPDES-authorized states, territories and tribes) to manage the national NPDES permitting and enforcement program. Through this regulation, EPA seeks to ensure that such facility-specific information would be readily available, accurate, timely and nationally consistent on the facilities that are regulated by the NPDES program. In the past, EPA primarily obtained this information from the Permit Compliance System (PCS). However, the evolution of the NPDES program since the inception of PCS has created an increasing need to better reflect a more complete picture of the NPDES program and the diverse universe of regulated sources. In addition, information technology has advanced significantly so that PCS no longer meets EPA's national needs to manage the full scope of the NPDES program or the needs of individual states that use PCS to implement and enforce the NPDES program.\nThis Unified Agenda entry also indicated that EPA intended to issue the proposed rule in November 2009, and that the rule's priority level was \"other significant\" (i.e., that it was significant enough to be reviewed by OIRA, but that it was not expected to have a $100 million impact on the economy).\nAlthough the Unified Agenda is a potentially valuable resource to allow the public to know about forthcoming proposed rules, it is not clear that many people outside of academia and established interest groups know of its existence. Also, CRS is unaware of any studies examining the extent to which federal agencies' proposed rules were, in fact, preceded by \"proposed rule\" entries in the Unified Agenda. In fact, the introduction to the Unified Agenda states the following:\nAgencies may withdraw some of the regulations now under development, and they may issue or propose other regulations not included in their agendas. Agency actions in the rulemaking process may occur before or after the dates they have listed. The Unified Agenda does not create a legal obligation on agencies to adhere to schedules in this publication or to confine their regulatory activities to those regulations that appear within it.", "To determine the extent to which agencies used the Unified Agenda to notify the public about their upcoming proposed rules, CRS examined all published proposed rules that had been reviewed by OIRA during calendar year 2008. Focusing on rules that had been reviewed by OIRA ensures that they are \"significant\" under Executive Order 12866, and are therefore likely to be of some consequence to the general public. Such rules are also more likely to have been under development for some time than non-significant rules, and therefore may be more likely to have been preceded by a Unified Agenda entry. However, this approach excludes rules issued by independent regulatory agencies like the Securities and Exchange Commission and the Federal Communications Commission (whose rules are not reviewed by OIRA), and also excludes rules that were issued without a prior NPRM.\nFor each significant proposed rule that had been reviewed by OIRA during 2008, CRS determined whether the issuing agency or agencies had published a \"proposed rule\" entry in the Unified Agenda (indicating that the agency planned to issue an NPRM) (1) before the NPRM was published and (2) before the start of OIRA's review of the draft proposed rule. The NPRM date was used because, as indicated previously, once a rule is published in the Federal Register , both the issuing agency and OIRA have signed off on the rule as consistent with the President's priorities. Therefore, significant changes in the proposed rules are arguably less likely to occur than before they are published in the Federal Register . The OIRA submission date (which always occurs before the NPRM for significant rules) was also used because, by the time draft proposed rules are submitted to OIRA, they have been approved within the agencies and any parent cabinet departments, and are arguably less likely to change substantively than earlier in the rule development process.\nThe results of this analysis are presented in Table 1 below. For about three-quarters of the proposed rules (176 of 231, or 76.2%), the agencies published Unified Agenda entries for their upcoming proposed rules before they published the related NPRMs. Two-thirds of the time (154 of 231 proposed rules, or 66.7%), those Agenda entries were published even earlier, before OIRA started its reviews of the draft NPRMs. Viewed another way, however, for about one-quarter of the proposed rules, the agencies did not use the Unified Agenda to alert the public of those NPRMs before they were published in the Federal Register , and one-third of the time there were no \"proposed rule\" Agenda entries published before OIRA started its reviews. The NPRMs that were published with no prior \"proposed rule\" Unified Agenda entries included the following:\nan August 2008 Department of Agriculture (USDA) rule on \"Requirements for the Disposition of Cattle that Become Non-Ambulatory Disabled Following Ante-Mortem Inspection\" a December 2008 Department of Commerce (DOC) rule on the \"Steel Import Monitoring and Analysis System\" a March 2008 Department of Defense (DOD) rule on the \"Relationship Between the TRICARE Program and Employer-Sponsored Group Health Insurance\" an April 2008 Department of Education (ED) rule on \"Improving the Academic Achievement of the Disadvantaged\" a January 2009 Department of Health and Human Services (HHS) rule on \"Payments to Sponsors of Prescription Drug Plans\" a March 2008 Department of Homeland Security (DHS) rule clarifying \"Safe-Harbor Procedures for Employers Who Receive a No-Match Letter\" an April 2008 Department of the Interior (DOI) rule on \"Firearms in National Park Service Lands\" an April 2008 Department of Justice (DOJ) rule on \"Classification of Three Steroids as Schedule III Anabolic Steroids under the Controlled Substances Act\" an August 2008 Department of Labor (DOL) rule on \"Requirements for DOL Agencies' Assessment of Occupational Health Risks\" a January 2008 DOT rule on \"Passenger Car and Light Truck Corporate Average Fuel Economy, 2011-2015\" an April 2008 Department of Veterans Affairs (VA) rule on \"Grants for the Hiring and Retention of Nurses in the State Home Program\" a November 2008 EPA rule on \"Petroleum Refinery Residual Risk Standards\" a December 2008 Office of Personnel Management (OPM) and DOD rule on the \"National Security Personnel System\" an August 2008 Social Security Administration (SSA) rule on \"Authorization of Representative Fees\" a January 2009 GSA rule on \"Federal Supply Schedule Contracting\"\nTable 1 also shows that the agencies differed in the extent to which they used the Unified Agenda to notify the public about upcoming proposed rules. For example, HHS published related \"proposed rule\" entries in the Unified Agenda before publishing 27 of the department's 30 NPRMs (90.0%), and EPA did so before publishing 25 of its 27 proposed rules (92.6%). On the other hand, DOD published \"proposed rule\" entries regarding 4 of its 12 NPRMs (33.3%), and OPM did so for 10 of its 20 proposed rules (50.0%).\nIn many cases, the agencies published multiple \"proposed rule\" entries in the Unified Agenda before they published the related NPRM. For example, a December 1, 2008, DOT proposed rule on a \"National Registry of Certified Medical Examiners\" was preceded by \"proposed rule\" entries in the spring and fall editions of the Unified Agenda for 2006, 2007, and 2008. Likewise, HHS published \"proposed rule\" entries regarding its September 18, 2008, NPRM on \"Label Requirement for Food That Has Been Refused Admission Into the United States\" in at least four previous editions of the Agenda. USDA published \"proposed rule entries regarding its March 27, 2008, NPRM on the \"Child and Adult Food Program\" in 14 consecutive semiannual editions of the Unified Agenda between 2001 and 2008. In these and other cases, the public was alerted well in advance that the agencies would be publishing the proposed rules.\nIn some cases, even though the agencies had published \"proposed rule\" entries in the Unified Agenda before they published the related NPRMs, those entries were arguably too late to serve as useful notice to the public, and were sometimes significantly after the rule had been approved by the agencies and submitted to OIRA for review. See, for example, the following:\nEPA published a proposed rule on \"Oil Pollution Prevention; Non-Transportation Related Onshore Facilities\" on November 26, 2008. The first Unified Agenda entry for this NPRM was published two days earlier on November 24, 2008—but more than 40 days after OIRA began its review of the proposed rule. DHS published a proposed rule on \"Changing the Period of Time for Admission or Extension of Stay from One Year to Three for TN Nonimmigrants\" on May 9, 2008. The first Unified Agenda entry for this NPRM was published four days earlier on May 5, 2008—but 30 days after OIRA began its review of the proposed rule. DOL published a proposed rule on \"Labor Organization Annual Financial Reports\" on May 12, 2008. The first Unified Agenda entry for this NPRM was published seven days earlier on May 5, 2008—but more than 60 days after OIRA began its review of the proposed rule. DOD published a proposed rule on \"Defense Support of Civil Authorities\" on December 4, 2008. The first Unified Agenda entry for this NPRM was published 10 days earlier on November 24, 2008—but nearly two months after the rule was submitted to OIRA for review.\nIn other cases, even though the agency published an entry in the Unified Agenda before OIRA's review and before the NPRM, the public still had little time to react. For example, OPM published a Unified Agenda entry regarding \"Proposed NSPS Joint Regulations\" on May 5, 2008, sent the rule to OIRA for review on May 12, 2008, OIRA completed its review four days later, and the NPRM was published on May 22, 2008. Therefore, the public was alerted to the upcoming proposed rule 7 days before OIRA's review, and 17 days before OPM and DOD published the NPRM.", "The Obama Administration has launched an initiative to make the policymaking process more open and transparent, and has asked for comments from the public on how the rulemaking process in particular can be improved in these respects. Some observers have concluded that the most critical part of that process occurs before the proposed rule is published in the Federal Register , and (for significant rules) possibly even earlier—before the rule is approved by the issuing agency and submitted to OIRA for review. Once a significant rule is submitted to OIRA, and certainly by the time the rule is published in the Federal Register as an NPRM, the issuing agency's position is arguably less likely to change than earlier in the rulemaking process. The White House's deputy chief technology officer has said that, as part of the Obama Administration's transparency and open government initiative, the public will be able to offer comments and suggestions while proposed rules are being developed. However, in order for the public to participate prior to the publication of a proposed rule, or even to begin preparing comments during sometimes brief public comment periods, the public must first become aware that the proposed rule is about to be issued.\nAlthough a variety of methods could be used to accomplish this goal, including blogs and other forms of new \"social media,\" the Unified Agenda—which has been published twice each year since 1983, and online since 1995—arguably provides agencies with the most systematic, government-wide method to alert the public about their upcoming proposed rules. The data examined for this report indicate that federal agencies are frequently using the Agenda to accomplish this goal. About three-quarters of the significant proposed rules that were published after OIRA reviewed the rules in 2008 were preceded by a \"proposed rule\" Unified Agenda entry. Two-thirds of the rules had such entries even earlier, before the draft rules were submitted to OIRA for review under Executive Order 12866. Therefore, by reviewing the most recent edition of the Unified Agenda, particularly shortly after its semiannual publication, the public can often know in advance when a proposed rule is about to be published.\nOn the other hand, there was no \"proposed rule\" Unified Agenda entry for about one-quarter of the proposed rules before they were published in the Federal Register , and there was no such entry before one-third of the rules were submitted to OIRA for review. In these cases, the issuing agencies may have notified the public about their upcoming proposed rules in some other manner (e.g., public meetings or direct notification of affected parties). Also, some proposed rules must be developed quickly, so it is understandable that a Unified Agenda that is published only once every six months would not reflect all upcoming published rules. See, for example, the following:\nUSDA said it issued its August 2008 proposed rule on \"Requirements for the Disposition of Cattle That Become Non-Ambulatory Disabled Following Ante-Mortem Inspection\" in response to a petition for rulemaking that it received in April 2008. To have been included in the previous (May 2008) edition of the Unified Agenda, USDA would have had to submit the Agenda entry to RISC by late March 2008—before the department had received the petition for rulemaking. Therefore, the first Unified Agenda entry for this rule was a \"final rule\" entry in the fall edition of the Agenda (published in November 2008). DOI said that it issued its August 2008 proposed rule amending its regulations governing the viewing of the inaugural parade after a March 20, 2008, district court opinion concluding that the National Park Service's procedures violated its regulations. To have been included in the previous (May 2008) edition of the Unified Agenda, DOI would have had to submit the Agenda entry to RISC within a few days after the court decision. Therefore, the first Unified Agenda entry for this rule was a \"final rule\" entry in the fall edition of the Agenda (published in November 2008).\nIn numerous other cases, however, it is unclear why the agencies did not use the Unified Agenda to alert the public about their upcoming rules. See, for example, the following:\nDOC said it was issuing its December 2008 proposed rule on steel import monitoring because a December 2005 final rule on this issue would expire in March 2009 unless it was extended. The first mention of this rule in the Unified Agenda was as a completed action in the spring 2009 edition (published on May 11, 2009)—five months after the NPRM was published, and nearly two months after the final rule was published in March 2009. HHS said it published its January 2009 proposed rule on payments to sponsors of retiree prescription drug plans based on a change in the agency's interpretation of a particular provision of the Social Security Act. The first Unified Agenda entry for this rule was in May 2009, after the NPRM was published. DOI said it published its April 2008 proposed rule related to firearms in national parks to update regulations previously issued in 1981 and 1983. The first Unified Agenda entry for this rule was in May 2008, after the NPRM was published. DOJ said it published its April 2008 proposed rule on the classification of three steroids pursuant to the Anabolic Steroid Control Act of 2004. The first mention of this proposed rule in the Unified Agenda was in May 2008, after the NPRM was published. VA said it published its April 2008 proposed rule on grants for the hiring and retention of nurses to implement provisions of the Veterans Health Programs Improvement Act of 2004. The only \"proposed rule\" entry for this rule was published in May 2008, after the NPRM was published.\nAlso, federal agencies differed significantly in their use of the Unified Agenda for these rules. Some agencies (e.g., EPA and HHS) almost always published at least one \"proposed rule\" entry in the Unified Agenda before they published the related NPRMs, while other agencies (e.g., DOC, DOD, and OPM) did so about half of the time, or less.", "As noted earlier in this report, Congress and various Presidents have established a number of requirements and processes regarding how agencies are to develop and promulgate proposed rules, including various mechanisms to enable transparency and public participation. Therefore, Congress and the Obama Administration may conclude that those existing mechanisms are sufficient, and that no changes are needed in how the public learns about forthcoming proposed rules. However, should either Congress or the Obama Administration conclude that improvements are needed in the transparency of the rulemaking process, or in opportunities for the public to participate in that process prior to the publication of proposed rules, various policy options are available.\nSome of the available options have nothing to do with the Unified Agenda. For example, either Congress or the President could require or encourage agencies to engage in pre-NPRM communications with the general or affected public through public meetings, ANPRMs, advocacy panels, or other consultative devices. Other alternatives include newer methods of communication that have been suggested by the White House's deputy chief technology officer, including blogs and other forms of \"social media.\" Also, GAO's 2009 report on federal rulemaking discussed tracking systems in place at DOT and other agencies that identified key milestones that the agencies needed to accomplish to produce a final rule. These tracking systems, or elements of these systems, could be made available to the public to disclose when proposed rules are expected to be issued. Finally, agencies could allow the public to sign up to receive notices about upcoming regulatory actions within particular areas.\nAnother set of alternatives could build on an element of the rulemaking infrastructure that has existed for more than 25 years, and use the Unified Agenda to improve participation and transparency prior to notice and comment. If Congress or the President elected to do so, several options within this category are available, either individually or in combination. One such option is to improve the visibility of the Unified Agenda to the public. As noted earlier in this report, other than federal agencies, certain members of academia, and certain interest group representatives, it is unlikely that many members of the general public know that the Unified Agenda exists. Notably, when discussing options for improving pre-NPRM rulemaking transparency and participation at a June 2009 American Bar Association conference, the White House's deputy chief technology officer did not mention the Unified Agenda. To improve the visibility of the Unified Agenda to the public, (1) the OMB \"open government\" directive could identify the Agenda as a way to improve rulemaking transparency and participation, (2) agency websites could provide the public with links to the agency's Agenda entries, and (3) agencies could use press releases to publicize Agenda entries describing upcoming proposed rules. Improvements in the visibility of the Unified Agenda to the general public could help \"level the playing field\" between the public and specialized interest groups who often know well in advance of agencies' forthcoming proposed rules, and are sometimes consulted as part of the rule development process.\nAnother option is to improve federal agencies' use of the Unified Agenda as a transparency mechanism. Although publication of a notice in the Unified Agenda is not always possible before the publication of an NPRM (e.g., when rules must be issued quickly after a precipitating event), the differences in the performances of the agencies and the reasons given for the issuance of some of the rules examined in this report suggest that improvements in this area are possible. In some cases, the agencies appeared to have been developing their proposed rules for years, but still did not use the Unified Agenda to alert the public about the forthcoming rule. To remedy this situation, either Congress or the President could require agencies to publish \"proposed rule\" entries in the Unified Agenda before submitting significant draft rules to OIRA, or to explain why such entries were not possible. This requirement could be enforced by OIRA as part of its review process under Executive Order 12866. While such a requirement could improve transparency and opportunities for participation, it could also have other, more negative effects (e.g., lengthening the rulemaking process, or driving agencies to issue more rules without an NPRM).\nA third option is for Congress or the President to increase the frequency with which the Unified Agenda is published. As noted earlier in this report, the Agenda is currently published twice each year, usually in either April or May, and again in October, November, or December. In order for an agency's entries to appear in the Agenda, they must be submitted to RISC at least one month prior to the date of publication, although a limited number of updates are sometimes possible. As a result of the infrequency of publication and lead times, agencies sometimes publish \"proposed rule\" entries in the Unified Agenda either after or just slightly before the NPRM is published, or publish no entry at all, thereby eliminating or diminishing the Agenda's value as transparency mechanism for the public. If the Unified Agenda was published more frequently (e.g., every quarter), or if the Agenda could be maintained as more of an ongoing, \"real-time\" database, the public could have a better sense of what rules are under development within the agencies.\nFinally, even if all of the above-mentioned options were implemented and the Unified Agenda was made more visible, useful, and timely, the public would often still be unable to file pre-NPRM comments on the Unified Agenda entries. A regulatory \"docket\" serves as the repository for documents or information related to an agency's rulemaking and other activities, and typically contains legal or economic analyses that the agency has prepared and the comments submitted by the public. In the past, paper rulemaking dockets were kept at the agencies. In recent years, however, agencies have been required to use the electronic docketing system at the Regulations.gov website. In that system, agencies are not allowed to establish a rulemaking docket before an NPRM is published in the Federal Register . If agencies could be allowed to establish those dockets when the first Unified Agenda entry is published (and when RIN numbers are assigned), then comments from the public on forthcoming proposed rules could be part of the rulemaking docket.\nUnified Agenda entries on forthcoming proposed rules are necessarily less specific and detailed than the NPRMs. Therefore, any comments on those Agenda entries may also be less specific, and less useful to the issuing agencies, than comments on proposed rules. Nevertheless, the commenting public may have information or perspectives that the issuing agencies would find useful, particularly before the agencies have signed off on the rule or published the NPRM. Even if pre-NPRM comments from the public are not permitted, advance notice of a forthcoming proposed rule can give the public more time to gather information and prepare their comments for submission after the proposed rule is published. This can be particularly important when agencies provide the public with relatively short comment periods (e.g., 30 days, or less). Finally, a revitalized Unified Agenda could serve as a government-wide mechanism for inter-agency coordination, allowing agencies to avoid duplication of effort and conflicting regulatory requirements." ], "depth": [ 0, 1, 1, 2, 2, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h1_full", "h0_title", "", "h0_full", "", "h1_full", "h0_full h1_full", "h2_full" ] }

{ "question": [ "What is the purpose of the initiative launched by the Obama Administration?", "What comments have been made?", "What is the potential role of the public in relation to the rules?", "How can public involvement take place?", "What is included in the Unified Agenda?", "How is the Unified Agenda reviewed to ensure how often tasks are being completed?", "How were these rules presented?", "How are the rules affected by the Federal Register?", "Why are agencies in contact with Unified Agenda?", "How does the Obama Administration's opinion matter?", "What options are separate from the involvement of the Unified Agenda?", "What can the Obama Administration or Congress do for the Unified Agenda?" ], "summary": [ "The Obama Administration has launched an initiative to make the policymaking process more open and transparent, and has asked for comments from the public on how the rulemaking process in particular can be improved in these respects.", "Some observers have concluded that the most critical part of that process occurs before a proposed rule is published in the Federal Register, and (for significant rules) possibly even earlier—before the rule is approved by the issuing agency and submitted to the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget for review pursuant to Executive Order 12866.", "A representative of the Obama Administration has said that the public will be allowed to participate in the development of proposed rules.", "However, in order for the public to do so, or to allow more time to prepare comments during sometimes brief comment periods, the public must first know that the proposed rule is being developed.", "The Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda), which has been published twice each year since 1983, arguably provides federal agencies with the most systematic, government-wide method to alert the public about their upcoming proposed rules.", "To determine how frequently agencies are using the Unified Agenda to perform this task, CRS examined all 231 significant proposed rules that were issued after having been reviewed by OIRA in 2008.", "About three-quarters of those rules were preceded by a \"proposed rule\" Unified Agenda entry (indicating that the agency was developing a proposed rule), and two-thirds of the rules had such entries even earlier, before the rules were submitted to OIRA for review.", "Viewed another way, however, there were no \"proposed rule\" Unified Agenda entries for about one-quarter of the proposed rules before they were published in the Federal Register, and there were no such entries before one-third of the rules were submitted to OIRA for review.", "Some agencies almost always used the Unified Agenda to notify the public about their upcoming proposed rules, while others did so less frequently.", "If Congress or the Obama Administration conclude that improvements are needed in the transparency of the rulemaking process, or in the ability of the public to participate in that process prior to the publication of proposed rules, various policy options are available.", "Some of the options do not involve the Unified Agenda (e.g., greater use of public meetings, blogs, or making agencies' internal rulemaking tracking systems available to the public).", "Also, or alternatively, either Congress or the Obama Administration could take one or more of the following actions: (1) improve the visibility of the Unified Agenda to the public; (2) require agencies to publish \"proposed rule\" entries in the Unified Agenda before submitting their significant draft rules to OIRA, or to explain why such entries were not possible; (3) increase the frequency with which the Unified Agenda is published; and (4) require agencies to establish a rulemaking docket where comments could be placed when the public is notified of an upcoming proposed rule." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, 1, -1, -1, -1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2 ] }

{ "title": [ "Background", "Key Aspects of Support for Families with Special Needs Vary Widely Across the Services, Leading to Potential Gaps in Assistance for Families with Special Needs", "Services Plans", "Resources", "Each Service Has Mechanisms to Monitor EFMP Assignment Coordination and Family Support Activities, but DOD Lacks Common Performance Measures and a Process to Fully Evaluate These Activities Each Service Has Mechanisms to Monitor Assignment Coordination and Family Support", "DOD Has Not Developed Common Performance Measures or Fully Developed a Process for Evaluating the Results of the Services’ Monitoring Activities", "DOD Has Begun to Standardize Procedures", "DOD Does Not Systematically Review the Services’ Monitoring Activities", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Services’ Fiscal Year 2016 Exceptional Family Member Program Data", "Appendix III: Issues Identified by Discussion Group Participants", "Appendix IV: Comments from the Department of Defense", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The EFMP provides support to families with special needs at their current and proposed locations. Servicemembers relocate frequently, generally moving every 3 years if in the Army, Marine Corps, and Navy, and every 4 years if in the Air Force. In fiscal year 2016, the Military Services relocated approximately 39,000 servicemembers enrolled in the EFMP to CONUS installations.\nTo implement DOD’s policy on support for families with special needs, DOD requires each Service to establish its own EFMP for active duty servicemembers. EFMPs are to have three components—identification and enrollment, assignment coordination, and family support.\nIdentification and enrollment: Medical and educational personnel at each installation are responsible for identifying eligible family members with special medical or educational needs to enroll in the EFMP. Once identified by a qualified medical provider, active duty servicemembers are required to enroll in their service’s EFMP. Servicemembers are also required to self-identify when they learn a family member has a qualifying condition.\nAssignment coordination: Before finalizing a servicemember’s assignment to a new location, DOD requires each Military Service to consider any family member’s special needs during this process, including the availability of required medical and special educational services at a new location.\nFamily support: DOD requires each Military Service’s EFMP to include a family support component through which it helps families with special needs identify and gain access to programs and services at their current, as well as proposed, locations. Servicemembers assigned to a joint base would receive family support from the Service that is responsible for leading that installation. For example, an Airman assigned to a joint base where the Army is the lead would receive family support from the Army installation’s EFMP.\nAs required by the NDAA for Fiscal Year 2010, DOD established the Office of Community Support for Military Families with Special Needs (Office of Special Needs or OSN) to develop, implement, and oversee a policy to support these families. Among other things, this policy must (1) address assignment coordination and family support services for families with special needs; (2) incorporate requirements for resources and staffing to ensure appropriate numbers of case managers are available to develop and maintain services plans that support these families; and (3) include requirements regarding the development and continuous updating of a services plan for each military family with special needs. OSN is also responsible for collaborating with the Services to standardize EFMP components as appropriate and for monitoring the Services’ EFMPs. OSN has been delegated the responsibility of implementing DOD’s policy for families with special needs by the Undersecretary of Defense for Personnel and Readiness through the Assistant Secretary for Manpower and Reserve Affairs according to DOD officials. Currently, OSN is administered under the direction of the Deputy Assistant Secretary of Defense for Military Community and Family Policy through the Office of Military Family Readiness Policy. In addition, each Military Service has designated a program manager for its EFMP who is also responsible for working with OSN to implement its EFMP (see fig. 1).\nDOD’s guidance for the EFMP (1) identifies procedures for assignment coordination and family support services; (2) designates the Assistant Secretary of Defense for Manpower and Reserve Affairs as being responsible for monitoring overall EFMP effectiveness; (3) assigns the OSN oversight responsibility for the EFMP, including data review and monitoring; and (4) directs each Service to develop guidance for overseeing compliance with DOD requirements for their EFMP. Table 1 provides an overview of the procedures each Service must establish for the assignment coordination and family support components of the EFMP.\nAs a part of its guidance for monitoring military family readiness programs, DOD also requires each Military Service to certify or accredit its family readiness services, including family support services provided through the EFMP. In addition, DOD states that each Service must balance the need for overarching consistency across EFMPs with the need for each Service to provide family support that is consistent with their specific mission. To accomplish this, each Service is required to jointly work with DOD to develop a performance strategy, which is a plan that assesses the elements of cost, quality, effectiveness, utilization, accessibility, and customer satisfaction for family readiness services. In addition, each Military Service is required to evaluate their family readiness services using performance goals that are linked to valid and reliable measures such as customer satisfaction and cost. DOD also requires each Service to use the results of these evaluations to inform their assessments of the effectiveness of their family readiness services for families with special needs.", "According to DOD officials, each Military Service provides family support services in accordance with DOD guidance as well as Service-specific guidance. However, we found wide variation in each Service’s requirements for family support personnel as well as the practices and expectations of EFMP staff. As a result the type, amount, and frequency of assistance enrolled families receive varies from Service to Service and when a servicemember from one Service is assigned to a joint base led by another Service (see table 2).\nFor example, in terms of a minimum level of contact for families with special needs enrolled in the EFMP, the Services vary in the frequency with which they require family support providers to contact families with special needs:\nThe Marine Corps specifies a frequency (quarterly) with which families with special needs should be contacted by their family support providers.\nThe Air Force has each installation obtain a roster of families with special needs enrolled in the EFMP on a monthly basis, but it does not require family support providers to, for example, use this information to regularly contact these families.\nThe Navy assigns one of three service levels to each family member enrolled in the EFMP. These service levels are based on the needs of each family with special needs; family support providers are responsible for assigning a “service level” that directs the frequency with which the family must be contacted.\nThe Army has no requirements for how often families with special needs should be contacted.\nThe Services also vary as to whether they offer legal assistance to families with special needs as follows:\nThe Marine Corps employs two attorneys who can represent families with special needs who fail to receive special education services from local school districts, as specified in their children’s individualized education programs (IEP). They can also advise EFMP-enrolled families on their rights and options if a family believes their child needs special education services from a local school district (e.g., an IEP).\nThe Air Force, Army, and Navy choose not to employ special education attorneys. Officials with whom we spoke said families with special needs in these Services can receive other types of assistance that may help them resolve special education legal issues. For example, Air Force officials said servicemembers and their families can receive support from attorneys that provide general legal assistance on an installation, Army officials said installation EFMP managers can refer families with special needs to other organizations that provide legal support, and Navy officials said families can find support through working with their installation’s School Liaison Officers.", "The NDAA for Fiscal Year 2010 requires DOD’s policy to include requirements regarding the development and continuous updating of a services plan (SP) for each family with special needs, and DOD has specifically required these plans as part of the provision of family support services. These plans describe the necessary services and support for a family with special needs and document and track progress toward meeting related goals. According to DOD guidance, these plans should also document the support provided to the family, including case notes. In addition, the DOD reference guide for family support providers emphasizes that timely, up-to-date documentation is especially important each time a family relocates, as military families regularly do. Therefore, SPs are an important part of providing family support during the relocation process, and provide a record for the gaining installation. Requiring timely and up-to-date documentation is consistent with federal internal control standards, which state that agencies should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving their objectives. SPs follow families with special needs each time they relocate and without timely and up-to-date documentation, DOD cannot ensure that all families continue to receive required medical and/or special educational services once they relocate to another installation.\nFor every Service the number of SPs was relatively few when compared to the number of servicemembers (known as sponsors) or the number of family members enrolled in the EFMP (see table 3).\nThe Services and OSN provided a range of reasons as to why the Services do not develop and maintain a SP for each family with special needs. For example, Air Force officials said their family support providers consider the needs of each family with special needs before determining whether a SP will help them receive the required services. In addition, Army and Marine Corps officials said they may not develop these plans if families do not request them. Further, according to a Navy official, some families lack the required SPs because installations may not have the staff needed to develop them—even though DOD requires the Services to maintain sufficient staff and certify their EFMPs. OSN officials with whom we spoke also said that the Services may not have developed many SPs during fiscal year 2016 because DOD had not yet approved a standardized form that could be used to meet this requirement. Finally, OSN officials also said that each family with special needs enrolled in the EFMP may not need a SP because their condition does not require this type of family support.", "To meet requirements of the NDAA for Fiscal Year 2010, in April 2017, DOD issued to the Services guidance that directed them to “rogram, budget, and allocate sufficient funds and other resources, including staffing,” to meet DOD’s policy objectives for the EFMP. According to OSN officials, DOD relies on each Service to determine what level of funds and resources is sufficient and what constitutes an appropriate number of family support personnel. To determine family support providers and related personnel staffing levels, the Service officials with whom we spoke said they consider a number of factors, including the number of families with special needs enrolled in the EFMP at any given installation (see app. II for more information about the EFMP data by installation). See Table 4 for a summary of EFMP family support providers and other key personnel at CONUS installations.\nAs required by DOD, all of the Services employ family support providers to assist families with special needs. In addition, some Services employ additional personnel to support implementation of the EFMP (see sidebar). For example, the Air Force employs family support coordinators to administer its EFMP and no other personnel are dedicated to assisting these coordinators or enrolled families. The Army employs “system navigators” who provide individualized support to families with special needs at selected installations through its EFMP, as well as other personnel to administer the EFMP. workers at most of its CONUS installations to administer individualized support to families with special needs. In addition, the Marine Corps employs program managers, administrative assistants, as well as training and education outreach specialists.\nThe Navy contracts regional case liaisons and case liaisons at selected CONUS installations to administer individualized support to families with special needs. In addition, the Navy employs collateral duty case liaisons who assist with the delivery of family support services at all other CONUS installations.\nSenior OSN officials said they rely on each Service to determine the extent to which its EFMP complies with DOD’s policy for families with special needs because they consider OSN to be a policy-making organization that is not primarily responsible for assessing compliance. In addition, these officials said the Services need flexibility to implement DOD’s policy for families with special needs because they each have unique needs and the number of enrolled families in the EFMP is constantly changing. However, DOD has not developed a standard for determining the sufficiency of funding and resources each Service allocates for family support. Air Force officials at one of the installations we visited said the Air Force identified the lack of staff and funding to provide individualized support to most families with special needs as an issue. In addition, officials from the Army and Navy said they have not received any guidance from OSN officials about their Service-specific guidance, including requirements for resources and services plans. Further, the Services may not know the extent to which their Service- specific guidance complies with DOD’s policy for families with special needs.\nThe NDAA for Fiscal Year 2010 requires DOD to identify and report annually to the congressional defense committees on gaps in services for military families with special needs and to develop plans to address these gaps. However, DOD’s most recent reports to the congressional defense committees did not address the relatively few SPs being created for families with special needs, or whether the Services are providing sufficient resources to ensure an appropriate number of family support providers. Federal internal control standards require that agencies establish control activities, such as developing clear policies, in order to accomplish agency objectives such as those of the Services’ EFMPs. Without fully identifying and addressing potential gaps in family support across these programs, some families with special needs may not get the assistance they require, particularly when they relocate.", "Each Service monitors EFMP assignment coordination and family support using a variety of mechanisms, such as regularly produced internal data reports. However, DOD has not yet established common performance measures to track the Services’ progress in implementing its standard procedures over time or developed a process to evaluate the overall effectiveness of each Service’s assignment coordination and family support procedures.\nDOD requires each Service to monitor implementation of their EFMP, including their procedures for assignment coordination and family support. To comply with this requirement, each Service has developed guidance that establishes monitoring protocols and assigns oversight responsibilities. Officials from each Service told us they use internal data reports from each installation to monitor assignment coordination and family support.\nTo monitor assignment coordination, officials from each Service told us their headquarters reviews proposed assignment locations for families with special needs enrolled in the EFMP. These officials said monitoring proposed assignment locations helps ensure that enrolled families will be able to access required services at their new installations. In addition, Army officials said each Army unit commander is responsible for tracking the number of families with special needs that have expired enrollment paperwork because it affects assignment coordination worldwide. Several years ago, the Army determined that 25 percent of soldiers (over 13,000) enrolled in the EFMP had expired enrollment paperwork, complicating the task of considering each enrolled family’s special medical or educational needs as part of proposed relocations. In response, in August 2011, the Army revised its policies and procedures for updating enrollment paperwork which would help ensure a family member’s special needs are considered during the assignment coordination process.\nTo monitor family support provided by installations worldwide, each Military Service told us they use a variety of mechanisms (see table 5).\nThe Marine Corps pays particular attention to customer satisfaction. Marine Corps officials told us that every three years Marine Corps headquarters administers a survey of family members enrolled in the EFMP. We previously reported that organizations may be able to increase customer satisfaction by better understanding customer needs and organizing services around those needs. This survey is one of the primary ways Marine Corps headquarters measures customer satisfaction with family support services at installations worldwide. Marine Corps officials also said this survey helps ensure its EFMP is based on the current needs of families with special needs.", "To improve its oversight of the EFMP and implement its policy for families with special needs, DOD, through OSN, has several efforts under way to standardize the Services’ procedures for assignment coordination and family support. However, DOD has not developed common performance measures to monitor its progress toward these efforts and has not developed a process for assessing the Services’ related monitoring activities. Federal internal control standards emphasize the importance of assessing performance over time and evaluating the results of monitoring activities.", "To help improve family member satisfaction by addressing gaps in support that may exist between Services, OSN has begun to standardize procedures for assignment coordination and family support. To date, OSN’s efforts have focused on ensuring each Service’s EFMP considers the needs of family members during the assignment process and helps family members identify and gain access to community resources. According to OSN’s April 2017 Report to Congress, the long-term goal of these efforts is to help ensure that all families with special needs enrolled in the EFMP receive the same level of service regardless of their Military Service affiliation or geographic location. In addition, OSN officials told us its standardized procedures will also help DOD perform required oversight by improving its access to Service-level data and its ability to validate each Service’s monitoring activities.\nTo date, efforts to standardize assignment coordination and family support have included efforts such as developing new family member travel screening forms which will be the official documents used during the assignment coordination process and completing a DOD-wide customer service satisfaction survey on EFMP family support (see table 6).\nDespite its efforts to begin standardizing assignment coordination and family support services, DOD is unable to measure its progress in standardizing assignment coordination and family support procedures for families with special needs and assessing the Services’ performance of these processes because it has not yet developed common metrics for doing so. Federal internal control standards emphasize the importance of agencies assessing performance over time. We have also reported on the importance of federal agencies engaging in large projects using performance metrics to determine how well they are achieving their goals and to identify any areas for improvement. By using performance metrics, decision makers can obtain feedback for improving both policy and operational effectiveness. Additionally, by tracking and developing a baseline for all measures, agencies can better evaluate progress made and whether or not goals are being achieved—thus providing valuable information for oversight by identifying areas of program risk and causes of risks or deficiencies to decision makers. Through our body of work on leading performance management practices, we have identified several attributes of effective performance metrics relevant to OSN’s work (see table 7).\nOSN officials said each Service is currently responsible for assessing the performance of its own EFMP, including the development of Service- specific goals and performance measures. OSN officials said that they recognize the need to continually measure the department’s progress overall in implementing its policy for families with special needs, and are considering ways to do so. They also said they have encountered challenges to developing common performance measures. In addition, OSN officials said its efforts to reach consensus among the Services about performance measures for the overall EFMP are still ongoing because each Service wants to maintain its own measures, and DOD has not required them to reach a consensus. Absent common performance measures, DOD is unlikely to fully determine whether its long-standing efforts to improve support for families with special needs are being implemented as intended.", "DOD requires each Service to monitor its own family readiness programs, including procedures for assignment coordination and family support through the EFMP, but lacks a systematic process to evaluate the results of these monitoring activities. To monitor family readiness services, as required by DOD, each Service must accredit or certify its family support services, including the EFMP, using standards developed by a national accrediting body not less than once every 4 years. In addition, personnel from each Service’s headquarters are required to periodically visit installations as a part of their monitoring activities for assignment coordination, among other things. The Services initially had the Council on Accreditation accredit family support services provided through their installations’ EFMPs using national standards developed for military and family readiness programs, according to the officials with whom we spoke. However, by 2016, each Service was certifying installations’ family support services using standards that meet those of a national accrediting body, Service-specific standards, and best practices. According to officials from each Service with whom we spoke, this occurred due to changes in the funding levels allocated to this activity. Table 8 provides an overview of the certification process currently being used by each Service.\nOSN officials said they do not have an ongoing process to systematically review the results of the Services’ activities, including the certification of EFMPs because they choose to rely on the Services to develop their own monitoring activities and ensure they provide the desired outcomes. In doing so, DOD allows each Service to develop its own processes for certifying installations’ family support services, including the selection of standards. In addition, OSN officials told us that efforts to standardize certification of EFMPs are ongoing because the Military Services have not been able to reach consensus on a set of standards that can be used across DOD for installations’ family support services. Further, OSN has not established a process to assess the results of the Services’ processes for certifying installations’ family support services. Federal standards for internal control state that management should evaluate the results of monitoring efforts—such as those the Services are conducting on their own—to help ensure they meet their strategic goals. The lack of such a process hampers OSN’s ability to monitor the Services’ EFMPs and determine the adequacy of such programs as required by the NDAA for Fiscal Year 2010.", "OSN’s job of developing a policy for families with special needs that will work across DOD’s four Services is challenging given the size, complexity, and mission of the U.S. military. It has had to consider, among other things, the Services’ mission requirements, resource constraints, and the myriad demands on servicemembers and their families during their frequent relocations. Anything that further complicates a relocation—such as not receiving the required family support services for family members with special needs—potentially affects readiness or, at a minimum, makes an already stressful situation worse. By providing little direction on how the Services should provide family support or what the scope of family support services should be, some servicemembers get more—or less—from the EFMP each time they relocate, including when a servicemember from one Service is assigned to a joint base led by another Service.\nBy largely deferring to the Services to design, implement, and monitor their EFMPs’ performance, DOD cannot, as required by the NDAA for Fiscal Year 2010, fully determine the adequacy of the Services’ EFMPs in serving families with special needs, including any gaps in services these families receive, because it has not built a systematic process to do so. Instead, it relies on the Services to self-monitor and address, within each Service, the results of monitoring activities. However, because servicemembers relocate frequently and often depend on the EFMP of a Service other than their own, a view of EFMP performance across all of the Services is essential to ensuring, for example, that relocating servicemembers get consistent EFMP service delivery no matter where they are stationed. Evaluating and developing program improvements based on the results of the Services’ monitoring would help DOD ensure the Services’ EFMPs achieve the desired outcomes and improve its ability to assess the overall effectiveness of the program.", "We are making the following three recommendations to DOD: We recommend the Secretary of Defense direct the Office of Special Needs (OSN) to assess the extent to which each Service is (1) providing sufficient resources for an appropriate number of family support providers, and (2) developing services plans for each family with special needs, and to include these results as part of OSN’s analysis of any gaps in services for military families with special needs in each annual report issued by the Department to the congressional defense committees. (Recommendation 1)\nWe recommend that the Secretary of Defense direct the Office of Special Needs (OSN) to develop common performance metrics for assignment coordination and family support, in accordance with leading practices for performance measurement. (Recommendation 2)\nWe recommend that the Secretary of Defense implement a systematic process for evaluating the results of monitoring activities conducted by each Service’s EFMP. (Recommendation 3)", "We provided a draft of this report to the Department of Defense (DOD) for comment. DOD provided written comments, which are reproduced in appendix IV. DOD also provided technical comments, which we incorporated as appropriate.\nDOD agreed with all three of our recommendations.\nIn its written comments, DOD stated that additional performance metrics need to be developed for assignment coordination and that it is in the process of measuring families’ satisfaction with family support provided through the EFMP. DOD also stated that it is developing plans for evaluating the results of each Service’s monitoring activities for the EFMP.\nWe are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and Education, and other interested parties. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (617) 788-0580 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "The National Defense Authorization Act (NDAA) for Fiscal Year 2017 includes a provision for GAO to assess the effectiveness of the Department of Defense’s (DOD) Exceptional Family Member Programs (EFMP). This report focuses on the assignment coordination and family support components of the EFMP for dependents with special needs and examines: (1) the extent to which each Service has provided family support as required by DOD, and (2) the extent to which the Services monitor and DOD evaluates assignment coordination and family support. To address these objectives, we used a variety of data collection methods. Key methods are described in greater detail below.\nFor both objectives, we reviewed relevant federal laws, regulations, and DOD guidance and documentation that pertain to the EFMP, including the following:\nThe NDAA for Fiscal Year 2010, which established the Office of Special Needs and defined program requirements for assisting families with special needs, including assignment coordination and family support.\nDOD’s guidance for administering the EFMP. We assessed how DOD implements the requirements in the NDAA for Fiscal Year 2010; how each Service implements assignment coordination and family support; and how the Services and DOD monitor assignment coordination and family support using performance measures. Specially, we reviewed DOD Instruction 1315.19 - Exceptional Family Member Program; Service-specific guidance and related documents from the Air Force, Army, Marine Corps, and Navy; and DOD Instruction 1342.22 - Military Family Readiness.\nStandards for internal control in the federal government related to the documentation of responsibilities through policies, performance measures, and evaluating the results of monitoring activities. We compared each Service’s procedures for monitoring assignment coordination and family support to these standards.\nTo determine the extent of the Services’ EFMP family support, we obtained and analyzed fiscal year 2016 EFMP data (the most recent available) for each Service. We reviewed DOD policy to identify data variables that each Service maintains related to its EFMP. We used these data to summarize key characteristics of each Service’s EFMP. The selected variables provided Service-wide and installation-specific EFMP information on, the number of continental United States (CONUS) and outside the continental United States (OCONUS) installations; the number of servicemembers (sponsors) enrolled in the EFMP; the number of family members with special needs enrolled in the EFMP; the number of EFMP family support personnel; and the number of services plans created for families with special needs enrolled in the EFMP.\nWe determined that the selected data variables from each Service are sufficiently reliable for the purposes of providing summary results about family support for fiscal year 2016.\nTo learn more about how the Services implement their EFMPs, we visited seven installations in five states. We selected the seven installations based on their location in states with the largest number of military- connected students in school year 2012-2013 (the most recent available and reliable data) or in states with the largest percentage of students enrolled in U.S. DOD schools as of May 2017, as well as their status as a joint base. At each installation, we interviewed installation officials, EFMP managers, selected family support personnel, and family members and caregivers enrolled in the program. In states we visited that had the largest number of military-connected students, the EFMP personnel we interviewed collectively served 66 percent of students who attend local public schools and 42 percent of the students attending U.S. DOD schools.\nTo obtain illustrative examples about how the EFMP serves families with special needs, we conducted seven group interviews with EFMP-enrolled family members and caregivers (one at each of the seven installations we visited). Using a prepared script, we asked participants to describe how they were identified and enrolled in the EFMP, how they were assigned to new installations, and the types of family support services they received. We also asked about how these services aligned with their family member’s EFMP-eligible condition, the benefits and challenges they experienced, as well as their overall satisfaction. A total of 38 self- selected volunteers participated in the seven group discussions. While the participants in these groups included a variety of family members and caregivers, the number of participants and groups were very small relative to the total number of family members enrolled in the EFMP. Their comments are not intended to represent all EFMP-enrolled family members or caregivers. Other EFMP-enrolled family members and caregivers may have had other experiences with the program during the same period.\nFinally, for both objectives, we conducted interviews with a variety of DOD, Service-level, and nonfederal officials. We spoke with DOD officials from the Office of the Assistant Secretary of Defense–Offices of Manpower and Reserve Affairs, Military Community and Family Policy, Military Family Readiness Policy, and Special Needs. We also spoke with EFMP Managers from Air Force, Army, Marine Corps, and Navy headquarters. We also met with officials from selected national military family advocacy organizations including the National Military Family Association; the Military Family Advisory Network; and the Military Officers Association of America to discuss the EFMP.\nWe conducted this performance audit from February 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Each Service has an Exceptional Family Member Program (EFMP) that provides support to military families with special needs. The tables below present the following information on selected EFMP and family support categories for each Service’s program at continental United States (CONUS) and outside the continental United States (OCONUS) installations in fiscal year 2016:\nCity, state or country;\nNumber of exceptional family members;\nNumber of family support providers (by Full-Time Equivalent);\nNumber of family support provider vacancies;\nNumber of services plans;\nNumber of indirect contacts; and\nNumber of direct contacts.\nThe information below is listed sequentially in alphabetical order by Service.", "We held small group discussions with Exceptional Family Member Program (EFMP) participants at the seven military installations we visited. Family members and caregivers who attended each session reported they had children or spouses with EFMP-eligible conditions. The discussion group participants were self-selected; and their comments are not intended to represent all EFMP -enrolled family members or caregivers in fiscal year 2016. In addition, other EFMP -enrolled family members and caregivers may have had different experiences with the program during the same period. There were a total of 38 participants representing all the Services. The following issues were discussed by one or more participants during the small group discussions at the installations we visited. The issues that emerged relate to the current and future overall effectiveness of the EFMP.\nOverall Satisfaction with EFMP (Discussed by 30 of 38 participants): Measure of participants’ approval of the family support services offered and experience with the EFMP.\nMany participants expressed overall satisfaction with the EFMP.\nSeveral participants expressed dissatisfaction with the EFMP.\nA participant expressed dissatisfaction with the lack of consistency in the provision of family support services (i.e., special education advocacy) across installations.\nSchool Liaison Officers (Discussed by 20 of 38 participants): Serve as the primary point of contact for school-related matters as well as assist military families with school issues.\nSeveral participants noted that they received no response to their request for assistance from their School Liaison Officer or they only received general information.\nSeveral participants said School Liaison Officers were not helpful.\nSome participants found School Liaison Officers were helpful.\nSome participants were unaware of School Liaison Officers being available at their installation and the service(s) they provide.\nA few participants said School Liaison Officers did not follow up on requests for information.\nA participant noted there seems to be a disconnect between family support services provided through the EFMP and services provided by School Liaison Officers.\nFamily Support Personnel (Discussed by 12 of 38 participants): Provide information and referral to military families with special needs.\nSome participants at one installation noted that the EFMP was understaffed.\nSome participants at one installation noted high turnover of family support personnel.\nSome participants noted family support personnel did not provide support for their family with special needs.\nStigma (Discussed by 12 of 38 participants): A perception that participating in the EFMP may limit a soldier’s assignment opportunities and/or compromise career advancement.\nSeveral participants believe there is still stigma associated with participating in the EFMP.\nSome participants said participating in the EFMP has not affected career advancement.\nAssignment Coordination (Discussed by 10 of 38 participants): The assignment of military personnel in a manner consistent with the needs of armed forces that considers locations where care and support for family members with special needs are available.\nSome participants found the assignment coordination process challenging.\nSome participants described limitations with the assignment coordination process.\nA few participants noted there is a lack of information among families with special needs regarding how to express the need for stabilization and /or continuity of care.\nA few participants cited the challenges of assignment coordination as contributing to their decision to retire.\nOne participant commented that the opinion of a medical professional was not reflected in the assignment coordination process.\nSpecial Education Services (Discussed by 10 of 38 participants): The provision of staff capable of assisting families with special needs with special education and disability law advice and/or assistance and attendance at individualized education program (IEP) meetings where appropriate.\nSeveral participants who had a family support provider assist them with preparing for or attending a school-based meeting, including IEP meetings, spoke positively of their experience(s).\nSome participants at one installation agreed that assistance from family support providers during meetings with school officials regarding special education services is helpful.\nA few participants who were unable to get assistance with special education services from the EFMP sought the services of private attorneys at their own expense.\nFamily Support Services (Discussed by 9 of 38 participants): The non-clinical case management delivery of information and referral for families with special needs, including the development and maintenance of a services plan.\nSome participants found that family support providers were helpful.\nSome participants could not identify needed resources or were unaware of the resources or services available to them.\nOne participant noted that the family support provider had minimal contact.\nOne participant said navigating the system can be challenging.\nSurveys (Discussed by 8 of 38 participants): The process of collecting data from a respondent using a structured instrument and survey method to ensure the accurate collection of data.\nSeveral participants noted that they had not or rarely had the opportunity to evaluate the family support services provided through the EFMP.\nOne participant noted that comment cards used by each service are not effective for evaluating the EFMP.\nWarm hand-off (Discussed by 6 of 38 participants): Assistance to identify needed supports or services and facilitating the initial contact or meeting with the next program.\nMany participants at one installation agreed that the warm hand-off process worked well for them.\nSeveral participants said they found the warm hand-off process helpful when moving from one installation to the next.\nOutreach (Discussed by 5 of 38 participants): Developing partnerships with military and civilian agencies and offices (local, state, and national), improving program awareness, providing information updates to families, and hosting and participating in EFMP family events.\nSome participants found it difficult to obtain information regarding the types of family support services that are available.\nA few participants noted that communications regarding the EFMP were not targeted to address their needs.\nA few participants noted communications regarding the EFMP are untimely, (e.g., newsletters not issued periodically).\nJoint Base Family Support Services (Discussed by 1 of 38 participants): Family support services provided by the lead Service of the Joint Base that is different from that of the servicemember enrolled in the EFMP.\nOne participant said that using family support services on joint bases may pose a challenge as each Service has different rules and procedures and as a result provides different types of family support services.", "", "", "", "In addition to the contact named above, Bill MacBlane (Assistant Director), Brian Egger (Analyst-in-Charge), Patricia Donahue, Holly Dye, Robin Marion, James Rebbe, Shelia Thorpe, and Walter Vance made significant contributions to this report. Also contributing to this report were Lucas Alvarez, Bonnie Anderson, Connor Kincaid, Brian Lepore, Daniel Meyer, and Mimi Nguyen." ], "depth": [ 1, 1, 2, 2, 1, 2, 3, 3, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full h1_full", "h0_title h1_title", "", "h0_full h1_full", "h2_title h1_full", "h2_title h1_full", "h2_full h1_full", "h2_full h1_full", "h1_full", "h2_full", "", "", "h0_full", "h0_full", "", "", "", "" ] }

{ "question": [ "What program helps with providing support to families?", "What does the federal law require DOD to do?", "How has the Army and Navy responded?", "What is not there in the DOD's most recent reports?", "What have some services done?", "What is included in each Service?", "What did the GAO find out during their interviews with DOD officials?", "What is an example that illustrates DOD's efforts in better supporting families?", "What is lacking, according to the OSN officials?", "Why is establishing common performance measures imperative?", "What are GAO's recommendations for the DOD?", "How did the DOD respond to these recommendations?" ], "summary": [ "The support provided to families with special needs through the Department of Defense's (DOD) Exceptional Family Member Program (EFMP) varies widely for each branch of Military Service.", "Federal law requires DOD's Office of Special Needs (OSN) to develop a uniform policy that includes requirements for (1) developing and updating a services plan for each family with special needs and (2) resources, such as staffing, to ensure an appropriate number of family support providers.", "However, Army and Navy officials said they have not received feedback from OSN about the extent to which their Service-specific guidance complies.", "In addition, DOD's most recent annual reports to Congress do not indicate the extent to which each Service provides services plans or allocates sufficient resources for family support providers.", "According to GAO's analysis, the Military Services have developed relatively few services plans, and there is wide variation in the number of family support providers employed, which raises questions about potential gaps in services for families with special needs (see table).", "Each Service uses various mechanisms to monitor how servicemembers are assigned to installations (assignment coordination) and obtain family support, but DOD has not established common performance measures to assess these activities.", "DOD has taken steps to better support families with special needs, according to the DOD officials GAO interviewed.", "For example, DOD established a working group to identify gaps in services.", "However, OSN officials said that DOD lacks common performance measures for assignment coordination and family support because the Services have not reached consensus on what those measures should be. In addition, OSN does not have a process to systematically evaluate the results of the Services' monitoring activities.", "Without establishing common performance measures and assessing monitoring activities, DOD will be unable to fully determine the effect of its efforts to better support families with special needs and the adequacy of the Services' EFMPs as required by federal law.", "DOD should assess and report to Congress on the extent to which each Service provides sufficient family support personnel and services plans, develop common performance metrics for assignment coordination and family support, and evaluate the results of the Services' monitoring activities.", "DOD agreed with these recommendations and plans to develop performance metrics for assignment coordination and develop plans to evaluate the Services' monitoring activities." ], "parent_pair_index": [ -1, -1, -1, -1, 3, -1, -1, 1, -1, -1, -1, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 5, 5 ] }

{ "title": [ "Background", "Internal Control Material Weaknesses, Significant Deficiencies, and Other Challenges Pose Risks to Federal Spending Data Quality", "Financial Audits and Readiness Reviews Indicate That Agencies Face Data Quality Issues in Three Broad Areas", "Accounting and Financial Management", "Financial Management Systems", "Information Technology Security and Controls", "Our Previous Work Has Identified Data Limitations in the Award Systems That Provide Data to USASpending.gov", "Federal Procurement Data System-Next Generation (FPDS-NG)", "System for Award Management (SAM)", "Award Submission Portal (ASP)", "FFATA Subaward Reporting System (FSRS)", "Reporting Challenges Related to Implementing DATA Act Guidance Will Affect Data Quality", "OMB Issued Guidance on Reporting Intragovernmental Transactions", "Missing or Incorrect ZIP+4 Information Will Lead to Inconsistent Reporting", "Challenges Exist Linking Financial and Award Data", "OMB Guidance Directs Agencies to Leverage Existing Assurance Processes Despite Known Limitations", "Efforts to Establish Data Governance Structure Are Still at an Early Stage", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Status of GAO’s Recommendations Related to the DATA Act and Data Transparency", "Report GAO-14-476 Data Transparency: Oversight Needed to Address Underreporting and Inconsistencies on Federal Award Website (June 2014)", "Report", "GAO-15-752T DATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed (July 2015)", "Report", "GAO-16-261 DATA Act: Data Standards Established, but More Complete and Timely Guidance Is Needed to Ensure Effective Implementation (January 2016)", "Report", "GAO-16-438 DATA Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of Reducing Recipient Reporting Burden (April 2016)", "Report GAO-16-698 Improvements Needed in Reviewing Agency Implementation Plans and Monitoring Progress (July 2016)", "Report", "Report GAO-17-156 DATA Act: OMB and Treasury Have Issued Additional Guidance and Have Improved Pilot Design but Implementation Challenges Remain", "(December 2016)", "GAO-17-460 DATA Act: Office of Inspector General Reports Help Identify Agencies’ Implementation Challenges", "(April 2017)", "Appendix III: Deficiencies Reported in CFO Act Agencies’ Fiscal Year 2016 Financial Reports That May Affect Data Quality", "Appendix IV: GAO Contacts and Staff Acknowledgements", "GAO Contacts", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "Signed into law on May 9, 2014, the DATA Act expanded on previous federal transparency legislation by requiring the disclosure of federal agency expenditures and linking agency spending information to federal program activities so that both policymakers and the public can more effectively track federal spending. The DATA Act requires government- wide reporting on a greater variety of federal funds, such as budget and financial information, as well as tracking of these funds at multiple points in the federal spending lifecycle. To improve the quality of these data, the act requires that agency-reported award and financial information comply with new data standards established by OMB and Treasury. These standards specify the items to be reported under the DATA Act and define and describe what is to be included in each element with the aim of ensuring that information will be consistent and comparable. The act identifies OMB and Treasury as the two agencies responsible for leading government-wide implementation.\nTwo key components of ensuring the accuracy, completeness, and consistency of federal spending data are OMB releasing policy guidance and Treasury developing technical guidance for the agency submissions and publication of the data required under the act. Toward that end, OMB has taken a number of steps to help agencies meet their reporting requirements, including establishing 57 standardized data element definitions for reporting federal spending information, issuing guidance to operationalize selected standards and clarify agency reporting requirements, and meeting with agencies to assess their readiness to meet the reporting requirements under the act. Specific actions include the following: In May 2015, OMB issued initial guidance to federal agencies on reporting requirements pursuant to the Federal Funding Accountability and Transparency Act (FFATA) as well as the new requirements that agencies must employ pursuant to the DATA Act. The guidance also directs agencies to (1) implement data definition standards for collecting and reporting agency-level and award-level data by May 9, 2017; (2) implement a standard data exchange format for providing data to Treasury to be displayed on USASpending.gov or a successor site; and (3) link agency financial systems with award systems by continuing to use specified unique identification numbers for financial assistance awards and contracts.\nIn May 2016, OMB released guidance on reporting financial and award information required under the act. This guidance addresses (1) reporting financial and award level data, (2) linking agency award and financial systems using a unique award identifier, and (3) assuring that data submitted to Treasury for publication on USASpending.gov are sufficiently valid and reliable.\nIn November 2016, OMB issued additional guidance in response to questions and concerns reported by agencies. This guidance specifies DATA Act reporting responsibilities for intragovernmental transactions, explains how to report financial assistance awards with personally identifiable information, and clarifies the senior accountable official (SAO) assurance process over the data submitted to the DATA Act broker, a system to standardize data formatting and assist reporting agencies in validating their data prior to submission.\nThe May and November 2016 guidance also directs agency SAOs to leverage existing data quality and management controls established in statute, regulations, or federal policy when submitting their assurance over the data.\nIn addition to issuing policy guidance to help agencies meet their reporting requirements under the act, OMB’s Controller and Treasury’s Fiscal Assistant Secretary conducted a series of meetings with CFO Act agencies to obtain information on any challenges that could impede effective implementation and assess agencies’ readiness to report required spending data in May 2017.\nTreasury also led efforts to develop the technical guidance and reporting systems to facilitate agency reporting. In April 2016, Treasury released the DATA Act Information Model Schema (DAIMS), or schema version 1.0, which provides information on how to standardize the way financial assistance awards, contracts and other financial and non-financial data will be collected and reported under the DATA Act. A key component of the reporting framework laid out in the schema is the DATA Act broker. According to Treasury guidance documents, agencies are expected to submit three files sourced from their financial management systems to the broker. The broker is also expected to extract award and sub-award information from existing award reporting systems that currently supply award data (covering federal assistance including grants and loans, as well as procurements) to USASpending.gov.\nThese award reporting systems—including the Federal Procurement Data System-Next Generation (FPDS-NG), System for Award Management (SAM), the Award Submission Portal (ASP), and the FFATA Subaward Reporting System (FSRS)—compile information submitted by agencies and award recipients to report, among other things, procurement and financial assistance award information required under FFATA. A more detailed discussion of the broker and the agency file submission process can be found in our August 2016 correspondence. In addition to developing the schema version 1.0 and the broker, Treasury also issued an implementation playbook that outlines 8 steps and a recommended timeline for agency implementation, and hosted multiple meetings, including weekly office hour calls and monthly technical workshops, to help agencies prepare and test their data for submission to the broker.\nTo help improve the quality of the data, the act also requires agencies’ IGs and GAO to assess and report on the completeness, timeliness, quality, and accuracy of spending data submitted by federal agencies. The first IG reports were due to Congress in November 2016. However, agencies are not required to submit spending data in compliance with the act until May 2017. As a result, the IGs did not report on the spending data in November 2016. The Council of the Inspectors General on Integrity and Efficiency (CIGIE) developed an approach to address what it describes as the IG reporting date anomaly and maintain early IG engagement with the agencies.\nCIGIE encouraged but did not require the IGs to undertake assessments of their respective agencies’ readiness to submit spending data in accordance with DATA Act requirements and delayed issuance of the mandated audit reports to November 2017. The Federal Audit Executive Council DATA Act Working Group—established by CIGIE to assist the IG community in understanding and meeting its DATA Act oversight requirements—issued the DATA Act Readiness Review Guide (version 2.0) on June 2, 2016, to guide IGs in conducting their readiness reviews.\nAccording to the review guide, the main objectives of the IG readiness reviews are to assess whether an agency’s DATA Act implementation plan or process is “on track to meet the requirements of the DATA Act,” and to provide, as needed, recommendations or suggestions on how to improve the agency’s likelihood of compliance with the requirements of the DATA Act.", "", "As of February 2017, 22 of the 24 CFO Act agencies had issued annual financial reports for fiscal year 2016 and 19 of the 22 CFO Act agencies’ auditors reported material weaknesses and/or significant deficiencies in internal control over financial reporting in their audit reports that may affect the quality of information reported under the DATA Act. In addition, as of February 2017, 20 of the 24 CFO Act agencies’ IGs had issued readiness review reports. Of these, 16 IGs identified a range of issues and challenges which may affect agencies’ abilities to produce quality data for submission to Treasury as part of the DATA Act reporting requirements.\nFurther, 9 of the 22 CFO Act agencies’ auditors reported agencies’ financial management systems did not substantially comply with Section 803(a) of FFMIA, which may limit an agency’s ability to provide reliable and timely financial information for managing day-to-day operations and to produce reliable financial statements, maintain effective internal control, and comply with legal and regulatory requirements, including the DATA Act.\nOur analysis of material weaknesses, significant deficiencies, and other challenges reported in agency annual financial reports and agency IGs’ DATA Act readiness reviews identified data quality issues and challenges in three broad areas that increase the risk agencies may not be able to report complete, timely, and accurate data as required under the DATA Act by May 2017.", "These issues and challenges relate to internal controls over financial reporting and financial management operations, properly recorded and reconciled accounting balances and transactions, and other issues related to the proper use of accounting practices in accordance with U.S. generally accepted accounting principles. Fourteen of the 22 CFO Act agencies’ auditor’s reports noted material weaknesses and significant deficiencies, and 14 of the 20 IG readiness reviews reported issues or challenges related to accounting and financial management. See appendix III for a list of agencies that had deficiencies in this area.\nAccording to some of the auditor’s reports, issues in this area could result in misstatements in budgetary balances, obligations, and undelivered orders—which are part of the information to be posted on USASpending.gov. Some examples include the following:\nOne agency’s auditor reported a material weakness in controls over financial management related to the maintenance of accounting records, recording obligations at the transaction level, and accounting and internal controls over obligations and undelivered orders. The auditor also reported a significant deficiency related to ineffective monitoring and reviewing, and inappropriate certification as to the validity of obligation balances, which resulted in invalid obligations remaining open. According to the auditor, these deficiencies restrict the availability of funding authority, and increase the risk of misstating obligation balances as of year-end. These types of issues increase the risk that quarterly obligation amounts reported by agencies under DATA Act requirements may be inaccurate or incomplete.\nAnother agency’s IG readiness review reported that the various layers of data validation and reconciliation involved in the agency’s DATA Act implementation are complex and require coordination with each reporting bureau. According to the agency’s IG, the complexities of performing reconciliations of reported data to source systems presents a challenge to the agency’s ability to ensure the quality and validity of data reported.", "This set of issues included longstanding challenges with disparate or antiquated financial management systems that affect financial reporting. These challenges include system infrastructure and integration issues such as systems that do not consolidate transaction level financial data or do not capture required data elements such as award identifiers used to link financial and non-financial data. Five of the 22 CFO Act agencies’ auditors’ reports noted material weaknesses and significant deficiencies, and 14 of the 20 IG readiness reviews reported issues or challenges related to financial management systems. See appendix III for a list of agencies that had deficiencies in this area.\nAccording to the auditors’ reports, issues in this area may cause ineffective application of controls used to identify and resolve differences in financial information with source systems to help ensure complete, accurate, and timely financial information for DATA Act reporting. Also, according to the IG readiness reviews, issues with agency financial management systems resulted in test file submissions being rejected by the DATA Act broker due to validation errors. Only data that have passed the broker validation and been approved by the SAO is included in USASpending.gov. Data that have not passed the broker validation will not be included, therefore increasing the risk of incomplete or misleading information. Some examples include the following:\nOne agency’s annual financial audit report stated that the agency had not enabled the full functionality of its accounting systems to capture all budgetary accounting events and to automate budgetary reporting procedures. As a result, the agency made numerous manual adjustments related to budgetary resources amounts that were not supported and not properly recorded to the correct general ledger accounts. According to the auditor, manual adjustments increase the risk (1) that budgetary adjustments were unsupported or inconsistently recorded, and (2) of the likelihood of errors in the financial statements. These deficiencies increase the risk that budgetary information that will be submitted to USASpending.gov may be incomplete and inaccurate.\nAnother agency’s IG readiness review reported that the agency faced challenges due to legacy and current financial systems using different technologies and data elements. Limited resources, such as lack of financial resources and human capital necessary to implement the act’s requirements, was also cited as a challenge. The IG also reported that the agency had been unable to resolve data quality issues that have impeded the complete and accurate reporting of departmental contract, grant, loan, and other financial assistance awards in USASpending.gov.\nFinally, according to the auditor’s reports, 9 of the 22 CFO Act agencies’ auditors reported agencies’ financial management systems did not substantially comply with 1 or more of the 3 requirements found in section 803(a) of FFMIA. Section 803(a) of FFMIA requires: (1) federal financial management systems requirements; (2) applicable federal accounting standards; and (3) the U.S. Standard General Ledger (USSGL) at the transaction level.\nEight of 22 agencies did not comply with federal financial management system requirements, which consist of reliable financial reporting; effective, efficient, and cost effective financial operations; safeguarding resources; and internal controls over financial reporting and financial system security. Four of 22 agencies did not comply with federal accounting standards, which provide guidance to improve federal financial reporting and are essential for public accountability and the effective and efficient functioning of government. Five of 22 agencies did not comply with the USSGL at the transaction level which means that each time an approved transaction is recorded in the financial management system it will generate the appropriate general ledger accounts for posting the transaction in accordance with the rules defined in USSGL guidance. By not implementing effective internal controls over financial management systems and not adequately implementing requirements in section 803(a) of FFMIA, agencies will be challenged to provide consistent financial and non-financial information across component entities and functions, which increases the risk that agencies may not be able to submit quality data for DATA Act reporting.", "The third area consists of issues involving security over information technology (IT) systems; improper access controls to limit users to systems and functions needed for their work; and system configurations such as outdated system software, patch management, and lack of compliance with internal policies. Issues involving IT security and ineffective controls could limit management’s ability to provide assurance over the completeness and accuracy of recorded transactions. Eighteen of the 22 CFO Act agencies’ auditors’ reports noted material weaknesses and significant deficiencies related to IT security and controls. See appendix III for a list of agencies that had deficiencies in this area. The IG readiness reviews, which primarily focused on other steps taken by agencies to implement the DATA Act, did not specifically mention challenges or issues related to IT security and controls.\nAccording to the auditors’ reports, issues in this area increase the risk that unauthorized and/or inappropriate changes made either accidentally or intentionally to financial IT systems may go undetected by management, increasing the risk of misstatement due to fraud and disruption of critical financial operations, as well as increasing the risk that the reliability and integrity of agencies’ data could be compromised and adversely affect the agencies’ ability to provide complete, accurate, and timely information for DATA Act reporting. One example iss the following:\nOne agency’s annual financial audit report stated that controls over access to programs and data and audit logs were not designed properly, consistently implemented, or fully effective. The auditor found that database and operating system patches were not documented, authorized or tested prior to implementation into the production environment, a complete and accurate listing of operating system patches could not be generated, and a feeder system was configured incorrectly to assign incorrect invoice acceptance date data, among other things. According to the auditor, these deficiencies increase the risk that unscrupulous, unauthorized, or inappropriate activity could be performed and not detected, which could lead to a compromise and/or security risk to the confidentiality, integrity, and availability of the data and systems. These issues also increase the risk that financial and non-financial information that will be submitted to USASpending.gov may be incomplete, inaccurate, and untimely.", "We have previously reported weaknesses, issues, and other challenges in key DATA Act award systems which increase the risk that the data that will be submitted to USASpending.gov may not be complete, accurate, and timely. The DATA Act broker is expected to extract award and sub- award information related to federal spending, such as federal assistance—including grants, loans, and procurements—directly from four award systems. The four award systems and related issues that we have previously identified are described below. Unlike the data submitted by agencies directly from their financial systems to the DATA Act broker, the award and sub-award information extracted from these four systems are not subject to any validations in the broker.", "Since 1978, FPDS-NG has been the primary government-wide central repository for procurement data, and feeds certain data to USASpending.gov—a searchable database of information on federal contracts and other government assistance such as grants and cooperative agreements. Individuals and entities awarded contracts over the micro-purchase threshold must submit detailed contract information to FPDS-NG. FPDS-NG includes information about the product or service, agency and vendor information, contract start and expiration dates, and location of contract performance, among other elements. According to Treasury officials, the DATA Act broker will extract procurement award and awardee information such as award description, amount, and awardee unique identifier from FPDS-NG to be reported on USASpending.gov.\nIn our past work, we found that FPDS-NG often contains inaccurate or incomplete data as agencies do not always input or document required information. For example, in September 2016, our review of the Department of Veterans Affairs (VA) contracting policies and procedures found that total obligations balances reflected in VA’s subsidiary accounting records did not match what was recorded in FPDS-NG. We also identified inaccurate data in FPDS-NG such as misclassified 8(a) firms and incorrect obligations balances in our March 2016 review of the Small Business Administration’s (SBA) 8(a) Business Development Program.\nFurther, our prior work on FPDS-NG also found data limitations with the system’s inability to identify more than one type of service purchased for each contract action. According to some of the IG reports we reviewed, these data quality issues were the result of human error, the lack of departmental internal controls to reasonably assure required procurement information is properly recorded in departmental systems and FPDS-NG, and limitations with the FPDS-NG functionality such as the inability to change incorrect data identified in FPDS-NG. These issues increase the risk that data reported from FPDS-NG to the Treasury data store will not be complete, accurate, and timely.", "SAM is the primary U.S. government repository for prospective federal awardee and federal awardee information, and the centralized Government system for certain contracts and grants. All entities that wish to do business with the government are to maintain an active registration in SAM unless exempt. As part of this registration, awardees register a name, unique identifier, address, and executive compensation information—all of which are required DATA Act standardized data elements. SAM also populates the entity name and address (street, city, state, congressional district, ZIP Code, and country) in FPDS-NG and certain executive compensation and other sub-awardee information is prepopulated from SAM to FSRS prior to the prime awardee’s reporting.\nWe have previously identified data limitations with SAM that may affect DATA Act reporting. For example, in January 2017, we found that SAM did not contain information on lessors that listed physical or mailing addresses in China. Our work also found that certain information disclosed in SAM is not validated. If the addresses for foreign awardees are not recorded in SAM, then they will not be displayed in USASpending.gov for access by the public, resulting in incomplete and inaccurate awardee data for DATA Act reporting. We further noted that prior to November 1, 2014, the General Services Administration (GSA) was not required to collect certain information from lessors through SAM, such as the parent, subsidiary, or successor entities to the lessor.\nIn addition, our June 2014 review of USASpending.gov found that ZIP Code information for awardees—which is provided by SAM—was one of the data elements that were significantly inconsistent with information in agency records. In that report, we recommended clarified guidance on agency maintenance of authoritative records adequate to verify the accuracy of required data reported for use by USASpending.gov to improve the completeness and accuracy of data submissions. Although some progress has been made by the related agencies, the recommendations related to this report remain unresolved. These data limitations increase the risk that federal agencies may not submit quality awardee data for DATA Act reporting.", "ASP is the system used by federal agencies to report financial assistance data (e.g., grants) to USASpending.gov. According to Treasury, the DATA Act broker will extract financial assistance award information from the ASP—including awardee unique identifier, award characteristics, awards amount, awardee legal identify name, and address for financial assistance—all of which are required by the DATA Act to be reported.\nIn December 2016, we reported that the DATA Act broker will not validate the accuracy of data extracted from the ASP and that according to Treasury officials ASP does apply some validation checks to the data submitted by federal agencies. In addition, ASP rejects individual records that fail 10 percent of the validation requirements. ASP also rejects entire file submissions if more than 10 percent of the records in the file submission fail validation checks. However, ASP partially accepts the file submission if less than 10 percent of the records in a file submission fail validation checks. The effectiveness of this validation process to prevent the submission of erroneous records raises concerns regarding the quality of awardee data that can be submitted for DATA Act reporting.", "FSRS allows prime grant award and prime contract recipients to report sub-award activity including executive compensation, and provides data on first-tier sub-awards reported by prime recipients. FSRS was created as a result of FFATA and became active in July 2010. Prime awardees must register and report sub-award information for first-tier sub-awardees, including award and entity information, such as Data Universal Numbering System (DUNS) identification numbers. FSRS contains the small business status of some subcontractors, but only for limited types of small businesses. The sub-awardee provides all of the information required for reporting to the prime awardee. This includes sub-awardee entity information, sub-awardee unique identifier, and relevant executive compensation data, if applicable. These are also DATA Act standardized data elements required to be reported.\nIn June 2014, we reported that we could not verify the subcontract data in FSRS as agencies frequently do not maintain the records necessary to verify the information reported by the awardees. We also found inconsistencies in the reporting of 20 of 21 data elements caused by errors in data entry, missing data, or lack of clear guidance. In our report, we recommended clarified guidance on agency maintenance of authoritative records adequate to verify the accuracy of required data reported for use by USASpending.gov. Our recommendation on this issue remains unresolved. These issues increase the risk that federal agencies may not submit complete, accurate, and timely sub-award data for DATA Act reporting.", "", "As agencies prepare to submit required financial and award information in May 2017, they have identified a number of reporting challenges that will affect the quality of data posted on USASpending.gov. Both OMB and Treasury acknowledged that these challenges are unlikely to be resolved before the first statutory deadline when data are collected in compliance with the act. Included in these challenges is how agencies are to report certain intragovernmental transactions that result from financial activities between federal government agencies. Specifically, in order to properly present the financial balances and activities of the federal government, the reciprocating balances and activities between the agencies should be offset and result in a zero balance.\nReconciling intragovernmental transactions for financial reporting purposes is a longstanding and government-wide challenge. Federal accounting standards, laws, regulations, and policies govern the accounting, reporting, and business rules for each of the categories and subcategories of intragovernmental transactions. Our annual audits of the U.S. government’s consolidated financial statements have identified the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal entities as an impediment that has prevented us from rendering an opinion on the federal government’s accrual-based consolidated financial statements for many years. Our most recent audit found that the amount of unmatched funds from intragovernmental transactions amounted to hundreds of billions of dollars. In response to our previous recommendations, Treasury has continued to actively work with federal agencies and improve its processes to resolve intragovernmental transactions.\nHowever, the guidance OMB developed on how agencies are to report intragovernmental transactions does not appear to leverage the existing processes that Treasury has put in place to resolve on a quarterly basis the differences in intragovernmental transactions between federal agencies. Treasury has implemented a new initiative for identifying and monitoring systemic root causes of intragovernmental differences, in addition to other enhancements to its processes for reporting various aspects of agencies intragovernmental differences between agencies, including the composition of the differences by agency and category of intragovernmental transaction.\nUSDA officials (one of our case example agencies) expressed concern about OMB’s guidance on intragovernmental transactions. Specifically, they told us that without a standard approach for reporting intragovernmental transactions—meaning whether the funding or awarding agency reports them—it is not appropriate for a funding agency to certify award data maintained in an awarding agency’s systems, a DATA Act reporting method allowed after the first data submission. HHS officials (our other case example agency) also expressed concern, and told us that although they will be prepared to report in a manner consistent with the current OMB guidance, they believe that OMB should revisit the guidance because it differs from other reporting requirements.\nTreasury officials told us that they are aware of these challenges, but they do not expect that these issues will be resolved before the May 2017 reporting deadline. These officials also told us that efforts to address longstanding challenges related to reporting intragovernmental transactions are under way, and that they plan to communicate data quality limitations to the public on USASpending.gov. The officials could not provide us with specifics on how they would communicate the limitations but indicated that it would likely be part of the SAO assurance process. OMB officials told us in January 2017 that they are unaware of any outstanding issues on this topic that would require an OMB policy response, and therefore OMB has no plans to issue additional implementation guidance at this time.", "Another reporting challenge identified by agencies involves missing or incorrect ZIP+4 information. OMB guidance requires agencies to validate federal assistance recipient information, including the recipient’s address and ZIP code, against the information in the System for Award Management (SAM) before they submit it to the DATA Act broker. This guidance requires agencies to ensure that award-level data in their systems for financial assistance recipients matches the recipients’ information in SAM. Consistent with OMB guidance, financial assistance recipients are required to register in SAM prior to submitting an application for an award, and OMB staff told us recipients are also required to provide accurate information as part of the terms and conditions of their award agreements. However, according to agency officials, because SAM does not enforce the use of ZIP+4 and agencies’ eligibility procedures may not flag incorrect or missing ZIP+4 information, some recipient records are incomplete or incorrect. In addition, some rural communities do not have ZIP+4 because the U.S. Postal Service (USPS) only assigns 5-digit ZIP codes in those areas.\nAs a result of the requirement that ZIP+4 information be consistent with the USPS address database, Treasury officials told us some agencies are unable to validate their financial assistance award information in the DATA Act broker. For example, USDA officials told us in January 2017 that instituting the ZIP+4 validation rule in the broker as a fatal error rather than just a warning would cause a large number of their financial assistance records to fail and ultimately not be included in data that are displayed on USASpending.gov. In February 2017, Treasury implemented the ZIP+4 validation rule as a fatal error. Treasury officials told us that this was done in an effort to enforce existing requirements and improve data quality.\nTreasury officials said that they examined the scope and seriousness of the problem and determined that it is not significant enough at this time to warrant the policy change that would be required to address it prior to May 2017. According to a Treasury analysis, SAM records that are missing ZIP+4 information represent about 1 percent of the total dollar value of all the awards in SAM. In addition, according to Treasury, SAM records that are missing ZIP+4 because the address has not been assigned a ZIP+4 by USPS represent less than 0.5 percent of the total dollar value of all the awards in SAM.\nTreasury officials acknowledged that missing or invalid ZIP+4 information is a longstanding data quality issue with agency records, but believe that it is one best addressed at the agency level. In March 2017, Treasury officials told us that although they planned to continue to enforce the ZIP+4 requirement through the DATA Act broker, they were developing a workaround for agencies encountering problems.", "Agencies have also reported challenges linking their financial and award data using the unique award identifier. OMB guidance requires agencies to link their agency financial and award data using the unique award identifier. As our work in 2016 showed, agencies continue to report challenges related to integrating their financial and award systems to report under the DATA Act. Some agencies, according to OMB staff, are unable to record unique award identifiers in their financial systems, and may not be able to link financial and award data. This linkage should help policymakers and the public track spending more effectively—one of the objectives of the DATA Act.\nHHS and USDA officials reported in their DATA Act implementation plan updates and confirmed with us that they are using short-term solutions to link their financial and award data to generate and submit a required file by May 2017. They both confirmed they will link their financial and award systems with the unique award identifier when they implement long-term system solutions.\nOMB staff told us that five agencies—the Departments of Defense, Housing and Urban Development, the Interior, and Veterans Affairs, and the Environmental Protection Agency—indicated that they will not fully meet the May 2017 reporting requirements, in part because some of their components have been unable to record unique award identifiers in their financial systems. OMB staff told us that these agencies would be able to report some data, but not all of the award financial information required for agency submissions. Treasury officials told us that they are aware of this issue and have structured the broker so that after providing a warning it will accept agency data submissions, even if they contain significant gaps.\nOMB staff and Treasury officials told us they are creating a mechanism in the broker that will allow agencies to explain reporting anomalies in their data displayed on USASpending.gov. According to Treasury officials, the broker will include a text box for agencies to explain any reporting anomalies related to the data they are submitting and certifying before it is displayed on USASpending.gov. In addition, OMB staff told us they plan to provide agencies with standard language to explain certain reporting discrepancies, such as data that are not aligned as a result of the time it takes between when an agency completes a transaction and when it is recorded in its financial system. OMB staff explained that the purpose of the text boxes is not to provide qualifications about data quality, but to communicate what they believe are legitimate data discrepancies that could be perceived as data quality issues by the public.\nOne of the purposes of the DATA Act is to provide consistent, reliable, and searchable government-wide spending data that are displayed accurately for taxpayers and policymakers on USASpending.gov (or a successor system). Longstanding issues related to agency financial information, systems and internal controls, and reporting challenges related to agency DATA Act report submissions underscore the need for OMB to address our open recommendation to provide additional guidance to address potential clarity, consistency, or data quality issues and for OMB to implement a process for communicating data quality limitations to the public. Information Quality Act (IQA) standards specify that data should have full, accurate, and transparent documentation where appropriate and should identify and disclose data quality issues.\nSimilarly, OMB’s Policies for Federal Agency Public Websites and Digital Services requires that agencies be transparent about the quality of the information that they disseminate and take reasonable steps where practicable to inform users about the quality of disseminated content.\nWe will continue to monitor the implementation of the DATA Act and how OMB, Treasury, and agencies communicate reporting anomalies and data quality limitations.", "Another area of risk to data quality is the agency senior accountable official (SAO) assurance process that leverages assurance processes of existing source systems with known data quality challenges. OMB guidance directs agency SAOs to leverage existing processes when providing assurances over required data submissions. However, during this review we have identified a number of concerns related to the effectiveness of some of these processes.\nOMB guidance directs agencies to match the procurement award data generated in the broker with data in the agency procurement award systems. The guidance also directs agencies to leverage the assurances provided in their annual Federal Procurement Data System- Next Generation (FPDS-NG) Data Verification and Validation reports submitted to OMB. Despite the requirement for agencies to conduct annual verification and validation reviews of the data contained in FPDS- NG, our prior work found that some award data reported on USASpending.gov contained information that was not fully consistent with agency records or was unverifiable due to gaps in agency records.\nOMB guidance also directs agencies to match financial assistance award data generated in the broker against data in their financial assistance award management systems for all award-level data and in SAM for prime awardee information (i.e., subrecipient executive compensation data). Although OMB guidance directs agencies to leverage existing assurance processes for other file submissions, there is no certification or assurance processes for the financial data submitted to the ASP. OMB guidance specifies that OMB is reviewing opportunities to enhance assurances over these data. However, as of March 2017, OMB has not established a timetable for this activity, so it is unclear whether new procedures will be in place in time for agencies to leverage these assurances for their May 2017 report submissions.\nGSA has posted on its website an assurance statement that provides assurance that the risk to federal agency operations, data, and assets resulting from the operation of the common controls of SAM and FSRS information systems are acceptable and meet all the security controls required for DATA Act reporting. According to OMB staff, agencies can rely on data from SAM and FSRS for DATA Act reporting. However, our review of the assurance statement posted on GSA’s website found that the statement focuses on security controls rather than data quality and appears to apply specifically to procurement management. The extent to which this assurance statement will be used by SAOs to provide assurances over the quality of the data for both procurement and financial assistance award information is uncertain. We will continue to monitor this issue moving forward.\nHHS officials told us they are still assessing the GSA assurance statement and its alignment to HHS’s overarching SAO certification. Since the requirements for SAM and FSRS are driven by both the FAR and Title 2 of the Code of Federal Regulations, officials said that HHS is interested in having GSA confirm that the assurance statement covers both procurement and financial assistance. OMB staff told us that agencies should leverage this assurance when certifying their data from these source systems. OMB staff also noted that the agencies are ultimately responsible for the quality of their data submissions. Furthermore, these staff stated that the quality of the information reported directly by awardees to SAM and FSRS is the responsibility of the awardee in accordance with the terms and conditions of their award agreements. The extent to which the GSA assurance statement regarding data integrity in SAM and FSRS will be used by agency SAOs when assuring the quality of their data submissions for May 2017 is unclear since some SAOs were still in the process of making that determination in March 2017. We will revisit this issue after May 2017 once agencies have made their determinations and will examine potential effects for data quality.\nOMB staff explained that the intent of OMB guidance on the SAO assurance process is to hold agency SAOs accountable for the reliability and validity of the data they submit. As discussed in OMB guidance, the SAO assurance process is also intended to leverage existing controls, processes, and procedures outlined in existing policies, regulations, and statutes, such as the internal control requirements outlined in OMB Circular A-123. However, questions regarding these assurance processes raise concerns about whether they will be effective in preventing or detecting data quality issues. They also increase the risk that SAO assurances over agency data quality will be unreliable. OMB staff told us that they are aware of these issues and are still finalizing the SAO assurance process, which they expect to do in time for the May 2017 reporting deadline. Accordingly, we are not making a recommendation at this time but will assess the quality of the assurance process in our future work.", "OMB has taken some actions to improve its data governance framework, but efforts to establish a fully functioning data governance structure are at an early stage with many specifics yet to be worked out. In July 2015, we reported that OMB and Treasury had begun standardizing data elements, but had not established a clear set of institutionalized policies and processes for enforcing data standards or adjudicating necessary changes to existing standards. Establishing a formal framework for providing data governance throughout the lifecycle of developing and implementing standards is key for ensuring that the integrity of data standards is maintained over time. In that report, we recommended that OMB, in collaboration with Treasury, establish a set of clear policies and procedures for developing and maintaining data standards that are consistent with leading practices. OMB and Treasury generally agreed with our recommendation. However, the recommendation remains open.\nIn September 2016, OMB established a Data Standards Committee to focus on clarifying existing data element definitions and identifying the need for new standards. OMB approved a charter for this committee in November 2016. According to the charter, the committee will make recommendations on these topics to OMB, the DATA Act Executive Steering Committee, and federal communities such as the Chief Acquisition Officers Council and the Chief Information Officers Council. The charter states that the committee is an advisory body that is not responsible for approving or operationalizing the data standards. The committee’s membership includes representatives of OMB, Treasury, GSA’s Integrated Award Environment Program Management Office, and federal communities and councils representing various areas of responsibility and expertise. OMB staff told us that the Data Standards Committee will be solely focused on maintaining and updating data standards, including standards used by federal communities but not specifically required under the DATA Act.\nAccording to OMB staff, the Data Standards Committee has held several meetings and plans to produce operating procedures to guide its work but has not yet done so. OMB staff told us that although the committee has reviewed specific data standards, the committee has not made any recommendations regarding these standards, nor has it produced a work plan or timetable for addressing known challenges related to any data standards. While these staff also said that the committee has begun to develop processes and procedures to guide its reviews of data standards, no details or documentation were available beyond the six-page charter.\nAlthough the charter states that the committee will seek to promote transparency by making information on the topics of its proceedings and resulting outcomes available to the public, it has not yet done so. As we have previously reported, one component of good data governance involves establishing a process for consulting with and obtaining agreement from stakeholders, including non-federal stakeholders potentially affected by changes in data standards. Moreover, standards for internal control in the federal government state that management should communicate quality information to external parties so that these parties can help the entity achieve its objectives and address related risks. The DATA Act requires that OMB and Treasury consult with public and private stakeholders in establishing data standards. The charter states that the committee is to make publicly available both the topics of its proceedings and the resulting outcomes. Doing so could allow public and private stakeholders not represented on the committee to provide better informed opinions on new data standards or revisions. Without publicly available information about the committee, these stakeholders may not be able to direct their input toward standards that are under review. OMB staff told us that the committee has not kept records and therefore has no information about its proceedings available to release.\nKeeping records of the Data Standards Committee’s activities and releasing them publicly could facilitate consultation with stakeholders. Actions beyond recordkeeping and public release of information about the committee are needed to address our 2015 recommendation that OMB and Treasury establish a data governance structure consistent with leading practices. The Data Standards Committee may provide a useful forum for collecting stakeholder input. However, additional steps need to be taken to build a data governance structure that fully reflects leading practices.", "Across the federal government, agencies are making final preparations to submit the data required by the DATA Act’s May 2017 deadline. This represents the culmination of almost 3 years of effort by OMB, Treasury, and federal agencies to address the many policy and technical challenges presented by the act’s requirements including the need to standardize data elements across the entire federal government, link data contained in agencies’ financial and award management systems, and expand the type and amount of data to be reported. Their submissions will provide an important initial test of the efficacy of this endeavor.\nLooking forward, attention will increasingly focus on another critical goal of the act—improving the quality of the data being produced and the mechanisms and assurances needed to communicate such information to users. An important component of this will be the first round of mandated reviews agency IGs will conduct later this year, which will include sampling and testing of data quality. However, prior audits and reviews have already identified much about the challenges agencies face in producing quality data. These reviews have identified material weaknesses and significant deficiencies reported in agencies’ financial audits and identified several widespread and longstanding issues that present risks to agencies’ ability to submit quality data for DATA Act reporting. In addition, specific challenges related to the operationalization of the act’s requirements also represent potential risks to data quality. Because of this, it is especially important for the quality assurance and data governance frameworks established by OMB to be robust, transparent, and effective. Users will need such mechanisms to make informed decisions about the nature and limitations of the data being reported. This is essential to the full implementation of the DATA Act and its promise of improving the usefulness of those financial data to Congress, federal managers, and the American people.", "To promote transparency in the development and management of data standards for reporting federal spending, the Director of the Office of Management and Budget should ensure that the Data Standards Committee makes information about the topics of the committee’s proceedings and any resulting outcomes available to the public.", "We provided a draft of this report to the Secretaries of the Departments of Agriculture, Health and Human Services, and Treasury, and the Director of the Office of Management and Budget for review and comment. OMB generally agreed with our recommendation. In addition, OMB, USDA, and Treasury provided technical comments which we incorporated as appropriate. HHS had no comments on the draft report.\nWe are sending copies of this report to the Secretaries of the Departments of Agriculture, Health and Human Services, and Treasury, and the Director of the Office of Management and Budget, as well as interested congressional committees and other interested parties. This report will be available at no charge on our website at http://www.gao.gov.\nIf you or your staff has any questions about this report, please contact J. Christopher Mihm at (202) 512-6806 or [email protected] or Paula M. Rascona at (202) 512-9816 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix IV.", "This review is part of our ongoing effort to provide reports on the progress being made in implementing the Digital Accountability and Transparency Act of 2014 (DATA Act). This review focuses on what is already known about existing challenges that affect the quality of agency financial data as well as issues that will affect data quality as agencies begin to report under the act. More specifically, it addresses the following: (1) risks to data quality related to known material weaknesses and other deficiencies, including internal controls over financial reporting, that have been identified in selected previous audits, reviews, and reports conducted by GAO, inspectors general (IG), and external auditors; (2) risks to data quality related to challenges in operationalizing DATA Act policy and technical guidance; (3) approaches that agencies will use to assure the quality of their data submissions and any associated limitations; and (4) efforts taken to establish a data governance structure. We also update the current status of the Office of Management and Budget’s (OMB) and the Department of the Treasury’s (Treasury) efforts to address our open recommendations related to DATA Act implementation in appendix II.\nTo assess potential risks to data quality related to known material weaknesses and other significant deficiencies, including internal controls over financial reporting, that have been identified in selected previous audits, reviews, and reports conducted by us, IGs, and external auditors, we examined: (1) the extent to which agencies’ independent auditors have reported material weaknesses, significant deficiencies, and other challenges, and (2) the extent to which we previously reported issues with government-wide systems.\nTo describe the extent to which agencies’ independent auditors have disclosed material weaknesses, significant deficiencies, and other challenges, we reviewed 22 of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies’ Performance and Accountability Reports (PAR) or Agency Financial Reports (AFR) for fiscal year 2016 to identify material weaknesses and significant deficiencies reported by independent auditors. Two agencies had not issued a PAR or AFR prior to our cutoff date of February 28, 2017, and therefore were not included in our review. We categorized the material weaknesses and significant deficiencies reported by the independent auditors that could affect the quality of the data submitted by agencies under the DATA Act. We also reviewed these agency reports for any auditor-identified noncompliance with the Federal Financial Management Improvement Act of 1996 (FFMIA) to identify factors that may increase the risk to reporting quality data. In addition, because the DATA Act requires IGs and GAO to assess and report on the completeness, timeliness, quality, and accuracy of data submitted by federal agencies, we reviewed readiness reviews issued by IGs to identify reported issues and challenges that could affect the quality of spending data reported under the DATA Act. Four agency IGs did not conduct a readiness review or their reports were not issued prior to our cutoff date of February 28, 2017, and therefore were not included in our review. To ensure we had a comprehensive understanding of these material weaknesses, significant deficiencies, and other challenges, we analyzed these reported issues to determine the extent to which they may hinder the entities’ abilities to submit complete and accurate spending data and categorized them.\nIn our analysis of agencies’ material weaknesses, significant deficiencies, and other challenges reported by independent auditors, we identified three overall categories that could affect data quality: (1) Accounting and Financial Management, (2) Financial Management Systems, and (3) Information Technology (IT) Security and Controls. We reviewed the auditor reports, PARs, AFRs, and readiness reviews using a data collection instrument to document our assessment of the extent to which the issues identified in these reports fit into the aforementioned categories.\nTo describe the extent to which independent auditors have reported issues with government-wide systems, we reviewed our previous reports to identify reported deficiencies in government-wide systems that could affect the quality of spending data submitted to USASpending.gov. According to Treasury, the source systems include: (1) the Federal Procurement Data System-Next Generation, (2) System for Award Management, (3) the Award Submission Portal, and (4) the Federal Funding Accountability and Transparency Act Subaward Reporting System. Although the conditions observed in these reports may not be present in all federal agencies and systems, they illustrate conditions that increase the risks and effects to agency data quality.\nTo assess the risks to data quality related challenges in operationalizing DATA Act policy and technical guidance during implementation of the act we examined (1) the extent to which selected agencies have been able to submit, validate, and certify their data submissions to the DATA Act broker and any challenges they reported, and the (2) the steps OMB and Treasury have taken to address known reporting challenges.\nTo understand the extent to which agencies have been able to submit, validate, and certify their data submissions we reviewed technical documentation; reviewed experiences at two agencies; interviewed knowledgeable officials from OMB, Treasury, and selected federal agencies; and reviewed past GAO reports to identify data quality issues related to DATA Act implementation. The review of technical documentation included material related to the schema version 1.01 to understand reporting structure, and the broker to understand its functionality and validation processes. We obtained technical documentation from the Federal Spending Transparency public website.\nFor the examination of experiences at agencies, we selected two agencies based on whether they were in compliance with existing federal requirements for federal financial management systems; the type of federal funding provided (such as grants, loans, or procurements); and their status as federal shared service providers for financial management. Based on these selection factors, we chose the U.S. Department of Health and Human Services (HHS), and the U.S. Department of Agriculture (USDA). Although the agencies’ experiences are not generalizable, they illustrate different conditions and challenges under which agencies are implementing the act. These two agencies were also selected for our January and December 2016 reports.\nTo understand the steps OMB and Treasury have taken to address known reporting challenges, we reviewed OMB policy guidance intended to facilitate agency reporting. We also interviewed OMB staff and Treasury officials to obtain information about steps they have taken to respond to previously identified challenges, agency requests for clarification on reporting requirements, and any plans for additional guidance. We also met with OMB staff and Treasury officials to obtain information on the status of efforts to address our previous recommendations related to providing policy and technical guidance.\nTo assess the approach that agencies will use to assure the quality of their data submissions and any associated limitations we (1) reviewed relevant OMB policy guidance; (2) spoke with relevant agency officials; and (3) examined experiences at our two case study agencies, HHS and USDA. We reviewed OMB policy guidance to understand the assurance process agency senior accountable officials (SAO) should follow, including the authoritative sources for each file to be submitted in the DATA Act reporting process. We spoke with OMB staff and Treasury officials to understand the purpose and rationale of parts of the assurance process, and asked about plans for additional guidance. We spoke with HHS and USDA officials, and requested and reviewed documentation where applicable, to understand any concerns they have or challenges they are facing or expect to face during the assurance process.\nTo determine the current status of OMB’s and Treasury’s efforts to implement a data governance structure for the DATA Act, we met with OMB staff and Treasury officials to obtain information on the status of their efforts to address our previous recommendation that they establish such a structure. We reviewed documents provided by OMB, including policy memorandums and the charter of the Data Standards Committee, an advisory body established by OMB as part of its data governance efforts. We also met with representatives of organizations with expertise in data governance to review the key practices we described in our December 2016 report and obtain additional information about how these key practices have been implemented in data governance frameworks.\nWe conducted this performance audit from January 2017 to April 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "Recommendations 1. To improve the completeness and accuracy of data submissions to the USASpending.gov website, the Director of the Office of Management and Budget (OMB), in collaboration with the Department of the Treasury's (Treasury) Fiscal Service, should clarify guidance on (1) agency responsibilities for reporting awards funded by non-annual appropriations; (2) the applicability of USASpending.gov reporting requirements to non-classified awards associated with intelligence operations; (3) the requirement that award titles describe the award's purpose (consistent with our prior recommendation); and (4) agency maintenance of authoritative records adequate to verify the accuracy of required data reported for use by USASpending.gov.\nImplementation Status Open. OMB and Treasury are working to implement the Digital Accountability and Transparency Act of 2014 (DATA Act), which includes several provisions that may address these recommendations once fully implemented. 1) OMB staff said they continue to agree with GAO that additional guidance is needed regarding agency responsibilities for reporting awards funded by non-annual appropriations but have not yet developed this guidance. 2) OMB staff stated that they believe a memorandum issued in November 2016 (M-17-04) addresses the applicability of USASpending.gov reporting requirements to non-classified awards associated with intelligence operations. We reviewed the memorandum and determined that additional guidance is still needed to ensure complete reporting of unclassified awards as required by FFATA. 3) OMB staff have agreed that it will be important to clarify guidance on how agencies can report on award titles to appropriately describe the award’s purposes and noted that they are working on providing additional guidance to agencies as part of their larger DATA Act implementation efforts. 4) OMB released policy guidance in May 2016 (Management Procedures Memorandum (MPM) No. 2016-03) and November 2016 (M-17-04) that identifies the authoritative sources for reporting procurement and award data. However, our review of this policy guidance determined that it does not address the underlying source that can be used to verify the accuracy of non- financial procurement data or any source for data on assistance awards. This recommendation was included in priority recommendation letters sent to OMB by the Comptroller General in July 2016 and Spring 2017.", "Recommendations 2. To improve the completeness and accuracy of data submissions to the USASpending.gov website, the Director of OMB, in collaboration with Treasury's Fiscal Service, should develop and implement a government-wide oversight process to regularly assess the consistency of information reported by federal agencies to the website other than the award amount.\nImplementation Status Open. As part of their DATA Act implementation efforts, OMB issued policy guidance in May 2016 (MPM 2016-03) and November 2016 (M-17-04) that identifies authoritative systems to validate agency spending information. The guidance also directs the DATA Act senior accountable officials (SAO) to provide quarterly assurance over the data reported to USASpending.gov and specifies that this assurance should leverage data quality and management controls established in statute, regulation, and federal government-wide policy and be aligned with the internal control and risk management strategies in Circular A-123. In addition, the DATA Act broker will provide a set of validation rules to further ensure the proper formatting of data submitted to USASpending.gov. In addition, OMB staff stated that they have reviewed reports from agency inspectors general (IG) on DATA Act implementation and plan to use future IG reports on data quality as part of a government-wide monitoring plan. However, OMB has not documented this monitoring plan. OMB staff noted that OMB and Treasury had prioritized linking financial data to award data as a means of addressing the issue of unreported awards we previously identified. We agree that linking financial and award data can help agencies identify gaps in reporting. However, other than citing agencies’ responsibility to certify the accuracy of their data, OMB did not identify any new or revised processes aimed at addressing the accuracy concerns we addressed. This recommendation was included in priority recommendation letters sent to OMB by the Comptroller General in December 2015, July 2016, and Spring 2017.", "1. To ensure that federal program spending data are provided to the public in a transparent, useful, and timely manner, the Director of OMB should accelerate efforts to determine how best to merge DATA Act purposes and requirements with the GPRAMA requirement to produce a federal program inventory.\nOpen. OMB staff told us that they do not expect to be able to identify programs for the purposes of DATA Act reporting until sometime after May 2017. However, they said that they are studying a program definition and alignment to identify a more consistent framework for defining federal agency programs with the aim of improving government-wide comparability and tying programs to spending. The effort is supported by a working group comprised of representatives from the Chief Financial Officers (CFO) community and other federal communities. OMB staff stated that they are incorporating ongoing feedback from this group into OMB’s efforts to identify a framework for defining federal agency programs. This was identified as a high priority recommendation in letters sent from the Comptroller General to the Director of OMB in December 2015, July 2016, and Spring 2017.", "Recommendations 2. To ensure that the integrity of data standards is maintained over time, the Director of OMB, in collaboration with the Secretary of the Treasury, should establish a set of clear policies and processes for developing and maintaining data standards that are consistent with leading practices for data governance.", "1. To help ensure that agencies report consistent and comparable data on federal spending, we recommend that the Director of OMB, in collaboration with the Secretary of the Treasury, provide agencies with additional guidance to address potential clarity, consistency, or quality issues with the definitions for specific data elements including Award Description and Primary Place of Performance and that they clearly document and communicate these actions to agencies providing this data as well as to end-users.\nImplementation Status Open. OMB and Treasury have taken some initial steps to build a data governance structure including conducting interviews with key stakeholders and developing a set of recommendations for decision-making authority. In September 2016, OMB and Treasury took another step toward establishing a data governance structure by creating a new Data Standards Committee that will be responsible for advising OMB and Treasury on new data elements and revisions to established standards. According to OMB staff, the committee has held several meetings but has not yet provided recommendations to OMB. However, more remains to be done. As part of our ongoing feedback to OMB, we shared five key practices that we believe should inform their plans to develop a data governance framework moving forward. This was identified as a high priority recommendation in letters sent from the Comptroller General to the Director of OMB in December 2015 and to the Director of OMB and the Secretary of the Treasury in July 2016 and Spring 2017. Open. In May 2016, OMB issued additional guidance for implementing the DATA Act entitled Implementing the Data- Centric Approach for Reporting Federal Spending Information (Management Procedures Memorandum No. 2016-03). This memorandum provided guidance on new federal prime award reporting requirements, agency assurances, and authoritative sources for reporting. In November 2016, OMB followed this with additional guidance intended to provide clarification on how agencies should: (1) report financial information for awards involving Intragovernmental Transfers (IGTs); (2) report financial assistance award records containing personally identifiable information (PII); and (3) provide agency SAO assurance regarding quarterly submissions to USASpending.gov. OMB staff also stated that they sent an email announcement to agency senior accountable officials to clarify that information submitted to USASpending.gov is subject to plain language requirements. Despite these positive steps, additional guidance is needed to facilitate agency implementation of certain data definitions (such as \"primary place of performance\" and \"award description\") in order to produce consistent and comparable information. We continue to have concerns about whether the guidance provides sufficient detail in areas such as the process for providing assurance on data submissions. This was identified as a high priority recommendation in letters sent from the Comptroller General to the Director of OMB and the Secretary of the Treasury in July 2016 and Spring 2017.", "Recommendations 2. To ensure that federal agencies are able to meet their reporting requirements and timelines, we recommend that the Director of OMB, in collaboration with the Secretary of the Treasury, take steps to align the release of finalized technical guidance, including the DATA Act schema and broker, to the implementation time frames specified in the DATA Act Implementation Playbook.", "1. To enable the development of effective recommendations for reducing reporting burden for contractors, the Director of OMB should ensure that the procurement portion of the pilot reflects leading practices for pilot design.\nImplementation Status Closed–Implemented. OMB and Treasury issued the finalized technical guidance (DATA Act Information Model Schema, version 1.0) in April 2016 intended to provide a stable base for agencies and enterprise resource planning (ERP) vendors to develop data submission plans. Treasury also released an alpha version of the broker in April 2016 and a beta version of the broker in June 2016. On September 30, 2016, Treasury released its latest version of the broker, which it stated was fully capable of performing the key functions of extracting and validating agency data. Following this release, Treasury continued to release broker updates approximately every 2 weeks. The software patches developed by ERP vendors, intended to help agencies submit required data to the broker, were all released by the end of December 2016. This was identified as a high priority recommendation in letters sent from the Comptroller General to the Director of OMB and the Secretary of the Treasury in July 2016. Closed-implemented. Our review of the revised design for the procurement portion of the Section 5 Pilot updated in January 2017 found that it largely reflected all 5 leading practices for effective pilot design. For example, in the revised design OMB provides additional details regarding its assessment methodology, includes a data analysis plan to evaluate pilot results, describes a strategy for two-way stakeholder outreach, and includes additional details on scalability of the pilot design. As a result we are closing this recommendation as implemented.", "Recommendations 1. To help ensure effective government- wide implementation and that complete and consistent spending data will be reported as required by the DATA Act, the Director of OMB, in collaboration with the Secretary of the Treasury, should establish or leverage existing processes and controls to determine the complete population of agencies that are required to report spending data under the DATA Act and make the results of those determinations publicly available. 2. To help ensure effective government- wide implementation and that complete and consistent spending data will be reported as required by the DATA Act, the Director of OMB, in collaboration with the Secretary of the Treasury, should reassess, on a periodic basis, which agencies are required to report spending data under the DATA Act and make appropriate notifications to affected agencies.\nImplementation Status Open. As we previously reported, OMB stated that each agency is responsible for determining whether it is subject to the DATA Act. To help agencies make that determination, OMB published guidance in the form of frequently asked questions and stated that the agencies may consult with OMB for additional counsel. In response to our recommendation, OMB staff told us they have reached out to federal agencies to identify which agencies have determined that they are exempt from reporting under the DATA Act and prepared a list of such agencies. However, OMB has not provided us the list or the procedures for reviewing agency determinations and compiling the results. In addition, OMB has not established procedures for ensuring non-exempt agencies are reporting spending data as required. Finally, OMB has not stated whether it will make the results of the determinations publicly available. Further, additional clarification would improve the usefulness of the frequently asked questions. For example, they state “Any Federal agency submitting data that OMB posts on its SF 133 Report on Budget Execution and Budgetary Resources is required to comply with DATA Act reporting.” However, the SF 133 Report for the third quarter of 2016 includes entities such as the Postal Service which are not required by the DATA Act to report financial and payment information. In explaining the frequently asked questions to us, OMB officials clarified that they meant that an entity is required to report if its data appears on the SF 133 and it meets the applicable statutory definition of agency. The frequently asked questions document does not clearly communicate this two-prong approach. Additionally, OMB’s verbal clarification when meeting with us does not account for those entities that meet the statutory definition of agency and are required by the DATA Act to report financial and payment information but do not appear on the SF 133. This was identified as a high priority recommendation in a letter sent from the Comptroller General to the Director of OMB in Spring 2017. Open. OMB does not have plans to reassess, on a periodic basis, which agencies are required to report spending data under the DATA Act. We continue to believe action on this recommendation is important to effectively implement the DATA Act. This was identified as a high priority recommendation in a letter sent from the Comptroller General to the Director of OMB in Spring 2017.", "Recommendations 3. To help ensure effective implementation of the DATA Act by the agencies and facilitate the further establishment of overall government- wide governance, the Director of OMB, in collaboration with the Secretary of the Treasury, should request that non-Chief Financial Officers Act of 1990 (CFO Act) agencies required to report federal spending data under the DATA Act submit updated implementation plans, including updated timelines and milestones, cost estimates, and risks, to address new technical requirements. 4. To help ensure effective implementation of the DATA Act by the agencies and facilitate the further establishment of overall government- wide governance, the Director of OMB, in collaboration with the Secretary of the Treasury, should assess whether information or plan elements missing from agency implementation plans are needed and ensure that all key implementation plan elements are included in updated implementation plans.\nImplementation Status Open. On June 15, 2016, OMB directed CFO Act agencies to update key components of their implementation plans by August 12, 2016. The requirement did not extend to non-CFO Act agencies. OMB stated that it is monitoring non-CFO Act agencies by providing feedback to non-CFO Act agencies through workshops instead of requesting updated implementation plan information. According to OMB officials, OMB has not followed-up with non-CFO Act agencies or requested updated implementation plan information because they are working with the CFO Act agencies which comprise approximately 90 percent of federal spending. In addition to these outreach efforts, OMB has worked with Treasury to engage with small and independent agencies through weekly phone calls and other forms of communication. However, the DATA Act applies to most federal agencies, and we believe that it is important to monitor smaller agencies’ implementation plans as well as large agencies. This was identified as a high priority recommendation in a letter sent from the Comptroller General to the Director of OMB in Spring 2017. Closed–Implemented. On December 8, 2016, OMB testified that OMB had reviewed implementation plan updates from the 24 CFO Act agencies, which enabled them to track and assess agency progress toward successful implementation and identify areas where subsequent action was needed. OMB also conducted in-person follow-up meetings with nine agencies that reported significant issues to better understand their challenges. We determined that these actions meet the intent of our recommendation.", "Recommendations 1.\nImplementation Status Closed–implemented. In response to our recommendation, OMB has made some revisions to the procurement portion of the pilot design including adding additional explanatory language. Our review of the revised design for the procurement portion of the Section 5 Pilot updated in January 2017 found that it largely reflected all 5 leading practices for effective pilot design. As a result we are closing this recommendation as implemented.", "In order to ensure that the procurement portion of the Section 5 Pilot better reflects leading practices for effective pilot design, the Director of OMB should clearly document in the pilot's design how data collected through the centralized certified payroll reporting portal will be used to test hypotheses related to reducing reporting burden involving other procurement reporting requirements. This should include documenting the extent to which recommendations based on data collected for certified payroll reporting would be scalable to other Federal Acquisition Regulation- required reporting and providing additional details about the methodology that would be used to assess this expanded capability in the future.", "", "OMB and the Secretary of the Treasury establish mechanisms to assess the results of independent audits and reviews of agencies’ compliance with the DATA Act requirements, including those of agency Offices of Inspectors General, to help inform full implementation of the act’s requirements across government.\nOpen. OMB stated that it generally concurred with our recommendation, but noted that OIG readiness reviews are just one of its agency engagement efforts, which also includes reviewing agency implementation plans, holding numerous meetings with the agencies, and requesting regular progress updates on the agencies’ implementation efforts. We recognize that OMB’s efforts to engage regularly with agencies are helpful for monitoring agencies’ implementation. However, it is also important to use information in independent audits and reviews to validate agencies’ progress. This was identified as a high priority recommendation in a letter sent from the Comptroller General to the Director of OMB in Spring 2017.", "Legend: — = not applicable. = Significant deficiency or material weakness identified in deficiency category.\nAgency auditor determined noncompliance with Section 803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA). Agency did not issue its performance and accountability report or agency financial report by February 28, 2017, therefore it was not included in our review. Auditors did not report any material weaknesses or significant deficiencies relevant to Digital Accountability and Transparency Act of 2014 (DATA Act) reporting.", "", "", "In addition to the above contacts, Peter Del Toro (Assistant Director), Michael LaForge (Assistant Director), Kathleen Drennan (Analyst-in- Charge), Theodore Alexander, Maria C. Belaval, Thomas Hackney, Charles Jones, Kirsten Leikem, Robert L. Gebhart, Carroll M. Warfield, Jr., James Skornicki, Sophie Geyer, Mark Canter, James Sweetman, Jr., Andrew J. Stephens, Carl Ramirez and Jenny Chanley made major contributions to this report. Additional members of GAO’s DATA Act Internal Working Group also contributed to the development of this report.", "DATA Act: Office of Inspector General Reports Help Identify Agencies’ Implementation Challenges. GAO-17-460. Washington, D.C.: April 26, 2017.\nDATA Act: Implementation Progresses but Challenges Remain. GAO-17-282T. Washington, D.C.: December 8, 2016.\nDATA Act: OMB and Treasury Have Issued Additional Guidance and Have Improved Pilot Design but Implementation Challenges Remain. GAO-17-156. Washington, D.C.: December 8, 2016.\nDATA Act: Initial Observations on Technical Implementation. GAO-16-824R. Washington, D.C.: August 3, 2016.\nDATA ACT: Improvements Needed in Reviewing Agency Implementation Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29, 2016.\nDATA Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of Reducing Recipient Reporting Burden. GAO-16-438. Washington, D.C.: April 19, 2016.\nDATA Act: Progress Made but Significant Challenges Must Be Addressed to Ensure Full and Effective Implementation. GAO-16-556T. Washington, D.C.: April 19, 2016.\nDATA Act: Data Standards Established, but More Complete and Timely Guidance Is Needed to Ensure Effective Implementation. GAO-16-261. Washington, D.C.: January 29, 2016.\nFederal Spending Accountability: Preserving Capabilities of Recovery Operations Center Could Help Sustain Oversight of Federal Expenditures. GAO-15-814. Washington, D.C.: September 14, 2015.\nDATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July 29, 2015.\nFederal Data Transparency: Effective Implementation of the DATA Act Would Help Address Government-wide Management Challenges and Improve Oversight. GAO-15-241T. Washington, D.C.: December 3, 2014.\nGovernment Efficiency and Effectiveness: Inconsistent Definitions and Information Limit the Usefulness of Federal Program Inventories. GAO-15-83. Washington, D.C.: October 31, 2014.\nData Transparency: Oversight Needed to Address Underreporting and Inconsistencies on Federal Award Website. GAO-14-476. Washington, D.C.: June 30, 2014.\nFederal Data Transparency: Opportunities Remain to Incorporate Lessons Learned as Availability of Spending Data Increases. GAO-13-758. Washington, D.C.: September 12, 2013.\nGovernment Transparency: Efforts to Improve Information on Federal Spending. GAO-12-913T. Washington, D.C.: July 18, 2012.\nElectronic Government: Implementation of the Federal Funding Accountability and Transparency Act of 2006. GAO-10-365. Washington, D.C.: March 12, 2010." ], "depth": [ 1, 1, 2, 3, 3, 3, 2, 3, 3, 3, 3, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 2, 2, 1 ], "alignment": [ "", "h0_title h1_title", "h0_full h1_full", "", "", "", "", "", "", "", "", "h2_title h1_title", "h2_full h1_full", "", "h1_full", "h2_full", "h3_full", "h4_full", "", "", "h0_full h5_full h2_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_full h5_full h1_full" ] }

{ "question": [ "What can create risks to data quality?", "What have reports from financial audits and IG readiness reviews shown?", "How can these issues be categorized?", "What else has been reported on this topic?", "How might challenges with guidance impact data quality?", "How quickly do OMB and Treasury expect to resolve these challenges?", "What may happen if these challenges are not resolved?", "What do these challenges tell us?", "How does the GAO plan to help?", "What is directed by OMB guidance?", "How are these processes viewed by the GAO?", "What are some specific concerns raised by the GAO?", "How has the OMB reacted to these concerns?", "How do these issues affect GAO's recommendation status?", "Why are efforts to establish a data governance structure still at an early stage?", "What has been conducted so far by the OMB?", "What is included in this charter?", "Why is public knowledge of committee activities important?", "Why are agencies rushing to make their final preparations?", "What is the significance of the final preparations?", "How will attention be redirected in the future?", "What is included in GAO's latest report?", "How was this report conducted?" ], "summary": [ "Internal control weaknesses and other challenges pose risks to data quality.", "Material weaknesses and significant deficiencies reported in agencies' financial audits and other challenges reported in Inspectors General (IG) readiness review reports show several widespread and longstanding issues that present risks to agencies' abilities to submit quality data as required by the Digital Accountability and Transparency Act of 2014 (DATA Act).", "These issues fall into three categories: (1) accounting and financial management, (2) financial management systems, and (3) information technology security and controls.", "GAO has also reported weaknesses and challenges in government-wide financial management systems used for DATA Act reporting.", "Challenges related to how agencies report certain intragovernmental transactions, reconcile recipient address information, and align required DATA Act files with missing data continue to present risks to the quality of data displayed on USASpending.gov.", "The Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) have stated that they do not expect to resolve these challenges before the May 2017 reporting deadline.", "Unresolved challenges affecting data quality could lead policymakers and the public to draw inaccurate conclusions from the data.", "This challenge underscores the need for OMB to address GAO's open recommendation that it provide agencies with additional guidance to address data quality issues.", "GAO will continue to assess how OMB, Treasury, and agencies address data quality issues moving forward.", "OMB guidance directs senior accountable officials at each agency to rely on existing assurance processes when they certify that their agencies' DATA Act submissions are valid and reliable.", "However, GAO identified concerns regarding some existing assurance processes.", "For example, OMB directed agencies to use a General Services Administration assurance statement attesting to the quality of data in two source systems, but the assurance statement focuses on data security rather than data quality, and it is unclear whether it applies to both procurement and financial assistance data.", "OMB is aware of these issues and expects to finalize the assurance process in time for the May 2017 reporting deadline.", "Accordingly, GAO is not making a recommendation at this time but will assess the quality of the assurance process in future work.", "OMB has taken some actions to improve its data governance framework, but efforts to establish a fully functioning data governance structure are at an early stage with many specifics yet to be worked out.", "OMB formally chartered the Data Standards Committee as an advisory body in November 2016 to focus on clarifying existing data element definitions and identifying needs for new standards.", "The charter states that the committee will promote transparency by making the topics and outcomes of its proceedings public, but OMB has not kept records of the committee's meetings nor has the committee produced a work plan for moving forward.", "Public information about the committee's activities and outcomes would facilitate consultation with stakeholders, as required by the act.", "Across the federal government, agencies are making final preparations to submit the required data by the DATA Act's May 2017 deadline.", "This represents the culmination of almost 3 years of effort by OMB, Treasury, and federal agencies to address many policy and technical challenges.", "Moving forward, attention will increasingly focus on another critical goal of the act: improving the quality of the data produced.", "This report examines (1) risks to data quality related to known material weaknesses and other deficiencies previously identified by GAO, IGs, and external auditors; (2) risks to data quality related to challenges in operationalizing policy and technical guidance; (3) agencies' assurances of the quality of their data submissions; and (4) efforts taken to establish a data governance structure.", "GAO reviewed DATA Act implementation documents and auditors' reports on known challenges and interviewed staff at OMB, Treasury, and other agencies." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, 1, 0, -1, -1, -1, 1, -1, -1, -1, -1, 1, -1, -1, 0, -1, -1, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 5, 5, 5, 5, 0, 0, 0, 1, 1 ] }

{ "title": [ "", "DWSRF Program Overview", "DWSRF Allotments and Set-Asides", "EPA Reserves", "State Set-Asides and Requirements", "DWSRF Program Appropriations", "Drinking Water Infrastructure Needs", "Lead Service Lines", "Drinking Water Infrastructure Funding Issues", "Congressional Actions", "Water Infrastructure Finance and Innovation Act (WIFIA)", "WIFIA Appropriations", "114th Congress", "Water Infrastructure Improvements for the Nation (WIIN) Act", "DWSRF and Related Infrastructure Bills in the 115th Congress", "America's Water Infrastructure Act of 2018", "Drinking Water Provisions", "WIFIA Provisions", "Clean Water Act Provisions", "Related Drinking Water Infrastructure Legislation", "Reported Legislation", "Introduced Legislation" ], "paragraphs": [ "", "The quality of water delivered by public water systems has been regulated at the federal level since enactment of the 1974 Safe Drinking Water Act (SDWA). Since then, the U.S. Environmental Protection Agency (EPA) has issued regulations for more than 90 contaminants, and all states (except Wyoming) have assumed primary responsibility for administering the federal drinking water program and overseeing public water system compliance. Congress last broadly amended the law in 1996 ( P.L. 104-182 ) in response to criticism that the statute had too little flexibility, too many unfunded mandates, and an arduous but unfocused regulatory schedule.\nAmong the key provisions, the 1996 amendments authorized a Drinking Water State Revolving Fund (DWSRF) program to help public water systems finance improvements needed to comply with federal drinking water regulations and to address the most serious risks to human health. The law authorizes EPA to make grants to states each year to capitalize a state revolving loan fund. Each state must match 20% of its annual capitalization grant. States are authorized to use DWSRF funds to provide financial assistance (primarily subsidized loans) to eligible public water systems for expenditures that EPA has determined, through guidance, will facilitate SDWA compliance or significantly further the act's health protection objectives. More specifically, the law directs each state to develop an intended use plan each year indicating how the allotted funds will be used and requires states to give funding priority to projects that\naddress the most serious human health risks, are necessary to ensure compliance, and assist systems most in need on a per-household basis according to state affordability criteria.\nThe federal grants and state match—combined with funds from loan repayments, leveraged bonds, and other sources—are intended to generate an ongoing source of water infrastructure funding over time. The DWSRF program is patterned after the Clean Water Act State Revolving Fund (CWSRF) program that Congress authorized in 1987 for financing municipal wastewater treatment projects.\nProjects eligible for DWSRF assistance include installation and replacement of treatment facilities, distribution systems, and certain storage facilities. Projects to replace aging infrastructure are eligible if they are needed to maintain compliance or to further health protection goals. Projects to consolidate water supplies and enhance water system security may also be eligible. DWSRF funds may be used for preconstruction activities. They may not be used to pay for operation and maintenance activities or for projects needed primarily to accommodate growth.\nPublic water systems eligible to receive DWSRF assistance include roughly 50,000 community water systems (whether publicly or privately owned) and 17,500 not-for-profit noncommunity water systems. States generally may not provide DWSRF assistance to systems that lack the capacity to ensure compliance with the act or are in significant noncompliance with SDWA requirements unless these systems meet certain conditions to return to compliance. Systems owned by federal agencies are not eligible. Although the law authorizes assistance to privately owned community water systems, some states have laws or policies that preclude privately owned utilities from receiving DWSRF assistance.", "The law directs EPA to allot DWSRF funds among the states based on the results of the most recent quadrennial needs survey (discussed under \" Drinking Water Infrastructure Needs \"), except that each state (including the Commonwealth of Puerto Rico and the District of Columbia) must receive at least 1% of available funds. SDWA authorizes EPA and the states to reserve portions of the available funds for specified purposes.", "Before distributing funds among the states, EPA reserves 2% of the appropriated amounts for grants to Indian tribes and Alaska Native villages for water infrastructure projects. For FY2017, Congress authorized EPA to set aside as much as $20.0 million for these grants. The law also directs EPA to allot grants to the Virgin Islands, the Commonwealth of the Northern Mariana Islands, American Samoa, and Guam, using not more than 0.33% of the funds available for grants to the states. Congress has regularly increased this amount to 1.5% in appropriations acts.\nThe SDWA further directs EPA to set aside from the annual DWSRF appropriation $2.0 million to pay for monitoring of unregulated contaminants in small and medium systems. EPA may reserve up to $30.0 million annually to reimburse states for operator training and certification costs if separate funding is not provided under Section 1419 of the SDWA. EPA reserved the full amount for several years but reserved none after FY2003, as state training programs had matured. To provide technical assistance to small systems, EPA may reserve up to 2% with a $15.0 million cap. However, Congress has appropriated funding for this activity under Section 1442(e), and EPA has not set aside DWSRF funds for this purpose.", "The SDWA also includes several set-asides and directives that apply to the states. These provisions offer states flexibility in tailoring their individual DWSRF programs to address state priorities. They also demonstrate the emphasis that the 1996 amendments placed on enhancing compliance, especially among smaller systems. The act requires states to make available at least 15% of their annual allotment for loan assistance to systems that serve 10,000 or fewer persons to the extent that the funds can be obligated to eligible projects.\nThe act also allows states to use up to 30% of their DWSRF capitalization grants to provide additional assistance, such as forgiveness of loan principal or negative interest rate loans, to help disadvantaged communities (as determined by the state). Through appropriations acts, Congress has frequently required states to provide additional subsidization.\nAmong other set-aside provisions, Section 1452(g) authorizes states to reserve a portion of their annual capitalization grants to cover the costs of administering the DWSRF program. Congress increased the amount states may use for administration purposes in the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322 ), enacted on December 16, 2016.\nStates may use an additional portion to help pay the costs of other SDWA mandates. Specifically, states may set aside as much as 10% for a combination of the following:\nPublic water system supervision programs (Section 1443(a)), Technical assistance through source water protection programs, State capacity development strategies (Section 1420(c)), and Operator certification programs (Section 1419).\nIn the WIIN Act, Congress removed the requirement that, in order to use DWSRF funds for the above four purposes, states were to match expenditures with an equal amount of state funds. Section 1452(g) further authorizes states to use an additional 2% of funds to provide technical assistance to systems that serve 10,000 or fewer persons.\nStates also have the option of using as much as 15% for a combination of the following:\nLoans for the acquisition of land or conservation easements, Loans to implement voluntary source water protection measures, Technical and financial assistance to water systems as part of a capacity development strategy, and Expenditures from the fund for wellhead protection programs.\nExpenditures may not exceed 10% for any one of these activities. Other SDWA provisions separately authorized funds to be appropriated for several of these activities (e.g., wellhead protection provisions, Section 1428). Congress has generally not provided separate appropriations for these activities, leaving states the option to use DWSRF resources for such activities.\nTo further promote public water system compliance, the 1996 amendments added capacity development and operator certification requirements. Section 1420 required states to establish capacity development programs that include (1) legal authority or other means to ensure that new systems have the technical, financial, and managerial capacity to meet SDWA requirements and (2) a strategy to assist existing systems that are experiencing difficulties in coming into compliance. States were also required to adopt programs for training and certifying operators of community and nontransient, noncommunity water systems.\nCongress designed the DWSRF program to give states implementation flexibility. Additionally, Congress provided states flexibility in setting priorities between the DWSRF and CWSRF programs to accommodate the divergent drinking water and wastewater needs and priorities among the states. Section 302(a) of the 1996 SDWA amendments authorized states to transfer as much as 33% of the annual DWSRF allotment to the CWSRF or an equivalent amount from the CWSRF to the DWSRF. The act authorized these transfers through FY2001. In 2000, EPA recommended that Congress continue to authorize transfers between the SRF programs to give states flexibility to address their most pressing water infrastructure needs. Several annual appropriations acts had authorized states to continue to transfer as much as 33% of funds between the two programs, and in P.L. 109-54 , Congress made this authority permanent.", "In the 1996 SDWA amendments, Congress directed EPA to establish the DWSRF program and authorized program appropriations at a level of $599.0 million for FY1994 and $1.0 billion annually for each of FY1995 through FY2003, for a total appropriations authority of $9.6 billion. Although the authorization of appropriations expired in 2003, the program authority has no expiration date, and Congress has continued to provide annual appropriations for the program. Table 1 presents annual appropriations for the program since it began.\nFrom FY2000 through FY2009, annual appropriations for the DWSRF program ranged from $820 million to $850 million. For FY2009, Congress appropriated $829.0 million for the program through regular appropriations. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided another $2.0 billion for infrastructure projects through the DWSRF program, for a total of some $2.83 billion in appropriations for this program for FY2009. For FY2010, in P.L. 111-88 , Congress appropriated $1.39 billion for the DWSRF. For FY2011, the President requested $1.29 billion, and P.L. 112-10 funded the program at $965.0 million ($963.1 million after applying an across-the-board rescission of 0.2%). For FY2012, the President requested $999.0 million, and Congress appropriated $919.4 million in P.L. 112-74 ($917.9 million after applying an across-the-board rescission of 0.16%). In this act, Congress applied Davis-Bacon prevailing wage requirements to DWSRF program funding for FY2012 and all future years.\nFor FY2013, the President requested $850.0 million for the DWSRF program. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), provided full-year continuing appropriations for Interior, EPA, and related agencies through September 30, 2013. After taking into account sequestration and a 0.2% rescission pursuant to P.L. 113-6 , EPA allocated $861.3 million for the program for FY2013. Additional SRF funds were appropriated for FY2013 in the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ): $95.0 million ($100.0 million before sequestration) for the DWSRF program and $475.0 million ($500.0 million before sequestration) for the CWSRF program. These funds were targeted for drinking water and wastewater infrastructure projects in areas of New Jersey and New York affected by Hurricane Sandy.\nFor FY2014, the President requested $817.0 million, and EPA received $906.9 million. The President reduced the request to $757.0 million for FY2015, but Congress again appropriated $906.9 million in P.L. 113-235 . For FY2016, the President requested $1.18 billion for the DWSRF program, and Congress appropriated $863.2 million ( P.L. 114-113 ).\nFor FY2017, the Obama Administration requested $1.02 billion for the DWSRF program. In the Consolidated Appropriations Act, 2017 ( P.L. 115-31 , Division G, Title II), Congress appropriated $863.23 million for DWSRF capitalization grants. P.L. 114-254 included an additional $100 million in DWSRF funding to provide assistance to Flint to address lead in the water system.\nFor FY2018, President Trump requested $863.0 million for the DWSRF program, while Congress provided $1,163.2 million—$300 million above the FY2017 level (excluding $100 million provided to assist Flint). Congress again directed each state to use 20% of its FY2018 grant to provide additional subsidy (e.g., grants) to eligible recipients. Although funding was not requested, Congress also appropriated funds for the three new grant programs authorized in the WIIN Act. For FY2019, the Administration requested $863.23 million for the DWSRF program.\nFrom 1997 through June 2017, cumulative appropriations for the DWSRF program reached $20.03 billion. Adjusted for set-asides and transfers between the clean water and drinking water SRFs, cumulative net federal contributions totaled $19.17 billion. When combined with the 20% state match ($3.71 billion), bond proceeds, loan principal repayments, and other funds, the total DWSRF investment through June 2017 had reached $36.96 billion, and the program had provided more than $35.38 billion in assistance. Over the same period, more than 14,090 projects had received assistance, and 9,836 had been completed.\nIn contrast to direct grants for construction projects—which would not create an ongoing funding source—the revolving fund program was designed to provide seed money to states in the form of capitalization grants to help generate a sustainable source of funding in each state over time.", "To determine how to allot DWSRF funds among the states, SDWA directs EPA to assess the capital improvement needs of eligible public water systems every four years. Concurrently, and in consultation with the Indian Health Service and Indian tribes, EPA must assess needs for drinking water treatment facilities to serve Indian tribes and Alaska Native villages. EPA is required to distribute the DWSRF funds among the states based on the results of the most recent needs survey. Eligible systems include approximately 50,000 community water systems (publicly or privately owned) and 17,500 not-for-profit nontransient, noncommunity water systems.\nIn March 2018, EPA issued the 2015 Drinking Water Needs Survey and Assessment, which presents estimated needs for DWSRF-eligible infrastructure projects for the period 2015-2034. This survey indicates that public water systems need to invest $472.6 billion on infrastructure improvements over 20 years ($19.2 billion annually) to achieve compliance with SDWA drinking water regulations and \"to continue to provide safe drinking water to the public.\" EPA reports that this amount represents an increase of 10% in the estimated total national need compared to the 2011 survey estimate of $384.2 billion ($428.6 billion in 2015 dollars)—with water transmission and distribution projects comprising the largest increase in needs.\nThe 2015 needs survey presents the 20-year needs estimates for DWSRF-eligible projects by category: transmission and distribution, treatment, source, storage, and other. As Figure 1 indicates, the largest needs category—installation and rehabilitation of transmission and distribution systems—accounts for $312.6 billion (66.2%) of total 20-year needs. EPA reports that community water systems have an estimated total of 2.2 million miles of transmission lines and distribution mains. Water treatment needs constituted the next-largest category, accounting for $83.0 billion (17.6%) of total needs, while water storage accounts for $47.6 billion (10.1%), and source—projects needed to obtain safe water supplies, including rehabilitation and installation of wells—accounts for $21.8 billion (4.6%) of total 20-year needs. The 2015 assessment did not specifically break out needs related to water system security improvements. In the 2011 survey, EPA estimated a 20-year need of $235.9 million for security-related projects. For that assessment, EPA concluded that security-related needs may be far greater, because many water systems incorporate these costs into the costs of broader construction projects rather than report them separately.\nThe needs survey also breaks down the 20-year needs estimates according to system size and ownership. The 20-year drinking water infrastructure need for states (including Puerto Rico and the District of Columbia) totaled $463.6 billion. Within that total, the reported needs among community water systems and not-for-profit noncommunity water systems (e.g., schools with their own water wells) broke out as follows:\nLarge community water systems (serving more than 100,000 people): $174.4 billion (36% of the total 20-year need); Medium systems (serving from 3,301 to 100,000 people): $210.6 billion (43.6%); Small systems (serving 3,300 or fewer people): $64.5 billion (17.4%); and Not-for-profit noncommunity systems: $5.1 billion (3%).\nIn addition, the American Indian and Alaska Native village water system needs totaled $3.8 billion. The 20-year needs reported by American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands totaled $669.7 million. EPA estimated that an additional $4.9 million would be needed for systems to comply with proposed and recently promulgated regulations.\nEPA reports that all the infrastructure projects in the needs assessment would promote the health objectives of the act. Within the total needs reported, $57.6 billion (12.2%) is directly attributable to regulatory costs, while $415.0 billion (87.8%) represents nonregulatory costs (e.g., replacing old distribution lines). (See Figure 2 .) Most regulatory funding needs typically involve the upgrade, replacement, or installation of treatment technologies. Most nonregulatory funding needs typically involve installing, upgrading, or replacing transmission and distribution infrastructure to allow a system to continue to deliver safe drinking water. Although these system problems often do not cause a violation of a specific drinking water standard, projects to correct infrastructure problems may be eligible for DWSRF funding if needed to address public health risks.\nEPA noted that the total needs estimate may be conservative for several reasons: (1) systems are required to meet stringent documentation criteria when identifying needs; (2) many systems had not fully evaluated their security needs at the time of the assessment; (3) capital improvement plans often cover fewer than 10 years, while the survey tries to capture 20-year estimates; and (4) the survey is limited to eligible needs, thus excluding water infrastructure projects related to dams, raw water reservoirs, fire protection, operation and maintenance, and future growth.\nEPA also presents drinking water infrastructure needs by state, as shown in Figure 3 . As noted, the act provides that, regardless of needs survey results, each state, the Commonwealth of Puerto Rico, and the District of Columbia is to receive at least 1% of available funds.", "Among other assessments of drinking water infrastructure needs, a 2012 study prepared by the American Water Works Association (AWWA) projected that restoring and expanding water systems to keep up with population growth would require a nationwide investment of at least $1 trillion over the next 25 years. Additionally, the authors of a 2012 AWWA-sponsored analysis of lead service line occurrence estimated that there may be 6.1 million lead service lines nationwide. The AWWA notes that, while progress has been made, removal of these lines could represent an additional $30.0 billion in infrastructure funding needs.\nIn conducting the needs assessment, some public water systems included needs estimates for replacing lead service lines, although EPA has not specifically asked water systems to report the number of lead service lines in their systems. Lacking project-specific data, the needs assessment model assumes that the cost to replace a lead service line is $3,777. Using that figure, EPA provides the following partial estimate:\nBased on data from large and medium systems in the 2015 Assessment and from small systems in the 2007 Assessment, water systems identified needs for replacement of approximately 1.4 million lead service lines over the 20-year period of January 2015 through December 2034. The estimated total cost of replacing these lead service lines is $4.2 billion in 2015 dollars.\nThe survey notes several factors that might affect this estimate. For example, water systems that have lead service lines but control lead in drinking water through corrosion control may not report a need to replace lead service lines.", "Overall, federal spending on drinking water infrastructure represents a small portion of total spending across federal, state, and local governments. The Congressional Budget Office reported that, in 2014, the federal share of total public spending on water and wastewater utilities was 4%, while state and local government expenditures accounted for 94% of all public spending on this infrastructure.\nIn addition to infrastructure needs, other SDWA mandates are eligible for DWSRF funding, thus increasing competition for these resources. The DWSRF program includes competing objectives, and, thus, this competition is perhaps unavoidable. On the one hand, the fundamental purpose of the program is to capitalize revolving funds in the states in order to generate a sustainable source of funding for drinking water projects. On the other hand, Congress authorized multiple set-asides to fund other drinking water program priorities and requirements, such as system compliance-capacity assurance, operator certification, wellhead protection, and small system technical assistance. Overall, states may use as much as 31% of their grants for the set-asides and another 30% to provide additional loan subsidies to disadvantaged communities.\nWhile these options offer states flexibility to tailor their programs to meet their particular needs, using funds for these activities could significantly erode the corpus of state funds and slow the rate at which they become capitalized. A concern for states is that, to the degree that Congress relies on the DWSRF to fund other SDWA requirements—rather than providing separate appropriations—the potential of the DWSRF program is diminished. Moreover, in recent appropriations acts, Congress has added several policy directives not present in the SDWA that may also affect the states' ability to grow or maintain their SRFs. These added provisions include specified additional subsidization requirements for disadvantaged systems, Davis-Bacon prevailing wage requirements, and Buy American (iron and steel) provisions. In FY2010 and subsequent appropriations acts, Congress has mandated that states use a certain portion (usually 20%) of their federal capitalization grants to provide additional subsidies to borrowers. EPA notes:\nThis change allowed states to aid communities most in need and incentivize particular types of projects. Because this subsidy comes from the federal dollars, continued federal support is needed to maintain this benefit and continue growing the fund.\nA chronic issue concerns the need for communities to address drinking water infrastructure requirements outside the scope of the DWSRF program. Communities must typically address several categories of infrastructure requirements that are unrelated to SDWA compliance or public health and, thus, ineligible for DWSRF assistance. These categories include future growth, ongoing rehabilitation, and operation and maintenance of systems. EPA has reported that outdated and deteriorated drinking water infrastructure poses a fundamental long-term threat to drinking water safety and that, in many communities, basic infrastructure costs can far exceed SDWA compliance costs. As reported in EPA's most recent drinking water needs assessment, roughly 12% of the 20-year estimated need is directly related to compliance with SDWA regulations.\nA fundamental question has concerned the long-term federal role in water infrastructure financing. A subset of questions concerns how deficit reduction efforts might affect federal involvement—for example, how deficit reduction objectives might impact proposals to develop a small system grant program or sustainable funding source, such as a water infrastructure trust fund. Other persistent water infrastructure issues include the gap between funding and estimated needs, the growing cost of complying with SDWA standards (particularly for small communities), the ability of small or disadvantaged communities to afford DWSRF financing, and the broader need for cities to maintain, upgrade, and expand infrastructure unrelated to SDWA compliance.", "In the face of large needs, competition for limited federal resources, and debate over the federal role in funding water infrastructure, EPA, states, and communities and utilities have increasingly focused on alternative management and financing strategies to address costs and promote greater financial self-reliance among water systems. Strategies include establishing public-private partnerships, improving asset management, and adopting full-cost pricing for water services. Such approaches are intended to improve the financial and managerial sustainability of water systems. However, they may be limited in their ability to fully meet needs, particularly among poorer communities, small water systems that may lack economies of scale, or communities with declining populations. Consequently, interest in exploring new infrastructure financing options (such as an infrastructure bank) and expanding federal assistance has persisted.", "Deficit reduction pressures are not new to DWSRF appropriations considerations, but statutory spending caps in the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012, placed added constraints on appropriators. The 113 th Congress considered various water infrastructure funding options. As discussed below, one such approach was enacted.\nThe Water Resources Reform and Development Act of 2014 ( P.L. 113-121 , H.R. 3080 ) included in Title V, Subtitle C, the Water Infrastructure Finance and Innovation Act of 2014 (WIFIA). In WIFIA, Congress authorized a pilot loan guarantee program to test the ability of innovative financing tools to promote increased development of, and private investment in, water infrastructure projects—while reducing costs to the federal government. The five-year pilot program is intended to complement—not replace—the SRF programs.\nEligible projects include SRF-eligible projects and a wide range of water resource development projects that generally have costs of at least $20.0 million. Such large projects face difficulty securing significant funding through the SRF programs. Moreover, unlike the SRF programs, WIFIA is not focused on regulatory compliance and, therefore, may be more available for other large-scale water infrastructure projects. For projects serving areas with a population of 25,000 or fewer individuals, eligible projects must have a total cost of at least $5.0 million. Projects financed under this program are subject to Davis-Bacon prevailing wage requirements. Also, WIFIA funds may be used only if all the iron and steel used in a project are produced in the United States (unless this requirement would increase project costs by more than 25%).\nWIFIA authorized to be appropriated to the Secretary of the Interior and the EPA Administrator $20.0 million each for FY2015 and $25.0 million each for FY2016, with amounts increasing annually to $50.0 million each for FY2019.", "For each of FY2015 and FY2016, Congress appropriated $2.2 million for EPA to hire staff and develop the WIFIA program, but no project funds were provided. In the President's FY2016 budget request, EPA noted that it faced a complex task in standing up a new federal loan program. For FY2017, the President requested $20.0 million for EPA to provide WIFIA financing for large drinking water and wastewater infrastructure projects (including administrative costs). The budget request stated that the program goal was to \"accelerate investment in our nation's water and wastewater infrastructure by providing supplemental credit assistance to credit worthy nationally and regionally significant water projects.\" EPA estimated, \"Of the total requested, $15 million in credit subsidy translates into a potential loan capacity of nearly $1 billion to eligible entities for infrastructure projects with the initial loans taking place in FY2017.\"\nIn the Continuing and Security Assistance Appropriations Act of 2017 ( P.L. 114-254 ), Congress provided $20.0 million for EPA to begin providing loan guarantees for infrastructure projects under WIFIA. Also, Congress provided for WIFIA $10 million in the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), for a total of $30.0 million for the program for FY2017. For FY2018, the President requested $20.0 million for WIFIA, and Congress provided $63 million in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 )—$8 million of which is for administrative costs.", "The detection of elevated lead levels in drinking water in Flint, MI, and elsewhere heightened attention to the state of the nation's drinking water infrastructure and the challenges many communities face in addressing their infrastructure needs. The 114 th Congress focused attention on funding levels for and implementation of the DWSRF program as well as EPA efforts to implement WIFIA. Further, numerous bills were introduced to establish new water infrastructure funding sources through grants, a trust fund, and other means and to revise the tax code to promote private sector investment in water infrastructure.\nAn array of proposals were introduced to provide infrastructure funding assistance to Flint to address lead contamination of drinking water associated with old pipes and corrosion problems and, more broadly, to increase water infrastructure funding for communities nationwide.\nAs in previous Congresses, legislation was offered to amend the Internal Revenue Code of 1986 to provide that the volume cap for private activity bonds (PABs) would not apply to bonds for drinking water or wastewater facilities. These tax-exempt bonds provide a financing tool to stimulate private sector investment in public projects. However, federal law imposes state bond caps, limiting the ability of state and local governments to use PABs to finance drinking water and wastewater infrastructure projects.", "Senate-passed S. 2848 , the Water Resources Development Act (WRDA) of 2016, included a number of SDWA and CWA infrastructure provisions and incorporated various bills introduced in response to the Flint water crisis. The House-passed WRDA bill, H.R. 5303 , excluded such EPA provisions and proposed to authorize the U.S. Army Corps of Engineers to provide water infrastructure assistance to certain communities in states subject to presidential emergency declarations as a result of lead or other contaminants in the water system. In lieu of convening a formal conference on these bills, Congress incorporated various provisions of S. 2848 and H.R. 5303 —along with other water resource provisions—into S. 612 , which became the Water Infrastructure Improvements for the Nation (WIIN) Act.\nEnacted on December 16, 2016, the WIIN Act ( P.L. 114-322 ) included an array of water resources, drought, and drinking water provisions. Title II of this wide-ranging water resources law comprises the Water and Waste Act of 2016. Title II, Subtitle B, authorized $100 million in DWSRF funding and other emergency assistance to help Flint address lead in the water system. In P.L. 114-254 , Congress appropriated the funding authorized in the WIIN Act to assist Flint.\nTitle II, Subtitle A, of the WIIN Act made several revisions to the DWSRF program, including requiring that funds made available from a state DWSRF during FY2017 may not be used for water system projects unless all iron and steel products to be used in the project are produced in the United States. (Certain waivers of the requirement are specified.) The act further amended SDWA to direct EPA to establish two new drinking water infrastructure grant programs: New SDWA Section 1459A authorizes grants to provide compliance assistance to small or disadvantaged public water systems, and new Section 1459B authorizes grants for lead reduction projects, including lead service line replacement. For each grant program, Congress authorized to be appropriated $60 million per year for FY2017-FY2021. The act did not reauthorize appropriations for the DWSRF program.\nThe WIIN Act, Section 2107, rewrote SDWA Section 1464 to require EPA to establish a voluntary program for testing for lead in drinking water at schools and child care programs under the jurisdiction of local education agencies. States or local education agencies may apply to EPA for grants to cover testing costs. Appropriations for this grant program are authorized at $20 million per year for FY2017-FY2021. (Funding for the three new grant programs is discussed below.)", "The 115 th Congress continues efforts to address drinking water infrastructure management and investment challenges. Members have introduced bills to increase federal investment in water infrastructure and to promote improved public water system asset management and SDWA compliance capacity. A number of bills would expand DWSRF eligibilities, increase funding authority, and make other revisions to assist communities in making improvements to drinking water infrastructure.", "In the first session of the 115 th Congress, the House Committee on Energy and Commerce favorably reported H.R. 3387 , the Drinking Water System Improvement Act of 2017 ( H.Rept. 115-380 ). In addition to proposing a number of changes to the DWSRF program and authorizing increased appropriations, this broader SDWA authorization bill includes provisions intended to improve public water systems, SDWA compliance, consumer confidence, and drinking water infrastructure quality and resilience. Among other purposes, it would increase funding to address lead in school drinking water and authorize additional assistance for disadvantaged communities.\nOn September 13, 2018, the House passed S. 3021 , amended and renamed as America's Water Infrastructure Act (AWIA) of 2018. Initially passed by the Senate as a courthouse naming bill, the House-passed version of S. 3021 was received by the Senate on September 17, 2018. This omnibus water resources and infrastructure bill includes elements of H.R. 8 , the House-passed Water Resources Development Act of 2018 (WRDA 2018), and S. 2800 , America's Water Infrastructure Act of 2018—which, as reported, includes WRDA, SDWA, CWA, WIFIA, and other provisions. Title II of S. 3021 , as amended, largely parallels H.R. 3387 , along with several other drinking-water-related provisions. ( H.R. 3387 and S. 2800 are outlined below under \" Reported Legislation \".)", "Compared to H.R. 3387 , Title II of AWIA would generally authorize or reauthorize appropriations for SDWA programs for shorter periods. For DWSRF capitalization grants, for example, Title II would authorize to be appropriated $4.4 billion over three years (compared to a five-year reauthorization in H.R. 3387 ). Grants for states and tribes to oversee water systems and enforce SDWA regulations would be reauthorized at a level of $125 million for each of FY2020 and FY2021 rather than $150 million annually for five years.\nAmong many similarities to H.R. 3387 , Title II of AWIA would increase the amount of DWSRF funding that states could use to assist disadvantaged communities and would authorize states to extend the loan repayment period. It would specify that DWSRF funds could be used for replacing or rehabilitating aging treatment, storage, or distribution facilities; require future needs surveys to include an assessment of costs to replace lead service lines; extend through FY2022 the requirement that projects receiving DWSRF assistance use American iron and steel; and apply Davis-Bacon prevailing wage requirements to projects receiving DWSRF assistance (currently required through appropriations acts). Title II of AWIA would also allow greater use of DWSRF funds for source water protection activities. It would authorize states to require system owners or operators, in certain circumstances, to assess options for consolidation, transfer of ownership, or other actions to achieve compliance and would encourage systems to develop asset management plans. Title II would rewrite and broaden SDWA antiterrorism provisions to require community water systems serving more than 3,300 persons to assess risks and resiliency to malevolent acts and natural hazards and to prepare emergency response plans and authorize $25 million for FY2020 and FY2021 for grants to support these activities. Title II would require large systems to provide consumer confidence reports to customers biannually (rather than annually as currently required) and direct EPA to develop a strategic plan to improve accuracy and availability of compliance monitoring data. To reduce exposure to lead in school drinking water, Title II of AWIA would (1) authorize increased appropriations ($25 million annually for FY2020 and FY2021) to assist states and local educational agencies in testing for lead in drinking water at schools and child care programs and direct EPA to provide technical assistance and (2) authorize $5 million annually for FY2019 through FY2021 for grants to replace pre-1988 school water fountains.\nFor disaster recovery, AWIA Title II would authorize $100 million to be appropriated for DWSRF capitalization grants to states to assist community water systems in areas covered by a federal disaster declaration issued after January 1, 2017. Funds may be used to help eligible systems restore or increase SDWA compliance in underserved areas.\nAWIA also includes drinking water provisions comparable to those in S. 2800 , as reported. Among other provisions, AWIA Title II would authorize $20 million for each of FY2019 through FY2022 for EPA to provide grants for drinking water and wastewater infrastructure projects at Indian reservations located in the Upper Mississippi River and Upper Rio Grande basins. This title would also require EPA, with the U.S. Department of Agriculture and the Department of Health and Human Services, to study and report to Congress on \"intractable water systems\" and barriers they face in delivering potable water.", "AWIA Title IV, Subtitle B, would make WIFIA permanent rather than a pilot program and would authorize appropriations at a level of $50 million for each of FY2020 and FY2021. It would establish special rules for WIFIA assistance to state SRF finance authorities including allowing states to finance up to 100% of project costs using WIFIA assistance. Further, Title IV would authorize another $5 million in appropriations for WIFIA assistance to state finance authorities in years when EPA receives at least $50 million in WIFIA appropriations. However, this extra $5 million would not be available unless appropriations for the CWSRF and DWSRF matched or exceeded the FY2018 level or were 105% or more of the previous year's funding, whichever was greater.", "AWIA, Title IV, Subtitle A, includes several amendments to the CWA. Among other provisions, Subtitle A would authorize to be appropriated $225 million for each of FY2019 and FY2020 for municipal sewer overflow control and stormwater management grants. The subtitle would authorize EPA to make grants to nonprofit organizations to provide technical assistance to enable rural, small, and tribal-community-owned treatment works to achieve CWA compliance or obtain financing. It would also authorize eligible nonprofit organizations to receive CWSRF assistance to provide assistance to low- or moderate-income households for repair or replacement of household decentralized wastewater treatment systems or for connection to a publicly owned treatment works. Among other provisions, Subtitle A would authorize funds to be appropriated for the Long Island Sound program and the Columbia River Basin Restoration program.", "In addition to AWIA, a broad range of DWSRF and other drinking water infrastructure bills are pending in the 115 th Congress. Outlines of such bills are provided below.", "H.R. 3387 ( H.Rept. 115-380 ), the Drinking Water System Improvement Act of 2017, would amend the DWSRF program and SDWA more broadly. It would authorize $8 billion to be appropriated for DWSRF capitalization grants over five years. It would specify that DWSRF funds could be used for replacing or rehabilitating aging treatment, storage, or distribution facilities; increase the portion of the capitalization grant that a state may use to provide additional subsidization to disadvantaged communities from 30% to 35% and conditionally require at least 6% to be used for this purpose; extend through FY2022 the requirement that projects receiving DWSRF assistance use American iron and steel; and apply Davis-Bacon prevailing wage requirements to projects receiving DWSRF assistance (currently required through appropriations acts). H.R. 3387 would require needs surveys to include assessments of costs to replace lead service lines, renew states' authority to use DWSRF funds to assess source water protection areas, and require large systems to consider cost and effectiveness of relevant processes and materials to receive DWSRF assistance through FY2022. ( S. 3021 does not include this requirement.) The bill would direct EPA to develop and provide to states best practices for administering their DWSRFs. Among other provisions, H.R. 3387 would (1) expand water system reporting to consumers, (2) promote partnerships and authorize assessment of consolidation options for struggling systems, (3) authorize $750 million over five years for states and tribes to oversee water systems and enforce SDWA regulations, (4) expand unregulated contaminant monitoring and increase related funding, (5) encourage systems to develop asset management plans, (6) require systems serving more than 3,300 persons to assess risks and resiliency to malevolent acts and natural hazards and authorize $175 million over five years for a drinking water infrastructure risk and resiliency grant program, (7) direct EPA to develop a strategic plan to improve accuracy and availability of compliance monitoring data, and (8) authorize $25 million for grants for local educational agencies to replace school drinking water fountains and monitor for lead. The bill would also amend the Emergency Planning and Community Right-To-Know Act to require prompt notification of hazardous substances releases to the state agency and any community water systems with affected source waters. On July 27, 2017, the Committee on Energy and Commerce held a markup session and ordered H.R. 3387 , as amended, to be reported favorably. The committee filed a written report on November 1, 2017. S. 2800 ( S.Rept. 115-294 ) , America's Water Infrastructure Act of 2018, a broad water infrastructure and water resources bill, includes various EPA- and SRF-related provisions, primarily in Title V. The bill would make permanent the requirement to use U.S.-produced iron and steel in all projects receiving DWSRF assistance and authorize states to use a portion of their DWSRF funds to implement source water protection plans. S. 2800 would amend WIFIA to authorize special terms for loan assistance provided to state DWSRF and CWSRF finance authorities (see related bills, H.R. 4902 / S. 2364 , SRF WIN, described below). On May 22, 2018, the Senate Environment and Public Works Committee ordered S. 2800 , as amended in the nature of a substitute, to be reported favorably. On July 10, 2018, the committee filed a written report on S. 2800 . S. 3021 , as passed by the House, incorporates many water resource and water infrastructure measures from S. 2800 .", "H.R. 904 , the Buy American Improvement Act of 2017, would standardize and expand Buy American requirements across federal agencies and programs and make permanent requirements to use U.S.-manufactured iron and steel for projects receiving DWSRF assistance. H.R. 939 , the Buy America for Drinking Water Extension Act of 2017, would expand and make permanent the SDWA provision that required, for FY2017, the use of U.S.-manufactured iron and steel in projects receiving DWSRF assistance. H.R. 1068 , the Safe Drinking Water Act Amendments of 2017, is a broad SDWA reauthorization bill, and Title IV includes numerous amendments to the DWSRF program. Among other revisions, the bill would (1) add Davis-Bacon prevailing wage requirements, (2) make permanent the Buy American iron and steel requirement for projects receiving DWSRF assistance (which SDWA applied to FY2017 funding), (3) direct states to give funding priority to projects that improve the ability of water systems to protect health and comply with SDWA affordably and to give greater weight to applications that describe measures to improve the management and financial stability of the water system, (4) conditionally require states to use at least 6% of their capitalization grants to provide additional subsidization to disadvantaged communities, (5) incorporate in the statute a governor's authority to transfer as much as 33% of the annual DWSRF or CWSRF capitalization grant to the other fund, (6) increase the amount reserved for insular areas from 0.33% to 1.5%, (7) authorize DWSRF program appropriations at a level of $21.17 billion over five years, (8) authorize EPA to use unobligated funds to make grants to states with water systems disproportionately affected by new regulations to assist those systems, and (9) require EPA to use information from states to develop best practices for DWSRF program administration. Further, the bill would expand eligible uses of funds to include replacement or rehabilitation of aging water systems or for producing or capturing sustainable energy. H.R. 1068 would increase the authorized funding level under SDWA Section 1459B for lead reduction projects (including lead service line replacement) from $60 million annually to $100 million annually for FY2018-FY2022. ( H.R. 6818 , the Clean Water Infrastructure Act, parallels many of the above provisions.) H.R. 1068 would create grant programs for replacing school lead service lines and water fountains that contain lead. (Bills with related lead provisions include H.R. 3387 ; H.R. 2479 , Title II; H.R. 4908 ; H.R. 4907 ; and S. 1401 .) H.R. 1068 would also authorize grant programs for increasing the resiliency or adaptability of water systems and for developing real-time contaminant monitoring technologies. It would also establish deadlines for EPA to issue a revised Lead and Copper Rule and new regulations for perchlorate, perfluorinated compounds, and microcystin toxin. H.R. 1071 —the Assistance, Quality, and Affordability Act of 2017—would amend and reauthorize the DWSRF program, paralleling DWSRF provisions in H.R. 1068 , Title IV (above), among other purposes. H.R. 1071 would authorize to be appropriated for the DWSRF program a total of $21.17 billion over five years. It would also place greater program emphasis on assisting disadvantaged communities, revise the list of eligible activities, and require states to give funding priority to projects needed to make compliance affordable. The bill would also increase the level of funding authorized to be appropriated under Section 1459B(d) for lead reduction projects. (See also H.R. 2479 , Title II. ) H.R. 1647 , the Water Infrastructure Trust Fund Act of 2017, would direct the Secretary of the Treasury to establish a voluntary product labeling system informing consumers that the manufacturer, producer, or other stakeholder is participating in the Water Infrastructure Investment Trust Fund and contributing to clean water. The Secretary would provide a label for a fee of 3 cents per unit. Funds would be made available only when the CWSRF appropriation is not less than the average of the preceding five fiscal years. Funds made available for a fiscal year would be split equally between the DWSRF and CWSRF programs. (This parallels H.R. 4468 from the 114 th Congress.) H.R. 1653 , the Drinking Water Affordability Act, would (1) extend DWSRF loan amortization periods to 30 years after project completion for public water systems generally and to 40 years for disadvantaged communities, (2) increase the portion of DWSRF funds states may use to provide additional subsidization to disadvantaged communities from 30% to 35%, (3) reauthorize state authority to use DWSRF funds for source water assessment and protection activities, (4) direct EPA to exempt water systems from a federal cross-cutting requirement if the Administrator determined that the state had an equivalent requirement, (5) require EPA to review best practices for streamlining the DWSRF loan process and fund administration and to report to Congress, and (6) direct the Government Accountability Office (GAO) to study and report on the cost-effective and economically feasible rehabilitation or replacement of drinking water infrastructure to meet SDWA goals and an assessment of barriers that preclude use of materials and technologies identified in the study. H.R. 3009 / S. 3358 , the Sustainable Water Infrastructure Investment Act of 2017/2018, would amend the Internal Revenue Code of 1986 to provide that the volume cap for private activity bonds shall not apply to bonds for drinking water and sewage facilities. (See also identical bills, H.R. 3912 and S. 1229 .) H.R. 4902 / S. 2364 , the Securing Required Funding for Water Infrastructure Now Act (SRF WIN), would add a new section to WIFIA authorizing EPA to provide financial assistance (e.g., secured loans) to SRF programs to support eligible wastewater and drinking water projects. Although state SRF financing authorities are currently eligible to receive WIFIA assistance, the SRF WIN bills would authorize EPA to provide secured loans at subsidized interest rates for eligible states. These states would include those that received less than 2% of the SRF funds in the most recent year or states in which the President declared a major disaster between 2017 and the enactment date. (These loans would be limited to wastewater or drinking water infrastructure damaged by the major disaster.) Funding for the subsidized loans would be capped. Unlike other WIFIA assistance, the federal assistance under this section would be able to support 100% of project costs, and application fees would be waived. The bills would authorize appropriations of $200 million for each fiscal year between FY2019 and FY2023. However, no funding would be available if the SRF program or the WIFIA appropriation (excluding this new section) were less than the amount provided in FY2018. H.R. 5609 , the Water Affordability, Transparency, Equity, and Reliability Act of 2018, would (1) establish a trust fund with funds going to EPA to support CWA and SDWA SRFs and activities and to the U.S. Department of Agriculture for household water well systems; (2) direct EPA to report on water affordability nationwide, discriminatory practices of water and sewer service providers, and water system regionalization; (3) authorize use of DWSRF funds to purchase privately owned community water systems from willing or unwilling sellers; (4) require states to use at least 50% of their capitalization grants to provide additional subsidization to disadvantaged communities; (5) authorize a grant program for repairing or replacing school drinking water coolers to ensure they are lead free; (6) require states to permit recipients of SRF assistance to enter into project labor agreements under the National Labor Relations Act; and (7) make permanent the SDWA requirement to use American iron and steel for projects receiving DWSRF assistance. (See also H.R. 1673 .)H.R. 6653 , the Innovative Materials for America's Growth and Infrastructure Newly Expanded Act of 2018, is a broad infrastructure bill to encourage research and use of innovative materials in transportation and water infrastructure systems. Section 8 would direct EPA to establish a water infrastructure innovation grant program for the design and installation of drinking water and wastewater systems that use innovative materials to reduce total costs and extend the service life of installed structures. It would authorize to be appropriated for this program $65 million for each of FY2019 through FY2023. H.R. 6727 / S. 3012 , the Water Technology Acceleration Act, would authorize EPA to carry out a grant program to accelerate the development of innovative water technologies that address various pressing water issues. It would authorize states to provide additional subsidization under the DWSRF and CWSRF programs for projects using innovative technologies. S. 181 would require GAO to (1) publish a report identifying all federal public works and infrastructure programs and whether a domestic content preference requirement (e.g., iron, steel, and manufactured products) applied and (2) include a list of programs for which a listed preference requirement does not apply. Generally, once GAO issued the report, no federal funds or credit assistance could be made available under a program that lacks a domestic content preference for infrastructure projects unless all iron, steel, manufactured goods, and commodity construction materials used were produced in the United States. S. 880 , the Made in America Water Infrastructure Act, would expand and make permanent the SDWA provision requiring use of U.S.-manufactured iron and steel in projects receiving DWSRF assistance. The bill would apply American iron and steel requirements to maintenance projects (in addition to construction, alteration, and repair projects). S. 1137 , the Clean Safe Reliable Water Infrastructure Act, includes a sense of Congress that appropriations for the DWSRF and CWSRF should be robust. The bill would increase DWSRF set-aside authority for state implementation of source water protection plans and would apply 40 U.S.C. Chapter 11 (the Brooks Act) to negotiation of DWSRF-assisted contracts for communities serving more than 10,000 individuals. The bill would also authorize EPA's WaterSense Program and authorize to be appropriated a total of $18 billion over five years for combined sewer overflow projects grants under CWA Section 221. (See also S. 2800 .) S. 2727 would direct EPA to establish a discretionary grant program for drinking water and wastewater infrastructure projects, including projects eligible under the CWSRF and DWSRF programs. S. 3121 would amend DWSRF and CWSRF provisions to require states to ensure, to the maximum extent practicable, that each procurement transaction for a project receiving SRF assistance is conducted in a manner that provides maximum open and free competition and that water systems consider use of all suitable materials for each solicitation of a procurement offer for a project. The bill would make similar revisions to WIFIA." ], "depth": [ 0, 1, 2, 3, 3, 1, 1, 2, 1, 1, 2, 3, 2, 3, 2, 3, 4, 4, 4, 3, 4, 4 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h2_full", "", "", "", "h0_full h3_full", "h1_full", "h1_full", "", "h4_title h0_title h2_title h3_title", "h2_full", "h2_full", "h0_full h3_title", "h3_full", "h4_full", "h4_full", "", "h4_full", "", "", "", "" ] }

{ "question": [ "What does the state of the nation's water infrastructure tell us?", "How has Congress helped in boosting safer water access?", "How are states receiving aid under this program?", "What measure of funding was allocated for the program through FY2018?", "How does this compare to prior funding levels?", "What are the implications of the EPA's latest survey?", "What is included in the reports by the EPA?", "Why does the American Water Works Association study estimate needing at least $1 trillion?", "Why did the WIFIA create a five-year pilot loan?", "What was Congress's response to the loan?", "How has Congress responded financially?", "How did the WIIN Act affect the DWSRF program?", "How has Congress impacted the DWSRF funding?", "How much money was set aside?", "How would bills positively impact DWSRF?", "How have these bills specifically affected DWSRF?", "How has the House played a role in passing of bills?", "What parallels can be drawn from parts of the bill?" ], "summary": [ "The state of the nation's water infrastructure and the challenges many communities face in addressing infrastructure needs continue to receive congressional attention.", "In 1996, Congress authorized the Drinking Water State Revolving Fund (DWSRF) program under the Safe Drinking Water Act (SDWA) to help public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to meet the act's health protection objectives.", "Under this program, states receive annual capitalization grants from the U.S. Environmental Protection Agency (EPA) to provide financial assistance (primarily subsidized loans) to water systems for drinking water projects and related activities.", "Through FY2018, Congress has appropriated a total of $20.41 billion for the program.", "From FY1997 through FY2017, states provided $35.38 billion in DWSRF assistance to water systems for 14,090 projects.", "EPA's latest survey of capital improvement needs indicates that public water systems need to invest $472.6 billion on infrastructure improvements over 20 years to ensure the provision of safe drinking water.", "EPA reports that, while all of the projects identified in the survey would promote SDWA health protection objectives, $57.6 billion (12%) of reported needs are attributable to SDWA compliance.", "An American Water Works Association study estimates that restoring aging infrastructure and expanding water systems to keep up with population growth would require a nationwide investment of at least $1 trillion through 2035.", "Enacted in 2014, the Water Infrastructure Finance and Innovation Act (WIFIA; P.L. 113-121,Title V) authorized a five-year pilot loan guarantee program to promote increased development of, and private investment in, primarily large water infrastructure projects.", "Congress noted that WIFIA was intended to complement, not replace, the DWSRF program and the similar Clean Water Act State Revolving Fund (CWSRF) program for wastewater infrastructure.", "For FY2017, Congress provided $30.0 million for WIFIA ($25 million for EPA to provide loan guarantees for water infrastructure projects and $5 million for administrative costs).", "The Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322) made several revisions to the DWSRF program and authorized $100 million in DWSRF appropriations to Michigan to assist the City of Flint in repairing its water system.", "In P.L. 114-254, Congress appropriated the DWSRF funding authorized in the WIIN Act.", "The Consolidated Appropriations Act, 2017 (P.L. 115-31), included $863.23 million in DWSRF program.", "Numerous bills in the 115th Congress would expand DWSRF eligibilities, increase funding authority, and authorize new programs to assist water systems and improve infrastructure.", "Two such bills have been reported: (1) the Drinking Water System Improvement Act of 2017 (H.R. 3387), a SDWA reauthorization bill with provisions intended to improve water systems, SDWA compliance, infrastructure resilience, consumer confidence, and source water protection, among others; and (2) America's Water Infrastructure Act of 2018 (S. 2800), an omnibus water resources development act (WRDA) and infrastructure bill that includes SDWA, the Clean Water Act (CWA) and WIFIA SRF provisions.", "On September 13, 2018, the House passed (amended and renamed) S. 3021, America's Water Infrastructure Act of 2018 (AWIA), which includes elements of S. 2800 and H.R. 8, the House-passed WRDA 2018 bill.", "Title II of AWAI closely parallels H.R. 3387 and includes other drinking water-related provisions. Title IV contains WIFIA SRF, CWSRF, and other CWA amendments." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, -1, -1, -1, -1, 1, -1, -1, 1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 3, 3, 3, 4, 4, 4, 6, 6, 6, 6 ] }

{ "title": [ "", "The Trade Adjustment Assistance for Firms Program: Recent Legislative Background", "Trade and Globalization Adjustment Assistance Act (TGAAA)", "Trade Adjustment Assistance Extension Act (TAAEA)", "Trade Adjustment Assistance Reauthorization Act (TAARA)", "Overview of the TAAF Program8", "The TAAF Program: How It Operates", "Eligibility, Certification, and Implementation", "Program Evaluation", "GAO 2012 Evaluation", "EDA Annual Reports", "Rationale and Economics of Trade Adjustment", "Global Value Chains and the Digital Economy", "Issues for Congress" ], "paragraphs": [ "T he Trade Adjustment Assistance (TAA) programs were first authorized by Congress in the Trade Expansion Act of 1962, as amended, to help workers and firms adjust to import competition and dislocation caused by trade liberalization. Although overall economic welfare can be increased by trade liberalization, TAA has long been justified on grounds that the government has an obligation to help the \"losers\" of policy-driven trade openings that may cause adjustment problems for firms and workers adversely affected by import competition. TAA programs that cover workers, firms, and farmers aim to \"facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.\" Congress continues to monitor TAA program performance and to periodically reauthorize and amend the governing legislation.\nThis report discusses the Trade Adjustment Assistance for Firms (TAAF) program, which is administered by the Economic Development Administration (EDA) of the Department of Commerce. The TAAF program assists eligible American companies that have been harmed by increasing imports; this harm is defined by lower domestic sales and employment because of increased imports of similar goods and services. Through the TAAF program, EDA provides technical assistance, on a cost-sharing basis, to help eligible businesses create and implement business recovery plans that may allow them to remain competitive in a dynamic international economy. The TAAF program provides technical assistance through a partnership with a national network of 11 EDA-funded Trade Adjustment Assistance Centers (TAACs).", "Congress first authorized TAA in Title III of the Trade Expansion Act of 1962 (P.L. 87-794), but it was little used until it was updated and reauthorized under The Trade Act of 1974 ( P.L. 93-618 ), enacted in January 1975. Congress has amended TAA programs many times over the half-century of its existence. TAA includes a firm and industry assistance program that is administered by the EDA.", "In 2009, the 111 th Congress expanded TAA through a bipartisan agreement to reauthorize the program. The Trade and Globalization Adjustment Assistance Act of the American Recovery and Reinvestment Act (ARRA) of 2009 ( P.L. 111-5 ) expanded and extended the then-existing programs for workers, firms, and farmers, and added a fourth program for communities (later repealed). In terms of the TAAF program, the TGAAA\nexpanded eligibility to include firms in the services sector to reflect the larger role of services in the U.S. economy; provided greater flexibility for a firm to demonstrate eligibility for assistance through an \"extended look-back period,\" giving firms longer time frames for calculating sales or production declines due to import competition; increased annual authorized funding levels from $16 million to $50 million; established new oversight and evaluation criteria; created a new position of Director of Adjustment Assistance for Firms; and required that EDA submit a detailed annual report to Congress.\nWhen the TAA programs were set to expire on January 1, 2011, the House and Senate passed, and the President signed, the Omnibus Trade Act of 2011 ( P.L. 111-344 ) in late December 2010. While the act extended TAA programs for six weeks through mid-February, it eliminated some of the expanded provisions of the TGAAA, including eligibility for services firms and the expanded look-back periods for qualifying firms to meet eligibility requirements. The debate over passage of the proposed free trade agreements (FTAs) with Colombia, Panama, and South Korea offered the 112 th Congress another opportunity to revisit TAA reauthorization as part of the implementing legislation approval process.", "In October 2011, Congress passed, and the President signed into law, the Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Title II, P.L. 112-40 ; H.R. 2832 ). The TAAEA authorized the TAAF program through December 31, 2014. The prior 2011 expiration of the expanded provisions of the TAAF program limited the number of firms entering the program (as services firms were no longer eligible to participate), and eliminated the extended look-back period. These factors, combined with an improving economy, made it more difficult for firms to demonstrate their eligibility to participate. The TAAEA retroactively extended the enhanced provisions (inclusion of services firms and the extended \"look-back\" period) contained in the TGAAA through December 31, 2013. On January 1, 2014, the TAAF again reverted back to the more limited program that had been in effect as of February 13, 2011.\nThough the TAAF authorization expired on January 1, 2015, the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), extended TAAF appropriations through September 30, 2015, allowing Trade Adjustment Assistance Centers administering the program to continue to serve existing firms and certify new firms.", "Six months after the TAAF authorization ended in January 2015, Congress passed, and the President signed, the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ), which included Title IV, the Trade Adjustment Assistance Reauthorization Act (TAARA) of 2015. The TAARA reauthorized the TAAF program through June 30, 2021, and added back the enhanced provisions of the TAAEA, effective retroactively to January 1, 2014. TAARA also restored annual authorization levels to $16 million. Appropriations were $12.5 million in FY2015 and $13 million in FY2016 and FY2017. (See Table 1 .)\nIf Congress does not reauthorize the program, on July 1, 2021, the TAAF program will revert to the more limited program as in 2011, and the entire program will expire on June 30, 2022. (See Figure 1 .)\nIf the President submits an implementing bill for a trade agreement, such as the potential renegotiation of the North American Free Trade Agreement (NAFTA), the subsequent legislative debate and package may provide Congress an opportunity to further amend TAARA, whether reforming the TAA programs, changing the management structure or requirements, or adjusting the current funding level or timelines.", "The TAAF provides technical assistance to help trade-impacted firms make strategic adjustments that may allow them to remain competitive in a global economy. Originally, TAAF also included loans and loan guarantees, but Congress eliminated all direct financial assistance in 1986 because of federal budgetary cutbacks and concern over the program's high default rates and limited effectiveness.\nTAAF authorizations and appropriations for FY2005-FY2017 appear in Table 1 .", "Administered by the Department of Commerce Economic Development Agency (EDA), the TAAF program provides technical assistance to firms through 11 regional Trade Adjustment Assistance Centers (TAACs). TAACS, which operate under cooperative agreements with EDA, are available to assist firms in the 50 states, the District of Columbia, and the Commonwealth of Puerto Rico. The following entities may apply to operate a TAAC: (1) universities or affiliated organizations; (2) states or local governments; or (3) nonprofit organizations. They provide or contract for technical assistance to firms from the initial certification process through adjustment proposal (AP) implementation. TAACs are staffed by professionals with broad business expertise who can help firms develop recovery strategies and also identify financial resources. These professionals function as consultants who specialize in business turnaround strategies specifically designed to meet the needs of individual firms that may face adjustments in competing with lower-priced imports. TAACs apply for EDA grants to operate their programs. All appropriated funds are used to support the TAAC process; no funds or direct financial assistance may be provided to firms.", "There are three phases to successful completion of a trade adjustment assistance project (see Figure 2 ).\nIn phase one , a firm must demonstrate that it is eligible to apply for assistance. The firm submits a petition for certification documenting that it is a \"trade-impacted firm\" by having met three conditions:\n1. \"A significant number or proportion of workers\" in the firm have become or are threatened to become totally or partially separated; 2. Sales, or production, or both decreased absolutely, or sales, or production, or both of any article that accounted for not less than 25% of total sales or production of the firm during the 12, 24, or 36 months preceding the most recent 12 months for which data are available have decreased absolutely (the \"look-back\" period); and 3. Increased imports of articles like or directly competitive with articles produced by the firm have \"contributed importantly\" to both layoffs and the decline in sales and/or production.\nCertification specialists are available in the TAACs to work with firms (at no cost to the firm) to complete and submit a petition to EDA to be certified as a trade impacted firm. EDA is statutorily required to make a final determination on a petition within 40 days of accepting it. This time period has declined from an average of 45 days in FY 2009 to 16 days in FY2015.\nIn phase two , a firm certified as eligible has two years to develop and submit a business recovery plan or a djustment p roposal ( AP ) . Approval of the AP is contingent on EDA's finding that the AP (1) is reasonably calculated \"to materially contribute\" to the economic adjustment of the firm; (2) gives adequate consideration to the interests of the firm's workers; and (3) demonstrates that the firm will use its own resources for adjustment.\nThe TAACs also provide detailed assistance for the adjustment proposal, which seeks to identify business planning and practices that can be enhanced to improve firm competitiveness. EDA has another 60 days to accept or reject the adjustment proposal. In FY2015, the average processing time for APs was 12 days. Because technical assistance is provided in the preparation of the petition and adjustment proposal, there is a high formal acceptance rate. TAAC assistance ensures that submissions are completed correctly and that poor candidates are weeded out early in the process. The firm must pay at least 25% of the cost to prepare the adjustment proposal. In FY2015, 128 firms received assistance in developing APs.\nIn phase three , firms have five years to complete project implementation based on an approved AP. EDA may provide financial assistance for project implementation, but firms must pay at least a 25% match where an AP total implementation cost is less than $30,000. For project assistance exceeding $30,000, a firm must cover at least 50% of the total cost, with the federal share capped at $75,000.\nAdjustment proposals may involve strategic restructuring of various aspects of business operations. Consultants with specific expertise are selected jointly between TAACs and the firm to help with implementation. Because firms must be experiencing falling sales or declining production to be eligible, TAACs often focus first on marketing or sales strategies to identify new markets, new products, promotional initiatives, and export opportunities. The core objective is to increase revenue. Second, production inefficiencies are often targeted to reduce firm costs and improve price competitiveness. Third, TAACs can develop debt restructuring strategies and act as intermediaries in finding new sources of business financing.\nIn FY2015, 729 firms received AP assistance in implementing projects. TAAC assistance to firms to prepare petitions and to develop and implement business recovery plans (APs) amounted to $9.5 million in FY2015 and the financial contribution of firms participating in the program amounted to $5.8 million. In 2015, 39% of adjustment assistance focused on improving marketing-sales, 26% on production, 21% on enhancing management and support systems, and 4% on financial systems (see Table 2 ).\nTable 3 summarizes select firm trade adjustment data for FY2005-FY2015. The TAAF program targets small- and medium-sized enterprises (SMEs), which is borne out in the firm data. Firms averaged fewer than 100 employees since 2010 with average sales of over $15 million. In 2015, the federal government provided 52% of adjustment costs, for an average $52.8 thousand per firm. In FY2015, 100% of certified firms were in manufacturing.", "Historically, TAAF program evaluation was limited, with EDA lacking a formal evaluation process. Early efforts to analyze the program included comprehensive outside studies by the Urban Institute in 1998 and Government Accountability Office (GAO) in 2000 that addressed two critical issues: program administration and effectiveness. The 2000 GAO report was not able to conclusively assess the impact of the program on firms because of a lack of systematic data. Both reports identified specific deficiencies with the TAAF program, such as a cumbersome certification process, long approval times, and little oversight and evaluation of projects. As a small program with limited resources, the TAAF had not received the managerial input required to adequately evaluate its efforts. Congress addressed this issue in the 2009 TGAAA, which required the creation of a new Director of Adjustment Assistance for Firms, along with additional support staff. The act also required an annual report to Congress and included specific performance measures to be collected and analyzed. Congress also mandated EDA to certify petitions for assistance and adjustment proposals within specific time frames.", "As required by Congress, the GAO conducted a comprehensive review of the TAAF program, released in September 2012. It noted important progress in the administrative capabilities of EDA and documents the positive impact of the TAAF program on trade-affected businesses. The GAO report also discussed the positive contribution of the changes initially made by the TGAAA and reinstated by the TAAEA.\nGAO found that EDA's administration of the TAAF program had improved markedly as a result of changes resulting from the 2009 legislation. EDA reduced processing times, provided new performance reporting measures, and increased firm participation. GAO noted that TGAAA modifications to the TAAF program led to improvements in (1) management and staffing, (2) annual reporting, (3) eligibility for participation of services firms, and (4) expansion of the \"look-back\" period that permitted more firms to meet certification criteria.\nThe report also pointed to continuing challenges in centralized data management, evaluation reporting, and assessment of the effectiveness of TAAF. One weakness identified by GAO was EDA's funding allocation formula for TAACs to ensure that the distribution of funds across TAACs provide \"equivalent benefits\" adequate to meet the varying needs of the 11 TAACs.\nThe second area of concern raised by GAO was EDA's analysis of performance measures. The most recent TAAF annual reports (FY2011 through FY2014) emphasize output measures (the type or level of program activities conducted or the direct products or services delivered by a program: number of firms assisted, petitions accepted, processing times) rather than outcome measures (defined as goals and performance measures that assess the results of a program, compared with its intended purpose). In part, this appears to be a result of the measures and indicators that Congress required EDA to collect and analyze. Of the 16 performance indicators, GAO reported that 13 emphasize outputs, or measures, of the goods and services provided by the program.\nThe TAAF annual reports have compared the performance of TAAF participants, which are, by definition, trade-impacted, troubled firms to the average performance of the U.S. manufacturing sector as a whole (using Bureau of Labor Statistics [BLS] data). GAO expressed concerns with EDA's methodology and recommended that \"using program evaluation methods to rule out plausible alternative explanations for outcomes that may be influenced by a variety of external factors, such as changes in the economy, can help strengthen evaluations.\" GAO conducted its own analysis to evaluate the policy impact of the TAAF on firms participating in the program.\nThe GAO report discussed the difficulties inherent in attempting to assess the \"apples-to-oranges\" effect of comparing TAAF-participating companies with a group of nonparticipating firms (as EDA has done). Even if a control group with characteristics similar to TAAF-participating firms could be identified, GAO noted that such an analysis would also have weaknesses. Given these limitations, GAO analyzed the performance of TAAF-participating firms, but explicitly recognized that such an approach could not determine whether TAAF firms' performance would have improved in the absence of the program.\nUsing its own methodology, GAO found a \"small and statistically significant relationship between program participation and sales.\" GAO estimated that TAAF assistance, on average, resulted in a 5% to 6% increase in sales, which was particularly relevant to smaller firms, and a 4% increase in productivity, albeit also highly correlated with firms operating in industries that were experiencing growth. Employment effects were not found to be statistically significant. GAO also confirmed EDA's assessment that both manufacturing and services firms faced import competition that directly affected their sales, and that these firms, by and large, benefitted from specialized attention provided by TAACs. In addition, GAO conducted a survey of firms participating in the TAAF program. The survey found that 90% of respondent firms reported that they were \"very\" or \"generally\" satisfied with the services that they received from the TAACs. The GAO report provided some of the strongest evidence to date of the benefits of the now-lapsed 2009 legislative changes, as well as EDA's much-improved administration and evaluation of the TAAF program compared to years past.", "Most of the public debate on trade and TAA does not distinguish between the various programs that EDA administers, including the TAAF. Some observers believe that TAA should be eliminated while others say that reform and changes are needed to the programs. Whether changes are needed to TAA programs may depend on their effectiveness in assisting workers, or firms in the case of TAAF, survive and grow despite trade liberalization.\nFor the TAAF program, EDA is required by Congress to submit an annual report that provides findings and specified results (or performance measures). EDA has released six annual reports (FY2010 through FY2015) that identify numerous administrative and operational improvements. In addition, TAACs are now allocated funds in part based on performance measures (number of firm certifications and adjustment proposals generated) and quality measures.\nAs part of the TAAF annual report, EDA is required to provide a comparison of sales, employment, and productivity for each firm at the time it was certified and both one and two years after the recovery plan was completed. EDA does not estimate the specific number of \"jobs retained\" or \"jobs created.\" In its FY2014 report, EDA notes that, from FY2012 to FY2013, average firm sales had increased by 13.6%, average employment increased by 3.5%, and average productivity increased by 9.7%. EDA also notes that all firms completing the adjustment program were still in operation—suggesting an impressive \"survival rate\"—particularly given that all these firms have the additional burden of adjusting to import competition.\nIn analyzing earlier EDA reports (FY2010 to FY2012), GAO concluded that these trends provide only a limited understanding of program effectiveness. The data on employment and productivity are derived from annual surveys conducted by the 11 TAACs. The data are then aggregated and presented as part of the congressionally required annual report. Employment effects are referred to as number of \"jobs impacted,\" or number of jobs retained or generated at firms completing at least one technical assistance project.\nDeclines in employment do not necessarily reflect TAAC performance. Employment can fall dramatically for firms that are hit by a surge of foreign import competition or by market disruptions that are not trade-related. In the two reporting years following firms' completion of business recovery programs, firms may continue to experience increased import competition or other negative effects (for instance, a slow economic recovery from the 2008 recession).\nUnder these circumstances, the fact that employment losses continue after an adjustment proposal has been completed is not necessarily an unexpected or negative outcome in terms of trade adjustment assistance effectiveness. Whether the current one- and two-year post-TAAF-exit reporting periods provide enough time and data to assess the effectiveness of recovery programs, it is possible that a number of successful TAAF participants will continue to face increased competition that results in some program participants operating at levels of output or employment that existed prior to TAAC assistance.\nAs noted in the previous section, caution is warranted when drawing conclusions on the basis of limited trend data. EDA figures reflect employment trends that could be attributable to the TAAF program. A more rigorous analysis would be needed to estimate and isolate the effects of the TAAF program from other factors that affect employment trends in TAAF-participating firms. To more accurately assess the effectiveness of the TAAF program in terms of helping firms or \"saving jobs,\" it would be necessary to use more sophisticated methodologies and analyses (such as those employed and recommended by GAO) than Congress currently requires for the TAAF annual report.\nWith respect to the reported high \"survival rate\" for firms that completed the TAAF program, they represent only about half of all firms that had their adjustment proposals approved for assistance. In FY2015, of the 176 firms that exited the TAAF program, 153 firms (87%) successfully exited the program, and another 107 (61%) completed an achievable number of projects within the five-year limit. The remaining 23 (13%) did not complete the program for various reasons, including that the firm was acquired or sold, went out of business, failed to submit the AP within two years after TAA certification or failed to implement the AP, or suffered bankruptcy. Given that TAAF focuses primarily on small- and medium-size firms that face multiple challenges, it is not entirely surprising that many firms that receive TAAF certifications are unable to complete the program.\nIt is difficult to compare firms because they enter and exit the TAAF program in different years, and some firms participate in more than one TAAF adjustment program at the same time. Yet, reporting indicates that the TAAF program is successful in assisting a significant percentage of firms through a recovery process that can last from two to seven years, which can lead to the conclusion that the limited amount of funds available to trade-impacted firms through the TAAF program may amount to a relatively efficient policy tool.\nIn a final section, the FY2012 through FY2015 TAAF annual reports offer anecdotes collected from the TAACs that provide success stories about participating firms from all parts of the country and in various industries that used TAAF assistance. Although these examples may identify TAAC-provided assistance to select firms, they do not demonstrate the extent to which TAAF or the TAACs provided the assistance that may have been critical to the success of any one particular firm to succeed where others do not. Whether some firms might have been able to adjust on their own cannot be determined.", "Economists tend to agree that in defining the rules of exchange among countries, freer trade is preferable to protectionism. Insights from trade theory point to the mutual gains for countries trading on their differences, producing those goods at which they are relatively more efficient, while trading for those at which they are relatively less so. Additional gains are realized from intra-industry trade based on efficiencies from segmented and specialized production. Firm-level evidence supports this theory. Trade appears to \"enable efficient producers within an industry, and efficient industries within an economy, to expand,\" leading to a reallocation of resources that increases a country's productivity, output, and income. Consumers (both firms and households) also gain from a wider variety of goods and lower prices.\nHowever, increased competition from trade liberalization also creates \"winners and losers,\" presenting adjustment problems for all countries. Some firms may grow as they expand into new overseas markets, while others may contract, merge, or fail when faced with greater foreign competition. While the adjustment process may be healthy from a macroeconomic perspective, much like market-driven adjustments that occur for reasons other than trade (e.g., technological changes, weather-related disasters), the transition can be hard on some firms and their workers.\nCritics of free trade agreements often highlight the adjustment costs of reducing trade barriers. To avoid business closures and layoffs, firms likely to be affected by increased trade may seek to weaken, if not defeat, trade liberalizing legislation. This makes economic sense from the perspective of the affected industries, firms, and workers, but economists argue that in the long run it can be more costly for the country as a whole. The costs of protection arise because competition is suppressed, reducing pressure on firms to innovate, operate more efficiently, and become lower-cost producers. The brunt of these costs falls to consumers, both individuals and businesses, who must pay higher prices, but the national economy is also denied forgone productivity gains.\nOne way to balance the large and broad-based gains from freer trade with the smaller and more highly concentrated costs is to address the needs of firms negatively affected, such as through the TAA programs, including the one for firms. Supporters justify TAA policy on grounds that (1) it helps those who are hurt by trade liberalization; (2) the economic costs are lower than protectionism and can be borne by society as a whole; and (3) given rigidities in the adjustment process, it may help redeploy economic resources more quickly, thereby reducing productivity losses and related public sector costs (e.g., unemployment compensation). Others dispute these claims and have raised concerns over the effectiveness and costs of the program, arguing that it should be limited or discontinued.", "In debates over trade liberalization, some observers may not appreciate the full impact that globalization and digitization trends are having on trade. While trade liberalization may present greater import competition for SMEs domestically, globalization and digitization also present opportunities for growth. The emergence of global value chains (GVCs) and the Internet revolution provide possible growth opportunities for firms as foreign markets are opened through trade liberalization. TAAF programs offer one way to help SMEs to gain the knowledge and skills needed to take advantage of these global shifts. The programs can help SMEs to improve their position by integrating into a GVC or using digital platforms to reach new markets, thus offsetting losses that may occur as a result of trade liberalization.\nGVCs are mainly organized and coordinated by large multinational companies (MNCs) and account for more than 70% of global trade in goods and services and in capital goods. A large share of global trade takes place within GVCs in the form of imports and exports of intermediate (or unfinished) goods and services that move within, between, and among countries. According to one study, in many countries, a domestically manufactured good contains over 20% of foreign value added, and that may rise to over 50% in some countries and industries. This system of production depends on the willingness of many countries to import in order to export. The WTO's \"Made in the World\" initiative finds that the increased use of GVCs has led industries globally to demand greater trade liberalization and lower protectionism as these firms depend on other links in the value chain, both domestic and foreign.\nAt the domestic level, the U.S. small- and medium-sized domestic producers that sell goods and services to multinational exporters are not counted as exporters—even though they may contribute a substantial amount of the value added in U.S. exports. The statistical data needed to measure the contribution of domestic and foreign value added at each stage of GVC production are under development, and a complete picture of the impact of GVCs may not be possible until such data become available.\nIn one study, the Organization for Economic Co-operation and Development (OECD) states that the participation of smaller firms in GVCs is often underestimated. Smaller firms \"often supply intermediates to exporting firms in their country and are as such relatively more integrated in the domestic value chains.\" Unlike most other major industrialized, emerging, and developing economies, the United States is less dependent on imports of foreign intermediate goods for its exports. Instead, small- and medium-size domestic firms are, in the aggregate, major suppliers of goods (parts, components, and finished products) and services to large U.S. exporters. The OECD cites studies by Matthew Slaughter and the U.S. International Trade Commission (USITC) showing that\nthe typical U.S. MNC buys more than $3 billion in inputs [goods and services] from more than 6,000 U.S. small and medium-sized enterprises (SMEs)—or almost 25% of the total input purchased by these firms. These domestic supplies are not reflected in international trade statistics, which only count direct exports; estimates for the United States show that in 2007 the export share of SMEs increased from approximately 28% (in gross exports) to 41% (in value-added exports), when such indirect exports are taken into account.\nThe USITC calculated that in 2007 total direct exports by U.S. SMEs amounted to $382 billion and indirect exports of SMEs amounted to $98 billion. The USITC translated these figures into an estimated 4.0 million U.S. jobs, with 1.7 million U.S. jobs supported by direct SME exporters and an additional 2.1 million jobs created by SME indirect exporters that sell intermediate inputs to direct exporters. Of the 10 million U.S. jobs that were supported by U.S. exports of goods and services, SME exports accounted for approximately 40% of all export-supported jobs in the United States. Significantly, the USITC report found that \"much of the indirect value-added exports by SMEs—the intermediate goods and services produced by SMEs that are eventually shipped abroad as components embedded in other products—is concentrated in the manufacturing sector.\"\nGiven that the main focus of TAAF is on troubled SMEs, the magnitude of U.S. SME-produced goods that are exported by GVCs suggests that the TAAF program could assist and encourage linkages between these troubled enterprises and the multinationals that are major exporters of their inputs. Although many SMEs have built strong ties to large U.S. exporters and MNCs, liberalized trade policies adopted by the United States or other countries, new technologies, or macroeconomic conditions could potentially erode the incumbent position and domestic advantages of U.S. SMEs. A potential question is whether the EDA, through the TAAF program and the TAACs, could assist trade-impacted firms in developing more relationships with MNCs, as well as analyzing the necessary conditions that would allow TAAF-participating firms to have a realistic chance of doing so.\nThe high volume of trade that flows through GVCs and the predominant position of the United States as a major hub and headquarters nations (with the highest level of domestic value-added export content [89%] of any OECD country and the third highest in the Group of Twenty [G20] after Russia and Brazil) suggests the possibility that such chains could be a source of opportunity for U.S. trade-impacted firms. EDA produces an annual report for Congress on the operations of the TAAF program, but among the data requirements established by Congress in the TGAAA, as amended, there are no performance measures that document or report on TAAF-participating firms that sell goods or services to U.S. exporters (in terms of number of firms assisted and value of goods sold), or that provide data on direct exports by firms receiving TAAF assistance.\nAnother opportunity related to GVCs is the growing demand for a skilled workforce to operate and support supply chains. A report by the U.S. Departments of Transportation, Education, and Labor titled \"Strengthening Skills Training and Career Pathways across the Transportation Industry\" identified high-paying, high-skilled, high-demand transportation jobs. As global trade and GVCs grow, these shortages could become more acute. Pairing a TAAF-qualified firm with MNCs or companies focused on supply chain may provide opportunities for EDA to help firms through TAAF meet growing demand.\nA second fundamental shift in global trade that is opening new markets for SMEs is occurring with the Internet-driven digital revolution. Digital platforms, including online communication tools and e-commerce websites, can minimize costs and enable SMEs to grow through extended reach to new customers and markets or by integrating into a GVC. As a result, many such firms that in the past might not export or seek new markets abroad are more easily able and willing to conduct business in global markets. In addition, increased digitization of customs and border control mechanisms helps simplify and speed delivery of imported goods to customers, making them more attractive to foreign buyers. As a result, digitization can enable SMEs to serve the new markets abroad that are opened by trade liberalization. For example, a study of U.S. SMEs on the e-commerce platform eBay found that 97% export; among the 50 states, the range was from 93 to 98%. According to eBay, 59% of its U.S. SMEs export to 10 or more markets. In countries as diverse as Peru and the Ukraine, a full 100% of eBay SMEs export. TAAF programs provide one channel for helping trade-impacted SMEs make the necessary shifts and gain the skills to succeed in online marketplaces and keep up with technological changes.", "As Congress considers trade liberalization agreements and ongoing trade negotiations, it may wish to further examine the TAAF in light of the current debate of its effectiveness and the impact of international trade on the U.S. economy. An implementing bill for a new trade agreement, such as a renegotiated NAFTA, may provide Congress an opportunity to reexamine and potentially revise the TAA programs. In addition to adjusting appropriations levels, Congress could examine changing the current program or EDA's administration of it.\nPotential options for Congress to consider on TAAF may include\ndetermining if current funding levels are appropriate; further refining the performance metrics to measure the employment or economic impact of TAAF programs; placing a stronger emphasis on assisting SMEs utilize technology to improve operational efficiency, expand into new markets, including through e-commerce, and take fuller advantage of an increasingly digitally-driven economy; facilitating partnerships with large multinational companies to support SME integration into GVCs; or consolidating or streamlining TAAF with other federal programs that assist troubled SMEs such as those operated by the Small Business Administration (SBA).\nWhile TAAF has traditionally focused on firms who can demonstrate they have been harmed by import competition, Congress could also explore the feasibility and possible steps that could or should be taken before firms are harmed. Congress might consider requiring EDA to conduct outreach and education on pending trade liberalization agreements. The analysis of each proposed trade agreement by the USITC may help identify industries or regions as potentially vulnerable or likely to experience a negative impact as a result of proposed trade liberalizing measures. For example, the USITC economic impact assessment report for the potential Trans-Pacific Partnership (TPP) contended that U.S. demand for business services would outstrip supply, presenting opportunities for growth, while employment could decline in certain manufacturing and transport sectors. Congress could, for example, consider requiring EDA to prepare a capacity building plan to assist those industries or regions USITC identified as potentially vulnerable or likely to experience a negative impact from implementation of a proposed trade agreement.\nAppendix A. Acronyms" ], "depth": [ 0, 1, 2, 2, 2, 1, 2, 3, 1, 2, 2, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h2_title h1_full", "h2_full", "", "h1_full", "h1_title", "h1_full", "", "h2_title", "h2_full", "h2_full", "h0_full", "h3_full", "h0_full h3_full" ] }

{ "question": [ "How might Congress's decision affect U.S. workers and firms?", "What do the Trade Adjustment Assistance programs do?", "How does trade liberalization affect workers and firms?", "What else does the TAA programs represent?", "What is included in the report about the TAAF program?", "What is the relationship between TAA and TPA?", "How does this linkage affect the timeline of both programs?", "How does the renewed TAA look like?", "What is required by the TGAAA?", "What have these reports revealed in relation to the TGAAA?", "What does the success rate represent?", "What happens to the rest of the firms?", "What was discovered by the GAO's evaluation of the TAAF program?", "What else was reported?", "What areas have received more focus in terms of trade liberalization?", "How are GVCs organized?", "How do the structure of GVCs affect their offerings?", "What are some questions raised by the debates?", "How might Congress respond to these questions?" ], "summary": [ "As Congress considers potential legislation related to trade agreements, the potential impact on U.S. workers and firms is part of the debate.", "The Trade Adjustment Assistance (TAA) programs were first authorized by Congress in the Trade Expansion Act of 1962 to help workers and firms adapt to import competition and dislocation caused by trade liberalization.", "While trade liberalization may increase the overall economic welfare of all the affected trade partners, it can also cause adjustment problems for firms and workers facing import competition, and adjustment assistance has long been justified on the grounds that it is the least disruptive option for offsetting policy-driven trade liberalization.", "The TAA programs for workers, firms, and farmers represent an alternative to policies that would restrict imports, providing assistance while bolstering freer trade and diminishing prospects for potentially costly tension (retaliation) among trade partners.", "This report discusses the Trade Adjustment Assistance for Firms (TAAF) program, which is administered by the U.S. Department of Commerce Economic Development Administration (EDA), and related policy issues.", "Most recently, reauthorization of TAA was linked to renewal of Trade Promotion Authority (TPA).", "Both TPA (P.L. 114-26 ) and TAA (P.L. 114-27) were signed into law in June 2015.", "The renewed TAA not only extended TAAF but reinstated certain expanded provisions and authorized annual funding.", "As required by the Trade and Globalization Adjustment Assistance Act of 2009 (TGAAA) (Title II of P.L. 111-5), EDA publishes annual reports on the performance of the TAAF program.", "The reports have generally shown that two years after completion of the program, on average, participating firms have increased sales, employment, and productivity.", "The high success rate for firms that \"completed\" the TAAF program represents only about half of all firms certified as eligible for assistance.", "The rest left the program without completing an adjustment plan and were no longer monitored.", "The Government Accountability Office (GAO) completed a comprehensive evaluation of the TAAF program in 2012 and found marked improvement in EDA's administration and evaluation efforts and also confirmed EDA's assessment that trade-impacted firms benefitted from the specialized attention provided by TAAF assistance.", "GAO also found a \"small and statistically significant relationship between program participation and sales,\" which was particularly relevant to smaller firms, albeit also highly correlated with firms operating in high-growth industries. Employment effects were not found to be statistically significant.", "Since the 1990s, debates over trade liberalization have increasingly focused on the changing nature of trade in an era of globalization—especially the emergence of global value chains (GVCs) and the evolving digital economy.", "GVCs are organized and coordinated by multinational companies (MNCs) and now account for about 70% of global trade in goods and services and capital goods.", "GVCs offer the potential for small- and medium-size firms to become more integrated into international trade and produce higher-value-added products.", "One question is whether EDA, through the TAAF program, can help trade-impacted firms in developing stronger relationships with MNCs and GVCs. Another is how EDA can help small and medium enterprises take advantage of the digital economy to reach new markets, including those opened up by trade agreements.", "Congress may consider these questions as well as further reforms or amendments to TAAF as part of ongoing discussions on potential trade agreements." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, 1, -1, -1, -1, -1, 2, -1, 4, -1, -1, 1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4 ] }

{ "title": [ "Background", "WIC Food Benefits", "WIC Program Oversight and Administration", "In Recent Years, USDA Has Further Aligned Formula Amounts with Current Nutrition Science and Infants’ Nutritional Needs", "The National Extent of Online Sales of WIC Infant Formula Is Unknown, but Some Participants Attempt Them", "USDA Has Provided Limited Assistance to States for Preventing and Addressing Online Sales", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Review of State WIC Policies and Procedures", "Monitoring of Online Classified Advertisements", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgements" ], "paragraphs": [ "Established as a national program in the mid 1970s, the WIC program is intended to improve the health status of low-income pregnant and postpartum women, infants, and young children by providing supplemental foods and nutrition education. Pregnant and post-partum women, infants, and children up to age 5 are eligible for WIC if they are found to be at nutritional risk and have incomes below certain thresholds.improve birth and dietary outcomes and contain health care costs, and USDA considers WIC to be one of the nation’s most successful and cost- effective nutrition intervention programs.", "In passing the legislation that created WIC, Congress intended the program to assist participants during critical times of growth and development. WIC participants typically receive food benefits—which may include infant formula—in the form of vouchers or checks that can be USDA has established redeemed at state-authorized retail vendors.seven food packages that are designed for different categories and nutritional needs of WIC participants (see fig. 1). The authorized foods must be prescribed from the food packages according to the category and nutritional needs of the participants. Because multiple members of a family may be eligible to receive WIC benefits, individual families could receive more than one food package.\nIn 2007, USDA issued interim regulations that implemented the first comprehensive revisions to the WIC food packages since 1980. After considering comments received in response to the interim regulations, FNS issued final regulations in 2014. The revisions aligned the food packages with the 2005 Dietary Guidelines for Americans and infant feeding practice guidelines of the American Academy of Pediatrics, and were largely based on recommendations of the IOM, which FNS commissioned to review the food packages.\nInfants who are not exclusively breastfeeding can receive formula from WIC until they turn 1 year of age. However, WIC’s authorizing legislation requires that the nutrition education provided to participants include breastfeeding promotion and support. In addition, the Child Nutrition Amendments of 1992 required that USDA establish a program to promote breastfeeding as the best method for infant nutrition. Accordingly, USDA, through regulations and guidance, has emphasized the importance of encouraging participating mothers to breastfeed. WIC regulations require state and local agencies to create policies and procedures to ensure that breastfeeding support and assistance are provided to WIC participants throughout the prenatal and postpartum period.", "USDA’s role in operating WIC is primarily to provide funding and oversight, and state and local WIC agencies are charged with carrying out most administrative and programmatic functions of the program. Specifically, USDA provides grants to state agencies, which use the funds to reimburse authorized retail vendors for the food purchased by WIC participants and to provide services. As part of its monitoring and oversight obligations, USDA annually reviews the state plan for each state WIC agency, which describes the agency’s objectives and procedures for all aspects of administering WIC for the coming fiscal year. USDA’s review of state plans is one of the federal oversight mechanisms for the program, and state plans provide important information about how states administer WIC. For their part, state agencies are responsible for developing WIC policies and procedures within federal requirements, entering into agreements with local agencies to operate the program, and monitoring and overseeing its implementation by these local agencies. WIC regulations define participant violations, which include the sale of WIC food benefits, and require state agencies to establish procedures to control participant violations. However, the regulations do not specify what steps states should take to prevent participant violations, such as methods for identifying attempted sales of WIC food benefits. The regulations also require state agencies to establish sanctions for participant violations, and require mandatory sanctions for certain types of violations. For example, when a state establishes a claim of $100 or more against a participant who improperly disposed of program benefits—such as through online sales—it must disqualify the participant for 1 year. Beyond these mandatory sanctions, in most cases the regulations do not specify how severely states should sanction participants for particular violations.\nThe WIC oversight structure is part of the program’s internal controls, which are an integral component of management. Internal control is not one event, but a series of actions and activities that occur on an ongoing basis. As programs change and as agencies strive to improve operational processes and implement new technological developments, management must continually assess and evaluate its internal control to assure that the control activities being used are effective and updated when necessary. Management should design and implement internal control based on the related cost and benefits. Effective internal controls include: (1) communicating information to management and others to enable them to carry out internal control and other responsibilities and (2) assessing the risks agencies face from both external and internal sources.", "In the past decade, USDA has taken steps to better tailor WIC food packages containing formula to the nutritional needs of participating infants. After reviewing the nutritional needs of WIC participants and food packages in a study contracted by USDA, the IOM recommended changes to the packages—including those containing formula. USDA issued revised regulations in 2007—which state agencies were required to implement at the start of fiscal year 2010—that adopted many of the recommendations from the IOM report to further encourage and support breastfeeding among participating mothers. According to USDA, the revised food packages were developed to better reflect current nutrition science and dietary recommendations than the food packages they were replacing. Among other changes, the revised regulations reduced the amount of formula provided to partially breastfed infants of all ages, delayed when partially breastfed infants may begin receiving formula, and reduced the amount of formula provided to older fully formula-fed infants.\nAmount of formula for partially breastfed infants: The revised regulations authorize maximum formula amounts for infant participants that vary by the extent to which the infant is breastfed (see fig. 2). Under the previous regulations, partially breastfed infants could receive up to the same amount of formula as those who were fully formula-fed. Under the revised regulations, “partially breastfed,” for the purposes of assigning the WIC food package, means an infant who is breastfed but also receives formula from the WIC program up to a maximum amount that is approximately half the amount of formula allowed for a fully formula-fed infant. USDA stated that this new category is intended to provide stronger incentives for continued breastfeeding, such as by providing partially breastfeeding mothers with additional quantities and types of supplemental foods—such as whole wheat bread or other whole grains—that are not provided to non-breastfeeding mothers. Because partially breastfed infants require less formula than fully formula- fed infants, this change may have reduced the potential for waste in the program.\nAge at which partially breastfed infants receive formula: To further support the successful establishment of breastfeeding, the revised regulations disallow the routine issuance of formula to partially breastfeeding infants during the first month after birth. While mothers of partially breastfed infants are not to automatically receive formula, local agency staff have some discretion and may determine, based on an assessment of the nutritional needs of the infant, that it is appropriate to make a small amount of formula available. According to the IOM, the fact that partially breastfed infants, under previous regulations, could receive up to the same amount of formula from birth as fully formula-fed infants may have interfered with mothers’ milk production and success at continued breastfeeding. Between implementation of the revised regulations in fiscal year 2010 and fiscal year 2014, the number of infant participants who were either partially or fully breastfed increased nearly 4 percent (see fig. 3).\nFormula amounts for older fully formula-fed infants: Under the revised regulations, fully formula-fed infants 6 through 11 months of age are authorized to receive less formula than they were authorized to previously. In addition, to introduce infants of this age to a variety of nutritious foods, the revised regulations, for the first time, added infant food fruits and vegetables to their food packages. Because the addition of fruits and vegetables provides infants greater amounts of nutrients, in its 2005 report, IOM determined that less formula is needed for infants that receive these foods. According to USDA, the revised maximum formula amount authorized for these infants is based on a scientific review of the calorie and nutrient needs of infants at this age.\nWhile federal regulations specify the maximum amount of formula different categories of infants are authorized to receive, state and local agency staff have some flexibility in determining precise amounts to provide, depending on an infant’s nutritional needs. Staff at local WIC agencies play a critical role in determining infants’ feeding categories, and they have the authority to provide them with less formula than the maximum amount allowed for each category, if nutritionally warranted. Nutrition specialists, such as physicians or nutritionists, working at the local agency perform nutritional assessments for prospective participants as part of certification procedures. They use the nutritional assessment information to appropriately target food packages to participants. WIC staff also provide regular nutrition and breastfeeding education services to established participants. In the guidance USDA issued in 2009 to assist state and local agency staff in implementing the provisions of the new food package regulations, staff were directed to tailor the amount of infant formula to the assessed needs of breastfed infants rather than to routinely issue food packages with standard quantities of infant formula to these infants. Further, the guidance stated that the maximum amount of formula authorized in the regulations is rarely warranted for partially breastfed infants.\nEven with USDA’s guidance, it is possible that some participants receive formula that they do not need or cannot use, and state and local policies on how participants should handle excess formula vary. WIC provided formula to a monthly average of nearly 1.8 million infant participants in 2013, according to USDA. Although federal regulations define the sale of WIC food benefits as a participant violation, one USDA official told us there is no federal guidance that addresses how local agencies should instruct participants to handle unused formula. Rather, according to USDA, state, and local WIC officials, state and local agencies establish their own policies and procedures. Officials from 7 of the 12 states we spoke with told us that participants are instructed to return unused formula to local agencies. Further, officials from the 2 local agencies we spoke with explained that it is relatively common for participants to return infant formula to their local agency, and one added that participants often return formula for health reasons, as pediatricians sometimes prescribe specialized formula because of food allergies. Officials we spoke to from two states said that the returned formula is given to participants who have lost their benefit vouchers. Officials from three other states said that returned formula is donated to food banks or hospitals.", "USDA does not have data that can be used to determine the national extent of online sales of WIC formula; however, officials in 5 of the 12 states we spoke to said that they have found WIC formula offered for sale online by some participants. USDA officials told us that the department has not conducted a comprehensive study to assess the national extent of online sales. According to the officials, the department does not collect data on this issue, in part because it is not the department’s responsibility to sanction WIC participants for program violations. Rather, it is the responsibility of state agencies to establish procedures to prevent and address participant violations, including attempts to sell WIC food benefits. Of the officials that we spoke to from 12 states, those from 9 states mentioned that the procedures they have established to identify this violation include regularly monitoring online advertisements. Officials in 3 of these states said that through their monitoring efforts, they have found fewer than 0.5 percent of their WIC participants attempting to sell WIC infant formula online. Officials in 2 other states did not estimate percentages but stated that the incidence is low.\nConsistent with these state accounts, our own monitoring of a popular e- commerce website for 30 days in four large metropolitan areas found few posts in which individuals explicitly stated they were attempting to sell WIC-provided formula. Specifically, we identified 2,726 posts that included the term “formula,” and 2 of these posts explicitly stated that the origin of the formula was WIC. In both posts, the users indicated they were selling the WIC formula because they had switched to different brands of formula.\nA posting from late June 2014 included the container size in the title and stated: “I am looking to sell 5 [brand name] 12.5oz cans (NOT OPENED) because is super picky and does not want to drink it no matter what i do. will drink the kind for some reason. I told my WIC office to switch me to another brand but they say it might take 3 months. Im asking 35$ but best offer will do since the brand I buy is from so Im not looking to make a profit here if you consider each can is 16$ at the store. please text if interested!! A posting from early July 2014 included the brand, type, and container size in the title and stated: “I have 7 powder cans of they dnt expire for another year at least just got them from my wic n we ended up switching formulas so its $65.oo for pick up all 7 cans or $70 if i have to drive.” formula-fed WIC infant participants each month, averaged across all ages.\nBeyond the 346 posts that matched these three criteria, we found another 135 that met at least one, but not all, of the criteria. However, since we did not investigate any of these posts further, we do not know if any or all of these 481 posts were attempts to sell WIC formula.\nA posting from mid-June 2014 stated: “$10 a can! 14 -12.9 oz Cans of [brand name and type] Formula. Expiration Date is - July 1, 2015. Please take it all. I will not separate the formula! NOT FROM WIC!!! is now 14 months and no longer needs this. Email only please A posting from mid-June 2014: “ Turn A Year Already, and we Just bought her 7 Brand New Cans of . She no longer needs Formula. Selling each Can for $10. Brand New, NOT Open. 12.4 Oz. EXP. 1 March. 2016.”\nThrough our monitoring efforts, and through interviews with USDA and state and local WIC officials, we identified a number of key challenges associated with distinguishing between WIC-obtained formula sales and other sales:\nEach state’s specific WIC-contracted formula brand is typically available for purchase at retail stores by WIC participants and non- WIC participants alike, without an indicator on the packaging that some were provided through WIC.\nThere are a number of reasons why individuals may have excess formula. For example, a WIC participant may obtain the infant’s full monthly allotment of formula at one time; alternatively, non-WIC parents may purchase formula in bulk at a lower cost to save money. In either case, if the infant then stops drinking that type of formula, parents may attempt to sell the unused formula.\nIndividuals posting formula for sale online are able to remain relatively anonymous, so WIC staff may not have sufficient information to link the online advertisement with a WIC participant. According to one WIC official we spoke with, staff in that state identify approximately one posting a week with sufficient detail about the seller—such as name or contact information—for staff to pursue. A WIC official from another state said that staff previously used phone numbers to identify WIC participants posting formula for sale, but they believe participants then began to list other people’s phone numbers on posts.\nAdvertisements for infant formula sales can be numerous online, and formula for sale originates from varied sources. For example, through our literature search, we found multiple news reports on stolen infant formula advertised for sale online.\nAccording to USDA, state, and local WIC officials, because of these challenges, the return on investment for monitoring online sales of WIC infant formula is low. One USDA official noted that it is difficult for states to prove that participants are selling WIC food benefits, which increases the amount of time and effort state staff need to spend to address these cases. Officials from one state WIC agency and one local WIC agency we spoke to said that efforts by state and local agency staff to identify and address online WIC formula sales result in few confirmed cases and draw away scarce resources from other aspects of administering the program. One USDA official said that states that sanction a participant for attempting to sell WIC formula without sufficient evidence that it occurred will likely have the violation overturned during the administrative appeal process. These cases also appear unlikely to result in court involvement, as when we asked the 19 officials from 12 states how these cases were addressed, only one said that a couple had gone through the legal system.should design and implement internal controls based on the related costs and benefits. According to USDA, because of the substantial risks associated with improper payments and fraud related to WIC vendor transactions, both USDA and the states have focused their oversight efforts in recent years on addressing vulnerabilities in the management of this area, rather than focusing on possible participant violations. However, because the use of the Internet as a marketplace has substantially increased in recent years and the national extent of online sales of WIC food benefits is unknown, USDA and the states have insufficient information to assess the benefits of broadening their oversight efforts to include this participant violation, as discussed in more detail later in this report.", "USDA has taken steps aimed at clarifying that the online sale of WIC benefits is a participant violation. For example, in 2013, USDA proposed regulations that would expand the definition of program violation to include offering to sell WIC benefits, specifically including sales or attempts made online. Earlier, in 2012, USDA issued guidance to WIC state agencies clarifying that the sale of, or offer to sell, WIC foods verbally, in print, or online is a participant violation.that USDA expects states to sanction and issue claims against participants for all program violations, but it did not provide direction to states on ways to prevent online sales of WIC foods, including formula. That same year, USDA also sent letters to four e-commerce websites— through which individuals advertise the sale of infant formula—requesting This guidance stated that they notify their customers that the sale of WIC benefits is prohibited, and two of the companies agreed to post such a notification.\nMore generally, USDA has highlighted the importance of ensuring WIC program integrity through guidance issued in recent years aimed at encouraging participants to report WIC program fraud, waste, and abuse to the USDA Office of the Inspector General (OIG). For example, in 2012, USDA disseminated a poster developed by the OIG and attached it to a guidance document describing its purpose, which includes informing WIC participants and staff how to report violations of laws and regulations relating to USDA programs. The following year, USDA issued additional guidance that encouraged states to add contact information for the OIG to WIC checks or vouchers, or to their accompanying folders or sleeves. USDA indicated that the intent of both guidance documents was to increase program integrity by making it easier for participants to report incidents of suspected fraud, waste, and abuse to the OIG. However, neither guidance document specifically directed states to publicize the fact that attempting to sell WIC benefits, either online or elsewhere, qualifies as an activity that should be reported.\nWIC Policy Memorandum #2013-4, OIG Hotline Information on WIC Food Instruments (June 10, 2013). require participants be informed of this violation through other means. In our review of rights and responsibilities statements from 25 states’ WIC policy and procedure manuals, we found that 7 did not require local agency staff to inform participants that selling WIC benefits is against program rules. Beyond this approach, some state officials we spoke to reported using other methods to inform participants of this program rule, but some methods may not reach all participants. For example, while officials from two states said that a statement instructing participants not to sell their benefits is printed either on the food voucher or the envelope containing the voucher given to participants, an official from another state said that local agencies in that state display a poster informing participants that selling WIC benefits online is prohibited. Both USDA officials and officials we spoke with from two states noted that some WIC participants do not know that selling food benefits is a program violation. Inconsistent communication to participants about this violation conflicts with federal internal control standards, which call for agency management to ensure that there are adequate means of communicating with external stakeholders that may have a significant impact on the agency achieving its goals. Participants who are unaware of this prohibition may sell excess formula online, thus inappropriately using program resources.\nIn addition, we found that states vary in the ways they identify attempted sales of WIC formula through monitoring efforts. According to the state and local WIC officials we spoke with, the method of monitoring used to identify online sales of WIC formula and the level of effort devoted to this activity vary across states. For example, while officials from 10 states said that state or local staff perform monitoring activities, an official from another state said that the state contracts with a private investigative firm to perform this task. Also, officials in one state said that a number of staff within the state office, as well as a number of those in local agencies, search social media websites daily. In contrast, officials from another state said that staff spend about a half day each week monitoring online sites for attempted sales of WIC food benefits, and an official from a different state said that staff monitor for such sales only when time allows.\nUSDA has signaled through recently proposed regulations and policy guidance that it considers the sale of WIC foods—including formula—to be a risk to program integrity; however, the department has not worked with states on developing ways to address these sales. A USDA official told us that the department would like to provide more support to states in pursuing likely cases of participant fraud related to the online sale of WIC food benefits, but it has not yet determined how to be of assistance. USDA officials told us that some of their regional meetings with state WIC staff have included discussions of states’ approaches to monitoring online sales of WIC food benefits, but these meetings were focused broadly on program integrity issues rather than on this type of monitoring. Without general information on monitoring techniques—such as promising search terms or online sites where states may want to focus their efforts—some states may be missing opportunities to better target their limited resources. Federal internal control standards call for agencies to analyze risks from both external and internal sources, and employ mechanisms to identify and deal with any special risks brought on by changes in economic or industry conditions. The standards also note that the attitude and philosophy of management toward control operations such as monitoring can have a profound effect on internal control.\nSee GAO-14-641. tools. While these efforts may help to assist state WIC staff monitoring attempted online sales of WIC formula to some extent, they are not directly applicable to WIC due to differences in benefit delivery. Specifically, SNAP benefits are provided through an electronic benefits transfer card that can be used to purchase a wide variety of foods at an authorized vendor by swiping the card and entering a personal identification number. Therefore, efforts to identify SNAP benefit trafficking focus on monitoring online sales of these cards and their personal identification numbers, which can be traced back to unique SNAP participants. In contrast, WIC participants generally receive benefits through vouchers that they use to purchase specific foods at an authorized vendor, and they are required to sign the voucher at the time As a result, efforts to identify online sales of WIC benefits of purchase.involve monitoring for formula after it has been purchased, and it is difficult to determine whether the formula was provided through WIC.\n42 U.S.C. § 1786(f)(1), 7 C.F.R. § 264.4(a). One related required element is the state agency’s plan for collecting and maintaining information on cases of participant fraud and abuse. We also found that the guidance USDA provides to states on developing their state plans, while relatively detailed in some respects, does not direct states to describe their plan for identifying program violations, including sales of WIC food benefits. area. According to federal internal control standards, agency management needs operating information to determine compliance with laws and regulations. Also, the standards note that factors outside management’s control or influence can affect an agency’s ability to achieve all its goals. Because state agencies are responsible for addressing program violations under the regulations, monitoring the actions they take is key to ensuring program integrity.", "WIC provides essential supplemental nutrition and assistance to low- income families, and infant formula, in particular, plays a critical role in the nutritional well-being of the many infant participants receiving it through the program. By better tailoring the food packages, USDA has better aligned the maximum amount of infant formula local agencies are allowed to provide to certain participants. For example, the reduction USDA made to the amount of formula that can be provided to partially breastfed infants reduced the amount of excess formula provided to them, which may have helped reduce opportunities for sales of excess formula. However, it is clear that some participants are selling WIC formula online, inappropriately using program resources. Although the extent of this activity is unknown, explicitly informing WIC participants that such sales are against WIC rules could help improve program integrity by preventing some online sales of WIC infant formula. However, USDA has not required state agencies to inform participants of this prohibition, and some states are not requiring local staff to do so. As a result, some participants may attempt to sell excess WIC formula online without the knowledge that it is against program rules.\nMonitoring online classified advertisements for attempted sales of WIC formula is another way to ensure program integrity. As the technological environment has changed with the increased use of e-commerce, actions needed to ensure WIC participants do not inappropriately use infant formula have changed as well. While USDA officials believe that states monitor for online sales of WIC formula, USDA currently does not collect information to confirm this. As a result, USDA is unable to effectively oversee state efforts to control this participant violation, and the agency lacks assurance that efforts are taking place nationwide. State officials we spoke to have responded to the inherent challenges involved in monitoring websites for infant formula sales with varied approaches, which likely yield varied outcomes, and some officials told us the return on investment for their monitoring efforts is low. However, because USDA and state agencies lack information from a national perspective about online sales of WIC food benefits and cost-effective approaches for identifying and addressing these sales, states are likely to be poorly positioned to strike the appropriate balance of costs and benefits when determining how to target their resources to ensure program integrity.", "To better ensure that WIC participants are aware of the prohibition against selling WIC formula, and to assist states’ efforts to prevent and address online formula sales, we recommend that the Secretary of Agriculture direct the Administrator of FNS to take the following three actions: Instruct state agencies to include in the rights and responsibilities statement that participants are not allowed to sell WIC food benefits, including online.\nRequire state agencies to articulate their procedures for identifying attempted sales of WIC food benefits in their WIC state plans and analyze the information to ascertain the national extent of state efforts.\nCollect information to help assess the national extent of attempted online sales of WIC formula benefits and determine cost-effective techniques states can use to monitor online classified advertisements.", "We provided a draft of this report to the Secretary of Agriculture for review and comment. In oral comments, USDA officials agreed with all three recommendations. Regarding the first two recommendations, officials noted that the department will incorporate into the WIC regulations requirements that states include the prohibition against the sale of WIC food benefits in participant rights and responsibilities statements and report to USDA in their WIC state plans on their procedures for identifying attempted sales of these benefits. USDA officials noted that because the regulatory process can be lengthy, in the interim period, the department will consider issuing guidance recommending these as best practices to state agencies. Regarding the third recommendation, officials said they would make it a priority to explore options for using available resources to assess the extent of online sales of WIC formula and to identify and share best practices, cost-effective techniques, or new approaches with state agencies to use in monitoring online advertisements. Specifically, they may draw on funds designated for addressing high-priority programmatic issues, and collaborate with stakeholders and other FNS program staff on monitoring strategies. We agree with the department’s planned approaches to addressing the recommendations, and we believe these efforts will help to improve WIC program integrity.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Agriculture, and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions concerning this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "To obtain and evaluate information about online sales of infant formula provided by the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), we used a variety of methods. We reviewed relevant federal laws, regulations, and U.S. Department of Agriculture (USDA) guidance to determine requirements related to the provision of formula to infants receiving WIC, as well as to identify federal, state, and local roles related to preventing and addressing online sales of WIC formula. We also interviewed USDA officials and reviewed USDA’s data on WIC infant participants who breastfeed, which was available for fiscal years 2010 through 2014. As part of our interviews with USDA officials, we assessed the reliability of these data and determined that they were sufficiently reliable for the purpose of this study. To help us understand how federal WIC food requirements were recently modified, we also reviewed a 2005 report published by the National Academies’ Institute of Medicine, since many of the changes were based on the recommendations of this report. To determine the role USDA regulations and guidance play in preventing and addressing online sales of WIC formula, we reviewed a non-generalizable sample of 25 states’ WIC policy and procedure manuals to determine how consistent states’ policies and procedures are in preventing and addressing online formula sales. To obtain some information about the extent of online sales of WIC formula in four metropolitan areas, we conducted monitoring of online classified advertisements to sell formula using one popular e-commerce website. To obtain additional information relevant to our study, we also interviewed an official from the National WIC Association, as well as 19 state and local WIC officials representing 12 states. In addition, we assessed USDA’s controls against GAO standards for Internal Control in the Federal Government.\nWe conducted this performance audit from April 2014 through December 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "To understand efforts to prevent and address online sales of WIC formula, we reviewed a non-generalizable sample of 25 states’ WIC policy and procedure manuals, including each state’s WIC participant rights and responsibilities statement. We selected these 25 states primarily based on varied size of WIC caseloads and geographic dispersion, and as a group, the states provided services to approximately For each two-thirds of all WIC participants in the U.S in fiscal year 2013.state, we reviewed the sections of the WIC policy and procedure manual relevant to participant violations, as well as the WIC participant rights and responsibilities statement. We analyzed each state’s rights and responsibilities statement to determine if it indicated that (1) the sale of WIC food benefits is a participant violation, and (2) the sale of WIC food benefits online is a participant violation. We reviewed these statements because federal regulations require that all WIC participants be informed of their rights and responsibilities during the certification process. However, federal regulations do not require state agencies to inform participants of this type of program violation. For each state, we also reviewed the state’s policies on addressing the participant violation of selling WIC benefits, such as through written warnings or program disqualifications for a specified time period.", "To obtain some information on the extent of online sales of WIC formula in four metropolitan areas, we conducted limited monitoring of online classified advertisements to sell formula using one popular e-commerce website that operates local websites. The selected areas included Chicago, IL; Dallas-Fort Worth, TX; Los Angeles, CA; and New York, NY. We selected these areas based on (1) high number of births—defined as over 100,000 or more in the metropolitan area between July 1, 2012 and July 1, 2013, (2) high state WIC caseloads—defined as over 275,000 participants in fiscal year 2013, and (3) geographic dispersion. Our monitoring results are not generalizable to all localities across the United States.\nWe conducted our monitoring of potential attempts to sell WIC formula during a 30-day period, from mid-June 2014 through mid-July 2014. During that period, we conducted manual search queries of the section of the website specified for infant- and child-related sales on each non- holiday weekday to detect postings containing the key terms “formula” or “WIC.” We also conducted manual search queries of the same section of the website using the name of the formula brand equivalent to the WIC- contracted formula brand specific to the metropolitan area’s state. We reviewed the text of each posting that contained the term “WIC,” as well as each posting containing the state-specific WIC-contracted formula brand. During our reviews of the text of the postings, we also identified those that met additional criteria generally consistent with WIC formula provided to participants. Specifically, the formula type and volume of formula container advertised for sale were equivalent to a type and volume of formula provided to WIC participants in the state in which the posting was made, and the amount of formula advertised for sale represented approximately 85 percent or more of the maximum amount of formula authorized for fully formula-fed infant WIC participants each month, averaged across all ages. We included the latter criterion to help us identify individuals attempting to sell relatively large quantities of formula. While this provides no information about the individuals’ relationship to the WIC program, we included this criterion because participants receiving WIC checks or vouchers for formula may be likely to purchase the infant’s entire monthly allotment of formula at one time.\nThis may result in WIC participants having multiple cans of unused formula, for example, if the infant switches formulas during the month, as noted in the two posts we found that specifically stated the individuals were attempting to sell WIC formula online. However, a relatively large amount of formula could also indicate intent to traffic WIC benefits in bulk in order to make a profit.\nWhen designing our monitoring approach, we relied on lessons learned by the GAO team that recently conducted a study to assess online sales of other federal nutrition benefits. For example, we based our decision to use the popular e-commerce website on the experience of the other GAO team, which used both that website and a social media website. The team found that monitoring efforts were most effective when using the e- commerce website. Similarly, the other team used both an automated and a manual approach to monitor the e-commerce website but found the manual approach to be more effective—as measured by more postings indicative of potential sales of these benefits—than the automated Our monitoring was conducted to provide some information approach.on the extent to which WIC participants may have attempted to sell WIC formula in four metropolitan areas over 30 days. As a result, we conducted our monitoring activities for illustrative purposes, and we did not intend to use them as evidence for our own investigations into potential WIC participant violations. However, we provided information to USDA officials about the two posts that explicitly stated the formula for sale was from WIC.\nOur monitoring approach had some limitations. In the posts we reviewed, individuals might have been selling WIC formula, but did not clearly state in the post that the formula offered for sale was from WIC. As a result, our finding likely undercounts the number of individuals who offered WIC formula for sale in the four metropolitan areas during our monitoring period. Further, because of the general lack of structure to online sales, our findings on the numbers of posts offering formula for sale that met our criteria may over- or under-represent the true number. Specifically, while we excluded duplicate posts we identified on individual days, we were unable to identify duplicate posts across different days. Therefore, if someone posted formula for sale that met our criteria on Tuesday, and then because the formula did not immediately sell, they posted the same formula for sale on Friday, we would have counted those both as posts offering formula for sale. As a result, while our methods provide the total number of formula posts during our monitoring period, excluding duplicate posts on the same day, we cannot be certain that each post represented a new offer of formula for sale. In addition, our findings may understate the total number of posts from individuals attempting to sell WIC formula online because, although we chose search terms we thought individuals would be most likely to use, it is possible some individuals used different terms. We also had to make some assumptions about posts that did not include sufficient detail in the text of the post. For example, we included in our findings posts that did not explicitly state the formula brand name, type, or container volume in the text but included a photo that showed formula matching the criteria we identified. However, it is possible that the photo in some posts did not, in fact, match the formula being offered for sale, resulting in our findings overstating the true number.", "", "", "In addition to the contact named above, Rachel Frisk (Assistant Director), Sara Pelton (analyst in charge), and Bryant Torres made key contributions to this report. Other contributors included James Bennett, Susan Bernstein, Sarah Cornetto, Celina Davidson, Michael Hartnett, James Healy, Ashley McCall, Jean McSween, and Almeta Spencer." ], "depth": [ 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1, 2, 2 ], "alignment": [ "h3_full h2_title", "h3_full", "h2_full", "h0_full", "h3_full h2_full h1_full", "h2_full h1_full", "", "", "", "h3_full", "", "", "", "", "" ] }

{ "question": [ "What has the USDA done for the WIC in the recent years?", "Why were these changes made?", "What specifically changed in terms of supporting breastfeeding?", "How else did the USDA regulations affect the formula authorization?", "What has been discovered by the information gathered from state WIC officials?", "What has been uncovered by the GAO during their 30 days of monitoring?", "What kind of information is and is not included through advertising?", "Why is it a challenge to monitor attempted online sales?", "What else may pose challenges?", "What does the USDA say about selling WIC formula online?", "How has the USDA provided limited assistance?", "What is the USDA responsible for, and what are states responsible for?", "What may be some limitations arising from this separation of responsibility?", "What has the GAO reported on the states' approaches?", "What are the effects of these monitoring challenges?", "Why may states be missing opportunities to better target their resources?", "What does the WIC provide?", "What is included in WIC benefits for infants?", "What has been highlighted by recent news reports?" ], "summary": [ "In recent years, the U.S. Department of Agriculture (USDA) has more closely aligned the amount of formula it authorizes states to provide through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) with current nutrition science and the nutritional needs of participating infants.", "These changes were also made, in part, to encourage and support breastfeeding.", "Specifically, the agency issued revised regulations in 2007, finalized in 2014, that reduced the amount of formula authorized for partially breastfed infants and delayed the age when these infants may begin receiving formula.", "The regulations also reduced the amount of formula authorized for older fully formula-fed infants because they added infant fruits and vegetables for the first time.", "USDA has not conducted any nationwide studies on the extent of online sales of WIC formula by program participants, but information gathered from state WIC officials and GAO's own limited monitoring suggest that some WIC formula is offered for sale online, though program rules prohibit such sales.", "In 30 days of monitoring one online classifieds website in four large metropolitan areas, GAO found 2 posts in which individuals attempted to sell formula specifically identified as WIC—among 2,726 that advertised infant formula generally.", "A larger number, 346 posts, advertised formula matching the brand, type, container volume, and amount provided to WIC participants, but did not indicate the source of the formula.", "Because WIC participants purchase the same brands and types from stores as non-WIC customers, monitoring attempted online sales of WIC formula can present a challenge.", "State officials GAO spoke with cited other challenges to monitoring online sales, such as the fact that individuals posting formula for sale online are able to remain relatively anonymous, and their posts may contain insufficient information to allow staff to identify them as WIC participants.", "USDA has taken steps to clarify that attempting to sell WIC formula online is a participant violation but has provided limited assistance to states in preventing and addressing these sales.", "For example, USDA has not specifically directed states to instruct participants that selling WIC formula is against program rules, which could lead to participants making these sales unknowingly and using program resources inappropriately.", "Further, although states are responsible for controlling participant violations—including sales of WIC benefits—USDA is responsible for determining compliance with the WIC statute and regulations.", "However, because the department has not required states to describe their procedures for controlling these violations, USDA is unable to both oversee and assess state efforts to ensure program integrity in this area.", "Through interviews with 19 state and local WIC agency officials from 12 states, GAO found that states vary in their approaches and the amount of resources devoted to monitoring attempted WIC formula sales.", "In addition, due to monitoring challenges, some officials expressed concerns about the return on investment for these efforts.", "Without information on cost-effective monitoring techniques—such as promising search terms or online sites where states may want to focus their efforts—some states may be missing opportunities to better target their limited resources.", "WIC provides supplemental foods and assistance to low-income pregnant and postpartum women, infants, and young children.", "Approximately half of U.S. infants born each year receive WIC benefits, and infant formula is a key component of the food package many receive.", "Recent news reports suggest that some participants have attempted to sell WIC formula online, and the Internet has substantially increased as a marketplace in recent years." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, -1, -1, 3, -1, 0, -1, 2, -1, 4, -1, -1, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 4, 0, 0, 0 ] }

{ "title": [ "Background", "The Financial Outlook of the Postal Service Retiree Health Benefits Fund Is Poor", "Many Companies and State Governments Have Cut Retiree Health Benefits to Control Costs", "A Small and Decreasing Percentage of Companies Continue to Offer Retiree Health Benefits", "Many Companies with Retiree Health Benefits Have Changed Eligibility or Benefit Structures", "State Governments Have Also Changed Eligibility or Benefit Structures", "Various Policy Approaches to Address the Sustainability of Postal Retiree Health Benefits Could Have Wide-Ranging Effects", "Some Approaches Would Shift Costs to the Federal Government", "Some Approaches Would Reduce Benefits or Increase Costs to Postal Retirees and/or Employees", "Some Approaches Would Change How Benefits Are Financed", "Conclusions", "Matter for Congressional Consideration", "Agency Comments and Our Evaluation", "Appendix I: Postal Retiree Health Benefits Trend Data", "2017 Total", "Fiscal Year", "Appendix II: Comments from the U.S. Postal Service", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Postal retiree health benefits are provided as part of the Federal Employees Health Benefits Program (FEHBP). FEHBP covers federal employees and retirees, including postal and nonpostal retirees, who receive health insurance from companies that contract with OPM. Retiree participation is voluntary; in fiscal year 2018, about 500,000 postal retirees have participated in FEHBP.\nFunding requirements for postal retiree health benefits are established by law, which divides responsibility among USPS, the federal government, and postal retirees. USPS is responsible for a specific percentage of premiums, the federal government is responsible for paying a prorated share, and retirees are responsible for the rest. The funding requirements for these benefits changed in 2006. Before then, a “pay-as- you-go” system governed USPS’s payments, which required USPS to pay its share of premiums for current postal retirees. The 2006 Postal Accountability and Enhancement Act (PAEA) required USPS to start fully “prefunding” retiree health benefits. This meant that USPS was required to make annual prefunding payments to a newly established fund to build up funds to cover USPS’s share of future postal retiree health benefit costs. PAEA also established the RHB Fund as a new fund in the U.S. Treasury for USPS to deposit money into, and specified that beginning in fiscal year 2017, the fund would be used by OPM to pay USPS’s share of postal retiree premiums for health benefits. Under PAEA, the first 10 years of prefunding payments were fixed—ranging from $5.4 billion to $5.8 billion annually from fiscal years 2007 to 2016. From fiscal years 2007 through 2016, USPS was also required to continue “pay-as-you-go” payments for its share of premiums for current retirees. The permanent schedule for USPS payments to prefund postal retiree health benefits under PAEA started in fiscal year 2017.\nWe have reported that USPS’s financial condition continues to deteriorate and its outlook is bleak. We have separately issued reports and testimonies that examined USPS’s financial condition, including its liabilities, and identified strategies and options for USPS and Congress to reduce postal costs, generate revenue, and restructure the funding of USPS’s pension and retiree health benefits. Looking forward, we have reported that USPS is facing unsustainable financial challenges as First- Class Mail volume continues to decline. USPS has recently reported that its revenue generation options are constrained, including by the price cap on market-dominant mail, and that any cost-cutting opportunities within its control are “relatively limited and dwindling.” USPS stated that the opportunity for further cost savings within its control will not come close to filling its financial gap.\nWith respect to actions taken by companies and state governments, we have previously reported on the long-term trend for these organizations to eliminate or reduce retiree health benefits. Factors contributing to this decline include financial challenges for companies and states, current and expected retiree health benefit costs, and the legal ability to change retiree health benefit programs.", "The RHB Fund is on an unsustainable path and is projected to be depleted in 12 years under the status quo. USPS has missed approximately $38 billion in payments to the fund since fiscal year 2010, and the fund’s balance is declining. Beginning in fiscal year 2017, OPM started drawing from the fund to pay USPS’s share of premiums for postal retirees’ health benefits. OPM’s payments in that year exceeded the fund’s income from interest, and OPM projects that, based on the status quo, future payments will continue to exceed the fund’s income from interest. As long as USPS continues to miss its annual payments—which were nearly $4.3 billion in fiscal year 2017 and are $4.5 billion in fiscal year 2018—the fund is on track to be depleted in fiscal year 2030 based on OPM projections requested by us (see fig. 1). We reported similar results in our December 2012 report on postal retiree health benefits.\nAt our request, OPM conducted a sensitivity analysis in which alternative projections were made that assumed USPS made payments to the fund of $1 billion per year or $2 billion per year; these alternative projections extended the fund’s projected depletion date from fiscal year 2030 to fiscal years 2032 or 2035, respectively (see fig. 2). OPM estimates the number of postal retirees eligible for federal retiree health benefits will remain near the current level of 500,000 through fiscal year 2035.\nThe outlook for the RHB Fund is poor as USPS has inadequate resources to cover its required payments to the RHB Fund and, in our view, based on past practices and USPS statements, appears unlikely to make partial payments. USPS has repeatedly testified that its required payments to the RHB Fund are “unaffordable” relative to its current financial situation and outlook. In this regard, USPS accumulated net losses of more than $65 billion in the last 11 years and has budgeted for a net loss of about $5 billion in fiscal year 2018. Further, USPS reached its statutory borrowing limit of $15 billion in 2012. Although USPS accumulated liquid assets (cash and cash equivalents) of about $10.5 billion at the end of fiscal year 2017, it did not make $6.9 billion in required payments for retiree health and pension benefits. According to USPS officials, USPS did not make these payments in order to preserve liquidity and cover operational costs.\nIf the RHB Fund is depleted, PAEA requires USPS to fill the resulting financial gap by resuming “pay-as-you-go” payments for its share of retiree health premiums that are currently being paid by the fund. However, PAEA does not address how funding will be provided or whether benefits will be provided if the fund becomes depleted and USPS does not make payments to cover its share of premiums.\nOPM and USPS have identified the following issues should the fund be depleted:\nAccording to OPM: (1) The RHB Fund is the initial funding source for USPS’s share of postal retirees’ health insurance premiums as long as money remains in the fund. (2) If the fund is depleted, then USPS becomes the funding source responsible for paying USPS’s share of these premiums. (3) Regardless of whether funds are available to pay USPS’s share of premiums, postal retirees are statutorily entitled to remain enrolled in their FEHBP plans. (4) Therefore, if the fund is depleted and USPS does not pay its share of premiums, the providers of these FEHBP plans would be underpaid.\nAccording to USPS: (1) Current law does not appear to contemplate a situation in which USPS itself is unable to make payments to the RHB Fund after the fund is depleted. (2) The law does not condition postal retirees’ eligibility for health benefits upon the fund or the payment of government contributions by USPS and the federal government. (3) Therefore, USPS stated it is reasonable to expect that postal retirees would remain eligible for health coverage even if USPS is unable to make payments to the RHB Fund after it is depleted. Regarding who would pay for their health coverage at this point, USPS stated that ultimately, it would be up to Congress to legislate a resolution to the funding issue.\nAs the above projections show, the RHB Fund could be depleted in as little as 12 years—and USPS may be unable to cover its share of retiree health insurance premiums should its financial condition remain precarious. Depletion of the fund could affect postal retirees—who have provided a vital service to the nation—as well as USPS, postal customers and other stakeholders, including the federal government.", "", "Survey data we reviewed indicate that most companies do not offer retiree health benefits and that the number of companies providing such benefits is decreasing over time. For example, the percentage of all private and public organizations (e.g., state or local governments) with more than 200 employees that offer employee health benefits and that also offer retiree health benefits is estimated to have declined from 40 percent in 1999 to 25 percent in 2017, according to annual surveys conducted by the Henry J. Kaiser Family Foundation and the Health Research & Educational Trust (Kaiser/HRET).\nFocusing specifically on the results for private for-profit companies, the 2017 Kaiser/HRET survey estimated that only 11 percent of companies with at least 200 employees that offered health benefits to active employees also offered retiree health benefits in 2017, the smallest percentage since comparable data were measured in 2012. The 2017 Kaiser/HRET survey also estimated that the percentage of companies offering retiree health benefits was greater among companies with at least 5,000 employees (35 percent) than those with 1,000 to 4,999 employees (18 percent) and those with 200 to 999 employees (9 percent) (see fig. 3).\nSurveys sponsored by the Agency for Healthcare Research and Quality (AHRQ) have estimated similar trends for private sector establishments with at least 1,000 employees and with 100-999 employees. According to the AHRQ surveys, an estimated 25 percent of private sector establishments with at least 1,000 employees offered health insurance coverage to retirees age 65 and older in 2016, down from 41 percent in 2003. For retirees under 65, an estimated 32 percent offered such coverage in 2016, down from 42 percent in 2003 (see fig. 4).", "Based on reports we reviewed and experts we interviewed, many companies that have retained their retiree health benefits have done so by making changes to control costs, including tightening eligibility and restructuring benefits. Depending on the company, the changes have applied to new hires, current employees, or retirees. Specific changes have included the following:\nTightening eligibility: Some companies have made new employees and/or employees hired after a given date ineligible to receive retiree health benefits, while other companies have increased the minimum age and/or length of service requirements for eligibility, according to reports and experts we interviewed.\nRestructuring benefits: Many companies have restructured retiree health benefits to reduce the level of the benefit, to shift costs to retirees, and to change how the benefits are provided. For example, some companies have shifted from an approach under which a company pays a percentage of premiums for a selected health benefit plan, to an approach under which a company pays a fixed dollar amount that employees may put toward health care costs. The 2017 Kaiser/HRET survey estimated that 30 percent of private and public organizations with 200 or more employees that offer retiree health benefits provide a fixed dollar amount that the retiree can use to purchase a retiree health plan they choose. Experts on retiree health benefits that we interviewed told us such companies often shift costs to retirees by maintaining defined contributions at the same level over time, even as overall health care costs increase.", "Based on multiple reports and experts, nearly all state governments continue to offer retiree health benefits to at least some state government retirees but generally have shifted some costs from the state to retirees and/or active employees in various ways. For example, in 2016, the Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation reported on the following recent changes at the state level related to eligibility for retiree health benefits, benefit levels, and aspects of how the benefits coordinate with Medicare:\nTightening eligibility or limiting benefit levels: Most states varied eligibility for retiree health benefits based on factors such as age and years of service, and varied benefit levels based on factors such as date of hire, date of retirement, or vesting eligibility; some states varied benefit levels based on years of service. Between 2000 and 2015, more than a dozen states changed the minimum age or the number of state service years required for retirees to be eligible for health benefits. During that timeframe, at least 10 states adopted formulas for prorating benefits that required different premium-sharing amounts based on years of service, or altered existing prorating formulas, bringing the total to 31 states that used prorating in 2015. At least 5 states stopped making any contributions to health premiums for certain retirees.\nMedicare coordination: Thirty-five states provided employer- sponsored Medicare Advantage or Medicare Part D plans, known as Employer Group Waiver Plans, to provide health or prescription drug benefit coverage for Medicare-eligible retirees since these options were authorized in 2003. According to the report, “These cost- saving programs provide states with financial subsidies from the federal Medicare program to provide Medicare plus wraparound benefits.”", "We identified eight potential policy approaches to address the financial sustainability of postal retiree health benefits, primarily based on a review of legislative proposals and pertinent literature on actions that were taken by private companies and state governments and are discussed above. These approaches fall into three categories: (1) approaches that shift costs to the federal government; (2) approaches that reduce benefits or increase costs to postal retirees and/or postal employees; and (3) approaches that change how the benefits are financed.\nThese eight approaches are not mutually exclusive, nor are they an exhaustive list of possible approaches. Each approach could include a range of specific options; thus, even if successfully implemented, no one approach would necessarily be sufficient to make postal retiree health benefits financially sustainable. Although our discussion of the various policy approaches specifically addresses postal retiree health benefits, most approaches could address federal retiree health benefits more broadly, as both postal and non-postal federal employees participate in the same federal health benefits program.\nAll approaches we identified have different potential effects and would require congressional action because current law establishes certain requirements for postal retiree health benefit plans, including basic rules for benefits, enrollment, and participation, and how benefits are to be paid for. Because the RHB Fund has a large and growing financial gap, any approach that would have a significant financial impact could affect the federal government, postal retirees, postal employees, USPS, and customers to varying degrees.", "Medicare Integration: Various legislative proposals have been made to increase postal retirees’ participation in Medicare—a shift that would decrease USPS’s costs but increase Medicare’s costs, according to analyses by the Congressional Budget Office (CBO). These proposals would establish a program within FEHBP for active postal employees and postal retirees. Under these bills, Medicare-eligible postal retirees enrolled in this program would generally also be required to be enrolled in Medicare Parts A, B, and D. According to CBO analyses, the bills would have resulted in USPS savings, in part because increased participation in Medicare would shift primary responsibility for covering certain health care services to Medicare for those who enroll. As we have previously reported, the primary policy decision for Congress to make is whether to increase postal retirees’ use of Medicare.\nSupplemental federal appropriations: If the RHB Fund becomes depleted and USPS does not fill the financial gap, supplemental federal appropriations could be an alternative if Congress wants benefits to continue at the same level. As previously noted, OPM officials told us that regardless of whether funds are available to pay USPS’s share of premiums, postal retirees are statutorily entitled to remain enrolled in their FEHBP plans. However, supplemental federal appropriations for postal retiree health benefits could increase the federal budget deficit. In addition, supplemental appropriations for postal retiree health benefits would be inconsistent with USPS functioning as a self-financing entity that covers its costs with revenue it generates.", "Tighten eligibility or reduce or eliminate retiree health benefits: As some companies and state governments have done, eligibility restrictions could be tightened for postal retiree health benefits, or other actions could reduce the level of benefits or even eliminate benefits, such as making new hires ineligible to receive retiree health benefits. The effects would depend on the specific changes and whether they were made to apply to current retirees, current employees, or future hires. Depending on the extent of the changes, this approach would reduce USPS’s liability for postal retiree health benefits and thereby reduce its unfunded liability.\nIncrease premium payments by postal retirees and/or postal employees: As some companies and state governments have done, premium payments for postal retiree health benefits by postal retirees and/or postal employees could be increased. For example, as others have reported, some companies and state governments have required retirees to pay 100 percent of the health insurance premium for their retiree health benefits. Similarly, a larger share of retiree health premiums could be borne by postal retirees or postal employees could be required to pay for retiree health benefits before they retire. Such changes would require changes to current law that allocates specific financial responsibility for payments among USPS, the federal government, and retirees participating in FEHBP, as active postal employees make no payment for retiree health benefits under current law.\nThe expenses of the RHB Fund could be decreased by these approaches that shift costs to postal retirees, postal employees, or both. Depending on how much of the costs are shifted, the additional costs could increase the challenge for retirees to ensure their accumulated resources last throughout retirement, or for postal employees to save for retirement. Further, as we have reported, rising health care costs can increase the overall amount individuals may need to save to ensure they have an adequate income once they retire.\nChange the federal contribution to a fixed subsidy: As some companies and state governments have done, postal retiree health benefits could be shifted to a structure with a fixed amount subsidizing the benefit. This amount could be adjusted over time; any adjustments might or might not keep up with costs. Depending on the initial size of the fixed subsidy and any adjustments over time, this approach could reduce the expenses of the RHB Fund and USPS’s required payments. RHB Fund expenses could be reduced over time if the fixed subsidy increases less than postal retiree health premiums. This approach would require changes to current law and regulations that prescribe the federal government’s financial contribution to FEHBP. For example, CBO recently identified one option to change FEHBP’s statutory structure from a premium-sharing structure that is required by law to fixed subsidies for health benefits. Under this option, the fixed subsidies would grow at the rate of inflation rather than at the average rate of growth for FEHBP premiums; CBO stated this change would be expected to slow the growth of federal contributions to FEHBP. A fixed subsidy for retiree health benefits could increase incentives for retirees to make less costly decisions with respect to health care. However, this approach could result in greater cost exposure for retirees, who may face difficult decisions regarding their health care, particularly if their financial resources are limited. As we have reported, individuals face the risk that rising and unpredictable health care or long-term care costs may lead them to draw down their retirement savings faster than expected.\nEstablish a non-federal voluntary employees’ beneficiary association (VEBA) for postal retiree health benefits: As some companies have done to provide retiree health benefits separately from the employer, a VEBA outside the federal government could be established to manage postal retiree health benefits. This approach means that postal retiree health benefits would be provided through the VEBA instead of through the OPM-administered FEHBP. The non-federal VEBA would administer the postal retiree health benefits program, including determining the specific benefits that would be provided and the level of contributions from the VEBA members—who could include retirees and employees—and the investing of its assets. Such an approach would require determining the VEBA’s governance structure, funding sources, level of funding, type of investments, and associated market risks. One issue could be determining the source and level of initial funding for a new VEBA for postal retiree health benefits, such as whether initial funding would come from the RHB Fund, the Treasury, or both. Other issues could be what funds would be provided to the VEBA going forward, including the source(s) and level of funding, and what the benefit levels would be. If the entire RHB Fund were transferred into a VEBA, the current level of benefits would ultimately not be sustainable unless further funding is provided from one or more sources, such as from USPS, retirees, active employees, or the federal government. Thus, trade-offs would involve what level of benefits would be provided, who would bear the costs, and what might happen if VEBA assets decline or become depleted.", "Reduce the required level of prefunding: Proposed legislation includes an 80 percent funding target for postal retiree health benefits instead of the 100 percent target established by current law. This would reduce USPS’s required payments to the RHB Fund but could increase costs for future postal ratepayers and increase the risk that USPS may not be able to pay for these costs. As previously discussed in this report, state governments either do not prefund their retiree health benefits or generally have a low level of prefunding. We have expressed concern about a proposed 80 percent funding target for postal retiree health benefits that would have the effect of carrying a permanent unfunded liability equal to roughly 20 percent of USPS’s liability, which could be a significant amount. As we previously reported, an alternative could be to build in a schedule to achieve 100 percent funding in a later time period after the 80 percent level is achieved. Although USPS payments with an 80 percent funding target would reduce USPS’s required payments, fully funded benefits protect against an inability to make payments later, make promised benefits less vulnerable to cuts, and protect USPS’s long-term viability. Further, reducing the funding target is unlikely to have any effect as long as USPS continues to make no payments to the RHB Fund, as discussed earlier.\nWe continue to believe that as long as USPS is required by law to pay its share of retiree health benefits premiums, it is important for USPS to prefund its retiree health benefit liability to the maximum extent that its finances permit. We recognize that multiple options exist to prefund benefits and amortize unfunded liability and that no prefunding approach will be viable unless USPS can make the payments and maintain liquidity. As we have reported, making affordable prefunding payments would protect the viability of USPS by not saddling it with bills later on, when employees are already retired and no longer helping it to generate revenue; making payments can also make the promised benefits more secure. We also have reported that deferring payments can pass costs from current to future postal ratepayers. To the extent prefunding is postponed by using a lower funding target, larger payments will be required later, when they likely would be supported by lower levels of profitable First-Class Mail volume.\nOutside investment: Proposed legislation would initially require 25 percent of the RHB Fund to be invested in index funds modeled after those used for federal Thrift Savings Plan investments. The objective of investing RHB Fund assets outside of U.S. Treasury securities would be to seek a greater rate of return on these assets in an attempt to reduce unfunded liabilities and the amount of required prefunding payments. Such outside investment would require legislation because current law limits RHB Fund assets to U.S. Treasury securities that are backed by the full faith and credit of the federal government. A higher rate of return on RHB Fund assets could reduce long-term funding needs. However, there are other considerations. For example, we have reported that if fund assets were invested in non-Treasury securities, the fund may experience losses in a market downturn and would thus have reduced assets available for health care. Assuming there would be no explicit federal guarantee of the value of the invested assets, we stated that USPS is not well positioned to deal with a potentially significant decline in their value, given its significant operating losses and continuing decline in mail volume. We also reported that the impact of any asset losses could be magnified because a market downturn that negatively affects asset value could be associated with a more general economic downturn that negatively affects USPS mail volume and revenues.", "About a half million postal retirees receive retiree health benefits. Postal retirees have provided a vital service to the nation, and resolving a key aspect of their future situation warrants congressional action. Failure to address the poor financial outlook of the RHB Fund could pose serious consequences for these retirees as well as USPS, postal customers, and other stakeholders, including the federal government. It is reasonable to believe that USPS will not be able to fill the financial gap once the RHB fund is depleted—a situation that could occur in as little as 12 years under the status quo. There is no certainty on what actions should be taken to address this problem. However, we have identified multiple approaches that could be used, individually or in combination, that Congress could consider to help address the financial shortfall in this area. All of these approaches have different potential effects, and it is up to Congress to consider the merits of the approaches and determine the most appropriate action to take. It would be preferable to take action when careful consideration is possible, rather than wait until lack of adequate funding could disrupt postal retiree health benefits.", "Congress should consider passing legislation to put postal retiree health benefits on a more sustainable financial footing.", "We provided a draft of this report to OPM and USPS for their review and comment. OPM provided technical comments, which we incorporated as appropriate. USPS provided a written response, which is reproduced in appendix II of this report.\nIn its written response, USPS stated that it concurred with our matter for congressional consideration that congressional action is necessary to achieve a financially sustainable Postal Service Retiree Health Benefits Fund (RHB Fund). However, USPS said our discussion of potential policy approaches for postal retiree health benefits would benefit from additional context and balance. USPS also put forth additional information for three of the potential policy approaches highlighted in our report. Our report presents a high-level overview of eight potential policy approaches. It was not designed to be a comprehensive catalog of possible options with an analysis of the various considerations relevant to each.\nWith regard to the Medicare integration approach, USPS stated that increased Medicare participation by postal retirees is not limited to the “full Medicare integration option,” as represented in our report and identified variations of such an approach. USPS said readers would benefit from a fuller picture of Medicare integration practices, stating that among employers that continue to provide retiree health benefits, full Medicare integration is a uniform best practice. USPS cited a 2014 report that said Medicare integration is the most common arrangement for employer-provided retiree health benefits, adding that retiree health benefits for Medicare-eligible employees are assumed to be merely supplemental to Medicare as a matter of course. Our report discussed Medicare integration by state governments, but did not present recent data on the percentage of private companies that coordinate their retiree health benefits with Medicare because such data are not publicly available. Additionally, USPS said our report framed the issue of Medicare integration as “solely” a tradeoff between USPS and Medicare costs while there are other factors to consider, such as the relative benefits to USPS compared to the overall cost for the Medicare program. As we noted in our report, the eight potential policy approaches were not designed to be mutually exclusive, nor an exhaustive list of possible approaches. Additionally, we recognize there are various factors related to this approach, but that the primary one is whether to increase postal retirees’ use of Medicare which would lead to further increasing Medicare costs.\nSecond, USPS said it believed our statements about approaches for changing the level of prefunding for retiree health benefits below the 100 percent level were misplaced, citing “universally accepted practices” for other entities to “pay-as-you-go” (i.e., not prefund at all), or to prefund at much lower levels. We have reported on such funding levels in the past as well. However, a proposed 80 percent funding target for postal retiree health benefits would have the effect of carrying a permanent unfunded liability equal to roughly 20 percent of USPS’s liability, which could be a significant amount. As we previously reported, an alternative could be to build in a schedule to achieve 100 percent funding in a later time period after the 80 percent level is achieved. As our report also explained, although USPS payments with an 80 percent funding target would reduce USPS’s required payments, fully funded benefits protect against an inability to make payments later, make promised benefits less vulnerable to cuts, and protect USPS’s long-term viability.\nFinally, USPS said that our statements about potential risks associated with investment of assets outside the U.S. Treasury seem disproportionate given USPS’s view that diversification of assets set aside for retiree health benefits is “universally accepted” as a best practice. We recognize that a higher rate of return on RHB Fund assets could reduce long-term funding needs for the RHB Fund. However, there are considerations specific to USPS. For example, assuming there would be no explicit federal guarantee of the value of the invested assets, we stated that USPS is not well positioned to deal with a potentially significant decline in their value, given its significant operating losses and continuing decline in mail volume. We also noted that, as we have previously reported, the impact of any asset losses could be magnified because a market downturn that negatively affects asset value could be associated with a more general economic downturn that also negatively affects USPS mail volume and revenues.\nIn summary, we believe our report presents a balanced description of a wide range of possible policy options; it does not endorse or recommend any particular option for Congress. As we concluded, all of these approaches have different potential effects, and the information we present, as well as the additional views presented by USPS, provide critical information for congressional decision-makers to assess as they consider the merits of the approaches and determine the most appropriate action to take.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Postmaster General; and the Director of the Office of Personnel Management. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix III.", "End of year net funded status (unfunded) (55.0)\nMissed USPS payments to the fund (53.5) (52.0) (48.6) (46.2) (47.8) (48.3) (48.9) (54.8) (52.1)", "payments due on Sept. 30, 2017, of $955 million for the amortization of USPS’s unfunded liability for postal retiree health benefits, and $3.3 billion for the “normal costs” of retiree health benefits. The “normal cost” is the annual expected growth in liability attributable to an additional year of employees’ service.", "", "", "", "", "In addition to the individual named above, Derrick Collins (Assistant Director); Kenneth John (Analyst-in-Charge); Amy Abramowitz; Taiyshawna Battle; William Colwell; Swati Deo; John Dicken; Leia Dickerson; William Hadley; James Leonard; Emei Li; Thanh Lu; Sara Ann Moessbauer; Joshua Parr; Malika Rice; Matthew Rosenberg; Amy Rosewarne; Frank Todisco; and Crystal Wesco made key contributions to this report." ], "depth": [ 1, 1, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h0_full h3_full", "h0_full h3_full h2_full", "", "", "", "", "h3_full h2_title h1_full", "h1_full", "h2_full", "h2_full", "h0_full h3_full h1_full", "", "h3_full h1_full", "", "", "", "", "", "", "" ] }

{ "question": [ "How has the RHB fund changed in the past couple of years?", "How does the future trajectory look like for the fund?", "What can extend the depletion of the fund?", "How has the USPS responded?", "What is some evidence that shows how the fund is unaffordable?", "What may happen if the funds become depleted?", "What are the repercussions of a depleted fund?", "What did the GAO report on when reviewing policy approaches?", "What is included in the first category?", "What is included in the second category?", "What is included in the third category?", "What are the purposes of these approaches?", "How does this affect Congress's involvement?", "Why should they not wait until there is a lack of adequate funding?", "How does the USPS prefund its share of health benefits?", "How has the USPS done on their payments so far?", "Why is the fund only 44% funded?", "How has the lack of funding impacted OPM's involvement with USPS?", "What is the purpose of the GAO report?", "How did GAO create their report?", "How did the laws reviewed by the GAO influence their report?", "What should be noted about these approached?", "What other approaches were taken by GAO to fulfill the report?" ], "summary": [ "At the end of fiscal year 2017, the fund's assets declined to $49.8 billion and unfunded liabilities rose to $62.2 billion.", "Based on Office of Personnel Management (OPM) projections requested by GAO, the fund is on track to be depleted in fiscal year 2030 if the United States Postal Service (USPS) continues to make no payments into the fund.", "Annual payments of $1 billion or $2 billion into the fund would extend the projected depletion date by 2 to 5 years (see figure).", "USPS has said that its required payments to the fund are unaffordable relative to its current financial situation and outlook.", "For the past 11 years USPS has incurred large operating losses that it expects will continue. Additionally, USPS has stated that its opportunities for revenue generation and cost-cutting are limited.", "If the fund becomes depleted, USPS would be required by law to make the payments necessary to cover its share of health benefits premiums for current postal retirees.", "Depletion of the fund could affect postal retirees as well as USPS, customers, and other stakeholders, including the federal government.", "GAO identified three categories of policy approaches for postal retiree health benefits, based on legislative proposals and pertinent literature.", "First, some approaches, such as generally requiring eligible postal retirees to participate in Medicare, would shift costs to the federal government.", "Second, some approaches would reduce benefits or increase costs to postal retirees and/or employees.", "Third, some approaches would change how benefits are financed (see table).", "All of these approaches have different potential effects and would require congressional action.", "Thus, it is up to Congress to consider the merits of different approaches and determine the most appropriate action to take.", "It would be preferable to take action when careful consideration is possible, rather than wait until lack of adequate funding could disrupt postal retiree health benefits.", "To do so, USPS is required to make payments into the RHB Fund, which is administered by OPM.", "However, USPS has not made any payments to the fund since fiscal year 2010.", "At the end of fiscal year 2017, USPS had missed $38.2 billion in payments, leaving the fund 44 percent funded.", "Pursuant to law, beginning in fiscal year 2017, OPM started drawing from the fund to cover USPS's share of postal retirees' health benefits premiums.", "This report examines (1) the financial outlook for the RHB Fund and (2) policy approaches for postal retiree health benefits, among other topics.", "GAO evaluated financial projections for the RHB Fund from OPM.", "GAO reviewed laws and regulations and identified policy approaches primarily by identifying legislative proposals, and literature on actions of companies and state governments to address retiree health benefits.", "These approaches are not exhaustive or mutually exclusive.", "GAO also interviewed experts in retiree health benefits and postal stakeholders, chosen on the basis of relevant publications and prior GAO work, and interviewed and obtained written responses from OPM and USPS officials." ], "parent_pair_index": [ -1, 0, -1, -1, 3, -1, 5, -1, -1, 1, 1, -1, 4, -1, -1, 0, -1, -1, -1, -1, -1, 2, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1, 1, 1 ] }

{ "title": [ "Background", "Roles and Responsibilities of Organizations Involved in Revocation of Personnel Security Clearances at DHS and DOD", "Guidance Governing Revocation of Personnel Security Clearances at DHS and DOD", "Personnel Security Clearance Revocation Process", "DHS and DOD Data Systems Do Not Track Complete Revocation Information", "DHS Revoked Clearances of Fewer than 1 Percent of Employees Eligible to Access Classified Information, but It Is Believed That Many Employees Resign before Final Determination Is Made", "DOD Revoked Clearances of More than 16,000 Employees and 2,500 Contractors from Fiscal Years 2009 through 2013", "DHS’s and DOD’s Systems Do Not Capture All Revocation-Related Data, Including the Total Population Affected by the Revocation Process", "Inconsistent Implementation of Revocation Requirements across DHS and DOD Is Due in Part to Limited Oversight of the Security Clearance Revocation Process", "DHS and DOD Have Implemented Executive Order Requirements in Different Ways", "DHS and DOD Implementation of Personal Appearance Requirement Provides Different Protection for Contractors than Military and Civilian Personnel", "DHS and DOD Employees Experience Different Rights to Cross-examine Witnesses during the Revocation Process", "DOD and the Military Departments Disagree on Legal Authority, Risks, and Benefits of Consolidating Multiple Appeals Boards", "Implementation of Some Revocation Processes by Components Is Potentially Not Consistent with Executive Orders or Agency Policy", "Navy and Army Policies Could Result in PSABs Collecting New Information without Sharing It with the Employee or Providing the Employee with an Opportunity to Respond", "U.S. Coast Guard Did Not Communicate Right to Counsel to Its Military Personnel", "DHS and DOD Have Performed Some Oversight over Revocation Process at Component Level but Have Not Evaluated Quality of Revocation Process at Department Level", "ODNI Has Exercised Some Oversight over Security Clearance Revocations, but Has Not Reviewed the Extent That Clearance Revocation Process Should Be Uniform across the Federal Government", "Employment Outcomes after Clearance Revocation Are Determined Based on Several Factors, and Identification of these Outcomes Is Hindered by Lack of Data", "Employment Outcomes for DHS and DOD Employees with Revoked Clearances Generally Is at Discretion of Employee’s Supervisor or Commander", "Communication Varies between Personnel Security and Human Capital Offices", "DHS and DOD Do Not Readily Know Employment Outcomes of Individuals with Revoked Clearances Because Data Are Not Readily Available", "Data ODNI Provides to Congress on Total Employees Eligible for Access to Classified Information May Include Inaccurate DOD Data", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Comments from the Department of Homeland Security", "Appendix III: Comments from the Department of Defense", "Appendix IV: Comments from the Office of the Director of National Intelligence", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "Multiple agencies and organizations within DHS and DOD have key roles and responsibilities for different steps of the personnel security clearance revocation process. In 2008, Executive Order 13467 designated the DNI as the Security Executive Agent. As such, the DNI is responsible for developing policies and procedures to help ensure the effective, efficient, and timely completion of background investigations and adjudications relating to determinations of eligibility for access to classified information and eligibility to hold a sensitive position.\nWithin DHS, the Office of the Chief Security Officer develops, implements, and oversees the department’s security policies, programs, and standards, among other things. The DHS Chief of Personnel Security Division, under the direction of the Chief Security Officer, is responsible for issuing department-wide policy for the Personnel Suitability and Security Program, maintaining a departmental database for tracking personnel security cases, and determining employees’ eligibility for access to classified information. DHS component Chief Security Officers implement personnel security and suitability programs within their respective component.", "Executive Order 12968, Access to Classified Information (Aug. 2, 1995, as amended).", "DHS and DOD can revoke an employee’s eligibility for access to classified information based on 13 adjudicative guidelines. While the personnel security clearance revocation process varies by agency and type of employee, the general process for DHS and DOD military and federal civilian personnel, and for government contractors, is summarized in figure 2. According to DHS officials, the revocation process will end if the employee chooses to resign before a decision has been made; if a DOD military or civilian employee has initiated an appeal of a revocation decision, the appeal will be decided even if an employee has separated.\nThe process begins with adverse information that can come from a variety of sources, including but not limited to individual self-reporting, federal or contract investigators who are conducting an investigation, Inspector General channels, hotlines, civilian law enforcement agencies, and reporting by persons such as security officers. According to DHS and DOD officials, the steps and time frames associated with investigating and verifying the credibility of the adverse information can vary considerably according to the nature and source of the adverse information. Some of these steps may include notifying the employee that adverse information was reported against him or her, allowing the employee an opportunity to provide a response, obtaining information from other government agencies, and conducting an updated background investigation to obtain court records, criminal records, and financial checks.\nThe February 2014 OMB report found that clear and consistent requirements do not exist across government for employees or contractors to report information that could affect their continued fitness, suitability, or eligibility for federal employment and that there was not consistent guidance in place to direct contractors or contract managers to The report noteworthy or derogatory information regarding employees.report recommended acceleration of the implementation of a continuous evaluation program that would notify security officials of noteworthy events or incidents in near-real time. If incident reporting increases as a result of these recommendations, it raises the potential that such incidents could lead to an increase in the number of revocation cases in the future. As part of an ongoing review on the quality of the personnel security background investigation process, we are examining the implementation status of the recommendations in this OMB report.", "DHS’s and DOD’s data systems track varying levels of detail related to personnel security clearance revocations. DHS’s and DOD’s data systems could provide data on the number of and reasons for revocations, but they could not provide some data, such as the number of individuals who received a proposal to revoke their eligibility for access to classified information, which means that the total number of employees affected by the revocation process is unknown.", "DHS data show that about 125,000 DHS civilian and military employees were eligible to access classified information as of March 2014, and that DHS revoked access to classified information for 113 employees, or less than 1 percent, in fiscal year 2013. An official from the DHS Office of General Counsel explained that many employees resign before the final determination is made to revoke their security clearance. Importantly, the total population affected by the revocation process is unknown because the number of individuals who received a proposal to revoke their eligibility for access to classified information is unknown, as discussed below. Table 1 shows the number of DHS employees eligible to access classified information as of March 2014, and the number of personnel security clearance revocations for each DHS component in fiscal year 2013, with the U.S. Coast Guard having the largest number of revocations. Coast Guard officials stated that the increase in the number of revocations for Coast Guard military personnel in fiscal year 2013 could be explained in part because that was the first year the Coast Guard enforced the use of position sensitivity codes. They said that, as a result, some administratively withdrawn clearances were counted as revoked, which artificially inflated the revocation number.\nTable 2 provides additional information on the number of personnel security clearance revocations for each DHS component in fiscal years 2011 through 2013.\nDHS data show that personal conduct, financial considerations, and criminal conduct were the most common reasons personnel security clearances were revoked in fiscal year 2013. Figure 3 provides details about the issues underlying personnel security clearance revocations for each DHS component in fiscal year 2013.\nDHS employees whose access to classified information was revoked can first appeal the adverse decision with an initial appeal to a second-level deciding authority, and then appeal this decision with a final appeal to a three-person Security Appeals Board. DHS data show that, in fiscal year 2013, 24 employees appealed a revocation decision to the DHS Security Appeals Board. Of those 24 employees, 1 had his or her security clearance reinstated.", "DOD data show that DOD revoked eligibility for access to classified information for more than 16,000 military and civilian employees from fiscal years 2009 through 2013, and for almost 2,500 contractors government-wide during this same period. Because of potential inaccuracies in DOD eligibility data, which are discussed below, we were unable to determine the percentage of DOD clearance holders whose clearances were revoked. However, as we found with DHS, the total population affected by the revocation process is unknown because the number of individuals who received a proposal to revoke their eligibility for access to classified information is unknown, as discussed in the next subsection in this report. Table 3 shows the number of personnel security clearance revocations in fiscal years 2009 through 2013 for each DOD component, with Army military personnel having the largest number of revocations, and for contractors government-wide working in the industrial security program.\nThe most common reasons for revoking a personnel security clearance for DOD civilian and military personnel in fiscal year 2013 were criminal conduct, drug involvement, and personal conduct. The most common reasons for revocation of security clearances for contractor personnel in fiscal year 2013 were financial considerations, personal conduct, and criminal conduct. Figure 4 provides details about the issues underlying personnel security clearance revocations for each DOD component and for contractors in fiscal year 2013.", "Although DHS’s and DOD’s data systems could provide data on the number of and reasons for revocations, neither department is currently required to track or report security clearance revocations data or any related metrics outside of the DHS and DOD elements of the intelligence community. As a result, neither system could provide data on how many individuals separated before a revocation decision was made, appeals, and time to complete a revocation case. Notably, neither the DHS nor the DOD system was able to provide data about the total number of individuals who received a proposal to revoke their security clearance, which would likely exceed the total number of revocations. Therefore, we are unable to comment on the total number of employees who might be affected by the revocation process. In order for organizations to measure performance, it is important that they have sufficiently complete, accurate, and consistent data to document performance and support decision making, while balancing the cost and effort involved in gathering and analyzing data. DHS’s system for managing and standardizing personnel security data, the Integrated Security Management System (ISMS), has not typically been used to track additional information about security clearance revocations, such as (1) the number of employees who received a proposal to revoke their clearance, (2) the number of employees who separated from the department before a revocation decision was made, (3) the number of employees that filed an initial appeal of a revocation decision, and (4) the length of time to complete a revocation case.\nFirst, DHS officials could not provide us with data on the number of individuals who had received a proposal to revoke their clearance. They said that this information could be recorded in ISMS, but that this capability may not be used by all of the components. Second, DHS officials said that ISMS does not track cases where an individual separated from the department before a decision was made regarding a proposal to revoke a personnel security clearance. For example, DHS officials said that if an employee was issued a proposal to revoke his or her clearance and he or she resigned and never responded to the proposal, then the security clearance was never revoked and the case would not be counted as a revocation. Once an initial decision is made to revoke a clearance, the decision is entered into ISMS and that decision will become final even if the employee does not respond, so those cases would be counted. Third, DHS data on the number of employees that filed an initial appeal of a revocation decision were not available. Officials from the Office of the Chief Security Officer told us that ISMS has a module that could provide this information, but because use of this module is not required, only a few DHS components use it. Finally, while officials at DHS components stated that the entire revocation process can take over a year to complete, DHS data on the average amount of time it takes to complete a revocation case were not available. Officials from the Office of the Chief Security Officer said that while ISMS can identify this information in individual records, it cannot track this type of data as a whole across the DHS components, because each appeal level would be saved as a different module entry. They said they try to complete a revocation case as quickly as possible. However, in some cases, employees request extensions of time in order to obtain representation or to obtain documents to refute or explain the revocation decision, which lengthens the process time. Until DHS considers whether tracking additional revocation and appeals information would be beneficial, and modifies its system to provide such information as is deemed beneficial, the department will continue to lack visibility over certain aspects of the security clearance revocation and appeal process, which may hinder its ability to effectively oversee these processes.\nSimilarly, DOD’s Joint Personnel Adjudication System (JPAS) system, which is designated as DOD’s system of record for personnel security management to record and document personnel security actions, captures varying levels of detail related to security clearance revocations. also We found certain JPAS data fields partially completed or incomplete, such as fields showing whether an employee received a proposal to revoke his or her clearance, whether the employee chose to appeal the revocation decision in writing or in person, the time taken at different stages of the employee’s revocation appeal, and the number of employees who separated from the department before a revocation decision was made. For example, although more than 16,000 military and federal civilian employees had their personnel security clearances revoked from fiscal years 2009 through 2013, JPAS data reflected that fewer than 3,000 individuals had received a statement of reasons, which is DOD’s initial proposal to revoke a personnel security clearance, because the JPAS field to record this information had not been filled.\nThe JPAS system of record notice, dated May 3, 2011, states that the categories of records in JPAS include records documenting the personnel security adjudicative and management process. However, officials from the Defense Manpower Data Center (DMDC), DOD’s JPAS administrator, and the DOD CAF stated that DOD users instead generally used component-specific case-management systems to keep track of adjudication information. DMDC officials explained that the final eligibility determination, and not all the other adjudication data, from the different case-management systems was uploaded to JPAS. Officials from the Office of the Under Secretary of Defense for Intelligence, which is responsible for overseeing DOD’s personnel security program, stated that their oversight efforts have been hindered by the lack of available data in JPAS, and that they do not have access to the component-specific case-management systems. DMDC officials stated that JPAS and the different case-management systems are going to be replaced, by 2016 and the end of fiscal year 2014, respectively. ODNI officials stated that it would be important for DOD to improve the data in JPAS before the new systems are implemented.\nDOD is already aware that data in JPAS are not being updated as frequently as needed. For example, the November 2013 DOD report in response to the Navy Yard shooting found that DOD does not have policies addressing roles, responsibilities, and standards for security managers to ensure the upkeep of data in JPAS. The report recommended that the department establish, reinforce, and enforce roles and responsibilities for updates to JPAS. Similarly, in April 2014, the DOD Inspector General issued a report assessing the personnel security clearance processes for contractors in four defense intelligence agencies. This report found a lack of effective recordkeeping that occurred because the appropriate investigative and personnel security databases, including JPAS, were not being reliably populated with investigative and security information. The report recommended that the Under Secretary of Defense for Intelligence direct the defense intelligence agencies to review the procedures used to ensure that JPAS and other systems are being properly populated. The report also found that DOD did not have any overarching policy documents governing JPAS operation, and recommended that DOD develop and issue an overarching policy for JPAS.improve the data in JPAS. Until DOD takes steps to ensure that information is recorded and updated in its systems, the department will continue to lack visibility over the security clearance revocation and appeal process, which may hinder its ability to effectively oversee these processes.", "Inconsistent implementation of the requirements in the governing executive orders by DHS, DOD, and some of their components, and limited oversight over the revocation process, have resulted in employees in some agency components and workforces experiencing different protections and processes than employees in other agency components and workforces. DHS and DOD have implemented the requirements in Executive Orders 12968 and 10865 in different ways for different groups of personnel, but these differences are required or permitted by the executive orders. However, some components’ implementation of the clearance revocation process could potentially be inconsistent with the executive orders in two areas: having an opportunity to be provided with certain information upon which a revocation appeal determination is based, and communicating the right to counsel. Although DHS and DOD have performed some oversight over the revocation process at the component level, they have not evaluated the quality of the process or developed performance measures to measure quality department-wide. Finally, while ODNI has exercised oversight of security clearance revocations by reviewing policies and procedures within some agencies, ODNI has not established any metrics to measure the quality of the process government-wide and has not reviewed revocation processes across the federal government to determine the extent to which policies and procedures should be uniform.", "DHS and DOD have implemented some requirements in the governing executive orders in different ways for different groups of personnel, but these differences are required or permitted by the executive orders. The areas of inconsistency include implementation of the personal appearance requirement, cross-examination of witnesses, and administration of the appeal boards within DOD.", "The right to a personal appearance during the personnel security clearance revocation process has been implemented differently across the two departments in a manner that provides different protections for contractors than for military and civilian personnel in two areas: the timing of the personal appearance and the information provided to the employee about the rationale supporting the revocation decision and the effect of the personal appearance. Executive Order 12968 provides that employees shall be provided an opportunity to appear personally at some point in the process before an adjudicative or other authority; it does not specify when during the process this personal appearance should occur. Executive Order 10865 provides that a contractor shall be provided an opportunity to appear personally after he or she has provided a written reply to the proposal to revoke eligibility to access classified information. Defense Office of Hearings and Appeals officials explained that the personal appearance is a significant opportunity to refute, explain, extenuate or mitigate critical facts, and stated that the later timing of this significant procedural protection for military and civilian personnel can adversely affect the individual’s continued employment while the appeal process is completed.\nThe timing of the personal appearance for contractors is earlier in the revocation process than for DHS employees and DOD military and civilian employees. Contractors who receive a proposal to revoke their clearance may choose to respond to the proposal by requesting a personal appearance before an administrative judge. The administrative judge, in turn, issues a written decision to revoke or sustain the clearance after the employee has had his or her hearing. The contractor can appeal this decision to an appeal board. Thus, contractors have their personal appearance before the revocation decision is made. In contrast, military and civilian personnel within DHS and DOD who receive a notice that their clearance may be revoked can only submit written documentation prior to a revocation decision. Adjudicators issue a written decision to revoke or sustain the clearance before any personal appearance by, and without any in-person discussion with, the employee. The employee can appeal this written decision and request a personal appearance during the appeal process.\nFurthermore, DHS military and civilian employees, and contractor employees government-wide, have a better opportunity than DOD military and civilian employees to understand the rationale for the revocation decision and the effect their personal appearance may have had on the revocation decision. DHS military and civilian employees receive a written decision letter to revoke or sustain the clearance from the individual who presided over the personal appearance. Similarly, contractors government-wide are also provided a copy of the administrative judge’s written decision. However, for DOD military and civilian employees, the administrative judge who presided over the personal appearance during the appeal makes a written recommendation rather than a decision. This recommendation is sent directly to one of DOD’s Personnel Security Appeals Boards (PSAB), based on the agency to which the employee is assigned, and the recommendation generally is not shared with the DOD military or civilian employee. The DOD PSABs consider the administrative judge’s recommendation and other evidence when they reach and issue a final written decision regarding the security clearance to the employee, but they are not required to follow the judge’s recommendation. The employee is provided a final written decision from one of the three military department PSABs, which cannot be appealed, but the employee generally is not privy to the administrative judge’s recommendation. An exception is the Washington Headquarters Services appeal board which, in its written decision, typically provides the employee with a copy of the administrative judge’s recommendation and the hearing transcript. Army PSAB officials explained that providing the judge’s recommendation to the employee could be misleading because the individual might assume that was the final decision, and would be disappointed if the PSAB reached a different decision.\nThe level of detail contained in the written decisions received by employees after the personal appearance also varied, with contractors having more information about the rationale for the decision than military and federal civilian personnel in the military departments. When we reviewed Defense Office of Hearings and Appeals administrative judge decisions that are provided to contractors, we found that they contained detailed findings of fact, discussions of applicable law and policy, and analysis, which provides an employee an in-depth understanding of the rationale for the judge’s decision. In reviewing versions of the PSAB decisions that are provided to military and civilian employees, however, we found that the Army and Air Force PSAB decisions were in a short memorandum format that state that case records have been reviewed and the board either sustains the revocation decision or reinstates eligibility for access to classified information. We found that only the Navy PSAB decisions provided a more detailed explanation of the rationale for the revocation of a security clearance. DOD guidance states that the PSAB’s written decision will provide the reasons that the PSAB either sustained or overturned the original determination of the adjudication facility, and that the PSAB’s final written determination shall state its rationale.\nAccording to Defense Office of Hearings and Appeals officials, DOD’s process for its military and civilian workers provides less transparency, quality, and accountability compared to contractor personnel. Specifically, these officials stated that DOD’s process for military and civilian employees makes it difficult to determine by reviewing the decision how or why component PSAB cases are decided the way they are. The officials also stated that they would like more transparency with regard to whether the component PSABs agreed or not with the administrative judge’s recommendation, and stated that as of summer 2013, they are now able to track this information.", "DHS and DOD employees are provided different rights to present and cross-examine witnesses during personal appearances, as the departments have implemented the executive orders differently, resulting in contractors, DOD employees, and some DHS employees receiving greater opportunities to cross-examine witnesses than other DHS employees. Executive Order 10865 explicitly provides contractors the opportunity to cross-examine persons who have made oral or written statements adverse to the employee, subject to certain exceptions. In contrast, Executive Order 12968, which covers military and civilian employees and contractors, is silent on the opportunity to do so. DOD military and civilian employees are permitted to cross-examine witnesses according to a memorandum from the Under Secretary of Defense for Intelligence issued in November 2007. Officials from the Defense Office of Hearings and Appeals and the Office of the Under Secretary of Defense for Intelligence stated that this was done as a matter of fundamental fairness, to give military and civilian employees an opportunity that had been provided to contractors for years.\nDHS Instruction Handbook 121-01-007, The Department of Homeland Security Personnel Suitability and Security Program (June 2009). witnesses during the personal appearance, while employees at other DHS components, such as U.S. Citizenship and Immigration Services and U.S. Immigration and Customs Enforcement, have been allowed to cross-examine witnesses during the personal appearance. U.S. Immigration and Customs Enforcement officials stated that employees were allowed to call and question witnesses during the personal appearance on a case-by-case basis. DHS officials from the Office of the Chief Security Officer told us that all employees should be treated the same across DHS’s components. They said that they would clarify the wording in the instruction, a draft of which has been under revision for more than a year; however, the officials had not decided whether they would revise the instruction to allow or prohibit the testimony or cross- examination of witnesses, and they could not tell us when the revised instruction would be finalized. Until the processes are consistent for all employees, and such processes are finalized in an instruction, employees within DHS may continue to have different rights concerning cross- examination of witnesses during the revocation process, depending on which component they work for.", "Each of DOD’s three military departments—of the Army, the Navy, and the Air Force—has a PSAB that reviews cases and makes final eligibility determinations for access to classified information for that department’s military and civilian employees. A fourth appeals board is administered by DOD’s Washington Headquarters Services, which reviews civilian employee cases for all other DOD agencies. A fifth appeals board is administered by the Defense Office of Hearings and Appeals, which reviews cases for all contractors in the industrial security program, including DOD and DHS. We have previously reported that overlap occurs when programs have similar goals, devise similar strategies and activities to achieve those goals, or target similar users, and duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries.\nWhile overlap in efforts may be appropriate in some instances, especially if agencies can leverage each others’ efforts, in other instances overlap may be unintended, may be unnecessary, or may represent an inefficient use of U.S. government resources. DOD’s multiple different PSABs could constitute inefficient overlap because more than one component within DOD provides the same service.\nIn 2010, the Secretary of Defense directed a series of initiatives designed to reduce duplication, overhead, and excess and instill a culture of savings and cost accountability across the department. As part of this initiative, in March 2011, the Secretary approved a recommendation to colocate and consolidate the overlapping security clearance appeal boards with the Defense Legal Services Agency, similar to the colocation and consolidation of the service adjudication activities that were previously directed by the base realignment and closure process and the Deputy Secretary of Defense. The Secretary directed a completion date of September 30, 2011, for this recommendation. However, this recommendation had not been implemented at the time of our review. A Defense Office of Hearings and Appeals official explained that this direction had not been cancelled, but it had not been implemented because of opposition from the military departments. Officials from the Navy PSAB stated that the direction had not been implemented because the PSABs had not received any instructions or guidance to implement this direction from the Defense Legal Services Agency. Similarly, the Army PSAB attributed the lack of action to a focus on completing the consolidation of DOD’s adjudication facilities as well as the absence of policy direction from the Under Secretary of Defense for Intelligence.\nAn official from the Office of the Under Secretary of Defense for Intelligence explained that there has been an impasse since 2011 over a legal question regarding whether the PSAB consolidation directed by the Secretary of Defense is consistent with Executive Order 12968. Specifically, Army and Air Force PSAB officials stated that PSAB consolidation is not consistent with Executive Order 12968, explaining that the review proceedings outlined in the executive order provide an employee with revoked access to classified information the opportunity for a final appeal in writing to an agency head–appointed high-level panel. Army and Air Force PSAB officials stated that “agency head” refers to the Secretary of the Military Departments, not the Secretary of Defense. Air Force PSAB officials stated that the Secretary of Defense direction for PSAB consolidation would require modifying section 5.2 of Executive Order 12968, and that removing PSABs from the services would neither enhance due process nor national security. Air Force PSAB officials also explained that the procedures used to review the DOD efficiency proposals did not include the opportunity for the service Secretaries to review and comment, and thus the memo directing consolidation of the PSABs was signed before military department equities in maintaining their department PSABs were captured for consideration.\nHowever, an official from the Defense Office of Hearings and Appeals explained that the term “agency head” as used in the executive order includes the Secretary of Defense. Further, an official from the Office of the Under Secretary of Defense for Intelligence explained that by law, the Secretary of Defense has authority, direction, and control over the Department of Defense, to include the Secretaries of the military departments, and the Secretary of Defense’s efficiency decisions are decisions as the head of DOD and apply to all subordinate components of the department, including the Secretaries of the military departments. This official stated that the interpretation of the language in the executive order was ultimately a legal question. DOD guidance provides that the DOD General Counsel shall provide advice and guidance as to the legal sufficiency of procedures and standards involved in implementing the DOD personnel security program.\nIn addition to the disagreement about the legal authority to consolidate the PSABs, there is disagreement within the department about the risks and benefits of implementing the Secretary of Defense direction to consolidate the PSABs. Officials from the Army, the Navy, and the Air Force PSABs explained that consolidating PSABs would limit the military department Secretary’s ability to consider circumstances and risk in light of that specific service’s special or sensitive programs, missions, or needs. Washington Headquarters Services officials stated that separate PSABs were more likely to be sensitive to their component’s special programs, missions, and needs than a central DOD PSAB. Air Force PSAB officials stated that, from their past experience, the DOD Consolidated Adjudications Facility’s (CAF) statement of reasons for revoking access to classified information is often narrowly focused and fails to weigh all issues appropriately, and that in personal hearings the Defense Office of Hearings Appeals administrative judges sometimes fail to challenge statements made by employees that immediately raise flags with PSAB members based on their background and experience. They stated that with the DOD CAF making initial DOD-wide risk assessments for the military departments, the final revocation appeals should be decided by the individual departments.\nIn contrast, officials from the Office of the Under Secretary of Defense for Intelligence and the Defense Office of Hearings and Appeals agree that DOD PSAB consolidation is in keeping with the principles of reciprocity where risk is managed DOD-wide, not on a component basis. They stated that with the DOD CAF, the components have already lost their ability to manage risk with respect to favorable adjudications because the CAF is making those decisions for the component when personnel security clearances are initially granted. Officials from the Defense Office of Hearings and Appeals stated that the requirement that agencies grant clearance reciprocity has removed the role that service-specific programs may play in clearance determinations that were completed by another agency. Officials from the Office of the Under Secretary of Defense for Intelligence explained that consolidation would bring standardization and consistency of quality, objectivity, and experience to the process for personnel security appeals, and would result in legal expertise being part of every appeal process, which would help ensure that national security needs and procedural fairness are appropriately balanced. Further, Defense Office of Hearings and Appeals officials stated that contractors have the benefit of independent fact-finding and an independent written decision by officials who do not work for the component, which provides an important check against unfairness and the taint of undue influence. These officials stated that having decision makers outside of the component’s chain of command helps to reduce the opportunity for the perception or reality that those in the individual’s component or chain of command can influence the outcome of the process.\nOfficials from the DOD CAF cautioned that DOD needs to study the implications of moving to a consolidated appeal board to make an informed decision on any process modifications, efficiencies, and resource implications prior to executing the direction to consolidate the appeal boards. Army officials also suggested that establishment of a working group to review the efficiencies, feasibility, way ahead, and timelines would be beneficial in formulating a course of action in implementing the direction to consolidate the PSABs. Until DOD General Counsel resolves the disagreement within the department about the legal authority to consolidate the PSABs, and collaborates with the PSABs and the Under Secretary of Defense for Intelligence to address any other obstacles to consolidation, the department will continue to face delays implementing the Secretary of Defense’s direction.", "Our review of DHS and DOD department- and component-level guidance, as well as the components’ communication letters to employees undergoing a revocation proceeding, found that both departments generally provided information to employees about their rights under the two executive orders. However, some components’ implementation of the clearance revocation process could potentially be inconsistent with the executive orders or agency policy in two areas: having an opportunity to be provided any additional information upon which a revocation appeal determination is based, and communicating the right to counsel.", "Navy and Army policies could allow the Navy and Army PSABs to collect and consider new information related to the revocation decision without informing the employee or giving the employee the opportunity to review or respond to the new information. For example, Navy Manual M-5510.30 strongly encourages the employee’s command to submit additional information directly to the Navy PSAB after military and civilian personnel have made their personal appearance in front of the administrative judge.an appeal of a revocation decision might be denied, to be introduced without the individual’s awareness. Executive Order 12968, however, states that employees who are determined not to meet the standards for access to classified information shall be provided with a reasonable opportunity to reply in writing to and request a review of the determination, and to request any documents, records, and reports upon which a revocation is based, to the extent that the documents would be provided under the Freedom of Information Act or Privacy Act.\nDOD Regulation 5200.2-R, Personnel Security Program (January 1987, incorporating administrative change Feb. 23, 1996).\nSimilarly, Army Regulation 380-67 could allow the Army PSAB to collect information without informing the employee or giving the employee the opportunity to respond to the new information. The Army regulation regarding appeal of a revocation decision requires the employee to respond to the decision through his or her immediate commanding officer. The Army regulation further requires that the commanding officer must recommend for or against reinstatement of the security clearance, and provide a rationale addressing the issues in the decision. As written, the Army regulation is silent on whether the comments will be provided to the individual to review and respond to the information contained in it. Army PSAB officials said that the PSAB is not responsible for providing employees with this information.\nFurther, Army PSAB officials noted that in cases where a security clearance was revoked because of financial considerations, the Army PSAB would request additional documentation concerning any actions that the employee has taken to resolve delinquent debts, but stated that the Army PSAB will obtain credit reports directly from the credit reporting bureaus and compare them to the documents in the appeal package. Army PSAB officials explained that the credit report is accessed solely to verify the existence or resolution of disqualifying financial information that formed the basis of an unfavorable determination by the DOD CAF, so it is not routinely provided to the employees, but they said that it would be provided upon request. This raises concerns about whether the employee has an opportunity to review or respond to information in the credit reports obtained directly by the PSAB, because credit reports may not always be accurate. Until the Army regulation is revised to specify that all information provided to the Army PSAB by the command or obtained by the Army PSAB itself must also be shared with the individual, along with an opportunity to respond to this information, the Army PSAB could potentially deny employees some of the protections provided in the executive order.", "DOD security clearance revocation prehearing memorandums provided to employees inform all types of employees—military personnel, DOD civilians, and contractors—of their right to obtain legal representation, and allow for discussion of any relevant issues. In contrast, at the time of our review, one DHS component—the Coast Guard—was not notifying its military personnel of their right to be represented by counsel or other representative at their own expense, but rather was erroneously informing military personnel that they had no right to counsel. While Executive Order 12968 and DHS Instruction Handbook 121-01-007 specify that employees shall be informed of their right to be represented by counsel or other representative at their own expense, letters the Coast Guard sent its military personnel appealing to the second-level deciding authority stated “you may not have an attorney or anyone else with you during this administrative process.” The existing Coast Guard Instruction states that if the final decision results in a revocation, the employee will be advised of his or her rights, but does not specify what these rights are.\nDuring our review, the Coast Guard Security Center Director acknowledged this disparity and stated the letters would be changed to provide the required notification to military personnel that they have a right to be represented by counsel or other representative at their own expense during the personal appearance before the second-level deciding authority. We subsequently reviewed a revised letter, and it had been modified to inform military personnel of their right to be represented by counsel. In addition, the Director said he would advocate for modifying the Coast Guard instruction to formalize this change. Currently, this Coast Guard instruction is undergoing revision, and the updated version is expected to be published in the fall of 2014. According to a Coast Guard official, the revised instruction will address this issue, but we have not reviewed the revision to determine whether this change was included.\nIn addition, although the Coast Guard’s communication letters inform Coast Guard civilian employees of their right to be represented by counsel or other representative at their own expense during the personal appearance, they impose some stipulations. The Coast Guard letters, unlike those sent by other DHS components, state that only the employee’s account of the issues can be heard during the meeting, the employee’s counsel or representative cannot instruct the employee during the meeting, and the employee is limited to only 30 minutes to appear in person and present any relevant information. The Coast Guard Security Center Director said these stipulations are imposed because the intent is to avoid allowing the administrative review from becoming a protracted and adversarial legal proceeding where objections are injected or cross- examinations are sought. To his knowledge, the “30 minutes” has never been enforced and is now under review for removal from the Coast Guard instruction. However, until the Coast Guard instruction and related communication letters are revised to clearly and consistently communicate rights provided by the executive orders, military and civilian employees within the Coast Guard are at risk of not being treated similarly to one another or to employees in other DHS components.", "DHS has taken recent steps in response to recommendations made in a December 2013 DHS Office of Inspector General report, and individual DHS and DOD components perform some oversight over aspects of the revocation process. But neither department has performed an overarching, department-wide evaluation of the quality of the revocation process or has developed performance measures and collects data to measure the quality of the process.\nDHS has taken some recent steps to improve the quality of the revocation process. Specifically, the DHS Office of Inspector General report found that appointments to the DHS Security Appeals Board and the composition of the board had not been made in accordance with DHS policy. For example, it found that one member served on the Security Appeals Board when an employee in his chain of command was the appellant, even though DHS guidance provides that board members cannot have a current supervisory relationship with the employee whose appeal is being heard. The Inspector General report recommended that the Director of the U.S. Secret Service ensure that the Uniformed Division Assistant Chief, or other officials in the agency’s chain of command, do not rule on appeals by Uniformed Division employees. In March 2014, the Secret Service issued a new directive describing the composition of the board and how a board member would be replaced if a case involved an employee in his or her chain of command.\nFurther, some DHS component officials told us that their component provides oversight during the revocation process. For example, officials from U.S. Citizenship and Immigration Services said that revocation data are reviewed throughout the process, at the initial stage of determining whether the action is warranted and by management at the initial stage and each subsequent stage, and by legal counsel prior to approval and signature of the revocation letter. Similarly, at DHS Headquarters, U.S. Immigration and Customs Enforcement, and the Federal Emergency Management Agency, officials stated that revocation determinations undergo multiple stages of review, including by the adjudicator’s first-line supervisor, the Personnel Security Division Director, and an attorney. Other components, such as Transportation Security Administration and DHS Headquarters, perform reviews after the process has been completed to determine whether policies and procedures were consistently followed prior to reaching the final case determination. In addition, DHS Headquarters officials said that they review all DHS component case files before the cases are sent to the Security Appeals Board.\nWithin DOD, although the Under Secretary of Defense for Intelligence is responsible for developing, coordinating, and overseeing the implementation of DOD policy, programs, and guidance for personnel security, the extent of oversight over the clearance revocation process and the use of related metrics varies across the department. Officials explained that the Office of the Under Secretary of Defense for Intelligence conducts annual quality reviews of DOD security clearance adjudicative determinations, but explained that their oversight efforts have been hindered by the lack of available data in JPAS, as we previously discussed. They explained that they do not have access to the agency- specific case-management systems, and that they have sent out manual data requests in the past, but have experienced difficulties in receiving responses to these requests that all have a consistent interpretation of the data. Furthermore, officials from the four PSABs we met with stated they collect appeal data—such as number of cases reviewed, favorable decisions, unfavorable issues, and number of days to process an appeal—and that they generated and submitted internal reports with this information to their respective leadership, but these appeal board officials did not elaborate how the information provided to their superiors was used to perform oversight.", "ODNI has exercised some oversight of security clearance revocations by reviewing policies and procedures within some agencies; however, it has not established any metrics to measure the quality of the process government-wide and has not reviewed security clearance revocation processes across the federal government to determine the extent to which policies and procedures should be uniform. In addition to DHS and DOD, ODNI also has oversight responsibility for the security clearance process government-wide. In June 2008, Executive Order 13467 designated the DNI as the Security Executive Agent to, among other things, direct the oversight of determinations of eligibility for access to classified information or to hold a sensitive position, and assigned the DNI responsibility for developing uniform and consistent policies and procedures to ensure the effective, efficient, and timely completion of investigations and adjudications relating to determinations of eligibility for access to classified information or to hold a sensitive position. Executive Order 13467 also provides the DNI the authority to issue guidelines and instructions to the heads of agencies to ensure appropriate uniformity, centralization, efficiency, effectiveness, and timeliness in processes relating to determinations by agencies of eligibility for access to classified information or eligibility to hold a sensitive position. This executive order further states that agency heads shall assist in carrying out any function under the order, which includes implementing any policies or procedures developed pursuant to the order.\nExecutive Order 13467 designated the Director of OPM as the Suitability Executive Agent, responsible for developing and implementing uniform and consistent policies and procedures to ensure the effective, efficient, and timely completion of investigations and adjudications relating to determinations of suitability for government employment. Executive Order 13467, Reforming Processes Related to Suitability for Government Employment, Fitness for Contractor Employees, and Eligibility for Access to Classified National Security Information (June 30, 2008). was added to address an agency’s process to deny or revoke a clearance.\nDespite these efforts at the component level, neither DHS, DOD, nor ODNI have evaluated the quality of the revocation process across the specific departments or government-wide. DHS and DOD do not perform overarching, department-wide oversight over the revocation process, and neither department has developed metrics or collected data to measure the quality of the revocation process. Furthermore, ODNI officials acknowledged that metrics have not been established to measure the quality of the security clearance revocation process. In November 2013, we testified that executive-branch agencies do not consistently assess quality throughout the personnel security clearance process, in part because they have not fully developed and implemented metrics to measure quality in key aspects of the personnel security clearance process. Having assessment tools and performance metrics in place is a critical initial step toward instituting a program to monitor and independently validate the effectiveness and sustainability of corrective measures. Our work has also found that agency managers need performance information as a basis for decision making to improve programs and results, identify problems in existing programs and develop corrective actions, and identify priorities and make resource decisions.\nODNI officials stated that they currently report some limited metrics on revocations for the intelligence community as part of their reporting in response to the Intelligence Authorization Act for Fiscal Year 2010.\nThey said that they would like to establish and make more robust metrics for reciprocity, quality, and out-of-scope periodic reinvestigations, and from there it would be a natural progression to look at developing some metrics for revocations and denials, and other areas. However, they stated that due to constrained resources and other priorities they were uncertain whether they could make a business case to allocate the resources. The absence of data on the number of persons who receive a proposal to revoke their eligibility to access classified information, as discussed above, combined with the likelihood that the shift to increase continuous evaluation may result in increased instances of revocation proposals, make it increasingly important for agencies to have performance measures and data to ensure a high-quality revocation process. Without performance measures and data to assess the quality of the personnel security clearance revocation process, individual departments, such as DHS and DOD, and ODNI lack information to identify and resolve potential problems in the process, and make informed decisions about potential changes to the program.\nFurthermore, the security clearance revocation process implementation differences we identified at DHS and DOD continue in part because ODNI has not reviewed security clearance revocation processes across the federal government to determine the extent to which policies and procedures should be uniform. Specifically, ODNI has not assessed whether the existing security clearance framework, with its parallel processes for contractors and government employees, or a single process applicable to all types of employees would best facilitate the effective, efficient, consistent, and timely completion of security clearance revocation proceedings. When asked about the different processes, ODNI officials stated that the executive orders provide broad guidelines that give agencies the flexibility to implement a review and appeal process that best fits the agency’s needs, and there is no single solution that all agencies must follow. Additionally, Executive Orders 12968 and 10865 do not require a uniform government-wide process, and in fact establish two parallel processes, one for contractors and one for government employees.perspective, standardization of the security clearance revocation process makes sense, but said that ODNI has not had a reason or purpose to perform an extensive review of the revocation processes. The ODNI officials stated that they had not heard complaints regarding fairness while conducting their reviews, and had only heard anecdotal concerns that the process took too long. Furthermore, ODNI has not established any policies and procedures to facilitate government-wide consistency in security clearance revocation proceedings. ODNI officials stated that The ODNI officials explained that from an efficiencies publishing guidance for the appeal process might be worth pursuing, but would have to be prioritized in light of competing priorities and limited resources. Given the inconsistencies we have identified in the revocation processes at DHS and DOD discussed previously, combined with the requirement of clearance reciprocity and the recommendations to implement continuous evaluation, the DNI’s new role as Security Executive Agent places ODNI in a unique position to examine whether any changes to the existing structure with its parallel revocation processes might be warranted. Until ODNI reviews the effectiveness and efficiency of all aspects of the security clearance revocation process, and DHS and DOD take specific actions, it is difficult to determine whether the existing structures, with different processes for military and civilian personnel and for contractors, are the most appropriate approach to meet national security needs.", "DHS and DOD employees whose eligibility to access classified information has been revoked may not have consistent employment outcomes, such as reassignment or termination, because these outcomes are generally dependent on several factors, including the agency’s mission and needs and the manager’s discretion. Communication between personnel security and human capital offices at DHS and DOD varies, because human capital and personnel security processes are intentionally managed separately, and most components could not readily ascertain the employment outcomes of individuals whose clearances had been revoked.", "Employment outcomes, such as reassignment or termination, for DHS and DOD civilian and military employees whose personnel security clearance has been revoked are generally dependent on a number of factors, including the agency’s mission and needs. Key to the decision is the judgment of the employee’s supervisor or commander, and also whether there is a job available that the employee is qualified to perform and the supervisor or commander considers it appropriate or possible to reassign the employee. DHS officials elaborated that if an individual’s clearance was revoked, then he or she is no longer qualified to perform the job he or she was hired for, and so, depending on the policies at the component where the employee works, the agency may have no obligation to reassign the individual to another position or find another position for the employee. DOD officials stated that in many places within the department, all positions are sensitive, so there may be no positions to which an employee could be reassigned. DHS officials stated that in such agencies where all positions require a clearance, holding a clearance is usually a condition of employment.\nComponents within DHS and DOD varied as to whether they reassign an employee after a security clearance revocation. Officials from five DHS components—U.S. Customs and Border Protection, U.S. Citizenship and Immigration Services, U.S. Coast Guard, U.S. Immigration and Customs Enforcement, and Transportation Security Administration—stated that management at their component could decide whether to reassign a civilian employee to a position with duties not requiring access to classified information. For two DHS components, U.S. Secret Service and DHS Headquarters, reassignment is generally not an option because all or almost all positions in these components require a security clearance. A DHS Headquarters general counsel official stated that DHS has no official policy regarding reassignment, so that it can preserve its administrative options. However, for DHS military personnel, Coast Guard officials said their component has guidance stating that in cases where a clearance is terminated for cause and the employee is not recommended for separation from the Coast Guard, the employee will be reassigned to a position that does not require a security clearance.\nFor most DOD civilian and military personnel, officials said that supervisors or commanders have discretionary authority to determine how to treat employees whose security clearance has been revoked. For DOD civilian employees, Army, Air Force, Marine Corps, and Washington Headquarters Services officials stated that supervisors have discretion to reassign employees, while Navy officials said that civilian employees will undergo a removal action after all appeals are completed if access to classified information is revoked. Additionally, while DOD department- level and Air Force guidance does not require separation of officers whose clearances have been revoked, with DOD guidance stating that officers may be separated from military service, Army and Navy guidance requires the discharge of an officer who receives a final revocation of a security clearance. However, two Army regulations concerning officers appear to contradict each other. While one Army regulation states that revocation of an officer’s security clearance requires that the officer be discharged, and further states that this requirement cannot be waived, a different Army regulation regarding reassignment of officers provides guidance for the reassignment of officers whose security clearance has been revoked.\nFor enlisted military personnel whose security clearance has been revoked, officials from the military services stated that the Army and the Marine Corps reassign military personnel to the extent that an alternative position is available, and the Air Force may reassign military personnel, while the Navy will generally only reassign military personnel until a final revocation decision is made by the PSAB. Army officials noted, however, that a clearance revocation should affect a soldier’s ability to reenlist, because as of 2005 all soldiers enlisting in the Army are subject to an investigation for eligibility to access classified information at the secret level, regardless of the access requirements of their position. Navy officials said that since 2011, all Navy positions require secret clearance eligibility as a condition of employment, regardless of whether the position requires access to classified information. As a result, a sailor who has lost his or her security clearance generally will be separated from the Navy.\nGiven the component’s policies and procedures regarding reassignment, officials from four DHS components—U.S. Citizenship and Immigration Services, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, and Transportation Security Administration—told us that it would be possible for similarly situated employees under investigation for the same infraction to be treated differently if their clearances were revoked. When asked how the quality of the process could be improved once a final revocation decision has been made, Immigration and Customs Enforcement officials suggested that the agency could identify a single human capital deciding official to review all employment outcomes, to ensure consistency of employment status decisions across the agency. The officials explained that knowing and tracking the employment outcomes of individuals who lost their clearances would benefit the agency, because disparate treatment would not be an appropriate outcome. For DHS Headquarters and the Secret Service, which do not reassign personnel whose clearances have been revoked, all employees will be treated similarly because employees who lose their clearances will be terminated. Given the varying policies and procedures at DOD components, similarly situated civilian and military personnel whose security clearances have been revoked may be treated differently.", "Communication between personnel security and human capital offices at DHS and DOD varies, but lack of communication between these offices could result in adverse employment actions being taken prematurely or in inappropriate use of personnel security or human capital processes. According to DHS and DOD officials, the personnel security revocation processes and human capital disciplinary or adverse action processes are intended to be separate and distinct processes, to help ensure independence and protect national security. DHS and DOD officials stated that an adverse disciplinary personnel action could be taken based on the same underlying offense that led to the revocation proceeding, and if that were to occur, the misconduct and personnel security processes can run in parallel or they can run consecutively. However, after a final decision is made to revoke a personnel security clearance, DHS and DOD personnel security officials said that their role in the process is over, and that it is a human capital decision as to what next happens to the individual. A DHS Headquarters general counsel official further stated that any personnel actions that result due to the revocation of a personnel security clearance are based exclusively on the fact that the individual is no longer qualified for his or her position, not on the reasons underlying the revocation action.\nGood human capital policies and practices, to include appropriate practices for evaluating, counseling, and disciplining personnel, are critical factors that affect the quality of internal controls. Moreover, to run and control operations and achieve goals, agencies must have relevant, reliable, and timely communications relating to internal as well as external events; effective communications should occur in a broad sense, with information flowing down, across, and up the organization. Personnel security offices at some DHS and DOD components said they worked very closely with human capital officials throughout the personnel security clearance revocation process, while at other components there was very little interaction between the offices. For example, Secret Service officials said that they have excellent communication between the personnel security and the human capital offices, and that personnel from both offices meet at every step of the process. Similarly, Coast Guard officials stated that their human capital and personnel security offices work closely with each other throughout the revocation process with respect to civilian employees.\nIn contrast, Immigration and Customs Enforcement officials stated that they are unaware of any specific DHS human capital policies and procedures that align or support the security process. These officials also stated that better coordination and communication between human capital and personnel security offices is needed during the revocation process, and that increased coordination and communication could improve the quality of the process. Similarly, DHS Headquarters employee relations officials said that their office is not involved or informed by the personnel security office throughout the security revocation and appeal process, which includes the initial decision to revoke an employee’s security clearance through the three levels of appeal. They explained that their office gets involved after the decision to revoke the employee’s security clearance is final, and the human capital office communicates with the personnel security office when a personnel action is necessary. They explained that this communication is not to share the details of the underlying offense, but to notify the human capital office or supervisor of the status of the investigation. An official from the DHS Office of General Counsel stated that the office is involved throughout the revocation process to provide legal sufficiency reviews of clearance determinations and to advise management during any clearance-related personnel action.\nWithin DOD, Army human capital officials stated that the appropriate offices are not informed of the revocation of the security clearance due to weaknesses in information sharing with other Army offices. They explained that there is no standard time frame or process for the civilian personnel office to be notified about a civilian employee’s clearance revocation, but the office is typically notified when the supervisor seeks advice regarding what action to take now that the employee’s clearance has been revoked. In contrast, Navy human capital officials stated that the nature of the adverse information may trigger employee misconduct actions as well as actions to revoke a security clearance, thus making communication among the commanding officer, security manager, and the serving human resource office essential. They said that, generally, the security officer and the human resource office interact at all stages of the incident. Similarly, Marine Corps headquarters officials stated that its human resources office works with the local command and includes its local security manager into the process from the very beginning of the revocation process. Air Force officials stated the local human capital office is normally informed by the organization when the employee’s security clearance is revoked. Washington Headquarters Services human capital officials stated that their personnel security office and occasionally the local component security manager notifies their human capital office when an employee’s security clearance has been revoked.\nA lack of communication between the human capital and personnel security offices could result in adverse employment actions being taken prematurely or in the inappropriate use of personnel security processes in lieu of human capital processes. For example, DOD officials stated that one issue that can arise is that human capital officials could fire an individual before all of the appeals associated with a revocation action are completed. If the termination was based upon a separate adverse action proceeding, that action would be appropriate; however, if the action was based on the clearance revocation, then, under DOD regulation, subject to certain exceptions, termination should not take place until after the revocation decision is final, after all appeals have been completed. Defense Office of Hearings and Appeals and other DOD officials stated that some components are inappropriately terminating employees due to loss of a security clearance before the personnel security clearance appeal process is completed. In addition, ODNI officials explained that some agencies could use the personnel security process to handle personnel disciplinary issues, which is not appropriate. For example, Defense Office of Hearings and Appeals Officials said that retaliation against whistleblowers is perceived, fairly or not, as a continuing problem in the personnel security clearance arena. Ordinarily, most federal civilian employees have a right to appeal serious adverse employment actions taken against them to the Merit Systems Protections Board. However, in the security clearance context, federal case law has limited the scope of the board’s review of adverse actions. Specifically, the board may review appeals of adverse employment actions resulting from a denial or revocation of a security clearance or a determination that an employee is not eligible to hold a sensitive position for specific procedural issues,clearance denial or revocation, or a finding that an employee is not eligible to hold a sensitive position. DOD officials said that the personnel security and human capital processes are designed and intended to be but the board cannot review the substance of a security separate in part to protect the employee from someone trying to exercise undue influence over the disciplinary process, as well as to protect national security. ODNI officials stated that there are legal restrictions on the type of information that can be shared between the human capital and personnel security offices, but said that further review of what information should be shared between the two offices could be beneficial. Until DHS and DOD develop guidance specifying what information can and should be communicated between human capital and personnel security officials, and at what decision points during the revocation process that information should be communicated, DHS and DOD will be hampered in their ability to combat the perception that the personnel security process is being used to circumvent procedural protections ordinarily provided to federal employees subject to adverse employment actions, and that individuals are not being treated in a fair and consistent manner.", "DOD and most DHS components cannot readily ascertain the employment outcomes of individuals whose clearances had been revoked, because these data are not readily available. Within DOD, officials representing all DOD civilian and military personnel—in the Army, the Navy, the Marine Corps, the Air Force, and Washington Headquarters Services—stated that they do not track and would not be able to report the human capital outcomes of employees with revoked security clearances. For example, Army officials explained that there is a resignation code in their human capital database, but that code covers all resignations for any reason, and there may or may not be a remark on the agency’s personnel action form (known as an SF-50) that would relate the resignation to a security clearance issue. Moreover, Army officials explained that if an individual were removed as a result of a security clearance revocation, the removal code could be attributed to failing to meet any one of several conditions of employment, if maintaining eligibility for a security clearance was one of the requirements listed in an individual’s position description. An official from the Office of the Under Secretary of Defense for Personnel and Readiness explained that the separation codes applied for military personnel are similarly broad in nature, and would include separations for reasons other than revocation of a security clearance.\nOfficials in some DHS components said they could manually gather information about employment outcomes from clearance revocations, but they explained that doing this would be labor-intensive because their human capital system would need to be cross-referenced against the personnel security system. For example, U.S. Immigration and Customs Enforcement officials commented that there is no DHS or Immigration and Customs Enforcement policy that requires the collection of data and reporting of outcomes for employees with revoked security clearances, but stated that they could determine the employment outcomes on a piecemeal basis by making a data query for each employee record. However, Coast Guard officials said that they maintain a spreadsheet of all disciplinary and adverse actions taken against its civilian employees. Similarly, Transportation Security Administration personal security officials also stated that their component can identify the outcomes of employees with revoked security clearances with help from human capital officials.", "The Intelligence Authorization Act for Fiscal Year 2010 requires the President to submit an annual report to Congress on, among other things, the total number of personnel security clearances across the government, categorized by government employees and contractors who held or were approved for a security clearance. In response to this requirement, ODNI has prepared and submitted a report each year, with the most recent report being issued for fiscal year 2013. However, we found that the DOD data that are included in this report to Congress likely overstate the total number of DOD employees eligible to access classified information, in part because JPAS does not have up-to-date information about the current population of DOD employees. Without accurate data, DOD’s ability to reduce the total population of clearance holders and minimize risk and reduce costs to the government will be hampered. To measure performance, it is important that organizations have sufficiently complete, accurate, and consistent data to document performance and support decision making. Further, one of the five internal control standards that define the minimum level of quality acceptable for internal control in the federal government states that information should be recorded within a time frame that enables management to carry out responsibilities, and that operational information is needed in part to determine whether the agency is complying with applicable laws and regulations.\nThe number of employees eligible to access classified information was obtained from JPAS, and includes all employees who had an active or valid confidential, secret, top secret, or sensitive compartmented information eligibility at the end of fiscal year 2013, and who did not have a separation date recorded in JPAS prior to the end of the fiscal year.\nWashington Headquarters Services provides human capital support and manages the personnel security process for several DOD components and agencies.\nWhen we asked DMDC officials for their opinions on why the number of employees eligible to access classified information was greater than the total number of employees for some of the DOD components, they provided some possible explanations for the discrepancy. For example, DMDC officials explained that the database includes individuals who have newly enlisted into the military services but who may not have begun their enlistment period yet, and this would not be included in the employee totals. However, we reviewed data reported by the Under Secretary of Defense for Personnel and Readiness for fiscal years 2010 through 2012, and found that the total number of all personnel who joined each year (not just those who joined with a delayed entry date) each year ranged from about 43,000 to 44,000 for the Air Force and around 40,000 to 42,000 for the Marine Corps, which is too few to explain the discrepancy of almost 200,000 for Air Force military personnel and 125,000 for Marine Corps military personnel.\nFurthermore, DOD officials said that the information in JPAS may not reflect changes in personnel status such as separations due to retirements, employee job transfers, and deaths. DMDC officials explained that JPAS receives data from the components’ personnel centers, and DMDC is dependent on the components to send separation information. As a result, the number of DOD clearance holders included in the report to Congress likely overstates the total number of DOD employees eligible to access classified information because it may include people whose clearance eligibility has not yet expired, but who have separated from the department, since JPAS was not updated to reflect that separation information. ODNI officials stated that because DOD has the largest number of eligible persons in the federal government, any overstatement of DOD’s data will have a greater effect on the reported totals than for other agencies.\nDMDC officials stated that since management of JPAS transitioned to DMDC in June 2010, DOD has conducted an extensive study on the quality of JPAS data. Specifically, they stated that DMDC has conducted more than 127 data-quality initiatives affecting 165 million records. These initiatives include examining records where the access level did not match the eligibility level (such as where a person has top-secret access but only secret eligibility) and identifying duplicate records. In addition, a DMDC official said that the team working on the migration from JPAS to the new system has identified data-quality issues that they are working to resolve.\nUntil DOD takes steps to review and analyze the discrepancies in the total number of employees and the number of employees eligible to access classified information, and address any problems identified, DOD will be unable to rely on the information provided by JPAS to get an accurate understanding of the total number of DOD employees eligible to access classified information. The lack of visibility over this total will impede the department’s ability to implement recommendations to improve the security clearance process. For example, the February 2014 OMB report on the security, suitability, and credentialing processes recommended that federal agencies reduce the total population of clearance holders to minimize risk and reduce costs. However, until DOD has an accurate baseline of the number of clearance holders in the department, DOD will be unable to determine the extent that it can or has reduced the number of clearance holders in accordance with this recommendation. Furthermore, having inaccurate data about the number of clearance holders within DOD will hinder the department’s ability to provide oversight and accurate, complete information about security clearance eligibility to Congress as required by statute, to other offices within the department, and to interagency stakeholders.", "In an environment where reciprocity of personnel security clearances is required among federal agencies, the consistent and transparent application of the processes governing whether individuals should retain their access to classified information has become increasingly important, so that all agencies can have reasonable assurance that only trustworthy individuals obtain and keep security clearances. Moreover, with the proposed implementation of continuous evaluation, the workload of agencies’ security offices could significantly increase, making it critical for agencies to have a high-quality clearance revocation process in place. In the absence of requirements to track or report security clearance eligibility data and related metrics, DHS and DOD do not have key revocation data, such as the number of proposed revocations, to help oversee the revocation process or determine their workload for planning purposes.\nAlthough both DHS and DOD are generally meeting their responsibilities and providing information to employees about most of their rights under the two executive orders governing the revocation process, until Army, Navy, and Coast Guard guidance is updated, some employees could potentially be denied some of the protections provided in the executive orders. Additionally, given the different interpretations of the executive order and other obstacles to implementation of the Secretary of Defense’s direction to consolidate DOD’s PSABs, in the absence of a resolution of these issues by the DOD General Counsel, DOD will be unable to implement the Secretary of Defense’s direction to eliminate the overlap in this function.\nFurther, DHS, DOD, and some of their components have implemented the requirements from the executive orders in different ways. Without consistent processes for all employees, regardless of which component they work for, employees within DHS may experience different opportunities to cross-examine witnesses during the revocation process. In addition, without performance measures to assess the quality of the personnel security clearance revocation process, the ODNI, DHS, and DOD lack information to identify and resolve potential problems in the process, and make informed decisions about potential changes to the program. Further, until the DNI, as the Security Executive Agent, reviews the efficiency and effectiveness of the existing revocation processes, it is unknown whether having different processes, for military and civilian personnel and for contractors, and having inconsistencies among DHS and DOD, is the most appropriate approach to meet national security needs. Finally, without specific guidance from DHS and DOD on what information should be shared between personnel security and human capital offices, and when that information should be shared, DHS and DOD cannot ensure that individuals are treated in a fair and consistent manner. Similarly situated individuals who lose their security clearance may lose their employment or remain employed and be reassigned, based on their supervisor’s discretion.\nMoreover, without accurate data about the number of current DOD military and federal civilian employees eligible to access classified information, DOD is not well positioned to provide the information Congress has requested. DOD also will be hindered in implementing recommendations to reduce the total population of clearance holders in order to minimize risk and reduce cost.", "We recommend that the Secretaries of Defense and Homeland Security, and the Director of National Intelligence take the following 13 actions.\nTo help ensure that the respective DHS and DOD data systems contain sufficiently complete and accurate information to facilitate effective oversight of the personnel security clearance revocation and appeal process, we recommend that the Secretary of Homeland Security direct the Chief Security Officer to assess the benefits and associated costs of tracking additional revocation and appeals information, and take any steps necessary to modify the Integrated Security Management System (ISMS) to track such information as is deemed beneficial; and the Secretary of Defense direct the Under Secretary of Defense for Intelligence to take steps to ensure that data are recorded and updated in the Joint Personnel Adjudication System (JPAS) and the department’s new systems, so that the relevant fields are filled.\nTo help ensure that all employees within DHS receive the same protections during their personal appearance, we recommend that the Secretary of Homeland Security direct the Chief Security Officer to revise and finalize the DHS instruction regarding the personnel security program to clarify whether or not employees are allowed to cross-examine witnesses during personal appearances.\nTo help ensure independence and the efficient use of resources, we recommend that the Secretary of Defense direct the DOD General Counsel to take the following two actions: first, resolve the disagreement about the legal authority to consolidate the PSABs and, in collaboration with the PSABs and the Under Secretary of Defense for Intelligence, address any other obstacles to consolidating DOD’s PSABs; and second, if the General Counsel determines that there are no legal impediments and that other obstacles to consolidation can be addressed, we recommend that the Secretary of Defense direct the Defense Legal Services Agency to take steps to implement the Secretary of Defense’s direction to consolidate DOD’s PSABs.\nTo help ensure that all employees within DOD receive the same rights during the revocation process, we recommend that the Secretary of Defense direct the Secretary of the Navy to revise Secretary of the Navy Manual M-5510.30 to specify that any information collected by the Navy PSAB from the employee’s command will be shared with the employee, who will also be given the opportunity to respond to any such information provided; and direct the Secretary of the Army to revise Army Regulation 380-67 to specify that any information collected by the Army PSAB from the employee’s command or by the Army PSAB itself will be shared with the employee, who will also be given the opportunity to respond to any such information provided.\nTo help ensure that all employees are treated fairly and receive the protections established in the executive order, we recommend that the Secretary of Homeland Security direct the Commandant, U.S. Coast Guard, to revise the Coast Guard instruction for military personnel to specify that military personnel may be represented by counsel or other representatives at their own expense.\nTo facilitate department-wide review and assessment of the quality of the personnel security clearance revocation process, we recommend that the DNI, in consultation with the Secretaries of Defense and Homeland Security, develop performance measures to better enable them to identify and resolve problems, and direct the collection of related revocation and appeals information.\nTo help ensure that similarly situated individuals are treated consistently, and to facilitate oversight and help ensure the quality of the security clearance revocation process, we recommend that the DNI review whether the existing security clearance revocation process is the most efficient and effective approach. In this review, the DNI should consider whether there should be a single personnel security clearance revocation process used across all executive-branch agencies and workforces, with consideration of areas such as the timing of the personal appearance in the revocation process, and the ability to cross-examine witnesses.\nFurther, to the extent that a single process or changes to the existing parallel processes are warranted, the DNI should consider whether there is a need to establish any policies and procedures to facilitate a more consistent process, and recommend as needed any revisions to existing executive orders or other executive-branch guidance.\nTo facilitate coordination between personnel security and human capital offices regarding how a security clearance revocation should affect an employee’s employment status, and to help ensure that individuals are treated in a fair and consistent manner, we recommend that the Secretary of Homeland Security direct the Under Secretary for Management to review and revise policy regarding coordination between the personnel security and human capital offices to clarify what information can and should be communicated between human capital and personnel security officials at specified decision points in the revocation process, and when that information should be communicated; and the Secretary of Defense direct the Under Secretary of Defense for Personnel and Readiness, in consultation with the Under Secretary of Defense for Intelligence, to review and revise policy regarding coordination between the personnel security and human capital offices to clarify what information can and should be communicated between human capital and personnel security officials at specified decision points in the revocation process, and when that information should be communicated.\nTo help ensure that the DNI report to Congress contains accurate data about the number of current DOD military and federal civilian employees eligible to access classified information, we recommend that the Secretary of Defense direct the Under Secretary of Defense for Intelligence and the Under Secretary of Defense for Personnel and Readiness to review and analyze the discrepancies in the total number of employees and the number of employees eligible to access classified information, and take immediate steps to address the problems.", "We provided a draft of this report to DHS, DOD, and ODNI for review and comment. Written comments from DHS, DOD, and ODNI are reprinted in their entirety in appendices II, III, and IV respectively. All three agencies generally concurred with our recommendations and provided additional technical comments, which we incorporated in the report where appropriate.\nIn its written comments, DHS concurred with our four recommendations directed to it, and stated it has already taken steps to implement two of our recommendations.\nFirst, regarding our recommendation to assess the benefits and associated costs of tracking additional revocation and appeals information, DHS concurred, stating that the Office of the Chief Security Officer has established an estimated completion date of December 2014 to conduct a review to consider what additional data would be valuable for collection.\nSecond, with respect to our recommendation to revise and finalize the DHS instruction regarding cross-examination of witnesses, DHS concurred, commenting that the Office of the Chief Security Officer has revised its personnel security instruction with unambiguous language on cross-examination of witnesses, and intends to issue the revised instruction by the end of the year.\nThird, for our recommendation to revise the Coast Guard instruction to specify that military personnel may be represented by counsel, DHS concurred, stating that the Coast Guard, pending the update of the Commandant Instruction on Personnel Security, issued an interim memorandum in May 2014 advising that individuals may have counsel or other representatives present at the second-level review at their own expense. DHS also stated that it believes the Coast Guard’s actions to implement our recommendation regarding the revision of its instruction to specify that military personnel may be represented by counsel fulfill the intent of the recommendation, and requested that this recommendation be closed as implemented. While we are encouraged by the actions the Coast Guard has already taken, we continue to believe that it is important that the change be formalized in the updated Commandant instruction before we close out our recommendation. Moreover, the revision made by the Coast Guard in its interim memorandum appears to extend the right to counsel only to the personal appearance, and does not make clear how employees will be informed of their right to counsel, but under Executive Order 12968 the right to counsel is not limited to one specific stage of the revocation process, and the order requires that employees be informed of this right.\nFinally, regarding our recommendation to review and revise policy regarding coordination between the personnel security and human capital offices, DHS concurred, commenting that the DHS Office of the Chief Human Capital Officer concurs with the concept of facilitating coordination between the personnel security and human capital offices, and will assess the process to determine appropriate communication points and provide appropriate guidance. DHS established an estimated completion date of March 2015 for this action. Further, in its technical comments, DHS noted that this recommendation would be more appropriately directed to the DHS Under Secretary for Management, who oversees both the Office of the Chief Human Capital Officer and the Office of the Chief Security Officer. As a result, we have modified the recipient of this recommendation as suggested.\nIn its written comments, DOD fully concurred with all but one of our seven recommendations directed to it, and partially concurred with one of our recommendations.\nFirst, with respect to our recommendation to ensure data are recorded and updated in JPAS and DOD’s new systems, DOD concurred, stating that the Office of the Under Secretary of Defense for Intelligence will incorporate monitoring of data fields pertaining to the personnel security clearance revocation and appeal process into its quarterly oversight of DOD Personnel Security Program metrics.\nRegarding our two recommendations to revise Navy and Army guidance, respectively, about sharing information collected by the respective PSABs with the employee, DOD concurred with both recommendations. DOD commented that the Navy plans to issue interim guidance by October 1, 2014, and issue the final revised Navy Manual by October 1, 2015. DOD further stated that the Army Regulation is under revision and will specify that the PSAB will provide any documents it obtains to the subject and allow a period of time for response.\nWith respect to our recommendation to review and revise policy regarding coordination between the personnel security and human capital offices, DOD concurred, stating that the Office of the Under Secretary of Defense for Personnel and Readiness, with support from the Office of the Under Secretary of Defense for Intelligence, will identify the way forward to review and revise policy and procedures regarding coordination between the personnel security and human capital offices as appropriate.\nFinally, regarding our recommendation to review and analyze the discrepancies in the total number of employees and the number of employees eligible to access classified information, DOD concurred, commenting that within 30 days of the release of the final report, the Office of the Under Secretary of Defense for Intelligence will convene a meeting of action officers and analysts to identify strategies for reviewing, analyzing, and resolving the discrepancies in the total number of employees and the number of employees eligible to access classified information.\nDOD partially concurred with our draft recommendation for the DOD General Counsel to resolve the disagreement about the legal authority to consolidate the PSABs and address any other obstacles to consolidation, and to implement the Secretary of Defense’s direction to consolidate DOD’s PSABs if there are no legal or other impediments to consolidation. DOD agreed with us to review legal or other impediments to consolidation, and stated that the DOD Office of General Counsel will address any unresolved disagreements about legal authority for consolidation of PSABs. DOD further commented that the DOD Office of General Counsel will work closely with the Office of the Under Secretary of Defense for Intelligence to address other issues concerning consolidation of PSABs. However, DOD commented that some DOD components disagreed with PSAB consolidation. Specifically, DOD stated that of the eleven components that provided responses to the draft report, eight concurred or had no issues or comments, while the remaining three components noted that the PSABs should remain at the component level and not be consolidated. One of these three components also commented that the perceived efficiencies from consolidation described in our report should be validated and that all models for consolidation should be evaluated before a decision is made that would consolidate the PSABs. DOD’s comments reflect internal disagreement, which corroborates our finding that there is disagreement within DOD on the legal authority, risks, and benefits of consolidating the department’s multiple appeals boards. As we also note in our report, the Secretary of Defense has already directed this consolidation. However, in light of statements from some DOD officials that DOD needs to study the implications of moving to a consolidated appeal board to make an informed decision, we clarified our recommendation to clearly separate the two actions to be taken by the DOD General Counsel: first to resolve the disagreement about the legal authority for consolidation and address other obstacles, and second to take steps to implement the consolidation if there are no legal impediments and the other obstacles to consolidation can be addressed. We believe this language addresses the need for DOD to fully consider and resolve the components’ concerns about consolidation.\nIn its written comments, ODNI concurred with our two recommendations directed to it, for ODNI to develop performance measures and direct the collection of related revocation and appeals information, and to review whether the existing security clearance revocation process is the most efficient and effective approach. ODNI stated it established the Security Executive Agent National Assessment Program in April 2014 to conduct oversight of personnel security processes across the Executive Branch. ODNI said that this program includes gathering and analyzing data to establish standard processes as appropriate and developing performance measures against those standards. ODNI further commented that DHS and DOD have implemented revocation processes in different ways, which warrant additional ODNI oversight of agency revocation policies. DOD also concurred with our recommendation directed to ODNI regarding development of performance measures and collection of related revocation and appeals information, stating that the Office of the Under Secretary of Defense for Intelligence would ensure that ODNI receives a copy and is made aware of this recommendation.\nWe are sending copies of this report to appropriate congressional committees, the Secretaries of Homeland Security and Defense, and the DNI. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3604 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "This report assesses the policies and practices that the Department of Homeland Security (DHS) and Department of Defense (DOD) use when revoking personnel security clearances. The scope of our work focused on the revocation of personnel security clearances for federal civilian employees and military personnel within DHS and DOD, as well as federal government contractors. Known intelligence community military and civilian personnel and contractors were excluded from our scope, because they follow different processes and guidance than other DOD personnel. Table 5 provides a complete list of the agencies we contacted for our review.\nTo examine the extent to which DHS and DOD track data to oversee their revocation processes, and what these data show, we analyzed relevant executive orders and DHS and DOD personnel security clearance revocation policies to identify the extent to which they are required to maintain or report data and documentation on their security clearance revocation and appeals processes. We compared those requirements to leading practices, and assessed the extent that the policy requirements comply with these leading practices.obtained DHS and DOD personnel security clearance revocation and appeal data.\nIn addition, we requested and Revocation data for DHS was provided by DHS’s Office of the Chief Security Officer using its system for managing and standardizing personnel security processes and data, the Integrated Security Management System (ISMS). Personnel security records maintained in ISMS include suitability and security clearance investigations, which contain information related to background checks, investigations, and access determinations. The reported DHS security clearance revocation and appeals data include DHS military personnel and federal civilian employees within DHS Headquarters and the DHS operational components. DHS revocation cases for its contractor employees are processed by DOD and were not included in the DHS data. Although we requested data from fiscal years 2009 through 2013, DHS officials from Office of the Chief Security Officer could only provide revocation data for fiscal years 2011through 2013, because not all of the DHS operational components had been using ISMS to manage personnel and administrative security case records until recently. DHS Headquarters migrated data from its legacy system into and began using ISMS in May 2008; Federal Emergency Management Agency migrated to ISMS in May 2009; U.S. Customs and Border Protection migrated in October 2009; U.S. Immigration and Customs Enforcement migrated in December 2009; U.S. Citizenship and Immigration Services migrated in December 2009; U.S. Coast Guard migrated in July 2011; Transportation Security Administration migrated in December 2012; and U.S. Secret Service migrated in May 2013.\nTo provide the revocation data we requested regarding the number of revocations and the reasons for the revocation under the adjudicative guidelines, DHS queried ISMS and then validated those results with each of its operational components. The components made changes to the ISMS data when they determined that the data entered into ISMS did not track with what they had tracked elsewhere. DHS officials said that the differences were likely based on data entry and system use issues. The total number of revocation cases and the total number of revocation cases that went to the Security Appeals Board represents DHS military and civilian employees’ revocation cases that were closed in that particular fiscal year. We found that the total number of cases where a revocation proceeding was initiated could be higher because ISMS does not track cases where a person separated from the agency before a final decision was made on a proposal to revoke a personnel security clearance. In addition, the total number of military and civilian employees eligible to access classified information represents a current snapshot in time as ISMS does not track historical security clearance numbers. To corroborate the accuracy of the ISMS total number of DHS employees eligible to access classified information at each component, we compared this information to the total number of employees at six DHS components (U.S. Coast Guard, Transportation Security Administration, Federal Emergency Management Agency, U.S. Immigration and Customs Enforcement, U.S. Citizenship and Immigration Services, and U.S. Customs and Border Protection). We found that in all six components, the total number of employees was greater than the number of employees eligible to access classified information, as not all DHS employees need eligibility for access.\nFurthermore, while we requested DHS data on the number of employees that filed an initial appeal and the average amount of time it takes to complete a revocation case, these data were not available. Officials from the Office of the Chief Security Officer told us that ISMS has a module, called the Appeals Case, that could provide information about the number of initial appeals, but because use of this module is not required, only a few DHS components use it. Furthermore, officials from the Office of the Chief Security Officer told us that ISMS cannot track case timeliness data as a whole across the DHS components, because each appeal level would be saved as a different appeals case module entry, but the officials explained that they could determine this information for a particular case by looking at the individual ISMS records. We analyzed the DHS revocation data and supporting documentation, and discussed its reliability with DHS officials, and found the data to be sufficiently reliable to report on the number of employees whose personnel security clearance was revoked in DHS, and the reasons for the revocations.\nRevocation data for DOD military and federal civilian personnel and for industry or contractor personnel government-wide was provided by the Defense Manpower Data Center from DOD’s Joint Personnel Adjudication System (JPAS), which is DOD’s system of record for personnel security management to record and document personnel security actions. DOD security clearance revocation and appeals data include military personnel and federal civilian employees within the military services (Army, Navy, Air Force, and Marine Corps) and the defense agencies (referred to as Washington Headquarters Services). Data for government-wide contractors (also referred as industry personnel) is collectively grouped as one entity because Defense Manpower Data Center officials informed us that data on contractor personnel do not indicate the agency with which an individual’s contract is associated. We met with officials from the Office of the Under Secretary of Defense for Intelligence and the Defense Manpower Data Center (the administrator of JPAS) to discuss the approach for our data request and to get their feedback. We requested JPAS data extracts showing the total number of persons eligible to access classified information, the number of security clearance revocations, the reasons for a revocation decision, the number of appeals, the number of favorable and unfavorable appeal decisions, the type of appeal selected by the individual (personal appearance or in writing), and the time values at different intervals of the revocation and appeal process. We requested that all of these data be broken out by each DOD component for DOD military personnel, DOD federal civilian employees, and government-wide contractor employees for fiscal years 2009 through 2013.\nFurthermore, while we requested DOD data on the number of employees that filed an appeal, appeal outcomes, and the average amount of time it takes to complete a revocation case, these data were not available. Although there are fields in JPAS where this information can be recorded, we found that these fields were not consistently being used in JPAS.\nDefense Manpower Data Center officials initially provided mock-ups of the data request that excluded these data fields or left them blank. When we asked about this, Defense Manpower Data Center officials stated that it is their agency’s practice not to provide information from data fields with less than 50 percent fill rates. We asked that Defense Manpower Data Center to provide all the requested data along with an additional worksheet to show the data fill rate percentage, so we could report on the extent that these data fields had not been used.\nTo corroborate the accuracy of the JPAS revocation data for DOD military and civilian employees, we asked DOD officials from the DOD Consolidated Adjudications Facility (CAF) to provide us with the number of revocations processed by their adjudicators for the military departments’ military and civilian employees for fiscal years 2009 through 2013. We compared the JPAS data received from Defense Manpower Data Center with the data provided by the DOD CAF and we found that the data did not match. We determined that the discrepancy with the DOD CAF data was likely caused by a difference in the periods and populations included in the counts.\nTo corroborate the accuracy of the JPAS revocation data for contractor personnel, and data regarding the personal appearance for DOD military and civilian employees, we asked DOD officials from Defense Office of Hearings and Appeals (DOHA) to provide information on the number of contractor hearings and appeals performed, and their outcomes, for fiscal years 2009 through 2013 and the number of personal appearances for DOD military and civilian employees and their outcomes for fiscal years 2009 through 2013. We compared the JPAS data received from the Defense Manpower Data Center with the data provided by DOHA and we found that the data did not match. We determined that the discrepancy with the contractor data from DOHA was a result of the inclusion of clearance denials, which the DOHA database was unable to separate from clearance revocations. Security clearance denials were not part of the scope of this review. We analyzed the DOD revocation data and supporting documentation, and discussed their reliability with DOD officials, and found the data to be sufficiently reliable to report on the number of military personnel and federal civilian employees and contractors whose personnel security clearances were revoked in DOD, and the reasons for the revocations.\nTo examine the extent to which DHS and DOD consistently implemented government-wide requirements in their revocation processes, we obtained and reviewed the policies and procedures DHS, DOD, and their components use when revoking an employee’s access to classified information, interviewed DHS and DOD officials about whether these processes are being uniformly applied within each department and across the departments, and discussed the officials’ suggestions for improving the revocation process. In addition, we reviewed Executive Orders 12968 and 10865, which establish the overall process for revoking an employee’s security clearance, to identify agency and employee rights and responsibilities during the clearance revocation process. We then analyzed DHS and DOD template or redacted sample communication letters sent to employees during the revocation and appeal process by each component within DHS and DOD to determine whether they provide employees notice of their security clearance revocation rights and responsibilities under Executive Orders 12968 and 10865. Two analysts independently reviewed and assessed the DHS and DOD communication letters to determine whether they contain the 14 key rights and responsibilities for military, civilian, and contractor employees provided by Executive Order 12968 and the three additional rights for contractor employees provided by Executive Order 10865. For DHS military and civilian employees, we reviewed the Notice of Determination, the Notice of Review, and the Security Appeals Board decision letter. For DOD military and civilian employees, we reviewed the Statement of Reasons, the Letter of Revocation, and the PSAB decision letter. For contractor employees government-wide, we reviewed a Statement of Reasons, the administrative judge’s decision letter, and the DOHA Appeal Board decision letter. The analysts then compared their results to identify any disagreements and reached agreement on all items through discussion. We reviewed processes for civilian and military personnel within DHS and DOD, excluding the intelligence community, and for industry or contractor personnel that are part of the 23 executive-branch agencies that follow the DOD guidance and process.\nAdditionally, we interviewed officials from DHS, DOD, and their respective components to discuss (1) how they are following their policies, (2) how employee rights and responsibilities factor into the security clearance revocations process, and (3) how and under what circumstances they communicate with employees who are subject to the security clearance revocation process. When we identified discrepancies in following policies or communicating with employees, we contacted appropriate DHS and DOD officials to determine the reasons for such discrepancies and their potential effect. We also met with DHS, DOD, and ODNI officials to discuss the oversight they provide over executive-branch agencies’ personnel security revocation processes, their suggestions for building quality into the revocation process, and whether there are currently any metrics or reporting requirements related to personnel security clearance revocations.\nTo examine the extent to which DHS’s and DOD’s respective human capital and personnel security clearance revocation policies enable the departments to determine the employment status of their federal civilian and military employees subject to revocation in a consistent manner, we analyzed department-level and component level DHS and DOD human capital guidance—specifically their respective guidance for misconduct, discipline, and adverse actions, such as a table of penalties—and personnel security guidance. We assessed the extent that this guidance could be used to systematically determine what actions the agencies should take regarding the employment status of individuals subject to the clearance revocation and appeals processes, and what employment actions, such as reassignment or separation, are typically taken if an employee’s personnel security clearance is revoked. In addition, we assessed the extent to which the different sources of guidance are linked or are cross-referenced, and assessed what communication is required to take place between an agency’s personnel security office and human capital office during the course of a clearance revocation proceeding. We also interviewed human capital officials at DHS, DOD, and their components to obtain their perspectives on the extent that DHS and DOD’s human capital practices regarding the employment status of individuals subject to revocation are linked to and aligned with personnel security policies related to security clearance revocation, and the extent that there is communication between an agency’s personnel security office and a human capital office during the course of a clearance revocation proceeding.\nIn addition, we analyzed DHS’s, DOD’s, and the components’ guidance to determine whether the departments required tracking of any data regarding the employment outcomes of individuals whose personnel security clearances were revoked. We also discussed with DHS and DOD officials what data regarding employment outcomes were available at the department and component level. For this objective, within DHS, we focused on the three DHS components that had the largest number of personnel security clearance revocations from fiscal years 2011 through 2013, which were the U.S. Coast Guard, U.S. Immigration and Customs Enforcement, and U.S. Secret Service. Within DOD, our review included the headquarters-level elements of the Departments of the Army, the Navy, and the Air Force; the Marine Corps, and the Washington Headquarters Services. Contractor personnel were not included in the scope of this objective, as the human capital policies applicable to contractors would be those of their private-sector employers.\nTo assess whether DOD’s personnel security management system accurately reports the total number of DOD employees eligible for access to classified information, we compared the total number of DOD employees eligible for access to classified information reported by DOD’s personnel security management system to the total number of DOD employees in each component. To corroborate the accuracy of the JPAS total number of military and federal civilian employees eligible to access classified information, we compared this information with total military personnel end strength and civilian personnel full-time equivalents from the Under Secretary of Defense Comptroller’s National Defense Budget Estimates (Green Book). We assumed that the total number of military and civilian employees in each component should be higher than the total number of military and civilian employees who were eligible to access classified information, because not all DOD employees should be required to have clearance eligibility. However, we found that the total number of military and civilian employees eligible to access classified information in fiscal year 2013 as reported by JPAS was higher than the total number of military and civilian employees listed in the fiscal 2013 military personnel end strength and civilian personnel full-time equivalent data found in the DOD Green Book. We met with officials from Defense Manpower Data Center to discuss the discrepancies. Regarding the disparity in the revocation data, the Defense Manpower Data Center officials stated that they could not speak for the accuracy of the data derived from the Green Book, since full-time equivalents would undercount the total number of individuals employed, due to issues such as two part-time individuals occupying one full-time position. As a result, they believed that it would not be appropriate to compare these data against the total number of persons eligible to access classified information. DMDC officials subsequently agreed to provide us with counts for the total numbers of DOD active-duty and reserve military personnel and federal civilian employees for fiscal year 2013.\nTo determine the total number of DOD active-duty military personnel who were employed at any time in each active component during fiscal year 2013, data were taken from the Automated Extract of Active Duty Military Personnel Records. DMDC calculated the total number of active-duty military personnel by adding the totals from all 12 monthly files for fiscal year 2013 that were counted and reported as part of official active component strength. After combining the 12 files, duplicate personnel were dropped based on Social Security number and service. This methodology could potentially double-count individuals if someone transferred from one active service to another active service (e.g., if an individual transferred from active duty in the Army to active duty in the Navy).\nTo determine the total number of DOD reserve personnel who were employed at any time in each component during fiscal year 2013, data for reserve personnel were taken from the Reserve Components Common Personnel Data System. Reserve personnel data includes all Reserve categories in the Reserve and National Guard (Ready Reserve, Standby Reserve, and Retired Reserve). DMDC calculated the total number of reserve personnel by adding the totals of all members of the reserve components from all 12 monthly files for fiscal year 2013. combining the 12 files, duplicate personnel were dropped based on Social Security number and service.\nThis count excludes reserve personnel who were counted within the active end strengths of the components, which is usually those who serve on active duty for more than 180 days. permanent and non-full-time permanent employees.12 files, duplicate personnel were dropped based on Social Security number and service. This methodology could potentially double-count individuals if someone transferred from one agency to another agency (e.g., if an individual transferred from an Army civilian position to a Navy civilian position).\nUsing these total employee counts, we still found that the number of DOD employees who were eligible to access classified information in five components exceeded the actual number of DOD employees in those components. Regarding the disparity in the revocation data, Defense Manpower Data Center officials stated that JPAS completeness and accuracy of the data is dependent on the users entering the data. They further stated that information in JPAS may not reflect the loss of personnel—due to changes such as retirements, employee job transfer, and deaths—in the different agencies in DOD, because the department’s personnel centers can only send in separation dates for their personnel for a limited period and the personnel centers may not enter or correct an employee’s status during this period. As a result, we did not find the JPAS data on the number of current military personnel and federal civilian employees and contractors who are eligible to access classified information to be reliable.\nWe conducted this performance audit from April 2013 to September 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "", "In addition to the contact named above, Margaret A. Best (Assistant Director), Renee S. Brown, Grace Coleman, Sara Cradic, Randy DeLeon, Cynthia Grant, Mary Jo LaCasse, Amie Lesser, David E. Moser, Kelly Rubin, and Michael Willems made major contributions to this report.", "Personnel Security Clearances: Actions Needed to Ensure Quality of Background Investigations and Resulting Decisions. GAO-14-138T. Washington, D.C.: February 11, 2014.\nPersonnel Security Clearances: Actions Needed to Help Ensure Correct Designations of National Security Positions. GAO-14-139T. Washington, D.C.: November 20, 2013.\nPersonnel Security Clearances: Opportunities Exist to Improve Quality Throughout the Process. GAO-14-186T. Washington, D.C.: November 13, 2013.\nPersonnel Security Clearances: Full Development and Implementation of Metrics Needed to Measure Quality of Process. GAO-14-157T. Washington, D.C.: October 31, 2013.\nPersonnel Security Clearances: Further Actions Needed to Improve the Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June 20, 2013.\nManaging for Results: Agencies Should More Fully Develop Priority Goals under the GPRA Modernization Act. GAO-13-174. Washington, D.C.: April 19, 2013.\nSecurity Clearances: Agencies Need Clearly Defined Policy for Determining Civilian Position Requirements. GAO-12-800. Washington, D.C.: July 12, 2012.\nPersonnel Security Clearances: Continuing Leadership and Attention Can Enhance Momentum Gained from Reform Effort. GAO-12-815T. Washington, D.C.: June 21, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington, D.C.: February 28, 2012.\nBackground Investigations: Office of Personnel Management Needs to Improve Transparency of Its Pricing and Seek Cost Savings. GAO-12-197. Washington, D.C.: February 28, 2012.\nGAO’s 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011.\nHigh-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 16, 2011.\nPersonnel Security Clearances: Overall Progress Has Been Made to Reform the Governmentwide Security Clearance Process. GAO-11-232T. Washington, D.C.: December 1, 2010.\nPersonnel Security Clearances: Progress Has Been Made to Improve Timeliness but Continued Oversight Is Needed to Sustain Momentum. GAO-11-65. Washington, D.C.: November 19, 2010.\nDOD Personnel Clearances: Preliminary Observations on DOD’s Progress on Addressing Timeliness and Quality Issues. GAO-11-185T. Washington, D.C.: November 16, 2010.\nPersonnel Security Clearances: An Outcome-Focused Strategy and Comprehensive Reporting of Timeliness and Quality Would Provide Greater Visibility over the Clearance Process. GAO-10-117T. Washington, D.C.: October 1, 2009.\nPersonnel Security Clearances: Progress Has Been Made to Reduce Delays but Further Actions Are Needed to Enhance Quality and Sustain Reform Efforts. GAO-09-684T. Washington, D.C.: September 15, 2009.\nPersonnel Security Clearances: An Outcome-Focused Strategy Is Needed to Guide Implementation of the Reformed Clearance Process. GAO-09-488. Washington, D.C.: May 19, 2009.\nDOD Personnel Clearances: Comprehensive Timeliness Reporting, Complete Clearance Documentation, and Quality Measures Are Needed to Further Improve the Clearance Process. GAO-09-400. Washington, D.C.: May 19, 2009.\nHigh-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 2009.\nPersonnel Security Clearances: Preliminary Observations on Joint Reform Efforts to Improve the Government wide Clearance Eligibility Process. GAO-08-1050T. Washington, D.C.: July 30, 2008.\nPersonnel Clearances: Key Factors for Reforming the Security Clearance Process. GAO-08-776T. Washington, D.C.: May 22, 2008.\nEmployee Security: Implementation of Identification Cards and DOD’s Personnel Security Clearance Program Need Improvement. GAO-08-551T. Washington, D.C.: April 9, 2008.\nPersonnel Clearances: Key Factors to Consider in Efforts to Reform Security Clearance Processes. GAO-08-352T. Washington, D.C.: February 27, 2008.\nDOD Personnel Clearances: DOD Faces Multiple Challenges in Its Efforts to Improve Clearance Processes for Industry Personnel. GAO-08-470T. Washington, D.C.: February 13, 2008.\nDOD Personnel Clearances: Improved Annual Reporting Would Enable More Informed Congressional Oversight. GAO-08-350. Washington, D.C.: February 13, 2008.\nDOD Personnel Clearances: Delays and Inadequate Documentation Found for Industry Personnel. GAO-07-842T. Washington, D.C.: May 17, 2007.\nHigh-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007.\nDOD Personnel Clearances: Additional OMB Actions Are Needed to Improve the Security Clearance Process. GAO-06-1070. Washington, D.C.: September 28, 2006.\nDOD Personnel Clearances: New Concerns Slow Processing of Clearances for Industry Personnel. GAO-06-748T. Washington, D.C.: May 17, 2006.\nDOD Personnel Clearances: Funding Challenges and Other Impediments Slow Clearances for Industry Personnel. GAO-06-747T. Washington, D.C.: May 17, 2006.\nDOD Personnel Clearances: Government Plan Addresses Some Long- standing Problems with DOD’s Program, But Concerns Remain. GAO-06-233T. Washington, D.C.: November 9, 2005.\nDOD Personnel Clearances: Some Progress Has Been Made but Hurdles Remain to Overcome the Challenges That Led to GAO’s High-Risk Designation. GAO-05-842T. Washington, D.C.: June 28, 2005.\nHigh-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 2005.\nDOD Personnel Clearances: Preliminary Observations Related to Backlogs and Delays in Determining Security Clearance Eligibility for Industry Personnel. GAO-04-202T. Washington, D.C.: May 6, 2004." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 2, 1, 2, 3, 3, 3, 2, 3, 3, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_full", "h0_full h2_full h1_full", "h2_full", "", "h0_full h2_full", "", "", "", "", "", "", "" ] }

{ "question": [ "Why might the DOD's clearance eligibility totals be inaccurate?", "What data supports this conclusion?", "Why are these counts inconsistent?", "How do these DOD inconsistencies affect ODNI figures?", "What are the negative impacts of the overstated clearances?", "What issues surround clearance and US security?", "Why are these issues more important currently?", "What clearances do the DOD and DHS grant?", "What was the GAO asked to review?", "What parts of the revocation processes did the GAO evaluate?", "What inaccuracies did the GAO find?", "What information did the GAO review for this report?" ], "summary": [ "GAO's comparison of the total number of DOD employees eligible to access classified information to the total number of DOD employees in fiscal year 2013 suggests that DOD's clearance eligibility totals may be inaccurate.", "Specifically, GAO found that the number of eligible employees exceeded the total number of employees in five DOD components.", "DOD officials said this discrepancy could be because DOD's eligibility database is not consistently updated when an employee separates.", "As a result, the total number of government employees eligible to access classified information that ODNI reports to Congress likely overstates the number of eligible DOD employees.", "Inaccurate eligibility data hampers DOD's ability to reduce its number of clearance holders to minimize risk and reduce costs to the government.", "Personnel security clearances allow people access to classified information that, through unauthorized disclosure, can cause exceptionally grave damage to U.S. national security.", "In light of recent events, having a high-quality process to determine whether an individual's eligibility to access classified information should be revoked has become increasingly important.", "DOD and DHS grant the most clearances in the executive branch, and the Director of National Intelligence is responsible for, among other things, oversight of clearance eligibility determinations.", "GAO was asked to evaluate revocation processes at DHS and DOD.", "GAO evaluated the extent to which the agencies (1) track data on these processes; (2) consistently implement government-wide requirements and exercise oversight over these processes; and (3) determine outcomes for employees whose clearances were revoked.", "During this review, GAO identified possible inaccuracies in DOD's data on eligible personnel with access to classified information and is also reporting on that issue.", "GAO analyzed agency revocation data, reviewed executive orders, agency guidance, and documents, and interviewed officials from ODNI, DHS, DOD, and their components." ], "parent_pair_index": [ -1, 0, 1, -1, 3, -1, 0, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 5, 5, 5, 5, 5, 0, 0, 0, 1, 1, 1, 1 ] }

{ "title": [ "Background", "CHS Program Administration", "Methodology for Allocating CHS Funds", "Allocation of CHS Funds", "IHS’s Allocation of CHS Funds Has Varied across IHS Areas", "IHS’s Allocation of CHS Funds Varied Widely across IHS Areas in Fiscal Year 2010", "IHS’s Methods of Allocating CHS Funds Have Maintained Funding Differences", "IHS Has Taken Few Steps to Address the Funding Variation within the CHS Program", "IHS Has Taken Few Steps to Evaluate the Funding Variations within the CHS Program", "IHS’s Ability to Address Funding Variations Is Limited by Statute", "Conclusions", "Matter for Congressional Consideration", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Department of Health and Human Services", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Federal and tribal CHS programs in each of IHS’s 12 areas pay for services from external providers if services are not available directly through IHS-funded facilities, if patients meet certain requirements, and if funds are available. IHS uses three primary methods—base funding, annual adjustments, and program increases—to allocate CHS funds to the area offices.", "IHS administers contract health services through 12 IHS area offices, which include all or part of 35 states where many American Indian and Alaska Natives reside. (See fig. 1.) IHS uses CHS funds to pay for services from a variety of health care providers, including hospital- and office-based providers. IHS, among other things, sets program policy for and allocates CHS program funds to the area offices. The area offices distribute funds to individual federally operated and tribally operated CHS programs that purchase contract care services from outside providers. There can be multiple individual CHS programs within an area. Tribes currently administer 177 of the 243 (73 percent) individual CHS programs and receive about 54 percent of IHS’s funding for CHS. In addition to receiving federal funding through IHS, the tribes may provide supplemental funds to the CHS programs they administer.\nPatients must meet certain eligibility, administrative, and medical priority requirements to have their services paid for by the CHS program. Generally, to be eligible to receive services through the CHS program, patients must reside on a reservation or within a reservation’s federally established CHS Delivery Areas and be members of a tribe or tribes located on that reservation or maintain close economic and social ties with that tribe or tribes. In addition, if there are alternate health care resources available to a patient, such as Medicaid and Medicare, these resources must pay for services first because the CHS program is generally the payer of last resort. If a patient has met these requirements, a program committee (often including medical staff), which is part of the local CHS program, evaluates the medical necessity of the service. IHS has established four broad medical priority levels of health and each area office is required to care services eligible for payment,establish priorities that are consistent with these medical priority levels. Because IHS typically does not have enough funds to pay for all CHS services requested, federal CHS programs pay first for emergency and acutely urgent medical care to the extent funds are available. They may then pay for all or only some of the lower-priority services they fund, funds permitting. Tribal CHS programs must use medical priorities when making funding decisions, but unlike federal CHS programs, they may develop a system that differs from the set of priorities established by IHS.\nThere are two primary paths through which patients may have their care paid for by the federal CHS program. First, a patient may obtain a referral from a provider at an IHS-funded health care facility to receive services from an external provider. That referral is submitted to the CHS program for review. If the patient meets the requirements and the CHS program has funding available, the services in the referral are approved by the CHS program and a purchase order is issued to the external provider and sent to IHS’s fiscal intermediary. Once the patient receives the services from the external provider, that provider obtains payment for the services in the approved referral by sending a claim to IHS’s fiscal intermediary. Second, in the case of an emergency, the patient may seek care from an external provider without first obtaining a referral. Once that care is provided, the external provider must send the patient’s medical records and a claim for payment to the CHS program. At that time, the CHS program will determine if the patient met the necessary program requirements and if CHS funding is available for a purchase order to be issued and sent to the fiscal intermediary. As in the earlier instance, the provider obtains payment by submitting a claim to IHS’s fiscal intermediary.\nIn addition to funds appropriated annually for CHS, IHS also distributes funds to individual CHS programs from the Indian Health Care Improvement Fund, designed to reduce disparities and resource deficiencies at the local level as measured by IHS’s Federal Disparity However, because these funds may be used to pay for either Index. contract care or direct care services, it is possible that they may not finance contract care services in some programs. Further, this fund is small compared to both CHS and direct care funding. For example, in fiscal year 2010, funds distributed from the Indian Health Care Improvement Fund equaled about 6 percent of the CHS funding level, or about 2 percent of the funding level for direct care services. IHS has reported on a number of data limitations related to the current formula used to distribute funds from the Indian Health Care Improvement Fund.", "IHS uses three primary methods—base funding, annual adjustments, and program increases—to determine the allocation of CHS funds to the IHS area offices, which then distribute the funds to individual CHS programs.(See fig. 2.) IHS uses these methods sequentially. Base funding is the amount of CHS funds that equal the total amount of all CHS funds that each area received in the prior fiscal year. When appropriations for CHS are higher than the amount needed for base funding, IHS uses national measurements of population growth and inflation to determine annual funding adjustments. Each IHS area office receives the same percentage increase for the annual adjustments. Since 2001, when IHS has also received additional funding for what it refers to as “program increases,” IHS has used the CHS Allocation Formula to determine how to allocate those program increases to the 12 area offices. According to IHS officials, IHS established the CHS Allocation Formula in part to ensure that American Indians and Alaska Natives had equitable access to contract health funds. The Allocation Formula is based on a combination of factors, including variations in the number of people using health care services, geographic differences in the costs of purchasing health care services, and access to IHS or tribally operated hospitals.\nMost CHS funding, which IHS refers to as “base funding,” is allocated based on past funding history. Each year, each of the 12 IHS area offices receives an allocation of base funding equal to the total amount of all CHS funds they received the previous fiscal year. According to IHS, base funding is intended to maintain existing levels of patient care services in all areas. Because of adjustments or funding increases that are received in most years, a new level of base funding is created in those years. IHS officials have told us they do not know the exact origins of the base funding policy, but that it dates back to the 1930s, when the health programs were under the Bureau of Indian Affairs. In 1954, Congress transferred responsibility for the maintenance and operation of hospitals and health facilities for Indians from the Bureau of Indian Affairs in the Department of the Interior to what is now IHS in HHS.\nWhen appropriations for CHS are above the previous fiscal year’s level, IHS allocates each area office an additional amount to adjust for overall population growth and inflation. The population growth funding adjustment is based on national population increases determined by the U.S. Census Bureau with annual adjustments made for changes based on state birth and death data provided by the National Center for Health Statistics. The inflation adjustment is based on the prevailing Bureau of Labor Statistics’ Consumer Price Index for medical costs. IHS gives each area the same percentage increase to its base funding regardless of any population growth or cost-of-living differences among areas. IHS receives increases in CHS funding that are large enough that the agency can allocate at least some for annual adjustments, even if not the full amount. The funding adjustments for population growth and inflation provided to the area offices are incorporated into the next year’s base funding.\nIn fiscal year 2009, each individual CHS program received a 1.5 percent adjustment for population growth and a 3.8 percent adjustment for inflation. In fiscal year 2010, those adjustments were 1.5 percent and 3.3 percent, respectively.\n3 years. This active user population is then used as a multiplier for the cost adjustment and access to care factors.\nThe cost adjustment factor provides an adjustment to account for geographic differences in the costs of purchasing health care services. It is based on a price index derived from the American Chamber of Commerce Researchers Association Regional Cost of Living index, which provides regional comparative costs for inpatient and outpatient services. The price index for each CHS program is multiplied by the active user population for each program to determine the value of the cost adjustment factor.\nThe access to care factor provides an additional increase only for those individual CHS programs that do not have access to an IHS or tribally operated hospital. IHS area officials determine if individual CHS programs meet two qualifying criteria for this factor: (1) the individual CHS program has no IHS or tribally operated hospital with an average daily patient load of five or more, and (2) the individual CHS program does not have an established referral pattern to an IHS or tribally operated hospital within the area. These additional funds are allocated to each program where there is no access to an IHS or tribally operated hospital in an amount proportional to the cost adjustment factor.\nTo allocate the program increase funding, IHS first designates 75 percent of the funds for increases based on the cost adjustment factor at each individual CHS program and 25 percent of the funds for the increases based on the access to care factor at each individual CHS program. IHS then totals the program increases for the individual CHS programs and allocates that total amount to the IHS area offices. Program increases allocated using the CHS Allocation Formula become part of the area offices’ base funding for the next fiscal year.\nIHS used the CHS Allocation Formula to allocate program increases in fiscal years 2001, 2002, and 2008 through 2010. In each of those years, IHS informed the IHS area offices of the total amounts of program increase funds to be allocated to the offices and the dollar values that IHS calculated under that formula for each individual CHS program in their areas. To specifically address health care needs in local communities, IHS permits area offices, in consultation with the tribes, to distribute program increase funds to local CHS programs using criteria other than the CHS Allocation Formula. Because these adjustments are made at the individual CHS program level, they do not affect future base funding which is determined at the area level.", "Funds allocated to the IHS area offices through base funding, annual adjustments, and program increases have increased substantially over the past 10 years. In fiscal year 2001, area offices received just over $386 million; in fiscal year 2010, they received just over $715 million in CHS funds. (See fig. 3.)", "IHS’s allocation of CHS funds has varied widely across IHS area offices, and IHS’s method of allocating CHS funds has maintained those funding differences. Moreover, the CHS Allocation Formula for determining program increases uses imprecise counts of CHS users.", "CHS funding varied widely across IHS area offices in fiscal year 2010. Total CHS funding for fiscal year 2010 ranged across the 12 area offices from nearly $17 million to more than $95 million. There were also substantial ranges in base funding, annual adjustments, and the program increase. For fiscal year 2010, base funding ranged from nearly $15 million to nearly $76 million, annual adjustments ranged from less than $1 million to more than $3 million, and the program increases ranged from around $1.5 million to more than $16 million across the area offices. (See table 1.)\nBecause total funding may reflect variations in the size of the population of IHS areas, we also examined per capita funding for fiscal year 2010 using IHS’s count of active users from the most recent year for which data were available. Per capita CHS funding for fiscal year 2010 varied widely, ranging across the area offices from $299 to $801. In addition, per capita CHS funding was sometimes not related to areas’ dependence on CHS for the provision of IHS-funded inpatient services. For example, California received a level of per capita funding that was in the lower half of the range for all areas, while American Indians and Alaska Natives in that area rely entirely on CHS for their IHS-funded inpatient services because there are no IHS or tribally operated hospitals. Similarly, the Bemidji area depends almost entirely on CHS for its IHS-funded inpatient services, yet received levels of per capita CHS funding that were in the lower half of the range of CHS funding for all areas.\nBecause CHS funds are used to purchase services not accessible or available through the direct care program, we compared patterns of funding for the direct care program and the CHS program across areas. On average, areas were allocated about three times as much in per capita direct care funding as they were in per capita CHS funding. We also found that, in general, the areas that were allocated higher amounts of per capita direct care funding were also allocated higher amounts of per capita CHS funding, and those areas that were allocated lower amounts of per capita direct care funding were also allocated lower amounts of per capita CHS funding. The notable exceptions were Alaska, which was allocated much more in per capita direct care funding than average, and Portland and Tucson, which were allocated much less in per capita direct care funding than average. Alaska was allocated per capita direct care funding ($3,340) that was about six times more than its per capita CHS funding ($548) and was the highest per capita direct care funding of all the areas, nearly double that of the area with the second highest per capita funding (Nashville, $1,869). Direct care funding for Alaska reflects the unique health care challenges that Alaska faces due to its remoteness and vast distances, which result in some of the highest costs for health care services in the United States. In contrast, the lower per capita direct care allocations to Tucson and Portland were somewhat offset by relatively higher levels of per capita CHS funding. Tucson was allocated the lowest per capita direct care funding ($1,324) but it received the third highest per capita CHS funding ($664). Similarly, Portland’s per capita direct care funding ($1566) was relatively low, but its per capita CHS funding ($799), was the second highest.\nIn addition to variation in funding across IHS area offices, variation in funding may exist among individual CHS programs within area offices of which IHS headquarters is not aware. Some IHS area offices use methods other than the CHS Allocation Formula to distribute CHS program increases and IHS does not require the area offices to report these variations to headquarters. As a result, IHS may not be able to appropriately oversee agency operations. According to Standards for Internal Controls in the Federal Government, agency managers should establish appropriate and clear policies and procedures for internal reporting relationships that effectively provide managers with the information they need to carry out their job responsibilities. The standards further state that an agency must have reliable and timely communications relating to internal events to run and control its operations. IHS allows area offices, in consultation with the tribes, to distribute program increase funds to local CHS programs using different criteria than the CHS Allocation Formula to meet health care needs in local communities, but does not require that the areas inform IHS headquarters. By not requiring area offices to report to IHS headquarters about deviations in funding, IHS is not meeting internal control standards. For example, IHS headquarters officials identified two area offices that have used alternate methods to distribute CHS program increases to local CHS programs. We identified a third area that used alternative methods that IHS was not aware of, specifically using the count of actual CHS users at each individual CHS program.", "The allocation pattern of per capita CHS funds has been generally maintained over the 10-year period that we examined. Those areas that had the highest and the lowest levels of per capita CHS funding in fiscal year 2001 generally also had the highest and lowest levels of per capita CHS funding in fiscal year 2010. (See fig. 4.)\nBase funding, which is based solely on funding from the prior year, accounts for the great majority of CHS funds and therefore maintains any funding variations. For example, in fiscal year 2010, the year in which IHS received its largest program increase, base funding accounted for 82 percent of total CHS funds allocated to IHS area offices. (See fig. 5 for the allocation of funds in fiscal year 2010.) Annual adjustments for population growth and inflation are made as a percentage of base funding that is the same for all areas and therefore do not affect funding variations. Further, program increase funds allocated through the CHS Allocation Formula are not large enough to alter funding variations because they have been a relatively small proportion of the CHS funds that area offices receive. For example, in fiscal year 2010, CHS Allocation Formula funds amounted to about 14 percent of total CHS funding. Therefore, any variations in the original base funding amounts allocated to the areas are perpetuated since the occasional program increases are not sufficiently large to be able to close that gap.\nThe CHS Allocation Formula IHS uses to allocate CHS program increases to IHS area offices is largely dependent on an estimate of active users that is imprecise, even though IHS considers population estimates to be a critical factor in allocating CHS funds. In 2010, IHS’s Data/Technical Workgroup noted that the active user population is not a precise measure of American Indians and Alaska Natives eligible for CHS services.of all users who had at least one direct care or contract care inpatient stay, or obtained at least one outpatient, ambulatory, or dental service during the preceding 3-year period. The active user estimates that IHS used to allocate program increases therefore included an unknown proportion of patients who had not received contract health services, but rather had received only direct care services. IHS has acknowledged that its method of counting active users for the CHS Allocation Formula does not measure the number of people who actually received CHS services, nor does it measure the number of people who are eligible for CHS services. Because the active user population is used to determine The CHS Allocation Formula allocates funds based on counts program increases, any inaccuracies in that number potentially could contribute to variation not linked to actual use of CHS services.\nWhile IHS has an information technology system that could produce actual counts of CHS users, IHS officials do not believe that the data in the system are complete or that areas collect these data in the same way. This system contains separate tabulations of users of direct care services, contract care services, and dental care services. However, IHS officials told us that they do not provide guidance to area offices on how to record data on active CHS user counts. Nevertheless, officials from one area told us that one of their statisticians separated out the CHS users from the active user population count identified by IHS for 2 recent years and found that the CHS user count is about half of the active user population count. Without accurate data, it is not possible for IHS to know if the proportion of actual CHS users is consistent across areas.", "IHS has taken few steps to evaluate the funding variations within the CHS program. In addition, IHS’s ability to address funding variations is limited by statute.", "IHS has taken few steps to evaluate the funding variations within the CHS program. IHS officials told us that they have not evaluated the effectiveness of base funding and the CHS Allocation Formula in meeting the health care needs of American Indians and Alaska Natives across the IHS areas and they do not plan to do so with respect to the determination of base funding amounts. Without such assessments, IHS cannot determine the extent to which the current variation in CHS funding reflects variation in health care needs. According to Standards for Internal Controls in the Federal Government, agency managers should compare actual performance to planned or expected results throughout the organization and analyze significant differences. Further, the standards specify that activities need to be established to monitor performance measures and indicators. IHS has not developed policies and procedures in the Indian Health Manual for its headquarters and field staff employees on how to conduct assessments of the CHS program funding methodologies, nor has it included goals, measures, and time frames for assessing the CHS program funding allocation performance within areas, which would potentially help IHS and the area offices identify and allocate CHS program funds to areas and local CHS programs with the greatest need.\nIn March 2010, the Director of IHS formed the Director’s Workgroup on Improving CHS to review tribal input to improve the CHS program, to evaluate the existing formula for allocating program increases using the CHS Allocation Formula, and to recommend improvements in the way CHS business operations are conducted. The workgroup members agreed that their recommendations would apply only to program increases and not to base funding. In February 2011, the Director of IHS reported that she concurred with the four recommendations made by the workgroup in October 2010.\nThe workgroup recommended that a technical subcommittee be created and charged with calculating the current CHS need and estimates of future CHS need. Such information would be essential to understanding the variation in CHS funding. However, we previously reported that IHS data on denials and deferrals that IHS used to estimate program need are incomplete and inconsistent.\nThe workgroup recommended convening 12 Area Work Sessions to review and make recommendations about current CHS policies and procedures, which would then be used to revise the CHS chapter of the Indian Health Manual, specifically relating to issues of evaluating the cost of care and communication of CHS program requirements, among others. These sessions have been completed and the workgroup is developing a summary report.\nThe workgroup recommended that an evaluation of the current CHS Allocation Formula be postponed until at least fiscal year 2013. The workgroup members said that the CHS program had only begun receiving substantial increases in fiscal years 2009 and 2010, and the full impact of these increases needed to be reviewed before making recommendations to change the formula. In contrast, we found that IHS has used the formula to allocate program increases, at least in part, in 5 years since 2001. Members of the workgroup we interviewed told us that outcome measures for the evaluation have not yet been defined. As part of this recommendation, they also suggested that a subcommittee be created to review the CHS Allocation Formula for equity across areas. An IHS representative to the workgroup told us that the recommendations of the subcommittee will not be considered by the full committee until the review of equity is complete.\nThe workgroup recommended that the inpatient and outpatient components of the Consumer Price Index be used for any new CHS program increases that IHS may receive for fiscal year 2013 and beyond.\nMembers of the 2010 Director’s Workgroup we spoke with expressed concern that the CHS Allocation Formula does not differentiate between large and small hospitals when determining the access to care factor, although the workgroup did not make a recommendation concerning this issue. Specifically, programs with access to small hospitals with minimal services do not receive an adjustment for access to care, and are therefore treated similarly to programs with access to large medical centers where a range of specialty care services may be available. As a result, the CHS Allocation Formula does not equitably compensate for limitations in hospital access. When the CHS Allocation Formula was created in 2001, its developers noted that the access to care factor should be refined to better reflect the complexities of the IHS system of health care. IHS has neither refined nor made any change to the way that access to care is defined.", "Federal law restricts IHS’s ability to reallocate funding should the agency desire to do so. Specifically, IHS officials identified two statutory provisions that limit IHS’s ability to adjust funding allocations. The Indian Self-Determination and Education Assistance Act currently prohibits reductions in funding for certain tribally operated programs, including some CHS programs, except for limited circumstances. In addition, the Indian Health Care Improvement Act imposes a congressional reporting requirement for proposed reductions in base funding for any recurring program, project, or activity of a service unit of 5 percent or more.officials told us that no such proposal to reallocate base funding has been transmitted to the Congress.\nIHS officials have told us that areas and tribes have resisted changes to the current funding allocation methods, particularly base funding, as consistent funding allows the areas and tribes to plan and manage their resources. However, minutes from a 2010 session of the Director’s workgroup show that not all tribes agree with the CHS Allocation Formula and that some workgroup members said that the current CHS Allocation Formula was not sufficiently equitable. Concerns about IHS’s funding methods are longstanding. For example, in 1982, we concluded that IHS’s practice of funding programs based on the previous year’s funding level caused funding inequities and that IHS did not distribute funds to the neediest programs in fiscal year 1981.", "There are wide variations in CHS funding across the 12 IHS areas, and these variations are largely maintained by IHS’s long-standing use of the base funding methodology. IHS officials are unable to link variations in funding levels to any assessment of health care need. As we have reported in the past and found once again in this evaluation, IHS’s continued use of the base funding methodology undermines the equitable allocation of IHS funding to meet the health care needs of American Indians and Alaska Natives. Program increases for the CHS program over the years have not significantly altered variations across the areas, primarily because they are too small to have a strong impact on overall funding. Funds from the Indian Health Care Improvement Fund, designed to reduce funding disparities, also have had little impact because they are relatively small and not targeted solely for the CHS program. Further, federal law restricts IHS’s ability to reallocate funding, principally by prohibiting reductions for certain tribally operated CHS programs, which account for more than half of total CHS funding. IHS also may be unaware of additional variation in funding across individual CHS programs because it does not require that area offices notify IHS headquarters when they choose different funding methodologies than those suggested by headquarters.\nIHS can improve the equity of how it allocates program increase funds to areas through improvements in its implementation of the CHS Allocation Formula, primarily by using counts of actual CHS users rather than by using the current method of estimating the number of overall IHS users, which now includes patients who never used a CHS service, and by refining the access to care factor to account for differences in available health care services at IHS and tribally operated facilities. However, because of the predominant influence of base funding and the relatively small contribution of program increases to overall CHS funding, it would take many years to achieve funding equity just by revising the methods for distributing CHS program increase funds.", "In order to ensure an equitable allocation of CHS program funds, the Congress should consider requiring IHS to develop and use a new method to allocate all CHS program funds to account for variations across areas that would replace the existing base funding, annual adjustment, and program increase methodologies, notwithstanding any restrictions currently in federal law.", "To make IHS’s allocation of CHS program funds more equitable, we recommend that the Secretary of Health and Human Services direct the Director of the Indian Health Service to take the following three actions for any future allocation of CHS funds: require IHS to use actual counts of CHS users, rather than all IHS users, in any formula for allocating CHS funds that relies on the number of active users; require IHS to use variations in levels of available hospital services, rather than just the existence of a qualifying hospital, in any formula for allocating CHS funds that contains a hospital access component; and develop written policies and procedures to require area offices to notify IHS when changes are made to the allocations of funds to CHS programs.", "HHS reviewed a draft of this report and provided written comments, which are reprinted in appendix I. In its comments, HHS concurred with two of our recommendations and did not concur with one recommendation. HHS did not comment on our general findings or our conclusion that IHS’s use of the base funding methodology has led to long-standing inequities in the distribution of CHS funds.\nHHS concurred with our recommendation that IHS use variations in levels of available hospital services to allocate CHS funds. HHS noted that the IHS Director’s Workgroup on Improving CHS will review the formula and make recommendations in fiscal year 2013. HHS also concurred with our recommendation to develop written policies to require area offices to notify IHS when changes are made in the allocations of funds to CHS programs. HHS noted that guidance requiring areas to report these changes to IHS headquarters will be added to the CHS manual; however, the agency did not specify a date for doing so.\nHHS did not concur with our recommendation that it should require IHS to use actual counts of CHS users, rather than all IHS users, in any formula for allocating CHS funds that relies on the number of active users. HHS stated that IHS’s combined count of all users of IHS direct care services and CHS users is intended to reflect the health care needs of those eligible for CHS services. However, as we reported, IHS’s own Data/Technical Workgroup found that the current IHS active user count does not measure the number of people who are eligible for CHS services, in part because not all users of IHS direct care services are eligible for CHS services. Further, as HHS acknowledged in its comments, the current count of active users also does not reflect those who actually received CHS services. Because CHS program increases are intended to reflect variations in the numbers of CHS users among areas, we continue to believe that IHS should use counts of actual CHS users in determining program increases.\nWe are sending copies of this report to the Secretary of Health and Human Services, Director of the Indian Health Service, appropriate congressional committees, and other interested parties. In addition, the report is available at no charge on the GAO website at http//www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of the report. GAO staff who made major contributions to this report are listed in appendix II.", "", "", "", "In addition to the contact named above, Martin T. Gahart (Assistant Director), George Bogart, Carolyn Feis Korman, and Laurie Pachter made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title", "h0_full h2_full", "h2_full", "", "h0_title h2_full h3_title", "h0_full h2_full", "h0_full h3_full", "h2_title h1_full", "h2_full h1_full", "h1_full", "h1_full", "h3_full h2_full", "h3_full", "h3_full", "", "", "", "" ] }

{ "question": [ "How did the IHS allocate CHS funds?", "What was the range of funding variations for areas?", "What was the range of per capita funding variations for areas?", "How has the allocation of this per capita funding changed FY2001 to FY2010?", "Why has allocation been maintained through many years?", "How has this method been ineffective?", "What else maintains the allocation patterns?", "How are IHS counts imprecise?", "How has the IHS handled funding?", "What did the IHS comment on their evaluations of funding?", "Why does the IHS need these assessments?", "How will the CHS Allocation Formula be evaluated?", "How was the later evaluation justified by the workgroup?", "What did the GAO find contradicting this argument?", "Why does the GAO find the evaluation of the CHS Allocation Formula to be inefficient?", "What are additional reasons the revisions are less effective?", "What does the IHS provide?", "How does the IHS perform when their facilities are full?", "Why must the GAO study the CHS program?", "How does the IHS determine allocation of CHS funds?", "What did the GAO examine?", "What did the GAO review for this report?", "Why does the GAO recommend new allocation methods for CHS funds?", "How does the GAO recommend the IHS change their data collection?", "How did the HHS respond to GAO recommendations?", "Why does the GAO back the third recommendation?" ], "summary": [ "The Indian Health Service’s (IHS) allocation of contract health services (CHS) funds varied widely across the 12 IHS geographic areas.", "In fiscal year 2010, CHS funding ranged from nearly $17 million in one area to more than $95 million in another area.", "Per capita CHS funding for fiscal year 2010 also varied widely, ranging across the areas from $299 to $801 and was sometimes not related to the areas’ dependence on CHS inpatient services, as determined by the availability of IHS-funded hospitals.", "The allocation pattern of per capita CHS funds has been generally maintained from fiscal year 2001 through fiscal year 2010.", "This is due to the reliance on base funding—which incorporates all CHS funding from the prior year to establish a new base each year—and accounts for the majority of funding.", "In fiscal year 2010, when CHS had its largest program increase and base funding was the smallest proportion of funding for any year, base funding still accounted for 82 percent of total CHS funds allocated to areas.", "Further, allocations of program increase funds are largely dependent on an estimate of CHS service users that is imprecise.", "IHS counts all users who obtained at least one service either funded by CHS or provided directly from an IHS-funded facility during the preceding 3-year period. This count therefore includes an unknown number of individuals who received IHS direct care only and who had not received contract health services.", "IHS has taken few steps to evaluate funding variation within the CHS program and IHS’s ability to address funding variations is limited by statute.", "IHS officials told GAO that the agency has not evaluated the effectiveness of base funding and the CHS Allocation Formula.", "Without such assessments, IHS cannot determine the extent to which the current variation in CHS funding accurately reflects variation in health care needs.", "While IHS has formed a workgroup to evaluate the existing formula for allocating program increases, the workgroup recommended, and the Director of IHS concurred, that the CHS Allocation Formula for distributing program increases would not be evaluated until at least 2013.", "The workgroup members maintained that the CHS program had only begun receiving substantial increases in fiscal years 2009 and 2010, and the full impact of these increases needed to be reviewed before making recommendations to change the formula.", "However, GAO found that IHS has used the formula to allocate program increases, at least in part, in 5 years since 2001.", "GAO also concluded that, because of the predominant influence of base funding and the relatively small contribution of program increases to overall CHS funding, it would take many years to achieve funding equity just by revising the methods for distributing CHS program increase funds.", "Further, federal law restricts IHS’s ability to reallocate funding, specifically limiting reductions in funding for certain tribally-operated programs, including some CHS programs, and imposing a congressional reporting requirement for proposed reductions in base funding of 5 percent or more. According to IHS officials, no such IHS proposal to reallocate base funding has ever been transmitted to the Congress.", "IHS, an agency in the Department of Health and Human Services (HHS), provides health care to American Indians and Alaska Natives.", "When care at an IHS-funded facility is unavailable, IHS’s CHS program pays for care from non-IHS providers if the patient meets certain requirements and funding is available.", "The Patient Protection and Affordable Care Act requires GAO to study the administration of the CHS program, including a focus on the allocation of funds.", "IHS uses three primary methods to determine the allocation of CHS funds to the 12 IHS geographic area offices: base funding, which accounts for most of the allocation; annual adjustments; and program increases, which are provided to expand the CHS program.", "GAO examined (1) the extent to which IHS’s allocation of CHS funding varied across IHS areas, and (2) what steps IHS has taken to address funding variation within the CHS program.", "GAO analyzed IHS funding data, reviewed agency documents and interviewed IHS and area office officials.", "GAO suggests that Congress consider requiring IHS to develop and use a new method to allocate all CHS program funds to account for variations across areas, notwithstanding any restrictions now in federal law.", "GAO also recommends, among other things, IHS use actual counts of CHS users in methods for allocating CHS funds.", "HHS concurred with two of GAO’s recommendations, but did not concur with the recommendation to use actual counts of CHS users.", "GAO believes that its recommendation would provide a more accurate count of CHS users." ], "parent_pair_index": [ -1, 0, 0, 2, -1, 4, 4, 6, -1, -1, 1, -1, 3, 4, -1, 6, -1, -1, -1, -1, -1, 4, -1, -1, -1, 2 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0, 0, 0, 3, 3, 3, 3 ] }

{ "title": [ "Background", "Overlap Exists in the Design of Community Development Tax Expenditures", "Multiple Tax Expenditures Fund Community Development Activities", "Community Development Tax Expenditures Overlap in Design with Some Limits on Combining Multiple Tax and Spending Programs", "Limited Information and Measures Are Available to Assess the Performance of Community Development Tax Expenditures", "IRS Does Not Collect Basic Information for Some Community Development Tax Expenditures and Has Some Information for Tax Credits and Bonds", "Previous Studies Provide Limited Information on the Effectiveness of Select Tax Expenditures in Promoting Community Development", "Scarcity of Literature for Select Tax Expenditures’ Effectiveness", "While Some Studies Have Found Improvements in EZ Communities, Establishing Clear Program Results Is Difficult", "Limited Data Collection and Methodological Challenges in Establishing Comparison Areas May Inhibit Evaluations of Effectiveness on Disaster Provisions", "Literature on the Rehabilitation Tax Credits Has Often Not Focused on Community Development Aspects", "Conclusions", "Matters for Congressional Consideration", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Identification of Community Development Tax Expenditures and Interactions", "Tax Expenditure Information and Performance Measures", "Previous Studies of Selected Tax Expenditures", "Appendix II: Universe of Community Development Tax Expenditures and Estimates of Revenue Losses and Outlays for Fiscal Year 2010", "Tax expenditures supporting community development and other federal mission areas 6. $5,650", "Number Tax expenditure 9.", "Appendix III: Multiple Tax Expenditures Fund Community Development, Fiscal Year 2010", "Total – tax expenditures primarily promoting community development in distressed areas Tax relief for certain presidentially declared disaster areas", "Total – tax expenditures supporting community development and other federal mission areas Bond tax expenditures that may support community development", "Total – bond tax expenditures that may support community development", "Appendix IV: Community Development Tax Expenditures by Description, and Targeted Geographies and Populations", "Number Tax expenditure Tax expenditures primarily promoting community development 1.", "Number Tax expenditure", "Number Tax expenditure 3.", "Number Tax expenditure 5.", "Tax expenditures supporting community development and other federal mission areas 6.", "Number Tax expenditure 7.", "Number Tax expenditure 10.", "Number Tax expenditure 14.", "Number Tax expenditure Disaster relief and recovery tax expenditures 17. New York Liberty Zone", "Number Tax expenditure 21.", "Appendix V: Community Development Tax Expenditures by Volume Caps, Other Allocation Limits, and Administration", "Number Tax expenditures primarily promoting community development 1.", "Number 2.", "Number 4.", "Tax expenditures supporting community development and other federal mission areas 6.", "Number 7.", "Number 10.", "Number 14.", "Number Disaster relief and recovery tax expenditures 17. New York Liberty Zone", "Number", "Number 21.", "Number", "Appendix VI: Tax Provisions and Special Rules Available for Disaster Relief and Recovery in Specific Presidentially Declared Disaster Areas", "Total provisions by disaster relief packages", "Appendix VII: Potential Duplication, Overlap, and Fragmentation among Economic Development Spending Programs", "Appendix VIII: Comments from the Department of the Treasury", "Appendix IX: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Bibliography", "Related GAO Products" ], "paragraphs": [ "Tax expenditures are preferential provisions in the tax code, such as exemptions and exclusions from taxation, deductions, credits, deferral of tax liability, and preferential tax rates that result in forgone revenue for the federal government. The revenue that the government forgoes is viewed by many analysts as spending channeled through the tax system. However, tax expenditures and their relative contributions toward achieving federal missions and goals are often less visible than spending programs, which are subject to more systematic review. Many tax expenditures—similar to mandatory spending programs—are governed by eligibility rules and formulas that provide benefits to all those who are eligible and wish to participate. Tax expenditures do not compete overtly with other priorities in the annual budget, and spending embedded in the tax code is effectively funded before discretionary spending is considered. Tax expenditures generally are not subject to congressional reauthorization and, therefore, lack the opportunity for regular review of their effectiveness.\nSome We have long recommended greater scrutiny of tax expenditures.tax expenditures may be ineffective at achieving their social or economic purposes, and information about their performance as well as periodic evaluations can help policymakers make more informed decisions about resource allocation and the most effective or least costly methods to deliver federal support. Performance measurement is the ongoing monitoring and reporting that focuses on whether programs have achieved objectives in terms of the types and levels of activities or outcomes of those activities. Program evaluations typically examine a broader range of information on program performance and its context than is feasible to monitor on an ongoing basis. A “program” may be any activity, project, function, or policy that has an identifiable purpose or set of objectives, including tax expenditures. In the context of community development programs, impact evaluations can be a useful tool to assess the net effect of a program by comparing program outcomes with an estimate of what would have happened in the absence of the program. This form of evaluation is employed when external factors are known to influence the program’s outcomes, in order to isolate the program’s contribution to achievement of its objectives. Importantly, challenges in performance measurement and evaluation are not unique to tax expenditures as agencies have encountered difficulties in measuring the performance of spending programs as well.\nPub. L. No. 111-352, 124 Stat. 3866 (2011). GPRAMA amends the Government Performance and Results Act of 1993, Pub. L. No. 103-62, 107 Stat. 285 (1993). choices in setting priorities as government policymakers address the rapidly building fiscal pressures facing our national government.", "", "For fiscal year 2010, we identified 23 tax expenditures that fund community development activities. Appendix II lists each tax expenditure with information on its estimated cost, type, and taxpayer group, as well as enactment and expiration dates. Five tax expenditures primarily promote community development in economically distressed areas, including Indian reservations; these programs cost the federal government approximately $1.5 billion in fiscal year 2010. Nine tax expenditures both support community development and address other federal mission areas, such as rehabilitating historic or environmentally contaminated properties for business use as well as constructing a range of transportation facilities, such as airports and docks, and water and hazardous waste systems. These multipurpose tax expenditures cost the federal government approximately $8.7 billion in fiscal year 2010. Two large state and local bond tax expenditures also may support community development, although community development activities account for only a portion of the total costs of those tax expenditures. Finally, the federal government has periodically offered temporary tax relief following certain disasters, including six packages of tax provisions focused on specific areas as well as one provision available for any presidentially declared disaster area. Figure 1 illustrates the mix of various tax expenditures that support community development.\nThe federal government has five tax expenditures primarily to promote community development in economically distressed areas, such as low- income communities and Indian reservations. As noted below, all but one of these programs have expired.\nThe Empowerment Zones and Renewal Communities (EZ/RC) programs ($730 million in revenue losses in fiscal year 2010) were established to reduce unemployment and generate growth in economically distressed communities that were designated through a competitive process. Initially, the EZ program offered a mix of grants and tax incentives for community and economic development, but later EZ rounds and the RC program offered primarily tax incentives for business development. While eligibility varied slightly by program and round, the 40 EZ- and 40 RC-designated communities were selected largely on the basis of poverty and unemployment rates, population, and other area statistics based on Decennial Census data.tax provisions expired at the end of 2011.\nThe RC tax provisions expired at the end of 2009, and the EZ\nThe New Markets Tax Credit (NMTC) ($720 million in revenue losses in fiscal year 2010) encourages investment in impoverished, low- income communities that traditionally lack access to capital. Whereas the EZ/RC programs target designated communities, the NMTC targets Census tracts where the poverty rate is at least 20 percent or where median family incomes do not exceed 80 percent of such incomes within a state or a metropolitan area. In January 2010, we reported that 39 percent of the Census tracts qualified for the NMTC program and 36 percent of the U.S. population lived in these Census tracts. The NMTC expired at the end of 2011.\nTwo tax expenditures—Tribal Economic Development Bonds and Indian employment credit—target Indian tribal reservations. Indian tribes are among the most economically distressed groups in the United States, and tribal reservations often lack basic infrastructure commonly found in other American communities, such as water and sewer systems as well as telecommunications lines. Created under the American Recovery and Reinvestment Act of 2009 (the Recovery Act), the temporary bond authority ($10 million in revenue losses in fiscal year 2010) provided tribal governments with greater flexibility to use tax-exempt bonds to finance economic development projects. The $2 billion bond authority was to be allocated by February 2010, but Treasury and IRS have extended deadlines to reallocate unused bond authority. The Indian employment credit expired at the end of 2011.\nThe Recovery Act also created temporary Recovery Zone bonds— including Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds allocated among the states and counties and large municipalities within the states based on unemployment losses in 2008. These bond authorities ($60 million in outlays in fiscal year 2010) expired at the end of 2010.\nFour of the five community development tax expenditures targeted to economically distressed areas have a statutory limit, such as a specified number of community designations, volume cap, or allocation amount, as shown in table 1. Although the allocation processes varied, these tax expenditures resemble grants in that an agency—either a federal agency or a state or local government—selects the qualifying communities, community development entities (CDE), or projects to receive the limited allocation available.\nFor the EZ/RC program, communities nominated by their state and local governments had to submit a strategic plan showing how they would meet key EZ program principles or a written “course of action” with commitments to carry out specific legislatively mandated RC activities. In selecting the designated communities, HUD and USDA were required to rank EZ nominees based on the effectiveness of their plans, but HUD was required to designate RCs based in part on poverty, unemployment, and, in urban areas, income statistics. For designated EZs and RCs, state and local governments were responsible for allocating certain tax provisions with specified limits, including the RC Commercial Revitalization Deduction and EZ Facility bonds.\nFor the NMTC program, the annual tax credit allocation limit was $3.5 billion for fiscal years 2010 and 2011. The CDFI Fund awards tax credit allocations to winning CDE applicants based on application scoring by peer review panels. The CDEs, in turn, invest in qualified low-income community investments. As of November 1, 2011, the CDFI Fund had allocated $29.5 billion in NMTC authority available from 2001 to 2010 and announced $3.6 billion in 2011 tax credit allocations on February 23, 2012.\nFor more on the selection process, see GAO, Community Development: Federal Revitalization Programs Are Being Implemented, but Data on the Use of Tax Benefits Are Limited, GAO-04-306 (Washington, D.C.: Mar. 5, 2004).\nFor the Recovery Zone bond programs, the national volume cap was $10 billion for Recovery Zone Economic Development Bonds and $15 billion for Recovery Zone Facility Bonds. State and local governments were responsible for allocating bond issuance authority to specific projects. Tribal Economic Development Bonds had a national volume cap of $2 billion. Tribal governments applied for allocations to issue bonds for specific projects.\nOther tax expenditures available in economically distressed communities are comparable to entitlement programs for which spending is determined by statutory rules for eligibility, benefit formulas, and other parameters rather than by Congress appropriating specific dollar amounts each year.taxes) available to all qualified claimants, regardless of how many taxpayers claim the tax expenditures, how much they claim collectively, or how much federal revenue is reduced by these claims. For example, businesses may claim Indian employment tax credits for employing Indian tribal members and their spouses without limit on the numbers or total Such tax expenditures typically make funds (through reduced amounts of claims. Similarly, businesses located in EZs and RCs may claim the EZ/RC Employment Credit and the Work Opportunity Tax Credit for employing eligible residents within an EZ or RC area without an aggregate limit on such tax credits.\nThe term \"brownfield site\" means real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.\nBoth tax credits cannot be claimed for a single rehabilitation project. Eligible expenditures include costs incurred for rehabilitation and reconstruction of certain older buildings. Rehabilitation includes renovation, restoration, and reconstruction and does not include expansion or new construction. end of 2009, and the expensing of environmental remediation costs expired at the end of 2011.\nTwo tax expenditures fund production of affordable rental housing for low-income households—the Low-Income Housing Tax Credit (LIHTC) and tax-exempt rental housing bonds. Under the LIHTC, a 9 percent tax credit is available for new construction or substantial rehabilitation projects not otherwise subsidized by the federal government, and a 4 percent tax credit is available for the projects receiving other federal subsidies including rental bond financing. Affordable housing projects must satisfy one of two income-targeting requirements: 40 percent or more of the units must be occupied by households whose incomes are 60 percent or less of the area median gross income, or 20 percent or more of the units are occupied by households whose incomes are 50 percent or less of the area median gross income. For fiscal year 2010, two grant programs also helped provide gap financing for LIHTC housing development following disruption of the tax credit market in 2008.\nFederally tax-exempt and tax credit bonds issued by state and local governments also contribute to community development and other federal mission areas by financing infrastructure improvements and other projects. For example, state and local governments may issue private activity bonds to finance airports, docks, and other transportation infrastructure; large business projects tied to the employment of residents in Empowerment Zones; and water or wastewater facilities that enable communities to meet community facilities needs and support development. Qualified Zone Academy Bonds (QZAB)—the authority for which expired at the end of 2011—may be used for renovating school facilities, purchasing equipment, developing course materials, or training personnel at qualified public schools in economically distressed areas including designated EZs or RCs. Whereas private activity bonds are used to support specific private activities and facilities often intended to generate economic development, state and local governments may also issue tax-exempt public-purpose state and local bonds and Build America Bonds (BAB) to help finance public infrastructure and facilities. In 2008, we reported that a majority of state and local bonds issued in 2006 were allocated for education or general purposes; for the latter category, it was not clear what activities or facilities were funded by the bonds.that community development activities comprise only a portion of governmental bonds, we did not sum the revenue losses for the two Given general bond provisions to avoid overstating federal support for community development.\nAs shown in table 2, all of the multipurpose community development tax expenditures involve other entities in addition to IRS in administering the tax benefits. Five multipurpose tax expenditures resemble grants in that state and local governments oversee the allocation process to select qualifying projects to receive the limited allocation available. For the LIHTC for example, state housing finance agencies (HFA) award 9 percent credits to developers for low-income housing projects based on each state’s qualified allocation plan, which generally establishes a state’s funding priorities and selection criteria. Although the federal government does not set specific limits for general-purpose state and local bonds and BABs, private activity bond financing—including for rental housing and water systems—is generally subject to an annual volume cap for each state, and QZABs and bond financing for certain transportation facilities also have statutory allocation limits.\nThe rehabilitation and brownfields tax expenditures resemble entitlement programs in that these tax incentives have no allocation limits and are available to all eligible claimants. In addition to IRS’s role in administering tax law, other federal and state agencies play a role in certifying that the properties are eligible for tax benefits. For the 20 percent rehabilitation tax credit for certified historic structures, the NPS, with the assistance of State Historic Preservation Offices, certifies historic structures, approves rehabilitation applications, and confirms that completed rehabilitation projects meet the Secretary of Interior’s Standards of Rehabilitation. For the brownfields tax expenditures, state environmental agencies certify eligible properties.\nThe federal government has offered various mixes of temporary tax incentives and special rules to stimulate business recovery and provide relief to individuals after certain major disasters. See appendix VI for a detailed list of 45 tax benefits made available for specific disaster areas. Business recovery is a key element of a community’s recovery after a major disaster. To assist New York in recovering from the September 11, 2001, terrorist attacks, Congress passed a 2002 package with seven tax benefits targeted to the Liberty Zone in lower Manhattan. In the aftermath of the 2005 Gulf Coast hurricanes, Congress enacted the Gulf Opportunity Zone Act of 2005 (GO Zone Act) offering 33 tax benefits in part to promote business recovery and provide debt relief for states. A 2007 Kansas disaster relief package provided 13 tax benefits for 24 counties in Kansas affected by storms and tornadoes that began on May 4, 2007. A 2008 midwest disaster relief package targeted 26 tax benefits for selected counties in 10 states affected by tornadoes, severe storms, and flooding from May 20 through July 31, 2008. Also in 2008, Congress enacted a package offering eight tax benefits available to any individual or business located in any presidentially declared disaster area during calendar years 2008 and 2009.\nThe preponderance of the disaster tax incentives offered in the six legislative packages we examined were modifications of existing tax expenditures, including increased allocations for the NMTC, LIHTC, rehabilitation tax credits, and tax-exempt bond financing. Several tax packages have offered accelerated first-year depreciation allowing businesses to more quickly deduct costs of qualified property, as well as partial expensing for qualified disaster cleanup and environmental remediation costs. Other tax incentives available for individuals in disaster areas included increased tax credits for higher education expenses and relief from the additional 10 percent tax on early withdrawals of retirement funds. An eligible disaster area may encompass communities that were economically distressed before the disaster as well as other communities, and taxpayers in the qualified area may be eligible for some tax incentives even if they did not necessarily sustain losses in the disaster. For those disaster tax incentives available to individuals and businesses as long as they meet specified federal requirements, the full cost to the federal government depends on how many taxpayers claim the provisions on their tax returns.", "For community development, tax expenditures are not necessarily an either/or alternative, and they may be combined to support certain community development activities. The design of each community development tax expenditure we reviewed appears to overlap with that of at least one other tax expenditure, as the following examples illustrate.\nFive tax expenditures targeted similar geography—economically distressed areas including tribal areas—although the specific areas served varied. Within the EZ- and RC-designated communities, a variety of tax incentives were available to help reduce unemployment and stimulate business activity.\nSeven bond tax expenditures share a common goal to finance infrastructure development.necessarily duplicative in that they allow flexibility in tax-exempt bond financing for similar projects with different ownership characteristics. For example, water and sewer facilities can be financed through public-purpose governmental bonds if a governmental entity is the owner and operator or through private activity bonds if the owner and operator is a private business.\nThe various bond authorities are not\nMultiple tax expenditures—including the NMTC, several EZ/RC incentives, as well as the rehabilitation and brownfields tax expenditures—can be used to fund commercial buildings. Within this broad area of overlap, the tax expenditures are not necessarily duplicative in that some target certain types of buildings. The various tax expenditures that can be used to fund commercial buildings have geographic or other targets that sometimes coincide and sometimes do not. Therefore, for example, the 20 percent rehabilitation tax credit targets certified historic structures and the 10 percent rehabilitation credit is available for other older structures, but these eligible structures may or may not fall within the low-income communities eligible for NMTC assistance.\nVarious tax benefits made available for certain disaster areas were largely modifications of existing tax expenditures.\nThe community development tax expenditures we reviewed also may potentially overlap with federal spending programs. As discussed above, our May 2011 report identified overlap among 80 economic development spending programs administered by four agencies—Commerce, HUD, SBA, and USDA.economic development spending programs that are similar to the areas of community development tax expenditure overlap discussed above.\nAppendix VII discusses areas of overlap among the Disaster tax aid may also potentially overlap with federal financial assistance offered through disaster assistance grants and loans.\nAreas of overlap with multiple tax expenditures funding the same community development project may not represent unnecessary duplication, in part, because some tax expenditures are designed to be used in combination. As an example, the 4 percent LIHTC is designed to be used in combination with rental housing bonds. In another example, the 20 percent historic preservation tax credit may be used in combination with other community development tax expenditures, including the NMTC and LIHTC. Under the Housing and Economic Recovery Act of 2008, state HFAs are allowed to consider historic preservation as a selection factor in their qualified allocation plans to promote redeveloping historic structures as affordable housing.\nAs shown in table 3, federal tax laws and regulations impose limits on how community development tax expenditures can be combined with each other and spending programs to fund the same individual or project. For example, employers cannot double dip by claiming two employment tax credits for the same wages paid to an individual. Whereas business investors may claim accelerated depreciation for LIHTC and NMTC projects, businesses generally may not claim accelerated depreciation for For the rehabilitation private facilities financed with tax-preferred bonds.tax credits and brownfield tax incentives, taxpayers may not claim costs funded by federal or state grants. Also, rehabilitation costs claimed for the 20 percent credit cannot be counted towards the adjusted basis of a property for the purposes of calculating the amount of other federal tax credits claimed for the same project; as a result, the effective tax savings on using the 20 percent credit with other federal tax credits are less than the sum of tax savings provided by each of the credits and deductions if they could be used together without this restriction. The information on tax law and regulatory limits listed in table 3 is not exhaustive; additional limits may apply in other federal laws and regulations.\nAn area of potential overlap also exists among the tax expenditures subsidizing community development activities and CRA regulatory requirements for depository institutions in helping to meet the credit needs of the communities in which they operate. Banks earn positive consideration toward their CRA regulatory ratings by investing in projects also receiving certain tax benefits. In 2007, we reported that investors used NMTC and LIHTC to meet their CRA requirements. At that time, over 40 percent of NMTC investors reported that they used the tax credit to remain compliant with CRA. NMTC investors using the tax credit to meet CRA requirements also viewed it as very or somewhat important in their decision to make the investment. Nearly half of NMTC investors we surveyed in 2007 reported that they made other investments eligible for LIHTC, and nearly three-quarters of those investors using both tax credits were also required to comply with the CRA.\nFederal community development financing is fragmented with multiple federal agencies administering related spending programs as well as with multiple federal, state, and local agencies helping administer certain tax expenditures. As we have previously reported, mission fragmentation and program overlap may sometimes be necessary when the resources and expertise of more than one agency are required to address a For example, IRS, NPS, and state historic complex public need.preservation offices are involved in administering the 20 percent historic preservation tax credit for rehabilitating historic structures. NPS oversees compliance with technical standards for historic preservation, and IRS oversees financial aspects of the tax credit. NPS and IRS have partnered with IRS providing guidance including frequently asked questions about the tax credit on the NPS website. At the same time, fragmentation can sometimes result in administrative burdens, duplication of efforts, and inefficient use of resources. Applicants may need to apply for tax expenditures and spending programs at multiple agencies to address the needs of a distressed area or finance a specific project. For example, owners and developers seeking to restore an historic structure for use as affordable rental housing would need to apply separately to NPS for the 20 percent historic rehabilitation credit as well as to the state HFA for a LIHTC allocation.", "Achieving results for the nation increasingly requires that federal agencies work together to identify ways to deliver results more efficiently and in a way that is consistent with limited budgetary resources. Agencies and programs working collaboratively can often achieve more public value than when they work in isolation. To address the potential for overlap and fragmentation among federal programs, we have previously identified collaborative practices agencies should consider implementing in order to maximize the performance and results of federal programs that share common outcomes. These practices include defining common outcomes; agreeing on roles and responsibilities for collaborative efforts; establishing compatible policies and procedures; and developing mechanisms to monitor, assess, and report on performance results.\nGAO-11-318SP. the extent possible, data sharing is a way to reduce collection costs and paperwork burdens imposed on the public.", "In general, IRS only collects information necessary for tax administration or for other purposes required by law. As a result, IRS does not collect basic information about the numbers of taxpayers using some community development tax expenditures. We have consistently reported that IRS does not have data on the use of various expensing and special depreciation incentives available to encourage investment in EZ/RC communities, tribal reservations, and disaster areas. For tax credits, IRS has data on the numbers of taxpayers and aggregate amounts claimed, but data often do not tie use of the tax credits to specific communities. Location information is critical to identifying the community where an incentive is used and determining the effect of the tax benefit on local economic development. For bonds, IRS collects data on the amount of bonds issued and broad purpose categories for governmental bonds and allowable uses for qualified private activity bonds. As we reported in 2008, while the information collected is useful for presenting summary information, it provides only a broad picture of the facilities and activities for which the bonds are used.sufficient for IRS to administer the tax code, it provides little information for use in measuring performance. As a result, information often has not been available to help Congress determine the effectiveness of some tax expenditures or even identify the numbers of taxpayers using some provisions. Table 4 summarizes the types of information, including limitations and potential gaps, IRS collects for different types of community development tax expenditures.", "", "Our systematic review of literature for select community development tax expenditures generally found few studies that attempted to assess the effectiveness of programs in promoting certain measures of community development, such as reducing poverty or unemployment rates. We reviewed government studies and academic literature on the following community development tax expenditures: the NMTC, EZ tax program, disaster relief tax provisions, and the rehabilitation tax credits. In reviewing this literature, we focused on studies that attempted to analyze the impact of the tax expenditures on community development through empirical methods. We also summarized our prior observations and recommendations on options to improve tax expenditure design and considerations in authorizing similar community development tax programs. For the NMTC, we did not identify any empirical studies issued since our last report in January 2010. For the EZ program, we identified several studies published since our most recent report in March 2010 that attempted to measure the effect of the program on some measure of community development, as described below. We identified one study on the rehabilitation tax credits that attempted to measure one aspect of community development. We did not identify any empirical studies on disaster tax relief provisions. The scarcity of literature on some tax expenditures may be due to the fact that establishing that a community development tax expenditure or spending program has causal impact on economic growth in a specific community can be challenging. Table 6 below summarizes key methodological issues in attempting to measure effectiveness of the tax expenditures we selected.\nAs we reported in 2010, making definitive assessments about the extent to which benefits flow to targeted communities as a direct result of NMTC investments presented challenges. For example, the small size of the NMTC projects relative to the total economic activity within an area made it difficult to detect the separate effect of a particular project. Many of the eligible communities may already have significant business activities that could mask NMTC impacts. Limitations associated with available data also made it difficult to determine whether benefits generated in a low- income community outside the scope of a particular project are the direct result of the NMTC program. As discussed above, CDFI Fund is collecting additional data on the use of the NMTC that may provide further insights into its use and impact on communities. For example, CDFI Fund is now collecting data on the amount of equity that CDEs estimate will be left in the businesses at the end of the 7-year period in which tax credits can be claimed. Collecting this information may provide CDFI Fund with additional information on the credit’s cost-effectiveness.\nOur 2007 NMTC report used statistical methods to attempt to measure the credit’s effectiveness, but determined that further analysis is needed to determine whether the economic costs of shifting investment are justified. Our analysis did find that the credit may be increasing investment in low-income communities, although this finding was not, in and of itself, sufficient to determine that the credit was effective. Increased investment in low-income communities can occur when NMTC investors increase their total funds available for investment or when they shift funds from other uses. A complete evaluation of the program’s effectiveness would require determining the costs of the program, including any behavioral changes by taxpayers that may be introduced by shifted investment funds. Neither our statistical analysis nor the results of a survey we administered allowed us to determine definitively whether shifted investment funds came from higher-income communities or from other low-income community investments.\nThe related entities test requires that the CDE have no more than a 50 percent ownership stake in a qualified low-income community business. program which expired at the end of 2011.should require Treasury’s CDFI Fund to gather data to assess whether and to what extent the grant program increases the amount of federal subsidy provided to low-income community businesses compared to the NMTC; how costs for administering the program incurred by the CDFI Fund; CDEs, and investors would change; and whether the grant program otherwise affects the success of efforts to assist low-income communities.\nIf it does so, Congress We did not identify any empirical studies on the effectiveness of the NMTC since our last report, but CDFI Fund has contracted with the Urban Institute for an evaluation of the NMTC that may lead to additional insights into the program’s effectiveness. In 2010, the Urban Institute published a literature review to inform a forthcoming evaluation, including challenges inherent in evaluating economic and community development CDFI Fund reports that the Urban Institute is programs in general. primarily relying on surveys to CDEs and businesses to conduct the evaluation. The Urban Institute conducted a preliminary briefing on the study's results with CDFI Fund in January 2012. After submitting a draft report to CDFI Fund, the Urban Institute will issue a final report in the spring 2012.\nMartin D. Abravanel, Nancy M. Pindus, Brett Theodus, Evaluating Community and Economic Development Programs: A Literature Review to Inform Evaluation of the New Markets Tax Credit Program, The Urban Institute, September 2010.", "Our prior work has found improvements in certain measures of community development in EZ communities, but data and methodological challenges make it difficult to establish causal links. Our 2006 report found that Round 1 EZs that received a combination of grant and tax benefits did show improvements in poverty and unemployment, but we did not find a definitive connection between these changes and the EZ program. Our 2010 report on the EZ/RC program reviewed seven academic studies of Round 1 projects and found that the evaluations used different methods and reported varying results with regard to poverty and unemployment. For example, one study concluded that the program reduces poverty and unemployment, while another study found that the program did not improve those measures of community development. As with the NMTC, our prior EZ/RC work has demonstrated challenges in measuring the effects of the program. For example, data limitations make it difficult to thoroughly evaluate the program’s effectiveness in that use of the EZ/RC Employment Credit cannot be tied to specific communities. Demonstrating what would have happened in the absence of the credit is difficult. External factors, such as national and local economic trends, can make it difficult to isolate the effects of the EZ/RC tax incentives.\nSince our 2010 EZ/RC report, we noted that more recent studies comparing employment, housing values, and poverty rates in EZ communities with similarly economically distressed areas have yielded mixed results. Two studies have found lower unemployment in the designated areas where the provisions have been used relative to similar non-EZ areas. Specifically, one study reviewed federal and state enterprise zones and found positive impacts on local labor markets in terms of the unemployment rate and poverty rate. In addition, the researchers found positive, but statistically insignificant, spillover effects to neighboring Census tracts. The second study focused on Round 1 of the EZ program and found that the EZ designation substantially increased employment in zone neighborhoods, particularly for zone residents. Importantly, the researchers examined Round 1 of the program that relied on a mix of tax benefits and grant funding. In addition, another study found that EZ program results seem to vary among different types of businesses within the designated zones. For example, researchers found that EZ tax incentives increase the share of retail and service sector establishments but decreases the share of transportation, finance, and real estate industries. They noted that the effectiveness of the EZ wage credit may be affected by the types of industries that are located in the designated area. However, while these studies have found that certain economic outcomes are associated with an area being eligible for EZ incentives, due to data limitations the studies cannot estimate the extent to which these outcomes vary with the amount of incentives actually used in an area.\nBoth JCT and the Congressional Research Service (CRS) conducted literature reviews and reported modest effects and methodological limitations in making any definite assessments on the effectiveness of EZs. JCT reported that studies generally found modest effects overall with relatively high costs. In addition, it is difficult to determine whether the spending or tax incentives were responsible for any increases in economic activity. CRS’s review of academic literature found modest, if any, effects of the program and called into the question their cost- effectiveness. According to CRS, one persistent issue in evaluating the potential impact of EZs is the inherent difficulty of identifying the effect of the programs apart from overall economic conditions.\nWith the expiration of the RCs at the end of 2009 and EZs at the end of 2011, we have made observations in prior work that Congress can consider if these or similar programs are authorized in the future. Without adequate data on the use of program grant funds or tax benefits, neither the responsible federal agencies nor we could determine whether the EZ/EC funds had been spent effectively or that the tax benefits had in fact been used as intended. If Congress authorizes similar programs that rely heavily on tax benefits in the future, it would be prudent for federal agencies responsible for administering the programs to collect information necessary for determining whether the tax benefits are effective in achieving program goals. In 2010, the U.S. Census Bureau began releasing more frequent poverty and employment updates at the Census tract level than it has traditionally provided. This information could be a useful tool in determining the effects of such programs on poverty and employment in designated Census tracts.", "Though we identified literature that discussed use of disaster tax provisions and their design, none of the articles attempted to measure empirically the impact the incentives had on promoting community development. A potential challenge in designing tax relief for disaster areas is that those communities within the zones most affected by the disaster may be slower to respond to the incentives than other areas within the zone. Our prior work on the GO Zone reported that bonds were awarded on a first-come, first-served basis that led to awarding bond allocation to projects in less damaged areas in the zone because businesses in these areas were ready to apply for and issue bonds before businesses in more damaged areas could make use of the incentive.\nThus, assessing the impact of disaster relief on an entire zone may not reflect how the provisions affected specific areas within the zone. Another key challenge in evaluating disaster relief tax expenditures is the difficulty in establishing a comparison area where a “comparable” disaster has taken place but government programs or tax provisions were not available. Moreover, evaluations of disaster relief tax expenditures may be difficult because IRS collects limited information on the use of temporary disaster aid, as discussed above.", "While we identified numerous articles focused on historic restoration funded with the federal rehabilitation tax credits and the potential benefits of historic preservation in adapting currently vacant or underused property, we identified only one study that attempted to empirically measure the impact of the tax credit on community development. The study analyzed rehabilitation investment in the Boston office building market between 1978 and 1991 and found that the percentage of investment spending that would have occurred without the tax credit varied over time from about 60 to 90 percent. Another study we reviewed used economic modeling to quantify some community development outputs associated with the 20 percent rehabilitation tax credit, such as estimated jobs and projected income data.the study did not assess whether a rehabilitation project would have occurred in the absence of the credit nor did it compare community development in a project community with development in similar communities. As we previously reported, a complete evaluation of a credit’s effectiveness also requires determining the costs of the program and an assessment of the program’s economic and social benefits.\nA challenge in attempting to evaluate how the rehabilitation tax credits affect measures of community development is that the credits have a dual purpose and are not solely intended to promote community development. Evaluators may have difficulty reviewing the program’s effectiveness because they lack specific data on the geographic locations of the projects. In addition, the small size of the rehabilitation tax credit projects relative to the total activity in the area’s economy makes it difficult to isolate the economic effects of the credit.", "The annual federal commitment to community development is substantial, with revenue losses from community development-related tax expenditures alone totaling many billions of dollars. However, all too often even basic information is not available about who claims tax benefits from community development tax expenditures and which communities benefit from the activities supported by the tax expenditures. Further, relatively few evaluations of the effectiveness of community development tax expenditures have been done and when they have been done, results have often been mixed about their effects. These issues are familiar and long-standing for tax expenditures generally. We have made recommendations to OMB in 1994 and 2005 to move the Executive Branch forward in obtaining and using information to evaluate tax expenditures’ performance, which can help in comparing their performance to that of related federal efforts.\nGPRAMA offers a new opportunity to make progress on these issues. For those limited areas where OMB sets long-term, outcome-oriented, crosscutting priority goals for the federal government, a more coordinated and focused effort should ensue to identify, collect, and use the information needed to assess how well the government is achieving the goals and how those efforts can be improved. We look forward to progress in achieving GPRAMA’s vision for a more robust basis for judging how well the government is achieving its priority goals. The Administration’s interim crosscutting policy goals include some that identify tax expenditures among the contributing programs and activities. OMB’s forthcoming guidance should be helpful in further drawing tax expenditures into the GPRAMA crosscutting performance framework.\nClearly, community development is but one of many areas where OMB could choose to set priority goals, and the interim goals to date encompass 1 of the 23 tax expenditures we reviewed. In this regard, Congress has a continuing opportunity to express its priorities about the goals that should be selected, including whether community development should be among the next cycle of goals. Whether or not OMB selects community development as a priority goal area, Congress also has the opportunity to urge more evaluation and focus Executive Branch efforts on addressing community development performance issues through oversight activities, such as hearings and formal and informal meetings with agency officials. Given the overlap and fragmentation across community development tax and spending programs, coordinated congressional efforts, such as joint hearings, may facilitate crosscutting reviews and ensure Executive Branch efforts are mutually reinforcing.\nWhile GPRAMA provides a powerful opportunity to review how tax expenditures contribute to crosscutting goals, progress is likely to be incremental and require sustained focus. Evaluating the impact of community development efforts is inherently difficult and definitive performance conclusions often cannot be drawn. Data limitations are not easy or inexpensive to overcome, and resources to evaluate programs must compete with other priorities even as the federal government copes with significant fiscal challenges. Thus, judicious choices will need to be made as efforts to improve tax expenditure performance information available to policymakers continue.", "Congress may wish to use GPRAMA’s consultation process to provide guidance on whether community development should be among OMB’s long-term crosscutting priority goals as well as stress the need for evaluations whether or not community development is on the crosscutting priority list. Congress may also wish to focus attention on addressing community development tax expenditure performance issues through its oversight activities.", "We provided a draft of this report for review and comment to the Director of OMB, the Secretary of the Treasury, the Commissioner of Internal Revenue, as well as representatives of three federal agencies helping administer certain community development tax expenditures—the Director of the CDFI Fund, the Secretary of Housing and Urban Development (HUD), and the Secretary of the Interior (Interior). The Deputy General Counsel of OMB, the Director of HUD’s Office of Community Renewal, the GAO Audit Liaison of Interior, and the Director of the CDFI Fund provided general comments. The first three provided email comments and the last provided a comment letter which is reprinted in appendix VIII. Only the HUD comments addressed our matters for congressional consideration directly, stating that the report provided minimal justification for them. Although the Secretary of the Treasury and Commissioner of Internal Revenue did not provide written comments, Treasury’s Office of Tax Analysis and IRS’s Office of Legislative Affairs provided technical changes, which we incorporated where appropriate.\nWhile not commenting on our matters for congressional consideration, OMB staff reiterated the view that the Administration has made significant progress in addressing tax expenditures. OMB staff cited assorted Fiscal Year 2013 budget proposals which it estimated would save billions of dollars by eliminating certain spending through the tax code and modifying other tax provisions. Some of the budget proposals relate to tax expenditures covered in this report, and we updated the text to reflect the President’s latest proposals. We also updated our report to reflect the release of new interim crosscutting priority goals and that the Administration has identified some tax expenditures that contribute to these goals, as required under GPRAMA. OMB staff said that this is a significant step forward and will be important for broader GPRAMA implementation over 2012 and 2013. We agree that this inclusion of tax expenditures along with related other programs in the GPRAMA goals is an important step toward providing policymakers with the breadth of information needed to understand the full federal effort to accomplish national objectives. Finally, OMB staff expressed concern that we were suggesting that tax expenditures be addressed through a “one size fits all” framework. We do not believe this report or earlier products suggest that assessing the performance of tax expenditures be done in only one way. We have emphasized the need for greater scrutiny of tax expenditures and more transparency over how well they work and how they compare to other related federal programs.\nIn its comments, HUD described the report as substantive and comprehensive in addressing community development tax incentives with accurate information about the EZ/RC tax expenditures and HUD’s role in their administration. However, HUD expressed the view that we had minimal justification for our matters for Congress to consider using the GPRAMA consultation process to express congressional priorities related to community development and to focus attention on community development tax expenditures’ performance through its oversight activities. We disagree. The basic issues we found in this review—the all too often lack of even basic information about tax expenditures’ use and the relative paucity of evaluations of their performance—are among the key issues that could be mitigated through GPRAMA crosscutting goals and Congress’s oversight activities. HUD also said we had skirted the issue of identifying programs with the greatest probability for elimination due to duplication, fragmentation, and overlap. This was not among our review’s objectives and we believe the type of information we present can assist Congress in understanding what information is available to support such decisions. As we have previously reported, agencies engaging Congress in identifying which issues to address and what to measure are critical, and GPRAMA significantly enhances requirements on the consultation process. With the release of the interim crosscutting goals, we believe that Congress has a continuing opportunity to express its priorities regarding community development ahead of the next goal cycle due in February 2014. HUD also noted the expiration of some tax expenditures and sought clarification about their inclusion in the report. Our report includes recently expired tax expenditures and where applicable discusses our prior findings and suggestions for Congress to consider if it wishes to extend the tax expenditures that have expired or create similar new ones. HUD also provided technical and editorial comments which we incorporated as appropriate.\nIn its comments, Interior disagreed with several findings. Interior characterized our report as expressing the view that unwarranted overlap, fragmentation, or duplication existed involving the 20 percent historic rehabilitation credit that Interior’s NPS helps administer. Interior agreed that the tax credit—which has a primary purpose to preserve and rehabilitate historic buildings—has a two-fold mission to also promote community development by revitalizing historic districts and neighborhoods. However, Interior disagreed that the historic rehabilitation tax credit overlaps or duplicates with other community development tax expenditures. Interior stated that only the tax credit has a specific purpose to preserve historic buildings, that the tax credit is not targeted to certain census tracts or low-income areas, and that Congress generally did not exclude historic tax credit users from also using other federal programs. In addition, Interior said that the administration of the historic rehabilitation tax credit was not fragmented, but instead was an example of joint administration that effectively draws upon the best resources of two federal agencies in a coordinated way to implement the law. Finally, Interior disagreed with our finding that limited information is available about the effectiveness of the 20 percent historic rehabilitation tax credit.\nOur report does not characterize any overlap, fragmentation, or duplication as “unwarranted.” Rather, we provide a factual description based on standard definitions used in many GAO reports of the relationships between the various tax expenditures that have at least a partial purpose of supporting community development. We make the same point that Interior raises as well—that Congress was aware of and often designed rules to govern the interrelationships among these tax expenditures. Accordingly, our report says these interrelationships do not necessarily represent unnecessary duplication. Based on Interior’s comments, however, we further clarified our text to note that one of the differences between the historic rehabilitation credit and the other community development tax expenditures is that the rehabilitation credit targets certain older structures. Regarding Interior’s comment about fragmentation in the credit’s administration, our report describes the roles of IRS and NPS and says fragmentation may sometimes be necessary when the resources and expertise of more than one agency are required, such as in the case of NPS overseeing technical standards for historic preservation. As we reported, however, fragmentation can result in administrative burdens when an applicant needs to apply at multiple agencies to finance a specific project, such as restoring a historic building as low-income housing. Finally, regarding Interior’s comments on the effectiveness of the rehabilitation tax credit, we continue to note that little is known about the effectiveness of the credit as a community development program given that we identified only one empirical analysis of the effect of the tax credit on community development. Interior pointed specifically to reports based on an economic model NPS helped fund. However, as our report states, the modeling reports did not assess what would have happened in the absence of the historic rehabilitation tax credits or compare development in tax credit project communities to similar communities.\nIn its comment letter (reprinted in app. VIII), the CDFI Fund said that it appreciated GAO’s ongoing efforts to improve and strengthen performance measurement and evaluation of community and economic development programs. The CDFI Fund said that it has committed resources to systematically evaluate the impacts of the NMTC program and proposed to develop tools that would have provided standard benchmarking and estimation techniques for measuring outcomes and coordinating reporting for projects with multiple sources of funding. Our literature review for this report drew on a study contracted by the CDFI Fund that provided an overview of the inherent challenges in evaluating community development programs. The literature review will inform a forthcoming independent evaluation of the NMTC to be issued later this spring. The CDFI Fund also provided technical comments which we incorporated as appropriate.\nThe CDFI Fund said that it continued to have strong reservations with our 2010 option for Congress to consider offering grants in lieu of NMTC tax credits if it extends the NMTC program. As stated in our 2010 report and reiterated as a cost saving option in our 2011 duplication report, our analysis suggests that converting the NMTC to a grant program would increase the amount of the equity investment that could be placed in low- income businesses and make the federal subsidy more cost-effective.\nOur 2010 report addressed both concerns that the CDFI Fund reiterated in its comments on this report.\nAs arranged with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days after the date of this report. At that time, we will send copies of this report to the Director of the Office of Management and Budget, the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have questions about this report, please contact me at (202) 512-9110 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other key contributors to this report are listed in appendix IX.", "Our objectives were to (1) identify tax expenditures that promote community development, and areas of potential overlap and interactions among them; (2) assess data and performance measures available and used to assess performance for community development tax expenditures; and (3) determine what previous studies have found about the effectiveness of selected tax expenditures in promoting community development.", "While both the U.S. Department of the Treasury (Treasury) and the Joint Committee on Taxation (JCT) annually compile a list of tax expenditures and estimates of their cost, the Treasury and JCT lists differ somewhat in terms of what is listed as a tax expenditure and how many specific provisions may be combined in a listed tax expenditure. Our count of community development tax expenditures is based on the Treasury and JCT published tax expenditure lists, detailed below. Where a single tax expenditure listing encompasses more than one tax code provision, we separately describe those provisions to provide a more detailed perspective of the mix of tax assistance available for community development.\nFederal agencies do not have a standard definition of what constitutes community or economic development. To identify community development tax expenditures, we developed a list of community development activities based on various federal sources and compared these activities to the authorized uses of tax expenditures. As a starting point for developing the list of activities, we used the definition of the community and regional development budget function and its three subfunctions—urban community development, rural and regional development, and disaster relief and insurance.JCT list tax expenditures by budget function.\nWe also used descriptions of spending programs under the community and regional development budget function as detailed in the 2010 Catalog of Federal Domestic Assistance (CFDA). We further reviewed descriptions of allowable uses under the Community Development Block Grant (CDBG)—the largest single spending program in the budget function. Finally, we reviewed the community development definition for the Community Reinvestment Act (CRA) and identified certain tax expenditures that banks can use in meeting CRA community investment tests. We included tax expenditures targeted to certain geographies, such as low-income areas or designated disaster areas, or specific populations, such as Native Americans. Table 7 summarizes the definition of community development for purposes of this report.\nWe compiled a preliminary list of tax expenditures for fiscal year 2010 listed under community and regional development budget function by Treasury and JCT. Our universe included expired tax expenditures listed by either Treasury or JCT which had estimated revenue losses or outlays in fiscal year 2010. While the tax expenditure lists published by Treasury and JCT are generally similar, specific tax expenditures reported by each under the community and regional development budget function differed, as shown in table 8. Four tax expenditures were listed by both under the community and regional development budget function. Another four tax expenditures were reported by both Treasury and JCT but appeared under community and regional development function on one list and under a different budget function on the other list. Fourteen tax expenditures were reported under the community and regional development budget function by either Treasury or JCT, including eight tax expenditures supporting disaster relief and recovery.\nWhereas JCT lists six disaster tax packages as tax expenditures, Treasury officials told us that disaster-related revenue losses were included in Treasury estimates for specific tax expenditures made available in disaster areas. For example, revenue losses from additional allocations of the Low-Income Housing Tax Credit for the GO Zone were incorporated into Treasury’s Low-Income Housing Tax Credit estimate. To avoid double-counting, we dropped two tax expenditures—credit to holders of Gulf and Midwest tax credit bonds, and employee retention credit for employers in certain federal disaster areas—listed separately by Treasury that were included in the JCT disaster package estimates. We used JCT and Internal Revenue Service (IRS) documents to identify specific tax code provisions within the disaster relief tax expenditures on JCT’s list. Appendix VI lists 45 tax provisions and special rules in the six disaster relief tax expenditures included in JCT’s list. We did not sum disaster revenue loss estimates to avoid double counting amounts already included in estimates for specific tax expenditures.\nUsing our list of community development activities as criteria, we also identified tax expenditures reported by Treasury under other budget functions that appeared to be at least partially intended to support activities we had identified as community development activities. Table 9 includes six tax expenditures reported by Treasury under other budget functions and our rationale for inclusion.\nTable 10 shows how we categorized the community development tax expenditures as primarily promoting community development versus supporting community development and other federal mission areas.\nWe shared the preliminary universe of community development tax expenditures with Treasury, IRS, Office of Management and Budget (OMB) and CRS. We also shared the preliminary universe with federal agencies helping administer specific community development tax expenditures, including the Community Development Financial Institutions (CDFI) Fund which administers the New Markets Tax Credit; the Department of Housing and Urban Development (HUD) which helps administer the Empowerment Zones and Renewal Communities programs; and the National Park Service (NPS) which helps administer rehabilitation tax credits. We asked these agencies to review the preliminary universe and confirm that the tax expenditures could be used to promote community development, delete tax expenditures that were listed incorrectly or are duplicative, or add tax programs that we had omitted.\nBased on feedback from federal agencies, we refined the universe of community development tax expenditures as appropriate. We excluded six tax expenditures reported under the community and regional budget function, as shown in table 11. As discussed above, we excluded two disaster tax expenditures listed by Treasury to avoid double counting disaster aid packages listed by JCT. Similarly, we excluded a District of Columbia tax expenditure listed by JCT to avoid duplication with Treasury’s estimate for Empowerment Zones and Renewal Communities. We excluded three tax expenditures listed by Treasury or JCT under the community and regional development budget function that were not specifically linked to community development activities. Our final universe does not include various energy tax expenditures that may be claimed for bank investments used to meet CRA regulatory requirements nor tax expenditures for deductible charitable contributions. Although certain charitable contributions may fund organizations or activities that contribute to community development, we excluded charitable contribution tax deductions from the universe based on external feedback that it is not feasible to isolate the community development portion of the large charitable contributions tax expenditures or link the charitable aid to specific communities.\nSee appendix II for our final universe of 23 community development tax expenditures. This count reflects the number of tax expenditures as reported on the Treasury or JCT lists. Whereas appendix II lists the Empowerment Zones and Renewal Communities (EZ/RC) as a single tax expenditure consistent with Treasury’s list, appendix IV details the various tax incentives available in EZs and RCs. We used Treasury revenue loss estimates for each tax expenditure except in cases where only JCT reported a tax expenditure. Where appropriate, we summed revenue loss estimates to approximate the total federal revenue forgone through tax expenditures that support community development. Certain tax expenditures, including tax credit and direct payment bonds, also have associated outlays, and we included those outlays in presenting total costs. While sufficiently reliable as a gauge of general magnitude, the sum of the individual tax expenditure estimates does not take into account interactions between individual provisions.\nTo identify areas of potential overlap among the tax expenditures, we used the definitions from our March 2011 report on duplication in government programs:\nOverlap occurs when multiple agencies or programs have similar goals, similar activities or strategies to achieve them, or similar target beneficiaries;\nFragmentation refers to circumstances where multiple agencies or offices are involved in serving the same broad area of national need; and\nDuplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries.\nUsing information from prior GAO products, publications from CRS, IRS, JCT, Office of the Comptroller of Currency (OCC), and OMB; as well as documentation from other federal agencies helping administer specific tax expenditures, we compiled publicly available information about each tax expenditure’s design and implementation, including descriptions; specific geographies or populations targeted; volume caps and other allocation limits; and roles of entities within and outside the federal government in administration. Based on the information we collected and the clarifications that the agencies provided, we determined that this descriptive information was sufficiently reliable for the purposes of this engagement to identify potential duplication, overlap, and fragmentation. We reviewed the Internal Revenue Code and IRS regulations to identify allowable interactions or limits on using community development tax expenditures together. Where specified in tax law and regulations, we also identified interactions and limits on using tax expenditures with other federal spending programs. The review of allowable interactions and limits was not exhaustive—we did not search documentation from all federal agencies carrying out community development programs, and regulations for related spending programs may also document interactions between those programs and the community development tax expenditures.", "To determine what data and performance measures are available and used to assess community development tax expenditures, we identified the data elements and types of information that IRS and federal agencies collect. We also reviewed tax forms, instructions, and other guidance and interviewed IRS officials to determine the types of information that IRS collects on how the tax expenditures in our universe are used. For certain community development tax expenditures in our universe where other federal agencies help with administration—the New Markets Tax Credit, Empowerment Zone/Renewal Community tax incentives, and the rehabilitation tax credits—we reviewed prior GAO reports, and interviewed and collected information from the CDFI Fund, HUD, and NPS to identify their roles in helping administer the tax expenditures and any measures the agencies use to review tax expenditure performance. We also interviewed officials and reviewed documentation from OMB, Treasury, IRS, HUD, and NPS about efforts to assess performance for community development tax expenditures and any crosscutting reviews of related tax and spending programs. For the purposes of this report, we focused on information collected by federal agencies. State and local entities also collect information on some of the tax expenditures included in our universe. For example, housing finance agencies collect data on low-income housing tax credit projects. Similarly, state and local bond financing authorities may have additional data on specific projects and activities funded with federally subsidized bond financing.", "To determine what previous studies have found about effectiveness for selected tax expenditures, we conducted a literature review for selected tax expenditures—the Empowerment Zone/Renewal Community tax programs, the New Markets Tax Credit program, and tax expenditures available for certain disaster areas. We selected these tax expenditures because they account for most of the 2010 revenue loss for the tax expenditures that primarily promote community development. The EZ tax incentives and the NMTC expired after December 31, 2011. For the EZ/RC and NMTC programs, we focused on literature published since our 2010 reports on these programs. We also selected the rehabilitation tax credits; these multipurpose tax expenditures support community development as well another federal mission area, and they can be used in combination with other community development tax expenditures. We searched databases, such as Proquest, Google Scholar, and Econlit, for studies through May 2011. To target our literature review on effectiveness, we identified studies that attempted to measure the impact of the incentives on certain measures of community development, such as the poverty and unemployment rate. We reviewed studies that met the following criteria: studies that include original data analysis, studies based on empirical or peer-reviewed research, and studies not derived from or sponsored by associations representing industry groups and other organizations that may benefit from adjustments to laws and regulations concerning community development tax expenditures.\nUsing these criteria, we identified and reviewed eight studies on the EZ/RC programs published since our most recent report on the topic. For NMTC, although we did not identify any new studies meeting our criteria, we included a literature review study contracted by CDFI Fund that was intended to provide the groundwork for a forthcoming evaluation and provides an overview of inherent challenges in evaluating community development programs. Additionally, we summarized our prior findings about the selected tax expenditures, and these findings are not generalizable to the universe of community development tax expenditures. For the rehabilitation tax credits, we identified one study that used empirical methods to measure one aspect of community development. We also included an academic study prepared with assistance from NPS that highlights some limitations in attempting to evaluate the effectiveness of the rehabilitation tax credits. For disaster relief incentives, we identified peer reviewed articles that made potentially useful qualitative points, but the articles did not use rigorous or empirical methods to examine effectiveness. See the bibliography for a listing of the studies we reviewed in detail.\nWe conducted this performance audit from January 2011 through February 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Budget function(s)\nExpiration date (if applicable)\nEmpowerment Zones and Renewal Communities (EZ/RC)\n8/10/1993 (EZ); 12/21/2000 (RC)", "Low-Income Housing Tax Credit (LIHTC) 20 percent credit for rehabilitation of historic structures environment (Treasury); commerce and housing (JCT)\n10 percent credit for rehabilitation of structures (other than historic)\nN/A Community and regional development (Treasury); commerce and housing (JCT)", "Budget function(s)\nExpiration date (if applicable) 12/31/2009 environment (Treasury); commerce and housing (JCT)\nN/A Community and regional development (Treasury); Transportation (JCT)\nExclusion of interest on bonds for water, sewage, and hazardous waste facilities environment (Treasury); community and regional development (JCT)\n6/28/1968 (water and sewage facilities); 10/22/1986 (hazardous waste facilities)\nCredit for holders of qualified zone academy bonds (QZAB)\nExclusion of interest on public purpose state and local bonds Build America Bonds $1,850 General purpose fiscal assistance (Treasury); community and regional development (JCT)\nBudget function(s)\nExpiration date (if applicable)\nN/A: Not applicable. The EZ and RC programs offered packages of tax incentives in specific designated communities. Appendix IV lists seven EZ and six RC tax incentives.\nJCT indicated a revenue loss of less than $50 million. The exclusion of interest on public-purpose state and local bonds has been in effect, in one form or another, since the enactment of the Revenue Act of 1913, ch. 16, 38 Stat. 114. JCT indicated a revenue loss of less than $50 million in fiscal year 2010. JCT did not quantify revenue losses for this tax expenditure.", "", "See Appendix VI for tax provisions and special rules available for disaster relief and recovery for specific presidentially declared disaster areas Low-Income Housing Tax Credit Exclusion of interest on rental housing bonds Rehabilitation of older structures, subtotal 20 percent credit for rehabilitation of historic structures 10 percent credit for rehabilitation of structures (other than historic)", "", "Includes both Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds. We did not sum total costs of disaster package tax expenditures listed by JCT to avoid double counting estimated revenue losses for Treasury tax expenditures we identified as promoting community development.\nTotal includes $190 million in revenue losses, and $10 million in outlays for fiscal year 2010.", "", "Empowerment Zones and Renewal Communities (EZ/RC)\nBusinesses in designated Empowerment Zones (EZ) or Renewal Communities (RC) are eligible to claim various tax incentives, listed below. These incentives may help reduce unemployment, generate economic growth, and stimulate community development and business activity.\n30 urban EZs, 10 rural EZs, 28 urban RCs and 12 rural RCs located throughout the United States. These areas consist of Census tracts that are economically depressed and meet statutory or regulatory requirements (based on 1990 Census data) for (1) poverty level, (2) overall unemployment, (3) total population, and (4) maximum required area of EZs or RCs. Additionally, the boundaries of RCs were expanded based on 2000 Census data. The eligibility requirements differed by round, by program, and between urban and rural nominees; for example, round I urban EZs (selected in 1993) were selected using 6 indicators of general distress, including incidence of crime and narcotics use and amount of abandoned housing, while urban and rural ECs (selected in 2000) were selected using 17 indicators, including number of persons on welfare and high school dropout rates.\nEmployment credit (EZ/RC)\nBusinesses may claim an annual tax credit of up to $3,000 or $1,500 for each employee living and working for the employer in an EZ or RC area, respectively.\nBusinesses in EZs and RCs, and employees living and working for the employer in EZs or RCs.\nBusinesses may claim a tax credit of up to $2,400 for each new employee age 18 to 39 living in an EZ/RC, or up to $1,200 for a youth summer hire ages 16 or 17 living in an EZ or RC.\nBusinesses in EZs and RCs, and employees living and working for the employer in EZs or RCs aged 18-39, or youth summer hires ages 16 or 17 living in an EZ or RC.\nNew construction and rehabilitation projects in RCs.\nBusinesses may claim an accelerated method of depreciation to recover certain business costs of new or substantially rehabilitated commercial buildings located in an RC; states may allocate up to $12 million annually per RC for the provision.\nIncreased Section 179 deduction (EZ/RC)\nBusinesses may claim an increased deduction of up to the smaller of $35,000 or the cost of eligible property purchases (including equipment and machinery) for businesses in an EZ/RC.\nBusinesses incurring costs for tangible personal property, such as equipment and machinery, for use in EZs or RCs.", "Description State and local governments can issue tax-exempt bonds to provide loans to qualified businesses to finance construction costs in EZs. State and local government entities can issue up to $60 million for each rural EZ, $130 million for each urban EZ with a population of less than 100,000, and $230 million for each urban EZ with a population greater than or equal to 100,000. These bonds are not subject to state volume caps.\nTargeted geographies and populations Large business projects tied to the employment of residents in EZs.\nRollover of capital gains (EZ)\nOwners of businesses located in EZs may be able to postpone part or all of the gain from the sale of a qualified EZ asset that they hold for more than 1 year.\nBusinesses located in EZs.\nIncreased exclusion of capital gains (EZ)\nTaxpayers can exclude 60 percent of their gain from the sale of small business stock in a corporation that qualifies as an enterprise zone business.\nEnterprise zone businesses located in EZs.\nExclusion of capital gains (RC)\nOwners of businesses located in RCs can exclude qualified capital gains from the sale or exchange of a qualified community asset held more than 5 years.\nBusinesses located in RCs.\nNew Markets Tax Credit (NMTC)\nInvestors are eligible to claim a tax credit for investing in certified Community Development Entities (CDE) for 39 percent of the investment over 7 years. CDEs, in turn, invest in qualified low-income community investments such as mixed-use facilities, housing developments, and community facilities, which may contribute to employment in low-income communities.\nLow-income communities defined as Census tracts (1) in which the poverty rate is at least 20 percent, or (2) outside a metropolitan area in which the median family income does not exceed 80 percent of median statewide family income or within a metropolitan area in which the median family income does not exceed 80 percent of the greater statewide or metropolitan area median family income. Low-income communities also include certain areas not within Census tracts, tracts with low population, and Census tracts with high-migration rural counties.", "Description State and local governments issuing Recovery Zone Economic Development Bonds (RZEDB) allow investors to claim a tax credit (equal to 45 percent of the interest rate established between the buyer and the issuer of the bond). States and localities also had the option of receiving a direct payment from the U.S. Treasury of equal value to the tax credit. Bond proceeds were to be used to fund (1) capital expenditures paid or incurred with respect to property located in the designated recovery zone (e.g., Empowerment Zones or Renewal Communities); (2) expenditures for public infrastructure and construction of public facilities; and (3) expenditures for job training and educational programs. Individuals and corporations can exclude Recovery Zone Facility Bond (RZFB) interest income from their taxable income. Bond proceeds are used by state and local governments to finance projects pertaining to any trade or business, aside from exceptions listed below. More specifically, RZFBs may be issued for any depreciable property that (1) was constructed, reconstructed, renovated, or acquired after the date of designation of a “recovery zone;” (2) the original use of which occurs in the recovery zone; and (3) substantially all of the use of the property is in the active conduct of a “qualified business,” which is defined to include any trade or business except for residential rental facilities or other specifically listed projects under Internal Revenue Code 144(c)(6)(B), including golf courses, massage parlors, and gambling facilities.\nTargeted geographies and populations RZEDBs and RZFBs target any area designated “recovery zones”, including (1) areas having significant poverty, unemployment, rate of home foreclosures, or general distress; (2) areas that are economically distressed by reason of the closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990; or is (3) any area for which an Empowerment Zone or Renewal Community was in effect as of February 17, 2009.\nIndian reservations. temporary category of tax-exempt bonds, could exclude that interest income from their taxable income.. Indian tribal governments were allowed greater flexibility to use the bonds to finance economic development projects, which in turn were to promote development on Indian reservations. Previously, Indian tribal governments could only issue tax-exempt bonds for essential government services.", "Description Businesses on Indian reservations are eligible to claim a tax credit for employing Indian tribal members and their spouses. The credit is for 20 percent of the first $20,000 in wages and health benefits paid to tribal members and spouses. This credit is intended to provide businesses with an incentive to hire certain individuals living on or near an Indian reservation.\nTargeted geographies and populations Businesses on Indian reservations, and Indian tribal members and spouses.", "Low-Income Housing Tax Credit (LIHTC)\nState housing finance agencies (HFA) award the tax credits to owners of qualified rental properties who reserve all or a portion of their units for occupancy for low-income tenants. Once awarded LIHTCs, project owners typically attempt to obtain funding for their projects by attracting third-party investors that contribute equity to the projects. These investors can then claim the tax credits. This arrangement of providing LIHTCs in return for an equity investment is generally referred to as “selling” the tax credits. The credit is claimed over a 10-year period, but a project must comply with LIHTC requirements for 15 years. A 9 percent tax credit—intended to subsidize 70 percent of the qualified basis in present value terms—is available for the costs for new construction or substantial rehabilitation projects not otherwise subsidized by the federal government. An approximately 4 percent tax credit—intended to subsidize about 30 percent of the qualified basis in present value terms—is available for the acquisition costs for existing buildings. The 4 percent credit is also used for housing financed with tax-exempt rental housing bonds. The low-income housing tax credit program is intended to stimulate the production of affordable rental housing nationwide for low-income households.\nHouseholds with income at or below 60 percent of an area’s median gross income (AMGI). Qualified Census tracts and difficult development areas are eligible for additional credits. In a qualified Census tract, 50 percent or more of the households have incomes of less than 60 percent of the area’s median income. In a difficult development area, construction, land, and utility costs are high relative to the area’s median income.", "Description Building owners and private investors may qualify to claim a 20 percent tax credit for costs to substantially rehabilitate buildings that are on the National Register of Historic Places or are otherwise certified as historic by the National Park Service (NPS). To be eligible for the credit, buildings must be used for offices; rental housing; or commercial, industrial, or agricultural enterprises. Building owners must hold the building for 5 years after completing the rehabilitation or pay back at least a portion of the credit. The credit is intended to attract private investment to the historic cores of cities and towns. The credit is also intended to generate jobs, enhance property values, and augment revenues for state and local governments through increased property, business and income taxes.\nTargeted geographies and populations Certified historic buildings either listed individually in the National Register of Historic Places, or located in a registered historic district and certified by NPS as contributing to the historic significance of that district.\n10 percent credit for rehabilitation of structures (other than historic)\nIndividuals or corporations may claim a 10 percent tax credit for costs to substantially rehabilitate nonhistoric, nonresidential buildings placed into service before 1936. These structures must retain specified proportions of the buildings’ external and internal walls and internal structural framework. To be eligible for the credit, buildings must be used for offices or commercial, industrial, or agricultural enterprises. Qualified spending must exceed the greater of $5,000 or the adjusted basis (cost less depreciation taken) of the building spent in any 24-month period. The credit is intended to attract private investment to the historic cores of cities and towns. The credit is also intended to generate jobs, enhance property values, and augment revenues for state and local governments through increased property, business and income taxes.\nNonresidential buildings placed into service before 1936; especially those located in older neighborhoods and central cities.\nTax-exempt organizations may exclude gains or losses from the unrelated business income tax when they acquire and sell brownfield properties on which there has been an actual or threatened release of certain hazardous substances. This exclusion reduces the total cost of remediating environmentally damaged property and may attract the capital and enterprises needed to rebuild and redevelop polluted sites.\nEnvironmentally contaminated sites identified as brownfields held for use in a trade or business on which there has been an actual or threatened release or disposal of certain hazardous substances. The exclusion does not target specific geographies or populations.", "Description Firms may deduct expenses related to controlling or abating hazardous substances in a qualified brownfield property. This deduction subsidizes environmental cleanup and may help develop and revitalize urban and rural areas depressed from environmental contamination.\nTargeted geographies and populations Environmentally contaminated sites identified as brownfields held for use in a trade or business on which there has been an actual or threatened release or disposal of certain hazardous substances. The deduction does not target specific geographies or populations.\nIndividuals and corporations can exclude private activity bond interest income from their taxable income. Bond proceeds are used by state and local governments to finance the construction of multifamily residential rental housing units for low- and moderate-income families. Low-income housing construction partly financed with the tax-exempt bonds may be used with the 4 percent low-income housing tax credit.\nHouseholds with incomes at or below 60 percent of an area’s median gross income (AMGI).\nIndividuals and corporations can exclude private activity bond interest income from their taxable income. Bond proceeds are used by state and local governments to finance the construction of government-owned airports, docks, and wharves; mass commuting facilities such as bus depots and subway stations; and high-speed rail facilities and government-owned sport and convention facilities.\nInfrastructure such as airports, docks, wharves, mass commuting facilities, and intercity rail facilities. The bond provision does not target specific geographies or populations.\nIndividuals and corporations can exclude private activity bond interest income from their taxable income. Bond proceeds are used by state and local governments to finance the construction of water, sewage, and hazardous waste facilities.\nInfrastructure such as water treatment plants, sewer systems and hazardous waste facilities; the bond provision does not target specific geographies or populations.", "Credit for holders of qualified zone academy bonds (QZAB)\nDescription Banks, insurance companies, and other lending corporations that purchase qualified zone academy bonds are eligible to claim a tax credit equal to the dollar value of their bonds multiplied by a Treasury-set credit rate. Or, issuers had the option for qualified zone academies to receive a direct payment from the Treasury of equal value to the tax credit. School districts with qualified zone academies issue the bonds and use at least 95 percent of the bond proceeds to renovate facilities, provide equipment, develop course materials, or train personnel in such academies. Business or nonprofit partners must also provide at least a 10 percent match of QZAB funds, either in cash or in-kind donations, to qualified zone academies. The bond program helps school districts reduce the burden of financing school renovations and repairs.\nTargeted geographies and populations Public schools below the college level that (1) are located in an Empowerment Zone, Enterprise Community or Renewal Community, or (2) have at least 35 percent of their student body eligible for free or reduced-cost lunches.\nIndividuals and corporations can exclude governmental bond interest income from their taxable income. State and local governments generally use bond proceeds to build capital facilities such as highways, schools, and government buildings.\nCapital facilities owned and operated by governmental entities that serve the public interest. The bond provision does not target specific geographies or populations.\nIndividuals and corporations could claim a tax credit equal to 35 percent of the interest rate established between the buyer and the issuer of the bond. State and local governments issuing BABs also had the option of receiving a direct payment from the Treasury of equal value to the tax credit. Bond proceeds were intended to be used for stimulating development of public infrastructure in communities, as well as to aid state and local governments. If issuers choose to receive a direct payment, then they must use bond proceeds for capital expenditures.\nNo specific geographies or populations are targeted.", "Areas of Lower Manhattan affected by terrorist attacks occurring on September 11, 2001.\nHurricane Katrina disaster area (consisting of the states of Alabama, Florida, Louisiana, Mississippi), including core disaster areas determined by the President to warrant individual or individual and public assistance from the federal government following Hurricane Katrina in August 2005.\nGulf Opportunity Zone (GO Zone)\nCounties and parishes in Alabama, Florida, Louisiana, Mississippi and Texas that warranted additional, long-term federal assistance following Hurricanes Katrina, Rita and Wilma in 2005 were designated as Katrina, Rita and/or Wilma GO Zones.\nIndividuals and corporations affected by the September 11, 2001, terrorist attacks were eligible for seven tax provisions. These provisions included tax-exempt bonds targeted toward reconstruction and renovation; a special depreciation allowance for certain property that was damaged or destroyed; and a tax credit for businesses to hire and retain employees in the New York Liberty Zone. Individuals and corporations affected by hurricanes Katrina, Rita, and Wilma, which struck between August-October 2005, were eligible to claim 33 GO Zone tax provisions. These provisions include tax-exempt bond financing, expensing for certain clean-up and demolition costs, and additional allocations of the New Markets Tax Credit for investments that served the GO Zone.\nTwenty-four counties in Kansas affected by storms and tornadoes that began on May 4, 2007.", "Description Individuals and corporations affected by severe storms, tornadoes or flooding in 10 states from May 20-July 31, 2008 were eligible for a package of 26 tax benefits, including tax- exempt bond financing, increased rehabilitation tax credits for damaged or destroyed structures, and suspensions of limitations on claiming personal casualty losses. Qualified small or farming businesses affected by disasters in federally declared disaster areas are eligible to claim a net operating loss for up to 3 years after the loss was incurred, instead of the usual 2 years generally permitted. This credit may allow small and farming businesses in communities declared disaster areas to recoup a portion of their losses following a disaster.\nTargeted geographies and populations Selected counties in 10 states affected by tornadoes, severe storms and flooding occurring from May 20-July 31, 2008.\nIndividuals and businesses located in any geography declared a disaster area in the United States during tax years 2008 and 2009.\nQualified small businesses and farming businesses located in any federally declared disaster area. Qualified small businesses are sole proprietorships or partnerships with average annual gross receipts (reduced by returns and allowances) of $5 million or less during the 3-year period ending with the tax year of the net operating loss.\nFor more information on the bond financing by Indian tribal governments, see GAO, Federal Tax Policy: Information on Selected Capital Facilities Related to the Essential Governmental Function Test, GAO-06-1082 (Washington, D.C.: Sept.13, 2006) and U.S. Department of the Treasury, Report and Recommendations to Congress reqarding Tribal Economic Development Bond provision under Section 7871 of the Internal Revenue Code (Washington, D.C.: Dec. 19, 2011).", "", "Volume cap or other allocation limits?\nInvolves administration by a federal agency outside IRS?\nInvolves administration by nonfederal entity?\nEmpowerment Zones and Renewal Communities (EZ/RC)\nVaried. Five EZ and four RC tax incentives did not have any volume caps or allocation limits.\nYes; HUD oversaw EZ programs in urban areas, and the USDA oversaw EZ programs in rural areas. HUD is responsible for outreach efforts and serves as a promoter for EZs and RCs. HUD and IRS established a partnership regarding the EZ/RC tax incentives, where both HUD and IRS provide representation at workshops and conferences.\nYes; state and local governments nominate communities for EZ and RC designation. Nominated EZ communities had to submit a strategic plan showing how they would meet key program principles, while nominated RCs had to submit a written “course of action” with commitments to carry out specific legislatively mandated activities.\nLimit of up to an annual total of $12 million per RC.\nNo; IRS has sole federal responsibility for the administration of the CRD program. HUD collected data from local administrators used for commercial projects in RCs.\nYes; state governments allocate CRD authority to eligible businesses engaged in commercial projects within RCs.\nLimits on issuing EZ facility bond volume were up to $60 million for each rural EZ, up to $130 million for each urban EZ with a population of less than 100,000, and $230 million for each urban EZ with a population greater than or equal to 100,000.\nNo; IRS has sole federal responsibility for the administration of EZ facility bond program. HUD collected information from local administrators of EZs on the use of facility bonds used for construction projects in EZs.\nYes; state and local governments issue EZ facility bonds to finance construction costs.", "Tax expenditure New Markets Tax Credit (NMTC) Yes; the maximum amount of annual investment eligible for NMTCs was $3.5 billion each year in calendar years 2010 and 2011.\nVolume cap or other allocation limits?\nInvolves administration by a federal agency outside IRS? Yes; the Treasury Community Development Financial Institutions (CDFI) Fund certifies organizations as community development entities (CDE), CDFI Fund also provides allocations of NMTCs to CDEs through a competitive process. The CDFI Fund is responsible for monitoring CDEs to ensure that CDEs are compliant with their allocation agreements through the New Markets Compliance Monitoring System and, on a more limited basis, by making site visits to selected CDEs. The CDFI Fund also provides IRS with access to CDFI data for monitoring CDEs’ compliance with NMTC laws and regulations.\nInvolves administration by nonfederal entity? Yes; once a CDE receives an allocation of tax credits, the CDE can offer the tax credits to investors, who in turn acquire stock or a capital interest in the CDE. The investor can gain a potential return for a “qualified equity investment” in the CDE. In return for providing the tax credit to the investor, the CDE receives proceeds from the offer and must invest “substantially all” of such proceeds into qualified low-income community investments.\nYes; the Recovery Zone Economic Development Bond (RZEDB) and Recovery Zone Facility Bond (RZFB) programs had national volume caps of $10 billion and $15 billion, respectively.\nYes; Treasury determined the amount of RZEDB and RZFB volume cap allocations received by each state and the District of Columbia based on declines in employment levels for each state and the District during 2008 relative to declines in national employment levels during the same period.\nYes; each state was responsible for allocating shares of RZEDB and RZFB volume caps to counties and large municipalities based on declines in employment levels for such areas during 2008 relative to declines in employment levels for all counties and municipalities in such states during the same period. State and local governments issued RZEDBs, and had the option of allowing investors to claim a tax credit for the bonds. States and localities also had the option of receiving a direct payment from the Treasury of equal value to the tax credit.", "Volume cap or other allocation limits? Yes; the bond program had a $2 billion national volume cap.\nInvolves administration by a federal agency outside IRS? Yes; Treasury allocated bond capacity to Indian tribal governments in consultation with the Secretary of Interior, and the Department of Interior (Interior) maintains updated lists of Indian tribal entities that are eligible to apply for allocations of bond volume. Interior may also issue letters to Indian tribal entities indicating federal recognition of such entities in order to demonstrate eligibility for the bond program.\nInvolves administration by nonfederal entity? Yes; Indian tribal governments applied for Tribal Economic Development Bonds, issued the bonds, and used proceeds from bond sales to finance economic development projects or nonessential governmental activities. Indian tribal governments had the option of allowing investors to claim a tax credit for the bonds. Indian tribal governments also had the option of receiving a direct payment from the Treasury of equal value to the tax credit.", "Low-Income Housing Tax Credit (LIHTC)\nYes; in 2010, the allocation limit was the greater of $2.10 per- capita or $2.43 million for each state, U.S. territory, and the District of Columbia. The per capita amount is subject to cost of living adjustments.\nNo; the IRS has sole federal responsibility for the administration of LIHTC program. However, the program is closely coordinated with HUD housing programs for the computation of the area median gross income (AMGI) used to determine household eligibility and maximum rents, as well as the definition of income. he IRS also uses HUD’s Uniform Physical Condition Standards to determine whether the low-income housing is suitable for occupancy. HUD also maintains a LIHTC database with information on the project address, number of units and low-income units, number of bedrooms, year the credit was allocated, year the project was placed in service, whether the project was new construction or rehabilitation, type of credit provided, and other sources of project financing.\nYes; state housing finance agencies (HFA) award LIHTCs to owners of qualified low- income housing projects based on each state’s qualified allocation plan, which generally establishes a state’s selection criteria for how its LIHTCs will be awarded. Additionally, state HFAs monitor LIHTC properties for compliance with Internal Revenue Code requirements, such as rent ceilings and income limits for tenants, and report noncompliance to the IRS.", "Involves administration by a federal agency outside IRS? Yes; the Secretary of Interior sets Standards of Rehabilitation for claiming the tax credit. Within Interior, NPS maintains a National Register of Historic Places; approves applications for rehabilitation projects proposing use of the 20 percent rehabilitation tax credit; and certifies whether completed projects meet the Secretary’s standards and are eligible for the tax credit. NPS may inspect a rehabilitated property at any time during the five-year period following certification of rehabilitation for claiming the 20 percent preservation tax credit, and NPS may revoke certification if work was not done according to standards set by the agency. NPS also notifies the IRS of such revocations or dispositions so the tax credit may be recaptured.\nInvolves administration by nonfederal entity? Yes; state historic preservation offices (SHPO) review applications and forward recommendations for historic designation of structures to NPS, provide program information and technical assistance to applicants, and conduct site visits. SHPOs may also inspect a rehabilitated property at any time during a five- year period following completion of a rehabilitation project using the tax credit.\n10 percent credit for rehabilitation of structures (other than historic)\nYes; NPS determines whether buildings in historic districts do not contribute to such districts and, consequently, are not deemed to be historic structures. Such decertification is required before owners of such structures can claim for the 10 percent tax credit.\nYes; SHPOs review decertification applications and forward recommendations to NPS, provide program information and technical assistance to applicants.\nYes; EPA maintains a National Priority List of properties; such listed properties are ineligible for the tax incentive.\nYes; state environmental agencies certify brownfield properties on which there has been an actual or threatened release or disposal of certain hazardous substances. Following certification, taxpayers may incur eligible remediation expenditures and claim the tax provision.", "Involves administration by a federal agency outside IRS? Yes; EPA maintains a National Priority List of properties; such listed properties are ineligible for the tax incentive.\nInvolves administration by nonfederal entity? Yes; state environmental agencies certify brownfield properties on which there has been an actual or threatened release or disposal of certain hazardous substances. Following certification, site owners may claim the tax deduction, including for some expenditures incurred from prior tax years.\nYes, the bond provision is subject to the private activity bond annual volume cap for each state.\nYes; state and local governments, typically housing finance agencies, may issue bonds and use proceeds from bond sales to finance the construction of multifamily residential rental housing units for low- and moderate-income families.\nVaried; bond for the construction of mass commuting facilities, and 25 percent of bond issues for privately-owned intercity rail facilities, are included in the private activity bond annual state volume cap (government-owned facilities are exempted).\nYes; state and local governments may issue bonds, and use proceeds from bond sales to finance construction of airports, docks, wharves, mass commuting facilities and intercity rail facilities.\nYes, the bond provisions are subject to the private activity bond annual volume cap for each state.\nYes; state and local governments may issue bonds, and then use proceeds from bond sales to finance capital improvements for water, sewer and hazardous waste facilities.", "Tax expenditure Credit for holders of qualified zone academy bonds (QZAB)\nVolume cap or other allocation limits? Yes; the bond provision has national volume caps of $1.4 billion in 2010, and $400 million in 2011.\nInvolves administration by a federal agency outside IRS? Yes; Treasury determines the credit rate of QZABs and allocates shares of QZAB volume to state education agencies on the basis of the states’ respective populations of individuals below the poverty line (as defined by OMB).\nInvolves administration by nonfederal entity? Yes; state education agencies determine the share of QZAB volume allocated to qualified zone academies, and issues QZABs following approval by local education agencies. Local education agencies issue QZABs after applying for and obtaining permission from states. Business or nonprofit partners provide at least a 10 percent match of QZAB funds, either in cash or in-kind donations, to qualified zone academies.\nExclusion of interest on public purpose state and local bonds Build America Bonds (BAB)\nYes; state, and local governments may issue bonds, and then use proceeds from bond sales to finance eligible projects—primarily public infrastructure projects such as highways, schools, and government buildings.", "Volume cap or other allocation limits?\nInvolves administration by a federal agency outside IRS?\nInvolves administration by nonfederal entity?\nVaried. Authority to designate up to $8 billion in tax-exempt private activity bonds (New York Liberty bonds) and $9 billion in advance refunding bonds.\nYes; the Governor of the State of New York and the Mayor of New York City were allowed to issue tax-exempt New York Liberty bonds, and use proceeds to finance reconstruction and renovation projects within the New York Liberty Zone. The Governor and Mayor were allowed to issue advance refunding bonds to pay principal, interest, or redemption price on certain prior issues of bonds issued for facilities located in New York City (and certain water facilities located outside of New York City).\nKatrina Emergency Act Gulf Opportunity Zone (GO Zone) Varied.within the tax expenditure package have volume caps or other revenue loss limitations.\nVaried; multiple provisions within the tax expenditure package involved administration by federal agencies besides IRS.\nVaried; multiple provisions within the tax expenditure package involved administration by state and local governments and other entities.\nThe maximum amount of advance refunding for certain governmental and qualified 501(c)(3) bonds that may have been issued was capped at $4.5 billion in the case of Louisiana, $2.25 billion in the case of Mississippi, and $1.125 billion in the case of Alabama.\nState and local governments in the GO Zone— Alabama, Louisiana, and Mississippi—issued advance refunding bonds.\nGulf Tax Credit Bonds had a volume cap of $200 million for Louisiana, $100 million for Mississippi, and $50 million for Alabama.\nYes; Treasury determines the credit rate of Gulf Tax Credit Bonds.\nState and local governments in the GO Zone— Alabama, Louisiana, and Mississippi—issued Gulf Tax Credit Bonds to help pay principal, interest, and premiums on outstanding state and local government bonds.", "Volume cap or other allocation limits? The maximum aggregate face amount of GO Zone Bonds that may have been issued in Alabama, Louisiana or Mississippi was capped at $2,500 multiplied by the population of the respective state within the GO Zone; no other states were eligible for tax- exempt bond financing.\nInvolves administration by nonfederal entity? State and local governments in the GO Zone— Alabama, Louisiana, and Mississippi—issued bonds, though state governments approved projects for bond financing.\nIncreased credit cap and other modified provisions for use of the Low-Income Housing Tax Credit (LIHTC)\nA special allocation of the LIHTC was issued for each of three years (2006, 2007 and 2008) to each of the States within the GO Zone. Each year’s special allocation was capped at $18.00 multiplied by the population of the respective state in the GO Zone. In addition, the otherwise applicable LIHTC ceiling amount was increased for Florida and Texas by $3,500,000 per State.\nSee above description of the LIHTC regarding the involvement of state housing finance agencies (HFA).\nAn additional allocation of the New Markets Tax Credit (NMTC) in amounts equal to $300 million for 2005 and 2006, and $400 million for 2007, were to be allocated among qualified community development entities (CDE) to make qualified low- income community investments within the Gulf Opportunity Zone.\nSee above description of the NMTC regarding involvement of the Community Development Financial Institutions (CDFI) Fund.\nSee above description of the NMTC regarding the involvement of CDEs.", "Volume cap or other allocation limits? Varied. Multiple provisions within the tax expenditure package have volume caps or other revenue loss limitations.\nInvolves administration by a federal agency outside IRS? Varied; multiple provisions within the tax expenditure package involved administration by federal agencies besides IRS.\nInvolves administration by nonfederal entity? Varied; multiple provisions within the tax expenditure package involved administration by state and local governments.\nThe maximum amount of Midwestern Tax Credit Bonds that may have been issued was capped at: (1) $100 million for any state with an aggregate population located in all Midwest disaster areas within the state of at least 2,000,000; (2) $50 million for any state with an aggregate population located in all Midwest disaster areas within the state of at least 1,000,000 but less than 2,000,000; and (3) $0 for any other state.\nYes; Treasury determines the credit rate of Midwestern Tax Credit Bonds.\nState governments in the Midwest disaster area issued Midwestern tax credit bonds to help pay principal, interest and premiums on outstanding state and local government bonds.\nThe maximum aggregate face amount of Midwestern disaster zone bonds that may have been issued in any state in which a Midwestern disaster area was located, was capped at $1,000 multiplied by the population of the respective state within the Midwestern disaster zone; no other states were eligible for tax- exempt bond financing.\nState and local governments in the Midwest disaster area issued bonds.", "Tax expenditure Increased credit cap and other modified provisions for use of the Low-Income Housing Tax Credit (LIHTC)\nVolume cap or other allocation limits? A special allocation of the LIHTC was issued for each of three years (2008, 2009, and 2010) to any state in which a Midwest disaster area was located. Each year’s special allocation was capped at $8.00 multiplied by the population of the respective state in a Midwest disaster area.\nInvolves administration by nonfederal entity? See above description of the LIHTC regarding the involvement of state housing finance agencies (HFA).\nYes; for the provision allowing expensing of environmental remediation costs from disasters, state environmental agencies certify brownfield properties on which there has been an actual or threatened release or disposal of certain hazardous substances as a result of a federally declared disaster.\nState and local governments had the authority to issue RZEDBs and RZFBs from February 17, 2009 through December 31, 2010.\nTribal governments are authorized to issue tax-exempt bonds only if substantially all of the proceeds are used for essential governmental functions or certain manufacturing facilities.", "Legislation targeted towards the New York Liberty Zone and the Gulf Opportunity Zones (GO Zone) allowed an additional advance refunding to redeem certain prior tax- exempt bond issuances from state and local governments. The provision allowed state and local governments to refund, or refinance, bonds that are not redeemed within 90 days after the refunding bonds are issued.\nResidential rental property may be financed with tax- exempt facility bonds issued by state and local governments, if the financed project is a “qualified residential rental project” with required ratios of residents with certain income limitations. Under the provision, the operator of a qualified residential rental project may rely on the representations of prospective tenants displaced by reason of certain disasters to determine whether such individual satisfies the income limitation for a qualified residential rental project.\nDescription Mortgage revenue bonds are tax-exempt bonds issued by state and local governments to make mortgage loans to qualified mortgagors for the purchase, improvement, or rehabilitation of owner-occupied residences, and are typically required to exclusively finance mortgages for “first-time homebuyers.” Qualified mortgage revenue bonds, may be issued in targeted disaster areas without a first-time homebuyer financing requirement. Additionally, the permitted amount of qualified home-improvement loans increases from $15,000 to $150,000 for residences in a disaster zone.\nState and local governments in GO Zones and the Midwest disaster area may have issued tax credit bonds in areas affected by certain disasters. 95 percent of these bonds must be used to (1) pay principal, interest, or premium on outstanding bonds (other than private activity bonds) issued by state and local governments, or (2) make a loan to any political subdivision (e.g., local government) of such state to pay principal, interest, or premium on bonds (other than private activity bonds) issued by such political subdivision. These bonds differed from tax-exempt bonds in that rather than receiving tax- exempt interest payments, bondholders were entitled to a federal tax credit equal to a certain percentage of their investment.\nDescription In certain disaster areas, tax-exempt bonds for qualified private activities may have been issued and were not restricted by aggregate annual state private activity bond limits. These bonds allow state and local governments to finance the construction or rehabilitation of properties following a disaster.\nTreasury named Series I inflation-indexed savings bonds purchased through financial institutions as “Gulf Coast Recovery Bonds” from March 29-December 31, 2006, in order to encourage public support for recovery and rebuilding efforts in areas devastated by Hurricanes Katrina, Rita, and Wilma. Proceeds from the sale of the bonds were not specifically designated for hurricane relief and recovery efforts.\nThe provision provided a temporary tax credit of 30 percent to qualified employers for the value of employer- provided lodging to qualified employees affected by certain disasters. The amount taken as a credit was not deductible by the employer.\nCertain disaster relief tax packages included a credit of 40 percent of the qualified wages (up to a maximum of $6,000 in qualified wages per employee) paid by an eligible employer that conducted business in a disaster zone and whose operations were rendered inoperable by the disaster.\nDescription For 2005, the Hope Scholarship Credit rate was 100 percent on the first $1,000 of qualified tuition and related expenses, and 50 percent on the next $1,000 of qualified tuition and related expenses. For 2005, the Hope credit was temporarily increased for students attending eligible educational institutions in the GO Zone to 100 percent of the first $2,000 in qualified tuition and related expenses and 50 percent of the next $2,000 of qualified tuition and related expenses, for a maximum credit of $3,000 per student. For 2006, this provision increased the tax credit again to 100 percent of the first $2,200 of qualified tuition and related expenses (instead of $1,100 under standard law in 2006), and 50 percent of the next $2,200 of qualified tuition and related expenses (instead of $1,100) for a maximum credit of $3,300 per student (instead of $1,650). For 2008 and 2009, the Hope scholarship credit was extended to students attending eligible educational institutions in the Midwestern disaster area, based on increased credit rates enacted in 2006.\nIndividual taxpayers are typically allowed to claim a nonrefundable credit, the Lifetime Learning Credit, equal to 20 percent of qualified tuition and related expenses of up to $10,000 (resulting in a total credit of up to $2,000) incurred during the taxable year on behalf of the taxpayer, the taxpayer’s spouse, or any dependents. The Lifetime Learning Credit rate was temporarily increased from 20 percent to 40 percent for students attending institutions in certain disaster areas.\nDescription The provision increased from 20 to 26 percent, and from 10 to 13 percent, respectively, the preservation credits with respect to any certified historic structure or qualified rehabilitated building located in certain disaster areas, provided the qualified rehabilitation expenditures with respect to such buildings or structures were incurred during an established period of time following the disaster.\nThe LIHTC cap amount increased for affected states within the GO Zones and the Midwestern disaster area. Also, rules concerning implementation of the LIHTC were modified for the GO Zone; in the case of property placed in service from 2006-2008 in a nonmetropolitan area within the GO Zone, LIHTC income targeting rules are applied by using a national nonmetropolitan median gross income standard instead of the area median gross income standard typically applied to low-income housing projects.\nThe provision allowed an additional allocation of NMTCs in an amount equal to $300 million for 2005 and 2006, and $400 million for 2007, to be allocated among qualified community development entities to make qualified low- income community investments within the Katrina GO Zone.\nDescription Individuals whose principle residence were in certain disaster areas or were otherwise displaced from their homes by disasters may have elected to calculate their Earned Income Tax Credit and Refundable Child Credit for the taxable year when the disaster occurred using their earned income from the prior taxable year.\nEmployers hiring and retaining individuals who worked in certain disaster areas were eligible to claim up to $2,400 in Work Opportunity Tax Credits per employee (or 40 percent of up to the first $6,000 of wages). Employees in other targeted categories for the tax credit (e.g., qualified veterans or families receiving food stamps) are typically required to provide certification from a designated local agency of their inclusion in such groups on or before they begin work, or their employer provides documentation to said agencies no later than 28 days after the employee begins work. However, employees who worked and/or lived in certain disaster areas do not require certification from such agencies for employers to qualify for the tax credit.\nTax provision or special rule Deductions Carryback of net operating losses (NOL)\nUnder present law, a net operating loss (NOL) is, generally, the amount by which a taxpayer’s business deductions exceed its gross income. In general, an NOL may be carried back 2 years and carried over 20 years to offset taxable income in such years. NOLs offset taxable income in the order of the taxable years to which the NOL may be carried. This provision provided a special 5-year carryback period for NOLs to the extent of qualified disaster losses in any presidentially declared disaster area during 2008 and 2009.\nIndividuals and corporations affected by certain disasters may have carried back NOLs, for a period of 5 years, of the sum of the aggregate amount of deductions from such disasters, including deductions for qualified casualty losses; certain moving expenses; certain temporary housing expenses; depreciation deductions with respect to qualified property in disaster areas for the taxable year the property was placed into service; and certain repair expenses resulting from applicable disasters.\nA NOL to a farming business may have been carried back for five years if such loss was attributable to any portion of qualified timber property which was located in the Katrina or Rita GO Zones.\nDescription The provision provided an election for taxpayers who incurred casualty losses attributable to certain disasters with respect to public utility property located in applicable disaster zones. Under the election, such losses may be carried back 5 years immediately preceding the taxable year in which the loss occurred. If the application of this provision resulted in the creation or increase of a NOL for the year in which the casualty loss is taken into account, the NOL may be carried back or carried over as under present law applicable to NOLs for such year.\nThe provision provided an election for taxpayers to treat any GO Zone public utility casualty loss caused by Hurricane Katrina as a specified liability loss to which the present-law 10-year carryback period applies. The amount of the casualty loss is reduced by the amount of any gain recognized by the taxpayer from involuntary conversions of public utility property (e.g. physical destruction of such property) located in the GO Zone caused by Hurricane Katrina. Taxpayers who elect to use this provision are not eligible to treat the loss as part of the 5-year net operating loss carryback provided under another provision of the GO Zone Act (see 5-year NOL carryback of public utility casualty losses mentioned above).\nThe provision suspended two limitations on personal casualty or theft losses to the extent those losses arise in certain disaster areas and are attributable to such disasters. First, personal casualty or theft losses meeting the above requirements needed not exceed $100 per casualty or theft; present law at the time contained a required threshold of $100. Second, such losses were deductible without regard to whether aggregate net losses exceed 10 percent of a taxpayer’s adjusted gross income, which was standard under present law at the time the disasters took place. The provision treats personal casualty or theft losses from the pertinent disaster as a deduction separate from other casualty losses.\nDescription The provision removed one limitation on personal casualty or theft losses to the extent those losses arise in federally declared disaster areas during 2008 and 2009. More specifically, losses were deductible without regard to whether aggregate net losses exceed 10 percent of a taxpayer’s adjusted gross income, which was standard under present law at the time the disasters took place. The provision treats personal casualty or theft losses from federally declared disasters as a deduction separate from other casualty losses. However, present law at the time contained a required threshold of $100 for meeting requirements to claim losses, and this provision increases the threshold to $500. These rules are in effect for all federally declared disaster areas in 2008 and 2009 aside from those areas declared “Midwestern disaster areas” from flooding, tornadoes, and storms in 2008. The portion of the provision increasing the limitation per casualty to $500 only applies to 2009.\nUnder present law, a taxpayer’s deduction for charitable contributions of inventory generally is limited to the taxpayer’s basis (typically cost) in the inventory, or if less, the fair market value of the inventory. Under this provision, a C Corporation was eligible to claim an enhanced deduction for qualified book donations. An enhanced deduction is equal to the lesser of (1) basis plus one-half of the item’s appreciation (basis plus one-half of fair market value in excess of basis) or (2) two times basis.\nDescription Under present law, a taxpayer’s deduction for charitable contributions of inventory generally is limited to the taxpayer’s basis (typically cost) in the inventory, or if less, the fair market value of the inventory. Under this provision, any taxpayer, whether or not a C corporation, engaged in a trade or business was eligible to claim an enhanced deduction for donations of food inventory. An enhanced deduction is equal to the lesser of (1) basis plus one-half of the item’s appreciation (i.e., basis plus one- half of fair market value in excess of basis) or (2) two times basis. For taxpayers other than C corporations, the total deduction for donations of food inventory in a taxable year generally may not exceed 10 percent of the taxpayer’s net income for such taxable year from which contributions of apparently wholesome food are made.\nThe provision allowed a taxpayer using a vehicle while donating services to charity for the provision of relief related to certain disasters to compute charitable mileage deduction using a rate equal to 70 percent of the business mileage rate in effect on the date of the contribution, rather than the charitable standard mileage rate generally in effect under law.\nThe provision allowed for qualified contributions up to the amount by which an individual’s contribution base (adjusted gross income without regard to any NOL carryback) or corporation’s taxable income exceeds the deduction for other charitable contributions. Contributions in excess of this amount are carried over to succeeding taxable years subject to limitations under law.\nThe provision allowed an additional first-year depreciation deduction equal to a percentage of the adjusted basis of qualified property; the percentage varies depending on the disaster area where the property is located, e.g., 30 percent for New York Liberty Zone, 50 percent for GO Zones, Kansas Disaster Zone, and other areas in the U.S. declared disaster areas under national disaster relief.\nA taxpayer was permitted a deduction for 50 percent of qualified disaster clean-up costs, such as removal of debris or demolition of structures, paid or incurred for an established period of time following certain disasters.\nUnder the provision, a taxpayer may have elected to treat any repair of business-related property affected by presidentially declared disasters, including repairs that are paid or incurred by the taxpayer, as a deduction for the taxable year in which paid or incurred.\nDescription Taxpayers may typically elect to deduct (or “expense”) certain environmental remediation expenditures that would otherwise be chargeable to a capital account, in the year paid or incurred. The deduction applies for both regular and alternative minimum tax purposes. The expenditure must be incurred in connection with the abatement or control of hazardous substances at a qualified contaminated site. The provision was extended beyond present law for qualified contaminated sites located in the GO Zone and Midwestern disaster zones, as well as federally declared disaster areas in 2008 and 2009. The length of such extensions depended on the applicable disaster zone.\nQualified improvements made on leasehold property in the New York Liberty Zone could have been depreciated over a 5-year period using the straight-line method of depreciation, instead of the 39-year period standard under present law. Qualified leasehold property improvements included improvements to nonresidential real property, such as additional walls and plumbing and electrical improvements made to an interior portion of a building.\nDescription In lieu of depreciation, a taxpayer with a sufficiently small amount of annual investment may elect to expense qualified property placed in service for the taxable year under section 179 of the Internal Revenue Code. Taxpayers in certain disaster areas were eligible to increase the maximum dollar amount of Section 179 expensing for qualified property, which is generally defined as depreciable tangible personal property that is purchased for use in the active conduct of a trade or business. Taxpayers in the New York Liberty Zone could deduct an additional amount up to the lesser of $35,000 or the cost of the qualified Section 179 property put into service during the calendar year. Taxpayers in the GO Zone, Kansas Disaster Zone or disaster zones covered under “National Disaster Relief” could deduct an additional amount up to the lesser of $100,000 or the cost of the qualified Section 179 property put into service during the calendar year.\nThe provision doubled, for certain taxpayers, the present- law expensing limit of $10,000 for reforestation expenditures paid or incurred by such taxpayers for certain periods of time with respect to qualified timber property in the Katrina, Rita and Wilma GO Zones. For example, single taxpayers may have claimed $20,000 instead of $10,000 for eligible reforestation expenditures.\nDescription The Internal Revenue Code allowed an additional first- year depreciation deduction equal to 30 or 50 percent of the adjusted basis of qualified property, including (1) property to which the modified accelerated cost recovery system applies with an applicable recovery period of 20 years or less, (2) water utility property, (3) certain computer software, or (4) qualified leasehold improvement property placed in service by December 31, 2005. Under this provision, the Secretary of Treasury had authority to further extend the placed-in-service date (beyond Dec. 31, 2005), on a case-by-case basis, for up to 1 year for certain property eligible for the December 31, 2005 placed-in-service date under present law. The authority extended only to property placed in service or manufactured in the Katrina, Rita or Wilma GO Zones. In addition, the authority extended only to circumstances in which the taxpayer was unable to meet the December 31, 2005 deadline as a result of Hurricanes Katrina, Rita, and/or Wilma.\nThe provision provided an additional exemption of $500 for each displaced individual of a taxpayer affected by certain disasters. The taxpayer may have claimed the additional exemption for no more than four individuals; thus the maximum additional exemption amount was $2,000.\nIndividuals whose principal residence was located in the Hurricane Katrina core disaster area or certain portions of the Midwestern disaster area on the date that a disaster was declared may generally exclude any nonbusiness debt from gross income, such as a mortgage, that is discharged by an applicable entity on or after the applicable disaster date for an established time period. If the individual’s primary residence was located in the Hurricane Katrina disaster area (outside the core disaster area) or other portions of the Midwestern disaster area, the individual must also have had an economic loss because of the disaster.\nA taxpayer may have elected not to recognize gain with respect to property that was involuntarily converted, or destroyed, if the taxpayer acquired qualified replacement property within an applicable period, which is typically 2 years. The replacement period for property that was involuntarily converted in certain disaster areas is 5 years after the end of the taxable year in which a gain is realized. Substantially all of the use of the replacement property must be within the affected area.\nDescription The provision provided a temporary income exclusion for the value of in-kind lodging provided for a month to a qualified employee (and the employee’s spouse or dependents) affected by certain disasters by or on behalf of a qualified employer. The amount of the exclusion for any month for which lodging is furnished could not have exceeded $600. The exclusion did not apply for purposes of Social Security and Medicare taxes or unemployment tax.\nUnder the provision, reimbursement by charitable organizations to a volunteer for the costs of using a passenger automobile in providing donated services to charity for relief of certain disasters was excludable from the gross income of the volunteer. The reimbursement was allowed up to an amount that did not exceed the business standard mileage rate prescribed for business use.\nThe provision provided an exception to the 10 percent early withdrawal tax in the case of a qualified distribution of up to $100,000 from a qualified retirement plan, such as a 401(k) plan), a 403(b) annuity, or an IRA. Income from a qualified distribution may have been included in income ratably over 3 years, and the amount of a qualified distribution may have been recontributed to an eligible retirement plan within 3 years.\nDescription In general, under the provision, a qualified distribution received from certain retirement plans in order to purchase a home in certain disaster areas may be recontributed to such plans in certain circumstances. The provision applies to an individual who receives a qualified distribution that was to be used to purchase or construct a principal residence in a disaster area, but the residence is not purchased or constructed on account of the disaster.\nUnder this provision, residents whose principal residence was located in designated disaster areas and who suffered economic loss as a result of such disasters may borrow up to $100,000 from their employer plan. In addition to increasing the aggregate plan loan limit from the usual $50,000, the provision also relaxed other requirements relating to plan loans.\nThe provision permits certain retirement plan amendments made pursuant to changes made under Section 1400Q of the Internal Revenue Code, or regulations issued there under, to be retroactively effective. In order for this treatment to apply, the plan amendment is required to be made on or before the last day of the first plan year beginning on or after January 1, 2007, or such later date as provided by the Secretary of the Treasury. Governmental plans are given an additional 2 years in which to make required plan amendments.\nThe Secretary of the Treasury was required to provide certain administrative relief to taxpayers affected by certain presidentially declared disasters. Such relief allows for postponement of actions required by law, such as filing tax returns, paying taxes, or filing a claim for credit or refund of tax, for an applicable period of time following a disaster.\nThe provision authorized the Secretary of the Treasury to make such adjustments in the application of federal tax laws to ensure that taxpayers did not lose any deduction or credit or experience a change of filing status by reason of temporary relocations caused by applicable disasters. Any adjustments made under this provision must insure that an individual is not taken into account by more than one taxpayer with respect to the same tax benefit.", "(h)\nThe Katrina Emergency Act package was enacted by the Katrina Emergency Tax Relief Act of 2005 (Pub. L. No. 109-73), and targeted the Hurricane Katrina disaster area (consisting of the states of Alabama, Florida, Louisiana, and Mississippi), including core disaster areas determined by the President to warrant individual or individual and public assistance from the federal government following Hurricane Katrina in August 2005. On enactment, JCT projected total budget effects of $6,109 million for fiscal years 2006 through 2015.\nThe Gulf Opportunity Zone package was enacted by the Gulf Opportunity (GO) Zone Act of 2005 (Pub. L. No. 109-135). Counties and parishes in Alabama, Florida, Louisiana, Mississippi and Texas that warranted additional, long-term federal assistance following Hurricanes Katrina, Rita and Wilma in 2005 were designated as Katrina, Rita and/or Wilma GO Zones. Portions of the Katrina and Rita GO Zones overlapped with counties and parishes eligible for relief under the Katrina Emergency Tax Relief Act. The Gulf Opportunity Zone tax package also included some nondisaster-related tax provisions: election to treat combat pay as earned income for purposes of the Earned Income Tax Credit; modifications of suspension of interest and penalties where IRS fails to contact taxpayer; authority for undercover operations; disclosure of tax information to facilitate combined employment tax reporting; disclosure of return information regarding terrorist activities; disclosure of return information to carry out contingent repayment of student loans; and various tax technical corrections. On enactment, JCT projected total budget effects of $8,715 million for the disaster provisions for fiscal years 2006 through 2015. The Kansas disaster relief package was enacted by the Food, Conservation, and Energy Act of 2008 (Pub. L. No. 110-246). The Kansas disaster relief package targeted 24 counties in Kansas affected by storms and tornadoes that began on May 4, 2007. On enactment, JCT projected total revenue effects of $63 million for the disaster provisions for fiscal years 2008 though 2018. The Midwest disaster relief package was enacted by the Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008, and Tax Extenders and the Alternative Minimum Tax Relief Act of 2008 (Pub. L. No. 110-343). The Midwest disaster relief package targeted selected counties in 10 states affected by tornadoes, severe storms and flooding occurring from May 20-July 31, 2008. The listed components associated with the Midwest disaster relief package do not include rules outlining IRS reporting requirements for contributions to disaster relief; these rules apply for tax returns due after December 31, 2008. On enactment, JCT projected total revenue effects of $4,576 million for the Midwest disaster provisions for fiscal years 2009 through 2018. The National disaster relief package was enacted by the Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008, and Tax Extenders and the Alternative Minimum Tax Relief Act of 2008 (Pub. L. No. 110-343). The National disaster relief package targeted individuals and businesses located in any geography declared a disaster area in the United States during tax years 2008 and 2009. Certain provisions of the National Disaster Relief Act of 2008 do not apply to the Midwest disaster areas because the Heartland and Hurricane Ike Disaster Relief Act, part of the same legislation that resulted in the National Disaster Relief Act, provides other tax benefits. On enactment, JCT projected total revenue effects of $8,091 million for fiscal years 2009 through 2018. The numbers of provisions across the six disaster relief packages exceeds the total number of provisions because some tax provisions and special rules were part of more than one disaster package.", "In March 2011 and more recently in May 2011, we reported on the potential for duplication among 80 federal economic development programs at four agencies—the Departments of Commerce (Commerce), Housing and Urban Development (HUD), and Agriculture (USDA) and the Small Business Administration (SBA). According to the agencies, funding provided for these 80 programs in fiscal year 2010 amounted to $6.2 billion, of which about $2.9 billion was for economic development efforts, largely in the form of grants, loan guarantees, and direct loans. Some of these 80 programs can fund a variety of activities, including such noneconomic development activities as rehabilitating housing and building community parks.\nOur work as of May 2011 suggested that the design of each of these 80 economic development programs appears to overlap with that of at least one other spending program in terms of the economic development activity that they are authorized to fund, as shown in table 12. For example, 35 programs can fund infrastructure, and 27 programs can fund commercial buildings. Some of the 80 economic development programs are targeted to economically distressed areas.\nIn February 2012, we reported our findings to date on overlap and fragmentation among 53 economic development programs that support entrepreneurial efforts. Based on a review of the missions and other related program information for these 53 programs, we determined that these programs overlap based not only on their shared purpose of serving entrepreneurs but also on the type of assistance they offer. Much of the overlap and fragmentation among these 53 programs is concentrated among programs that support economically distressed and disadvantaged businesses. In ongoing work that will be published as a separate report, we plan to examine the extent of potential duplication among the 53 programs.", "", "", "", "In addition to the contact named above MaryLynn Sergent, Assistant Director; Elizabeth Curda; Jeffrey DeMarco; Edward Nannenhorn; Melanie Papasian; Mark Ryan; and Sabrina Streagle made key contributions to this report.", "To determine what is known about the effectiveness of selected community development tax expenditures, we conducted a literature review of studies that addressed the following tax expenditure provisions: (1) the Empowerment Zone/Renewal Community tax programs; (2) the New Markets Tax Credit program; (3) tax expenditures available for certain disaster areas; and (4) rehabilitation tax credits, including the 20 percent tax credit for preservation of historic structures and the 10 percent tax credit for the rehabilitation of structures (other than historic). We searched databases, including Proquest, Google Scholar, and Econlit, for studies through May 2011. We focused on studies that attempted to measure the impact of the selected tax incentives on certain measures of community development, such as the poverty and unemployment rate.\nAbravanel, Martin D., Nancy M. Pindus, and Brett Theodos. Evaluating Community and Economic Development Programs: A Literature Review to Inform Evaluation of the New Markets Tax Credit Program. Prepared for the Department of the Treasury Community Development Financial Institutions Fund. The Urban Institute. September 2010.\nAprill, Ellen P., and Richard Schmalbeck. “Post-Disaster Tax Legislation: A Series of Unfortunate Events.” Duke Law Journal, vol. 56, no. 1 (2006): 51-100.\nBartik, Timothy J. “Bringing Jobs to People: How Federal Policy Can Target Job Creation for Economically Distressed Areas.” Discussion paper prepared for The Hamiltion Project (2010).\nBusso, Matias, Jesse Gregory., and Patrick M Kline. “Assessing the Incidence and Efficiency of a Prominent Place Based Policy.” National Bureau of Economic Research Working paper no. 16096 (2010).\nChernick, Howard and Andrew F. Haughwout. “Tax Policy and the Fiscal Cost of Disasters: NY and 9/11.” National Tax Journal, vol. 59, no. 3 (2006): 561-577.\nCongressional Research Service. Empowerment Zones, Enterprise Communities, and Renewal Communities: Comparative Overview and Analysis. Washington, D.C.: 2011.\nGotham, Kevin F., and Miriam Greenberg. “From 9/11 to 8/29: Post- Disaster Recovery and Rebuilding in New York and New Orleans.” Social Forces, vol. 87, no. 2 (2008): 1039-1062.\nHam, John C., Charles Swenson, Ayse Imrohoroglu, and Heonjae Song. “Government Programs Can Improve Local Labor Markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community. Journal of Public Economics, vol. 95, no. 7-8 (August 2011): 779-797.\nHanson, Andrew. “Utilization of Employment Tax Credits: An Analysis of the Empowerment Zone Wage Tax Credit.” Public Budgeting & Finance, vol. 31, no. 1 (2011): 23-36.\nHanson, Andrew and Shawn Rohlin. “The Effect of Location-Based Tax Incentives on Establishment Location and Employment across Industry Sectors.” Public Finance Review, vol. 39, no. 2 (2011): 195-225.\nHebert, Scott, Avis Vidal, Greg Mills, Franklin James, and Debbie Gruenstein. Interim Assessment of the Empowerment Zones and Enterprise Communities (EZ/EC) Program: A Progress Report. A report prepared for the U.S. Department of Housing and Urban Development. November 2001.\nJennings, James. “The Empowerment Zone in Boston, Massachusetts, 2000-2009.” Review of Black Political Economy, vol. 38, no. 1 (2011): 63- 81.\nJoint Committee on Taxation. Incentives for Distressed Communities: Empowerment Zones and Renewal Communities (JCX-38-09), October 5, 2009.\nKolko, Jed and David Neumark. “Do Some Enterprise Zones Create Jobs?” Journal of Policy Analysis and Management, vol. 29, no. 1 (2010): 5-38.\nListokin, David, Michael L. Lahr, Charles Heydt, and David Stanek. Second Annual Report on the Economic Impact of the Federal Historic Tax Credit. A report prepared for the Historic Tax Credit Coalition. May 2011.\nRich, Michael J., and Robert P. Stoker. “Rethinking Empowerment: Evidence from Local Empowerment Zone Programs.” Urban Affairs Review, vol 45, no. 6 (2010): 775-796.\nRichardson, James A. “Katrina/Rita: The Ultimate Test for Tax Policy.” National Tax Journal, vol. 59, no. 3 (September 2006): 551-560.\nSchilling, James D., Kerry D. Vandell, Ruslan Koesman, and Zhenguo Lin. “How Tax Credits Have Affected the Rehabilitation of the Boston Office Market.” Journal of Real Estate Research, vol. 28, no. 4 (2006): 321-348.\nStead, Meredith M. “Implementing Disaster Relief Through Tax Expenditures: An Assessment of the Katrina Emergency Tax Relief Measures.” New York University Law Review, vol. 81, no. 6 (2006): 2158- 2191.\nTolan, Patrick E, Jr. “The Flurry of Tax Law Changes Following the 2005 Hurricanes: A Strategy for More Predictable and Equitable Tax Treatment of Victims.” Brooklyn Law Review, vol. 72, no. 3 (2007): 799-870.", "2012 Annual Report: Opportunities to Reduce Duplication, Overlap, and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington, D.C.: February 28, 2012.\nFollow-up on 2011 Report: Status of Actions Taken to Reduce Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance Revenue. GAO-12-453SP. Washington, D.C.: February 28, 2012.\nManaging for Results: Opportunities for Congress to Address Government Performance Issues. GAO-12-215R. Washington, D.C.: December 9, 2011.\nEconomic Development: Efficiency and Effectiveness of Fragmented Programs Are Unclear. GAO-11-872T. Washington, D.C.: July 27, 2011.\nEfficiency and Effectiveness of Fragmented Economic Development Programs Are Unclear. GAO-11-477R. Washington, D.C.: May 19, 2011.\nManaging for Results: GPRA Modernization Act Implementation Provides Important Opportunities to Address Government Challenges. GAO-11-617T. Washington, D.C.: May 10, 2011.\nPerformance Measurement and Evaluation: Definitions and Relationships. GAO-11-646SP. Washington, D.C.: May 2, 2011.\nIndian Issues: Observations on Some Unique Factors that May Affect Economic Activity on Tribal Lands. GAO-11-543T. Washington, D.C.: April 7, 2011.\nGovernment Performance: GPRA Modernization Act Provides Opportunities to Help Address Fiscal, Performance, and Management Challenges. GAO-11-466T. Washington, D.C.: March 16, 2011.\nOpportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington D.C.: March 1, 2011.\nRecovery Act: Opportunities to Improve Management and Strengthen Accountability over States’ and Localities’ Uses of Funds. GAO-10-999. Washington, D.C.: September 20, 2010.\nCommunity Development Block Grants: Entitlement Communities’ and States’ Methods of Distributing Funds Reflect Program Flexibility. GAO-10-1011. Washington, D.C.: September 15, 2010.\nRevitalization Programs: Empowerment Zones, Enterprise Communities, and Renewal Communities. GAO-10-464R. Washington, D.C.: March 12, 2010.\nNew Markets Tax Credit: The Credit Helps Fund a Variety of Projects in Low-Income Communities, but Could Be Simplified. GAO-10-334. Washington, D.C.: January 29, 2010.\nDisaster Recovery: Past Experiences Offer Insights for Recovering from Hurricanes Ike and Gustav and Other Recent Natural Disasters. GAO-08-1120. Washington, D.C.: September 26, 2008.\nGulf Opportunity Zone: States Are Allocating Federal Tax Incentives to Finance Low-Income Housing and a Wide Range of Private Facilities. GAO-08-913. Washington, D.C.: July 16, 2008.\nTax Expenditures: Available Data Are Insufficient to Determine the Use and Impact of Indian Reservation Depreciation. GAO-08-731. Washington, D.C.: June 26, 2008.\nTax Policy: Tax-Exempt Status of Certain Bonds Merits Reconsideration, and Apparent Noncompliance with Issuance Cost Limitations Should Be Addressed. GAO-08-364. Washington, D.C.: February 15, 2008.\nHUD and Treasury Programs: More Information on Leverage Measures’ Accuracy and Linkage to Program Goals is Needed in Assessing Performance. GAO-08-136. Washington, D.C.: January 18, 2008. 21st Century Challenges: How Performance Budgeting Can Help. GAO-07-1194T. Washington, D.C.: September 20, 2007.\nLeveraging Federal Funds for Housing, Community, and Economic Development. GAO-07-768R. Washington, D.C.: May 25, 2007.\nTax Policy: New Markets Tax Credit Appears to Increase Investment by Investors in Low-Income Communities, but Opportunities Exist to Better Monitor Compliance. GAO-07-296. Washington, D.C.: January 31, 2007.\nEmpowerment Zone and Enterprise Community Program: Improvements Occurred in Communities, but the Effect of the Program is Unclear. GAO-06-727. Washington, D.C.: September 22, 2006.\nFederal Tax Policy: Information on Selected Capital Facilities Related to the Essential Governmental Function Test. GAO-06-1082. Washington, D.C.: September 13, 2006.\nRural Economic Development: More Assurance Is Needed That Grant Funding Information Is Accurately Reported. GAO-06-294. Washington D.C.: February 24, 2006.\nTelecommunications: Challenges to Assessing and Improving Telecommunications for Native Americans on Tribal Lands. GAO-06-189. (Washington, D.C.: January, 11, 2006).\nResults-Oriented Government: Practices That Can Help Enhance and Sustain Collaboration among Federal Agencies. GAO-06-15. Washington, D.C.: October 21, 2005.\nGovernment Performance and Accountability: Tax Expenditures Represent a Substantial Federal Commitment and Need to Be Reexamined. GAO-05-690. Washington, D.C.: September 23, 2005.\nA Glossary of Terms Used in the Federal Budget Process. GAO-05-734SP. Washington, D.C.: September 2005.\nCommunity Development: Federal Revitalization Programs Are Being Implemented, but Data on the Use of Tax Benefits Are Limited. GAO-04-306. Washington, D.C.: March 5, 2004.\nNew Markets Tax Credit Program: Progress Made in Implementation, but Further Actions Needed to Monitor Compliance. GAO-04-326. Washington, D.C.: January 30, 2004.\nSeptember 11: Overview of Federal Disaster Assistance to the New York City Area. GAO-04-72. Washington, D.C.: October 31, 2003.\nTax Administration: Information Is Not Available to Determine Whether $5 Billion in Liberty Zone Tax Benefits Will Be Realized. GAO-03-1102. Washington, D.C.: September 30, 2003.\nEconomic Development: Multiple Federal Programs Fund Similar Economic Development Activities. GAO/RCED/GGD-00-220. Washington, D.C.: September 29, 2000.\nTax Policy: Tax Expenditures Deserve More Scrutiny. GAO/GGD/AIMD-94-122. Washington, D.C.: June 3, 1994." ], "depth": [ 1, 1, 2, 2, 1, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 1, 1, 1, 2, 2, 1, 1 ], "alignment": [ "h0_full h3_full", "h0_title h3_title", "h0_full", "h0_full h3_full", "h1_title", "h1_full", "h2_title", "h2_full", "", "", "", "h1_full", "h4_full h1_full", "h4_full", "h3_full h2_title h1_title", "h3_full h1_full", "h3_full", "h3_full h2_full", "", "", "", "", "", "", "", "h0_title", "", "", "", "", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_full h1_full", "h1_full" ] }

{ "question": [ "What tax expenditures were available in FY2010?", "What did the tax expenditures support?", "How is tax expenditures funding designated for different areas?", "How is the overlap considered federally?", "When is overlap not allowed?", "What federal agencies are involved in tax expenditures?", "What is one of these other federal agencies?", "What can cause administrative burden?", "How are tax expenditures documented and measured?", "Why is this information so limited?", "How do agencies outside the IRS contribute to the limited information?", "What recommendations have the GAO given regarding tax expenditure assessments?", "What assessment procedures are lacking?", "What document supports assessment procedures?", "How will the OMB asses federal performance regarding GPRAMA?", "What is the goal of this assessment?", "What control does Congress have regarding GPRAMA?", "How can Congress utilize this control with GAO recommendations?", "Why haven't previous studies had certain results regarding tax procedures?", "What one of the methodological limits?", "What information is limited in the report?", "How does the government promote community development?", "What is the GAO reviewing?", "What sources will the GAO review?", "What agencies will the GAO be reviewing material from?", "What additional studies will the GAO be reviewing?", "What guidance could Congress provide to OMB?", "How was the given matter questioned?", "How does GAO regard this questioning?" ], "summary": [ "GAO identified 23 community development tax expenditures available in fiscal year 2010.", "For example, five ($1.5 billion) targeted economically distressed areas, and nine ($8.7 billion) supported specific activities such as rehabilitating structures for business use.", "The design of each community development tax expenditure appears to overlap with that of at least one other tax expenditure in terms of the areas or activities funded.", "Federal tax laws and regulations permit use of multiple tax expenditures or tax expenditures with other federal spending programs, but often with limits.", "For instance, employers cannot claim more than one employment tax credit for the same wages paid to an individual.", "Besides IRS, administering many community development tax expenditures involves other federal agencies as well as state and local governments.", "For example, the National Park Service oversees preservation standards for the 20 percent historic rehabilitation tax credit.", "Fragmented administration and program overlap can result in administrative burden, such as applications to multiple federal agencies to fund the needs of a distressed area or finance a specific.", "Limited data and measures are available to assess community development tax expenditures’ performance.", "IRS only collects information needed to administer the tax code or otherwise required by law, and IRS data often do not identify the specific communities assisted.", "Other federal agencies helping administer community development tax expenditures also collect limited information on projects and associated outcomes.", "GAO has long recommended that the Executive Branch improve its ability to assess tax expenditures, but little progress has been made in developing an evaluation framework.", "Generally, neither these agencies, nor the Department of the Treasury or the Office of Management and Budget (OMB) have assessed or plan to assess community development tax expenditures individually or as part of a crosscutting review.", "The Government Performance and Results Act Modernization Act of 2010 (GPRAMA) calls for a more coordinated approach to focusing on results and improving performance.", "OMB is to select a limited number of long-term, outcome-oriented crosscutting priority goals and assess whether the relevant federal agencies and activities—including tax expenditures—are contributing to these goals.", "These assessments could help identify data needed to assess tax expenditures and generate evaluations of tax expenditures’ effect on community development.", "Through related GPRAMA consultations agencies are to have with Congress, Congress has a continuing opportunity to say whether it believes community development should be among the limited number of governmentwide goals.", "While community development was not on the interim priority list, Congress also can urge more evaluation and focus attention on community development performance issues through oversight activities.", "In part due to data and methodological limitations, previous studies have not produced definitive results about the effectiveness of the New Markets Tax Credit, Empowerment Zone tax incentives, historic rehabilitation tax credits, and tax aid for certain disaster areas.", "A key methodological challenge is\\ demonstrating a causal relationship between community development efforts and economic growth in a specific community.", "As a result, policymakers have limited information about the tax expenditures reviewed, including those that expired after 2011, and ways to increase effectiveness.", "Tax expenditures—exclusions, credits, deductions, deferrals, and preferential tax rates—are one tool the government uses to promote community development. Multiple tax expenditures contribute to community development.", "GAO (1) identified community development tax expenditures and potential overlap and interactions among them; (2) assessed the data and performance measures available and used to assess their performance; and (3) determined what previous studies have found about selected tax expenditures’ performance.", "GAO identified community development activities using criteria based on various federal sources and compared them with authorized uses of tax expenditures.", "GAO reviewed agency documents and interviewed officials from the Internal Revenue Service (IRS) and five other agencies.", "GAO also reviewed empirical studies for selected tax expenditures, including the New Markets Tax Credit and Empowerment Zone program which expired in 2011.", "Congress may wish to provide OMB guidance on whether community development should be among OMB’s long-term crosscutting priority goals, stress the need for evaluations, and focus attention on addressing community development tax expenditure performance issues through its oversight activities.", "Two agencies questioned the matters for congressional consideration or findings.", "GAO believes its analysis and matters remain valid as discussed in the report." ], "parent_pair_index": [ -1, 0, -1, 2, 3, -1, 5, -1, -1, 0, 0, -1, 3, -1, 5, 6, -1, 8, -1, 0, -1, -1, -1, -1, 2, 2, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 0, 0, 0, 0, 0, 4, 4, 4 ] }

{ "title": [ "Background", "Federal Border Security and Counternarcotics Efforts", "Federal, State, and Local Responsibilities", "The UCR Program", "Best Available Data Cannot Be Used to Make Insights about Spillover Crime but Show a General Decline in Reported Crime Rates in Counties with Sufficiently Complete Data along the Southwest Border", "Few Law Enforcement Agencies Track Spillover Crime along the Southwest Border", "Federal Law Enforcement Agencies", "State and Local Law Enforcement Agencies", "Law Enforcement Agencies Have Varying Concerns about Potential Effects of Violent Crime in Mexico on Border Communities", "Federal Concerns", "State and Local Concerns", "Law Enforcement Agencies Have Initiatives that Target Border-related Crime, Including a Federal Contingency Plan to Address Violent Crime Spilling Over from Mexico", "Agency Comments", "Appendix I: Southwest Border Counties by State", "Arizona", "California", "New Mexico", "Texas", "Appendix II: Objectives, Scope, and Methodology", "Appendix III: Comparison of UCR SRS with NIBRS", "Appendix IV: UCR Data Tables for Southwest Border Counties, 2004-2011", "a. Violent crime rates per 100,000 for all border counties combined by state, 2004-2011 2008 State 2007 2004 2005 2006 Arizona 508.2 641.3 623.4 572.4 490.8", "b. Violent crime rates per 100,000 for all nonborder counties combined by state, 2004-2011 State 2008 2007 2006 2004 2005 Arizona 435.6 471.7 495.0 469.0 524.4", "c. Violent crime rates per 100,000 for large counties (population of 25,000 or more) by state, 2004-2011 State County 2004 2007 2005 2006 2008 2009 Arizona", "c. Violent crime rates per 100,000 for large counties (population of 25,000 or more) by state, 2004-2011 State 2007 2005 2009 2006 2004 2008", "d. Number of reported violent crimes for small counties (population under 25,000) by state, 2004-2011 State 2009 County 2008 2007 2004 2005 2006", "e. Property crime rates per 100,000 for all border counties combined by state, 2004-2011 State 2006 2008 2004 2005 2007 Arizona Local law enforcement agencies did not submit complete data to the FBI.", "f. Property crime rates per 100,000 for all nonborder counties combined by state, 2004-2011 State 2008 2007 2006 2004 2005 Arizona Not computed because comparable data for border counties not available.", "g. Property crime rates per 100,000 for large counties (population of 25,000 or more) by state, 2004-2011 State County 2004 2006 2007 2008 2009 2005 Arizona", "g. Property crime rates per 100,000 for large counties (population of 25,000 or more) by state, 2004-2011 State 2007 2004 2006 2008 2009 2005 Local law enforcement agencies in the county did not submit complete data to the FBI.", "h. Number of reported property crimes for small counties (population under 25,000) by state, 2004-2011 State County 2004 2009 2006 2007 2008 2005 New Mexico", "Appendix V: Results from Analyzing UCR SRS and NIBRS Crime Data", "Violent Crime along the Southwest Border Reported through the UCR SRS", "Appendix VI: Assaults against Border Patrol Agents by Border Patrol Sector, Fiscal Years 2006-2012", "Appendix VII: Select Federal, State, and Local Law Enforcement Efforts along the Southwest Border", "Appendix VIII: Comments from the Department of Homeland Security", "Appendix IX: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The federal government has taken a number of steps to combat threats posed by drug cartels, including potential crime and violence directed against U.S. citizens and government interests. For example, in 2008, the U.S. government began a program—known as the Mérida Initiative—to provide Mexico and the countries of Central America with financial and technical assistance for counterdrug efforts, among others. In March 2009, as a response to the violence in Mexico, DHS announced a new southwest border initiative to guard against violent crime spillover into the United States by increasing the deployment of personnel and technology along the southwest border. In addition, in June 2009, the Office of National Drug Control Policy issued the National Southwest Border Counternarcotics Strategy with the goal to substantially reduce the flow of illicit drugs, drug proceeds, and associated instruments of violence across the southwest border.disrupting and dismantling drug-trafficking organizations along the To accomplish this goal, the strategy listed southwest border as one of its key objectives. In August 2010, President Barack Obama signed an emergency supplemental appropriation for border security, which included $600 million in supplemental funds for enhanced border protection and law enforcement activities. The President also separately authorized the temporary deployment of up to an additional 1,200 National Guard troops to the border to assist law enforcement agencies in their efforts to target illicit networks’ trafficking in people, drugs, illegal weapons, and money, and the violence associated with these illegal activities. Moreover, in May 2011, DHS Secretary Napolitano stated that CBP, in partnership with independent third-party stakeholders, had begun the process of developing an index to comprehensively and systematically measure security along the southwest border and quality of life in the region. As we reported in May 2012, this index—the Border Condition Index—is being developed, and accordingly, it is too early to determine how it will be used to provide oversight of border security efforts.", "At the federal level, five agencies in two departments are responsible for securing the border and combating drug cartel–related activities along the southwest border. These agencies enforce federal laws related to, among other things, immigration, drugs, weapons, and organized crime. Additionally, they collect data related to their criminal investigations and operations to support prosecutions. Specifically, they track violations of federal criminal statutes relevant to their responsibilities, including the number of pending and closed cases, arrests, convictions, indictments, seizures, and forfeitures. Table 1 presents information on these law enforcement agencies and their responsibilities.\nIn addition to enforcing laws, a number of agencies have intelligence components and oversee interagency task forces responsible for collecting, analyzing, and disseminating information related to threats from the drug cartels. These components include DHS’s Office of Intelligence and Analysis and intelligence offices within CBP and U.S. Immigration and Customs Enforcement (ICE), as well as DOJ’s DEA, and the FBI. These entities produce various intelligence products, such as threat assessments, related to Mexican drug cartel-related activities in support of law enforcement operations. Also, the Office of National Drug Control Policy, in the Executive Office of the President, is responsible for coordinating the national drug control effort, and designates areas within the United Sates that are significant centers of illegal drug production, manufacturing, importation, or distribution as High Intensity Drug Trafficking Areas. Law enforcement agencies in these designated areas collect and share intelligence and coordinate interagency task forces to target drug-trafficking operations.\nAt the state and local levels, sheriffs’ offices and municipal police departments are responsible for investigating and tracking crime occurring in their jurisdictions, based on the laws of their respective states. If the investigation determines that the criminal violation falls under federal purview, such as an immigration violation, the local law enforcement agency may refer the case to the appropriate federal agency and might not track such cases in its records. The Departments of Public Safety in Arizona, New Mexico, and Texas, and the state Department of Justice in California, are responsible for overseeing the process for collecting, validating, and publishing crime data from local agencies. These agencies voluntarily submit crime data to the FBI, which is responsible for publishing and archiving national crime statistics.", "The FBI oversees the UCR Program, the federal government’s centralized repository for crime data. The UCR Program provides a nationwide view of crime, and is based on the voluntary submission of a variety of statistics by city, county, and state law enforcement agencies. Begun in 1930, the UCR Program established a system to collect summary data, known as SRS data, and now contains 8 types of violent and property crimes, referred to as Part I offenses, that are reported to law enforcement agencies. Violent crimes are composed of murder and nonnegligent manslaughter, forcible rape, robbery, and aggravated assault. Property crimes are composed of burglary, larceny-theft, motor vehicle theft, and arson. If multiple offenses are reported for an individual crime incident, only the highest-level offense is recorded. Offense data submitted to the FBI by local law enforcement agencies show the aggregate counts for reported crimes and arrests for the 8 Part I offenses and aggregate counts on arrests made for 21 other offenses, such as embezzlement, prostitution, and drug abuse violations. These UCR data can be used to measure fluctuations in the type and volume of crime for specific offenses in a particular jurisdiction for which they have been collected.\nThe FBI reported that 18,233 law enforcement agencies in the United States, representing 97.8 percent of the U.S. population, submitted UCR data in 2011. As of November 2012, law enforcement agencies in 46 states and the District of Columbia were submitting UCR data through a state UCR Program, or a district system in the case of the District of Columbia. In the remaining 4 states, local law enforcement agencies submit UCR data directly to the FBI. State programs are to conform to national UCR Program standards, definitions, and quality control procedures in order for their data to be submitted to the FBI. The FBI is to help state UCR Programs meet these requirements by, among other actions, reviewing and editing data submitted by individual agencies and providing technical assistance on reporting procedures.\nTo meet the needs of the law enforcement community for more detailed crime data, the FBI introduced NIBRS in 1988 with the intent that local law enforcement agencies will transition from the SRS to NIBRS at their own pace. NIBRS collects data on more types of offenses than the traditional SRS and includes details on individual incidents, such as information on offenders, victims, property, and whether multiple offenses are reported in an individual crime incident. NIBRS collects offense and arrest data on 46 specific crimes grouped in 22 offense categories, which include 8 Part I offenses and other offenses, such as extortion and kidnapping. In addition, NIBRS collects arrest data for 10 other crimes, such as trespassing and driving under the influence. The data can be used to examine linkages among offenses, offenders, victims, property, and arrestees. Tables that list offenses collected for the UCR SRS and the NIBRS programs and summarize the main differences between the two crime data systems can be found in appendix III.\nNIBRS allows local law enforcement agencies to report a wider range of offenses and arrests. However, the FBI reported that, as of 2011, 7,819 law enforcement agencies, representing 28 percent of the U.S. population, contributed NIBRS data to the UCR Program. According to senior FBI officials, because of the voluntary nature of the UCR Program, implementation of the NIBRS occurs at the pace commensurate with the resources, abilities, and limitations of the contributing law enforcement agency. Since participation in the program is limited, the FBI converts NIBRS data submitted by law enforcement agencies to the format for the SRS data system.", "UCR SRS data provide the best available information on crime levels and crime trends in southwest border counties. Our interviews with officials from 33 of the 36 local law enforcement agencies in the southwest border counties determined that SRS data are the only crime data that those agencies collect in a systematic way—that is, in an automated form that can be readily retrieved and analyzed. Our analysis determined that the remaining 3 local law enforcement agencies also systematically collect SRS data, but we do not know if they also systematically collect other crime data because these agencies were not available to participate in our interviews. The sheriff’s office in Yuma County, Arizona, is the only southwest border law enforcement agency that collects NIBRS data.\nThe UCR data cannot be used to draw conclusions about the extent to which crimes are attributable to spillover from Mexico. The SRS does not collect data on all types of crimes committed in the United States that have been associated with Mexican drug-trafficking organizations, such as particular types of kidnappings or home invasions. Further, the SRS does not collect enough information, such as a motivation for committing a crime, to identify a link between violent or property crime rates and crimes associated with spillover from Mexico, such as drug trafficking. Because of its summary nature, the SRS does not provide data about individual crime incidents, including details on offenses, arrests, victim/offender relationships, or whether multiple offenses occurred in an individual crime incident. In addition, UCR data might also underreport the actual amount of crime that has occurred, since not all crimes are reported to law enforcement. For example, law enforcement officials with whom we spoke stated that individuals who may have been assaulted or robbed in the course of drug trafficking and other illicit activities are hesitant to report their involvement to the police. Moreover, senior FBI officials stated that NIBRS data, although more comprehensive than SRS data, also might not include sufficient detail to provide information on spillover crime even if they were more widely available.\nCognizant of these limitations, we analyzed SRS crime data to calculate violent and property crime rates for both border and nonborder counties in the four southwest border states: Arizona, California, New Mexico, and Texas. Our analyses of SRS data for border and nonborder counties showed that in all four states, both violent and property crime rates per 100,000 population were generally lower in 2011 than in 2004. Figure 1 shows the changes in crime rates from 2004 through 2011 for southwest border and nonborder counties. (Detailed data for fig.1 can be found in app. IV.)\nMouse over the state or county names to find out more information about border crime statistics.\nWith respect to violent crimes, as shown in figure 1,\nThe violent crime rate was lower in border counties than nonborder counties for three of the four southwest border states. Comparing all border counties combined with all nonborder counties combined within each state, the violent crime rate in California and Texas border counties was lower than in nonborder counties each year from 2004 through 2011, and lower in New Mexico border counties each year from 2005 through 2011. In contrast, the violent crime rate in Arizona border counties was higher than in nonborder counties from 2004 to 2011.\nThe violent crime rate declined over time in both border and nonborder counties across all southwest border states. Comparing 2011 with 2004, the violent crime rate in border counties in 2011 was lower by 33 percent in Arizona, 26 percent in California, and 30 percent in Texas. In nonborder counties, the decrease was 22 percent, 25 percent, and 24 percent, respectively. The violent crime rate in border counties in New Mexico was lower by 8 percent in 2011 than in 2005, and in nonborder counties the decrease was 19 percent.\nWith two exceptions, the violent crime rate was lower over time in large border counties across the southwest border states. The violent crime rate in 2011 was lower than in 2004 in 10 of 12 large border counties in Arizona, California, and Texas with sufficiently complete data for analysis. The violent crime rate in Dona Ana County, New Mexico, was lower in 2011 than in 2005. Additionally, across all 7 small border counties with sufficiently complete data for analysis, the total number of violent crimes for these counties in 2011 was also lower than in 2004.\nWith respect to property crimes, as shown in figure 1,\nThe property crime rate in border counties was either lower or similar to the rate in nonborder counties in three of the four southwest border states. Comparing all border counties combined with all nonborder counties combined within each state, the property crime rate in California border counties was lower than the rate in nonborder counties each year from 2009 through 2011. Each year from 2004 through 2008, the crime rate in California border and nonborder counties was similar. The rate in Texas border counties was similar to the rate in nonborder counties each year from 2004 through 2011. The rate in New Mexico border counties was lower than in nonborder counties in all years, 2005 through 2011.\nThe property crime rate declined over time in both border and nonborder counties in three of the four southwest border states. Comparing 2011 with 2004, the property crime rate in border counties in 2011 was lower by 35 percent in California and 28 percent in Texas. In nonborder counties, the decrease was 23 percent and 22 percent, respectively. The property crime rate in border counties in New Mexico was lower by 7 percent in 2011 than in 2005, and in nonborder counties the decrease was 18 percent.\nThe property crime rate was lower over time in large border counties across the southwest border states. The property crime rate in 2011 was lower than in 2004 in all 11 large border counties in Arizona, California, and Texas with sufficiently complete data for analysis. The property crime rate in Dona Ana County, New Mexico, was lower in 2011 than in 2005. Additionally, across all 7 small border counties with sufficiently complete data for analysis, the total number of property crimes for these counties in 2011 was also lower than in 2004.\nComparing UCR SRS and NIBRS data for the Yuma County sheriff’s office, we found comparable decreases in violent crimes. Specifically, we found that the total number of violent crimes reported through NIBRS was 32 percent lower in 2010 than in 2007, when the office began reporting NIBRS data. The number of violent crimes reported in the SRS format was 33 percent lower in 2010 than in 2007. (Additional detail on our analysis results is presented in app. V.) Local law enforcement officials with whom we spoke provided a range of factors that they thought contributed to declining violent and property crime rates, including increased law enforcement presence, either federal, local or a combination of both, and new infrastructure, such as a border fence.", "", "Federal law enforcement agencies have few efforts under way to track what might be considered to be spillover crime, including violence, for several reasons. First, while several federal components established a definition of spillover crime, there is no common government definition of such crime. For example, in 2009, the DEA reported that U.S. intelligence and law enforcement agencies agreed to define spillover violence as deliberate, planned attacks by drug cartels on U.S. assets, including people and institutions. This definition does not include trafficker-on- trafficker violence. On the other hand, according to officials from DHS’s Office of Intelligence and Analysis, also in 2009, in partnership with other intelligence agencies, DHS developed definitions of spillover violence that include violence in the United States directed by Mexican drug cartels and violence committed by cartel members or their associates against each other. Second, DHS and DOJ components, including those that have a formal definition of spillover crime, either do not collect data for the purposes of tracking spillover crime, or do not maintain such data in an automated format that can be readily retrieved and analyzed. However, officials from Arizona and Rio Grande Valley Border Enforcement Security Task Forcesmultiagency teams led by DHS’s ICE to combat cross-border criminal activitystated that while data are not tracked systematically, teams maintain information on violent activities related to drug and human smuggling they identify during the course of their investigations. Teams use this information, which includes home invasions, assaults on individuals during illegal border crossings, and robberies of drug traffickers, to inform their assessments of violent trends along the U.S.-Mexico border. In addition, the Executive Committee for Southwest Border Intelligence and Information Sharing, cochaired by the DHS Office of Intelligence and Analysis and Texas Department of Public Safety, has been working since April 2012 to propose new terms and definitions for various facets of border-related crime and violence and identify new metrics and indicators to measure such crime. The committee plans to complete this effort in March 2013.\nCBP reported that while it does not specifically define spillover crime, it does collect and maintain automated, retrievable data on assaults against Border Patrol agents and officers at ports of entry. CBP recognizes that these data do not directly measure the extent of spillover crime but may serve as an indirect indicator of such crime. With respect to Border Patrol agents, CBP maintains data on physical assaults, assaults with a vehicle, assaults with weapons, assaults with rocks, and assaults with instruments other than rocks. CBP data show that the total number of assaults against Border Patrol agents in southwest border sectors in fiscal year 2012 (549) was about 25 percent lower than in fiscal year 2006 (729). Generally, assaults increased from 2006 (729) through 2008 (1,085), decreased slightly from 2008 (1,085) through 2010 (1,049), and decreased sharply from 2010 (1,049) through 2012 (549). (See fig 2.)\nIn each fiscal year from 2006 through 2011, there were more rockings— defined as thrown rocks, for example by drug or human smugglers, at Border Patrol agents with the intent of threatening or inflicting physical harm—than all other assaults combined in Border Patrol sectors along the southwest border. In 2012, when the number of rockings was at a 7- year low, there were 51 fewer rockings than all other assaults. While the total number of assaults for all sectors combined in 2012 is smaller than in 2006, certain southwest border sectors show an increase in the number of all assaults other than rockings in 2012 from 2006. For example, the Tucson sector experienced 91 such assaults in 2012 compared with 76 in 2006, and the Rio Grande Valley sector experienced 77 such assaults compared with 41 in 2006. (Additional analysis of assault trends for fiscal years 2006 through 2012 by Border Patrol sector is presented in appendix VI.) CBP officials cited several factors that could affect a change in the number of assaults against Border Patrol agents, including changes in the level of illegal activity crossing the border, as well as changes in Border Patrol presence along the border. Also, CBP officials reported that from September 2004 through November 2012, 3 out of 22 Border Patrol agent deaths on the southwest border had a nexus to cross-border crime, while the remaining deaths mostly resulted from vehicular accidents or health issues.\nWith respect to officers at ports of entry, CBP maintains data on physical assaults, assaults with a vehicle, and assaults with a weapon. For the 2 fiscal years that CBP has reliable data, the data show that assaults against officers at southwest border ports of entry declined from 37 assaults in fiscal year 2011 to 26 assaults in fiscal year 2012.\nIn addition, the FBI reported that its Latin American Southwest Border Threat Section—created to focus on issues specifically related to drug cartels—began in fiscal year 2010 to classify incidents of violent crime with links to Mexico, including kidnappings of American citizens and non- terrorism-related hostage taking occurring in or having a substantial nexus to Mexico or Central and South America. According to the FBI, under the new classifications, from October 2009 through September 2012, it investigated and closed five cases involving kidnappings of American citizens and five cases involving non-terrorism-related hostage taking. None of these cases occurred in the United States. FBI officials cautioned that drug cartel related crimes, such as kidnappings and home invasions, are highly underreported and are not captured in national crime statistics.", "Only 1 of the 37 state and local law enforcement agencies that we interviewedthe Texas Department of Public Safetystated that it tracks spillover crime. There are several reasons spillover crime is not more widely measured and tracked across these agencies. First, there is no common definition of spillover crime shared by the border law enforcement communities, and our interviews with border sheriffs and police officials indicated that their opinions on what types of incidents constitute spillover crime vary. For example, the Texas Border Sheriff’s Coalition defined spillover crime as any action on one side of the border that is the result of violence or the threat of violence that causes a reaction on the other side of the border, such as a law enforcement response, or an economic or social impact. The Luna County, New Mexico, sheriff’s office defined spillover crime as occurring when a person is injured by any means by an act along the border that has a direct nexus to Mexican drug-trafficking organizations. The Cochise County, Arizona, sheriff’s office defined spillover crime as any crime associated with cross-border trafficking. Officials from 27 out of 37 state and local law enforcement agencies stated that it would be at least somewhat useful to have a common definition of spillover crime, because it would establish types of activities that constitute spillover crime and allow agencies to track such crime, among other uses. However, officials from 22 of those 27 agencies also stated that accomplishing such a task might be challenging. The reasons cited included differences of opinion among border counties about what incidents represent spillover crime and differences in the missions and priorities of federal, state, and local law enforcement agencies. As discussed previously in this report, the Texas Department of Public Safety and the DHS Office of Intelligence and Analysis are leading an effort by select state and local law enforcement agencies to propose new terms and definitions and identify metrics for various facets of border-related crime and violence by March 2013.\nSecond, no state or local law enforcement agency we interviewed in our review systematically collects data on what might be considered to be spillover crime in a way that can be used to analyze trends. Officials from the Texas Department of Public Safety, the single agency that said it tracks spillover crime, stated that the department collects data on crimes it considers to be related to spillover, such as murders, kidnappings, and shootings related to activities of the Mexican drug cartels. The department manages six intelligence centers along the border that, according to officials, rely on a variety of sources, including incident reports from sheriffs’ offices, news reports, and intelligence information from interagency task forces, to assess which incidents can be clearly linked to Mexico and determined to be spillover crime. However, officials stated that spillover incidents reported by the department cannot be used to analyze trends over time because they are not collected systematically and may be incomplete. For example, the incident reports can vary by sheriff’s office in terms of what is reported and how incidents are characterized. For example, we found in our interviews with Texas border sheriffs’ offices that each office may have different ways of capturing information on incidents and may consider different incidents to be related to spillover crime.\nWhile the Texas Department of Public safety is the only state or local law enforcement agency we interviewed that reported collecting data specifically on spillover crime, 6 out of 37 law enforcement agencies we spoke with stated that they collect information on cross-border and drug- related activities, which could be elements of spillover crime. Specifically,\nOfficials from 3 sheriffs’ offices in Arizona and Texas and 1 police department in California stated their agencies collect information on incidents that involve aliens without lawful immigration status to track cross-border activity. However, the officials noted that the data are too general to determine whether a specific crime incident is attributable to spillover from Mexico.\nOfficials from the Laredo, Texas, Police Department stated that since 2003, the department has tracked incidents of drug smuggling, human smuggling, and the types of weapons seized. According to officials, while the data contribute to intelligence necessary to determine whether a crime is cartel-related, the data do not contain sufficient detail to determine whether a specific crime incident is attributable to spillover from Mexico.\nOfficials from the San Diego office of the California Highway Patrol stated that in 2012 their field office began tracking how often they respond to calls from CBP’s Office of Field Operations to investigate incidents at the port of entry. However, the officials noted that the data could not be a measure for spillover crime because the incident may not always result in a crime or an arrest and may not be related to cartel activity or involve Mexican nationals.\nOfficials from 27 out of 37 state and local law enforcement agencies stated that it would be at least somewhat useful to collect spillover crime data. Some of the reasons given were that the data would enhance intelligence, identify trends, and assist the agencies in making decisions about deploying resources. In addition, some officials said that data on spillover crime could help agencies apply for grants. However, the majority also expressed concerns about the burden of collecting additional information. Specifically, officials from 22 out of 37 state and local agencies stated that they have limited technological, financial, and human resources to collect additional data.", "", "Officials from all of the DHS and DOJ components we interviewed stated that while they do not believe that spillover violence has been a significant problem, they expressed concerns about the potential for it to occur in the future because drug cartels employ increasingly violent methods to interact with rivals and law enforcement agencies in Mexico. Threat assessments conducted by DHS and DOJ during fiscal years 2006 through 2012 do not indicate that violence from Mexico spilled over the southwest border. For example, the assessments indicate that violent infighting among rival Mexican cartels has remained largely in Mexico, and crimes such as kidnappings and home invasion robberies directed against drug traffickers have remained largely isolated instances in U.S. border communities. However, DHS threat assessments have reported that the threat facing U.S. law enforcement personnel from drug- trafficking organizations has been increasing, as evidenced by more aggressive tactics used by drug-trafficking organizations and smugglers to confront or evade law enforcement. Examples of such tactics include ramming or impeding police vehicles, fleeing at high speeds, and carrying weapons.", "Officials from 37 state and local law enforcement agencies and four Chambers of Commerce we interviewed expressed varying concerns regarding the extent to which violent crime from Mexico spills into and potentially affects their border communities. Officials in 31 of the 37 state and local law enforcement agencies stated that they have not observed violent crime from Mexico regularly spilling into their counties; nonetheless, officials from 33 of the 37 agencies said they are at least somewhat concerned about the potential for spillover crime to occur. Officials noted that there is always potential for the high levels of violence in Mexico, such as organized murders and kidnappings for ransom, to spread to their border towns. A senior DEA official in the El Paso, Texas, region testified in March 2009 that the southwest border is the principal arrival zone for most illicit drugs smuggled into the United States and is also the predominant staging area for the drugs’ distribution throughout the country.\nFurther, state and local law enforcement officials expressed concerns about safety threats to law enforcement officers and residents who might encounter drug and human smugglers transiting through border communities, and according to some officials, smugglers are increasingly aggressive in evading capture and likely to be armed. For example, a New Mexico sheriff stated that while there have not been any serious injuries, drug smugglers ram police vehicles to stop a pursuit or speed through residential neighborhoods to avoid capture. In addition, armed cartel members on the Mexican border sometimes engage in gunfights with rival smugglers returning from the United States. According to the sheriff, such activities could result in vehicular accidents or shootings at U.S. law enforcement officers. An Arizona sheriff stated that most of the violence the office sees involves trafficker-on-trafficker violence. For example, a crew of smugglers might steal drug or human cargo from other smugglers to sell it themselves. In addition to the potential for violence during the event, there is also a potential for violence because of retaliation for the stolen goods. Officials in a California police department stated that auto thefts have increased, and officials believe that an increasing proportion of these thefts are related to cartel activity as cars are stolen to transport drug loads to the final destination after being transported over the border. Examples of some crimes that local officials attributed to spillover from Mexico include the following:\nA border sheriff in Arizona stated that a rancher was most likely murdered in 2010 by a smuggler.\nOfficials in a Texas police department stated that they investigated a murder in 2010 that they attributed to spillover crime. Investigators in the case determined that the victim was a cartel member and the perpetrator was from a rival cartel in Mexico and had crossed the border to assassinate the rival cartel member.\nOfficials in a California police department stated that a vehicle in Mexico was engaged in a gunfight with the Mexican police and the vehicle crossed the border into the United States.\nA sheriff in a border county in Texas stated that the property crime rates in his county had increased in 2008 because over a series of months, a group of smugglers from Mexico were burglarizing houses on their way back to Mexico. They were eventually arrested and prosecuted.\nAccording to state and local law enforcement officials, many crimes associated with drug-trafficking threats are unreported, since in many instances, both the perpetrators and the victims may be involved in criminal activity, and the victim may not be in this country legally. Further, the sheriff of a rural county in Texas stated that while statistics indicate that there is little crime in his county, it may be because there are very few law enforcement officials or residents to confront or resist smugglers moving through the county, not because criminal activity is not occurring. Similarly, a sheriff from another rural county in Texas stated that he believes that an enhanced law enforcement presence in the Rio Grande Valley may force illicit activity toward his county because it is less populated than other counties and smugglers are less likely to be confronted there. Moreover, according to some local law enforcement officials, the levels of violent crime in Mexico can have effects on the border communities that are not captured in the crime statistics. The 2011 Arizona Counter Terrorism Information Center threat assessment stated that the southwest border violence, such as kidnappings and home invasions carried out by Mexican criminal organizations, and gang-related violence, present the most substantial threat to public safety in Arizona.\nWhile 33 of 37 law enforcement agencies expressed some concern about spillover crime, officials from 11 of the 37 agencies stated that they do not treat spillover crime differently than they would any other crime. In addition, an Arizona sheriff and a police official from the same county stated that they are not more concerned about spillover crime because their county has not experienced any incidents of kidnappings or extortion, which could be indicators that crime has spilled over from Mexico.\nIn addition to concerns about crime and violence potentially spilling over from Mexico, local law enforcement officials provided a number of examples of how the violence in Mexico affects local communities:\nU.S. citizens that cross the border daily, such as for school or employment are vulnerable to extortion or recruitment by cartels. For example, police officials in a California border city stated that cartel members in Mexico have come into the United States to recruit gang members, and a sheriff in a county in New Mexico stated that in his county, 400 or more U.S. citizens live in Mexico but attend school in the United States. The students may be recruited or coerced to smuggle drugs into the United States on their way to school.\nA Texas sheriff stated that a local college was forced to close after bullets from a gunfight originating in Mexico hit the college dorm building.\nCartels may target public officials and law enforcement for corruption. Specifically, we were told of cases from local law enforcement in both New Mexico and Arizona in which public officials had been corrupted by a Mexican cartel.\nSheriff and police department officials in counties in Texas, Arizona, and New Mexico stated that cartel members may reside with their families in U.S. border communities because they are considered to be safe havens. An officer in one police department stated a concern that there is a potential for violent altercations in the United States between cartel members living in their community that represent rival Mexican cartels.\nIn addition, we spoke with Chamber of Commerce officials in one Arizona and three Texas border counties, and they all stated that they have not seen spillover violence from Mexico, but that violence in Mexico has nonetheless negatively affected businesses in their border communities. Specifically, they said that violence in Mexico has resulted in a perception that border communities are not safe and this has hindered economic growth and tourism. For example, an official from a Chamber of Commerce in one Texas county stated that local universities and hospitals have difficulty recruiting students and staff. Additionally, Chamber of Commerce officials in all three Texas counties said that violence in Mexico and more delays and stricter searches at the border have impeded Mexican consumers’ ability to more easily cross the border and purchase goods and services from the local U.S. businesses.", "At the federal level, officials from DOJ and DHS and their components stated that they have undertaken a number of efforts, both individually and through interagency partnerships, related to drug smuggling and cartel activity with a focus on the southwest border; however, all but one of these efforts do not specifically target spillover crime. For example, the FBI created a Latin American Southwest Border Threat Section to focus on issues specifically related to drug cartels. Also, DHS issued Border Violence Protocols in 2006 that set out the steps that CBP and Mexican government personnel are to follow when reporting incidents of border violence, and further updated them in 2011 to enhance coordination between the U.S. and Mexican agencies. Moreover, interagency task forces provide a forum for federal, state, and local law enforcement agencies to, among other things, share information and conduct coordinated enforcement activities to combat drug smuggling and cartel activity. Additional details on these and other efforts are contained in appendix VII.\nDHS developed the Operations Plan for Southwest Border Violence in October 2008 to address the possibility that spillover crime, such as a significant violent and spontaneous event that results in unintended cascading effects spilling over the border, may exceed DHS’s assets to respond in those locations. This contingency plan describes the various roles and responsibilities that DHS components are to undertake to coordinate an agency-wide response to a variety of potential threats of violence that could arise along the southwest border, such as credible threats against U.S. facilities or personnel. Although the plan is to be updated annually, senior officials at DHS’s Office of Operations Coordination and Planningthe office responsible for coordinating and facilitating development of the plan among the DHS componentsstated that the plan has not been revised or updated in the 4 years since it was finalized. According to these officials, DHS components have undertaken related planning efforts, such as establishing local-level coordination mechanisms to increase coordination and information sharing along the southwest border. In addition, officials at DHS’s Office of Operations Coordination and Planning stated that they do not plan to update the Operations Plan for Southwest Border Violence at this time because DHS has shifted to a more strategic approach to planning that will provide the framework for all of DHS’s planning efforts. The officials could not provide additional details on what the new strategic approach would entail because it is still in the early stages of development. To complete its framework, DHS is awaiting approval of planning guidance that it submitted to the President in June 2012. DHS developed the planning guidance pursuant to Presidential Policy Directive 8, a directive that called for DHS to develop an integrated set of guidance, programs, and processes to enable the nation to meet its national preparedness goals. DHS’s Office of Operations Coordination and Planning intends to develop DHS’s strategic framework in accordance with the new planning guidance and expects to complete the framework by October 2014. The officials said they will then decide whether to update the Southwest Border Violence Operations Plan so it follows the new planning guidance or replace the operations plan with other plans developed under the strategic framework.\nAt the state and local levels, officials from all law enforcement agencies that we spoke with stated that their agencies had undertaken some efforts, either individually or in partnership with other agencies, to combat criminal activities often associated with spillover crime, such as drug and human smuggling. Generally, these efforts aim to increase state and local law enforcement agencies’ capacity to combat criminal activities associated with spillover crime, such as forming units that focus on such crime, participating in federal grant programs, coordinating enforcement activities, and facilitating information sharing. Specific examples of state and local law enforcement efforts are contained in appendix VII.", "We provided a draft of our report to, DHS, DOJ, and the Office of National Drug Control Policy for their review and comment. DHS provided written comments, which are reprinted in full in appendix VIII. In its comments, DHS stated that it was pleased with our discussion of the initiatives that law enforcement agencies have undertaken to target border-related crime, including a DHS contingency plan for responding to a significant southwest border violence escalation and interagency task forces that combat drug smuggling and cartel activity. In addition, DHS reiterated its commitment to working with many partners across the federal government, public and private sectors, and internationally, to mitigate spillover crime along the southwest border. DOJ and the Office of National Drug Control Policy did not provide official written comments. All three agencies provided technical comments which we have incorporated where appropriate.\nWe are sending copies of this report to the Secretary of Homeland Security, the Attorney General, the Director of the Office of National Drug Control Policy and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-5431 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are acknowledged in appendix IX.", "There are 24 U.S. counties that share a border with Mexico. These counties are arranged below by state, in an alphabetical order.", "", "", "", "", "This report addresses the following questions: (1) What information do reported crime rates in southwest border communities provide on spillover crime and what do they show? (2) What efforts, if any, have federal, state, and select local law enforcement agencies made to track spillover crime along the southwest border? (3) What concerns, if any, do these agencies have about spillover crime? (4) What steps, if any, have these agencies taken to address spillover crime?\nTo address the first question, we analyzed Summary Reporting System (SRS) data from the Federal Bureau of Investigation’s (FBI) Uniform Crime Reporting (UCR) Program—the government’s centralized repository for crime data—from January 2004 through December 2011 for the four southwest border states (Arizona, California, New Mexico, and Texas). We selected January 2004 as the initial date because it provided us with data for more than 2 years prior to December 2006, when Mexican President Felipe Calderón took office and began a major military offensive against Mexican drug cartels. We also analyzed UCR’s National Incident-Based Reporting System (NIBRS) data, available from January 2007 through December 2010, for the single southwest border law enforcement agency reporting such data—the sheriff’s office in Yuma County, Arizona. To assess the reliability of the UCR data, we conducted analyses to test for irregularities in the data, reviewed FBI documentation on how the data can and cannot be used and on the FBI’s procedures for ensuring UCR data quality, and interviewed FBI officials knowledgeable about the data. On the basis of this assessment, we excluded some counties from our analysis because they did not report complete crime data to the FBI. We concluded that the data for the remaining counties were sufficiently reliable for the purposes of our review. In addition, we reviewed crime reports and documentation on crime databases published by the FBI, state agencies, and local law enforcement agencies in the four southwest border states. To further determine the types of data that are systematically collected, how these data are recorded and used in southwest border counties, and what information these data provide on spillover crime, we reviewed guidance documents and research reports developed by federal agencies, such as the Department of Justice (DOJ) and Congressional Research Service. Also, we interviewed knowledgeable officials from a total of 37 state and local agencies on the southwest border that are responsible for investigating and tracking crime occurring in their jurisdictions. At the state level, we conducted interviews with officials from the California Highway Patrol and the Arizona, New Mexico, and Texas Departments of Public Safety. At the local level, we interviewed officials representing 21 of 24 sheriffs’ offices in southwest border counties (4 in Arizona, 2 in California, 3 in New Mexico, and 12 in Texas), and 12 large municipal police departments in these border counties (4 in Arizona, 3 in California, 1 in New Mexico, and 4 in Texas).\nWe selected departments from each of four states, and we selected large departments because according to our review of the UCRSRS data, in general, large departments had more reported crimes than did smaller departments. A list of the 24 southwest border counties can be found in appendix I.\nMoreover, to obtain information on spillover crime and efforts by law enforcement agencies along the U.S.-Mexico border to combat such crime, we conducted site visits to five southwest border counties in Arizona and Texas. These visits were to (1) Tucson, Pima County, Arizona; (2) Nogales, Santa Cruz County, Arizona; (3) Brownsville, Cameron County, Texas; (4) McAllen, Hidalgo County, Texas; and (5) Laredo, Webb County, Texas. We selected these locations because they represent diverse rural and urban environments, as well as have a range of border geographic features, such as rivers, mountains, agricultural deltas, and deserts that may pose different challenges for crossing the U.S. border from Mexico. These factors might have an effect on the levels and types of crime occurring in southwest border communities. As part of our visits, we met with federal officials, such as U.S. Customs and Border Protection (CBP) agents and officers operating between and at the ports of entry along the southwest border, state law enforcement officials from the Arizona Department of Public Safety, and local law enforcement officials, such as sheriffs in Santa Cruz and Hidalgo Counties and officials in the Tucson and Nogales Police Departments. The information we obtained from these visits is not generalizable to all southwest border counties. However, the information provides valuable insights into the types of crime information that are available to law enforcement agencies and perspectives on crime occurring in southwest border communities.\nTo address the second question, we collected information, such as crime reports and documentation on categories of data collected, from and conducted interviews with state and local law enforcement agencies identified above, as well as federal agencies and interagency task forces that have responsibilities for combating drug cartel–related activities along the southwest border. Federal agencies include Department of Homeland Security (DHS) and DOJ headquarters and field offices, including DHS’s CBP, U.S. Immigration and Customs Enforcement (ICE), Office of Policy, Office of Operations Coordination and Planning, and intelligence offices, such as the Office of Intelligence and Analysis; as well as DOJ’s FBI; Drug Enforcement Administration (DEA); and Bureau of Alcohol, Tobacco, Firearms and Explosives. Interagency task forces— that is, partnerships of federal, state, and local law enforcement counterparts—include Arizona’s High Intensity Drug Trafficking Area, El Paso Intelligence Center, and Border Enforcement Security Task Forces in Arizona and Texas. State and local agencies include those identified above, as well as Arizona’s Alliance for Countering Transnational Threats, the Arizona Counter Terrorism Information Center, and members of the Texas Border Sheriff’s Coalition. We asked agencies about their efforts to track spillover crime, any challenges they encountered in doing so, and whether they collected or tracked other data they considered related to spillover crime and violence on the southwest border. Specifically, we analyzed CBP data on the number of assaults on Border Patrol agents in southwest border patrol sectors from fiscal years 2006 through 2012, and the number of assaults on Office of Field Operations personnel at southwest border ports of entry for fiscal years 2011 and 2012, the date ranges for which these data were available. To assess the reliability of the CBP data on assaults and other crimes against agents and personnel, we reviewed relevant documentation, such as procedures for collecting data consistently, and interviewed CBP staff responsible for the data. On the basis of our efforts, we determined the data to be sufficiently reliable for the purposes of our report.\nTo address the third question, we analyzed threat assessments by federal agencies, covering the time period from 2004 through 2012, to determine the extent to which these agencies identified Mexican drug cartel–related threats facing southwest border communities and law enforcement agents in those communities. Specifically, we analyzed 4 DHS Office of Intelligence and Analysis assessments that focused on violence along the entire southwest border covering the time period from 2006 through 2011. In addition, we analyzed the total of 12 Border Patrol threat assessments and Operational Requirements-Based Budgeting Process documents containing threat information for the Laredo, Tucson, and Rio Grande Valley sectors: 1 assessment in sample fiscal years 2004, 2007, 2009, and 2012 per each sector to discern any trends in crime and violence along the southwest border over time. We selected the three Border Patrol sectors to correspond to the locations of our site visits. We selected these particular years because they approximate release dates of the DHS Intelligence and Analysis assessments to help identify potential similarities or differences in trends. To obtain additional context on potential threats facing southwest border communities, we reviewed several other assessments, such as National Drug Intelligence Center assessment (2011) and an Arizona Counter Terrorism Information Center assessment (2011), and other documentation, such as congressional reports and testimonies. To obtain perspectives on a range of concerns regarding the existence and potential effects of spillover crime, in addition to interviews with the officials from 37 state and local law enforcement agencies and federal officials identified above, we interviewed officials from Chambers of Commerce in four of the five counties we visited— Cameron, Hidalgo, Santa Cruz, and Webb Counties. While the results of these interviews are not generalizeable to all local businesses or Chambers of Commerce on the southwest border, they provide perspectives about the effects that violence in Mexico might have had on the businesses in their communities.\nTo address the fourth question, we reviewed and analyzed information, such as fact sheets and contingency plans, from and conducted interviews with all of the federal, state, and local agencies and task forces previously discussed.\nWe conducted this performance audit from January 2012 through February 2013, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Appendix III provides information about differences between the UCR SRS and NIBRS. As shown in table 2, the SRS collects aggregate offense information for Part I offenses, and arrest information for Part I and Part II offenses. NIBRS collects offense information on each occurrence of crimes listed under Group A offenses and arrest information for Group A and Group B offenses.\nTable 3 summarizes the main differences between the two crime data systems.", "", "The FBI provided GAO with the 2011 SRS data when it publicly released these data in November 2012. According to the FBI, law enforcement agencies were able to revise these data until the end of the calendar year 2012.", "The FBI provided GAO with the 2011 SRS data when it publicly released these data in November 2012. According to the FBI, law enforcement agencies were able to revise these data until the end of the calendar year 2012.", "Local law enforcement agencies in the county did not submit complete data to the FBI.", "Local law enforcement agencies in the county did not submit complete data to the FBI.\nThe FBI provided GAO with the 2011 SRS data when it publicly released these data in November 2012. According to the FBI, law enforcement agencies were able to revise these data until the end of the calendar year 2012.", "Local law enforcement agencies in the county did not submit complete data to the FBI.\nLocal law enforcement agencies in the county did not submit complete data to the FBI.", "The FBI provided GAO with the 2011 SRS data when it publicly released these data in November 2012. According to the FBI, law enforcement agencies were able to revise these data until the end of the calendar year 2012.", "The FBI provided GAO with the 2011 SRS data when it publicly released these data in November 2012. According to the FBI, law enforcement agencies were able to revise these data until the end of the calendar year 2012.", "Local law enforcement agencies in the county did not submit complete data to the FBI.\nLocal law enforcement agencies in the county did not submit complete data to the FBI.", "The FBI provided GAO with the 2011 SRS data when it publicly released these data in November 2012. According to the FBI, law enforcement agencies were able to revise these data until the end of the calendar year 2012.", "Local law enforcement agencies in the county did not submit complete data to the FBI.\nLocal law enforcement agencies in the county did not submit complete data to the FBI.", "We analyzed UCR SRS crime data in the four southwest border states: Arizona, California, New Mexico, and Texas. This appendix presents the results of our analyses of SRS crime data broken out by violent and property crimes for southwest border counties, separately and combined within each state, for the period 2004 through 2011. We also present the results of analyses of violent and property crime data for nonborder counties, combined within each state, and compare the nonborder county crime rates per 100,000 population with border county crime rates. We also analyzed available NIBRS data, covering the period 2007 through 2010, for the Yuma County, Arizona, sheriff’s office. The office is the single southwest border law enforcement agency that collects NIBRS data.", "All border and nonborder counties. We analyzed SRS violent crime data for all 4 border counties in Arizona, both border counties in California, all 3 border counties in New Mexico, and all 15 border counties in Texas. We also analyzed these data for all 11 nonborder counties in Arizona, all 56 nonborder counties in California, 29 of 30 nonborder counties in New Mexico, and all 239 nonborder counties in Texas. The violent crime rate for the New Mexico border counties was lower in 2011 than in 2005, but the rate in New Mexico’s border counties decreased less than in its nonborder counties. For the border counties in each of the other states, we found that the violent crime rate was lower in 2011 than in 2004, and the rate in the border counties decreased more than in the nonborder counties. Specifically, as shown in figure 3,\nThe violent crime rate in Arizona’s border counties was higher than in Arizona’s nonborder counties in each year from 2004 through 2011.\nHowever, the crime rate decreased in both, with the rate in border counties being 33 percent lower in 2011 than 2004, and the rate in nonborder counties being 22 percent lower.\nThe violent crime rate in California’s border counties was lower than in California’s nonborder counties in each year from 2004 through 2011. For border counties, the rate was 26 percent lower in 2011 than in 2004. The violent crime rate in California’s nonborder counties generally decreased and was 25 percent lower in 2011 than in 2004.\nThe violent crime rate in New Mexico’s border counties was lower than in New Mexico’s nonborder counties in each year from 2005 through 2011. The decrease in crime rate in border counties (8 percent) was smaller than the decrease in nonborder counties (19 percent).\nThe violent crime rate in Texas’s border counties was lower than in Texas’s nonborder counties in each year from 2004 to 2011. For border counties, the rate was 30 percent lower in 2011 than in 2004, while the rate for nonborder counties was 24 percent lower.\nLarge border counties. We analyzed SRS violent crime data for all 13 large southwest border counties—that is, counties with populations of 25,000 or more—that submitted sufficiently complete data to the FBI to enable us to calculate the violent crime rate.\nOf these, in 10 of the 12 large border Arizona, California, and Texas counties, the rate was lower in 2011 than in 2004. In 2 large border counties in Texas, the violent crime rate increased (see fig. 1). Specifically, (1) in Maverick County, Texas, the violent crime rate increased by 6 percent; and (2) in Val Verde County, Texas, the violent crime rate increased by 41 percent, largely because of an increase in aggravated assaults. Although lower in 2011 than in 2004, the violent crime rate in Cochise County, Arizona, increased 20 percent from 2010 to 2011, principally because of an increase in aggravated assaults. The violent crime rate in Dona Ana County, New Mexico, was lower in 2011 than in 2005. However, the rate increased 5 percent between 2010 and 2011, largely because of increases in robberies and aggravated assaults. Comparing UCR SRS and NIBRS data for the Yuma County sheriff’s office—the single southwest border law enforcement agency that reports NIBRS data—we found comparable decreases in violent crimes. Specifically, we found that the total number of violent crimes reported through NIBRS was 32 percent lower in 2010 than in 2007, when the office began reporting NIBRS data. The number of violent crimes reported in the SRS format was 33 percent lower in 2010 than in 2007. Overall, the total number of violent crime offenses reported by the Yuma County sheriff’s office through NIBRS was about 1 percent higher than those reported through the SRS.\nSmall border counties. The southwest border has 9 small counties— that is, counties with populations of less than 25,000. The average combined population of these 9 counties from 2004 through 2011 was about 46,000. Our analysis of SRS violent crime data for 7 of the 9 counties with sufficiently complete data shows that the total number of reported violent crimes in these small counties decreased by 55 percent, that is, from a total of 93 violent crimes in 2004 to 42 in 2011 (see fig. 4).\nAll border and nonborder counties. We analyzed SRS property crime data for both border counties in California, all 3 border counties in New Mexico, and all 15 border counties in Texas. We also analyzed the data for the nonborder counties in California, New Mexico, and Texas. For the border counties in California and Texas, we found that the reported property crime rate in 2011 was lower than in 2004, and the rate in the border counties decreased more than in the nonborder counties. The rate for New Mexico border counties was lower in 2011 than in 2005, but the rate in New Mexico’s border counties decreased less than in its nonborder counties. Specifically, as shown in figure 5,\nEach year from 2009 through 2011, the property crime rate in California’s border counties was lower than the rate in California’s nonborder counties; and each year from 2004 to 2008, the rate in border and nonborder counties was similar. For border counties, the rate was 35 percent lower in 2011 than in 2004. The property crime rate in California’s nonborder counties decreased each year and was 23 percent lower in 2011 than in 2004.\nThe property crime rate in New Mexico’s border counties was lower than in New Mexico’s nonborder counties in each year from 2005 to 2011. The decrease in crime rate in border counties (7 percent) was smaller than the decrease in nonborder counties (18 percent).\nThe property crime rate in Texas’s border counties was similar to the rate in nonborder counties in nearly all years. However, the crime rate decreased in both, with the rate in border counties being 28 percent lower in 2011 than 2004, and the rate in nonborder counties being 22 percent lower.\nLarge border counties. We analyzed SRS property crime data for the 12 large southwest border counties that submitted sufficiently complete data to the FBI to enable us to calculate the reported property crime rate. Of these, in all 11 large border counties in Arizona, California, and Texas, the SRS data showed that the crime rate was lower in 2011 than in 2004, although there was variability in the rate in some counties, such as Cochise County, Arizona, and Val Verde County, Texas, over the years (see fig. 1). The reported property crime rate in Dona Ana County, New Mexico, was lower in 2011 than in 2005. Comparing UCR SRS and NIBRS data for the Yuma County sheriff’s office, we found that both showed a decrease in property crimes. Specifically, the total number of property crimes reported through NIBRS was 27 percent lower in 2010 than in 2007, when the office began reporting NIBRS data. The number of property crimes reported in the SRS format was 33 percent lower in 2010 than in 2007. Overall, the total number of property crime offenses reported through NIBRS was about 24 percent higher than those reported through in the SRS format.\nSmall border counties. Our analysis of SRS data for 7 of 9 counties with sufficiently complete data shows that the total number of reported property crimes in these small counties decreased by about 29 percent, that is, from a total of 701 crimes in 2004 to 497 in 2011 (see fig. 6).\nWe excluded Hidalgo County, New Mexico, and Presidio County, Texas, because SRS property crime data local law enforcement agencies submitted to the FBI were incomplete.\nThe average combined total population for the 7 counties from 2004 through 2011 was about 36,000.", "Analysis of assault trends for fiscal years 2006 through 2012 by Border Patrol sector is presented in figure 7 and source data for the analysis are presented in table 4.\nMove mouse over the sector name to learn more about the sector.\nU.S. Customs and Border Protection’s Border Patrol has divided geographic responsibility for border security operations along the southwest border among nine sectors, each of which has a headquarters with management personnel.", "Select efforts by federal, state, and local law enforcement agencies to address crime along the southwest border are presented in tables 5 and 6.", "", "Appendix IX: GAO Contact and Staff Acknowledgments Error! No text of specified style in document.", "", "In addition to the contact named above, Rebecca Gambler, Director; Cindy Ayers, Assistant Director; Evi Rezmovic, Assistant Director; David Alexander; Hiwotte Amare; Eric Hauswirth; Margaret McKenna; Erin O’Brien; Yanina G. Samuels; and Julia Vieweg made significant contributions to the work." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 2, 1, 2, 2, 1, 1, 1, 2, 2, 2, 2, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "h3_full", "", "", "h0_full h4_full", "h1_title", "h1_full", "h1_full", "h2_title", "h2_full", "h2_full", "h3_full", "h4_full", "", "", "", "", "", "h0_full h4_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "How can data on crime in border counties be accessed?", "What limits does the UCR have?", "How does the UCR fail to acknowledge Mexican spillover?", "How did the GAO regard crime in southwest border counties?", "What evidence backs up this analysis?", "What efforts assist tracking of spillover crime?", "How is spillover crime defined?", "How could spillover crime be determined from existing data?", "What is an example of this data?", "How does law enforcement fail to track spillover crime?", "Why is spillover crime not tracked?", "What is pushing this tracking to improve?", "What is the concern for crime at the border with Mexico?", "What threat does this crime possibly pose?", "How does the reality of spillover crime compare to largeness concern of it?", "How is the spillover crime being handled?", "What plans have the DHS made?", "How did law enforcement interact with spillover-related crime?", "How did the GAO assess crime data at the southwest border?", "What interview information did the GAO collect?", "What information do these interviews provide?", "What recommendations are made in this report?" ], "summary": [ "The Federal Bureau of Investigation's (FBI) Uniform Crime Reporting (UCR) Program, the government's centralized repository for crime data, provides the only available standardized way to track crime levels in border counties over time.", "However, UCR data lack information on whether reported offenses are attributable to spillover crime, and have other limitations, such as underreporting to police.", "Also, UCR data cannot be used to identify links with crimes often associated with spillover from Mexico, such as cartel-related drug trafficking.", "Cognizant of these limitations, GAO's analysis of data for southwest border counties with sufficiently complete data show that, generally, both violent and property crimes were lower in 2011 than in 2004.", "For example, the violent crime rate in three states' border counties was lower by at least 26 percent in 2011 than in 2004 and in one other state lower by 8 percent in 2011 than in 2005.", "Law enforcement agencies have few efforts to track spillover crime.", "No common federal government definition of such crime exists, and Department of Homeland Security (DHS) and Department of Justice (DOJ) components, including those with a definition, either do not collect data to track spillover crime, or do not maintain such data that can be readily retrieved and analyzed.", "However, several components collect violent incident data that could serve as indirect indicators of spillover crime.", "For example, GAO analysis of U.S. Customs and Border Protection (CBP) data show that, generally, assaults on agents between southwest border ports of entry were about 25 percent lower in 2012 than in 2006.", "State and local law enforcement agencies, except for one state agency, do not track what might be considered to be spillover crime because they lack a common definition and do not systematically collect these crime data in a way that can be used to analyze trends.", "Officials from 22 of 37 state and local agencies told GAO that they have limited resources to collect additional data.", "Since April 2012, DHS and the Texas Department of Public Safety have coled an effort to propose definitions and metrics for border-related crime by March 2013.", "Law enforcement agencies have varying concerns regarding the extent to which violent crime from Mexico spills into southwest border communities.", "While DHS and DOJ threat assessments indicate that violent infighting between drug cartels has remained largely in Mexico, DHS assessments also show that aggressive tactics used by traffickers to evade capture demonstrate an increasing threat to U.S. law enforcement.", "Also, officials in 31 of the 37 state and local agencies stated that they have not observed violent crime from Mexico regularly spilling into their counties; nonetheless, officials in 33 of the 37 agencies were at least somewhat concerned, for example, for the safety of their personnel or residents.", "Law enforcement agencies have undertaken initiatives to target border-related crime, including one effort to address violent crime spilling over from Mexico.", "For example, in October 2008, DHS developed a contingency plan for the possibility that a significant southwest border violence escalation may exceed DHS assets' ability to respond.", "In addition, officials from all state and local law enforcement agencies that GAO spoke with said their agencies had undertaken some efforts, either individually or in partnership with others, to combat criminal activities often associated with spillover crime, such as drug and human smuggling.", "GAO analyzed crime data from all of the 24 southwest border counties from 2004 through 2011 and federal documentation, such as threat assessments and DHS's plans for addressing violence along the southwest border.", "GAO interviewed officials from DHS and DOJ and their components. GAO also interviewed officials from 37 state and local law enforcement agencies responsible for investigating and tracking crime in the border counties in the four southwest border states (Arizona, California, New Mexico, and Texas).", "While the results of the interviews are not generalizable, they provided insights.", "GAO is not making any recommendations. DHS provided comments, which highlighted border-related crime initiatives recognized by GAO." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, -1, -1, 2, -1, 4, 4, -1, 0, -1, -1, 0, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 5, 5, 5, 1, 1, 1, 1 ] }

{ "title": [ "Background", "Zika Virus: An Overview", "Zika Virus Surveillance Overview", "Diagnostic Tests for the Zika Virus", "Mosquito Control EffortsMosquito Control Efforts", "Federal Agency Roles in a Zika Virus Outbreak Response", "Challenges to Gathering New Information about Zika Virus Epidemiology", "What Is Known about the Epidemiology of Zika Virus", "Zika Virus Cases Reported in the U.S. States and Territories", "Zika Virus Infection Can Cause Microcephaly and Other Adverse Health Outcomes", "What Is Not Known about the Epidemiology of Zika Virus", "The Total Number of Infections Is Not Known", "The Biological Mechanisms, Risks, and Reasons for Geographic Differences in Outcomes Associated with Maternal-Fetal Transmission Are Unclear", "The Presence and Duration of the Virus in Different Bodily Fluids Is Not Well-Understood", "The Role of Prior Zika Virus Infections or Exposure to Other Related Flaviviruses is Not Clear", "The Full Spectrum of Outcomes of Zika Virus Infection is Not Known", "Three Key Challenges to Zika Virus Surveillance", "Establishing Case Definitions Challenged the Collection of Consistent and Timely Information", "Information Dissemination and Communication Were Not Always Timely", "The Interoperability of Surveillance Databases Was Lacking", "Two Key Challenges in Conducting Epidemiological Zika Virus Research", "Establishing Association and Causality Between Zika Virus Infection and Adverse Health Outcomes Faced Study Design Challenges", "Predicting the Spread of the Zika Virus Was Challenged by Insufficient Data and Lack of Developed Models", "Characteristics of Different Diagnostic Tests Varied, Manufacturers and Users Faced Several Challenges, and FDA and CDC Did Not Consistently Communicate Sufficient Information", "Molecular and Serological Zika Virus Diagnostic Tests Varied in Performance and Operational Characteristics", "Molecular Tests Varied in Their Ability to Detect Zika Virus", "Molecular Tests Varied in Ease of Use and Timeliness", "Strengths and Limitations of Molecular Diagnostic Tests", "Serological Tests Varied in Their Timeliness and Throughput", "Strengths and Limitations of Serological Diagnostic Tests", "Overall Limitations of Diagnostic Testing Can be Addressed Through the Use of Algorithms", "Manufacturers and Users Faced Several Challenges in Developing and Using Zika Diagnostic Tests", "Manufacturers Faced Several Challenges Developing Diagnostic Tests", "Diagnostic Test Users Faced Challenges Acquiring Equipment and Determining the Most Accurate Test", "Mosquito Control Methods Have Strengths and Limitations, and Federal Agencies Face Several Challenges Assisting These Efforts", "Mosquito Control Methods in the United States Are Often Combined Under Integrated Vector Management", "Available Methods for Controlling Mosquito Larvae and their Strengths and Limitations", "Available Methods for Controlling Adult Mosquitoes and their Strengths and Limitations", "Available Methods for Personal Protection against Mosquitoes and their Strengths and Limitations", "Other Issues Related to Available Mosquito Control Efforts", "The Federal Government Faced Challenges Supporting Mosquito Control Efforts", "The Timing of the Availability of Funds and Sustaining Expertise", "CDC Faced Challenges Communicating the Presence of Mosquitoes", "Challenges in Linking Mosquito Control Efforts to Disease Outcomes", "CDC had Limited Information on Mosquito Control Entities", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Participants in GAO’s Expert Meeting", "Appendix II: Objectives, Scope, and Methodology", "Appendix III: Comments from the Department of Health and Human Services", "Appendix IV: Zika Virus Case Definitions for National Notifiable Disease Reporting", "Criteria for a Zika case", "Appendix V: Performance Characteristics Information Presented in EUA Molecular Diagnostic Tests Labels for Zika Virus", "Appendix VI: Issues with Mosquito Control Pesticide Regulation", "Appendix VII: Related GAO Products", "Appendix VIII: GAO Contacts and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The Zika virus is related to dengue, yellow fever, West Nile, and Japanese encephalitis viruses, among others. The virus was first identified in the Zika Forest in Uganda, Africa in 1947, from where it moved east, causing only sporadic human disease until 2007. The first documented outbreak of Zika virus disease was reported in Yap State, Federated States of Micronesia, in 2007 and subsequent outbreaks occurred in Southeast Asia and the Western Pacific. Some researchers have suggested that several combined factors contributed to the current outbreak and that travel was a major factor. Figure 2 illustrates the spread of the Zika virus over time.\nIn February 2016, a WHO emergency committee on the Zika virus noted a strong association in time and place between Zika virus infection and a rise in detected cases of congenital malformations and neurological complications, suspecting a causal relationship. WHO declared that the recent cluster of microcephaly cases and other neurological disorders, including Guillain-Barré syndrome, reported in Brazil and following a similar cluster in French Polynesia in 2013, constituted a Public Health Emergency of International Concern which required urgent and coordinated research. The Secretary of Health and Human Services also designated the Zika virus a public health emergency in Puerto Rico in August 2016.\nMicrocephaly is a rare nervous system disorder that causes a baby’s head to be smaller than expected and not fully developed, which can lead to impaired thought processes, delayed motor function, and other adverse outcomes. Guillain-Barré syndrome is a rare disorder in which the body’s immune system attacks the nervous system outside the brain and spinal cord, causing muscle weakness and, in some cases paralysis, although most people recover.\nCurrently available Zika virus prevention methods include various mosquito control and control methods, guidance on safe sex practices if a person has or is suspected of having Zika virus or has traveled to an area with high rates of local transmission, and guidance for travel to areas affected by Zika virus. Although at present no vaccine has been approved by the FDA to prevent Zika virus disease, several vaccines are in different development phases.", "Key Terms Related to Epidemiology Emerging Infections: Infectious disease that is newly recognized; one that has been recognized before but is newly appearing in a different population or geographic area than previously affected; one that is newly affecting many more individuals; and/or one that has developed new attributes (e.g., resistance or virulence). Epidemiology: The study of the occurrence and distribution of health-related events, states, and processes in specified populations, including the study of the determinants influencing such processes and the application of this knowledge to control relevant health problems. Incidence: The number of new cases of a disease in a defined population within a specified time. Incidence rate: The rate at which new events occur in a population expressed as the number of new cases divided by the population at risk in a defined time period. Outbreak: An epidemic limited to a localized increase in the incidence of a disease as in a village, town, or closed institution. Surveillance: Systematic and continuous collection, analysis, and interpretation of data, closely integrated with the timely and coherent dissemination of the results and assessment to those who have the right to know so that action can be taken.\nThe Zika virus was added to the list of nationally notifiable diseases in February 2016. CDC collects data on new cases of notifiable diseases through its National Notifiable Diseases Surveillance System (NNDSS), by encouraging states and territories to report laboratory-confirmed cases. Arthropod-borne viruses (also called arboviruses) are also reported in a surveillance system that is specific to arboviral diseases, called ArboNET. Reporting nationally notifiable diseases, including the Zika virus, from states and territories to CDC is voluntary. States and territories rely on healthcare providers or laboratories to report cases to their local, state, or territorial health departments according to the laws or regulations within their jurisdictions. A surveillance case definition is a set of uniform criteria used to define a disease for public health surveillance, with the purpose of enabling public health officials to classify and count cases consistently across reporting jurisdictions.\nCSTE—a professional organization of member states and territories representing public health epidemiologists—recommends that state health departments report cases of selected diseases to CDC’s NNDSS, in accordance with CSTE’s position statements that establish case definitions and are reviewed by CDC. The CSTE Zika virus interim case definition position statement was published in February 2016 and revised in June 2016. By April 2017, all states with the exception of Alaska, and three U.S. territories reported Zika virus cases to CDC through the ArboNET system, according to CDC’s reports.\nTo understand more about Zika virus infection, CDC established the U.S. Zika Pregnancy Registry and is collaborating with state, tribal, local, and territorial health departments to collect information about pregnancy and infant outcomes following laboratory evidence of possible Zika virus infection during pregnancy. According to CDC, the data collected through this registry will be used to update recommendations for clinical care, to plan for services for pregnant women and families affected by Zika virus, and to improve prevention of Zika virus infection during pregnancy. The Puerto Rico Department of Health and CDC developed the Zika Active Pregnancy Surveillance System (ZAPSS)/Sistema de Vigilancia Activa de Zika en Embarazos (SVAZE) to evaluate the association between possible Zika virus infection during pregnancy and adverse outcomes during pregnancy, birth, and early childhood up to 3 years of age. Pregnant women in Puerto Rico with laboratory evidence of possible Zika virus infection (positive or equivocal test results, regardless of whether they have symptoms) and prenatally or perinatally exposed infants born to these women will be actively monitored. According to CDC, this information has been used to inform best practices in care for women infected with Zika virus during pregnancy and their infants. CDC compiles data from the aforementioned systems to regularly update its website information regarding case counts and its Morbidity and Mortality Weekly Report (MMWR) of notifiable diseases.", "Accurate diagnostic tests have a key role in patient management and the control of most infectious diseases. Good quality diagnostic tests that are fit for purpose and can provide accurate results can help in reducing the burden of infectious diseases. The choice of which diagnostic test to use can depend on several factors, such as: which tests are approved for use by regulatory authorities, which tests are available for use at the patient’s health care location, and the physician’s decision on which of the available tests he or she judges might be useful in clinical decision making. Zika virus diagnostic testing is now performed in federal, state, and commercial laboratories.\nHHS, through FDA, oversees the safety and effectiveness of diagnostic tests, which are regulated as medical devices sold in the United States. FDA can authorize the use of unapproved medical products, including diagnostic tests or an unapproved use of approved medical products for certain emergencies. Under an Emergency Use Authorization (EUA), these medical products can be used in emergencies under certain conditions, when there are no adequate, approved, and available alternatives. An EUA for a specific diagnostic test is intended to be temporary and only remains in effect for the duration of the declared emergency unless it is revoked, for example because of issues with the diagnostic test.\nBefore FDA may issue an EUA, the Secretary of Health and Human Services must declare that circumstances exist justifying the authorization (see fig. 3). In appropriate circumstances, an HHS EUA declaration may support issuance of more than one EUA. For example, based on an HHS EUA declaration that circumstances exist to justify the authorization of emergency use of diagnostics for a specified biological agent, FDA may authorize emergency use for multiple diagnostic tests to meet the need, provided that each EUA meets the statutory criteria for issuance. The FDA website includes a current list of available diagnostic tests and associated letters of authorization, fact sheets, and product labels. The letter of authorization includes the criteria for issuance, the scope of the authorization, waiver of certain requirements, and conditions and duration of authorization. Fact sheets are available for public health providers and for patients. Product labels include the intended use, procedures for conducting the test, and performance characteristics, among others.\nHHS determined that the Zika virus posed a significant potential for a public health emergency affecting national security and declared in February 2016 that circumstances justified EUA of Zika virus diagnostic tests. FDA’s analytical and clinical evaluation of an EUA for a medical product is limited in comparison to the extensive evaluation required for premarket notification (also called a 510(k) review) or premarket approval.\nLaboratory developed tests, on the other hand, are intended for clinical use, not for commercial sale and distribution, and are designed, manufactured and used within a single laboratory or laboratory network. FDA has generally not enforced premarket review and other applicable FDA requirements for laboratory developed tests because such tests are relatively simple and generally available on a limited basis. However, according to an expert from out meeting, laboratory developed tests have increased in technical and analytical complexity.\nFDA has authorized under EUA two different types of diagnostic tests for the Zika virus—molecular and serologic. Molecular tests are used to detect genetic material in samples of bodily fluids, such as serum and urine. Serologic tests are diagnostic tests that detect antibodies against the Zika virus in the blood. CDC manufactured and received authorization for both types of tests, one called Trioplex (molecular) and the other, Immunoglobulin M Antibody Capture enzyme linked immunosorbent assay, called MAC-ELISA (serological). Trioplex is a real time reverse transcription polymerase chain reaction test (real time RT-PCR) and the MAC-ELISA is used to detect antibodies created against the Zika virus.", "Because Zika virus disease cannot yet be prevented by drugs or vaccines, mosquito control is critical in mitigating risks associated with this disease. According to a CDC webpage, Zika virus is transmitted to people mainly through the bite of infected Aedes aegypti or possibly Aedes albopictus mosquitoes, which an article in a CDC journal reports are present in the United States and widely distributed globally Figure 4 shows the potential range of the Aedes aegypti and Aedes albopictus mosquitoes in the United States. The Aedes aegypti mosquitoes are reportedly the primary mosquito spreading Zika virus in the Americas, while the Aedes albopictus mosquitoes share many of the same traits as Aedes aegypti.\nA female mosquito that bites someone with Zika virus of sufficient titer can obtain the virus, allow it to multiply within it, and enter its salivary gland such that subsequent humans bitten by this mosquito can potentially be infected with the Zika virus. According to experts, the Aedes aegypti mosquitoes are primarily daytime biters and can bite multiple human hosts in succession. According to the CDC, mosquito control measures that reduce the number of potentially infectious mosquitoes can help reduce the spread of the Zika virus.\nMosquito control in the United States is implemented and overseen at the state and local levels, by entities such as mosquito control districts and health agencies. CDC, using sources such as the American Mosquito Control Association, identified over 900 entities in the United States that perform mosquito control; however, not all geographic areas within the United States are covered by a mosquito control entity. Federal agencies support such control entities with funding and subject matter experts and may regulate some control methods such as pesticides.", "HHS is the lead federal agency for public health and medical response to disease outbreaks and it leverages national public health and medical resources to prepare for and respond to disease outbreaks. For a Zika virus response, HHS coordinates activities across federal agencies to prevent and reduce Zika virus disease transmission and detect Zika virus disease and infection in communities where it may emerge. It would provide clinical guidance for diagnosis and case management. Table 1 shows the role of federal agencies and other agencies with respect to Zika virus disease in the United States.", "Surveillance and research during the recent Zika virus outbreaks in the United States and abroad have established new information about the epidemiology of Zika virus. Since the Zika virus was a newly emerging infectious disease threat in the United States, and relatively little was known about the virus prior to 2016, CDC and the states were not fully equipped with information and resources needed for a rapid response at the outset of the recent outbreaks. This presented surveillance and research challenges in addressing the Zika virus knowledge gaps.", "Knowledge about Zika virus epidemiology has increased in the past year, including information about Zika virus disease incidence and distribution of cases and its associated adverse health outcomes.", "Between January 1, 2015 and April 5, 2017, reported Zika virus disease cases numbered 5,197 in the United States. Florida and New York had the largest number of reported cases, followed by California and Texas.\nWith the exception of Alaska, every state and three territories reported at least one Zika virus disease case by April 5, 2017. (See fig. 5.) Ten states reported more than 100 cases each. Ninety-four percent of all cases in U.S. states and the District of Columbia were travel-associated. According to a CDC analysis of reported cases between January 1, 2016 and July 31, 2016 in U.S. states and the District of Columbia, 66 percent of the 2,354 travel-related cases were associated with travel to countries and territories in the Caribbean, followed by Central America (18 percent), South America (10 percent), North America (5 percent), and Southeast Asia and the Pacific Islands (<1 percent).\nAccording to CDC, the first identified occurrence of local (mosquito-borne) areas of transmission and the first identified outbreak of mosquito-borne Zika virus infection in the continental United States occurred in Florida in Miami-Dade and Broward counties during June–August, 2016. This led to the designation of red zones for those areas and guidance for people living in or traveling to those areas. Texas is the only other state that has since reported locally-acquired cases. As of April 5, 2017, 216 of the total reported cases in Florida and 6 of the total cases in Texas were locally-acquired. Seventy-four reported cases in U.S. states and the District of Columbia were acquired through other routes, including maternal-fetal transmission, person-to-person through sexual transmission, and laboratory transmission.\nAt 36,504 reported cases, the U.S. territories had about seven times the number of cases as U.S. states, and most of these cases were presumed to have been acquired through local mosquito-borne transmission; only 143 cases reported in the U.S. territories were among travelers returning to territories from other affected areas. CDC reports that with local transmission in the territories, it is not possible to determine whether infection was caused by mosquito-borne or sexual transmission.\nIn addition to routinely updating cumulative Zika virus disease case counts on its Zika webpage, CDC periodically publishes Zika case demographic and other information in its MMWR. For example, 63 percent of the 2,382 Zika virus disease cases reported between January 1, 2016 and July 31, 2016 in U.S. states and the District of Columbia were female, and the same percentage was reported in an analysis of Puerto Rico cases between November 1, 2015 and October 20, 2016. CDC noted that the higher proportion of women with symptomatic disease could be because of care-seeking behavior, differential exposure to mosquitoes or other risks, or testing of pregnant women increased.\nThe median age of reported Zika virus disease cases was 39 years in U.S. states and the District of Columbia. Preliminary CDC analysis indicated that reported cases in U.S. states typically were among older persons compared to cases in U.S. territories. According to CDC, the age difference observed in this preliminary analysis was most likely due to differences in the traveler population versus the general population. The majority of cases in U.S. states were travel-associated, while most cases in U.S. territories were acquired through presumed local mosquito-borne transmission, according to a CDC Zika case count update report.", "In a paper published in May 2016, CDC authors applied criteria for causality in a review of available data and concluded that a causal relationship exists between prenatal Zika virus infection and microcephaly and other serious brain abnormalities. In September 2016, a WHO Zika causality statement concluded that the most likely explanation of available evidence from outbreaks of Zika virus infection and clusters of microcephaly is that Zika virus infection during pregnancy is a cause of congenital brain abnormalities including microcephaly. Other studies have sought to estimate the risk of adverse health outcomes to pregnant women infected with Zika virus. For example, a CDC study estimated that the risk of microcephaly from Zika virus infection in the first trimester in Brazil was between about 100 to 1300 cases per 10,000 births, compared to an estimated baseline risk of 2 to 12 cases per 10,000 births. According to CDC and WHO, microcephaly is just one of a range of birth defects that could be related to Zika virus infection.\nWHO reported that by January 18, 2017, 29 countries or territories had reported microcephaly and other central nervous system malformations that were potentially associated with Zika virus infection. In the United States, the U.S. Zika Pregnancy Registry publicly reports about twice a month the total number of pregnant women with laboratory evidence of possible Zika virus infection who were reported to the registry. The March 28, 2017 update included 1,716 pregnant women in U.S. states and the District of Columbia with laboratory evidence of possible Zika virus infection. Of 1,311 completed pregnancies as of March 28, 2017 with laboratory evidence of Zika virus infection in U.S. states and the District of Columbia, there were 56 live born infants reported to have birth defects and 7 pregnancy losses with birth defects. As of March 28, 2017, 3,461 pregnant women with laboratory evidence of Zika virus infection in U.S. territories were reported to the U.S. Zika Pregnancy Registry or to the Zika Active Pregnancy Surveillance System for Puerto Rico. CDC noted in this update that Puerto Rico was not using the same case inclusion criteria, and CDC was not reporting numbers for adverse pregnancy outcomes in the territories at that time. A CDC report in April 2017 provided data on the impact of Zika virus on pregnant women and babies for 2016, including that 44 states reported cases of pregnant women with evidence of Zika virus infection and most were travel-associated, and about 1 in 10 pregnant women with confirmed Zika virus had a fetus or baby with birth defects.\nAs of January 18, 2017, 21 countries or territories had reported an increase in the incidence of Guillain-Barré syndrome or laboratory confirmation of a Zika virus infection among Guillain-Barré syndrome cases. CDC also reported that its own research suggested a strong association between Guillain-Barré syndrome and Zika virus, but also noted that only a small proportion of persons with a recent Zika virus infection got Guillain-Barré syndrome. CDC reported that of 56 suspected cases of Guillain-Barré syndrome with onset of neurologic signs identified between January 1 and July 31, 2016 in Puerto Rico, 20 patients had no evidence of Zika virus infection, compared to 34 patients who had evidence of Zika virus or flavivirus infection.", "While much has been learned about the epidemiology of Zika virus, many unknowns remain, including the total number of infections; the biological mechanisms, risks, reasons for geographic differences, and full spectrum of outcomes associated with maternal-fetal transmission; the presence and duration of the virus in different bodily fluids; the role of prior Zika virus infections or exposure to other related flaviviruses; and the full spectrum of outcomes of Zika virus infection.", "Zika virus case counts obtained from the national disease surveillance system underestimate the total number of Zika virus infections over a specified time period, for reasons including that an infected person may not seek medical care because they have only mild or no symptoms, or other reasons, may not be diagnosed because of limitations in Zika virus diagnostic surveillance reporting can be incomplete for a variety of reasons.\nFirst, the ArboNET surveillance system captures only reported Zika virus disease and infection cases. As such, the case counts does not capture the suspected high proportion of infected people who are asymptomatic and may not seek care and get a diagnosis of Zika virus infection. One study estimated that about 18 percent of Zika-infected persons will have clinical symptoms of the infection. CDC and WHO have reported that about 80 percent of people who have Zika virus infection won’t have any symptoms.\nFindings from a May 2017 study in Puerto Rico also suggested there is a high rate of asymptomatic people infected with Zika virus who are not diagnosed. The study applied results from a blood donor population that was screened for Zika virus to estimate the number of Zika infections in the population of Puerto Rico and estimated that there were over 450,000 Zika virus infections in Puerto Rico over approximately four months in mid-2016. In comparison, 35,375 disease cases were reported in Puerto Rico from January 1, 2015 through April 5, 2017, according to a CDC Zika virus disease case count update report. The Puerto Rico blood donor study authors concluded that results from blood donation screening during arboviral outbreaks can supplement routine clinical and surveillance data for improved targeting of prevention efforts.\nSecond, limitations in Zika virus diagnostic testing can also affect the accuracy of the number of Zika virus cases reported in disease surveillance due to inaccurate laboratory test results. Some Zika diagnostic tests can determine that a recent flavivirus infection has occurred, which may or may not be caused by Zika virus. This is because the antibodies produced in response to flavivirus infection (Zika, dengue, West Nile, yellow fever) are cross-reactive and may produce a positive result in a test for any of these viruses. This is of particular concern in areas where there has been co-circulation of flaviruses, such as dengue virus in Puerto Rico. The ability of the test to detect the virus also depends on the type of test used, when it is used, and the type of specimen collected. CDC recommends additional criteria and testing strategies for pregnant women for definitive diagnoses. The different types of Zika virus diagnostic tests, their challenges, and testing strategies for mitigating these challenges are discussed later in this report.\nThird, according to CDC documentation, notifiable disease reporting is likely incomplete, and the completeness varies depending upon the disease and the reporting state or territory. Factors that can influence completeness of reporting include the availability of diagnostic facilities; control measures in effect, public awareness of a specific disease, the state and local health officials responsible for disease control and public health surveillance, changes in methods for public health surveillance, or introduction of new diagnostics tests or other diseases. However, CDC documentation states that it has undertaken efforts to educate providers on Zika virus infection and provided guidance for screening and testing.", "The mechanisms of causality between Zika virus infection and microcephaly are not well-understood. According to a recent CDC Zika virus key messages document published on its website, questions also remain regarding the timing, risk, and full spectrum of adverse pregnancy outcomes as a result of Zika virus infection. Adding to the complexity, microcephaly is also caused by other environmental and genetic factors, including infections such as rubella during pregnancy, maternal exposure to toxic chemicals such as heavy metals or smoking, injuries to the developing brain, genetic abnormalities such as Down syndrome, and severe malnutrition during fetal life.\nThe reasons for differences in the reported incidence of microcephaly and other birth defects between geographic areas with Zika virus outbreaks are also not well-understood. For example, in Brazil in 2015, municipalities with high reports (defined as greater than 20 cases per 10,000 municipalities) of confirmed cases (per 10,000 live births) of newborns and children with changes in growth related to Zika virus infection and other infectious etiologies were concentrated in the Northeast region, although there was wider dispersion in other regions in 2016.\nThere is also wide variation in reported microcephaly cases relative to Zika virus cases in different countries. Using case data from PAHO, we found a wide variation among countries in the ratio of number of reported cases of birth defects associated with Zika virus infection to the total number of confirmed locally-acquired and travel-associated cases of Zika virus as of March 9, 2017 (table 2). For example, there were about 55 Zika virus cases for every birth defect case in Brazil, whereas in Colombia there are about 77 Zika virus cases for every birth defect case.\nAccording to literature we reviewed, some possible reasons for these variations include differences in mosquito prevention and family planning practices, environmental factors, population differences, and surveillance system differences (including case definitions).", "It is not well-understood how long the Zika virus can remain in different bodily fluids or how long it can be transmitted to other people. CDC reports that Zika can remain in semen longer than in other bodily fluids, including vaginal fluids, urine, and blood. One case report study found that Zika virus was detectable in semen at 69 days after symptom onset, and another study reported a maximum duration of Zika virus genetic material in semen of 125 days after symptom onset.", "The role of previous Zika virus infections or related flaviviruses such as dengue virus is unclear. According to WHO, it is not known whether Zika virus presence in a population over time results in widespread or low-level immune protection or possibly no protection. The cross-reactivity between Zika virus and related flaviviruses has not been established, although some studies are beginning to address this gap. For example, a study published in December 2016 suggests that preexisting dengue virus immunity may enhance Zika virus infection and lead to greater disease severity. Another study published in April 2017 found evidence that antibodies against related flaviviruses such as dengue and West Nile can cross-react with Zika virus and could increase disease severity.", "The full spectrum of outcomes from maternal-fetal transmission is not known. A paper published by CDC authors identified research gaps that need rapid and systematic assessment, including a complete understanding of the frequency and full spectrum of clinical outcomes resulting from fetal Zika virus infection and of the environmental factors that influence emergence. Another review paper noted that with causality between Zika virus infection and adverse pregnancy outcomes having been established, the critical research issues can turn to understanding the full spectrum of outcomes and quantifying the relative and absolute risks among infants who are born to women who were infected at different times during pregnancy, and identifying factors that modify the risk of an adverse pregnancy or birth outcome, such as coinfection with another virus, preexisting immune response to another flavivirus, genetic background of the mother or fetus, and severity of infection.\nThe associations between Zika virus infection and Guillain-Barré syndrome are also unclear. It has been reported that the most likely explanation of an association is that Zika virus infection can trigger Guillain-Barré syndrome. According to CDC documentation, CDC collaborates with state and local health departments to investigate possibly unusually large numbers or clusters of Guillain-Barré syndrome cases, and Puerto Rico has a surveillance system for Guillain-Barré syndrome.", "CDC, CSTE, and state and local public health agencies faced several challenges in implementing surveillance for Zika virus and its associated health outcomes. These challenges involved establishing early case definitions, timely communication of critical information, and interoperability between surveillance databases.", "We identified several challenges related to establishing case definitions for Zika virus infection and disease surveillance. According to CDC officials, typically, the process for adding a new disease to the national notifiable disease list is that the CSTE votes during its annual meetings whether to add the disease. If approved, the disease is usually made notifiable the following January. According to CDC officials, this allows time to plan and prepare for implementation, including the information technology aspects of reporting the disease. However, because of the emergent nature and emergency response needed for Zika virus, CSTE released an interim case definition in February 2016 so that Zika virus disease would become immediately notifiable.\nThese interim definitions included only laboratory diagnosed cases in persons who also reported certain clinical criteria. CDC officials and representatives from public health organizations told us that as more was learned about Zika virus, including the need to capture asymptomatic cases, the interim case definitions were revised. CSTE approved the revised case definitions position statement in June 2016, which included laboratory confirmed, asymptomatic cases (Zika virus infection) and some revisions related to laboratory diagnostic testing.\nThese changes presented some challenges, according to some public health officials and organizational representatives we interviewed. CDC and CSTE officials told us that because there were two case definitions approved during the year, changes had to be made to the reporting system twice, and all cases classified according to the first definition had to be reclassified based on the new definition, which takes time. CDC officials also told us that another challenge is that jurisdictions use different systems and have different capacities related to surveillance and informatics expertise, which required a lot of resources from CDC and others to assist these jurisdictions.\nCDC officials noted that it takes time for states to reclassify their older cases. CDC designates Zika virus cumulative case counts as provisional on its Zika virus case counts website. CDC officials told us that cases can be added or removed as new information becomes available, and that due to lags in investigation, testing, and reporting, newly reported cases often occurred weeks or even months earlier than the reported date.\nExperts at our meeting and public health officials at selected sites emphasized the importance of educating health care providers, including on testing and reporting guidelines. For instance, an official from one of the selected sites stated that “a well-informed clinician is the best reporting tool.” HHS officials told us that CDC engaged frequently with key professional organizations such as the American College of Obstetricians and Gynecologists to provide updated information; however gaps remain among providers who do not access up-to-date information provided on the CDC or professional organization websites.", "Public health officials from a selected site and representatives of public health organizations had some positive things to say regarding the assistance that federal agencies, or more specifically CDC, provided in responding to the Zika virus outbreaks. For example, officials from one selected site told us that a lot of guidance was coming out rapidly from CDC, and in general the guidance was very helpful and made providers more comfortable in patient care. Representatives from a public health organization told us that they viewed the U.S. government’s response to Zika as much stronger and more organized, forward leaning, inclusive, and transparent than it was for response to some earlier diseases, especially recognizing the many unknowns about Zika virus. Representatives from another public health organization told us that CDC demonstrated flexibility in its willingness to make modifications to Zika virus reporting based on feedback from states.\nNonetheless, we identified some challenges regarding the communication of guidance from CDC early in Zika virus surveillance implementation. For example, officials from one selected site told us that they were sometimes not able to get guidance consistently because entities within CDC did not talk with each other, and that CDC could not come to a quick conclusion about who to include in the Zika virus case definition. Representatives from a public health organization told us that they were sometimes not informed of changes in Zika-related information before learning about a change from a CDC media release, but that this had improved compared to 5 or 10 years ago.\nHowever, according to HHS officials, CDC frequently uses media outlets to disseminate important information to reach a broad audience. CDC also provided updated guidance for diagnosis and clinical practice, including several clinical guidelines and health alert network messages.\nPublic health officials in selected sites also told us that earlier in the Zika virus response, challenges resulted from officials from different CDC units needing to establish communication channels that had not existed before the Zika virus outbreak. Officials from one selected site told us about difficulty in communication and the importance of agency-wide communication and partnerships, and relationships that can make things happen faster. Officials from this site also told us that communication across different units improved over time. CDC officials similarly told us that many people were involved across CDC, including from birth defects and reproductive health, and arboviral diseases units, and that rarely were so many different people involved in a response effort. .", "There are separate systems for Zika virus cases and associated health outcomes surveillance that collect different information but also some of the same information, and these systems are not electronically linked. Officials from selected sites and representatives from a public health organization told us that having several different surveillance systems that were not interoperable was a challenge. Representatives we interviewed from one public health organization noted that states took issue with having to report data to the pregnancy registry that they already reported to other registries. Officials from one site we visited told us that there were questions as to whether different tracking systems are necessary, and that it is a challenge that they have different requirements. In another selected site, officials told us it is challenging when changes need to be made in the system because there’s no cross-communication in the data.\nHowever, HHS officials told us that surveillance systems for infectious diseases and surveillance of pregnancies and pregnancy outcomes and birth defects serve very different purposes and are also tailored to each jurisdiction’s needs. HHS officials also noted that the different and complementary surveillance systems serve equally important, yet very different critical needs during public health emergencies.", "We identified two key challenges for Zika virus epidemiological research: study designs needed for establishing association and causality challenged linking Zika virus and associated health outcomes, and insufficient data and lack of developed models challenged prediction of the spread of the virus.", "We identified challenges in linking the Zika virus with associated health outcomes. CDC was able to report pregnancy outcomes of women who were infected with or are suspected to have been infected with Zika virus and reported to the pregnancy registries. According to HHS officials, combining this prospective monitoring of pregnant women with retrospective birth defect surveillance allows for a comprehensive picture of pregnancy outcomes and has already provided critical information to inform the public health response to Zika virus. However, because the Zika pregnancy registry only includes pregnant women who have laboratory evidence of Zika virus infection, there is no control group of pregnant women without Zika virus in the pregnancy registry.\nAccording to HHS officials, studies that prospectively follow an identified group of people over time to monitor for both disease and outcomes are needed. WHO also noted that cohort studies of the populations currently at risk are needed to determine both absolute and relative risks of a Zika- affected pregnancy, the role of co-factors and effect modifiers, and to determine whether there is a specific congenital Zika virus syndrome.\nNIH recently launched such a studyZika in Infants and Pregnancy (ZIP) that aims to enroll as many as 10,000 pregnant women at up to 15 sites in Puerto Rico and abroad in order to study the outcomes of pregnant women who test positive for the Zika virus as well as those who test negative and their infants. The researchers plan to compare birth outcomes between mothers who were infected with Zika virus and those who were not, documenting the frequency of microcephaly and other adverse health outcomes. The study will also evaluate how the timing of infection affects pregnancy outcomes and the role that environmental influences, social determinants and other infections, such as dengue fever, may have on the health of the study participants and their newborns.\nHowever, there are challenges in conducting prospective cohort studies such as the ZIP study. These studies can take years before complete results are available and published in peer-reviewed journals. For example, the ZIP study start date was June 2016, and the estimated study completion date is June 2018. Prospective cohort studies that follow large numbers of individuals in multiple sites for many months or years are also generally expensive and time-consuming.", "Modeling and simulation studies that accurately estimate the number of disease cases in a population or predict cases of a disease can improve planning and allocating scarce public health resources. According to an April 2017 Zika virus key messages report, CDC has not been able to predict how much the Zika virus will spread in the continental United States. CDC officials told us that there was no epidemiologic model that looked at both types of transmission togethersexual and mosquito- borne. In addition, there are several major assumptions that need to be made for descriptive and predictive modeling of the Zika virus, including the number of infections and the overall number of pregnant women. CDC officials told us that as of October 2016, many uncertainties remained for Zika virus modeling. The models are constantly being refined and updated.\nA December 2016 report from an intergovernmental committee on infectious disease modeling noted the importance and potential of outbreak prediction and modeling to improve outbreak preparedness. The report outlined three major challenges concerning data‐ and information‐sharing, including the need for timely and accurate data and information, especially at the beginning of a novel disease outbreak, when knowledge about the pathogen and data on the epidemiological situation is limited; outbreak model development and decision support, including a systematic effort to synthesize results across modeling efforts and support on how to use this information in outbreak response decision-making; and science of disease emergence, which involves the need for better understanding of the processes that drive disease emergence and transmission well enough to predict where and when diseases are likely to emerge.", "Authorized diagnostic tests used for the recent Zika virus outbreak varied in their performance and operational characteristics. Diagnostic test manufacturers faced challenges in several areas, including research and development, testing, and regulatory approval of these tests. Diagnostic test users also encountered challenges, including determining the most accurate test to use, comparing clinical performance characteristics across tests, and obtaining equipment required to conduct authorized tests. Both manufacturers and users we spoke with raised issues about the EUA process. Moreover, CDC and FDA did not consistently communicate sufficient information about Zika virus diagnostic tests that could have enabled users to more easily identify the test that could detect the smallest amount of virus in a sample.", "There are currently no available diagnostic tests cleared by FDA for the detection of Zika virus. By April 12, 2017, FDA had authorized 16 diagnostic tests for the Zika virus (13 molecular tests and 3 serologic tests) under EUAs following the public health emergency declaration. According to FDA officials, they revoked one test, and as a result, 15 diagnostic tests are currently authorized. These authorized diagnostic tests for the Zika virus vary in their performance and operational characteristics. Molecular and serologic tests have different strengths and limitations, but some of the limitations can be mitigated by using an algorithm that CDC published.", "Limit of detection: The measure of how\nOperational characteristics: The time to perform the test, its technical simplicity or ease of use, user acceptability, and the stability of the test under user conditions. description of quality of a diagnostic test result including the analysis of accuracy, prevision, sensitivity, and specificity, among others.\nAuthorized molecular diagnostic tests for the Zika virus varied in their performance characteristics, and some may not have been sensitive enough to detect Zika virus infection in samples that were collected when the level of virus was low, namely, towards the end of, or after, the recommended collection time post onset of symptoms. The product labels for these authorized Zika virus diagnostic tests list a variety of different performance characteristics, including: analytical sensitivity, cross- reactivity, interference, and clinical evaluation. The differences between these performance characteristics are important for understanding the accuracy of the diagnostic test. For instance, the limit of detection listed on manufacturers’ product labels using their own samples and protocols range from 5.9 copies/mL (less virus is needed for detection) to 42,000 copies/mL (more virus is needed for detection) (appendix V has more details on these characteristics). If a person had 1,000 copies/mL of Zika virus RNA in his or her blood stream, the test that had the lower limit of detection (5.9 copies/mL) would indicate a positive result, while the test with the higher limit of detection (42,000 copies/mL) would incorrectly indicate a negative result (called a false negative). The limit of detection is an important measure for the Zika virus, which can be present in relatively low levels in the body. It is important to note that a negative result by molecular testing should be followed by serological testing, according to CDC’s guidance, in order to reduce the risk of false negative results.\nFDA created Zika virus reference material for molecular tests to compare test results to ensure accuracy. We found that the limit of detection varied between different tests when performed using samples and protocols FDA provided from 100 detectable units/mL to 30,000 detectable units/mL (See appendix V). The diagnostic accuracy of a new test refers to the extent of agreement between the outcome of the new test seeking authorization and the reference standard.\nAccording to FDA officials, when a new test is evaluated by comparison to a nonreference standard, as with the Zika virus, one cannot directly calculate unbiased estimates of sensitivity and specificity and therefore these terms are not appropriate. Instead, estimates called positive percent agreement and negative percent agreement are calculated and reflect the agreement of the new test with the nonreference standard. According to FDA officials, a major disadvantage with agreement measures is that agreement is not a measure of “correctness.” The two tests could agree; however, agreement does not indicate how good or poor test sensitivities and specificities are (for example, both tests could agree because they are both false negatives). Also, that two tests are not in agreement does not necessarily mean that the new test is inaccurate and the comparator test is correct.", "The authorized molecular diagnostic tests for the Zika virus after the public health emergency declaration also varied in their operational characteristics. These molecular diagnostic tests vary in their ease of use—some require manual steps, while others have some automation. Automation potentially allows for faster and more consistent processing and fewer staff resources. The time to perform individual authorized molecular diagnostic tests for the Zika virus is around 4 hours. One manufacturer using automation can process multiple samples in 8 hours. However, all the authorized molecular tests for the Zika virus have to be performed at Clinical Laboratory Improvement Amendments (CLIA) high complexity laboratories.", "Molecular diagnostic tests can be designed to be more specific to a single virus and, as a result, have fewer issues with identifying the specific virus compared to serological testing. These tests detect specific virus sequences of genetic material. According to a manufacturer we interviewed, some Zika virus diagnostic molecular tests detect multiple targets, meaning a test detects multiple segments of genetic material from the Zika virus, rendering the test more accurate since it can still detect the virus even if there is an alteration in one of the segments that the test is detecting. Molecular tests can also be used to simultaneously detect other viruses such as dengue, chikungunya, and Zika (see table 3 for strengths and limitations for both types of tests). .Molecular diagnostic tests give a definitive diagnosis independent of other tests when the result is positive. To reliably detect the Zika virus, molecular diagnostic tests should be performed within two weeks after symptom onset (see fig. 6).\nA negative molecular test does not rule out Zika virus infection because the amount of virus in the sample could be too low to be detected at the time of molecular testing. Some scientists have expressed concern over the limit of detection of some authorized molecular diagnostic tests, which could have resulted in missed Zika virus infections by molecular testing and increase the need for serological follow-up testing; however, additional testing according to CDC guidance is intended to correct these false negative findings. An expert from our meeting stated that the sensitivity limitation of molecular testing cannot be overcome by additional testing if the molecular test is negative based on low levels of virus but before the body has developed an antibody response. Specifically, CDC guidance specifies that negative samples from molecular tests should be sent for serology testing.\nSerology tests can be used to detect the Zika virus-specific IgM antibodies that typically develop during the first week of illness and persist for about 12 weeks. As previously mentioned, three serological tests were authorized for the Zika virus, of which CDC manufactured one (the MAC-ELISA) and the two others were commercially manufactured. Officials at a public health laboratory we interviewed said that one of the commercially authorized tests had better specificity than the CDC MAC- ELISA when compared using 30 different samples. However, the laboratory officials found that the commercially authorized test was easier to perform but more time consuming to interpret and evaluate.\nManufacturers evaluated cross-reactivity by testing specimens from patients with antibodies to other diseases that could potentially cause false positive results. Our analysis of the data provided by manufacturers in their EUA fact sheets and labeling found that one of the commercial tests did not demonstrate any cross-reactivity when compared to other flaviviruses and to nonflaviviruses during the initial qualification testing. An expert from our meeting stated that false positives based on cross- reactivity may depend on complex mixtures of antibodies at different states of infection, so it is complicated to assess this problem in a comprehensive and definitive manner. However, data provided in the EUA fact sheets and labeling for the CDC MAC-ELISA demonstrate that this assay had significant cross reactivity to dengue virus but not to other flaviviruses. CDC did not perform experimental studies for nonflaviviruses for the CDC MAC-ELISA test, stating in the label that the scientific literature indicated that only minimal cross-reactivity is expected with antibodies against other virus families.\nThe positive percent agreement listed on the label for one of the commercial tests is 100 percent, and for the CDC MAC-ELISA is 93.98 percent. The negative percent agreement is 92.5 percent for one of the commercial tests, but the CDC MAC-ELISA does not list a negative percent agreement in the product label. One of the commercial tests also showed that there is no interference with substances normally found in serum, while the CDC MAC-ELISA test did not include this information in the product label. According to HHS officials, the three diagnostic tests use different antigens for detection of Zika virus antibodies, which may be cross-reactive with antibodies from related flaviviruses. According to HHS officials, a side-by-side comparison of the performance of these diagnostic tests has demonstrated some cross-reactivity to other flaviviruses by each assay.", "Of the serologic tests authorized for Zika virus diagnosis, one takes three hours and the CDC MAC-ELISA takes three days to administer. Some diagnostic users we interviewed stated that one of the commercially authorized tests was easier to use and a more efficient assay than the CDC MAC-ELISA because it is automated. According to FDA, automation decreases the time and staff required to run the samples. The CDC MAC- ELISA test takes approximately 2 to 3 days because laboratories are required to perform two overnight incubations in the laboratory to complete the test; in contrast one of the commercial tests only takes about 3 hours, in part because the plates are pre-coated. Similarly, one of the commercially authorized tests can run 28 samples per plate, while the CDC MAC-ELISA test can run 8 samples per plate.\nDiagnostic users we spoke with stated that running the CDC MAC-ELISA in this format created issues with test throughput and capacity. One reason for different number of samples per plate between the tests is that the outer wells of the plates are used in one of the commercial tests and not in the CDC MAC-ELISA test. In addition, each CDC test sample was run in triplicate at the same time, decreasing the number of samples that can be run at one time.", "Serologic tests for IgM can diagnose a recent infection for a wider range of time (from about 7 days to up to 12 weeks after infection) compared to molecular tests, which generally detect current infections. Another strength of serologic tests is that they can be used to detect recent exposure to the Zika virus in asymptomatic patients.\nOne limitation of these tests is that antibodies produced against one flavivirus may be cross-reactive to other flaviviruses, so a positive Zika virus IgM result does not necessarily indicate a Zika virus infection. The reason is that related flaviviruses such as dengue, yellow fever, West Nile, and Japanese encephalitis, which can be caused by a previous natural infection or vaccination, can give a positive Zika virus IgM result by a serology test. This has proven to be an issue in South America, Central America, Mexico, and Puerto Rico, where multiple flaviviruses are circulating, according to FDA officials.\nAnother limitation is that positive results need to be confirmed by using the CDC algorithm, which can include the plaque reduction neutralizing testing (PRNT) that is performed only at CDC or one of CDC’s designated confirmatory testing laboratories (currently there are five designated state public health laboratories, according to HHS officials). The PRNT requires about six days to complete, and the logistics of specimen shipment can further extend the time, according to HHS officials. According to CDC officials, CDC typically takes three weeks to send PRNT results but reporting time may be longer during the summer. Based on our analysis of a recent FDA document, this prolonged period between getting the IgM results and the PRNT confirmatory results may have led some clinicians and patients to make family planning decisions without confirmation of Zika virus infection.\nBecause the PRNT measures virus-specific neutralizing antibodies to confirm infection, not only does it take more time, but it is also difficult to perform. The test requires mixing patient serum with live Zika virus to determine how effective the serum is at neutralizing the virus in cell culture. However, neutralizing antibodies may still react to related viruses. According to FDA officials, the PRNT is a well-recognized, established standard laboratory technique and therefore did not have to go through FDA approval or authorization. However, as mentioned above, only a few laboratories are able to perform the PRNT for the Zika virus. According to a CDC document, PRNT is considered the “gold-standard” for confirmatory testing for Zika virus infection. An expert from our meeting stated that there can still be cross-reactivity with PRNT that confounds interpretation of the results. The five state public health laboratories that perform Zika virus PRNT have demonstrated capacity and proficiency to perform PRNT testing on their own, according to HHS officials.\nFinally, according to CDC officials, neutralizing antibodies to the Zika virus develop shortly after IgM antibodies and consist primarily of IgG antibodies. Serology testing could be used to detect IgG antibodies; however, the United States has no EUA test for detecting Zika virus specific IgG at this time. The associations between the Zika virus and adverse health outcomes in newborns and the ability to detect infections older than 12 weeks could be relevant to family planning and clinical care of patients, if such tests were available. However, IgG is typically highly cross-reactive to other flaviviruses and can remain elevated for years following an infection or vaccination, so it is difficult to determine when a patient has an elevated IgG if it is elevated for a recent infection, a prior flavivirus infection (possibly years earlier) or both.", "As discussed above, different types of diagnostic tests for the Zika virus have different strengths and limitations. As a result, rather than a single diagnostic test being considered in isolation, multiple tests and sample types are often needed to establish a definitive laboratory diagnosis. The window of acute Zika virus infection is small. Viral RNA is the first thing that can be detected in an infected person in multiple specimen types. In blood, as the immune response develops and antibodies rise, levels of viral RNA decline.\nZika virus diagnostic tests that have been authorized since the public health emergency declaration varied in their ability to detect the Zika virus or antibodies to Zika virus. Consequently, a test that is less sensitive may produce a false negative result, while a more sensitive test may detect the virus.\nCDC provides guidance for determining the order of testing (known as testing algorithms) with different types of tests based on the strengths and limitations of the different test types, presence of symptoms, pregnancy status, and time between symptom onset or exposure and sample collection. For individuals with symptoms, the time between symptom onset and sample collection dictates test order. For pregnant women who have no symptoms but meet certain epidemiological criteria for testing, time between exposure or return from travel dictates test order. The testing order algorithms are shown in table 4.", "We identified five challenges that manufacturers of diagnostic tests faced related to Zika virus diagnostic testing, research, and development, and regulatory approval: (1) biological aspects of the virus and the immune response, including low levels of virus in the bodily fluids of infected patients for short periods of time and the cross-reactivity of antibodies to other flaviviruses, (2) difficulty in accessing well-characterized clinical samples, (3) getting access to EUA tests for use as a comparator assay, (4) gaining cooperation with international entities, and (5) challenges interacting with FDA during review. Challenges users of the diagnostic tests faced included: (1) requirements to purchase new specific equipment to be compliant with the EUA label on a test they wanted to use; and (2) determining the most accurate test because information in the EUA labels for some of the performance characteristics were not easily comparable. Consequently, users could not easily compare diagnostic test performance measures from product labels.", "The first challenge to manufacturers developing diagnostic tests was the lack of knowledge of Zika virus biology and infections, especially at the beginning of the U.S. outbreak. The best sample type to use for molecular testing was uncertain at the beginning of the outbreak. For instance, the Zika virus had been found to be present longer in urine than in serum or plasma, but information on just how long the virus could persist in different bodily fluids was still evolving. Compared to related viruses, the Zika virus is present at low levels in bodily fluids of patients during an active infection. Manufacturers also faced challenges in identifying ways to test for antibodies, as well as unique Zika virus antigens to target due to issues with extensive cross-reactivity with other flaviviruses. Information is still evolving about antigens that are unique to the Zika virus and how long the virus persists in various bodily fluids, making it difficult to develop diagnostic tests for the virus.\nSecond, the lack of well characterized clinical samples for diagnostic test development was identified as a major challenge for developing Zika virus diagnostic tests, according to the federal agency officials and manufacturers we interviewed, and all the experts who participated in our meeting. However, several manufacturers told us that obtaining samples for testing was difficult because of high costs, potential cross-reactivity with other flaviviruses, and an insufficient number of samples. For example, one manufacturer had to pay more than $200,000 to acquire samples from commercial vendors. According to another manufacturer we interviewed, a single clinical sample for the Zika virus can cost around $450. Manufacturers told us they requested, but were not able to obtain, samples from CDC in the early stages of the outbreak and one manufacturer stated this was because not enough samples were available. One manufacturer stated that this delayed the development of its test. According to HHS officials, to help address the lack of samples for test development, BARDA, a component of ASPR, provided characterized samples to test manufacturers, once the samples became available in midsummer 2016. However, HHS officials stated that no test manufacturer received enough samples from BARDA for the EUA testing requirements and had to acquire samples from other sources to support the EUA application.\nBARDA officials told us they have worked closely with CDC and manufacturers to collect and characterize clinical samples that can be used to develop and validate diagnostic tests to detect Zika virus infection. Manufacturers also had issues with clinical samples, since samples sourced from Central and South America were not well characterized, because other circulating flaviviruses could cause cross- reactivity, creating uncertainty in the outcome of a given test.\nThird, FDA recommends that manufacturers perform clinical evaluation studies that compare their tests to another “comparator” assay that is laboratory developed, an in-house assay, or an EUA test. The selection and quality of the comparator assay directly affects the measurements of the test performance. A CDC document states that CDC rarely has the resources needed to fully respond to public health emergencies but should provide a consistent, fair, and transparent review process for all public-private initiatives. However, according to CDC officials, they did not make their EUA test available to some commercial manufacturers for use as a comparator assay. One manufacturer we interviewed said its request to CDC for reagents to perform the Trioplex test was denied since it was a commercial manufacturer. Another manufacturer told us it attempted to purchase an EUA test from another manufacturer but was unable to because the other manufacturer refused to sell the EUA diagnostic test. According to HHS officials, in order to obviate this challenge, FDA allows manufacturers to use laboratory developed tests as comparator tests. An expert at our meeting, stated a manufacturer had to establish their own assay because commercial manufacturers cannot purchase the Trioplex test or create it since it is unpublished.\nTwo of the 12 authorized molecular diagnostic test labels have CDC’s Trioplex listed as their comparator assay. CDC was the first manufacturer to receive an EUA and therefore the Trioplex test was the first authorized molecular test that other tests attempting to get EUA could be compared to. According to CDC officials, diagnostic tests CDC created are distributed only to public health laboratories performing Zika virus clinical diagnoses because in the early stage of the response, CDC did not have the capacity to adequately support public health laboratories and also supply commercial manufacturers with CDC tests for performance testing. CDC officials also stated that issues with intellectual property rights, such as patents, or material transfer agreements, may prevent sharing reagents, individual components and technology. An expert from our meeting stated that this could have been overcome by publishing the test protocol with specific details about the test. However, CDC distributed its tests to four manufacturers through technology transfers, when no shortage of reagents was experienced by September 2016. CDC officials we spoke with were unclear of how the process to transfer authorized CDC tests to manufacturers originally started. Standards for Internal Control in the Federal Government state that agencies should document their operational processes to ensure that the organization meets its objectives. Without a clear and transparent process for distributing CDC diagnostic tests, the agency may not be able to develop the capacity of the commercial sector during an outbreak.\nFourth, interacting with international entities to obtain samples and perform testing presented some challenges. Some foreign countries have laws that must be followed when collecting samples. A manufacturer we interviewed faced import challenges trying to perform a diagnostic test in another country. One manufacturer told us it took 6 weeks for diagnostic manufacturers to ship materials to another country for testing, and the import tax was $30,000. An expert from our meeting also stated that obtaining CDC import permits was challenging.\nFifth, manufacturers had mixed opinions on the effectiveness of communication from FDA. Specifically, representatives of some manufacturers said that FDA did a good job communicating with them throughout the EUA process during the recent outbreaks while some said that communication with FDA could be improved. FDA interacts with manufacturers about potential EUA products to help ensure that manufacturers submit complete EUA applications and thereby enhances FDA’s ability to review and ultimately authorize the EUA. FDA stated that its review expertise is scarce, making it imperative to prioritize efforts to move the best diagnostic tests forward first (that is, the test that is most effective in addressing an unmet public health need). However, one manufacturer we interviewed stated that the longer time for communication and time to receive authorization from FDA were challenging in developing diagnostic test for Zika virus. According to FDA, the average time between pre-EUA, a time when FDA begins review of fact sheets and other documentation before the submission and EUA submission is 87.6 days, with a range of 14 to 178 days for Zika diagnostic tests. The average time once an application was submitted to the authorization date was 7.4 days, with a range of 1 to 26 days. A manufacturer suggested an improvement would be to shorten the time to respond to inquiries.\nFDA developed templates for molecular and serology diagnostic tests and sent them to manufacturers in order to support obtaining an EUA. According to FDA officials, templates provided transparency in terms of the studies required for a successful EUA submission and streamlined submission for the manufacturers. FDA officials stated that updates to studies were communicated to manufacturers as new information became available during the Zika outbreak, including by direct communication with manufacturers and through FDA’s webpages. As new information on Zika virus became available, FDA instituted changes to the EUA to ensure that manufacturers were demonstrating adequate performance for their diagnostic tests. However, some manufacturers requested greater clarity. Some manufacturers we interviewed stated that FDA changed its requirements for authorization throughout the process. HHS officials stated that they had to incorporate new information about the Zika virus into their review process as it became available throughout the outbreak, consequently changing the required amount of analytical and clinical data requested from manufacturers before they could make EUA authorizations.", "Zika virus diagnostic test users we interviewed faced challenges because they had to purchase new equipment to be compliant with the EUA label on a test they wanted to use. It was difficult to determine the most accurate test because information on the EUA labels of the performance characteristics of tests were not comparable or not available on the CDC website.\nFirst, although CDC officials stated that all states had at least one public health laboratory that had the equipment to run the CDC MAC-ELISA test, representatives from several laboratories we interviewed stated that they had to acquire new equipment to be able to perform a certain EUA diagnostic test. For instance, implementation of serological testing within another federal laboratory was delayed because additional equipment was needed to perform the authorized test. CDC officials stated that the agency is working to expand diagnostic testing capacity within both public health and commercial laboratories in the United States.\nSecond, diagnostic test users also faced challenges in determining the most accurate test because information on the labels was not easily comparable. An FDA document states that the agency should share information that is up-to-date, understandable, and easily accessible so diagnostic test users has some basis for choosing medical products to purchase and use. Moreover, according to this document, posting compilation or analysis of data can benefit users since all users may not have the ability or resources to independently analyze raw data. By comparing the diagnostic test labels, we found that the labels had units listed differently for key performance characteristics, data had to be extracted from each product insert, and some of the information could not be readily compared with other data. We also found that performance characteristics are listed on the diagnostic test labels, but it is not available in a consolidated format.\nAccording to FDA officials, the agency began collecting information using FDA Reference Materials because different manufacturers were using different samples and potentially different methods to determine the limit of detection of their tests. Using common samples across manufacturers allowed FDA to directly compare the limits of detection across different molecular diagnostic tests. However, the FDA Reference Materials were available only after certain diagnostic tests were already authorized under EUA. Therefore, those diagnostic test labels did not initially list the limit of detection using the FDA Reference Materials until their labels were updated.\nFDA officials stated that if manufacturers had not previously performed the limit of detection using the FDA Reference Materials, they would need to perform those tests and provide results to FDA. This would allow users to compare limits of detection for tests that were performed using the same samples and procedures. FDA officials stated that they were waiting to receive all the results from all the manufacturers with an authorized diagnostic test before considering consolidating information about performance characteristics, since this information was already publically available in the updated product labels of the individual tests. All authorized molecular test manufacturers had submitted limit of detection data using the FDA Reference Materials to FDA by March 6, 2017.\nUntil limit of detection data have been extracted and summarized from all the diagnostic test labels, it may be difficult and time-consuming for users to compare the performance characteristics and results of diagnostic tests. By waiting until FDA has all the information before compiling information about performance characteristics, it will be time-consuming for users to compare the limit of detection across the authorized molecular diagnostic tests. This will become especially important with the mosquito season approaching and public health laboratories making decisions about which tests to use.\nAnother challenge users faced was related to the lack of information on comparator assays. An FDA document recommends that there should be a clear description of all methods used and how and what data were collected when performing comparison testing, including a description of the comparator assay “nonreference standard.” Experts at our meeting agreed that identifying the comparator assay would make it easier to compare the risks and benefits of different Zika virus diagnostic tests. The selection and quality of the comparator assay directly affects the legitimacy of the comparison of the test performance. When we compared product labels for different molecular tests, we found that 6 of 12 product labels did not identify the comparator assay and that the comparator assay could fall into one of three types: (1) another EUA test, (2) a laboratory developed test, or (3) an in-house assay (see appendix V).\nFDA officials stated that the comparator assay for authorized diagnostic tests can be either another authorized test or a validated reference method and manufacturers are allowed to decide if they will identify the comparator assay. However, the manufacturers are not required to do so. According to FDA officials, comparison studies for EUA diagnostic tests are based on a relatively low number of clinical specimens, and the levels of viral RNA in a number of specimens can be low. In addition, FDA officials stated that these two factors preclude definitive conclusions regarding the comparative performance of devices, and FDA staff are concerned that studies using comparator assays in labeling may be used to make inappropriate claims and could be misinterpreted by end users. The use of FDA Reference Material allows for a more rigorous analysis of the comparative sensitivities of the assays from the various manufacturers, according to FDA officials.\nHowever, without knowing the identity of the comparator assay, it is more difficult for users to compare performance characteristics across different diagnostic tests and determine the most appropriate test to use. According to an expert at our meeting, this information would be helpful for laboratories in determining what test to use in the face of multiple approved tests. Although the criteria for procuring diagnostic tests can vary, for most laboratories the paramount focus is on test performance.\nStandards for Internal Control in the Federal Government state that agencies are to communicate quality information externally through reporting lines so that external parties can help an entity achieve its objectives and address related risks. CDC did not make publically available data comparing the performance characteristics of different CDC diagnostic tests that it distributed during the outbreak. CDC’s website has information about the performance of its two authorized diagnostic tests and the PRNT technique, but not the laboratory- developed test it distributed, called the Singleplex laboratory developed test (Singleplex).\nAccording to a HHS report, CDC did not provide information about one of its diagnostic tests because it could potentially create confusion and could have caused public health laboratories to discontinue use of the Trioplex test, and it had not done a comprehensive comparison of the Trioplex and Singleplex assay. Because CDC did not publically provide performance information about its laboratory developed test—which was distributed to some public health laboratories—questions arose regarding the sensitivity of the two CDC tests (Singleplex and Trioplex, see text box).\nA CDC scientist (who later became a whistleblower) alleged that the Emergency Operation Center at CDC endangered public health when it failed to disclose that an emergency use authorized CDC test used to detect Zika virus—called the Trioplex Real-time RT-PCR assay (Trioplex)—was substantially less sensitive than another CDC laboratory developed test (Singleplex). After raising concern about the test’s sensitivity, an Office of Special Counsel (OSC) investigation was conducted.\nThe CDC investigation into the whistleblower’s claims did not attempt to gather additional information on comparing the tests from public health laboratories using the Singleplex test. According to CDC officials, they could not do a direct comparison of the two tests because the equipment required for both tests did not exist at either location. The agency acknowledged that the original Trioplex test was authorized only a smaller input volume while the Singleplex is not subject to such limitation because it had never been submitted to the Food and Drug Administration (FDA) for review and was used only as a laboratory-developed test.\nOSC encouraged CDC to promote scientific debate on this issue and said that whistleblowers should be encouraged to speak out on matters of public concern. OSC also requested the Department of Health and Human Services (HHS) to conduct an independent investigation about the allegations made and CDC’s Associate Director of Laboratory Science and Safety, who conducted the investigation, found that the evidence did not support the allegations. OSC found the CDC investigation reasonable. CDC had three sources of data to compare the different tests’ sensitivities. One was from the whistleblowers’ laboratory, another from the creator of the Trioplex test that was alleged to be less sensitive, and the third was an independent laboratory that compared the Singleplex and Trioplex tests.\nCDC submitted a substantial amendment to the Trioplex test for FDA’s authorization to increase the input volume of the test in August 2016, and in January 2017 the authorization was amended again to allow laboratories to use a singleplex reaction on the Trioplex assay. According to CDC, the larger input volume has been demonstrated to increase the sensitivity of the Trioplex assay. According to a CDC website, a “head-to-head comparison of the Trioplex test and the Zika-only assay” has not been conducted. In HHS’ technical comments they stated that a “head- to-head comparison of the Trioplex and the Singleplex laboratory developed test” has been performed and showed equivalent performance.\nA journal article later showed that the original Trioplex test was less sensitive than the Singleplex test. Increasing the input volume of the test increased the limit of detection of the Trioplex test approximately 20 to 50 times.\nRepresentatives of three scientific professional societies told us that information about the development and verification of CDC’s diagnostic test should be made available to the scientific and medical communities. Access to such data would provide transparency and allow for optimal patient care, according to these representatives. According to these societies’ representatives, the lack of access to data on test performance prevented users from making informed decisions about which test to adopt or recommend during the outbreak. Without including information on the performance characteristics of tests it is distributing, CDC cannot ensure that healthcare providers and the public have the information they need to make informed decisions about which test is best for their use.", "", "Types of mosquito control methods available in the United States include: (1) physical control, or nonchemical mosquito control, (2) larval mosquito control, (3) adult mosquito control, and (4) personal protection. Mosquito control entities and literature identified available methods that may control mosquitoes in general. However, not all methods presented in this report specifically apply to Aedes aegypti mosquitoes, in part because not all such entities we spoke with had Aedes aegypti in their area. For example, HHS identified ditching as irrelevant for Aedes aegypti mosquitoes. These methods can be combined with surveillance of the mosquito population, using integrated vector management (IVM) to optimize the application of multiple methods, depending on knowledge of mosquito biology and distribution.\nDifferent mosquito control methods target different stages of the mosquito lifecycle. The mosquito’s lifecycle has two stages—an aquatic stage in which eggs develop into larvae and pupae and a terrestrial stage in which the mosquito leaves the water, can fly, and can transmit pathogens and lay eggs. Figure 7 depicts major lifecycle steps encompassing these stages.\nPhysical control, or the use of physical or mechanical means to remove water sources serving as larval development sites or prevent mosquito entry into buildings, includes (1) controlling water sources needed for mosquito breeding and (2) using barriers, such as window screens, to keep mosquitoes away from people. A National Science and Technology Council (NSTC) report stated that physical control includes removing standing sources of water, such as from containers, old tires, or blocked drains, and using well-fitted and intact screens on all house doors and windows.\nMosquito control entity officials we interviewed told us that they use a variety of physical control methods. For example, one told us that his mosquito control program still benefits from ditching projects completed in the 1960s and is continuing to use excavators to ditch areas to enhance water run-off. Another official told us that his program includes a “drain and cover” community outreach approach, asking residents to drain standing water, use window screens, and wear long-sleeved clothing. A third official we interviewed included a program for swimming pool management by helping identify and fill in abandoned swimming pools.\nEach of these physical control methods has strengths and limitations. Specifically, officials from mosquito control entities told us that water- source control such as by large-scale ditching is very effective and avoids the use of chemicals for certain types of mosquitoes. However, a mosquito control entity official also said that this method is probably challenged in the current regulatory environment. According to a NSTC report, large-scale outdoor water source control may have limited effectiveness against Aedes aegypti mosquitoes because breeding requires only small volumes of water (for example, one tablespoon, under certain conditions). Another mosquito control entity stated that inspections of property by mosquito control personnel may be effective but are time- consuming. According to a NSTC report and mosquito control entity officials we interviewed, such property inspections can be challenged by privacy and property rights.\nIn addition, while physical control of larval development sites can reduce or eliminate mosquito larvae, the local environment may not be suited to such measures if extensive water bodies are present. It may be impractical or impossible to remove or move volumes of water. For example, a mosquito control entity official told us that since nearby swampland cannot be removed, physical control through water management is not an option for them.", "Controlling immature mosquitoes includes using chemical or biological control methods. Chemical larvicides include methoprene and pyriproxyfen, and biologically based larvicides include Bacillus thuringiensis israelensis (Bti). CDC guidance includes another method of larvae control—applying certain oils on water surfaces to suffocate mosquito larvae and pupae. Mosquito control entity officials we spoke with all told us they use larviciding, such as with Bti, or with mosquito fish that eat mosquito larvae.\nUsing larvicides has strengths and limitations. Specifically, using biologically based larvicides may be more accepted by the public than adult pesticides, but is limited by cost and effectiveness. Officials from mosquito control entities we spoke with told us that residents are more accepting of biologically-based larvicides because they consider them more natural. However, a mosquito control entity official added that larviciding tends to be more expensive than other techniques. A mosquito control official told us that mosquito-borne diseases have not been successfully controlled by using larvicide alone because, while it reduces the population by 70 percent to 80 percent, controlling a disease such as the Zika virus disease requires a population reduction greater than 80 percent to 90 percent. Even very few mosquitoes can lead to an outbreak or epidemic.\nA mosquito control entity official told us that larvicide also needs to be applied within a limited window of opportunity and that larvicide application is delayed in its effect. Similarly, control using mosquito fish appears to be “natural” to the public, but is time consuming and has limited applicability for Aedes mosquitoes that carry the Zika virus, because Aedes mosquito eggs can survive in small containers that dry out.", "Adult mosquitoes can be controlled with certain pesticides, or adulticides, applied indoors or outdoors. An EPA official told us it has registered nine active ingredients for use as adulticides, including malathion, naled, and permethrin. CDC and NSTC documents indicate that some adulticides are intended for area-wide space spraying (fogging), while others are intended for residual spraying (in and around buildings), where the pesticide remains active on surfaces that mosquitoes land on. Mosquito control entity officials we spoke with said they disperse a variety of adulticides using a variety of methods, including handheld units, helicopters, fixed wing aircraft, and trucks. CDC guidance includes additional methods such as nonpesticide traps—for example, CDC’s Autocidal Gravid Ovitrap, which captures egg-laying mosquitoes on a sticky glue.\nWhen someone spends long periods of time outdoors, insect repellent should be reapplied according to product label instructions. The best way to protect yourself and your family from chikungunya, as well as other mosquito- borne illnesses including the Zika virus, is to avoid being bitten by mosquitoes by using insect repellent, wearing long sleeves and pants, using air conditioning or window and door screens to keep mosquitoes outside, and reducing mosquito breeding grounds such as standing water.\nUsing adulticides also has strengths and limitations. Specifically, officials from mosquito control entities told us that adulticide spraying can be effective in controlling mosquito populations. One mosquito control professional noted that mosquito-borne diseases such as West Nile virus disease have historically been controlled by adulticides. However, we identified several limitations with adulticide spraying. One limitation mosquito control entity officials and CDC staff identified is public resistance to pesticides. Another limitation is that adulticiding effectively requires control over droplet size; mosquito control entity officials we spoke with told us they required special equipment to control the dispersal rate and properties of the adulticides. Other limitations include limited effectiveness under certain weather conditions and the potentially deleterious effect of broad-spectrum adulticides on other insects such as bees.\nAdditionally, Aedes aegypti mosquitoes are primarily daytime biters, requiring spraying during certain times for optimal effectiveness. However, one mosquito control entity official was reluctant to spray during commuting hours, including times when schoolchildren go to or return from schools. Further, increasing resistance of mosquitoes to existing active ingredients decreases the effectiveness of adulticiding and creates the need for new control methods. Finally, pesticide spraying over waters of the U.S. is subject to permit requirements under the Clean Water Act, which may present a challenge for mosquito control entities in applying pesticides for mosquito control (see appendix VI).\nAlternative strategies may enhance the effectiveness of adulticide application. For example, one study demonstrated that data from “contact tracing”—which uses travel histories to help identify potential sites of infection—can be used to target locations for indoor spraying. According to this study, this method may reduce mosquito-borne dengue transmission by about 90 percent. However, the method requires access to indoor environments and permission to spray inside homes.", "Personal protection includes using repellents, wearing long-sleeved clothing, and using bed nets. Repellent ingredients can include dermally applied chemicals such as DEET. Some repellents such as permethrin can be impregnated in clothing.\nPersonal protection methods also have strengths and limitations. Specifically, NSTC reports that using repellents permits individuals to remain protected as they conduct their daily routines. While personal protection methods are under the individual’s control, they are effective only when properly and regularly applied. For example, one mosquito control expert at our meeting told us that despite having authority over a specific population, compliance related to the usage of bed nets or repellants is still difficult to enforce.", "We identified three other related issues that affect available mosquito control efforts: Community Awareness of Mosquito Control Efforts. NSTC reports that the effectiveness of public-health interventions, such as mosquito control, depends on community awareness and perception and the implementation of control practices. The risk of the Zika virus is generally under-perceived and misinformation is widespread about vector-control practices. Further, communication and outreach between the mosquito control entities and the community are necessary for effective mosquito control. Mosquito control entity officials we spoke with agreed, noting the importance of public education and outreach. For example, mosquito control entity officials sometimes use a variety of approaches for such efforts, such as going door to door, attending meetings and conferences, holding public events at schools, buying radio time, and communicating online. Mosquito control entity officials told us that two major challenges that mosquito control efforts face are educating the public and ensuring public compliance. One told us that the public generally misunderstands mosquito control methods. Additionally, while reducing sources of water can be effective and people tend to be receptive to such messages, they can forget to implement them.\nThis “light trap” enabled CDC scientists to venture easily into dense, remote areas when conducting arbovirus epidemiological field work that included capturing mosquito vectors. The trap weighs only 1.75 pounds and is easily repaired. Different types of traps are used for different types of mosquitoes. For example, the “light trap” is not used for Aedes aegypti mosquitoes.\nMosquito Control Methods Can Be More Effective with an IVM Approach. IVM combines control methods with surveillance of the mosquito population. A CDC website describes IVM as combining methods to control mosquitoes and prevent the spread of mosquito-borne viruses based on an understanding of mosquito biology, behavior, and spread of viruses. IVM uses methods that are safe and scientifically proven to reduce mosquito populations when applied correctly, according to this website. An expert from our meeting included education as a critical component of IVM; an NSTC report describes education as a prerequisite for successful IVM. Officials from all the mosquito control entities we spoke with told us they use some form of IVM, and include surveillance of the mosquito population. One mosquito control official also noted that IVM is sometimes tailored to specific mosquito species.\nAdditional methods being developed may eventually be incorporated into IVM strategies.\nMosquito Control Methods Under Development Show Promise but Their Effectiveness Remains to be Established Mosquito control methods under development include the use of genetically-engineered mosquitoes and mosquitoes infected with the Wolbachia bacterium, among others. Some of these approaches can decrease the number of offspring that survive to adulthood. Other approaches under development can decrease the transmission of disease-causing virus. An NSTC report stated that some reported strengths of these approaches include potentially lower impact on other species and minimizing collateral risks to humans by more specific targeting of mosquito species. Some potential limitations include public opposition to some of the methods as well as a lack of studies demonstrating their effect on mosquito-borne disease transmission.\nSurveillance Helps Inform Mosquito Control Efforts. All mosquito control entity officials we spoke with told us that they use surveillance of the mosquito population to assess the presence and abundance of mosquitoes and to direct the use of mosquito control methods. Traps can be used to perform surveillance. Different traps are suited to different species—for example, mosquito control entity officials told us that they use BioGents-Sentinel traps to specifically target Zika virus vectors such as Aedes aegypti and Aedes albopictus. Mosquito control entity officials also said that sentinel animals, such as regularly monitored chickens, are used for surveillance of mosquitoes that carry West Nile virus. One mosquito control entity uses landing counts, which enumerate the number of mosquitoes landing on a human volunteer over some period such as 1 minute. Finally, mosquito control entities can rely on reported mosquito complaints from the community as part of their surveillance.", "The federal government has a limited role in implementing mosquito control because mosquito control efforts are implemented at the state and local levels. However, the federal government faced a number of challenges in supporting these mosquito control efforts. According to CDC documentation, the agency developed technical guidance and provides funding and technical assistance to support state and local mosquito control activities. We identified four challenges to the federal government’s efforts to support mosquito control activities: (1) the timing of the availability of funds and sustaining expertise, (2) communication of data about mosquito distribution, (3) linking the effects of mosquito control to disease outcomes, and (4) limited information about mosquito control entities.", "Federal agencies faced challenges related to the cyclic nature of mosquito-borne diseases, including recruiting and maintaining expertise. For example, part of IVM is matching specific methods or tools to specific situations and requires an understanding of mosquito biology. However, experts at our meeting identified two issues in implementing IVM. First, one expert at our meeting said that vector biology is “ kind of a dying field” in which “trained people cannot get jobs,” and another expert at our meeting indicated that vector biology program support has not been sustained. CDC officials agreed, stating that it is challenging to study cyclic diseases such as West Nile virus. When the disease fades, the jobs and resources also go away, so that the next time the disease appears, staff must be retrained or new staff trained.\nSecond, CDC officials told us that mosquito control needs vary with seasonal cycles, resulting in periods of several months that require more resources followed by some periods when little or no resources are needed. For example, CDC officials told us that even though surveillance traps are not perishable, mosquito control entities ran out of certain traps during the 2016 mosquito season and had to wait 6-months to acquire new traps. According to CDC officials, funds for purchasing traps were not available until summer.\nFurther, grant funds awarded for mosquito control may not make it to some local mosquito control districts. CDC staff stated that CDC awarded funds to combat the Zika virus, including $56 million between August and December 2016 for mosquito control and surveillance. However, an expert at our meeting told us that CDC does not directly fund specific mosquito control entities but instead provides funds to grant recipients, typically states. Since the states submit the grant applications and direct the use of certain grant funds after the award, and CDC does not directly monitor mosquito control entities, CDC may face challenges addressing entity needs.", "CDC faced challenges in communicating the presence of mosquitoes in a manner that was clear and useful to different groups such as mosquito control entities and the general public. CDC distributed maps of the estimated potential range of the primary Zika virus vector mosquitoes on its webpage and in guidance, but imprecision in the maps can lead to confusion, according to some mosquito control officials. According to CDC officials, the maps allowed states to determine the level of effort needed for more precise mosquito surveillance as well as to show the public where they may encounter certain mosquito species.\nOne mosquito control official told us that confusion about CDC’s maps resulted from people failing to look at the qualifications stated in the map captions and mistakenly concluding that an entire state was infested with Zika virus vector mosquitoes. This official said that CDC’s maps of the range of Aedes mosquitoes may be unhelpful since they are intended to show the mosquitoes’ potential range while some residents who saw the maps were worried that they were in an area with Zika virus. This official also told us the maps created a challenge of reconciling information that their own mosquito control program staff had gathered with that presented on a highly publicized CDC map. For example, one mosquito control entity official we spoke with told us that it has not had Aedes aegypti in its county since 2012. However, the state where the mosquito control entity is located is entirely within the potential range identified by the CDC map. An expert from our meeting told us that the CDC map showed regions painted with a broad brush, and such information could spread fear.\nTo illustrate some differences between CDC’s estimated potential range of Aedes aegypti mosquitoes and locations with reported occurrence of the mosquito, we compared the CDC map to a map of historical mosquito data compiled from multiple sources and published in a recent article written by CDC scientists. The map from the article shows a different, much sparser, pattern of recorded presence than CDC’s estimated potential range (figure 8).\nExperts identified limitations with both maps. For example, one expert from our meeting told us that the CDC map may extend the potential mosquito range too far north in some locations. Another expert stated that the CDC map does not account for all the factors that affect mosquito distribution. In addition, one expert told us that the data for the map on the right in figure 8 may be incomplete, and a mosquito control official told us that the map did not convey whether an area reporting no mosquitoes had performed mosquito surveillance.\nCDC officials told us that their map was generated with data ranging as far back as 1995, and was sourced from a combination of published records and an understanding of species ecology and U.S. geography.\nHowever, the detailed information was not posted on the CDC website or in documentation associated with the map. As a result, the map may not be useful for all of its intended purposes. According to Standards for Internal Control in the Federal Government, management should use quality information to achieve the agency’s objectives and should select appropriate methods to communicate externally. Additionally, the standards state that agency management should externally communicate necessary quality information to achieve those objectives. This includes selecting appropriate methods to communicate externally, considering factors such as the intended recipients and the nature of the information being communicated. With regards to the information presented on CDC maps, experts suggested including more details, such as (1) collection records, (2) measures of the stability of the mosquito populations (showing how long populations of such mosquitoes would be expected to persist in a given location), and (3) areas of risk for transmission of mosquito-borne diseases. Additionally, understanding the date range and sources of the data can help place map information in context. Without such context, CDC’s maps could generate confusion about mosquito presence, resulting in concern among residents and public relations challenges, among other things.", "CDC faced challenges in determining whether mosquito control efforts are associated with the reduction of mosquito-borne disease. For example, mosquito control entity officials told us the entity’s mosquito control efforts are not directly linked to disease reduction. An official from another mosquito control entity told us that it links mosquito control only to the mosquito population. Another said that it links mosquito control to the presence of West Nile virus in sentinel chickens. Additionally, West Nile virus, CDC officials told us, is a bird disease, so CDC can surveil for West Nile virus and detect this virus 2 weeks before it can affect people. However, Zika virus lacks this environmental component and enters a country with human travelers. Zika virus is thus picked up by human surveillance before mosquito surveillance and lacks a similar 2- week delay.\nOther challenges to analyzing the relationships between mosquito control methods and disease reduction include the dependence of reported disease cases on weather, human susceptibility and immunity. According to CDC officials, data were insufficient to create an analogous link for the Zika virus, in part because the specific data needed to demonstrate the effect were not available, due to privacy considerations for individuals’ health records. Therefore, it will be difficult to tease out the effect of mosquito control methods on disease reduction.", "CDC’s capacity to develop a national strategy for mosquito control is limited and depends on its knowledge of mosquito control entities and their capabilities. CDC relied on external sources such as the National Pesticide Information Center, the American Mosquito Control Association, or the National Association of County and City Health Officials to compile a list of mosquito control entities. CDC staff told us that this list is likely to capture the larger, well-funded entities but may miss some smaller ones.\nFurther, mosquito control capabilities in the United States are variable. According to an assessment by the National Association of County and City Health Officials, 68 percent of the responding mosquito control entities in 10 priority jurisdictions were rated as “needs improvement.” A mosquito control official we interviewed agreed that variability in mosquito control entity capacities is significant. This means that it is challenging for CDC to determine the status of mosquito control efforts in different regions of the United States and to identify regions that may need additional technical guidance or assistance.", "Emerging infectious diseases such as influenza, Ebola and Zika viruses represent an ongoing threat to the health of people in the United States and worldwide. The recent Zika virus outbreak presented some challenges, some of which are unique to Zika virus disease, in relation to epidemiology, diagnostic tests, and federal agencies’ role in vector control strategies.\nWith regard to the epidemiology of the Zika virus, CDC and its public health partners established standardized Zika case definitions. However, the estimated high rate of infected persons who had mild or no symptoms and, as a result, did not seek medical treatment made it challenging to obtain an accurate measure of the magnitude and impact of Zika virus in the United States.\nWith regard to the availability of accurate and reliable diagnostic tests for the Zika virus, FDA authorized several diagnostic tests under EUA, but some performance characteristics were not consistently reported across different diagnostic tests, making it more challenging to compare tests. Information on performance characteristics presented in each diagnostic test product label was not consolidated across available tests, and the identity of the comparator assay was not listed on some labels, making it challenging for users to make informed decisions about which test to adopt or recommend to patients.\nCDC developed the first two authorized diagnostic tests for the Zika virus and offered these tests to public health laboratories, but not to some manufacturers. Some manufacturers did not have access to the authorized CDC tests and encountered difficulty acquiring authorized tests from other manufacturers. Without a clear and transparent process for distributing CDC diagnostic tests, the agency may not be able to develop the capacity of the commercial sector to be able to meet the needs during an outbreak.\nIn addition, users were not able to compare clinical performance across authorized diagnostic tests in the absence of a diagnostic test reference standard that all manufacturers use. CDC has not provided detailed information on its website for all the diagnostic tests it distributed during the Zika virus outbreak. Until CDC lists information about all the diagnostic tests it distributes, it may be more challenging for users to determine which test to use.\nWith regard to vector control methods, federal agencies can provide important information to assist mosquito control efforts implemented at the state and local levels. However, the information that CDC included in its maps did not include sufficient details on its estimates of potential distribution of mosquitoes that carry the Zika virus, which made it challenging for mosquito control experts and the public to correctly interpret and use such data.", "We recommend that the Secretary of Health and Human Services direct the Commissioner of the Food and Drug Administration to take the following two actions:\nConsolidate information from individual diagnostic test labels and make this information available in a form that enables users to more readily compare information across tests.\nRequire manufacturers to list the identity of comparator assays on their diagnostic test labels.\nWe also recommend that the Secretary of Health and Human Services direct the Director of Centers for Disease Control and Prevention to take the following three actions:\nEstablish a transparent process to provide CDC diagnostic tests, upon request, to manufacturers that are in the final stages of diagnostic test authorization.\nInclude information on CDC-developed tests distributed to or shared with public health laboratories on CDC’s website, including laboratory developed tests.\nProvide details such as collection records, dates, and data limitations on posted and disseminated mosquito distribution maps to better inform mosquito control experts and the general public.", "We provided a draft of this report for review and comment to HHS and EPA. HHS’s written response is reprinted in appendix III. EPA did not provide a written response. HHS agreed with four of our recommendations, partially agreed with one of our recommendations and provided information on actions it is taking to address these recommendations. HHS and EPA also provided technical comments, which we incorporated as appropriate.\nHHS concurred with our recommendation for FDA to consolidate information from individual product labels and said that this information would be available on FDA’s website.\nIn response to our recommendation that FDA require manufacturers to list the identity of the comparator assay, HHS stated that it would recommend that manufacturers describe the test used for comparison in order to reduce the risk of confusion by diagnostic test users.\nIn response to our recommendation to establish a transparent process to provide CDC diagnostic tests to manufacturers, HHS stated that CDC will work with its existing Technology Transfer Office to implement a transparent process for providing manufacturers with approved CDC diagnostic assays.\nIn response to our recommendation that CDC provide details such as collection records, dates, and data limitations on posted and disseminated mosquito distribution maps to better inform mosquito control experts and the general public, HHS described several actions taken by CDC to help improve the quality of the data that is used to develop estimated potential ranges of the mosquitoes that spread Zika virus disease, including conducting a rapid review of available data on the mosquitoes that can transmit the Zika virus and conducting surveys to record the location of mosquitoes capable of spreading different diseases.\nIn response to our recommendation to include information on CDC-developed tests distributed to public health laboratories, HHS partially concurred and provided clarifying information. HHS agreed that it should share information on CDC-developed tests that have received EUA. However, regarding this recommendation, HHS did not agree that it should share information on CDC’s laboratory-developed tests that have not received EUA because CDC is unable to provide detailed information on characteristics of these unstandardized tests. We maintain that sharing information about these laboratory developed tests that are used for comparison testing is important because of the concerns that were raised regarding the sensitivity of one of CDC’s EUA tests. We recognize that laboratory- developed tests that have not received EUA are not standardized, but we believe that CDC can provide certain information on the performance characteristics and quality of these tests based on its knowledge about these tests. Sharing this information could help other diagnostic test users make informed decisions about which test to adopt or recommend. HHS also noted that CDC does not distribute laboratory developed tests that have not received EUA but in some circumstances shares them with public health laboratories. In response to this comment, we have modified our recommendation to reflect this information.\nAs agreed with your offices, we will send copies of this report to appropriate congressional committees, the Secretary of Health and Human Services, and the Administrator of the Environmental Protection Agency, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions concerning this report, please contact Timothy M. Persons, Chief Scientist, at (202) 512-6512 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to the report are listed in appendix VIII.", "This appendix lists the experts, and their affiliations, who participated in the Zika Virus Expert Meeting held with the assistance of the National Academies of Sciences, Engineering, and Medicine, on November 9–10, 2016, at 500 5th Street, N.W., Washington, D.C.\nAmy L. Altman, Ph.D., Vice President, Biodefense and Protein Diagnostics, Luminex Corporation Jamie A. Blow, Ph.D., Director, Armed Forces Pest Management Board, Defense Pest Management, Department of Defense Michael Callahan, M.D., M.S.P.H., Director of Translational Therapeutics, Vaccine, and Immunotherapy Center, Massachusetts General Hospital, Harvard Medical School Joseph M. Conlon, M.Sc., BCE, Technical Adviser, American Mosquito Control Association Durland Fish, Ph.D., Honorary D.Sc., Emeritus Professor, Yale School of Public Health Eva Harris, Ph.D., Professor, Division of Infectious Diseases and Vaccinology, School of Public Health and Director, Center for Global Public Health, University of California at Berkeley Anna M. Likos, M.D., M.P.H., State Epidemiologist and Interim Deputy, Secretary for Health, Florida Department of Health Jorge L. Munoz-Jordan, Ph.D., Chief, Molecular Diagnostics and Research Laboratory, Division of Vector Borne Infectious Diseases, Dengue Branch, Centers for Disease Control and Prevention Benjamin Pinsky, M.D., Ph.D., Medical Director, Clinical Virology Laboratory, Stanford University School of Medicine Brenda Rivera-García, D.V.M., M.P.H., Territorial Epidemiologist, Puerto Rico Department of Public Health Alfonso J. Rodriguez-Morales, M.D., Ph.D., Chair, Colombian Collaborative Network of Zika (RECOLZIKA)", "The objectives of this review were to (1) provide information on what is known and not known about the epidemiology of the Zika virus and determine the challenges, if any, in conducting surveillance and epidemiological studies, (2) determine the characteristics of different Zika virus authorized diagnostic tests and any challenges manufacturers and users faced, and the extent to which Food and Drug Administration (FDA) and Centers for Disease Control and Prevention (CDC) followed their own communication guidance during the U.S. outbreak, and (3) identify available mosquito control methods, describe their strengths and weaknesses, and identify any challenges federal agencies and others face in assisting mosquito control efforts.\nTo conduct this work, we reviewed relevant laws, regulations, and guidance. We reviewed relevant documentation such as, FDA’s guidance to the manufacturers, product labels, and agencies reports on the epidemiology of the Zika virus, and interviewed officials from key federal agencies that are involved in the domestic Zika virus response. With the assistance of the National Academy of Sciences, we convened a meeting with 16 experts to discuss issues related to the Zika virus outbreak. These experts represented academia, the federal government, and industry and had combined expertise in epidemiology, diagnostics, and mosquito control.\nThe Forum on Microbial Threats within the National Academies of Sciences, Engineering, and Medicine solicited nominations for the expert panel from its extensive contacts in academia, government, foundations, and other organizations interested in vector borne diseases, particularly Zika virus disease. These contacts include current and past members of National Academies of Science’s Forum on Microbial Threats, selected members of the National Academy of Medicine, and other National Academies of Science stakeholders. The result was approximately 109 nominees. From this initial list, experts were selected for their knowledge and expertise in the science and epidemiology of Zika virus, Zika virus diagnostics, and mosquito control, as well as their experience in the academic, industry, nonprofit, and government sectors.\nWe chose two U.S. cities to visit to interview about their experiences and challenges in terms of Zika virus epidemiology, diagnostic users, and mosquito control—namely, New York City, which had the largest reported number of travel-associated cases, and Miami, Florida, for the largest reported number of locally transmitted cases. For both site visits, we interviewed and collected information from city and state public health and mosquito officials. We also conducted site visits to three agencies within the Department of Health and Human Services (HHS): CDC, FDA, and National Institutes of Health (NIH).\nTo provide information on what is known about Zika virus epidemiology and the challenges in conducting surveillance and epidemiologic studies, we reviewed surveillance case data from CDC, the Pan American Health Organization (PAHO), and the World Health Organization (WHO). We reviewed peer-reviewed journal articles and reports about the Zika virus and associated health outcomes. We interviewed federal and selected state and city public health officials about Zika virus surveillance and epidemiology. We also interviewed representatives from public health organizations, including the Association of State and Territorial Health Officials (ASTHO), Council of State and Territorial Epidemiologists (CSTE), and National Association of County and City Health Officials (NACCHO). We asked the representatives about the roles of their organizations in Zika virus surveillance and epidemiologic studies and any challenges they encountered.\nTo determine the characteristics of different Zika virus diagnostic tests, we focused on those diagnostic tests that were authorized for use under FDA’s Emergency Use Authorizations (EUA). This excluded laboratory developed tests. We reviewed and compared the product labels available on FDA’s website for 16 diagnostic tests with EUAs as of April 12, 2017. We reviewed product labels and determined the reported limit of detection for each molecular diagnostic test. We reviewed the product labels for information about the FDA reference samples. We also reviewed the letter of authorization and factsheets for healthcare providers and patients available on FDA’s website for each authorized diagnostic test.\nTo determine the strengths and limitations of different diagnostic tests and the challenges associated with Zika virus diagnostic testing, research, development, and regulatory approval, we interviewed several manufacturers that had an EUA diagnostic test for the Zika virus. We attempted to interview the manufacturers of the 14 different Zika virus diagnostic tests that had a EUA, including CDC, which manufactured two of the diagnostic tests. We interviewed CDC officials about their tests in site visits to Atlanta, Georgia, and Fort Collins, Colorado. We also contacted the 14 commercial manufacturers of the EUA diagnostic tests through email and were able to interview 10 of them that responded to our inquiry. We used a structured set of interview questions to obtain data from the eight manufacturers that included questions on performance characteristics, operational characteristics, types of samples, strengths and weakness of the diagnostic test as well as limitations, and challenges associated with Zika diagnostic test development, research, testing, and regulatory processes.\nWe also spoke with various users of the authorized diagnostic tests, including officials from selected state public health laboratories and CDC and Department of Defense (DOD) laboratories about the strengths and limitations of different tests. We selected diagnostic test users by emailing seven different entities that were listed in an HHS report as using a CDC test in their laboratories, and we were able to interview officials at five laboratories that responded to our inquiry. We coordinated with DOD officials and submitted questions to their laboratories that use diagnostic tests for Zika. We asked users of diagnostic tests about the type or types of tests they used, how they decided on which test(s) to use, the origin of specimens tested, the performance of comparison testing performed, and whether they had access to information regarding the potential risks and benefits of EUA tests and knowledge of available alternatives. We also asked for their interpretation of an adverse event for Zika diagnostic tests.\nWe compared information from our interviews with federal officials and our review of agency documents to internal controls from Standards for Internal Control in the Federal Government. To determine current CDC and FDA practices and whether they follow of their own communication guidance, we compared information we collected from agency interviews and from our expert meeting and review of relevant documentation to internal agency guidance documents, such as the Emergency Use Authorization of Medical Products and Related Authorities.\nTo identify available mosquito control methods and their strengths and weaknesses, we reviewed agency documents and peer-reviewed literature and conducted interviews with a nongeneralizable selection of mosquito control entities. We focused on entities with a high potential abundance of the mosquito species that transmit the Zika virus as reported in a journal article and areas where there was local Zika transmission, among other things. We emailed 13 mosquito control entities and were able to interview eight that responded to our inquiry. We asked these mosquito control entities about challenges with implementing their programs, technologies they use for mosquito control, how they select specific methods, sources of funding, and changes to their programs because of Zika. To assess the challenges that federal agencies face in assisting mosquito control efforts, we spoke with federal agency officials in CDC, EPA, and FDA; experts in federal government and academia; and members of our expert panel. The sample of mosquito control entities we selected for our review is nongeneralizable, meaning that information from our interviews cannot be used to make general statements about mosquito control entities across the United States.\nWe conducted this performance audit from June 2016 to May 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "The following are summarized descriptions of criteria and Zika case classifications that were effective in June 2016, which updated interim definitions published in February 2016.", "Criteria for laboratory evidence of recent Zika virus infection: culture of Zika virus from blood, body fluid, or tissue; OR detection of Zika virus antigen or viral ribonucleic acid (RNA); OR positive Zika virus immunoglobulin M (IgM) antibody test with positive Zika virus neutralizing antibody titers and negative neutralizing antibody titers against dengue or other flaviviruses regularly found to the region where exposure occurred.\nCriteria for laboratory evidence of recent flavivirus infection that is possibly Zika virus: positive Zika virus IgM antibody test with positive neutralizing antibody titers against Zika virus and dengue virus or other flaviviruses regularly found to the region where exposure occurred. positive Zika virus IgM antibody test AND negative dengue virus IgM antibody test with no neutralizing antibody testing performed.\nCriteria for establishing an epidemiologic linkage: resides in or recent travel to an area with known Zika virus transmission; OR sexual contact with a confirmed or probable case within the infection transmission risk window of Zika virus infection or person with recent travel to an area with known Zika virus transmission; OR receipt of blood or blood products within 30 days of symptom onset; OR organ or tissue transplant recipient within 30 days of symptom onset; OR association in time and place with a confirmed or probable case; OR likely vector exposure in an area with suitable seasonal and ecological conditions for potential local vector-borne transmission.", "", "In discussion with mosquito control entities, we heard that certain federal regulations related to pesticide applications may create additional issues for mosquito control. Pesticide use for mosquito control, among other uses, is regulated by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), under which vendors register pesticides for sale or distribution and pesticide users are required to follow the labeling for the pesticide application. In addition to using products that have been registered under FIFRA, mosquito control entities must obtain a permit to spray pesticides on or near waters of the United States under the Clean Water Act. Some mosquito control entity officials we spoke with told us the National Pollution Discharge Elimination System (NPDES) permit process has led to an increase in ongoing administrative burdens, such as reporting requirements, with one stating that their burden has increased from 1 hour of daily paperwork to 6 hours.\nMosquito control officials we interviewed told us that some mosquito control entities have discontinued their programs, at least partly because of additional reporting requirements under NPDES permitting. However, an American Mosquito Control Association official told us that while they had a number of second-hand reports, they could not specify actual instances of entities ceasing operations because of NPDES costs. One mosquito control official told us that NPDES permitting burdens will largely affect smaller mosquito control entities that may not be as well funded, many of which shut down and have not been replaced with another entity. This official added that the entities shut partially because of the economic downturn and that NPDES paperwork burden was a possible, but not exclusive, cause. A mosquito control professional told us that his program discontinued applying pesticides partly as a result of NPDES permitting, but since the program still supplies pesticides, they know that the use of pesticides has increased. This professional questioned the benefit of NPDES permits if pesticide applicators react by taking actions that result in the use of more pesticides. The American Mosquito Control Association stated that NPDES permits duplicate FIFRA processes, create new avenues for lawsuits, and have no substantive or foreseeable environmental benefit.\nA mosquito control official expressed support for NPDES permitting, because following NPDES permitting guidelines allowed his program to minimize adulticide discharges as a first response and to develop a more desirable IVM plan. From 2012 to 2016, this entity was able to reduce adulticiding acres by more than 30 percent, despite an increase in citizen requests for service. However, another official stated that encouraging larvicide use or IVM can be done more effectively than through NPDES permitting, such as through federal funding of programs that implement best practices.\nEnvironmental group representatives we spoke with agreed that documented evidence is scarce on the effects of NPDES permits on pesticide levels in water. However, environmental group representatives told us of benefits to the permit process, including (1) encouraging nonchemical means of control, (2) establishing a limit on the amount of pesticides in specific bodies of water, and (3) enabling the monitoring of pesticide use. Representatives from one group told us that the Clean Water Act fills a regulatory gap that FIFRA does not address. Representatives from another group stated that the permitting application is simple.\nFurther, an environmental group representative told us NPDES notification and reporting requirements allow the public to be aware of what is being sprayed and how much. One representative told us her office received calls from residents wondering what was being sprayed and saying they are not aware of requirements regarding who notifies the public about spraying.\nEPA officials told us that they have not documented evidence that (1) pesticide use has decreased or (2) water quality has changed, in response to NPDES permits for FIFRA-compliant pesticide application. However, an EPA notice states that the cost of compliance with NPDES permits is minimal. Further, EPA documentation states that EPA disagrees that FIFRA and NPDES requirements are duplicative. According to this documentation, NPDES permits minimize discharges of pesticides to waters of the United States beyond FIFRA requirements, among other things.", "Biodefense: The Nation Faces Multiple Challenges in Building and Maintaining Biodefense and Biosurveillance. GAO-16-547T. Washington, D.C., April 14, 2016.\nEmerging Infectious Diseases: Preliminary Observations on the Zika Virus Outbreak.GAO-16-470T. Washington, D.C., March 2, 2016 Biosurveillance: Ongoing Challenges and Future Considerations for DHS Biosurveillance Efforts. GAO-16-413T. Washington, D.C., February 11, 2016.\nAir Travel and Communicable Diseases: Comprehensive Federal Plan Needed for U.S. Aviation System’s Preparedness. GAO-16-127. Washington, D.C., Dec 16, 2015.\nEmerging Animal Diseases: Actions Needed to Better Position USDA to Address Future Risks. GAO-16-132. Washington, D.C., December 15, 2015.\nBiosurveillance: Additional Planning, Oversight, and Coordination Needed to Enhance National Capability. GAO-15-664T. Washington, D.C., July 8, 2015.\nBiological Defense: DOD Has Strengthened Coordination on Medical Countermeasures but Can Improve Its Process for Threat Prioritization. GAO-14-442. Washington, D.C., May 15, 2014.\nInfluenza: Progress Made in Responding to Seasonal and Pandemic Outbreaks. GAO-13-374T. Washington, D.C., February 13, 2013.\nBiosurveillance: Observations on BioWatch Generation-3 and Other Federal Efforts. GAO-12-994T. Washington, D.C., September 13, 2012.\nBiosurveillance: Nonfederal Capabilities Should Be Considered in Creating a National Biosurveillance Strategy. GAO-12-55. Washington, D.C., October 31, 2011.\nNational Preparedness: Improvements Needed for Acquiring Medical Countermeasures to Threats from Terrorism and Other Sources. GAO-12-121. Washington, D.C., October 26, 2011.\nInfluenza Pandemic: Lessons from the H1N1 Pandemic Should Be Incorporated into Future Planning. GAO-11-632. Washington, D.C., June 27, 2011.\nInfluenza Vaccine: Federal Investments in Alternative Technologies and Challenges to Development and Licensure. GAO-11-435. Washington, D.C., June 27, 2011.\nPublic Health Preparedness: Developing and Acquiring Medical Countermeasures Against Chemical, Biological, Radiological, and Nuclear Agents. GAO-11-567T. Washington, D.C., April 13, 2011.\nBiosurveillance: Efforts to Develop a National Biosurveillance Capability Need a National Strategy and a Designated Leader. GAO-10-645. Washington, D.C., June 30, 2010.\nInfluenza Pandemic: Sustaining Focus on the Nation’s Planning and Preparedness Efforts. GAO-09-334. Washington, D.C., February 2009.\nInfluenza Pandemic: Applying Lessons Learned from the 2004-05 Influenza Vaccine Shortage. GAO-06-221T. Washington, D.C., November 4, 2005.\nWest Nile Virus Outbreak: Lessons for Public Health Preparedness. HEHS-00-180. Washington, D.C., September 11, 2000.", "", "", "In addition to the individual listed above, Sushil Sharma (Assistant Director), Ashley Grant, Hayden Huang and Amber Sinclair made key contributions to this report. Additional contributors included: Pille Anvelt, Amy Bowser, Maureen Lackner, Penny Pickett, Paola Tena, and Elizabeth Wood." ], "depth": [ 1, 2, 2, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 1, 2, 3, 3, 3, 3, 3, 3, 2, 3, 3, 1, 2, 3, 3, 3, 3, 2, 3, 3, 3, 3, 1, 1, 1, 1, 1, 1, 1, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_title h1_title", "", "", "h1_full", "h2_full", "", "h0_full h2_title", "h0_full", "h0_full", "", "h0_full", "", "", "", "", "", "h0_full h2_full", "", "", "", "", "", "", "h1_full", "h1_title", "", "", "", "", "", "h1_full", "h1_title", "", "h1_full", "h2_title", "h2_full", "h2_full", "", "h2_full", "", "h2_full", "", "", "", "", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What happened due to the lack of knowledge of Zika virus?", "What types of challenges emerged from this?", "What more is now known about Zika virus?", "What is known about the history of Zika acquisition out of the US?", "What is known about the history of Zika acquisition in the US?", "What is still not known about the Zika virus?", "How did Zika virus tests compare?", "What was a major way they varied?", "What issues did test manufacturers face?", "What issues did test users face?", "Why was the development of tests concerning to some users?", "How does the GAO determine users could have been better informed?", "How can risks surrounding Zika virus be reduced?", "What different control programs are there?", "What different benefits do mosquito control methods provide?", "What different limitations do mosquito control methods provide?", "How does the CDC support mosquito control methods?", "What challenges does federal support face?" ], "summary": [ "Since Zika virus disease was a newly emerging disease threat in the United States, and relatively little was known about the Zika virus prior to the 2016 U.S. outbreak, the Centers for Disease Control and Prevention (CDC), and the states were not fully equipped with needed information and resources at the beginning of the outbreak.", "This presented several challenges for Zika virus disease surveillance and research efforts, such as challenges related to establishing a national definition for reporting cases.", "Knowledge about Zika virus epidemiology has increased in the past year, including information about Zika virus disease incidence and distribution of cases, and its associated adverse health outcomes.", "Most of the 5,197 Zika virus disease cases reported by April 5, 2017 in the United States were associated with travel from affected areas outside the continental United States.", "Only two states had disease cases of local, mosquito-borne transmission—216 were in Florida and 6 in Texas.", "While much has been learned about the epidemiology of the Zika virus, many unknowns remain, including the actual number of infections and the full spectrum of outcomes.", "The 16 Zika virus diagnostic tests authorized during the outbreak varied in their performance and operational characteristics.", "For example, they varied in their ability to detect the virus and provide accurate results.", "In developing the diagnostic tests, manufacturers faced challenges in several areas, including access to clinical samples and other authorized diagnostic tests for comparison purposes.", "Users of the tests also encountered challenges, including determining the most accurate test to use, and obtaining equipment needed to conduct the tests.", "Some manufacturers raised concerns about the difficulty in developing diagnostic tests that met the Food and Drug Administration's (FDA) requirements for Emergency Use Authorization and some users expressed concerns about selecting tests amongst those authorized.", "GAO also determined that CDC and FDA did not follow some of their guidance in communicating with users of diagnostic tests, including providing clear information that would have enabled users to more easily compare performance across different tests.", "Mosquito control programs in the United States are implemented at state and local levels and are critical to mitigating the risks associated with the Zika virus.", "Control methods include applying pesticides, reducing available water sources for breeding, and using personal protection. Each method has its strengths and limitations.", "For example, some control methods are more effective at reducing mosquito populations while others help prevent individuals from mosquito bites.", "Similarly, each method has some limitations, for example, there is varied public opposition to the use of certain pesticides.", "CDC supports state and local mosquito control activities primarily by providing guidance on mosquito control methods and funding to support certain mosquito control efforts.", "Challenges federal agencies faced in supporting these activities include sustaining staff expertise in mosquito control during periods when there are no outbreaks, funding constraints, and effectively communicating information about the geographical distribution of mosquitoes that transmit the Zika virus." ], "parent_pair_index": [ -1, 0, -1, 2, 2, -1, -1, 0, -1, -1, 3, 3, -1, 0, 1, 1, -1, 4 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 5, 5, 5, 5, 5, 5 ] }

{ "title": [ "", "Background", "Congressional Mandates for the Use of UAVs", "Benefits and Limitations of UAVs", "Benefits", "Limitations", "Other Concerns", "Issues for Congress", "Costs vs. Benefits", "UAV Effectiveness", "Lack of Information", "Coordination with USBP Agents", "Safety Concerns", "Implementation Schedule" ], "paragraphs": [ "", "Within the Department of Homeland Security (DHS), aerial assets are operated by the U.S. Customs and Border Protection's (CBP's) Office of Air & Marine (A&M). CBP utilizes advanced technology to augment its U.S. Border Patrol (USBP) agents' ability to patrol the border. The technologies used include, but are not limited to, sensors, light towers, mobile night vision scopes, remote video surveillance systems, directional listening devices, various database systems, and unmanned aerial vehicles (UAVs). These so-called \"force multipliers\" allow the USBP to deploy fewer agents in a specific area while maintaining the ability to detect and counter intrusions and are increasingly becoming a part of the USBP's day-to-day operations. Increasingly, DHS has explored the use of UAVs by A&M in support of USBP's mission to augment USBP agents' ability to patrol the border.\nThere are two different types of UAVs: drones and remotely piloted vehicles (RPVs). Both drones and RPVs are pilotless, but drones are programmed for autonomous flight. RPVs are actively flown—remotely—by a ground control operator. UAVs are defined as a powered aerial vehicle that does not carry a human operator, uses aerodynamic forces to provide lift, can fly autonomously or be piloted remotely, can be expendable or recoverable, and can carry lethal or nonlethal payloads. Both types of UAVs have played key roles in recent conflicts.\nThe UAVs utilized by CBP are RPVs, and the current fleet consists of six low-to-medium altitude Predator B UAVs. As of late June 2010, A&M was operating five Predator B UAVs: four from the UAS Operations Center in Sierra Vista, AZ, and one from the UAS Operations Center in Grand Forks, ND. One additional UAV was modified with structural, avionics, and communications enhancements that are optimized for maritime operations as part of a congressionally mandated maritime modification program (discussed in the section below). This program also includes procuring a specifically configured maritime ground control station aimed at exploiting the new maritime surveillance hardware and software. Once operational testing and evaluation are completed, CBP plans to base the modified UAV—known as \"Guardian\"—at the Corpus Christi Naval Air Station for flights along the Texas border and in the Gulf region.\nThe recent UAV modification is part of an ongoing push by some policymakers and CBP to both expand CBP's UAV resources and open additional domestic airspace for UAV operations along the border. On June 23, 2010, the Federal Aviation Administration (FAA) granted a certificate of authorization requested by CBP, clearing the UAV flights along the Texas border and Gulf region. Other requests have reportedly been delayed due to safety concerns, some of which stem from previous incidents. The National Transportation Safety Board held a forum in 2007 on safety concerns associated with pilotless aircraft after a Predator crashed in Arizona the previous year. The board concluded the ground operator remotely controlling the plane had inadvertently cut off the plane's fuel. Additionally, the FAA and CBP grounded flights of UAVs for six days in June 2010 following a communications failure with a UAV flying over Texas. In response to this incident CBP, with the FAA's cooperation, conducted a safety review and provided UAV operators with additional training. Despite safety concerns raised by such incidents, some policymakers continue to call for the increased domestic use of UAVs.", "Congress has directed DHS to study the feasibility of using UAVs and to implement the technology to surveil the border on numerous occasions. In the 108 th Congress, the Intelligence Reform and Terrorism Prevention Act ( P.L. 108-458 ) included provisions calling for a pilot program to study the use of these technologies, including UAVs, along the northern border. The law also required DHS to present a plan within six months of enactment to comprehensively monitor the southwest border with UAVs, and to implement the plan as a pilot program as soon as funds are appropriated for that purpose. The 2003 DOD Authorization Act ( P.L. 108-136 ) required the President to issue a report \"on the use of unmanned aerial vehicles for support of homeland security missions.\" In the 109 th Congress, the conference report to the FY2007 DHS Appropriations Act ( P.L. 109-295 ) urged DHS to work with the Federal Aviation Administration (FAA) to implement a pilot program for the use of UAVs to surveil the northern border.\nThe FY2006 DHS Appropriations Act ( P.L. 108-90 ) provided $35.2 million to establish a Northern Border air wing and tasked the DHS Under Secretary of Border and Transportation Security to devise a report outlining operational plans by which the Air and Marine Operations Center (AMOC) would eliminate surveillance gaps affecting the northern border and western United States. The act also provided $10 million for the use of UAVs. P.L. 108-334 , the FY2006 Homeland Security Appropriations Act, provided another $10 million for UAVs in border security. P.L. 109-295 provided $20 million in FY2007 for DHS's use of UAVs. P.L. 110-161 provided $14.7 million in FY2008 for the operation and maintenance of UAVs. In FY2009, Congress did not specify the amount of funding A&M should put toward UAVs. The Supplemental Appropriations Bill of FY2010 ( H.R. 4899 ) would include $32 million for the acquisition of two additional UAVs by A&M.\nIn response to these congressional mandates, DHS has tested and used UAVs to surveil the U.S.-Mexican border since June 2004 in certain border sectors. The UAV demonstrations conducted by various commercial companies at Fort Huachuca and Gila Bend, AZ, on behalf of CBP have prompted various questions regarding their potential use within the United States that will be addressed subsequently. The FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) directed DHS to explore the use of UAVs in the marine environment in addition to the border, and appropriated $15 million for DHS's UAV program, resulting in the modified \"Guardian\" Predator B UAV. Additionally, the DHS conference report to the FY2008 Act directed DHS to work with other federal agencies, including the FAA, to \"evaluate the appropriateness of an FAA exemption for small scale\" UAV technology.", "", "One potential benefit of UAVs is that they could fill a gap in current border surveillance by improving coverage along remote sections of the U.S. borders. Electro-Optical (EO) sensors (cameras) can identify an object the size of a milk carton from an altitude of 60,000 feet. UAVs also can provide precise and real-time imagery to a ground control operator, who would then disseminate that information so that informed decisions regarding the deployment of border patrol agents can be made quickly. Additionally, the Predator B used along the southern border can fly for more than 30 hours without having to refuel, compared with a helicopter's average flight time of just over 2 hours. The ability of UAVs to loiter for prolonged periods of time has important operational advantages over manned aircraft. The longer flight times of UAVs means that sustained coverage over a previously exposed area may improve border security.\nThe range of UAVs is a significant asset when compared to border agents on patrol or stationary surveillance equipment. If an illegal border entrant attempts to transit through dense woods or mountainous terrain, UAVs would have a greater chance of tracking the violator with thermal detection sensors than the stationary video equipment which is often used on the borders. It is important to note, however, that rough terrain and dense foliage can degrade the images produced by a UAV's sensory equipment and thus limit their effectiveness at the borders. Nevertheless, the extended range and endurance of UAVs may lessen the burdens on human resources at the borders. Also, UAV accidents do not risk the lives of pilots, as do the helicopters that currently patrol U.S. borders.", "Despite potential benefits of using UAVs for homeland security, various problems encountered in the past may hinder UAV implementation on the border. According to a 2003 report, there have been concerns regarding the high accident rate of UAVs, which can be multiple times higher than that of manned aircraft. Because UAV technology is still evolving, there is less redundancy built into the operating system of UAVs than of manned aircraft and until redundant systems are perfected mishap rates are expected to remain high. Additionally, if control systems fail in a manned aircraft, a well-trained pilot is better positioned to find the source of the problem because of his/her physical proximity. If a UAV encountered a similar system failure, or if a UAV landing was attempted during difficult weather conditions, the ground control pilot would be at a disadvantage because he or she is removed from the event. Unlike a manned pilot, the remote pilot would not be able to assess important sensory information such as wind speed.\nInclement weather conditions can also impinge on a UAV's surveillance capability, especially UAVs equipped with only an EO camera and Forward Looking Infrared Radar (FLIR), because cloudy conditions and high humidity climates can distort the imagery produced by EO and FLIR equipment. Although the Predator B is operating in the low-humidity environment of the Southwest, the effects of extreme climatic or atmospheric conditions on its sensors reportedly can be mitigated if DHS decides to outfit the Predator B with a synthetic aperture radar (SAR) system and a moving target indicator (MTI) radar. Adding SAR and MTI to the Predator B's platform could significantly enhance its operational capability for border missions. However, adding SAR and MTI to the UAV platform would increase the costs associated with using UAVs on the border.\nAccording to the CBP Inspector General, the costs of operating a UAV are more than double the costs of operating a manned aircraft. This is because UAVs require a significant amount of logistical support and specialized operator and maintenance training. Operating one UAV requires a crew of up to 20 support personnel. Additionally, the use of UAVs has resulted in fewer alien apprehensions per flight hour than the use of manned aircraft. The high comparative costs of operating a UAV may be offset somewhat by their comparatively lower unit costs. The unit cost of UAVs varies widely, from $350,000 for the Shadow UAV to $4.5 million for the Predator. In contrast, the unit cost for manned aircraft used along the border varies from $8.6 million for the CBP Blackhawk helicopters to $36 million for Immigration and Custom Enforcement's P-3 airplanes. However, the benefit of the Blackhawk's relative low unit cost is offset by its lack of endurance, given its maximum flight time of 2 hours and 18 minutes.", "Lastly, how UAVs could be integrated into civilian airspace within the United States is a fundamental question being addressed by the FAA, DHS, and the Department of Defense (DOD). Integrating UAVs into civilian airspace so that they could operate safely would require not only the creation of regulatory guidelines by the FAA but also technical developments. The FAA requires that all aircraft operating in U.S. airspace have the ability to detect and avoid other aircraft. For UAVs, this has meant that an operator at the Air and Marine Operations Center (AMOC) must be dedicated to each UAV that is flying. Additionally, the FAA has required that UAV operators be licensed pilots. The FAA currently is working on guidelines for integrating UAVs into the national air space (NAS) and has deployed a representative to AMOC to liaise with DHS on a variety of issues, including the use of UAVs. Although there are no guidelines or regulations for incorporating UAVs into the NAS, the FAA has worked closely with government users of UAV technology in developing a certificate of authority (COA) so NAS can be blocked off for exploratory development or operational testing. A primary concern of the FAA is whether UAVs can operate in already crowded airspace. Before UAVs can be introduced into national airspace, the FAA, DHS, and other relevant users will need to address collision-avoidance, communication, and weather avoidance issues.", "While Congress has demonstrated consistent support for the concept of using UAVs in border security, many questions remain regarding their practical employment.", "As noted, the cost comparison between UAVs and manned aircraft is complicated. UAVs are less expensive to procure than manned aircraft but may cost more to operate. Thus, the life cycle cost of UAVs could actually be greater than the life cycle cost of manned aircraft. The disparity in operating the two types of aircraft may be offset by the fact that UAVs can remain in the air more than 10 times longer than the helicopters currently being used by A&M to support the USBP. Further, UAV command and control systems are being developed that can control multiple UAVs simultaneously. When fielded, these new capabilities may change the cost comparison to favor UAVs over manned aircraft.", "Questions as to the effectiveness of UAVs persist. Although \"Homeland Security officials praised the (UAVs) as a safe and important tool that … has contributed to the seizing of more than 22,000 pounds of marijuana and the apprehension of 5,000 illegal immigrants,\" others disagree. \"Unmanned aircraft serve a very useful role in military combat situations, but are not economical or efficient in civilian law enforcement applications,\" said T. J. Bonner, president of the Border Patrol union. \"There are a number of other technologies that are capable of providing a greater level of usefulness at a far lower cost.\"\nThe DHS Inspector General noted that UAVs were less effective, in their limited tests, than manned aircraft in supporting the apprehension of unauthorized aliens. In addition, the UAVs were used to assist in the apprehensions of aliens who had already been detected by other means. However, the ability of UAVs to maintain position for over 20 hours represents a significant advantage over manned aircraft; in the future, they may be used to actually detect unauthorized entries as opposed to merely supporting apprehensions of aliens already detected. An issue for Congress could entail whether UAVs are an effective tool for securing the border.", "Testing of UAVs along the border has been limited. A robust program to test multiple UAVs on the borders might ascertain where, how, and whether UAVs should be deployed. Larger scale testing would provide an opportunity to evaluate whether the limitations of UAVs would hinder their utility on the border. In the past, multiple UAVs piloted in close proximity have experienced interference and loss of control between the UAV and the remote pilot. In many cases, interference led to accidents. A possible issue for Congress could include whether testing should be expanded before any decisions are made regarding the wide-scale use of UAVs along the border.", "While UAVs may, in the future, be used to detect unauthorized entries, the fact remains that USBP agents must be deployed to apprehend any aliens identified. A possible issue for Congress could entail whether there are enough border patrol resources to investigate all UAV identified targets.", "The technical capabilities of the UAVs have been tested in a military context, but safety and technical issues need to be addressed if the program is to be expanded domestically. Chief among these issues is the FAA's concerns about the NAS and whether UAVs can be safely incorporated into the nation's crowded skies. It has been noted that UAVs suffer accident rates multiple times higher than manned aircraft. However, in an effort to support the wars in Afghanistan and Iraq, DOD fielded UAVs such as Predator and Global Hawk before their development programs were complete. Thus, the UAV accident rate might be lower if these systems had been allowed to mature under the full development program.", "Currently, there is not a timeline for the regular use of UAVs in U.S. airspace—either along the entire U.S. border by CBP or in the interior by other agencies. However, other countries, such as Japan and South Korea have, for many years, used UAVs in a variety of civil roles. Israel has certified UAVs for civil use, and European air traffic control authorities plan to have UAVs integrated into civil airspace by 2015. A possible issue for Congress could involve whether U.S. aviation authorities should pursue a more aggressive implementation plan for the use of UAVs." ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full", "h1_title", "h1_full", "h1_full", "", "h0_title h1_title", "h1_full", "", "h0_full", "", "", "" ] }

{ "question": [ "How has Congress supported change in border patrol?", "How does CBP currently patrol the border?", "What does this report examine?", "What is the risk assessment of UAVs?", "What surveillance benefit could the UAVs provide?", "What might outweigh the benefits of the UAVs?", "How are UAV accident rates detrimental?", "How can UVA surveillance be harmed?", "How is UAV cost detrimental?" ], "summary": [ "Congress has expressed a great deal of interest in using Unmanned Aerial Vehicles (UAVs) to surveil the United States' international land border.", "U.S. Customs and Border Protection (CBP) utilizes advanced technology to augment its USBP agents' ability to patrol the border, including a fleet of six UAVs.", "This report examines the strengths and limitations of deploying UAVs along the borders and related issues for Congress.", "UAVs come with several costs and benefits.", "One potential benefit of UAVs is that they could fill a gap in current border surveillance by improving coverage along remote sections of the U.S. borders. Moreover, the range of UAVs is a significant asset when compared to border agents on patrol or stationary surveillance equipment.", "Yet, despite potential benefits of using UAVs for homeland security, various problems encountered in the past may hinder UAV implementation on the border.", "There are concerns regarding the high accident rates of UAVs, which have historically been multiple times higher than that of manned aircraft.", "Inclement weather conditions can also impinge on a UAV's surveillance capability.", "Also, according to the CBP Inspector General, the costs of operating a UAV are more than double the costs of operating a manned aircraft." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 2, 2, 2 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 1, 1 ] }

{ "title": [ "Background", "NRC and Agreement States Have Taken Several Steps to Better Control Radioactive Materials, but Not Requiring Tracking and Agency License Verification for Category 3 Quantities Leaves Vulnerabilities", "NRC Revised Guidance Provides Greater Scrutiny of Radioactive Materials License Applications", "New Screening Criteria, Site Visit Checklist, and Guidance", "Prelicensing Guidance", "NRC and Agreement States Took Steps to Assess Whether Licensing Guidance Is Properly Implemented", "NRC Developed and Deployed Tracking, Licensing, and Verification Systems to Better Control Category 1 and 2 Quantities of Radioactive Material", "NRC Does Not Require Tracking or Agency Verification for Category 3 Quantities, Creating Risks to Public Health, Safety, and Security", "Our Testing of NRC and Agreement State Programs Showed Them to Be Effective in Some Cases but Not Others, Allowing Us to Obtain Commitments to Purchase a Dangerous Quantity of Radioactive Materials", "NRC Guidance Was Effective in Preventing Us from Obtaining Licenses for Our Fictitious Companies in Two Cases", "The Implementation of NRC’s Guidance Was Not Effective in Preventing Us from Obtaining a License for Our Fictitious Company in One Case", "GAO Used License to Obtain Vendor Commitments to Sell a Dangerous Quantity of Radioactive Material Considered Attractive for Use in a Dirty Bomb", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Nuclear Regulatory Commission", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The human health risks posed by any given type of radioactive material depend on its activity level, or intensity; how long exposure lasts; and the way in which the body is exposed to it—via inhalation, ingestion, or external exposure. The different types of radiation—including alpha, beta, gamma, and neutron—vary in how easy or difficult they are to block or shield, which, in turn, affects the health threat posed by a particular type of radiation. Depending on the radioactive material’s intensity and the length and manner of exposure to it, health effects range from death, to severe injury, to the development of cancer, to no discernable damage. For example, alpha radiation poses little threat to human health from external exposure, but poses considerable health risks if inhaled or ingested. Gamma radiation is more penetrating and, if not properly shielded, can cause injury or death through external exposure. Neutron radiation, like gamma radiation, if not shielded, can also cause injury or death through external exposure. Although sources of neutron radiation are less common, neutron radiation is emitted from some materials that are used to make nuclear weapons.\nNRC oversees licensees of radiological material through three regional offices located in Illinois, Pennsylvania, and Texas; radiological material licensing responsibilities for the region II office in Georgia are handled by the region I office in Pennsylvania. NRC has relinquished regulatory authority for licensing and regulating certain radioactive material to 37 states that have entered into an agreement with NRC (agreement states). Figure 1 shows which states are agreement states and in which states NRC has maintained all regulatory authority (NRC states).\nNRC and agreement states issue two types of licenses authorizing the possession and use of radioactive materials: specific licenses and general licenses. Specific licenses, which are the focus of this report, are issued for devices that contain relatively larger sealed radioactive sources. These devices, such as medical equipment used to treat cancer, cameras used for industrial radiography, and moisture and density gauges used in construction, generally require training to be used safely and may also need to be properly secured to avoid misuse. An organization or individual seeking to obtain a specific license must submit an application and gain the approval of either NRC or the appropriate agreement state prior to receiving and using licensed radioactive materials. According to NRC, of the approximately 21,000 specific radioactive materials licenses in the United States, NRC administers about 2,900, and agreement states administer the rest.\nOur prior work on security of radioactive materials found that NRC could do more to ensure the security of these materials. Specifically, we recommended in 2008 that among other things NRC take steps to develop and implement the systems it was then planning to better track, secure, and control radioactive materials. These systems are the National Source Tracking System (NSTS), the Web-based Licensing System (WBL), and the License Verification System (LVS).\nNSTS, deployed in January 2009, tracks category 1 and 2 sources of the 20 radionuclides that NRC determined are sufficiently attractive for use in an RDD or for other malicious purposes and warrant national tracking. NSTS is a transaction-based system that tracks each major step that each tracked radioactive source takes within the United States from “cradle to grave.” Licensees are responsible for reporting the manufacture, shipment, arrival, disassembly, and disposal of all nationally tracked sources. A nationally tracked source is a source containing a category 1 or 2 quantity of certain radioactive materials specified in NRC’s regulations. More specifically, NSTS includes the radionuclide, quantity (activity), manufacturer, manufacture date, model number, serial number, and site address. The licensee has until the close of the next business day after a transaction—such as the sale of a source from a vendor to a customer—takes place to enter it into the system. As a result, the location of all such sources are accounted for and closely tracked.\nWhile NSTS is presently configured to track larger and potentially more dangerous radioactive sources, NRC’s WBL—deployed in August 2012— provides quick access to up-to-date information on all NRC and four agreement states’ specific licenses for all radioactive materials and sources in all five IAEA categories, enabling the user to enter, maintain, track, and search radioactive material licensing and inspection information. WBL also includes pdf images of all paper copies of category 1 and 2 licenses for both NRC and agreement state licensees. NRC also developed a third system—LVS, deployed in May 2013—which draws on the information in NSTS and WBL and provides information to regulators and vendors and other would-be transferors on whether those applicants seeking to acquire category 1 and 2 sources are legitimately licensed to do so. This is particularly important because paper licenses issued by NRC and agreement states can be altered or counterfeited. LVS provides a means to mitigate the risks of using paper licenses.\nWhile NRC and agreement states have taken steps to improve their licensing programs and better ensure that radiological materials are safe and secure, concerns about the theft of radioactive materials and the possible consequences of a dirty bomb attack persist. In 2012, for example, we identified security weaknesses at some U.S. medical facilities that use high-risk radioactive materials, such as cesium-137, and in 2014, we found that challenges exist in reducing the security risks faced by licensees using high-risk radioactive materials for industrial purposes.\nNRC periodically evaluates NRC regional offices’ and agreement states’ programs for licensing radioactive materials through its Integrated Materials Performance Evaluation Program (IMPEP). NRC implemented IMPEP in 1995 to periodically review NRC regional office and agreement state radioactive materials programs to ensure that they are adequately protecting public health and safety from the potential hazards associated with the use of radioactive materials, and that agreement state programs are compatible with NRC’s program. As part of IMPEP, each NRC regional office and agreement state regulatory program is typically expected to undergo a program review every 4 years; reviews may occur more or less frequently depending on a program’s past performance. The IMPEP reviewers examine a regional office’s or an agreement state’s performance in areas such as licensing and inspections to determine if the regional office’s program is adequate to protect public health and safety and if the agreement state’s program is adequate to protect public health and safety and compatible with NRC requirements.\nNRC also has the option to employ greater oversight of agreement state programs if it discovers performance issues. Specifically, if performance problems are found, a Management Review Board (MRB)—comprised of NRC officials and an agreement state liaison—may decide to (in ascending order of seriousness) institute Monitoring, Heightened Oversight, Probation, Suspension, or Termination. The MRB may decide to place an agreement state on Monitoring if weaknesses in the program have resulted in or could result in less than satisfactory performance in one or more performance areas. If an agreement state program is found to have more serious problems (i.e., one or more performance indicators are found to be unsatisfactory), the MRB may opt to place a program on Heightened Oversight. Under Heightened Oversight, a program may be requested to submit a program improvement plan, which involves establishing a plan to address all recommendations to eliminate unsatisfactory performance as well as frequent contact with NRC to closely monitor progress. If the program under IMPEP review does not correct performance weaknesses under Heightened Oversight the MRB/NRC may place the program on Probation or even suspend or terminate the agreement and reassert regulatory authority. Probation is a formal process and requires approval of the Commission and notification of the state’s governor, congressional delegation, and public.", "NRC and agreement states have taken several steps since 2007 to help ensure that radioactive materials licenses are granted only to legitimate organizations and that licensees can only obtain such materials in quantities allowed by their licenses, but have not taken some measures for better controlling category 3 quantities of radioactive materials. In 2008, NRC developed revised screening criteria and a checklist covering all five IAEA categories of radioactive materials and now directs regions and agreement states to conduct prelicensing site visits for all unknown applicants. NRC and agreement states performed IMPEP reviews to assess whether licensing guidance was being met and took corrective actions when it was not. NRC also developed and deployed NSTS, WBL, and LVS to better control such materials, although these systems are focused on category 1 and 2 quantities. NRC does not require that category 3 quantities be tracked in NSTS nor does it require all category 3 licenses be included in WBL. LVS, which queries NSTS and WBL, provides information to regulators and vendors on whether a license is valid. By not including category 3 materials in NSTS nor most agreement state licenses in WBL, NRC has not taken an important step that could better track and control these materials. Further, including all category 3 materials in these systems could help address the risk that paper licenses issued by NRC and agreement states could be altered or counterfeited or that a licensee could obtain radioactive materials in quantities greater than what is allowed by their license.", "NRC has taken a number of steps to address the vulnerabilities in its licensing process identified by GAO and others. Specifically, in September 2007, NRC approved its Action Plan to respond to recommendations to address security issues its and agreement states’ radioactive materials programs raised in NRC Inspector General, Senate subcommittee, and GAO reports. NRC also established prelicensing and materials working groups and the Independent External Review Panel to assess the security of NRC and agreement programs and develop recommendations to address any vulnerabilities identified. Among the outcomes of the working groups and panel was the September 2008 issuance of revised prelicensing guidance, which, among other things, according to NRC officials suspended the “good faith presumption.” Prior to this change, NRC and agreement states were to maintain a good faith presumption that assumed that applicants and licensees did not have malicious intentions and that they would be honest and truthful in providing information to regulators. The revised guidance suspended this presumption, and directed regions and agreement states to conduct prelicensing site visits for all unknown applicants. Prior to June 2007, such visits were optional except in cases where the proposed use of radioactive materials involved unusually complex technical, safety, or unprecedented issues, or were otherwise judged to be high risk. The revised guidance directed NRC regions to conduct prelicensing site visits for unknown applicants for specific licenses starting in September 2008, and as a matter of compatibility for agreement states since March 2009. Taken together, according to NRC officials, the suspension of the presumption of good faith was intended to provide greater scrutiny of both license applications and prelicensing site visits for unknown applicants.", "In addition to suspending the good faith presumption for previously unknown applicants, NRC developed screening criteria to determine whether a prelicensing site visit should be conducted. Specifically, among other things, these criteria focus on whether the applicant may already have a license elsewhere with NRC or agreement states. If the applicant is known to NRC or an agreement state, a site visit may not need to be conducted. Nonetheless, some agreement states conduct prelicensing site visits for all applicants, regardless of whether they are known to NRC or other agreement states, according to NRC officials. According to NRC, the purpose of the site visit is to have a face-to-face meeting with the applicant to determine whether there is a basis for confidence that the sought radioactive materials will be used as represented in the application when the applicant receives the license. NRC also established a 14-point checklist to guide prelicensing site visits and developed a list of questions and activities related to the applicant’s business operations, facility, radiation safety operations, and personnel qualifications, to scrutinize the applicant and provide a basis for confidence that the applicant will use the radioactive material as specified in the license.", "In 2008, NRC also adopted revised prelicensing guidance. Under this guidance, according to NRC officials, for any specific license (category 1- 5) to be granted, unknown applicants must demonstrate during the prelicensing site visit that they are aware of, capable of, and committed to complying with all applicable (health, safety, and security) guidance before they take possession of licensed radioactive materials. In general, according to NRC officials, applicants must demonstrate that they are constructing facilities, establishing procedures, and have sufficient qualified staff to support the size and scope of the program described in the application. In addition, NRC officials told us that new applicants for category 1 and 2 quantities also undergo an on-site security review performed by NRC or agreement state officials. These security reviews verify that the applicant is prepared to implement the required security measures before the applicant takes possession of licensed radioactive materials, according to NRC officials. (On-site security reviews are not conducted for applicants for category 3-5 licenses.) According to NRC staff, those conducting on-site security reviews determine whether the applicant has the staff, processes, procedures, facilities, and equipment to be ready to comply with all applicable additional security requirements. NRC officials told us that they inspect each licensee for compliance with health, safety, and security requirements for all licenses (category 1-5) during an inspection after a licensee takes possession of the materials and that this inspection occurs within 12 months of the issuance of a new or amended license. NRC officials we spoke with, however, say that the initial postlicensing inspection may, and typically does, take place sooner.", "Through IMPEP reviews, NRC identified instances where agreement state programs did not follow NRC licensing guidance and took steps to ensure that corrective actions are taken. For example, according to NRC officials, from 2009 to 2013, IMPEP reviews found that three agreement state programs did not consistently apply the 2008 prelicensing guidance. As a result, NRC reminded all agreement state programs to follow prelicensing guidance, to ensure that the problem would not continue. According to NRC officials, NRC regional offices and agreement state agencies follow essentially the same guidance and procedures when reviewing license applications.\nNRC also took steps to improve IMPEP by, among other things, addressing program weaknesses. For example, in 2008, the NRC- chartered Materials Program Working Group recommended that NRC incorporate new security policies and foster an enhanced security culture as part of IMPEP reviews. In 2007, GAO recommended that NRC should conduct periodic oversight of the license application examiners to ensure that the new guidance is being appropriately applied. In response to this recommendation, NRC officials told us that they started working to incorporate enhanced security measures into the review process. For example, according to NRC officials, IMPEP review teams now evaluate programs on items such as their implementation of the prelicensing checklist, control of sensitive information, and amending of licenses to include new security requirements. In addition, the Commission directed NRC staff to develop options, among other things, to revise IMPEP metrics. According to NRC officials, the Commission approved the staff’s plan to improve IMPEP consistency by updating guidance and training, and the staff have started implementing plans to enhance the IMPEP process and expects these activities to be completed by the end of 2017.", "To help ensure that licensees can obtain radioactive materials only in quantities allowed by their licenses, NRC developed and deployed NSTS and WBL to track category 1 and 2 quantities of radioactive materials and record specific license information, respectively. It also deployed LVS, which queries WBL and NSTS, to better enable regulators, vendors, and other licensees to ensure that those seeking category 1 and 2 quantities of radioactive materials are properly licensed to do so. Specifically, prior to transferring category 1 and 2 quantities of radioactive materials, licensees are required to verify with the appropriate regulatory body that the transferee is licensed to have material of the type, form, and quantity specified on the license and, in the case of category 1, to receive material at the location specified on the license. Verification can be done electronically using LVS or by the vendor or other seller (licensee) contacting the appropriate regulatory body (specifically, NRC or the agreement state that issued the license) directly to confirm the validity of the license. LVS queries WBL and NSTS and enables users to confirm that 1. a category 1 or 2 license is valid and accurate, 2. a licensee is authorized to acquire quantities and types of radioactive 3. the licensee’s current category 1 or 2 inventories in NSTS do not exceed the possession limits.\nIf the licensee is over their possession limit at the time the license verification request is made, the LVS user would receive an error message to contact the regulatory agency that issued the license for a manual license verification, according to NRC officials. For category 1 and 2 licenses, deployment and use of these three systems, combined with the requirement that transferors verify the legitimacy of licenses with the appropriate regulatory body, serve as an impediment to those who would attempt to illicitly obtain radioactive materials using a counterfeit or altered license.", "In contrast to the requirements for category 1 and 2 quantities of radioactive materials, NRC does not require the tracking of category 3 materials or specifically require vendors to verify the legitimacy of licenses with the appropriate regulatory body for those seeking to acquire category 3 materials. Category 3 quantities of radioactive materials, which are considered dangerous by IAEA, are not tracked in NSTS, nor are licenses for such material issued by most agreement states in WBL. In addition, unlike transfers of category 1 and 2 quantities of radioactive materials, NRC regulations governing transfers of category 3 and smaller quantities of radioactive materials, which were last updated in 1978, do not specifically require transferors to contact the appropriate NRC regional office or agreement state regulator to verify that those wishing to take possession of the material are licensed to do so. Instead, transferors have several options, including obtaining a copy of the transferee’s license, for verifying that the transferee has a license. We recommended in 2008 that NRC include all potentially dangerous radioactive sources in NSTS to address risks that a licensee could obtain radioactive materials in quantities greater than what is allowed by their license.\nIn 2009, after years of study, NRC staff recommended that the Commission approve a final rule requiring that category 3 materials be tracked in NSTS. The recommendation, according to NRC staff, was based on several factors:\nCategory 3 sources are considered dangerous by IAEA\nThe potential to accumulate category 3 sources by aggregation to a more dangerous category 2 level\nThe additional burden to track category 3 was deemed justified given the benefit in improved source accountability\nNSTS could accommodate additional data for newly tracked sources When considering the recommendation to require that category 3 materials be tracked in NSTS, the Commission was evenly divided. Specifically, the Commission split two to two, and thus did not adopt the recommendation as Commission policy. Accordingly, it continues to be the case that only category 1 and 2 sources are required to be tracked in NSTS.\nIn addition to not requiring tracking of category 3 quantities of radioactive materials, NRC regulations governing transfers of category 3 and smaller quantities of radioactive materials do not specifically require transferors to verify the legitimacy of the license with the appropriate regulatory body. Instead, transferors are required to choose one of several methods to assure themselves that the purchaser has a license. Options include obtaining a copy of the transferee’s license and verifying directly with the appropriate regulatory body that a purchaser has a license to acquire sought category 3 or below radioactive materials. Because category 3 licensees are not specifically required to verify licenses through LVS or directly with the appropriate regulatory body, most agreement state category 3 license information is not in WBL, and transferors cannot verify through LVS that a purchaser is legitimately licensed. Instead, to get agency verification, transferors would need to contact the appropriate NRC regional office or agreement state regulatory body. By contrast, those transferring category 1 and 2 quantities of radioactive materials to other parties must verify license validity either by using LVS or by contacting the relevant NRC regional office or agreement state regulatory authority. The NRC regulations applicable to category 3 and smaller quantities of radioactive materials have not been updated since 1978. According to NRC officials, many transferors of category 3 and smaller quantities of radioactive materials comply with NRC requirements by obtaining and keeping a copy of the transferees’ licenses for their records. However, there is presently no specific requirement that they do so. Because they do not require transferors of category 3 and smaller quantities of radioactive materials to verify the validity of a transferee’s license by contacting the appropriate regulatory body directly, and do not make LVS available for use by these transferors, NRC and agreement states do not have assurance that their systems would prevent bad actors from altering licenses or fraudulently reporting the details of their licenses to transferors, accumulating dangerous materials by aggregation to category 2 or larger quantities on the basis of those fraudulent licenses, and thereby endangering public health and safety. On this point, we recommended in 2007 that NRC explore options to prevent individuals from counterfeiting NRC licenses, especially if this counterfeiting allows transferees to purchase more radioactive materials than they are approved for under the terms of their original licenses.", "Our testing of NRC and agreement state programs showed guidance— including the suspension of the good faith presumption, screening criteria, and checklists, as well as inspectors’ application of scrutiny during prelicensing site visits—to be effective in two out of our three cases. In a third case, we were able to obtain a license for a category 3 quantity of radioactive materials and secure commitments to purchase a category 2 quantity of radioactive materials by aggregation by altering a paper license.\nIn order to test the effectiveness of NRC’s revised guidance, screening criteria, checklists, and the prelicensing site visit, we established three fictitious companies; leased vacant space in an industrial or office park for each company (two in agreement states, one in an NRC state); and submitted an application to the appropriate NRC regional office or agreement state for a specific radioactive materials license to possess a high-level category 3 quantity source that was only slightly below the threshold for a category 2 quantity source. We designed our test to fail the prelicensing site visit. In each case, we took no actions to prepare the leased space for the site visit. According to NRC officials, while the NRC prelicensing checklist does not require that a site have implemented all the requirements that apply to licensees, its purpose, among other things, is to establish a basis for confidence that radioactive material will be used as specified on the license being sought, and we made no attempt to improve or outfit the site to make it appear as if a legitimate business was operating there. In our view, a prelicensing site visit, conducted with adequate scrutiny, would likely reveal that our fictitious companies were not suitable for a license. In each case, after we submitted a license application, and answered some additional questions from NRC or agreement state officials, we scheduled a time to meet officials from the NRC or agreement state at the location of the fictitious business.", "Two of the three fictitious companies we established were unable to obtain a license because NRC or agreement state officials found some aspects of the application, the fictitious company, the leased space, or a combination of these not to be credible. In these two cases, the scrutiny of the prelicensing site visit was an important factor in the regulatory bodies not granting our fictitious companies a radioactive materials license.\nGAO Also Obtained a License for a Fictitious Business in 2007 In 2007, GAO tested controls on the licensing of radioactive materials in two states—a state regulated by the Nuclear Regulatory Commission and an agreement state. To do this, GAO established two fictitious businesses and submitted a radioactive materials application to the relevant regulatory body for each state. GAO did not rent office space for its fictitious businesses but instead used post office boxes for addresses. GAO was able to obtain a genuine radioactive materials license from one of the two regulatory bodies. After obtaining a (paper) license, GAO investigators altered the license so the fictitious company could purchase a much larger quantity of radioactive material rather than the maximum listed on the license. GAO then sought to purchase, from two suppliers, devices containing radioactive materials. These suppliers gave GAO price quotes and commitments to ship the devices containing radioactive materials in an amount sufficient to reach the International Atomic Energy Agency category 3 level—considered dangerous if not safely managed or secured. Importantly, GAO could have accumulated substantially more radioactive material. GAO withdrew its application from the second regulatory body after the license examiners indicated that they would visit the fictitious company’s office before granting the license. An official with the regulatory body told GAO that conducting a site visit was a standard procedure before license applications are approved. adequate to protect public health and safety and minimize danger to life and property. To reach this conclusion, they asked us numerous detailed questions about the nature of our business and our past business experience. We had difficulty answering some of these questions because of the fictitious nature of our business. They asked for key business documents that we could not provide, such as a copy of a business license from the state. Further, they contacted us the day after the site visit about not being able to verify the work history of the company’s radiation safety officer. (We had fabricated this individual’s work history.) This regulatory body performed satisfactorily for all performance indicators during its most recent IMPEP review and was rated satisfactory on all performance indicators in two consecutive IMPEP reviews.\nIn the second case, officials from the regulatory body stated that we would not receive a license until the site was significantly more developed, consistent with operating as a genuine business, and had installed on-site an appropriately safe and secure storage container for the radiological source and posted requisite safety placards specified in the application, among other things. These comments are consistent with NRC officials’ statements that the purpose of the site visit is to have a face-to-face meeting with the applicant to determine whether there is a basis for confidence that the sought radioactive materials will be used as represented in the application. Moreover, the regulatory body stated in a follow-up e-mail that the company must submit additional information on several aspects of the application before a license could be issued: new facility drawings (as the ones provided were not accurate), public radiation dose calculations (as the proposed facility was next to an office building), descriptions of the security measures that would be implemented, and more specific information about how the company planned to transfer the source from the facility to the company’s truck since there was no garage door in the facility. In summary, the regulators stated that they wanted to “see everything that is in place right before you go into business.” This regulatory body had recently been subjected to Heightened Oversight by NRC because of problems uncovered regarding, among other things, the qualifications, retention, and depth of its licensing staff during an earlier IMPEP review. The regulatory body’s performance had improved in the next IMPEP review, and its status was upgraded from Heightened Oversight to Monitoring by the time the prelicensing visit took place.", "In one of the three cases, we were able to obtain a license for one of our fictitious companies. Specifically, our application was approved and the paper license was handed to our GAO investigator posing as a representative of our fictitious company at the end of the prelicensing site visit. During the application process and site visit, the regulatory official accepted our written and oral assurances of the steps that our fictitious company would take—to construct facilities, establish safety procedures, hire sufficient qualified staff, and construct secure storage areas—after receiving a license. We had taken no actions to implement any of these steps when regulators approved our application and awarded the company a license. The regulatory body in this case used a more lengthy and detailed application than the other two regulatory bodies from which we attempted to obtain licenses. However, notwithstanding NRC’s guidance to suspend the presumption of good faith, the official from the regulatory body accepted our assurances without scrutinizing key aspects of our fictitious business to the extent that the other regulatory bodies had. This regulatory body was found to have satisfactory performance in all performance areas in its most recent IMPEP review.", "Once we obtained a license, we were able to exploit the absence of a requirement to verify the legitimacy of category 3 licenses with the appropriate regulatory body and obtained commitments to acquire, by accumulating multiple category 3 sources, a category 2 quantity of radioactive material. Importantly, this material is 1 of the 20 radionuclides that NRC previously determined are attractive for use in an RDD (also known as a dirty bomb). Once we obtained a license, we contacted a vendor of the category 3 radioactive source that we specified on our license application. We provided a copy of the license, among other things, to the vendor and subsequently obtained a signed commitment from this vendor to sell us the source. We then altered the paper license and contacted another vendor who also agreed to sell us a category 3 source we specified on our altered license. When combined, these two high-level category 3 sources aggregate to a category 2 quantity of radioactive material. According to IAEA, a category 2 quantity, if not safely managed or securely protected, could cause permanent injury to a person who handled it, or was otherwise in contact with the material, for a short time (minutes to hours). NRC and agreement states require additional security measures for those seeking to acquire this quantity of material. Our fictitious business was not subjected to these more stringent measures and provisions, however, because we were seeking a category 3 quantity of material.\nIt is important to note that we undertook a very similar covert testing of NRC and agreement state radioactive materials licensing programs in 2007 with very similar results. In 2007, we obtained a real radioactive materials license for a below category 3 quantity of material and then altered it to obtain commitments from multiple vendors to sell us, in aggregate, devices containing a category 3 quantity of a radioactive material considered attractive for use in an RDD. This time, we were able to complete a similar covert vulnerability test in which we obtained a real license for a category 3 quantity of radioactive material and altered it to obtain commitments from multiple vendors to sell us, in aggregate, a more dangerous category 2 quantity of a type of radioactive material considered attractive for use in an RDD.\nOnce we received our license from the agreement state and secured commitments from vendors to sell us radiological material, we met with NRC officials in October 2015 to alert them to the outcomes of the investigative component of our work. As a result of our findings, NRC officials told us that they are taking a number of corrective actions. Specifically, NRC is updating training courses for new NRC and agreement state inspectors to reinforce the importance of properly implementing the prelicensing guidance. A key part of this training is to reinforce the suspension of the good faith assumption during prelicensing—particularly during site visits. NRC also developed and provided a training webinar for NRC and agreement state staff to further emphasize prelicensing guidance and providing adequate scrutiny during site visits. In addition, NRC requested that NRC regional offices and agreement states conduct self-assessments of their implementation of the prelicensing guidance and site visits. Finally, according to NRC officials, NRC and agreement state working groups are currently developing and evaluating enhancements to (1) current prelicensing guidance overall, and (2) license verification and transfer requirements and prelicensing guidance for category 3 licenses in particular. However, NRC officials informed us that since the Commission did not adopt a proposal to include category 3 quantities of radioactive materials in NSTS in 2009, NRC had no current plans to take action on requiring category 3 quantities be included in NSTS. Because of this, NRC and the agreement states will continue to be very limited in their ability to track these dangerous quantities of radioactive material.", "Since 2007, NRC has taken steps to implement several of the recommendations made by GAO and others to enhance the control and accountability of radioactive sources and materials. NRC has deployed data systems—NSTS, WBL, and LVS—that are helping to better track, secure, and control category 1 and 2 quantities of radioactive materials. NRC also developed revised guidance, screening criteria, and checklists covering all five IAEA categories of radioactive materials, and now directs regions and agreement states to conduct prelicensing site visits for all unknown applicants. However, NRC chose not to implement recommendations to better track, secure, and control category 3 materials. GAO testing of the revised guidance, checklists, and prelicensing site visits showed these revised systems to be only partially effective in that our attempts to obtain a license using a fictitious company was successful in one of our three cases—allowing us to obtain commitments from vendors to sell, in aggregate, a category 2 quantity of radioactive material considered attractive for use in an RDD. This demonstrates vulnerabilities similar to those we found in 2007.\nTo its credit, NRC has taken a number of corrective actions in response to our findings, including more training on prelicensing guidance to ensure that NRC and agreement state staff provide adequate scrutiny during prelicensing site visits. NRC has also formed working groups to consider enhancements to the prelicensing process. It will be important for NRC to continue these efforts as part of its process to ensure that its prelicensing guidance, including site visits, is effectively performed. Nonetheless, our work shows that NRC can do more to strengthen its processes of licensing radioactive materials. Specifically, we continue to believe that NRC should implement the recommendations by GAO and others for enhancing the ability to track, secure, and control category 3 sources by including such sources in both NSTS and WBL. Doing so would also enable LVS to query these systems and better enable transferors to verify the legitimacy of those seeking to purchase radioactive materials. As the results of our covert vulnerability testing show, it is possible for someone to obtain a license, which is printed on paper; make alterations to this paper license; and use the altered license for a category 3 source to acquire another category 3 source and thereby accumulate more dangerous, high-risk category 2 quantities. Including category 3 quantities in NSTS and WBL, and requiring transferors to verify the legitimacy of licenses of those seeking to purchase radioactive materials through LVS or with the appropriate regulatory body, would provide greater assurance that a bad actor could not manipulate the system by, for example, altering a paper license, to acquire radioactive materials in aggregate greater than what they are authorized to possess.\nMoreover, NRC regulations governing the steps that transferors of category 3 quantities of radioactive materials must take to verify that those wishing to take possession of the material are properly licensed to do so have not been updated since 1978 and may not be adequate to protect public health and safety. In contrast, NRC has taken several steps to update its licensing guidance by, among other things, directing regions and agreement states to conduct site visits for unknown applicants and suspending the good faith presumption, which fosters greater scrutiny of applicants. However, because paper licenses are vulnerable to being altered, not requiring transferors of category 3 quantities of radioactive materials to verify the validity of their licenses with the appropriate regulatory body may still allow bad actors to accumulate dangerous materials and in quantities that threaten public health and safety.\nFinally, prior to issuing a license to a new applicant for category 1 and 2 quantities, NRC and agreement states conduct an on-site security review to verify that the applicant is prepared to implement the required security measures before taking possession of licensed radioactive materials. However, such on-site security reviews are not conducted for applicants of category 3 quantities and below, and regulators told us that they may take up to a year to ensure that applicants have implemented all required health, safety, and security measures. Although category 3 quantities of materials are considered dangerous by IAEA, NRC on-site security reviews are not currently conducted for all prospective licensees that will have access to dangerous quantities of radioactive materials.", "Because some quantities of radioactive materials are potentially dangerous to human health if not properly handled, we recommend that NRC take action to better track and secure these materials and verify the legitimacy of the licenses for those who seek to possess them. Specifically, we recommend that the Nuclear Regulatory Commission (NRC) take the following three actions:\nTake the steps needed to include category 3 sources in the National Source Tracking System and add agreement state category 3 licenses to the Web-based Licensing System as quickly as reasonably possible.\nAt least until such time that category 3 licenses can be verified using the License Verification System, require that transferors of category 3 quantities of radioactive materials confirm the validity of a would-be purchaser’s radioactive materials license with the appropriate regulatory authority before transferring any category 3 quantities of licensed materials.\nAs part of the ongoing efforts of NRC working groups meeting to develop enhancements to the prelicensing requirements for category 3 licenses, consider requiring that an on-site security review be conducted for all unknown applicants of category 3 licenses to verify that each applicant is prepared to implement the required security measures before taking possession of licensed radioactive materials.", "We provided a draft of this product to NRC for comment. In its written comments, reproduced in appendix I, NRC neither explicitly agreed nor disagreed with our recommendations, but noted that the agency has formal evaluations underway considering all three recommendations. Specifically, NRC stated that the agency would consider GAO’s recommendations as part of the working groups the agency has established to evaluate (1) including category 3 sources in WBL and NSTS, (2) license verification transfer requirements for category 3 sources, and (3) enhancing security and safety measures as part of the prelicensing process. In addition, NRC recommended that we revise the first recommendation for clarity. We modified the language in this recommendation to provide greater clarity. NRC also provided technical comments that were incorporated, as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Chairman of the Nuclear Regulatory Commission, the appropriate congressional committees, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions concerning this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix II.", "", "", "", "In addition to the contact named above, Ned Woodward (Assistant Director), Antoinette Capaccio, Frederick Childers, Jenny Chow, John Delicath, Barbara Lewis, Steven Putansu, Brynn Rovito, Kevin Tarmann, and the Forensic Audits and Investigative Service team made key contributions to this work." ], "depth": [ 1, 1, 2, 3, 3, 2, 2, 2, 1, 2, 2, 3, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full", "h0_full h2_full", "h0_title h2_full", "h0_full", "", "", "", "h0_full", "h2_title h1_full", "h2_full", "h1_full", "h1_full", "h0_full h3_full h1_full", "", "h3_full h2_full", "", "", "", "" ] }

{ "question": [ "How does the Nuclear Regulatory Commission (NRC) ensure performance quality?", "How has the NRC ensured licenses are only granted to proper parties?", "How has the NRC not met all safety needs?", "How are radioactive materials ranked?", "How has the NRC failed to ensure safety for category 3 applicants?", "How does the NRC system cater to only category 1 and 2?", "How are category 3 licenses less valid?", "What did GAO covert testing reveal about NRC requirements?", "How did GAO set up their covert testing?", "How did the GAO make sure their office was not suitable?", "How did this impact the testing results?", "How is the NRC improving their licensing?", "What enhancements are they attempting to create?", "What was the GAO asked to review?", "What does this report examine?", "What did the GAO review for the report?", "What additional information did the GAO create to review?", "What recommendations is the GAO making?", "What did the GAO provide the NRC?", "How did the NRC respond to this report?" ], "summary": [ "The Nuclear Regulatory Commission (NRC) and the 37 states it permits to grant licenses for radioactive materials—called agreement states—have taken several steps since 2007 to help ensure that licenses are granted only to legitimate organizations and that licensees can only obtain such materials in quantities allowed by their licenses.", "NRC developed revised guidance, screening criteria, and a checklist, among other things, and now directs NRC regions and agreement states to conduct prelicensing site visits—focusing on questions related to the applicant's business operations, facility, radiation safety operations, and personnel qualifications for all unknown applicants. NRC has also developed and deployed the National Source Tracking System (NSTS), the Web-based Licensing System (WBL), and the License Verification System to better control some materials.", "However, NRC and agreement states have not taken some measures to better control some dangerous quantities of radioactive materials.", "The International Atomic Energy Agency established a system ranking quantities of certain radioactive materials into five categories based on their potential to harm human health, with, in descending order of danger, categories 1, 2, and 3 all considered dangerous.", "NRC, however, has not strengthened controls for all categories of radioactive material considered dangerous. Unlike its process for applicants for category 1 and 2 quantities of radioactive materials, for category 3 applicants NRC does not review specific security measures before a license is issued.", "However, these systems focus on more dangerous category 1 and 2 quantities but not category 3 quantities.", "Further, NRC does not specifically require that the validity of category 3 licenses be verified by the seller with NRC or the agreement states—creating risks that licenses could be counterfeited or that licensees could obtain radioactive materials in quantities greater than what is allowed by their licenses.", "GAO's covert testing of NRC requirements showed them to be effective in two out of our three cases; in a third case, GAO was able to obtain a license and secure commitments to purchase, by accumulating multiple category 3 quantities of materials, a category 2 quantity of a radioactive material considered attractive for use in a “dirty bomb”—which uses explosives to disperse radioactive material.", "To test NRC's prelicensing processes, GAO established three fictitious companies, leased vacant space for each company (two in agreement states, one in an NRC state), and submitted an application to the appropriate agreement state or NRC office for a license to possess a category 3 source only slightly below the threshold for category 2.", "GAO made no attempt to outfit the site to make it appear as if a legitimate business was operating there.", "In the two cases where GAO was unable to obtain a license, the scrutiny provided by NRC or agreement state (regulatory body) officials during the prelicensing site visit led to the license not being granted. In the third case, the official from the regulatory body accepted GAO's assurances without scrutinizing key aspects of the fictitious business, which led to a license being obtained.", "NRC is currently taking corrective actions to provide training to NRC and agreement state officials to emphasize greater scrutiny in conducting prelicensing site visits.", "According to NRC officials, NRC and agreement state working groups are currently developing and evaluating enhancements to (1) prelicensing guidance overall and (2) license verification and transfer requirements for category 3 licenses.", "GAO was asked to review and assess the steps NRC and agreement states have taken to strengthen their licensing processes.", "This report examines (1) the steps NRC and agreement states have taken to ensure that radioactive materials licenses are granted only to legitimate organizations and licensees can obtain materials only in quantities allowed by their licenses; and (2) the results of covert vulnerability testing designed to test the effectiveness of these controls.", "GAO reviewed relevant guidance documents, regulations, and analyses of orders, and interviewed NRC and state officials.", "GAO also established three fictitious businesses and applied for a radioactive materials license for each.", "GAO is making three recommendations to NRC, including that NRC (1) take steps to include category 3 quantities of radioactive materials in NSTS and WBL, and (2) require that transferors of category 3 quantities of radioactive materials confirm the validity of licenses with regulators before selling or transferring these materials.", "GAO provided a draft of this report to NRC for comment.", "NRC neither agreed nor disagreed with GAO's recommendations, but noted that the agency has formal evaluations underway considering all three recommendations." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 4, 4, -1, -1, 1, 2, -1, 4, -1, -1, -1, 2, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 1, 1, 1, 1, 4, 4, 4 ] }

{ "title": [ "", "Introduction", "Key Considerations for Food and Agriculture", "Projected TPP Impacts on U.S. Agriculture", "Specific Market Access Commitments", "TPP: Beyond Market Access", "Rules of Origin", "Sanitary and Phytosanitary Measures", "Agricultural Biotechnology", "Geographical Indications", "Export Disciplines", "Technical Barriers to Trade", "Food and Agriculture Stakeholders' Views on TPP", "Selected Agricultural and Food Groups Supporting TPP", "Selected Agricultural and Food-Related Groups Opposed to TPP", "Selected Agricultural Groups with No Definitive Position on TPP", "Next Steps" ], "paragraphs": [ "", "The Trans-Pacific Partnership (TPP) is a regional free trade agreement (FTA) among 12 Pacific-facing nations—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam—that was concluded in October 2015. The TPP agreement is pending congressional approval, which is required for it to enter into force. If approved, TPP would become the largest FTA in which the United States is a participant. TPP seeks to liberalize trade across a vast range of goods and services, including agricultural products. As such, it could enhance export market opportunities for U.S. food and agricultural products while also raising the level of competition in agricultural markets in North America.\nExports make a vital contribution to U.S. agriculture, absorbing about 20% of total agricultural production, while representing a far larger share of the production of certain commodities, including wheat, rice, soybeans, cotton, almonds, pecans, pistachios, and walnuts, to name a few. As such, foreign demand for U.S. food and fiber contributes materially to higher commodity prices and farm income. The positive ripple effects from farm trade extend beyond farmers and ranchers to rural communities; farm input industries that provide seed, fertilizer, and machinery; and commodity processors and food manufacturers with a stake in foreign markets. Exports also can contribute to higher input prices for food to the extent that additional foreign demand is not met by an increase in domestic supplies, although commodity costs amount to a fraction of overall retail food prices. Rising farm productivity, market-oriented U.S. farm policies, and the prospect of competing on more favorable terms for a larger share of the faster-growing food markets in many developing countries are among the reasons that negotiations aimed at liberalizing agricultural trade among TPP countries have elicited a high level of interest and broad-based engagement from U.S. agriculture and food industry interests.\nTPP countries already loom large in U.S. farm and food trade: Between 2011 and 2015, U.S. agricultural exports to these countries averaged $63.5 billion, or 42% of total exports, while TPP countries were the source for $60.9 billion in U.S. agricultural imports, amounting to about 47% of the U.S. total. Even so, it appears the TPP agreement reached in October 2015 would significantly improve market access for many U.S. food and agricultural products, potentially enhancing U.S. competitiveness in a number of TPP markets. At the same time, the trade deal also would provide TPP partners with greater access to U.S. product markets, potentially raising the level of competition among some U.S. products. In May 2016, the U.S. International Trade Commission (ITC) issued a report on the projected economic impact of the agreement on the U.S. economy as a whole as well as on specific industry sectors, including agriculture and food, and on consumers as mandated by P.L. 114-26 , the law that provides the President with trade promotion authority, and as discussed in the section titled \" Projected TPP Impacts on U.S. Agriculture .\"\nThe text below identifies four considerations about the TPP agreement that are particularly relevant for U.S. food and agriculture. Next, the report summarizes key conclusions of the projected effects of implementing TPP for U.S. food and agriculture based on analysis undertaken by ITC and the American Farm Bureau Federation. This is followed by a partial snapshot of some of the higher-profile changes in market access for agricultural products in the agreement, a summary of selected provisions beyond market access that are of particular interest to stakeholders in food and agriculture, a brief overview of industry reactions to the agreement, and a review of what actions need to occur for the agreement to enter into force for the United States.", "An overarching consideration is that among significant TPP markets, the United States lacks free trade agreements (FTAs) with five TPP countries: Brunei, Japan, Malaysia, New Zealand, and Vietnam. Among these five, the most significant for U.S. agricultural exports are Japan, Vietnam, and Malaysia. With a combined population of roughly 250 million, these three countries likely offer the greatest potential for boosting U.S. farm and food exports via lower tariffs, or expanded tariff rate quotas (TRQs). Significantly, all three countries impose much higher average applied most-favored-nation (MFN) agricultural tariffs than the United States, which could work to the advantage of U.S. farm and food exports versus domestic suppliers and non-TPP export competitors as tariffs decline under the agreement. In 2014, applied MFN tariffs on agricultural products averaged 5.1% in the United States, 9.3% in Malaysia, 14.3% in Japan, and 16.3% in Vietnam. Moreover, as illustrated in Figure 1 , existing tariff peaks are far higher for a number of product categories. Examples include dairy and poultry imports into Canada; bovine meat, rice, and dairy products into Japan; and Vietnamese tariffs across a number of food categories.\nJapan is likely the leading agricultural market opportunity in the TPP due to its highly protected farm and food markets, large population, and high per capita gross domestic product. Vietnam, with the fourth-largest population in the TPP and a fast-growing economy, is viewed as a market that could hold significant future growth potential for U.S. farm and food products. At the same time, preferential access that U.S. food and agricultural interests have to markets in Canada and Mexico under the North American Free Trade Agreement (NAFTA) would become available to a wider group of potential competitors over time as tariffs are lowered within the TPP zone. For instance, U.S. rice grower interests have expressed concern that the additional access the agreement would provide for U.S rice in Japan might not offset the potential loss of U.S. rice exports to Mexico as Mexico progressively lowers its 20% duty on Vietnamese rice under TPP.\nAlso significant is that potential key export expansion opportunities for U.S. food and agricultural interests, such as beef and pork to Japan and dairy products to Japan, Canada, and Vietnam, generally are to be phased in over a period of years, if not decades. For certain products in certain countries, including Japan for beef, pork, and whey powder, and the United States for some dairy products, safeguard measures allow for additional tariffs to be imposed for a period of time if imports should exceed specified thresholds. Generally, the quantitative trigger level for invoking safeguard measures would increase over time even as duties imposed under the safeguard are scheduled to be reduced or eliminated.\nIf the United States chooses not to implement the TPP agreement, U.S. agricultural export competitors would have an opportunity to gain a competitive edge over U.S. exports of certain products to Japan and elsewhere. This could occur as a result of existing preferential tariff arrangements—such as Australia's Economic Partnership Agreement with Japan—or by ratifying an agreement similar to TPP without U.S. participation. As an example, Australia already enjoys preferential tariffs rates on its beef exports to Japan compared with the tariff rates imposed on U.S. beef. TPP would place U.S. beef on an even footing with Australian product in Japan. Also, while the European Union is not party to the TPP, it is negotiating FTAs with Japan, Malaysia, and Vietnam that could enhance its competitive position in those markets. How \"Brexit,\" or the vote in the United Kingdom to withdraw from the European Union, will affect the course of these negotiations is not yet entirely clear.\nFinally, it is worth recognizing at the outset what the TPP agreement is not designed to accomplish. Similar to other FTAs, the TPP generally would not address domestic subsidy regimes that may tend to distort trade. Attempting to impose disciplines around domestic subsidies schemes has generally been the province of multilateral trade negotiations under the auspices of the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT).", "ITC, in a report issued in May 2016, concluded that TPP would provide significant benefits for U.S. agriculture, mainly by eliminating tariffs and expanding markets protected by TRQs. The report was mandated by the trade promotion authority legislation ( P.L. 114-26 ). The quantitative results in the report reflect ITC's model, which projects TPP outcomes for U.S. agriculture in year 15 (2032), compared with a baseline scenario without TPP. Among the model's results were the following:\nU.S. agricultural exports would be $7.2 billion higher (2.6%), while agricultural imports would increase by $2.7 billion (1.5%). Other macro effects include a gain of $10 billion (0.5%) in U.S. agricultural output and an increase of 0.5% in agricultural employment. U.S. dairy product exports would increase by $1.85 billion, or 18%, while processed foods and beef would be expected to post gains of $1.54 billion (3.8%) and $875 million (8.4%), respectively. But corn and rice exports could be marginally lower. U.S. imports of processed foods are projected to be $427 million higher (1.1%) with TPP than without it, while beef imports would be increased by $419 billion (5.7%), and imported dairy products would post an increase of $349 million, or 10.3%. U.S. export gains stem primarily from greater market access via lower tariffs and expanded TRQs, with the lion's share of the total increase of $7.2 billion concentrated in Japan ($3.6 billion) and Vietnam ($3.3 billion).\nSeparately, the American Farm Bureau Federation, a large general farm organization that supports ratification of the TPP, issued its own analysis of the effects of TPP on American agriculture in February 2016. It concluded that TPP would boost U.S. farm income by $4.4 billion per year once it is fully implemented compared with a second scenario it modeled under which the United States does not implement TPP and the 11 remaining signatories ratify an equivalent agreement. For perspective, since 2011, U.S. net farm income has ranged from a high of $123.3 billion in 2013 to a low of $80.7 billion in 2015, according to USDA.\nAlthough support for TPP is broad-based among stakeholders within food and agriculture, it is by no means universal. For additional detail, see the section entitled \" Food and Agriculture Stakeholders' Views on TPP .\"", "The TPP agreement would affect market access for a broad range of agricultural commodities and food products. What follows is a non-comprehensive selection of some of the notable changes by commodity that are included in the agreement.\nBeef : Japan ranks as the largest U.S. export market for beef and beef products, according to the U.S. Department of Agriculture (USDA). Under the TPP agreement, Japan would drop its current tariff on fresh, chilled, and frozen beef from 38.5% to 27.5% in year one, with subsequent annual reductions to 9% by year 16. A special safeguard duty would be applied during the transition period if imports exceed specified quantities. The safeguard duty would be progressively lowered each year, while the quantitative trigger would be increased. Japan would lower tariffs on other beef products as well, while Vietnam would eliminate such tariffs over three to eight years. The United States, for its part, would eliminate tariffs on beef and beef products that range as high as 26.4% in no more than 15 years and in fewer than 10 years in most instances. Pork : Japan, which also ranks as the leading market in the world for U.S. pork and pork product exports, would immediately cut its tariff of 4.3% on fresh, chilled, and frozen pork cuts to 2.2%, phasing out the residual over nine years. A separate duty on pork cuts under Japan's \"gate price system,\" which acts as a minimum import price, would be lowered immediately to 125 yen per kilogram, from 482 yen now. This duty would then be cut to 70 yen in year 5 and subsequently lowered each year thereafter to reach 50 yen in year 10. A special U.S.-specific safeguard would allow Japan to temporarily increase the duty during this transition period if imports were to exceed a trigger level. Vietnam would eliminate tariffs that are as high as 34% on pork and pork products within 10 years, while the United States would immediately eliminate most such tariffs. Poultry : Canada would allow incremental increases in access to its highly protected poultry and egg markets over five years via new duty-free, TPP-wide TRQs amounting to 2.3% of domestic production for eggs, 2.1% for chicken, 2% for turkey, and 1.5% for broiler hatching eggs. Thereafter, the quotas would be raised moderately each year, plateauing in year 19, at which point these TRQs would amount to 19 million dozen eggs, 26,745 metric tons of chicken, 3,983 tons of turkey, and 1.14 million dozen broiler hatching eggs and chicks. Vietnamese tariffs on poultry of up to 40% would be eliminated within 13 years. U.S. tariffs of up to 18.6% ad valorem equivalent would be eliminated within 10 years. Dairy : Opening dairy markets to greater import competition was among the most difficult agricultural issues to resolve. Under the agreement, Canada would allow incremental additional access to its highly protected dairy product markets amounting to 3.25% of its output for 2016 under TRQs that would be phased in over five years, with moderate annual increases thereafter. For perspective, this additional access would amount to about 0.3% of current U.S. milk production and would be open to all TPP countries. These Canadian TRQs for dairy products, such as fluid milk, butter, cheese, and yogurt, would be increased over a period of 14 to 19 years and then would remain fixed. In-quota dairy products would enter Canada duty free. Canada also would eliminate its over-quota tariff of 208% on whey powder over 10 years. Japan would eliminate many tariffs it imposes on cheese imports within 16 years and on whey within 21 years. The United States, in part, would gradually phase out tariffs and establish TRQs for dairy products from Australia and New Zealand that would be increased annually. Existing preferential access for Australian dairy products under the U.S.-Australia FTA would be transferred to perpetual TRQs. New U.S. TRQs for Canadian dairy products would be raised gradually each year until year 19 of the agreement, at which point the quantities would plateau. The individual TRQs the United States would provide for Canadian dairy products include cheese; skim milk and whole milk powder; dried yogurt, sour cream, whey, and milk constituent products; concentrated milk; sour cream, ice cream, and milk beverages; butter and butter substitutes; and other dairy products. Corn and Corn Products : Japan would create a new country-specific quota (CSQ) for U.S. corn and potato starch of 2,500 tons that would increase to 3,200 tons in six years, and would expand a TPP-wide TRQ for starches. Vietnam would eliminate tariffs as high as 30% within four to seven years and a tariff of 5% on feed corn in five years. Malaysia would immediately eliminate tariffs of up to 8%. U.S. tariffs as high as 3.4% would be eliminated within 10 years. Soybeans and Soybean Products : Japan would immediately eliminate a 4.2% tariff on soybean meal and, within six years, would eliminate a tariff of up to 13.2 yen/kg on soybean oil. Vietnam's tariff of 5% would be eliminated immediately, while tariffs on soybean products would be eliminated within 11 years. Malaysia would immediately eliminate tariffs of up to 10%. U.S. tariffs on soybean products of up to 19.1% would be eliminated within 10 years. Wheat and Wheat Products : Japan, the largest importer of U.S. wheat, limits its wheat imports through an existing TRQ, which accounts for 90% of its imports. A government-imposed markup on in-quota wheat to domestic buyers of 17 Japanese yen per kilogram would be lowered over nine years to between 8.5 and 9.4 yen, depending on the wheat variety imported. Japan also would establish a new duty-free, country-specific quota (CSQ) exclusively for U.S. wheat of 114,000 metric tons (equal to about 0.5% of U.S. wheat exports in the 2014/2015 marketing year), which would be increased to 150,000 tons in seven years and which also would be subject to the same progressively lower markup price. Japan also would provide new CSQs for U.S. processed wheat products, such as mixes, doughs, and cake mix. The initial CSQ for these products of 10,500 tons would be increased to 12,000 tons over six years, as well as new TPP-wide TRQs for wheat products and wheat-based food preparations. Vietnam would eliminate tariffs of up to 31% within four years, while Malaysian tariffs as high as 7% would be eliminated immediately. U.S. tariffs that are as high as 6.8% would be eliminated within 10 years. Barley and Barley Products : Japan would establish a new TPP-wide TRQ for barley of 25,000 metric tons that expands to 65,000 tons over nine years along with a progressive reduction in the maximum markup it imposes on quantities under this TRQ from 7.6 yen to 4.4 yen over nine years. Moreover, Japan would eliminate its tariff on feed barley of 39 yen per kilogram. It also would create new duty-free CSQs for imports of U.S. unroasted and roasted malt. The CSQ for unroasted malt would begin at 20,000 metric tons and increase to 32,000 tons over six years, while that of roasted malt would increase over 11 years from 700 tons to 1,050 tons. U.S. tariffs would be eliminated once the agreement enters into force. Rice : Japan, the second-largest overseas market for U.S. rice, would establish a new duty-free quota for U.S. rice of 50,000 tons initially, rising to 70,000 tons in year 13, but still well below the 165,000 tons the U.S. rice industry had sought. Japan also would allow a broader range of domestic entities to participate in tenders on this additional quota, as well as on 60,000 tons of rice under an existing quota. But the \"minimum markup\" Japan imposes on rice imports of 22 yen/kg would continue to be applied to all imports. U.S. tariffs on rice products of up to 11.2% would be eliminated within 15 years. Cotton : All of Vietnam's tariffs on cotton, which range up to 10%, would be eliminated in four years or fewer. In 2014, nearly all of Vietnam's imports of U.S. cotton, amounting to nearly $400 million, consisted of cotton that was not carded or combed, which already enters duty-free. U.S. tariffs on cotton that range as high as $0.314 per kg generally would be eliminated within 10 years, and in some cases would be removed immediately. Tree Nuts : Japan immediately would eliminate tariffs on certain fresh and dried nuts, including tariffs of 2.4% on almonds, 10% on walnuts, and 4.5% on pecans. An existing zero tariff rate on pistachios would be locked in. Vietnam would eliminate tariffs of 5% to 20% on walnuts and 10% to 20% on almonds by year three of the agreement. U.S. tariffs of up to $0.265 per kg on fresh or dried nuts would be eliminated within five years, whereas imports of prepared or preserved nuts would generally be tariff-free within 10 years, except for nut mixtures from Australia, which would be phased out over 20 years. Citrus Fruits : Japan would eliminate tariffs of 16% and 32% on oranges over six and eight years, respectively. The higher tariff—currently in force from December through May–would be shortened to December through March, thereby extending the lower tariff season to April through November. The higher tariff period would be subject to a safeguard for seven years, beginning at 35,000 metric tons and increasing by 2,000 tons each year, with a corresponding tariff of 28% in the initial five years and 20% for the final two years. A 10% tariff on grapefruit would be eliminated in six years. Tariffs on orange juice and grapefruit juice of up to 28.9% would be phased out in eight years and six years, respectively, while a 6% tariff on lemon juice would be eliminated immediately. Non-Citrus Fruits : Japan's tariff of 17% on fresh apples would be reduced by 25% immediately, then eliminated in equal annual stages over the next 10 years. The tariff of 8.5% on fresh cherries would be cut in half upon entry into force of the agreement and eliminated over the next five years. Tariffs on fresh grapes of 7.8% and 17% (depending on the season) would be eliminated immediately, as would a 1.2% tariff on raisins. A tariff of 6% on fresh apricots, peaches, nectarines, plums, strawberries, raspberries, and cranberries would go to zero immediately, as would a 6.4% tariff on kiwifruit and a 3% tariff on avocados. Vietnam would eliminate over three years tariffs of 15% on fresh grapes and apples and a 17% tariff on raisins, and would eliminate over two years a 20% tariff on fresh cherries, among other reductions. Malaysia would immediately eliminate its 5% tariff on fresh grapes. The United States would immediately eliminate tariffs on fresh apricots, cherries, mangoes, papayas, peaches, pears, plums, and strawberries. Sugar : The United States would expand access to its market for sugar incrementally by establishing new TRQs for sugar and sugar-containing products totaling 86,300 tons annually. For perspective, this quantity would have amounted to 2.4% of U.S. sugar imports in the 2014/2015 crop year. Australia and Canada would immediately receive new duty-free quotas totaling 65,000 tons and 19,200 tons per year, respectively. The residual would be split between Japan, Malaysia, and Vietnam. The Australian and Canadian TRQ s include the potential for expansion in years when additional U.S. sugar imports are required. The additional TRQ for sugar is not expected to threaten the budget-neutral requirement of the U.S. sugar program, but it could displace a portion of Mexican sugar exports to the United States, which are managed under bilateral suspension agreements. Japan would provide new TRQs that would expand access to its market for sugar and sweetener-related processed products on a duty-free, or preferential-tariff-rate basis, including chewing gum, chocolates and products containing chocolate, confectionery goods and other such products, and would eliminate tariffs on various sweetener products over time. Tobacco : U.S. tariffs on tobacco of up to 350% would be eliminated within 10 years, while Japan would eliminate tariffs on smoking tobacco and cigars over 11 years, and Malaysia would eliminate all tariffs on tobacco and tobacco products over 16 years. Vietnam would create a TRQ of 500 metric tons for unmanufactured tobacco imports that would increase by 25 tons each subsequent year, with no limit from year 21. Vietnam also would eliminate in-quota tariffs on unmanufactured tobacco over 11 years and for all tobacco leaf in 21 years. Vietnamese tariffs on blended tobacco, cigars, and other tobacco products would be eliminated over 16 years. A controversy has emerged over a provision in the Exceptions chapter of the agreement that allows countries to deny recourse to protections under the investor state dispute settlement (ISDS) to tobacco product manufacturers for claims directed at tobacco control measures. This optional exclusion would not apply to leaf tobacco, although to the extent that tobacco product sales could be blunted by this provision it would appear to have the potential to affect sales of leaf tobacco.\nUSDA has compiled summaries with additional detail on how the agreement addresses market access for numerous farm commodity groups, which includes a limited selection of additional food and agricultural products that would be subject to liberalized terms of trade under the TPP agreement. Table 1 provides a timetable for tariff elimination for a selection of food and agricultural products in specific TPP markets.", "The TPP agreement addresses a number of trade-related measures beyond tariffs and TRQs that are of importance to producers and exporters of food and agricultural products. In its report on the likely effects of the TPP agreement on the U.S. economy and specific sectors, including agriculture, ITC specifically cites new provisions in the areas of sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT), and biotechnology as being among the beneficial elements in the agreement for U.S. agriculture. The text that follows summarizes provisions in the agreement that address rules of origin, SPS, agricultural biotechnology, geographic indications (GIs), export programs, and TBT.", "Only goods that are considered to be of TPP origin can receive the benefit of preferential tariff rates and TRQs in the agreement. As concerns agricultural products, the criteria for determining whether a product is wholly obtained, or produced entirely, within the territory of one or more TPP parties—and thus entitled to benefit from TPP preferences—is as follows:\nPlants that are grown, cultivated, harvested, picked, or gathered in a TPP country; A live animal born and raised in a TPP country; A good obtained from a live animal in a TPP country; An animal obtained by hunting, trapping, fishing, gathering, or capturing in a TPP country; Additional criteria are provided to determine whether fish, shellfish, and marine life are of TPP origin.\nA de minimis provision in the agreement allows for goods to be considered of TPP origin even if they include content from non-TPP members as long as the value of all the non-TPP content does not exceed 10% of the transactional value of the good. The agreement articulates a number of exceptions to this 10% de minimis rule for certain agricultural goods. These exceptions include dairy products and preparations that contain more than 10% milk solids by dry weight and which are used to produce various other dairy products, as well as infant formula, mixes and doughs, ice cream, and animal feeds. Also not covered by the de minimis rule are certain edible oil-bearing crops of non-TPP origin used to produce vegetable oils, including soybean oil and peanut oil; citrus juices and various fruit of non-TPP origin that are used to produce certain fruit and vegetable juices; and non-TPP peaches, pears, and apricots (whether fresh or dried) that are used in the production of prepared or preserved fruit.", "As tariff rates have been lowered for food and agricultural products in recent decades, non-tariff barriers have gained greater visibility as obstacles to trade. Among the non-tariff measures the TPP seeks to address are sanitary and phytosanitary measures (SPS), which consist of actions that address issues of food safety, plant pests, and animal diseases. Notably, the SPS obligations in TPP go beyond the WTO SPS agreement in a number of substantive areas, including risk assessment, risk management, transparency, border checks and laboratory testing, and rapid response to issues that arise over export shipments. Among SPS commitments TPP addresses are the establishment of an SPS committee composed of TPP member representatives; an obligation to base SPS measures either on international standards or on objective scientific evidence and to select risk management measures that are no more trade-distorting than necessary; and a commitment to allow for public comment on the development of SPS measures. Moreover, the agreement commits TPP countries to providing rapid notification of shipments held on importation. Such notification is to be communicated within seven days of when an inbound shipment is restricted or prohibited. Importantly, SPS disputes are to be addressed first in technical consultations among governmental authorities under a procedural timeline established in the agreement. If the issue cannot be resolved through technical consultations, parties may turn to dispute settlement procedures in the agreement.", "The TPP agreement commits the signatories to increase transparency and provide notification of national laws and regulations pertaining to products of agricultural biotechnology products. It also encourages information sharing on issues related to the occurrence of low-level presence (LLP), or trace amounts, of biotech material in food and agricultural products. To minimize LLP occurrences and any disruptions to trade that may result from such incidents, both importers and exporters commit to exchange certain information, such as product risk assessments and new plant authorizations.\nThe agreement also establishes a working group on agricultural biotechnology within the TPP Committee on Agricultural Trade. The working group is to function as a forum for exchanging information on issues such as national laws, regulations, and policies affecting trade in biotech products. Finally, the agreement states that parties are under no obligation to adopt or modify existing laws, regulations, or policies that apply to biotechnology.", "Geographical Indications (GIs) are geographical names that act to protect the quality and reputation of a distinctive product originating in a certain region. As such, GIs can be commercially valuable and, as intellectual property, can provide eligibility for relief from acts of infringement or unfair competition. GIs are most often, but not exclusively applied to wines, spirits, and agricultural products. Examples of GIs include Parmesan cheese and Parma ham, Champagne, Florida oranges, Idaho potatoes, Washington State apples, and Napa Valley wines. GIs have become a point of controversy in international trade because GIs that are considered by some to be protected international property are considered by others to be generic or semi-generic names and thus not protected. For example, \"feta\" is considered a generic name for a type of cheese in the United States, but is a protected GI in the European Union (EU). As such, U.S.-produced \"feta\" cannot be sold under that name in the EU. This type of exclusivity can extend beyond the EU, for example, when a third country has agreed to recognize EU-approved GIs under a bilateral trade agreement.\nThe TPP agreement obligates members that provide for recognition of GIs to make this process available and transparent to interested parties within the TPP, while also providing a process for canceling GI protection. Parties that recognize GIs also are to adopt a procedure by which interested parties may object to the provision of a GI before it is officially recognized. Among the reasons the agreement lists for opposing a GI are (1) the GI is likely to cause confusion with a trademark that is recognized within the country, (2) a pre-existing application is pending, or (3) the GI is the customary term for the same item in the common language of a country.\nSpecific to wines and spirits that are \"products of the vine,\" TPP members are not required to recognize a GI of another member if the GI is identical to the customary name of \"a grape variety existing in that party's territory.\" The criteria for determining whether a term is the customary common name for a good include whether the term is used to identify the good in dictionaries, newspapers, and websites, and whether the term is the name by which the good is marketed and referenced in trade in the country.\nFinally, concerning other international agreements involving TPP members that provide for the protection of GIs, the TPP agreement states that members are to make available to interested parties information concerning the GIs involved in other agreements and to allow them a reasonable opportunity to comment on, and to oppose, the prospective recognition of the GIs. These obligations would not apply to international agreements that were concluded, agreed in principle, or ratified or that had entered into force prior to the entry into force of the TPP agreement.", "On the topic of agricultural export programs, signatories to the agreement commit to eliminate the use of export subsidies, a type of incentive the United States does not employ in any case. The export subsidy ban is seen mainly as setting a standard for future reform on a multilateral basis. A commitment around export credits, credit guarantees, and insurance programs—which the United States does employ—is less ambitious: the agreement merely states that the parties will cooperate to develop multilateral disciplines around these programs. The agreement also discourages restrictions on exports of food and agricultural products. To this end, it commits TPP countries to limit such restrictions to 6 months and requires a country that imposes such restrictions for more than 12 months to consult with interested TPP importing countries.", "Technical barriers to trade (TBT) refer to technical regulation, standards, and the conformity assessment procedures of government bodies that affect trade in goods. Among the annexes to the TBT chapter, three have relevance for food and agriculture.\n1. Wines and Distilled Spirits —the TPP chapter on TBT marks a first by including an annex specific to wines and distilled spirits. In essence, the agreement establishes parameters for labeling and certification of products, including what information is permitted on the label and terms that may not be excluded, such as \"chateau,\" \"reserve,\" and others, while seeking to preserve the ability of government regulators to protect consumers. It also creates common definitions of wine and distilled spirits and commits signatories not to require that a wine-making practice be disclosed on a label or container except for legitimate health or safety reasons. 2. Proprietary Formulas for Prepackaged Foods and Food Additives —the agreement provides that in adopting and applying technical regulations and standards, TPP members are to limit information requirements to what is necessary to achieve legitimate objectives and assure commercial interests are protected by treating the confidentiality of the information from other member states as it would for domestic products. 3. Organic Products —TPP members that have rules and regulations governing the production, processing, and sale of organic products are encouraged to exchange information concerning organic production and certification and to cooperate with other TPP members to improve and strengthen international guidelines and standards. Members that maintain requirements for organic products also are encouraged to consider expeditiously any requests from other TPP members for recognition or equivalence of standards, technical regulations, and the like. When such a request is denied, an explanation of the rationale behind the denial is to be provided.", "Numerous interest groups in the food and agricultural sector have stated their positions on the TPP agreement. The following section identifies the public positions taken by selected food and agricultural organizations and commodity groups on the TPP agreement since the text was issued on November 5, 2015.", "Among organizations that have expressed their support for TPP are the American Farm Bureau Federation, the American Feed Industry Association, the American Peanut Council, the American Seed Trade Association, the American Soybean Association, the International Dairy Foods Association, the National Association of Wheat Growers, the National Cattlemen's Beef Association, the National Chicken Council, the National Cotton Council, the U.S. Poultry and Egg Export Council, the National Corn Growers Association, the National Milk Producers Federation, the National Pork Producers Council, the Sweetener Users Association, the United Fresh Produce Association, the U.S. Dairy Export Council, the U.S. Grains Council, the U.S. Wheat Associates, and the Wine Institute. In addition to specific interest groups, a number of Agricultural Technical Advisory Committees (ATACs), comprised of stakeholders within food and agriculture, provided input to the President, the U.S. Trade Representative, and Congress on the completed TPP agreement. The ATAC for Trade in Fruits and Vegetables strongly endorsed the TPP as a positive for \"the vast majority of wine grape, nut, fruit and vegetable growers, packers, processors and marketers.\" Participating committee members included representatives of the Almond Board of California, the Florida Tomato Exchange, California Fresh Fruit Association, National Pecan Growers Council, Texas Citrus Mutual, Washington State Potato Commission, and Western Growers, among others. Separately, the ATAC for Trade in Sweeteners and Sweetener Products expressed the unanimous view that the TPP agreement achieved the overall and principal negotiating objectives established by Congress under TPA ( P.L. 114-26 ). Participating members included representatives from the American Sugar Alliance, the American Sugar Beet Growers Association, the American Sugarcane League of the USA Inc., and the Corn Refiners Association, among others. The ATAC for Trade in Processed Foods praised numerous aspects of the agreement, citing unprecedented new market access opportunities for processed food exports and enhanced SPS commitments, but it did not endorse TPP outright. Among the criticisms cited in its report are that dairy product TRQs provided by Canada and Japan would not provide meaningful new access to those markets. It also objected to the product-specific exception to recourse to dispute settlement that can be applied to tobacco products.", "Groups that have expressed opposition to TPP include the Burley Tobacco Growers Cooperative Association, the National Farmers Union, R-CALF USA, the U.S. Rice Producers Association, and the United Food and Commercial Workers Union International (UFCW). The UFCW, which represents workers in the grocery, retail, meat-packing, and food-processing industries, faults the agreement for the lack of an enforcement mechanism against currency manipulation, which it contends will nullify the benefits of tariff reductions while contributing to the transfer of U.S. jobs to lower-wage markets overseas.", "USA Rice is prominent among agricultural interest groups that have not adopted a position in support of or opposition to the TPP agreement.", "On February 4, 2016, trade ministers from the 12 TPP negotiating countries signed the TPP agreement. For the agreement to enter into force, Congress would need to pass implementing legislation that would codify tariff rates included in the agreement and enact other changes required to make U.S. laws consistent with the terms of the final agreement. There is no time limit for Congress to act on the agreement until such time as legislation is introduced to implement the agreement. Following the introduction of implementing legislation, Congress would have up to 90 days to take an up or down vote on the bill without amendments." ], "depth": [ 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full", "h3_full h1_full", "h2_full", "h3_full h2_full", "h1_title h4_title", "h1_full", "h4_full", "h4_full", "", "h4_full", "", "", "", "", "", "h0_full" ] }

{ "question": [ "What is the Trans-Pacific Partnership?", "What is needed before the TPP can enter into force?", "What would result from the ratification of the TPP?", "How is the U.S. economy supported by agricultural exports?", "Why is the TPP beneficial for U.S. agriculture and food industry interests?", "What are tariff rate quotas?", "What happens if quantities are outside of the quota amount?", "What is expected to happen in the five TPP countries with which the United States has not concluded FTAs?", "How would the TPP agreement affect the tariff that Japan applies to U.S. goods?", "What effect would this lowered tariff have on U.S. beef?", "What additional actions would Japan take?", "What has the U.S. International Trade Commission concluded?", "What is the corollary to the potential for greater export opportunities for U.S. farm products under TPP?", "What additional effect would lowering tariffs have?", "How would the United States provide additional duty-free access to farm imports?", "What issues does TPP seek to address?", "What are sanitary and phytosanitary measures?", "What does TPP aim to minimize or curb?", "What commitments does TPP seek from participating countries?" ], "summary": [ "The Trans-Pacific Partnership (TPP) is a regional free trade agreement (FTA), which the United States concluded with 11 other Pacific-facing nations in October 2015: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.", "Approval by Congress (through implementing legislation) is required before TPP can enter into force.", "If the 12 TPP countries ratify the deal, TPP would materially increase the overseas markets to which U.S. agricultural products would have preferential access.", "Exports account for around one-fifth of U.S. farm production, providing material support to commodity prices and farm income.", "For U.S. agriculture and food industry interests, much of the potential benefit from TPP lies in improving access to TPP markets by eliminating or lowering tariffs, and also increasing the quantity of products that may be imported on preferential terms under tariff rate quotas (TRQs).", "TRQs allow imports of a given product to enter duty-free, or at a reduced rate, within the quota amount.", "Quantities in excess of the quota are subject to higher duties that can be prohibitive.", "The opportunity to increase sales of farm and food products is expected to be greatest in the five TPP countries with which the United States has not concluded FTAs, particularly Japan and Vietnam.", "For example, the TPP agreement would substantially lower the tariff that Japan applies to U.S. fresh, chilled, and frozen beef cuts—from 38.5% currently to 27.5%—when the agreement enters into force, with further reductions down to 9% over 15 years.", "Significantly, this would place U.S. beef on par with the tariff treatment for Australian beef, which is the major competitor of U.S. beef in Japan and which currently enjoys a tariff preference under an FTA with Japan.", "Japan also would create new TRQs for U.S. wheat and rice, among other farm products, thereby expanding U.S. export opportunities across a number of product categories.", "The U.S. International Trade Commission has concluded that TPP would provide significant benefits to U.S. agriculture.", "The corollary to the potential for greater export opportunities for U.S. farm products under TPP is that the United States would lower and eliminate tariffs on many agricultural product imports—such as tree nuts, peanuts, cotton, various fruits, tobacco, and wine, among others.", "U.S. farm products, such as beef, that enjoy preferential access to Canada and Mexico under the North American Free Trade Agreement (NAFTA) would relinquish that advantage as tariffs are lowered over time for TPP partners.", "The United States also would provide limited additional duty-free access to farm imports via new TRQs for dairy products and for sugar and sugar-containing products.", "While tariff rate reductions and TRQs have long been a staple of trade liberalization efforts, TPP also seeks to address several non-tariff measures that can impede trade in food and agricultural products.", "Among these are sanitary and phytosanitary measures (SPS), which concern actions by governments to assure food safety and guard against plant pests and animal diseases.", "TPP seeks to curb the use of SPS measures as impediments to trade and provides procedures for resolving disputes that arise, including recourse to dispute settlement. TPP also aims to minimize disruptions to trade in products of agricultural biotechnology and to bring greater coordination to the use of geographic indications, which involve exclusive naming rights for distinctive products from specific geographic locations.", "TPP commits countries to eliminate the use of export subsidies for agricultural products, which the United States does not employ, and seeks to reduce technical barriers to trade in wine and spirits by creating common definitions of these products and by establishing parameters for labeling and certification." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, 1, -1, -1, 0, -1, -1, -1, 0, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4 ] }

{ "title": [ "", "History", "Recent Efforts to Change Grazing Rules and Policies", "Overview of Regulatory Process", "Changes to Grazing Regulations", "Share Title to Range Improvements", "Acquire Private Water Rights", "Reduce Requirements for Public Involvement", "Modify the Administrative Appeals Process", "Broaden the Definition of Grazing Preference", "Remedy Rangeland Health Problems", "Remove Limit on Permit Nonuse", "Eliminate Conservation Use Grazing Permits", "Other Changes", "Litigation17", "Changes Not Proposed", "Overview of Grazing Policy Process", "Grazing Policy Changes Considered", "Reserve Common Allotments (RCAs)", "Conservation Partnerships", "Voluntary Allotment Restructuring", "Conservation Easements", "Endangered Species Act Mitigation", "Conclusion" ], "paragraphs": [ "", "On August 11, 2006, revised grazing regulations of the Bureau of Land Management (BLM) took effect (43 C.F.R. Part 4100). Some of the regulations have been enjoined. The agency also considered related policy changes, but it appears that policy changes are no longer being considered. The previous revision of grazing regulations culminated in comprehensive changes effective August 21, 1995. The 1995 changes were the result of a several-year process of evaluating ideas and shaping alternatives, and occurred in the midst of a decades-long dispute over the ownership, management, and use of federal rangelands.\nThe 1995 changes were highly controversial, with criticism from many ranching interests that those new rules weakened grazing privileges and would reduce livestock grazing on federal lands, and from environmental organizations that the changes did not go far enough in protecting public lands. Supporters saw the changes as improving resource and range management and broadening participation in public land decisionmaking. Congress considered many of the 1995 changes as part of legislative proposals or committee oversight. Congress also has examined the development of the 2006 regulatory changes and related policy options through committee oversight.\nAmong the changes made in 1995, many of which were reexamined by BLM during the development of the 2006 regulatory changes, are those that:\nseparated grazing preference from permitted use , so that a permittee's preference for receiving a grazing permit was not tied to a specific amount of grazing based on historic levels (described as Animal Unit Months , or AUMs ) ; allowed permittees up to three years of nonuse of their permits; authorized suspending or canceling a permit if a permittee is convicted of violating certain state or federal environmental laws; eliminated the express requirement that a permittee be engaged in the livestock business; replaced the term affected interest with interested public ; allowed conservation use for the term of a grazing permit, thereby excluding livestock grazing from all or a portion of an allotment; required title of permanent structural improvements to be held in the name of the United States; required that water rights for livestock grazing be held in the name of the United States, to the extent allowed by state law; imposed a surcharge on a permittee who allows livestock not owned by the permittee or the permittee's children to graze on public land; eliminated Grazing Advisory Boards and replaced them with the broader interest Resource Advisory Councils; and adopted rangeland management standards called Fundamentals of Rangeland Health .\nIn issuing these changes, the Secretary of the Interior dropped the most contentious proposal—to increase the grazing fee—due to the rancor this issue generated. However, dissatisfaction with the 1995 changes among ranching interests led to a lawsuit ultimately decided by the U.S. Supreme Court. The regulations, challenged on their face, were upheld by the courts as not exceeding the authority of the Secretary, with one exception. The court struck down the rule pertaining to conservation use for the term of a permit on the grounds that a grazing permit was for grazing and the Secretary could more appropriately accomplish conservation use through the land use planning process.", "BLM took a two-pronged approach to the 2003-2006 iteration of grazing reform on public lands, by issuing changes to grazing regulations and considering changes to grazing policies. Under this Sustaining Working Landscapes initiative, first announced in March 2003, BLM sought to create working landscapes that are both economically productive and environmentally healthy. Changes to grazing regulations and/or policies could affect more than 18,000 grazing permits on 162 million acres of BLM land. The specific regulatory changes that were adopted and the policy alternatives that were considered are discussed under separate headings below.\nConflict over livestock grazing on public lands has become common. Critics of the latest reform effort asserted that the 1995 regulations were not in effect long enough to assess their effectiveness and that the policy issues were too vague to assess their potential effects. They also contended that BLM had not justified a need for regulatory and policy changes and that the changes adopted remove important environmental protections and opportunities for public comment. One concern voiced by environmentalists was that the changes would require more monitoring than would be feasible, thus possibly preventing changes in grazing practices. Another was that BLM and the Forest Service did not develop joint rules, advocated because many BLM and Forest Service lands are similar and adjoining and permittees often have permits for livestock grazing on both agencies' lands. There was also some disappointment among environmentalists that the reform effort did not encompass certain important issues such as altering grazing fees, controlling noxious weeds, retiring grazing permits, and establishing processes for identifying lands suitable for grazing.\nRegulatory changes have been supported by some livestock organizations and range professionals as helping both ranchers and the range. BLM asserted that regulatory changes were needed to increase flexibility for grazing managers and permittees, to improve BLM's relationship with ranchers, to improve rangeland management and permit administration, to promote conservation, and to comply with court decisions. According to the agency, the changes are based on lessons learned in implementing the 1995 regulations and thus improve upon those earlier regulations. Further, the final rule recognizes the benefits of grazing, including the economic and social benefits to rural communities and the preservation of open space, according to BLM.", "BLM proposed changes to its grazing regulations on December 8, 2003 (68 Fed. Reg. 68451), and on January 2, 2004, issued a draft environmental impact statement (DEIS) analyzing the potential impact of the proposed changes. The DEIS also assessed the impacts of a slightly different alternative and of keeping the existing grazing rules. Prior to proposing the changes, BLM reviewed more than 8,000 public comments on regulatory issues that were submitted in response to a March 3, 2003 advanced notice of proposed rulemaking.\nIn late January and early February of 2004, BLM held public meetings in the West and in Washington, DC, to gather public comments on the regulatory proposal and DEIS. The proposal and DEIS were open for public comment through March 2, 2004, during which time the agency received more than 18,000 comments. The BLM considered these comments, and on June 17, 2005, issued a final environmental impact statement (FEIS) on proposed changes and alternatives.\nThe proposed revisions in the FEIS met with mixed reaction, like those in the earlier DEIS. A number of the key proposals, which were adopted, are discussed under \" Changes to Grazing Regulations \" below. With regard to the environmental effects of the preferred alternative, the FEIS stated (p. ES-5) that \"most of the proposed regulatory changes have little or no adverse effects on the human environment. Some short-term adverse effects may not be avoided because of increases in timeframes associated with several components of this proposed rulemaking.\" This statement fueled concerns among environmentalists that the proposed changes could eliminate public land protections and lead to unsustainable grazing practices. The FEIS stated that to minimize the potential for adverse affects in the short-term, the BLM could \"curtail grazing if resources on the public lands require immediate protection or if continued grazing use poses an imminent likelihood of significant resource damage.\" Further, the BLM asserted that the long-term outcome of the proposed changes would be better and more sustainable grazing decisions, and that the changes \"would be beneficial to rangeland health.\"\nA particular controversy surfaced over assertions by two members of the draft EIS team, a BLM hydrologist and a BLM biologist (both now retired), that their scientific conclusions were reversed by BLM because they did not support the new rules. Those conclusions apparently had asserted that the proposed new rules could harm water quality and wildlife, including endangered species. A BLM official is reported to have called the changes to the views of the two scientists a part of the standard editing and review process. Further, a statement by the BLM contended that the EIS team found their work to be \"seriously lacking in the quality expected from each contributor to the environmental impact analysis.\" The statement alleged that the conclusions of the two team members were \"based on personal opinion and unsubstantiated assertions rather than sound environmental analysis. As a result, the work submitted by the two former BLM employees was rewritten.\"\nBLM initially intended to publish a final grazing rule in the Federal Register in July 2005, with an effective date in August 2005. However, on August 9, 2005, BLM announced its intent to prepare a supplement to the FEIS. The delay was intended to allow the agency to address public comment received after the comment period ended on March 2, 2004, primarily the views of the Fish and Wildlife Service (FWS). On March 31, 2006, BLM issued an addendum to the FEIS that addressed the FWS and other public comment and made relatively minor changes to its proposed rules.\nIn its comment to the BLM, the FWS asserted that the proposed changes would \"fundamentally change the way BLM lands are managed temporally, spatially, and philosophically. These changes could have profound impacts on wildlife resources.\" The FWS expressed overall concern that the proposed revisions would make grazing a priority over other land uses, which could be detrimental to fish and wildlife habitats and populations, for instance, management of sage-grouse habitat. The agency further contended that the proposed changes could \"constrain biologists and range conservationists from recommending and implementing management changes based on their best professional judgment in response to conditions that may compromise the long-term health and sustainability of rangeland resources.\"\nIn its addendum, BLM disagreed with the FWS assertion that the proposed rule would fundamentally change BLM management of rangelands and that there could be profound impacts on wildlife. BLM contended that the changes are primarily administrative and do not secure the dominance of grazing over other land uses. BLM also rejected the assertion that its proposals would constrain specialists from recommending changes, noting that changes can be made through varied means, including modification of the terms and conditions of grazing permits.\nWhile supporting some of the proposed grazing changes, the FWS identified a number of areas of particular concern. They included potential effects of administrative inconsistencies between BLM and the Forest Service on their management of fish and wildlife resources across boundaries; diminished requirements for public consultation on site-specific actions, which have the greatest potential for impacts to fish and wildlife; a phase-in of decreases (or increases) in livestock use that are greater than 10%, which may not be immediate enough to prevent irreversible harm to vegetation and wildlife; including a quantity of forage in the definition of grazing preference, which may not account for other range attributes; allowing shared title to range improvements, which could make it more difficult to reallocate land use, such as to provide quality habitat for wildlife; sharing of water rights, as water is the most important resource for fish and wildlife; and requiring monitoring of rangeland standards, which has not been achievable due to BLM funding and staffing limitations.\nIn response, BLM stated in its addendum that while it will coordinate with the Forest Service, consistency of grazing regulations is not necessary and inconsistencies stem from the agencies' different statutory requirements. With regard to diminished public consultation, BLM responded that most if not all of the site-specific actions on grazing allotments that would affect fish and wildlife are included in allotment management planning and the planning of range improvements. Such planning requires public consultation. While the phase-in of reduced livestock use may affect special status species outside those federally listed, any adverse effects are expected to be limited to few grazing allotments, according to BLM. Changes can be made in a shorter time period or even immediately; for instance, to protect sensitive species or other resources. Further, a permittee's preference does not necessarily have the highest priority in evaluating possible uses of available vegetation, and shared title to range improvements does not diminish BLM's ability to redirect or reallocate land uses. With regard to sharing of water rights, BLM stated that water will benefit multiple uses and that rights for wildlife (and other uses) will usually be held in the name of the United States. The BLM does not anticipate that monitoring will overwhelm its capacity, in part because only about 15% of allotments evaluated were not meeting land health standards, due in significant part to livestock grazing.\nFinal grazing regulations were published on July 12, 2006, and took effect on August 11, 2006. The regulatory changes are summarized in the following section. Some of these changes have been enjoined, as described below in the \" Litigation \" section.", "BLM had asserted that some of the regulatory changes would be substantive while others were clarifications, but it was not clear which changes the agency believed would fall within each category. This added to the uncertainty over which proposals were intended to, and likely to, make major changes in public lands grazing. There had been a difference of opinion as to the extent to which the regulatory effort should reinstate pre-1995 grazing provisions or substantially modify other provisions of regulations. There continues to be disagreement as to the extent of the environmental impact of the final changes and whether that impact would be primarily beneficial or damaging in both the short- and long-terms.\nSome of the key changes in the new regulations involve ownership of range improvements and water rights, and opportunities for public input and appeals. Other changes pertain to terms and conditions of permits and rangeland health. These areas were among the most controversial among affected interests. These and some of the other key regulatory changes are discussed below.", "The regulations reestablish a pre-1995 rule whereby title to a structural range improvement, such as a fence, well, or pipeline, is to be shared by the BLM and a permittee (or others) if it is constructed under a Cooperative Range Improvement Agreement. Title would be shared in proportion to each party's contribution to the cost of the improvement. The regulations also continue to require documentation of a permittee's contributions to improvements and compensation if a permit is cancelled or passes to another. However, some advocated that ranchers should receive more direct compensation for improvements, would be encouraged to undertake and maintain improvements if they get title, and should be able to include improvements as assets to secure loans for grazing. Opponents charged that shared title would create private rights on public land and could hinder action to correct grazing abuses. They contended that the government should hold title to improvements as they typically are important for other uses, such as recreation and wildlife habitat. Still others believed that improvements for grazing do not necessarily benefit other land uses, and thus permittees should not be rewarded with title.", "The new regulations allow permittees to acquire water rights, consistent with state law. Previous rules required the federal government to follow state procedural and substantive law regarding livestock watering rights, but directed that title to the rights be held by the United States to the extent state law permitted. Before 1995, practices as to water rights for livestock grazing varied and in some states could be acquired in the name of the permittee. Language allowing private individuals to hold water rights was supported by some as providing an incentive for private water development on public land, and protecting permittees from being denied water. It was opposed by others who believed water rights should be in federal ownership to facilitate multiple uses and to preclude private claims for compensation for water rights, and because states typically do not allow grazing permittees on state lands to obtain water rights. Still others were concerned that public resources will be given away at no cost.", "BLM reduced the occasions on which it is required to involve the public in its decisions. For instance, the agency is no longer required to get input from the public regarding designation and adjustment of grazing allotment boundaries, the issuance or renewal of grazing permits, or modification of the terms and conditions of permits that are not meeting management objectives or the fundamentals of rangeland health. The agency also modified the definition of \"interested public\" so that only individuals, groups, and organizations who participate in the decisionmaking process on management of a specific allotment are maintained on the list of interested publics. Supporters maintained that the changes would prevent delays and facilitate timely decisions. Also, the agency viewed additional consultation as redundant, because the public already has opportunities to participate during the planning processes and reviews under the National Environmental Policy Act of 1969 (NEPA). The changes were criticized as restricting public input which could lead to ill-considered decisions. They were further opposed on the grounds that decisions at the planning level are too general and broad to allow specific evaluation and comment. Still others contended that environmental reviews under NEPA are not required for some grazing decisions and where required are backlogged, and as a result public participation under NEPA often is delayed.", "The agency modified the administrative appeals process on grazing decisions and defined the extent to which grazing should continue in the face of an appeal or stay of a decision. For instance, the new rule provides that when a stay is granted on appeals to decisions involving renewing, modifying, suspending, or canceling a permit or on transferring preference, the affected permittee usually would continue grazing under the immediately preceding grazing authorization. The changes were sought to provide permittees with continuity of operations when a decision affecting their operations is appealed. They were opposed by some as limiting the ability of the public to participate in grazing decisions, reducing the flexibility of land managers to take certain actions based on what is best for resource conditions, and potentially continuing damaging grazing practices.", "Another rule change broadened the definition of grazing preference to include a quantitative meaning—forage on public lands, measured in AUMs—tied to a permittee's base property of land or water. The definition continues to include a qualitative meaning—a superior or priority position to obtain a permit. The revised definition, which is similar to pre-1995 rule language, was intended to link forage allocations to base property, give ranchers certainty as to the size of operations, and eliminate confusion as to the meaning of preference . Further, preference includes both active use, defined as use currently available for livestock grazing based on livestock carrying capacity and resource conditions, and suspended use , which is use that has been allocated for livestock grazing in the past but is currently unavailable. The new definition was opposed as infringing on the discretion of land managers to determine the extent of grazing that should be allowed.", "The new rules require both assessments and monitoring of resource conditions to support agency determinations that grazing practices or levels of use are significant factors in failing to achieve rangeland health standards or conform with guidelines on an allotment. They amend the timeframe and procedures for changing grazing management after a determination that grazing practices or levels are significant factors in failing to achieve standards or conform with guidelines. One change allows a maximum of 24 months, rather than the current 12-month limit, for developing remedial changes in grazing practices. However, BLM could extend the deadline if responsibilities of another agency prevent completion within 24 months. Further, a change would phase in grazing increases or decreases of more than 10% over a five-year period, unless the changes must be made sooner under law (e.g., the Endangered Species Act ) or the permittee agrees to a shorter period. BLM maintained that these changes would provide a sound basis for agency determinations and give the agency more time and flexibility in working with permittees who are not meeting the standards. For instance, by allowing permittees to make gradual reductions in grazing, adverse economic impacts would be minimized. The changes were opposed as potentially allowing damaging practices to continue and requiring excessive documentation even when damage is obvious. Opponents also claimed that BLM lacks staff and funds to collect the necessary information formally.", "The final rule removed the three-year limit on temporary nonuse of a permit by allowing permittees to apply for nonuse of all or part of a permit for up to one year at a time, for as many years as needed. The change was promoted as allowing for recovery of the land and providing flexibility to ranchers who may not be able to graze for reasons including financial hardship, drought, or overgrazing. Critics argued that the change did not address the underlying problem—permitting grazing that exceeds the capacity of allotments. Others were concerned that conservationists will obtain grazing permits and opt for extended nonuse. However, temporary nonuse is allowed only if authorized by BLM and for no longer than one year at a time.", "Regulations allowing BLM to issue long-term conservation use grazing permits were eliminated to comply with court decisions that permits should be issued for grazing and that conservation needs should be met through alternatives. Advocates of conservation use observed that the practice allowed overgrazed land to be rested and that BLM should develop a legal alternative to the conservation use language.", "Other changes include:\nrestricting BLM to taking action against a permittee convicted of breaking laws while engaged in grazing only if the violation occurred on the permittee's allotment; emphasizing that reviews under NEPA will consider the social, economic, and cultural impacts of proposed changes in grazing preference, in addition to the ecological impacts; increasing administrative fees for livestock crossing permits, billings, and preference transfers; providing that a biological assessment or evaluation by BLM under the ESA is not an agency decision for purposes of protests and appeals; specifying that BLM will cooperate with state, tribal, local, and county grazing boards in reviewing range improvements and allotment management plans on public lands; stating that the temporary changes that BLM can make within the terms and conditions of permits involve the number of livestock and period of use that would result in temporary nonuse and/or forage removal; and requiring BLM to document observations supporting a reduction in grazing intensity, and providing that reductions will be made through temporary suspensions of active use rather than through permanent reductions.", "Two lawsuits were filed to stop implementation of portions of the grazing regulations. Both cases were filed in the U.S. District Court for the District of Idaho. Two different claims were made: first, that the proposed regulations thwarted public participation, and second, that portions of the regulations were adopted despite an inadequate review under NEPA. On August 11, 2006, the district court ruled in favor of the plaintiffs in both lawsuits regarding the public comment disputes but rejected the other claims pertaining to NEPA. One of the two plaintiffs filed a renewed motion addressing the NEPA claims. On September 25, 2006, the district court stayed other regulations based on the plaintiff's NEPA claims. Those other regulations pertained to the fundamentals of rangeland health, including standards and guidelines, and ownership of range improvement.\nBecause of these lawsuits, BLM cannot use the 2006 regulations that were enjoined. Instead, the 1995 regulations apply in these areas. BLM issued an Instruction Memorandum to its field offices explaining BLM procedure as a result of the injunctions. An attachment to the memorandum shows what changes were made to the final regulations as a result of the injunctions.", "BLM considered but did not propose many other changes to grazing regulations, according to the proposed rule and FEIS. For instance, the agency considered adopting rule language to support establishing and operating a new type of grazing unit, called a reserve common allotment , but did not do so because of negative public reaction to the idea. The BLM also considered the issue of forage reserves as part of its consideration of policy changes. (See below under \" Grazing Policy Changes Considered \" for a discussion of reserve common allotments.) The agency also considered allowing permit holders to temporarily lock gates on public lands, for instance to protect private property by preventing cattle from leaving grazing allotments and to minimize disturbances during lambing and calving seasons. The idea was opposed as preventing access by other land users, such as hunters and recreationists; giving a special privilege to permittees; and being currently prohibited by law.\nBLM also did not propose altering the existing provisions under which a grazing fee surcharge is placed on permittees who allow livestock neither they nor their children own to graze on public land. The current surcharge provision was incorporated in 1995 to address concerns regarding the potential for a permittee to make a substantial profit when subleasing grazing privileges. BLM asserted that the current surcharge provision is equitable and that it did not want to address fee-related issues as part of the reform effort.", "The BLM originally had expected to address final grazing policy changes when the rulemaking process was \"substantially completed,\" according to the agency. However, it appears that policy changes are no longer being actively considered because some policy issues were discussed during the regulatory process and there are competing priorities and resources.\nOn March 25, 2003, BLM first announced possible grazing policy changes as a complement to the regulatory changes that were being considered. According to BLM, the focus was on policy changes that could be carried out under existing rules. The agency was seeking policy reforms to promote citizen stewardship of public lands, provide flexibility to managers of livestock grazing, and increase innovative partnerships. Policy changes considered included conservation partnerships, voluntary allotment restructuring, conservation easement acquisition, endangered species mitigation/landscape habitat improvement, and reserve common allotments (RCAs). RCAs would serve as livestock forage for permittees while their normal allotments undergo rest or improvements, and might be used for unplanned needs. BLM also examined the establishment of RCAs as a regulatory change, but did not propose rule language in this area. Some had asserted that other policy options under consideration might have necessitated the adoption of new rules, which would require opportunities for public comment. The distinction between policies and regulations is not always clear, and when an agency must take action through formal rulemaking can be an issue.\nBLM solicited public feedback on the policy options it considered through a series of public workshops. While some support for policy changes was expressed, many members of the public asserted that available information was inadequate to assess the policy changes, raised concerns about the outlined options, or viewed the initial schedule for considering policy and rules changes as too short. In response, BLM announced that it had extended the timeframe for developing policy changes, but did not issue a schedule for completing actions. The agency also developed and published on its website more detailed information on RCAs, conservation partnerships, and voluntary allotment restructuring. It noted that conservation easements were no longer being pursued as a major policy tool, and that the concept of endangered species mitigation had evolved to the broader notion of landscape habitat improvement . As part of its consideration of policy reforms, BLM reviewed the advice and recommendations of its Resource Advisory Councils. Key policy changes that had been considered are discussed below.", "", "RCAs would be created to provide livestock forage to permittees whose allotments undergo rest or improvements, and might be used when drought, fire, flood, or other unplanned needs make normal allotments unusable. BLM asserted that existing regulations allow the creation of RCAs but with impediments. RCAs were supported as encouraging improvements (such as prescribed burning) and recovery from heavy grazing, and necessary in emergencies so that ranchers would not have to reduce herd size or sell out for lack of forage. Conservationists were concerned that this approach did not address what they view as the fundamental issue—overstocking or grazing unsuitable lands—and that RCAs would benefit ranchers who mismanaged their allotments. Livestock groups feared a reduction in grazing and loss of water rights through nonuse, coercion to participate, and use of RCAs as a subterfuge for conservation use. Key issues for both supporters and critics included how much land, and which lands, would become part of RCAs (e.g., vacant allotments, areas of nonuse); what would trigger their use; their term; how many permittees would be allowed to graze simultaneously; and how forage would be allocated.", "The goal of conservation partnerships between permit holders and the BLM would be to improve environmental health. A permittee could enter into a performance-based contract with BLM to undertake projects to restore streambanks, wetlands, and riparian areas; enhance water quantity and quality; improve wildlife or fisheries habitat; support the recovery of threatened or endangered species; and other actions. In return, the permittee could receive management flexibility, increased livestock grazing, and stewardship grants to pay for investments in conservation practices. Advocates noted that these arrangements would give permittees credit for improvements they have been making, encourage and reward good stewardship, and enhance the role of permittees in managing grazing allotments. Opponents contended that private property rights could be impaired, the amount of available funding was unclear, the extent of resource improvement was uncertain, permittees might receive benefits for little or no resource improvement, and partnerships may not be entirely voluntary. Differences of opinion existed as to a role for third parties, rewards for permittees, and dealing with intermingled private land.", "Voluntary allotment restructuring would allow two or more grazing permittees to merge allotments. One or more of the permittees would not graze temporarily, while the others grazed over the entire area, to achieve lighter grazing. Such restructuring was supported as improving range conditions while maintaining the economic viability of permittees. Concerns included that restructuring would reduce grazing and could already occur informally, operator to operator. Issues involved when restructuring would be used and whether and how to compensate ranchers who give up grazing privileges.", "Conservation easements—land use restrictions—were being considered to preserve open space. Under this arrangement, BLM would place conservation easements on its land identified for disposal. Permittees would similarly restrict development on their private land in exchange for acquiring the BLM lands with the easements. These easements were advocated as benefitting the land, land managers, and permittees. However, BLM subsequently asserted that because they are limited in their ability to use conservation easements, such easements were not currently a major policy option. Easements have been opposed as reducing land values, limiting the management discretion of private landowners, not necessarily providing a public benefit, and encumbering land disposal.", "BLM viewed the policy options listed above as providing opportunities to mitigate the effects of livestock grazing on species listed under the ESA. Mitigation banks also were contemplated to preserve or create habitat for listed species in exchange for mitigation credits. Such credits could be sold to other land users to offset the impacts of development on listed species. This idea raised concerns among livestock groups that grazing would be subordinated to conservation and private property rights could be weakened, and among environmentalists that permittees would be compensated for something the BLM already is obligated to protect. This concept was later considered as Landscape Habitat Improvement , to promote species conservation and facilitate ESA consultations. Habitat management would be pursued on a landscape basis, perhaps involving lands under various ownerships, which presumes a larger geographic area than a grazing allotment. Grazing permittees could form partnerships to promote species conservation and maintain or improve habitat while continuing to graze public lands.", "BLM pursued grazing reform for more than three years after notifying the public in 2003 of its consideration of changes under its Sustaining Working Landscapes initiative. During that time, evaluations of possible regulatory and policy changes proceeded on separate tracks. Changes to regulations became effective August 11, 2006, although some of the changes were subsequently enjoined. No policy changes were made as a result of this effort, and it appears that there is no longer an initiative to review and revise grazing policies.\nMany of the key regulatory changes contained in the final rule deal with provisions that took effect in 1995, during the previous revision of grazing rules. Among them are changes to allow shared title to range improvements, allow private acquisition of water rights, reduce requirements for public involvement, modify the administrative appeals process, broaden the definition of grazing preference, change the timeframe and procedures for remedying rangeland health problems, remove the limit on permit nonuse, and eliminate conservation use grazing permits. The changes met with mixed reaction. The revisiting of issues dealt with a decade ago, together with other changes, was generally supported by livestock organizations and some range professionals who see benefits both to the range and those grazing on public land. By contrast, many environmental organizations and other range experts opposed the changes on the grounds that a need for change had not been demonstrated and the particular changes could harm the environment.\nPublic comment on the proposed regulatory changes, together with the DEIS assessing their impact, was accepted through March 2, 2004. BLM evaluated the comments over many months, before publishing an FEIS on June 17, 2005. The agency postponed developing a final grazing rule to consider public comment received after the closing date, particularly from the Fish and Wildlife Service. The BLM addressed this comment in an addendum issued March 31, 2006. Final grazing regulations were published on July 12, 2006, and took effect a month later. Some of the new regulations are not being implemented as a result of lawsuits, primarily changes regarding public participation, sharing title to range improvements, and fundamentals of rangeland health.\nBLM had expected to focus on final policy changes after the completion of the rulemaking process, but it appears that policy changes are no longer under consideration. Public feedback on possible policy changes had shaped the proposals that were examined and extended the timeframe for considering changes. Key policy issues that were considered related to RCAs, conservation partnerships, voluntary allotment restructuring, conservation easement acquisition, and landscape habitat improvement." ], "depth": [ 0, 1, 1, 2, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 2, 2, 3, 3, 3, 3, 3, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h0_full h2_title h1_title", "h2_full", "h0_title h1_title", "h1_full", "h1_full", "h1_full", "h1_full", "h1_full", "h1_full", "h1_full", "h1_full", "", "h0_full", "h1_full", "", "", "", "", "", "", "", "h2_full h1_full" ] }

{ "question": [ "What changes to regulations has the Bureau of Land Management made?", "What reasons did BLM provide for the 2006 changes?", "How did critics respond to the 2006 changes?", "What changes were made in 2006?", "What topics do the changes that were made cover?", "How was the definition of grazing preference modified?", "What changes to permits were made?", "What did BLM's final environmental impact statement address?", "What addendum did BLM make to the FEIS?", "How did the regulatory changes take effect?" ], "summary": [ "The Bureau of Land Management (BLM) issued changes to grazing regulations (43 C.F.R. Part 4100) on August 11, 2006, after a three year review. Some portions of the regulations have been enjoined.", "BLM asserted that the 2006 changes were needed to increase flexibility for grazing managers and permittees, to improve rangeland management and grazing permit administration, to promote conservation, and to comply with court decisions.", "Critics contend that a need for change was not justified and that changes adopted removed important environmental protections and opportunities for public comment.", "Under the 2006 changes, the BLM and a permittee could share title to structural range improvements, such as a fence. Permittees could acquire water rights for grazing, consistent with state law. The occasions on which BLM would be required to get input from the public on grazing decisions were reduced. The administrative appeals process on grazing decisions was modified and the extent to which grazing could continue in the face of an appeal or stay of a decision was delineated.", "Changes that have been enjoined relate primarily to public participation, sharing title to range improvements, and fundamentals of rangeland health. BLM also considered, but did not propose, certain changes due to adverse public reaction or other considerations.", "The definition of grazing preference was broadened to include a quantitative meaning—forage on public land.", "The three-year limit on temporary nonuse of a permit was removed, and permittees are able to apply for nonuse of a permit for up to one year at a time. Conservation use grazing permits were eliminated.", "On June 17, 2005, BLM had issued a final environmental impact statement (FEIS) analyzing the potential impact of proposed changes in the regulations, an alternative, and the status quo.", "On March 31, 2006, BLM published an addendum to the FEIS addressing public comment received after the closing date of March 2, 2004, primarily from the Fish and Wildlife Service.", "Final regulatory changes took effect August 11, 2006." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 2, 2, 2 ] }

{ "title": [ "Background", "Depots and Related Organizations", "Depot Maintenance Process and the Effects of Maintenance Delays on Readiness and Costs", "Depot Facilities and Equipment Are Key to Efficient and Effective Depot Maintenance", "Poor Condition of Facilities and Equipment Hinders Depot Performance, but the Services Do Not Consistently Track These Effects", "Majority of Depot Facilities Are in Poor Condition and Equipment Generally Exceeds Its Expected Useful Life", "Depot Facilities", "Poor Condition of Depot Facilities and Equipment Contributes to Worsening Performance", "The Military Services Do Not Consistently Track the Extent to Which Facility and Equipment Conditions Delay Maintenance", "DOD’s Approach for Guiding Depot Investments Lacks Key Elements Important to Addressing the Depots’ Challenges Efficiently and Effectively", "The Military Services Are Developing Optimization Plans, but These Plans Lack Key Elements to Guide Depot Investment", "The Office of the Secretary of Defense Does Not Provide Oversight of or Report on Service Efforts to Invest in Depots", "Conclusion", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Service Depot Investment Has Generally Met Statutory Requirements", "Military Departments Generally Have Met the 6 Percent Rule", "Military Department Compliance with Fiscal Year 2012 Change to Prohibit Facility Sustainment", "Army Depot Investment", "Letterkenny Depot Investment", "Army Depot Investment", "Pine Bluff Depot Investment", "Pine Bluff Facilities Restoration and Modernization Backlog As of fiscal year 2017, Pine Bluff has identified about $7 million in backlogged restoration and modernization projects.", "Appendix XXIV: Comments from the Department of Defense", "Appendix XXV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "Depots are government-owned, government-operated industrial installations that maintain, overhaul, and repair a multitude of complex military weapons systems and equipment for the Department of Defense. These depots are essential to maintaining readiness for DOD, and they have a key role in sustaining weapon systems and equipment in both peacetime and during mobilization, contingency, or other emergency. There are 21 depots operated by the military services that are subject to the 6 percent minimum investment requirement (the “6 percent rule”)—four are Naval Shipyards, three are Navy Fleet Readiness Centers, two are Marine Corps Production Plants, three are Air Force Air Logistics Complexes, and nine are Army Depots and Arsenals. Figure 1 shows the location of these 21 depots across the United States.\nThe depots are part of a larger, DOD-wide logistics enterprise that involves a number of different organizations. The Office of the Under Secretary of Defense for Acquisition and Sustainment is responsible for establishing policies for access to, and maintenance of, the defense industrial base, including depots. Specifically, the office is tasked with establishing policies and procedures for the management of DOD installations and environment to support military readiness with regard to facility construction, sustainment, and modernization. The Assistant Secretary of Defense for Sustainment serves as the principal assistant and advisor to the Under Secretary of Defense for Acquisition and Sustainment on material readiness. Among other responsibilities, the Assistant Secretary of Defense for Sustainment prescribes policies and procedures on maintenance, materiel readiness and sustainment support. DOD officials report that the Office of the Deputy Assistant Secretary of Defense for Materiel Readiness is responsible for maintenance policy along with the development of a strategic vision for DOD’s organic depot base. Finally, each service has its own logistics or materiel command component, which provides day-to-day management and oversight of the services’ depots (see fig. 2). In addition, service support commands such as Naval Facilities Engineering Command can provide expertise in project design or facility management.", "Depot maintenance across the services generally involves three primary steps: planning, disassembly, and rebuilding. During each step, the depots rely on their facilities and equipment to ensure that they can conduct the large number of activities needed to repair DOD’s complex weapon systems and return them to the warfighter to be used during training and operations. Repair duration for each system varies according to the complexity of the repair and the type of use the system has experienced since the last overhaul. Because repair times vary, demands on depot facilities and equipment also vary.\nDelays in depot maintenance can directly affect the services’ readiness by hindering their ability to conduct training and operations using these weapon systems. For example:\nWe reported in May 2016 that the Navy’s implementation of sustainable operational schedules—and readiness recovery more broadly—is premised on adherence to deployment, training, and maintenance schedules. However, we found that the Navy was having difficulty implementing its new schedule as intended, in part because public shipyards were challenged to complete maintenance on time. Specifically, we reported in December 2018 that in fiscal years 2012 through 2018, maintenance overruns on aircraft carrier repairs resulted in a total of 1,207 days of maintenance delay—days that ships were not available for operations—the equivalent of losing the use of 0.5 aircraft carriers each year. Similarly, in fiscal years 2012 through 2018, maintenance overruns on submarine repairs resulted in a total of 7,321 days of maintenance delay—the equivalent of losing the use of almost three submarines each year.\nWe found in September 2018 that depot maintenance delays, among other challenges, limit the Navy, Air Force, and Marine Corps’ ability to keep aviation units ready by reducing the number of aircraft that are available to squadrons for conducting full spectrum training.\nWe reported in June 2018 that the Army’s depots, which conduct reset and recapitalization to extend the life of the Patriot surface-to-air missile system, have often returned equipment to Patriot units late, which has affected unit training. Specifically, we found that of the seven Patriot battalions that underwent reset from fiscal years 2014 through 2017, only one received its equipment within 180 days in accordance with Army policy.\nDepot maintenance delays also cause the services to incur costs for which they receive no capability. For example, we reported in November 2018 that the Navy is incurring significant costs associated with maintenance delays on attack submarines. We estimated that from fiscal years 2008 to 2018, the Navy had spent more than $1.5 billion—in fiscal year 2018 constant dollars—to crew, maintain, and support attack submarines that provided no operational capability. This was a result of the submarines sitting idle and unable to conduct normal operations while waiting to enter the shipyards, and from being delayed in completing their maintenance at the shipyard.", "Our previous work has identified multiple factors that can affect depot performance, including the size and skill of the depot workforce, the condition of weapon systems upon arrival at the depot, the availability of spare parts, and the condition of the depot’s facilities and equipment, among others (see fig. 3). In addition, all of these factors can be affected by funding and operational considerations (such as unexpected accidents). DOD officials have stated that disruptions to funding, to include continuing resolutions, affect the ability to conduct depot maintenance.\nDepots rely on working and efficient facilities and equipment to complete repairs and overhauls, and DOD maintenance officials have stated that any underlying conditions – such as leaks, lack of capacity, inefficient layouts, and breakdowns – require workarounds. Facilities are defined as any building, structure, or linear structure (such as a fence or railway). Equipment includes all nonexpendable items needed to outfit or equip an organization; for the depots, that includes items used by depot personnel to conduct depot-level maintenance, such as tools, test equipment, machining equipment, and test stands. We have previously noted that workarounds are additional efforts to complete the task that can delay maintenance, negatively affect productivity, and increase costs of depot maintenance. Functioning depot facilities and equipment are essential to a number of depot processes, as shown in figure 4.\nThese facilities and equipment often require significant investment to plan, construct, install, repair, and modernize. For example, new DOD depot facilities can cost millions of dollars and are generally expected to last around 67 years, though facilities can, through restoration and modernization efforts, operate significantly longer. Equipment generally lasts for a shorter length of time, though equipment used in production can be expected to last 10 years or more and can be costly. Because these facility and equipment investments can take years to plan and require significant resources, a depot’s decision to invest must often take place well in advance of the specific need the facility or equipment is intended to serve. Other factors that the depots consider when planning investments include topography, flood plains, environmental and historic preservation needs, roads and parking, utilities, and the effect on continuing depot operations. This makes careful planning and management of these investments essential to ensuring that critical capabilities are not neglected.\nIn fiscal year 2007, Congress enacted the 6 percent rule, requiring each military department to invest in the capital budgets of its depots no less than 6 percent of the average total dollar value of the combined maintenance, repair, and overhaul workload funded at all the depots of that department over the preceding 3 fiscal years. The departments generally met the minimum investment requirement from fiscal year 2007 through fiscal year 2017, as we discuss in more detail in appendix I.", "Our analysis of service metrics shows that depot facilities are, on average, rated as “poor” on DOD’s facility rating scale, and the age of equipment at the depots generally exceeds its expected useful life. Meanwhile, performance at the service depots has generally declined since fiscal year 2007. Our previous work has shown that facility and equipment condition can affect depot performance. However, the military services do not consistently track the extent to which the condition of facilities and equipment affect depot performance.", "", "Navy Aviation Depots Rely on Many Facilities from World War II Era While service officials do not consider the age of a facility to be an ideal indicator of its overall health – since the services regularly restore and modernize older facilities rather than build new ones – the age of facilities can still offer insight into some of the depots’ challenges. For example, over 30 million square feet at the Navy aviation depots was built during the 1940’s – more than one-third of its existing space. components of a facility—such as the electrical and plumbing systems and use these assessments to develop a condition rating that summarizes the overall health of the facility. In turn, these condition ratings help service officials plan investment strategies and prioritize depot projects. The condition rating does not necessarily correlate with the age of the facility (see sidebar); a relatively new facility might have a poor condition rating if it has been damaged, for example, and an old facility that has recently been modernized might have a high condition rating.\nOur analysis of fiscal year 2017 depot facilities data found that the average weighted condition rating at a majority of the 21 service depots is poor. Specifically, 12 of the 21 depots–more than half–have average condition ratings that are below 80, indicating that they are in “poor” condition (see fig. 5). Of the remaining depots, five had an average rating in the “fair” category, and four had an average rating in the “good” category.\nOfficials note that older facilities can face additional challenges, such as electrical systems built for different weapon systems, historical preservation requirements, and suboptimal layouts. It can be difficult for a depot to maintain complex, modern weapon systems, such as the F/A-18, with facilities that were designed for less complex systems.\nEquipment is generally past its expected useful life at most military depots. Each piece of capital equipment has an expected service life, which indicates the number of years that the equipment is expected to operate. Equipment can be operated past its expected service life. However, equipment that is past its expected service life can pose an increased risk for maintenance delays or higher maintenance costs, affecting the depots’ ability to conduct work. As we have previously reported, aging equipment can present a number of challenges, such as more frequent breakdowns, less effective or efficient operation, and safety hazards. Our analysis shows that most of the 21 depots reviewed rely on equipment that is past its expected useful life (see fig. 7). As Figure 7 shows, only three depots rely on equipment that is, on average, within its useful life. Three other depots were unable to provide data.\nFor more detailed information about equipment age and equipment repairs at individual depots, see appendixes II through XXII.", "The service depots have generally experienced worsening performance in terms of completing maintenance on time or in the required amount over the past decade. The Navy aviation depots have seen decreases in their timely completion of maintenance for aircraft, engines and modules, and components. For example, on-time performance for aircraft completed at the Navy’s three aviation depots has decreased from about 56 percent in fiscal year 2007 to about 31 percent in fiscal year 2017 (see fig. 8). This occurred even though the number of aircraft scheduled for repair over that same time period declined by about 26 percent.\nSimilarly, the three Air Force aviation depots’ on-time performance has decreased over this same time period from about 98 percent on-time aircraft completions in fiscal year 2007 to about 81 percent on-time aircraft completions in fiscal year 2017 (see fig. 9). This decrease occurred even though the number of aircraft scheduled for repair declined by approximately 15 percent.\nNaval shipyards have also experienced performance challenges, such as an increase in maintenance delays (see fig. 10). Our analysis shows that the number of days of maintenance delay at the four Navy shipyards has increased by about 45 percent from fiscal year 2007 through 2017, from 986 days in fiscal year 2007 to 1,431 days in fiscal year 2017. We have previously reported that from fiscal year 2008 through fiscal year 2018, the Navy incurred $1.5 billion in fiscal year 2018 constant dollars to crew, maintain, and support attack submarines that provided no operational capability as a result of the submarines sitting idle while waiting to enter the shipyards and from being delayed in completing their maintenance at the shipyards.\nArmy depot data is mixed—our analysis shows that the performance at two depots has decreased, but for others it has held steady or improved. See figure 11 below for changes over time in performance.\nFinally, the Marine Corps depot output decreased by less than 1 percent, as shown in figure 12.\nThe depots rely on their facilities and equipment to ensure they can conduct the large number of activities needed to efficiently repair DOD’s complex weapons systems. Inadequate facilities can make the overall repair process less efficient, as maintainers perform workarounds that can increase maintenance time and costs. Because the depots are generally operating with equipment past its expected useful life, the depots may be incurring costs related to operating aging equipment – including performing equipment repairs, procuring spare parts, and expending labor hours to repair equipment – while at the same time delaying mission-related work. For example:\nAt Albany Production Plant, officials told us that a shortage of paint booths results in vehicles remaining unpainted and stored outside. Exposure to the elements can cause flash rusting in the event of rain or high humidity, necessitating retreatment that increases both maintenance time and cost.\nAt Norfolk Naval Shipyard, officials had to re-inspect 10 years’ of parts made in a single furnace, after it was discovered that the controls on the furnace were reading incorrectly.\nAt Corpus Christi Army Depot, depot documentation shows that engines are moved nearly 5 miles across the depots during their repair process. According to officials at the depot, this is the result of years of incremental construction that did not allow them to optimize their workflow.\nAt Fleet Readiness Center Southwest, officials told us that they had to develop an inefficient repair process to maintain the CMV-22 due to a lack of hangars that could accommodate the large aircraft.\nWhile maintenance delays can be brief, extended maintenance delays can prevent the timely return of weapon systems to operational status. Delays can cause the services to incur operating and support costs without an operational benefit. Lack of weapon systems can also cause other negative effects such as an inability to train people to use the system, leading to a reduction in readiness.\nThe services have used various facility strategies to keep the depots operating, such as restoring and modernizing facilities when funding was available, developing workarounds when space or funding was not available, or continuing to use the inadequate facilities. Over time, this patchwork of old, modernized, and workaround solutions for new weapons systems can result in suboptimzed workflow that adds time and cost to the maintenance process, which can ultimately affect readiness. For example, at Production Plant Albany, the depot has four welding centers in different locations throughout the depot. According to officials, they utilized these welding centers over time as needs arose, and the centers are not ideally located for an efficient work flow. This means that the depot has to provide welding supplies, shift maintainers between, and deliver vehicles to and from these different locations.\nAlternatively, investments that optimize depot facilities and equipment can positively affect maintenance efficiency. For example:\nFleet Readiness Center Southwest recently built a new facility that optimizes the workflow for its repairs of H-60 helicopters. Officials stated that its previous H-60 facility could only fit eight helicopters at a time, and only by crowding them such that using the crane on one required others to be moved as well, adding time and workload to the maintenance process. The new facility can accommodate more than 30 H-60s at a time, and each can be brought into and out of the facility without requiring others to be moved. As part of this effort, the depot also invested in additional lighting, ventilation, and crane capabilities that depot officials stated have increased the depot’s capacity for conducting H-60 repairs by more than 20 percent over their previous facility.\nAt Corpus Christi Army Depot, planners have designed a multiphase workflow for their engine and component repairs that involves investing in a new facility and related equipment. Officials noted that the current engine repair process has developed over decades, and is spread throughout the depot. The redesigned process, which involves several investments over more than two decades, is intended to have a more efficient workflow. An Army analysis estimated that this investment will reduce the time it takes to repair and test engines and components and could result in the depot requiring about 200,000 fewer labor hours, saving about $10 million in labor costs annually.\nThe Naval Shipyard Optimization Plan released by the Navy in February 2018 addresses the shipyards’ ability to maintain the current fleet, and projects that facility and equipment investments at the shipyards will increase efficiency and save resources. For example, the plan estimates that optimized facilities and equipment will save the shipyards over 325,000 labor days per year.", "Despite the negative effect that poor conditions can have on depot performance, the military services do not consistently track when facilities and equipment conditions lead to maintenance delays. Based on our analysis, the services each track a form of maintenance delay— specifically, work stoppages caused by either equipment or facility conditions. Work stoppages are circumstances where maintenance can no longer proceed because the depot does not have everything it needs, including the facility space to begin additional work or equipment needed to perform a certain function. However, table 1 below shows that although the services have the ability to track work stoppages, they do not all track both facility and equipment-related maintenance delays across all their depots. Further, even within a service, the depots may use different methodologies. Different methodologies make it difficult to compare across depots and identify issues. For example, according to Navy officials, the Navy aviation depots track work stoppages, but each depot uses different standards for determining which incidents are tracked. This means that an event counted as a work stoppage at one location might not be counted at another location.\nStandards for Internal Control in the Federal Government states that management should use quality information to achieve an entity’s objectives. However, the depots do not track maintenance delays caused by facility and equipment conditions, such as work stoppages, more consistently because there is currently no requirement from their respective materiel commands to do so. Every year, the services spend millions of dollars on depot facilities and equipment to meet their minimum investment requirement. Establishing measures and using them to track maintenance delays caused by facility and equipment conditions would help the services to make better investment decisions because they could target investments to facility and equipment needs that would have the greatest impact on repair times or other key performance goals. Without knowing how often facility and equipment conditions lead to work delays, the services risk investing in less critical infrastructure and experiencing more work stoppages due to facility or equipment conditions.", "The military services are developing optimization plans for their depots, but these plans lack analytically-based goals, results-oriented metrics, a full accounting of the resources, risks, and stakeholders, and a process for reporting on progress. Including these elements could enhance the effectiveness of service depot investments. Furthermore, there is currently no process at the Office of the Secretary of Defense level that monitors depot investment decisions or provides regular reporting to decision makers and Congress.", "The services have each begun to develop depot optimization plans, as directed by Congress. In June 2018 Congress directed the Secretaries of the Army, Navy and Air Force to submit an engineering master plan for optimal placement and consolidation of facilities and major equipment, as well as an investment strategy addressing the facilities, major equipment and infrastructure requirements of depots under the jurisdiction of each service. These plans are to include a life cycle cost analysis to modernize depot facilities and equipment and an investment strategy.\nThe Army, Navy, Air Force, and Marine Corps have all begun to develop depot optimization plans, and officials told us that they expect to complete work on these initial plans by the February 2019 date directed by Congress. However, material management command officials also noted that more detailed plans – that include workflow optimization, analysis of supporting utilities, and long-term investment planning – would not be possible by that date. Instead, officials intend to use the initial phase to develop a strategy for completing their final plans. Officials told us that they are using this initial development effort to identify the work needed to fully establish their depot optimization plans, identify the resources and expertise needed for implementation, and develop a timeline for completion. Depot optimization is a challenging effort that involves complex tasks such as, according to service officials, understanding interdependencies between facilities, equipment, and utilities; accounting for environmental, geographic, and economic factors; planning for facility construction and equipment purchases years in advance; and making arrangements for ongoing depot-level maintenance operations while facility and equipment improvements are underway.\nThe Navy developed a Shipyard Infrastructure Optimization Plan, released in February 2018, to address some of its longstanding challenges—including aging facilities and equipment, inefficient layouts, and lack of capacity. Officials estimate that the effort will cost $21 billion over 20 years, and will allow for increased repair capacity. Over time, the Navy estimates that this investment could ultimately save more than 328,000 labor days annually in reduced transportation and materiel movement time. We have a separate review examining the Navy’s effort to optimize its shipyards, which examines its use of results-oriented elements.\nHowever, based on our discussions with officials from all four services, the depot plans for the Army and Marine Corps depots and arsenals, the Navy Fleet Readiness Centers, and the Air Force Air Logistics Complexes currently under development will lack certain key elements identified in our prior work, including:\nAnalytically-based goals. The services have not fully established analytically-based goals for their depot investments that are tied to the service’s operational needs. For example, Army and Air Force officials told us that they were still in the process of developing goals for their plans. Meanwhile, Navy aviation officials had developed some initial goals, but expected these goals to change as their planning and information became more detailed. The Marine Corps is in the process of developing its plan, but officials say that they have not determined what analytically-based goals will serve as the foundation of their efforts. Some have told us that the only goal that is feasible by the February 2019 deadline is to plan to develop a better plan. Our prior work has shown that establishing analytically-based goals that define the desired outcomes and results is a leading practice that can enhance the success of an initiative.\nResults-oriented metrics. As we noted earlier, planners lack key data critical for developing investment plans, such as the source and extent of facilities- and equipment-related maintenance delays. Army, Navy, Air Force, and Marine Corps officials all noted that they were planning to use metrics to determine the effectiveness of their respective plans. However, without established goals for their plans, the services cannot identify the best ways to measure progress in meeting those goals. In addition, the Army, Navy, and Air Force do not have metrics that tie their depot investments to specific outcomes, such as increased performance or improved readiness. Our prior work has shown that using results-oriented metrics enables effective monitoring and facilitates targeting efforts to those with the greatest effect.\nIdentification of required resources, risks, and stakeholders. Army, Navy, Air Force, and Marine Corps officials told us that they have begun identifying the resources needed for their plans. For example, all services have identified at least some of the project costs that will be needed for certain depot facility and equipment improvements. However, without having analytically-based goals to serve as a starting point, it is impossible to fully identify the required resources and risks because the desired end state has not been established. Meanwhile, Army, Air Force, and Navy aviation officials have identified many stakeholders that they intend to involve in their optimization efforts, though in some cases these stakeholders have not been included in the process. Service officials also noted that in some cases they lack the necessary engineering expertise to redesign their depot’s workflow process from the ground up.\nThe services have identified about $6.5 billion in backlogged restoration and modernization projects for their depot facilities. However, this figure is likely under stated because our prior work has shown that depot facility projects are subject to factors such as regulatory compliance and historical preservation costs that can be hard to predict. Moreover, the services track their backlog of needed facility improvements differently, which makes it difficult to determine the full scope of investment required and to provide effective oversight. Our prior work has shown that fully identifying 1) the resources required to achieve the goals, 2) the stakeholders that have equities and requisite expertise in the effort, and 3) potential risks to the effort are leading results-oriented practices that are key to success.\nReporting on progress. Army, Navy, Air Force, and Marine Corps officials told us that they are in the process of developing one-time reports for Congress on the depots’ investment needs. However, these one-time reports will not provide Congress and decision makers with information after their initial release. Depot optimization planning will require time, along with sustained management and congressional attention to successfully implement. For example, the Navy’s Shipyard Optimization Plan estimates that it will be a 20-year effort requiring around $21 billion. However, the other initial steps taken by the services to address the congressional request are not as focused on the long term. For example, Army and Air Force officials told us that their initial plans will likely be “plans to get to a plan” rather than a decades-long proposal like the Navy shipyards. Our prior work has shown that reporting on progress is a leading results-oriented practice that holds the organization accountable for results and provides information to senior leaders and Congress that can help keep an effort on track and responsive to changes.\nAccording to service officials, the military services’ depot optimization plans will not include all the elements of a results-oriented management approach because there is no requirement that the plans do so. Our prior work has found that a results-oriented management approach can help organizations remain operationally effective, efficient, and capable of meeting future requirements. Specifically, our work has highlighted the importance of elements such as developing analytically-based goals; using results-oriented metrics to monitor progress; fully identifying required resources, risks, and stakeholders; and regular reporting on progress to making reform efforts more efficient, effective, and accountable. Congress directed the services to include some results- oriented elements in their plans, such as an identification of key steps and an initial report to Congress. However, including these additional elements—establishing results-oriented metrics; identifying all necessary resources, stakeholders, and associated risks; and regular reporting to decision makers and Congress—would further enhance the effectiveness of the plans. Without a plan that includes all the key elements of a results- oriented management approach, the services risk continued deterioration of the depots and making suboptimal investments that could hinder their ability to efficiently and effectively support readiness.", "DOD has not developed a process to oversee the implementation of the services’ depot optimization plans or provide reporting on depot investment effectiveness to DOD decision makers and Congress. Officials with the Deputy Assistant Secretary of Defense for Materiel Readiness stated that their role is to advocate for the service depots within DOD, and not to develop depot policies or review service depot investments. Specifically, they stated that they are unable to set infrastructure policy and do not have authority to alter service investment decisions. However, as part of an office reorganization during the summer of 2018, the Secretary of Defense tasked the Assistant Secretary of Defense for Sustainment with developing logistics and maintenance policy. organizations have successfully used a results-oriented management approach—which includes regular monitoring and reporting—to oversee the department-wide efforts to drive significant improvements. For example, officials with the Office of the Assistant Secretary of Defense for Logistics and Materiel Readiness created a Comprehensive Inventory Management Improvement Plan in 2010 that DOD used to improve data collection, develop standardized metrics, and provide increased oversight (see sidebar). The result was that DOD was able to achieve a number of improvements, such as reducing the value of its on-hand excess inventory by about $2 billion, improving policy and guidance, and establishing standardized metrics for monitoring its operations. Based on these positive results, DOD institutionalized this process through guidance and has continued to use it since 2010. Using this approach, DOD was ultimately able to improve its inventory management processes enough to have it removed from GAO’s High Risk List in 2017.\n2. The team of experts assessed the data sources and methods used by the services and DLA and evaluated potential department- wide metrics for measuring demand forecasting accuracy based on the available data sources. 3. DOD implemented the standardized metrics in a phased approach with the initial phase focused on establishing a baseline for the metrics.\nThrough the process of establishing these metrics, DOD developed additional areas for exploration and improvement, such as improving its guidance on demand forecasting.\nDOD does report some depot information to Congress; however, the information reported is limited in nature and does not address key issues concerning depot facilities and equipment. For example, every other year DOD is required to report to Congress on its core depot-level maintenance and repair capability requirements and workload. DOD must also report annually on the percentage of depot maintenance funds expended during the preceding fiscal year and projected to be expended during the current and ensuing fiscal year, for performance of depot-level maintenance and repair workloads by the public and private sectors. Combined with the services’ reporting on their depot investment spending (see appendix I), this information provides Congress with some information about depot operations and performance. However, these reports do not inform Congress about several key points, including whether the service depots are becoming more effective and efficient or the extent to which DOD has managed to address depot investment backlogs. We have noted in prior work that the backlog of facilities restoration and modernization projects at the depots can be significant, and that reducing these backlogs will likely take a sustained effort over many years. Furthermore, these efforts are important to improving the effectiveness and efficiency of the depots, which is important to ensuring the readiness of military forces.\nImproving readiness is one of DOD’s top priorities. Specifically, the Secretary of Defense issued a memorandum in September 2018 about improving readiness which set a minimum target of 80 percent mission capability for DOD’s key aviation platforms starting in fiscal year 2019. In addition, the memorandum identified reducing operating and support costs for these platforms every year beginning in fiscal year 2019 as another priority. Furthermore, DOD has more broadly identified rebuilding readiness as a priority across all the services. As noted previously, the depots are essential to providing readiness to DOD in the form of repaired weapon systems, and depot optimization efforts can provide a return on investment in the form of reduced maintenance time and cost. However, the investments made at the depots—which are crucial for optimization, throughput, and ultimately readiness—often need years and millions of dollars to execute, which means that long-term planning is essential to ensuring that investments are made effectively. Regular monitoring of the services’ depot investment efforts could ensure that these investments target readiness drivers to produce the greatest effect.\nFurthermore, our previous work has noted that timeframes for improvement efforts can slip, which makes reporting to DOD decision makers and Congress essential for holding stakeholders accountable for making progress. For example, we reported in 2017 that even though the Navy had developed capital investment plans in 2013 and 2015 intended to help improve the state of the facilities and equipment at the shipyards, backlogged restoration and maintenance projects had grown by 41 percent over 5 years which extended the amount of time required to clear the backlog under expected funding levels. Without providing oversight of and reporting on service depot investments, DOD risks continued deterioration of the depots’ facilities and equipment, suboptimal investments, and reduced military readiness as the services experience costly maintenance delays.", "DOD’s 21 depots are critical for repairing and maintaining its complex array of weapon systems. Inefficient depots contribute to longer maintenance times, increased costs, and reduced readiness. Currently, a majority of the depots have facilities that are in poor condition and are relying on old equipment that is past its useful service life. The military services spend millions of dollars annually on depot facilities and equipment in order to meet minimum investment requirements designed to sustain depot performance. Notwithstanding these expenditures, the services are not consistently required to track maintenance delays caused by facility or equipment conditions. This lack of tracking hinders the services’ ability to target investments to facility and equipment needs that would have the greatest effect on repair times or other performance goals. By knowing how often facility and equipment conditions lead to work delays, the services could reduce the risk of investing in less critical facilities and equipment. They could also reduce the risk of more work stoppages caused by facility or equipment conditions.\nThe military services are in the midst of developing congressionally- directed depot optimization plans that are expected to include both 1) an analysis of the cost of depot facilities and equipment modernization and 2) an investment strategy. However, with the exception of the plan designed to address the Navy shipyards, the services’ plans are still in the initial stages, and each one is expected to lack key elements of a results-oriented management approach—including analytically based goals, results-oriented metrics, full identification of required resources and risks, and regular reporting on progress—that would help guide investment. As the shipyard optimization plan has demonstrated, the cost of optimization may be high and, once defined, will require sustained management attention over many years to carry out successfully. In addition, implementing a regular monitoring and reporting process to provide oversight and accountability over depot investments would further enhance DOD’s ability to attain improvements at the depots significant enough to reverse years of decline and reach the challenging goals set by the Secretary of Defense for improving mission capability rates and reducing operating and support costs.", "We are making the following 13 recommendations to the Department of Defense.\nThe Secretary of the Army should ensure that Army Materiel Command establishes measures for its depots to track facility or equipment conditions that lead to maintenance delays. (Recommendation 1)\nThe Secretary of the Army should ensure that Army Materiel Command implements tracking of the measures for identifying when facility or equipment conditions lead to maintenance delays at each Army depot. (Recommendation 2)\nThe Secretary of the Navy should ensure that Naval Sea Systems Command and the Commander, Fleet Readiness Centers establish measures for their depots to track facility or equipment conditions that lead to maintenance delays. (Recommendation 3)\nThe Secretary of the Navy should ensure that Naval Sea Systems Command and the Commander, Fleet Readiness Centers implement tracking of the measures for identifying when facility or equipment conditions lead to maintenance delays at each Navy depot. (Recommendation 4)\nThe Secretary of the Air Force should ensure that Air Force Materiel Command establishes measures for its depots to track facility or equipment conditions that lead to maintenance delays. (Recommendation 5)\nThe Secretary of the Air Force should ensure that Air Force Materiel Command implements tracking of the measures for identifying when facility or equipment conditions lead to maintenance delays at each Air Force depot. (Recommendation 6)\nThe Commandant of the Marine Corps should ensure that Marine Corps Logistics Command establishes measures for its depots to track facility or equipment conditions that lead to maintenance delays. (Recommendation 7)\nThe Commandant of the Marine Corps should ensure that Marine Corps Logistics Command implements tracking of the measures for identifying when facility or equipment conditions lead to maintenance delays at each Marine Corp depot. (Recommendation 8)\nThe Secretary of the Army should ensure that Army Materiel Command incorporates in its depot optimization plan, key results-oriented elements including analytically-based goals, results-oriented metrics, identification of required resources, risks, and stakeholders, and regular reporting to decision makers on progress. (Recommendation 9)\nThe Secretary of the Navy should ensure that Commander, Fleet Readiness Centers incorporates in its depot optimization plan, key results-oriented elements including analytically-based goals, results- oriented metrics, identification of required resources, risks, and stakeholders, and regular reporting to decision makers on progress. (Recommendation 10)\nThe Secretary of the Air Force should ensure that Air Force Materiel Command incorporates in its depot optimization plan, key results-oriented elements including analytically-based goals, results-oriented metrics, identification of required resources, risks, and stakeholders, and regular reporting to decision makers on progress. (Recommendation 11)\nThe Commandant of the Marine Corps should ensure that Marine Corps Logistics Command incorporates in its depot optimization plan, key results-oriented elements including analytically-based goals, results- oriented metrics, identification of required resources, risks, and stakeholders, and regular reporting to decision makers on progress. (Recommendation 12)\nThe Secretary of Defense should ensure that the Assistant Secretary of Defense for Sustainment develops an approach for managing service depot investments that includes management monitoring and regular reporting to decision makers and Congress on progress. (Recommendation 13)", "We provided a draft of this report to DOD for review and comment. In written comments on a draft of this report (reproduced in appendix XXIV), DOD concurred with 12 of our 13 recommendations and stated, in general, that the Service Chiefs for the Army, Navy, Air Force, and Marine Corps will ensure that their respective material commands take actions to implement the recommendations for their service. DOD also provided technical comments, which we incorporated where appropriate.\nDOD did not concur with our recommendation that the Assistant Secretary of Defense for Sustainment (ASD for Sustainment) develop an approach for managing service depot investments. In its response, DOD stated it could not develop such an approach until the services finalized and resourced depot optimization plans. DOD stated it would continue to monitor capital investments at service depots through the budget process.\nWe continue to believe that the ASD for Sustainment should develop an approach for managing service depot investments that includes management monitoring and regular reporting to decision makers and Congress on progress for several reasons. First, our recommendation is focused on the ASD for Sustainment developing an approach for overseeing the services’ overall depot investments, not just those contained in their optimization plans. While the depot optimization plans will certainly affect the services’ depot investments, the depots will require additional investments to sustain, restore, and modernize their operations apart from their efforts to optimize facility layout and workflow.\nSecond, the ASD for Sustainment’s early involvement in the services’ development and resourcing of depot optimization plans could enhance service efforts to identify appropriate analytically-based goals aligned with the Secretary of Defense’s readiness objectives, enhance optimization across the DOD enterprise, and ensure sustained senior leadership attention to achieving optimal depot efficiency and effectiveness. Waiting until the services’ depot optimization plans have been resourced – that is, funded – could result in the ASD for Sustainment beginning its involvement and oversight after critical optimization decisions, such as setting goals, identifying key metrics, and adjudicating trade-offs across the depot enterprise, have been made on an individual basis by the services.\nThird, while monitoring investments at the service depots through the budget process is an important aspect of oversight, the ASD for Sustainment could enhance the oversight of and accountability over depot investments through a more comprehensive oversight approach. This comprehensive approach could include regular monitoring that focuses on ensuring that approved depot investment funding is implemented as planned and achieves desired results. An approach focused on the implementation of efforts aimed at desired outcomes could better position DOD and the services to make sustained progress.\nFinally, having regular reporting of progress will help ensure DOD leadership and the Congress have the information needed to help make critical funding and policy decisions. Reporting on progress towards desired outcomes also could assist in ensuring that there is accountability within the department for reversing years of decline and reaching the challenging goals set by the Secretary of Defense for improving mission capability rates and reducing operating and support costs.\nWe are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, and the Secretaries of the Army, Navy, Air Force, and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have questions about this report, please contact me at [email protected] or (202) 512-9627. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XXV.", "", "Based on our analysis of service budget submissions and 6 percent project lists, we found that the departments have generally met the 6 percent requirement in fiscal years 2007 through 2017 (see fig. 13).\nAs shown above, the Navy and Air Force met the minimum requirement every year since the minimum investment requirement was enacted in fiscal year 2007. The Army met the minimum investment requirement for most years, but did not meet the minimum on two occasions, in fiscal year 2011 and fiscal year 2013. According to Army officials, they missed the fiscal year 2011 minimum by around $21 million due to a software project that was scheduled to execute in fiscal year 2011, but was unable to execute and moved to fiscal year 2012 instead. An Army official attributed the difference in fiscal year 2013, which was over $68 million, to the effects of fiscal year 2013 sequestration, which generally reduced funding available to the services.\nWhile the Navy met its minimum investment requirement every year, it is worth noting that the 6 percent rule measures compliance by department. Therefore, the Navy’s reported investments include those for its four shipyards, its three fleet readiness centers, and the two Marine Corps depots. From fiscal year 2007 through fiscal year 2017, the shipyards accounted for 76 percent of Navy depot investment (see fig. 14).\nIf these three organizations were viewed independently, only the shipyards would have regularly met their minimum investment requirement; the fleet readiness centers and Marine Corps depots have generally invested less than 6 percent of their respective maintenance, repair, and overhaul workload, as shown in figure 15. Under this perspective, the fleet readiness centers would only have met the 6 percent minimum in fiscal years 2008 and 2012, and the Marine Corps depots would never have met the 6 percent minimum.", "The services have counted some facilities sustainment activities towards meeting the 6 percent minimum since fiscal year 2012, but the effect of these activities on the departments’ ability to meet the minimum investment requirement appears minimal. In fiscal year 2012, Congress revised 10 U.S.C. § 2476 to prohibit the services from counting sustainment activity towards meeting their 6 percent investment minimum. Sustainment activities are defined as the regular activities needed to keep a facility in good working order. We requested project documentation from each of the services for a number of the investments that they counted towards their 6 percent minimum.\nArmy officials were only able to provide us with about one-third of our requested project documentation (46 out of 158 projects requested); as a result, our assessment of the Army is limited. Of the project documentation we did receive, we found sustainment activities accounted for 13 projects totaling about $21 million in nominal dollars from fiscal year 2012 through fiscal year 2017. Those projects represent approximately 1 percent of the Army’s total depot investment over that time. The Army’s compliance with the 6 percent rule would not have been affected if those projects had been properly excluded.\nNavy and Marine Corps officials were able to provide project documentation for 172 out of 211 projects requested. Navy sustainment activities accounted for 47 projects totaling about $94 million in nominal dollars from fiscal year 2012 through fiscal year 2017. Those projects represent about 3 percent of the Navy’s total depot investment over that time. If those projects had been properly excluded, the Navy would still have met its 6 percent minimum for each fiscal year.\nFinally, Air Force officials were able to provide project documentation for 136 out of 138 projects requested. Air Force sustainment activities accounted for 51 projects totaling about $45 million in nominal dollars from fiscal year 2012 through fiscal year 2017. Those projects represent about 2 percent of the Air Force’s total depot investment over that time. If those projects had been properly excluded, the Air Force would still have met its 6 percent investment minimum for each fiscal year.\nMission Anniston specializes in tracked and wheeled vehicles, artillery, bridging equipment, small arms, and other items.\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, about $196 million – nearly 15% – went to Anniston.\nAnniston Facilities Restoration and Modernization Backlog As of fiscal year 2017, Anniston has identified about $38 million in backlogged restoration and modernization projects.\nMission Corpus Christi specializes in helicopters (AH-64, AH-1, CH-47, OH-58, UH-60, and UH-1), engines, and associated systems and subsystems.\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, about $311 million – over 23% – went to Corpus Christi.\nCorpus Christi Facilities Restoration and Modernization Backlog As of fiscal year 2017, Corpus Christi has identified about $25 million in backlogged restoration and modernization projects.", "", "", "", "", "Mission Red River specializes in tactical wheeled vehicles—including Mine Resistant Ambush Protected (MRAP) vehicles, High Mobility Multipurpose Wheeled Vehicles (HMMWV), Family of Medium Tactical Vehicles (FMTV), Bradley Fighting Vehicles, and the Multiple Launch Rocket System (MLRS).\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, about $227 million – nearly 17% – went to Red River.\nRed River Facilities Restoration and Modernization Backlog Red River did not provide any data on their backlog of restoration and modernization projects.\nMission Rock Island houses the Joint Manufacturing and Technology Center, which has been designated the Center of Industrial and Technical Excellence for mobile maintenance equipment such as the Forward Repair System. It is also the sole Army location for assembling recoil mechanisms (such as those on howitzers).\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, about $59 million – over 4% – went to Rock Island.\nRock Island Facilities Restoration and Modernization Backlog Rock Island did not provide any data on their backlog of restoration and modernization projects.\nMission Tobyhanna specializes in command, control, communications, computers, intelligence, surveillance and reconnaissance systems, electronics, avionics, and missile guidance and control systems.\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, about $279 million – nearly 21% – went to Tobyhanna.\nTobyhanna Facilities Restoration and Modernization Backlog As of fiscal year 2017, Tobyhanna has identified about $43 million in backlogged restoration and modernization projects.\nMission Tooele specializes in ammunition logistics (storage, shipping, sorting, and inspecting), as well as production of related equipment needed for ammunition maintenance and demilitarization.\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, about $84 million – over 6% – went to Tooele.\nTooele Facilities Restoration and Modernization Backlog As of fiscal year 2017, Tooele has identified about $21 million in backlogged restoration and modernization projects.\nMission Watervliet specializes in cannons, mortars, and associated components, as well as machining and fabrication services.\nOf the $1.6 billion spent by the Army on depot investment between fiscal year 2012 and fiscal year 2017, $309 million was spent on projects that benefited multiple depots. Of the remaining $1.34 billion, $87 million – about 6% – went to Watervliet.\nWatervliet Facilities Restoration and Modernization Backlog As of fiscal year 2017, Watervliet has identified about $36 million in backlogged restoration and modernization projects.\nMission Norfolk Naval Shipyard specializes in nuclear aircraft carriers (Nimitz class), submarines (Los Angeles- class and Ohio-class), and various surface combatants (CGs, LHDs, LPDs, LCCs, FFGs, and AS Tenders).\nOf the $2.4 billion spent by the four shipyards on depot investment between fiscal year 2012 and 2017, $557 million—about 23%— was spent on Norfolk Naval Shipyard.\nNorfolk Naval Shipyard Facilities Restoration and Modernization Backlog Norfolk Naval Shipyard identified about $1.46 billion in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts that have been identified but not yet executed.\nMission Pearl Harbor Naval Shipyard specializes in nuclear submarines (Los Angeles-class and Virginia- class) and surface combatants (CGs, DDGs, LPDs, FFGs, and AS Tenders). Navy Depot Investment Of the $2.4 billion spent by the four shipyards on depot investment between fiscal year 2012 and 2017, $458 million—about 19%— was spent on Pearl Harbor Naval Shipyard.\nPearl Harbor Naval Shipyard Facilities Rrestoration and Modernization Backlog Pearl Harbor Naval Shipyard identified about $1.69 billion in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts that have been identified but not yet executed.\nMission Portsmouth Naval Shipyard specializes in nuclear submarines (Los Angeles-class and Virginia- class). Navy Depot Investment Of the $2.4 billion spent by the four shipyards on depot investment between fiscal year 2012 and 2017, about $568 million—about 23%—was spent on Portsmouth Naval Shipyard.\nPortsmouth Naval Shipyard Facilities Restoration and Modernization Backlog Portsmouth Naval Shipyard identified about $761 million in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts that have been identified but not yet executed.\nMission Puget Sound specializes in nuclear carriers (Nimitz class), submarines (Los Angeles-class, Seawolf-class, and Ohio-class), and surface combatants (DDG-51 class). Navy Depot Investment Of the $2.4 billion spent by the four shipyards on depot investment between fiscal year 2012 and 2017, $841 million—about 35%— was spent on Puget Sound Naval Shipyard.\nPuget Sound Naval Shipyard Facilities Restoration and Modernization Backlog Puget Sound Naval Shipyard has identified about $1.49 billion in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts that have been identified but not yet executed.\nMission FRC East specializes in helicopters (AH-1, CH-53E, MH-53E, UH-1Y), airplanes (AV-8B and EA-6B), fighter aircraft (F/A-18 A, C, and D variants), the MV-22 Osprey, and various engines and components.\nOf the $526 million spent by the three FRCs on depot investment between fiscal year 2013 and fiscal year 2017, $199 million, about 38%, was spent on projects that benefited FRC East.\nFRC East Facilities Restoration and Modernization Backlog FRC East identified about $198 million in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts which have been identified but not yet executed.\nMission FRC Southeast specializes in helicopters (MH-60R and S) Aircraft (C-2A and E-2 C and D, EA-6B, P-3), fighter aircraft (F-35, F/A-18 A-F variants), trainers (T-6, T-34, T-44), and various components.\nOf the $526 million spent by the three FRCs on depot investment between fiscal year 2013 and fiscal year 2017, $197 million, about 37%, was spent on projects that benefited FRC Southeast.\nFRC Southeast Facilities Restoration and Modernization Backlog FRC Southeast identified about $124 million in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts which have been identified but not yet executed.\nMission FRC Southwest specializes in helicopters (AH-1, CH-53E, HH- 60, MH-60, and UH-1Y), airplanes (C-2A, E-2C, E-2D, and EA-18G), fighter aircraft (F/A-18 A-F variants), the MV-22 Osprey, and various engines and components.\nOf the $526 million spent by the three FRCs on depot investment between fiscal year 2013 and fiscal year 2017, $131 million, about 25%, was spent on projects that benefited FRC Southwest.\nFRC Southwest Facilities Restoration and Modernization Backlog FRC Southwest identified about $53 million in backlogged restoration and modernization (R&M) projects in fiscal year 2017. The Navy defines backlog as R&M efforts which have been identified but not yet executed.\nMission Ogden specializes in depot level maintenance for fighter aircraft (F- 35, F-22, F-16, A-10), cargo aircraft (C-130), testers (T-38), other weapons systems (Minuteman III ICBM), and software.\nOf the $2.1 billion spent by the Air Force on depot investment between fiscal year 2012 and fiscal year 2017, $717.1 million, or 34%, went to the Ogden ALC.\nOgden ALC Facilities Restoration and Modernization Backlog As of fiscal year 2017, Ogden ALC has identified about $259 million in backlogged restoration and modernization projects. Backlog is calculated as the difference between programmed requirements and funded requirements in the Complex’s annual budgets.\nMission Oklahoma City specializes in depot level repair of bombers (B-1B, B- 52), tankers (KC-135), E-3 Sentry, multiple engine systems, and software.\nOf the $2.1 billion spent by the Air Force on depot investment between fiscal year 2012 and fiscal year 2017, $1.0 billion – nearly half – went to the Oklahoma City ALC.\nOklahoma City ALC Facilities Restoration and Modernization Backlog As of fiscal year 2017, Oklahoma City ALC has identified about $104 million in backlogged restoration and modernization projects. The backlog is calculated as the difference between total programmed requirements and funded requirements in the Complex’s annual budgets.\nMission Warner Robins specializes in maintenance of cargo aircraft (C- 130, C-5, C-17), fighter aircraft (F- 15), aviation electronics, and software systems.\nOf the $2.1 billion spent by the Air Force on depot investment between fiscal year 2012 and fiscal year 2017, $358 million – 17% – went to the Warner Robins ALC.\nWarner Robins ALC Facilities Restoration and Modernization Backlog As of fiscal year 2017, Warner Robins has identified about $190 million in backlogged restoration and modernization projects. The backlog is calculated as the difference between total programmed requirements and funded requirements in the Complex’s annual budgets.\nMission Albany specializes in Amphibious Assault Vehicles (AAV), Light Armored Vehicles (LAV), High Mobility Multipurpose Wheeled Vehicles (HMMWV), Mine Resistant Ambush Protected (MRAP) vehicles, Medium Tactical Vehicle Replacements, communications/electronics equipment, and small arms. Marine Corps Depot Investment Of the approximately $111 million spent by the Marine Corps on depot investment between fiscal year 2012 and fiscal year 2017, $66 million, about 59%, was spent on projects that benefited Albany Production Plant.\nAlbany Facilities Restoration and Modernization Backlog As of fiscal year 2017, Albany Production Plant has identified about $12 million in backlogged restoration and modernization projects.\nMission Barstow specializes in Amphibious Assault Vehicles (AAV), Light Armored Vehicles (LAV), High Mobility Multipurpose Wheeled Vehicles, Mine Resistant Ambush Protected (MRAP) vehicles, Medium Tactical Vehicle Replacements (MTVR), howitzers, and communications/electronics equipment. Marine Corps Depot Investment Of the approximately $111 million spent by the Marine Corps on depot investment between fiscal year 2012 and fiscal year 2017, $45 million, about 41%, was spent on projects that benefited Barstow Production Plant.\nBarstow Facilities Restoration and Modernization Backlog As of fiscal year 2017, Barstow Production Plant has identified about $2 million in backlogged restoration and modernization projects.\nFor each of these locations, we collected and analyzed data such as facility condition rating, facility age, number of facility repairs, equipment age, number of equipment repairs, restoration and modernization backlog, work stoppages due to facility and equipment conditions, depot investment projects, and depot performance metrics including on-time delivery and delayed maintenance days. Whenever possible, we collected data from fiscal year 2007 – the year in which the 6 percent rule was first enacted – to fiscal year 2017, the latest for which most data were available. the General Fund Enterprise Business System for data on facility and equipment repairs and investment projects from fiscal year 2007 through fiscal year 2017; the Defense Industrial Financial Management System for data on Air Force age of equipment for fiscal year 2017; the Logistics Modernization Program for data on Army depot performance from fiscal years 2014 to 2017, investment projects, and equipment repairs from fiscal year 2007 through fiscal year 2017; the Navy Modernization Process for data on Navy shipyard performance from fiscal years 2007 to 2017;\nProduction Status Reporting for data on Navy aviation depot performance from fiscal years 2007 to 2017; the Aircraft/Missile Maintenance Production/Compression Report for data on Air Force depot performance from fiscal years 2007 to 2017; and the Master Scheduling Support Tool for data on Marine Corps depot performance from fiscal years 2007 to 2017.\nWe found the data that we used from these systems to be sufficiently reliable for the purposes of summarizing trends in the selected facility and equipment metrics reported.\nTo determine the extent to which the services track data on maintenance delays caused by facilities and equipment conditions, we requested data on work stoppages related to facilities and equipment conditions at the depots. We also spoke with service officials about delays and work stoppages and the ability of the services to collect this data, and the extent to which they used delay and work stoppage data to target their investments. We did not assess the reliability of any work stoppage data, as we are not reporting this data.\nMarine Corps Logistics Base Albany\nHeadquarters, Department of the Air Force\nAir Force Material Command\nAir Force Sustainment Center To determine the extent to which DOD and the services have developed an approach for guiding depot investments to address key challenges, we discussed with service depot and materiel command officials the depot investment process, the existence of investment plans at the DOD, service, or depot levels, and any challenges in meeting service operational needs resulting from inadequate investment. We also reviewed service documentation on current and future investment plans and analyzed the depots’ processes guiding investment decisions to determine whether these included any elements of a results-oriented management approach. Our previous work has highlighted the importance of a results-oriented management approach to effective operations and investment at various organizations, including defense logistics. the last year for which projects were available. We compared those lists with the services’ actual reported 6 percent spending in their respective budget justification books (specifically, the Fund-6 Report), and reconciled any differences.\nWe then identified facility projects that cost $250,000 and above with the potential for sustainment activities. First, an analyst recorded his assessment of whether a project might include sustainment activity. A second analyst independently reviewed the same information and recorded her assessment. The two analysts created a final assessment that reconciled their two independent assessments and reflects their consensus. This sample is not generalizable to all service projects, but was chosen to identify the projects most likely to affect compliance with the 6 percent rule.\nWe then requested and collected additional project documentation, such as project proposals, for those projects that both analysts agreed had the potential to include sustainment activities. Using this more detailed project documentation, an analyst recorded his assessment of whether a project included sustainment activity. A second analyst independently reviewed the same information and recorded her assessment of whether the project included sustainment activity. The two analysts created a final assessment that reconciled their two independent assessments and reflects their consensus.\nWe then shared the results of our review to obtain the services’ perspectives. In some cases, the services provided additional information about a project that led us to revise our initial determination, such as noting that a particular project was conducted as a result of severe weather damage (which is considered restoration, even if the activity would otherwise be considered sustainment). For the Air Force and Navy shipyards, our final determination of sustainment projects – as presented in summary in appendix I – was consistent with the services’ respective determinations of which projects included sustainment activity. We presented these amounts using nominal, non-inflation adjusted dollars, in order that the comparison with that year’s 6 percent minimum reporting would be comparable. Officials from the Marine Corps and Navy aviation command did not agree with our determination that one and three of the reviewed projects, respectively, included sustainment activity. The Army did not provide a response to most of our sustainment determinations.\nWe conducted this performance audit from August 2017 to April 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the individual named above, key contributors to this report are Suzanne Wren, (Assistant Director), James Lackey (Analyst in Charge), Andrew Duggan, Amie Lesser, Felicia Lopez, Michael Perkins, Carol Petersen, Michael Silver, John E. “Jet” Trubey, Britney Tsao, and Lillian Yob.", "DOD Depot Workforce: Services Need to Assess the Effectiveness of Their Initiatives to Maintain Critical Skills. GAO-19-51. Washington, D.C.: December 14, 2018.\nNavy Readiness: Actions Needed to Address Costly Maintenance Delays Facing the Attack Submarine Fleet. GAO-19-229. Washington, D.C.: November 19, 2018.\nAir Force Readiness: Actions Needed to Rebuild Readiness and Prepare for the Future. GAO-19-120T. Washington, D.C.: October 10, 2018.\nWeapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need to Be Clarified. GAO-18-678. Washington, D.C.: September 10, 2018.\nMilitary Readiness: Analysis of Maintenance Delays Needed to Improve Availability of Patriot Equipment for Training. GAO-18-447. Washington, D.C.: June 20, 2018.\nNavy Shipbuilding: Past Performance Provides Valuable Lessons for Future Investments. GAO-18-238SP. Washington, D.C.: June 6, 2018.\nNavy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Affecting the Fleet. GAO-17-809T. Washington, D.C.: September. 19, 2017.\nNaval Shipyards: Actions Needed to Improve Poor Conditions that Affect Operations. GAO-17-548. Washington, D.C.: September 12, 2017.\nNavy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery Process and Ship Quality. GAO-17-418. Washington, D.C.: July 13, 2017.\nDepartment of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.\nMilitary Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: September 7, 2016.\nDefense Inventory: Further Analysis and Enhanced Metrics Could Improve Service Supply and Depot Operations. GAO-16-450. Washington, D.C.: June 9, 2016.\nMilitary Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May 2, 2016.\nDefense Inventory: Actions Needed to Improve the Defense Logistics Agency’s Inventory Management. GAO-14-495. Washington, D.C.: June 19, 2014.\nDOD’s 2010 Comprehensive Inventory Management Improvement Plan Addressed Statutory Requirements, But Faces Implementation Challenges. GAO-11-240R. Washington, D.C.: January 7, 2011." ], "depth": [ 1, 2, 2, 2, 1, 2, 3, 2, 2, 1, 2, 2, 1, 1, 1, 1, 2, 2, 3, 3, 3, 3, 4, 1, 1, 2, 2, 1 ], "alignment": [ "h0_title", "h0_full", "", "", "h0_full", "h0_title", "h0_full", "h0_full", "", "h1_full", "h1_full", "h1_full", "h0_full h1_full", "", "h2_full h1_full", "h2_title", "", "h2_title", "", "", "", "h2_title", "h2_full", "", "", "", "", "h2_full" ] }

{ "question": [ "What are the conditions of facilities at DOD depots?", "What factors have contributed to a decline in performance at these depots?", "What effects have resulted from the decline in performance of these depots?", "How can optimizing facilities and equipment improve maintenance efficiency?", "Why is DOD and the services' approach to managing investments flawed?", "How could DOD address the poor conditions at its depots?", "What will happen while DOD neglects the poor conditions at its depots?", "What provision did Senate Report 115-125 include?", "What aspects of depot performance did GAO evaluate?", "How did GAO go about evaluating depot performance?" ], "summary": [ "The condition of facilities at a majority of the Department of Defense's (DOD) depots is poor and the age of equipment is generally past its useful life, but the services do not consistently track the effect that these conditions have on depot performance.", "Twelve of the 21 depots GAO reviewed––more than half––had “poor” average facility condition ratings (see figure). Some facilities also serve functions for which they were not designed, reducing their efficiency. In addition, the average age of depot equipment exceeded its expected useful life at 15 of the 21 depots. These factors contributed, in part, to a decline in performance over the same period.", "From 2007 to 2017, performance at the depots generally declined, reducing the availability of the weapon systems repaired for training and operations.", "Optimizing facilities and equipment at the depots can improve their maintenance efficiency. For example, the Navy estimates that its shipyard optimization effort will save over 325,000 labor days per year, which would allow an additional submarine overhaul annually. However, the services lack data on the effect that facilities and equipment conditions have on maintenance delays, hindering DOD's ability to effectively target investments to the highest priorities.", "DOD and the services' approach for managing investments to improve the efficiency and effectiveness of its depots lacks elements important to addressing key challenges. The services have efforts underway to complete their plans by February 2019 to address their depots' facility and equipment needs. However, GAO found that these plans are preliminary and will not include key elements, such as analytically-based goals; results-oriented metrics; a full accounting of the resources, risks, and stakeholders; and a process for reporting on progress.", "Addressing the poor conditions at DOD's 21 depots will cost billions and require sustained management attention over many years. However, the DOD office responsible for depot policy does not monitor or regularly report on depot improvement efforts to DOD decision makers and Congress.", "Until DOD and the services incorporate these key elements into the management approach for their depot investments, they risk continued deterioration of the depots, hindering their ability to meet the Secretary of Defense's goals for improving readiness and reducing operating and support costs.", "Senate Report 115-125 included a provision for GAO to examine the services' investment in and performance of their depots.", "GAO evaluated (1) the condition of depot facilities and equipment, their relationship to depot performance, and the services' tracking of the relationship to depot performance and (2) the extent to which DOD and the services have developed an approach for guiding depot investments to address key challenges. GAO also provides an overview summary for each depot.", "GAO reviewed data from fiscal years 2007 through 2017 on depot investment, performance, and the age and condition of facilities and equipment; reviewed agency guidance; and interviewed DOD, service, and depot officials." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 1, 1, 1 ] }

{ "title": [ "", "Background", "Legislative History", "Pharmacy Compounding", "FFDCA Section 503A", "Outsourcing Facility Compounding", "FFDCA Section 503B", "CQA Implementation and Possible Issues for Congress", "The Prescription Requirement and Compounding for Office-Use", "Interstate Distribution of Compounded Drugs", "Pharmacy Inspections Under CGMP Requirements", "Policy Considerations", "Appendix. Comparison of 503A Compounding Pharmacies and 503B Outsourcing Facilities" ], "paragraphs": [ "", "Drug compounding is a process by which a pharmacist or physician combines, mixes, or alters various drug ingredients to create a drug to meet the unique needs of an individual patient. Compounded drugs include both nonsterile products (e.g., capsules and ointments) and sterile products (e.g., injectable and ophthalmic products). In situations where a product approved by the Food and Drug Administration (FDA) would not be medically appropriate to treat a patient, a pharmacist or physician may formulate and dispense or administer a compounded drug product. For example, a patient with an allergy may need a medication without a certain dye, or an elderly person with a limited ability to swallow may need a medication in liquid form that is not commercially available.\nThe Federal Food, Drug, and Cosmetic Act (FFDCA) authorizes FDA to regulate the manufacturing and sale of drugs in the United States, including compounded drugs. Generally, a new drug may not be sold unless the FDA, through its drug approval process, has determined that the drug is safe and effective for its intended use. The FFDCA defines a new drug to be a drug \"the composition of which is such that such drug is not generally recognized ... as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof.\" Although compounded drugs are considered new drugs, it would not be practicable for pharmacies to obtain approval for each drug compounded for an individual patient. Thus, compounded drugs are not evaluated by FDA prior to marketing for safety or effectiveness and until the 1990s, responsibility for overseeing and regulating drug compounding has generally been left to the states.", "Historically, drug compounding has been overseen at the state level by state regulatory bodies such as boards of pharmacy or medicine. During the 1990s, the number of entities engaging in drug compounding increased, as did concern that compounding pharmacies were functioning like drug manufacturers, producing large quantities of compounded drugs not captured by the FDA drug approval process. To address the growing number of compounding entities, in 1992, the FDA issued a Compliance Policy Guide (CPG) for compounding to \"delineate FDA's enforcement policy on pharmacy compounding.\" The CPG remained in effect until 1997 when Congress provided statutory authority for portions of it through the FDA Modernization Act (FDAMA, P.L. 105-115 ). Among other things, FDAMA added new FFDCA Section 503A, \"Pharmacy Compounding,\" designed to clarify FDA's authority to regulate compounded drugs.\nFFDCA Section 503A, as created in 1997, set forth the conditions that must be met for a compounded drug to be exempt from three statutory requirements: (1) the new drug approval process, (2) labeling with adequate directions for use, and (3) current good manufacturing practice (CGMP) requirements. Among these conditions is that the drug must be compounded by a licensed pharmacist in a state-licensed pharmacy or federal facility, or by a licensed physician, based on the receipt of a valid prescription for an identified patient. In addition, drug compounding may be performed in limited quantities before the receipt of a valid prescription order if there is a history of receiving orders solely within an established relationship between the pharmacist or physician and the patient or other licensed prescriber.\nMoreover, S ection 503A included a provision that a drug could be compounded only if a physician or pharmacist d id not advertise or promote the compounding of any particular drug, class, or type of drug . The advertising provisions were challenged by several compounding pharmacies, and, in 2002, the provisions were found by the Supreme Court to be unconstitutional. However, the Supreme Court did not address a lower court's conclusion that the advertising prohibition was not severable from the rest of Section 503A and that the entire section was, therefore, invalid. FDA interpreted the Supreme Court's 2002 ruling as invalidating Section 503A in its entirety and issued guidance that it would exercise its enforcement discretion to exempt small pharmacies that only manufactured drugs for individual patients. However, in 2008 another federal appellate court disagreed with FDA's interpretation of the legal effect of the 2002 ruling, holding that Section 503A was severable from the rest of the section and leaving much of it in force. As a result, FDA considered the remaining provisions of Section 503A effective, but only in the states where the 2008 ruling had effect, resulting in a fractured and confusing legal landscape for pharmacy compounding.\nIn 2012, the interstate distribution of contaminated compounded drug products led to an outbreak of fungal meningitis, resulting in more than 60 deaths and 750 cases of infection. The entity responsible for compounding and shipping the contaminated drugs, the New England Compounding Center (NECC), had been the subject of prior complaints and had been investigated by both FDA and the Massachusetts state board of pharmacy. However, because, in part, of the uncertainty over the validity of Section 503A, it was not clear who had authority over compounding pharmacies (the state or FDA), and the NECC continued to operate. The NECC outbreak was not an isolated incident, and FDA studies had found quality problems with drugs compounded by other pharmacies, including sub- and super-potent drugs and contamination. According to one report, from 1990 to 2005, FDA became aware of almost 240 serious illnesses and deaths associated with improperly compounded products, with the actual number likely being greater since pharmacies are not required to report adverse events to FDA. A 2014 report published by the Pew Charitable Trusts identified more than 25 reported compounding errors or potential errors linked to 1,049 adverse events between 2001 and 2013.\nFollowing the NECC event and numerous other reports of problems resulting from compounded drugs, Congress passed the Compounding Quality Act (CQA) as Title I of the Drug Quality and Security Act (DQSA; P.L. 113-54 ). The CQA removed the advertising provisions that the Courts had determined were unconstitutional, clarifying FDA's authority to regulate pharmacy compounding practice under FFDCA Section 503A. The CQA also added a new FFDCA Section 503B and created a new category of drug compounders called outsourcing facilities , a term that describes entities that compound sterile drugs in circumstances that go beyond what 503A compounding pharmacies are allowed to do (e.g., compounding drugs in large volumes without obtaining patient-specific prescriptions). Unlike 503A compounding pharmacies, registered outsourcing facilities must comply with CGMPs and are subject to certain registration, reporting, and inspection requirements. The differences between these two types of compounding entities are discussed in more detail below and are summarized in Table A-1 .\nSince the enactment of the CQA, FDA has issued numerous draft and final guidance documents, proposed and final rules, and a draft memorandum of understanding (MOU) to implement the compounding provisions. The agency has communicated with stakeholders and state regulators via annual listening sessions, notice-and-comment guidance development, intergovernmental meetings, and information posted to FDA's website, among other things. Some states have found FDA communication to be helpful, while others have reported several communication challenges. In addition to the issues raised by some states, other stakeholders (e.g., pharmacist and physician groups) have expressed concern with FDA guidance and interpretation of certain compounding-related statutory provisions. In response to these concerns, some Members of Congress have sent letters to FDA, and appropriators have included directives to the agency in report language. In addition, legislation has been introduced that would amend certain compounding provisions in the FFDCA.\nThis report provides an overview of the requirements for compounding pharmacies under FFDCA Section 503A and the requirements for outsourcing facilities under Section 503B. It also discusses FDA activities related to implementation of the compounding provisions, the issues that have been raised by stakeholders, and considerations for policymakers.", "Historically, pharmacy compounding has been regulated by state entities (e.g., state boards of pharmacy), and the frequency of inspections and level of oversight by state regulators has varied. In response to concerns surrounding the practice of large-scale compounding that resembled drug manufacturing, in 1992, FDA issued guidance explaining the types of compounding that may be subject to enforcement action by the agency. Congress provided statutory authority for portions of the guidance in FFDCA Section 503A.", "FFDCA Section 503A describes the conditions that must be satisfied for a compounded drug to be exempt from three sections of the FFDCA:\nSection 501(a)(2)(B) concerning compliance with CGMP requirements, Section 502(f)(1) concerning the labeling of drugs with adequate directions for use, and Section 505 concerning drug approval under a new drug application (NDA) or abbreviated new drug application (ANDA).\nIf a drug is not compounded in accordance with the conditions set forth in Section 503A, it does not qualify for these exemptions and is subject to the same requirements as conventional manufacturers, including CGMP, labeling with adequate directions for use, and new drug approval requirements.\nPursuant to Section 503A, a drug product is exempt from the above requirements if it is compounded by a licensed pharmacist in a state-licensed pharmacy or federal facility, or by a licensed physician, for an identified patient based on the receipt of a valid prescription, or in limited quantities before the receipt of a prescription for an identified patient. In these cases, the compounding must be based on a history of the licensed pharmacist or physician receiving prescription orders for the compounding of the product, and the orders must have been \"generated solely within an established relationship\" between the licensed pharmacist or physician and either such patient for whom the prescription will be provided or the practitioner who will write the prescription.\nA drug product may be compounded if the licensed pharmacist or licensed physician\ncompounds using bulk drug substances that comply with specified requirements; compounds using ingredients (other than bulk drug substances) that comply with the standards of an applicable United States Pharmacopoeia (USP) or National Formulary (NF) monograph, if a monograph exists, as well as the USP chapter on pharmacy compounding; does not compound a product that appears on the Health and Human Services Secretary's list of drugs that have been withdrawn or removed from the market because they were found to be unsafe or not effective; and does not compound regularly or in inordinate amounts (as defined by the Secretary) any drug products that are essentially copies of a commercially available drug product.\nA drug product may be compounded if it\nhas not been identified by the Secretary, by regulation, as presenting \" demonstrable difficulties for compounding that reasonably demonstrate an adverse effect on the safety or ef fectiveness of the drug product , \" andis compounded in a state that has entered into an MOU with the Secretary addressing \" the interstate distribution of inordinate amounts of compounded drug products interstate\" and provides for appropriate state investigations of complaints about distribution outside the state. If a drug product is compounded in a state that has not entered into an MOU with the Secretary, the pharmacist, pharmacy, or licensed physician may not distribute or cause to be distributed compounded drugs outside that state in quantities that exceed 5% of the total prescriptions dispensed or distributed by that pharmacy or physician.\nCompounding pharmacies are not required to report to FDA adverse events or the type of drugs being compounded. Compounding pharmacies are not required to register with FDA, and the agency generally does not inspect them unless it is for cause (e.g., in response to adverse event reports or if there is visible contamination). FDA has the authority to inspect, \"at reasonable times and within reasonable limits and in a reasonable manner,\" pharmacies and \"all pertinent equipment, finished and unfinished materials, containers, and labeling therein,\" with some limitations. Although compounded drugs subject to Section 503A are exempt from CGMP requirements, other FFDCA requirements apply, such as the prohibition against adulteration and misbranding.", "In response to the 2012 fungal meningitis outbreak and a series of adverse event reports and quality problems linked to compounding facilities, Congress held a series of hearings, which led to the enactment of the CQA in November 2013. The law established FFDCA Section 503B and created a new category of drug compounders called outsourcing facilities . Entities that compound drugs in ways that exceed the circumstances described in Section 503A (i.e., facilities that compound drugs in bulk for use in hospitals or other facilities) may register with FDA as such. An outsourcing facility is defined as a facility at one geographic location or address that is engaged in the compounding of sterile drugs, has elected to register as an outsourcing facility, and complies with all the requirements of Section 503B.", "A registered outsourcing facility that complies with the requirements described in Section 503B is exempt from three sections of the FFDCA:\nSection 502(f)(1) concerning labeling of drugs with adequate directions for use, Section 505 concerning drug approval under an NDA or ANDA, and Section 582 concerning track and trace requirements.\nUnlike 503A compounding pharmacies, outsourcing facilities are not exempt from CGMP requirements. If a drug is not compounded in accordance with the conditions of Section 503B, it does not qualify for these exemptions and would be subject to the same requirements as conventional drug manufacturers, including the requirements for labeling, new drug approval and supply chain management. Section 503B includes requirements that focus on the drug and the outsourcing facility.\nA drug may be compounded by or under the direct supervision of a licensed pharmacist in a registered outsourcing facility if\nit is not compounded using bulk drug substances unless they comply with specified limitations; it is compounded using ingredients (other than bulk drug substances) that comply with the applicable USP or NF monograph, or any other compendium or pharmacopeia recognized by the Secretary; it does not appear on the Secretary's list, established by regulation, of drugs that have been withdrawn or removed from the market because they have been found to be unsafe or not effective; it is not \"essentially a copy of one or more approved drugs\"; it does not appear on the Secretary's list, established by regulation, of \"drugs or categories of drugs that present demonstrable difficulties for compounding that are reasonably likely to lead to an adverse effect on the safety or effectiveness of the drug or category of drugs, taking into account the risks and benefits to patients\" unless compounding is done \"in accordance with all applicable conditions identified on the list ... as conditions that are necessary to prevent\" such difficulties; the drug is subject to a Risk Evaluation and Mitigation Strategy (REMS), the outsourcing facility must demonstrate a plan to use \"controls comparable to the controls applicable\" under the REMS; it will not be sold or transferred by any entity other than the outsourcing facility that compounded it; it is compounded in an outsourcing facility that had paid fees pursuant to FFDCA Section 744K; the drug label bears the statement \"this is a compounded drug\" or a comparable statement; the name, address, and phone number of the outsourcing facility; and the following specified information with respect to the drug: the lot or batch number; the established name of the drug; dosage form and strength; statement of quantity or volume; date that the drug was compounded; expiration date; storage and handling instructions; National Drug Code (NDC) number, if available; the statement \"not for resale,\" and if the drug is dispensed or distributed other than pursuant to a prescription for an individual identified patient, the statement \"Office-use Only,\" as well as a list of active and inactive ingredients by established name and quantity or proportion of each ingredient; and the container \"from which individual units of the drug are removed for dispensing or administration\" includes a list of active and inactive ingredients (if there is not space on the label), adverse event reporting information, and directions for use (e.g., dosage and administration).\nTo qualify for the exemptions under Section 503B, an entity that elects to register as an outsourcing facility must\nregister with the Secretary annually (electronically, unless waived) and indicate whether it intends to compound a drug that appears on FDA's drug shortage list; submit a report to the Secretary twice a year identifying the drugs compounded, including the active ingredient and its source, National Drug Code numbers, and other specified information; be subject to inspection (pursuant to FFDCA Section 704, which applies to manufacturing facilities) according to a risk-based schedule based on factors such as the compliance history of the outsourcing facility, inherent risk of the drugs being compounded, and other specified factors; and submit adverse event reports to FDA.\nOutsourcing facilities may compound drugs with or without a patient-specific prescription. To meet the definition of an outsourcing facility, an entity must compound sterile drugs and may compound nonsterile drugs as well.", "Since the enactment of the CQA, FDA has issued numerous draft and final guidance documents to explain its policy on certain requirements and facilitate implementation of the compounding provisions under FFDCA Sections 503A and 503B. The agency also has issued a draft MOU addressing the interstate distribution of certain compounded drug products. Additionally, since enactment of the CQA, FDA has conducted over 400 inspections of drug compounders, issued more than 150 warning letters advising compounders of violations of federal law, and overseen more than 125 recall events. FDA also has communicated with stakeholders and state regulators via annual listening sessions, a notice-and-comment guidance development process, intergovernmental meetings, and information posted to the FDA website, among other things. As of December 2017, FDA's website lists 73 entities that have registered as outsourcing facilities. Because 503A compounding pharmacies are not required to register with FDA and are generally overseen by state regulatory bodies, it is difficult to quantify the total number of these entities.\nIn November 2016, the Government Accountability Office (GAO) published a report on drug compounding that included results from a survey of state pharmacy regulatory bodies. According to the report, most states that participated in the intergovernmental meetings found them to be helpful. Of the 40 states that reported having had compounding-related communication with FDA, 60% (24 states) reported being very or somewhat satisfied with the communication, whereas 23% (9 states) reported being very or somewhat dissatisfied. Respondents in 15 states reported experiencing one or more communication challenges with FDA, citing issues such as timeliness and difficulties getting the agency to respond to requests for information. Other stakeholders, including certain compounding pharmacist and physician groups, have voiced concern regarding FDA's interpretation and implementation of certain statutory provisions (e.g., the prescription requirement and draft MOU). Stakeholders in this space include state regulators, pharmacists and physicians who compound drugs, outsourcing facilities, and the groups that represent these entities. In response to the issues flagged by stakeholders, Congress has responded by sending letters to FDA, issuing directives in report language, and introducing legislation to amend the statutory provisions concerning compounding.\nThe following sections discuss some of the issues that have been raised in response to FDA's implementation of the compounding provisions, as well as the actions taken by Congress. This is not a comprehensive list of all of the issues flagged by interested parties, but rather a summary of selected issues that have been the subject of congressional letters to the agency, report directives, and legislation. The three issues discussed are: (1) the prescription requirement and compounding for office-use, (2) the draft MOU addressing interstate distribution of compounded drugs, and (3) inspections under CGMP requirements.", "As previously discussed, to qualify for the exemptions under FFDCA Section 503A, a drug product must satisfy certain statutory conditions. Generally, under Section 503A, a drug product may be compounded upon the receipt of a valid prescription for an identified patient, or in limited quantities before the receipt of a prescription for an identified patient, based on a history of prescription orders for that drug product within an established relationship between the pharmacist, patient, and the prescriber (see \" FFDCA Section 503A \"). This second circumstance is sometimes referred to as anticipatory compounding .\nWith respect to the provision for anticipatory compounding, there has been some disagreement as to whether it authorizes compounding for office-use. While anticipatory compounding refers to compounding done in limited quantities before the receipt of a patient-specific prescription, office-use refers to compounding that is not for an identified, individual patient pursuant to a prescription, but rather for the purpose of keeping compounded drugs in stock for use by hospitals, clinics, or health care practitioners. In some cases, for example, a provider may need to administer a compounded drug to a patient immediately rather than writing a prescription and waiting for the drug product to be compounded and shipped to the provider. FDA has generally taken the position that 503A pharmacies may not compound for office-use.\nIn FY2016 report language ( H.Rept. 114-205 ), the House Committee on Appropriations directed FDA to \"issue a guidance document on how compounding pharmacists can continue to engage in 'office-use' compounding before the receipt of a patient-specific prescription consistent with the provisions of 503A within 90 days after the enactment of this Act.\" On April 15, 2016, the agency issued draft guidance stating that the law provides for drug compounding in two situations: (1) in response to a patient-specific prescription, or (2) in limited quantities, pursuant to the anticipatory compounding provision under section 503A and in accord with the limitations proposed by FDA in the draft guidance. The draft guidance did not allow for office-use compounding under Section 503A, stating that hospitals, clinics, and health care practitioners can obtain non-patient-specific compounded drugs to keep in stock for office-use from outsourcing facilities registered under Section 503B. The agency further explained that the limitations on anticipatory compounding differentiate traditional compounding by licensed pharmacists or physicians from compounding by registered outsourcing facilities, which are subject to additional FDA requirements, including compliance with CGMPs, registration and reporting, and inspections. These additional requirements reduce the risk of quality problems such as production mistakes or contamination.\nIn FY2017 report language ( H.Rept. 114-531 ), the House Appropriations Committee wrote that compounding for office-use is authorized in the majority of states and was intended to be allowed under the CQA. The committee directed FDA to issue a final guidance that provides for office-use compounding of drugs \"in appropriate circumstances.\"\nIn December 2016, FDA finalized the guidance, maintaining that compounding for office-use is not allowed under Section 503A and that the prescription requirement is necessary to ensuring that compounding is based on individual patient need, and that the requirement helps to distinguish between drug compounding and conventional manufacturing. FDA also responded to the committee's report language, stating that \"the policies set forth in FDA guidance documents implement the statutory provisions that provide for compounding and distribution of drugs for office-use by outsourcing facilities under section 503B ... and anticipatory compounding by compounders under section 503A.\"\nIt remains to be seen how the issue of compounding for office-use will be resolved. Although the FDA has maintained its position that compounding for office-use is not permitted under current law, legislation introduced in Congress would, among other things, allow office-use compounding if permitted by the state in which the compounding is being performed. According to a GAO survey of state pharmacy regulatory bodies, respondents in 27 states reported that compounding for office-use is authorized in their state. Of those, respondents in four states added that only FDA-registered outsourcing facilities may compound for office-use, and a respondent in one state reported that the state was working to prohibit this practice \"to align with federal restrictions on pharmacies under section 503A.\" Some Members of Congress have sent letters to the FDA, stating that Congress did not intend to prohibit office-use compounding.", "Another issue flagged by some stakeholders has been FDA's draft MOU addressing the distribution of inordinate amounts of compounded drug products interstate. Section 503A prohibits a pharmacist, pharmacy, or physician from distributing compounded drug products outside of the state in which they are compounded in quantities that exceed 5% of the total prescription orders dispensed or distributed by that pharmacy or physician, unless the state performing the compounding has entered into an MOU with the Secretary. Pursuant to the statute, the MOU must address the distribution of inordinate amounts of compounded products interstate and provide for appropriate investigation by a state agency of complaints relating to compounded drug products distributed interstate. The law further requires the Secretary, in consultation with the National Association of Boards of Pharmacy (NABP), to develop such an MOU for use by the states.\nIn February 2015, FDA issued a draft MOU, which if finalized, would establish an agreement between FDA and a state regarding the distribution of inordinate amounts of compounded human drug products interstate. The draft MOU defines inordinate amounts and addresses how states would handle complaints about drug products compounded by pharmacies within their borders. While the law created a 5% limit on interstate distribution for 503A pharmacies operating in a state that has not entered into an MOU with FDA, the draft MOU proposes a 30% upper limit for 503A pharmacies operating in a state that enters into the MOU. The MOU and the interstate distribution restrictions do not apply to registered outsourcing facilities under section 503B. As of the date of this report, FDA has not issued a final MOU.\nOne criticism of the draft MOU is the inclusion of the act of dispensing in the definition of distribution . FFDCA Section 503A does not define these two terms; however, in the draft MOU, FDA defines distribution to mean \"that a compounded human drug product has left the facility in which the drug was compounded. Distribution includes delivery or shipment to a physician's office, hospital, or other health care setting for administration and dispensing to an agent of a patient or to a patient for the patient's own use.\"\nAccording to one pharmacy group, by including the word dispensing within the definition of distribution , FDA is attempting to regulate not only interstate distribution of compounded drugs, but also interstate dispensing of compounded drugs, the latter of which has traditionally been overseen by state regulators. The group states that the statute clearly distinguishes between the acts of dispensing and distribution, and authorizes FDA to issue an MOU that addresses only the interstate distribution of inordinate amounts of compounded drugs. As evidence of this distinction, the group also states that in the Controlled Substances Act (CSA) and FDA regulations, the terms dispense and distribute refer to different activities. Conversely, the FDA's position has been that 503A pharmacies, unlike outsourcing facilities, are primarily overseen by the states, are exempt from CGMP requirements, and are not required to register with FDA. If a substantial proportion of drugs compounded by 503A pharmacies are distributed outside of a state's borders, adequate regulation of those drugs can be challenging, and may make it more difficult to investigate and address multistate outbreaks. In 2012, the interstate distribution of contaminated compounded drug products resulted in an outbreak of fungal meningitis, with an estimated 14,000 patients receiving injections from lots of contaminated drug product.\nIn the explanatory statement accompanying the FY2017 omnibus, Congress stated that it \"did not intend to include dispensing of compounded drugs over state lines within the scope of the MOU,\" and allowed FDA to only regulate distribution. Legislation has also been introduced in the 115 th Congress that would exclude from the definition of the terms distribute or distribution the act of dispensing a compounded drug product under Section 503A.\nThe definition of the term distribution is significant because of its relationship to the issue of compounding for office-use. While FDA's view is that the agency's draft MOU does not alter the prescription requirement under 503A, others maintain that it goes against congressional intent. More specifically, some argue that by distinguishing between the two terms, Congress intended to exclude the act of dispensing from the definition of distribution, therefore allowing compounding for office-use.", "The FDA's implementation of CQA has raised another issue: the inspection of compounding entities under CGMPs. Unlike outsourcing facilities, 503A compounding pharmacies are not subject to CGMP requirements, are not required to register with FDA, and are not routinely inspected by the agency. Thus, the majority of compounding facilities in the United States do not register with FDA and, unless they elect to become outsourcing facilities, they are primarily overseen by state regulatory authorities. This means that FDA often is unaware of potential problems with the drug products or facility conditions unless the agency receives a complaint (e.g., a report of a serious adverse event or visible contamination).\nCompounding pharmacies are not exempt from the prohibition on preparing drugs under insanitary conditions, and FDA has the authority to inspect these pharmacies, within certain limitations. As of June 1, 2017, since the enactment of the CQA, the agency had conducted more than 400 inspections of compounding entities, the majority of which were 503A compounding pharmacies. FDA has issued more than 150 warning letters advising compounders of significant violations of federal law and more than 50 letters referring inspection findings to state regulatory agencies. In addition, the FDA has overseen over 125 recalls involving compounded drugs and worked with the Department of Justice on a number of civil and criminal enforcement actions.\nOne issue raised by stakeholders is that FDA has been inspecting 503A compounding pharmacies under CGMP standards, from which they are exempt. Upon conducting an inspection, the agency issues an FDA Form-483 (\"483\"), which lists the observations identified during inspection. Observations may include deficiencies related to the prohibition on insanitary conditions or deviations from drug production practices that could lead to quality problems. A 483 does not represent a final determination by FDA regarding a firm's compliance. Some pharmacy groups have said that FDA has listed deviations from CGMP as observations on the 483, even though 503A pharmacies are not subject to CGMP requirements. In response to concern from stakeholders, House appropriators wrote ( H.Rept. 114-531 ):\nThe Committee reminds the FDA that compounding pharmacies are not drug manufacturers, but rather, are state licensed and regulated health care providers that are inspected by state boards of pharmacy pursuant to state laws and regulations that establish sterility and other standards for the pharmacies operating within their states. Compounding pharmacies are more appropriately inspected using USP standards or other pharmacy inspection standards adopted by state law or regulation in the state in which a pharmacy is licensed.\nFDA has stated that it identifies CGMP deviations on the 483 only when it has evidence to suggest that the compounding pharmacy does not qualify for the exemptions under Section 503A because it does not meet the statutory requirements. For example, if a pharmacy is engaging in compounding without a patient-specific prescription and not within the limitations of anticipatory compounding, it does not satisfy the conditions of Section 503A and therefore does not qualify for the exemptions under that section, including the CGMP exemption. In response to stakeholder input, FDA issued a notice regarding a change in inspection procedures of 503A pharmacies, stating that it will now make a preliminary assessment regarding a facility's compliance with Section 503A before closing the inspection. Per the notice, the 483 will not include observations that represent CGMP deviations unless the investigator determines that the pharmacy does not meet the conditions of Section 503A. After the inspection, FDA is to review the evidence to evaluate whether the facility compounds all of its drugs in accordance with certain conditions of Section 503A and other applicable provisions of federal law, as specified. Despite this notice, at least one pharmacy stakeholder group alleges that FDA has continued to apply 503B outsourcing facility standards during inspection of 503A compounding pharmacies and to cite CGMP noncompliance.", "In working to address the issues raised by stakeholders and maintain public health protections, policymakers may consider issues such as patient access to compounded drugs, drug quality, and necessity of compounding. With respect to patient access, some patients have a legitimate medical need for compounded drugs, whereby an FDA-approved product would not be medically appropriate treatment. For these patients, preserving timely access to compounded medications is important, a concern raised by those who support compounding for office-use.\nDrug quality is also a consideration, particularly in the context of patient safety. Pharmacies that compound pursuant to Section 503A are exempt from CGMP requirements, are not subject to FDA registration, and are generally not inspected by the agency unless it is for cause. Because these pharmacies are not required to register with FDA, the agency is often unaware of potential issues with the compounded products or compounding practices until it receives a complaint or adverse event report, which pharmacies are not required to submit. For these reasons, among others, FDA maintains that compounded drugs pose a higher risk than FDA-approved drugs.\nA related policy consideration is necessity. As discussed, FDA's interpretation of the prescription requirement has been met with some opposition, and certain stakeholders have argued that compounding for office-use by 503A pharmacies should be allowed because health care providers need to keep certain compounded drugs in stock for immediate administration. However, FDA and outsourcing facility groups have generally disagreed that 503A pharmacies need to compound for office-use. Outsourcing facilities created by the CQA are able to produce in bulk while also providing additional patient protections since they are subject to more stringent regulatory requirements; as such, allowing 503A compounding pharmacies to produce for office-use may not be necessary. If a hospital, clinic, or health care practitioner wants to keep compounded drugs in stock for office-use, they can generally obtain non-patient-specific compounded drugs from outsourcing facilities that are registered under Section 503B. FDA also has stated that allowing pharmacies to compound without a patient-specific prescription may provide less incentive for such entities to register as outsourcing facilities. To help health care providers determine which outsourcing facilities compound the drugs they need for purposes of office-use, FDA has issued a list of the drugs that registered outsourcing facilities have produced. Several other stakeholders, including the pharmaceutical industry, have generally supported FDA's prescription requirement guidance.", "" ], "depth": [ 0, 1, 2, 1, 2, 1, 2, 1, 2, 2, 2, 1, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h2_title h1_title", "h2_full h1_full", "", "", "h1_full", "", "h2_full", "", "", "h2_full", "h3_full", "" ] }

{ "question": [ "What is the effect of the Federal Food, Drug, and Cosmetic Act?", "How are drug sales in the US restricted?", "Why are compounded drugs exempt from evaluation by FDA?", "Why did Congress pass the Food and Drug Administration Modernization Act?", "What did the FDAMA do?", "What events led to Congress passing the Drug Quality and Security Act?", "What did Title I of the DQSA do?", "What has the FDA done since the enactment of the CQA?", "How have stakeholders reacted to the actions of the FDA?", "What has Congress done in reaction to challenges brought forth by stakeholders?", "What issues might policymakers consider when working to address issues raised by stakeholders?", "How is necessity an important consideration for policymakers?", "Why does FDA maintain that compounded drugs pose higher risk?" ], "summary": [ "The Federal Food, Drug, and Cosmetic Act (FFDCA) authorizes the Food and Drug Administration (FDA) to regulate the manufacturing and sale of drugs in the United States, including compounded drugs.", "Generally, a drug may not be sold unless the FDA, through its drug approval process, has determined that the drug is safe and effective for its intended use.", "Although compounded drugs are considered new drugs, it would not be practicable for pharmacies to obtain FDA approval for each drug compounded for an individual patient. Thus, compounded drugs are not evaluated by FDA prior to marketing for safety, effectiveness, or quality.", "In 1997, Congress passed the Food and Drug Administration Modernization Act (FDAMA, P.L. 105-115), which attempted to clarify FDA's authority to regulate compounded drugs.", "The act set forth, in a new FFDCA Section 503A, the conditions that must be met for a compounded drug to be exempt from certain statutory requirements related to new drug approval.", "Following the 2012 fungal meningitis outbreak and a series of adverse event reports and quality problems linked to compounding facilities, Congress passed the Drug Quality and Security Act (DQSA, P.L. 113-54).", "Title I of the DQSA, the Compounding Quality Act (CQA), created a new category of drug compounders called outsourcing facilities, a term that describes entities that compound drugs in circumstances that go beyond what 503A compounding pharmacies are allowed to do (i.e., compounding drugs in bulk for use in hospitals and other facilities, referred to as \"office-use\").", "Since the enactment of the CQA, FDA has issued various guidance documents to facilitate implementation of the law and a draft memorandum of understanding (MOU) addressing the interstate distribution of certain compounded drug products. FDA has also increased its enforcement efforts with respect to compounding, conducting over 400 inspections of drug compounders, issuing over 150 warning letters, and overseeing 120 recalls involving compounded drugs. Additionally, FDA has communicated with stakeholders and state regulators via listening sessions, meetings, and information posted on the FDA website.", "Some stakeholders have found FDA guidance and communication to be helpful; others have reported communication challenges and disagreement with the agency's interpretation of the statutory provisions.", "These reported challenges have resulted in certain actions by some in Congress, including letters to FDA, report directives, and the introduction of legislation that would amend certain compounding provisions in the FFDCA.", "In working to address the issues raised by stakeholders and maintain public health protections, policymakers may consider issues such as patient access, drug quality, and the necessity of compounded drugs. For patients with a legitimate medical need, preserving timely access to compounded medications has been identified as a concern by supporters of office-use compounding. However, in the context of patient safety, drug quality is also a consideration.", "A third consideration is necessity, specifically whether pharmacies need to compound for office-use. If a hospital, clinic, or health care practitioner wants to keep compounded drugs in stock for office-use, these entities can generally obtain non-patient-specific compounded products from outsourcing facilities that are registered with FDA and subject to more stringent regulatory requirements.", "Compounded drugs are not evaluated by FDA prior to marketing, and pharmacies that compound pursuant to FFDCA Section 503A are not required to register with FDA or report adverse events to the agency. For these reasons, among others, FDA maintains that compounded drugs pose a higher risk than FDA-approved drugs." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, 2, -1, 0, 1, -1, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4 ] }

{ "title": [ "Background", "Most RAD Conversions Involved Construction and Tax Credits, but HUD’s Leveraging and Construction Metrics Are Limited", "Most RAD Conversions Involved Property Rehabilitation or New Construction, and Financing Often Included Tax Credits", "Most Conversions Involved Construction and Many Used Tax Credits", "Stakeholders Cited Various Factors Influencing Financing for RAD Conversions", "HUD’s Metric for Financial Outcomes—the RAD Leverage Ratio—May Not Be Accurately Calculated, Partly because Final (Postcompletion) Financial Information Is Not Used", "The RAD Leverage Ratio Does Not Reflect the Amount of Private-Sector Leveraging", "Recalculations, Including of Funding Sources, Can Increase Accuracy of the RAD Leverage Ratio", "HUD Implemented Procedures to Verify Completion of Planned Construction Activities and Costs in October 2017, but Does Not Collect Final Comprehensive Financial Data", "HUD Has Not Systematically Analyzed Household- Level Data on Residents in RAD Conversions or Monitored Implementation of Some Resident Safeguards", "HUD Has Not Systematically Analyzed Household-Level Data on the Effects of RAD Conversion on Residents", "HUD Has Been Developing Procedures to Monitor Some RAD Resident Safeguards", "Residents Described Mixed Experiences during the RAD Conversion Process", "PHAs Identified Benefits and Challenges of RAD Participation", "Strength of Protections Intended to Preserve Affordability Is Unknown and HUD Does Not Have Procedures to Address Preservation Risks", "RAD Provisions and Use Agreements Have Not Been Tested", "HUD Does Not Have Procedures in Place to Identify and Respond to Preservation Risks", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: HUD’s Reported Leverage Ratios and Our Recalculation Estimates", "Appendix III: RAD Resident Safeguard and Monitoring Requirements", "Appendix IV: Comments from the Department of Housing and Urban Development", "GAO’s Mission", "Obtaining Copies of GAO Reports and Testimony", "Order by Phone", "Connect with GAO", "To Report Fraud, Waste, and Abuse in Federal Programs", "Congressional Relations", "Public Affairs", "Strategic Planning and External Liaison", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The RAD program was authorized by Congress and signed into law by the President in November 2011 under the Consolidated and Further Continuing Appropriations Act, 2012 with amendments in 2014, 2015, 2016, and 2017. The RAD program consists of two components. The first component of the RAD program—and the focus of our review— provides PHAs the opportunity to convert units subsidized under HUD’s public housing program and owned by the PHAs to properties with long- term (typically, 15–20 years) project-based voucher (PBV) or project- based rental assistance (PBRA) contracts. These are two forms of Section 8 rental assistance that tie the assistance to the unit to provide subsidized housing to low-income residents. In a RAD conversion, PHA- owned public housing properties can be owned by the PHA, transferred to new public or nonprofit owners, or transferred to private, for-profit owners when necessary to access LIHTC financing, if the PHA preserves its interest in the property in a HUD-approved manner. The second component of RAD converts privately owned properties with expiring subsidies under old rental assistance programs to PBV or PBRA in order to preserve affordability and encourage property rehabilitation.\nThe goals of the RAD program include preserving the affordability of federally assisted rental properties and improving their physical and financial condition. Specifically, postconversion owners (PHAs, nonprofits, or for-profit entities) can leverage the subsidy payments under the newly converted contracts to raise capital through private debt and equity investments, or conventional private debt, to make improvements. The RAD program provides added flexibility for PHAs to access private and public funding sources to supplement public housing funding. These financing sources may include debt financing through public or private lenders; mortgage financing insured by FHA; PHA operating reserves; replacement housing factor funds; seller or take-back financing; deferred developer fees; equity investment generated by the availability of 4 percent and 9 percent LIHTC; or other private or philanthropic sources.\nPHAs also may pursue various options for their conversions, which often depend on property needs and available financing, including property rehabilitation or new construction. Additionally, PHAs may undertake conversion involving no property rehabilitation or new construction to meet certain financial goals or for future rehabilitation or new construction, as long as the PHA can demonstrate to HUD that the property does not need immediate rehabilitation and can be physically and financially maintained for the term of the Section 8 Housing Assistance Payment contract (HAP contract).\nThe RAD authorizing legislation and RAD Notice also specify requirements for ownership and control of converted properties. That is, converted properties must have public or nonprofit ownership or control, with limited exceptions. The RAD authorizing legislation, RAD Notice, HAP contracts, and RAD Use Agreement also establish procedures to help ensure that public housing remains a public asset should challenges arise, such as default, bankruptcy, or foreclosure.\nOversight of RAD conversion and properties is primarily divided among three HUD offices. The Office of Recapitalization is responsible for administering the conversion process but generally does not oversee converted properties. Before conversion, the Office of Public and Indian Housing oversees the properties. After conversion, oversight remains with Public and Indian Housing for properties that convert to PBV contracts and transfers to the Office of Multifamily Housing Programs for PBRA.\nThe RAD program has been implemented and expanded in phases. Since its authorization, the RAD unit cap gradually increased from 60,000 units in 2011 to 225,000 units in May 2017. The RAD program is currently fully subscribed with all 225,000 units allocated. As of September 30, 2017, 689 conversions were closed that involved a total of 74,709 units (see fig. 1 for a breakdown by fiscal year). Additionally, 706 conversions involving 79,078 units were in the process of structuring conversion plans. The remaining conversions under the cap were allocated to specific properties and in the process of having commitments issued or reserved under multi-phase or portfolio awards, according to HUD officials.\nRAD conversions begin with the submission of an application by PHAs after which they are notified of selection. The PHA is then required to submit a financing plan within 180 days or a later deadline based on the nature of the financing proposed.\nA RAD conversion is considered closed when the HAP contract is signed and financial documents are executed. The properties are considered converted to Section 8 assisted housing on the effective date of the HAP, which is generally the first day of the following month. Once the RAD conversion is closed, the PHA or ownership entity can move forward with its submitted proposals or RAD-related rehabilitation or new construction and is responsible for complying with RAD requirements and associated contracts. In some cases, rehabilitation can take place in advance of conversion closing if public housing funds are being used.", "", "", "Most RAD conversions involved some type of construction. Our analysis of HUD data showed that as of September 30, 2017\n417 of 689 closed conversions (61 percent) involved planned rehabilitation to the property, 86 (12 percent) new construction, and 186 (27 percent) no construction; and\n361 of 706 active RAD conversions (51 percent) involved planned rehabilitation, 89 (13 percent) new construction, and 256 (36 percent) no construction.\nHUD officials stated that they approve conversions that involve no immediate planned rehabilitation or new construction as long as the property has no immediate needs to be addressed. Such conversions allow PHAs to better position themselves to access additional capital to address future rehabilitation or construction plans.\nOur review of 31 conversion files also showed that the scope of proposed physical changes varied among RAD conversions. For properties that included scope of work narratives, physical changes included renovations to mitigate hazardous materials, aesthetic renovations, code and accessibility compliance, and construction of new buildings, among other changes.\nFinancing for RAD conversions involved multiple public and private sources, but many conversions used LIHTC. Our analysis of HUD data showed that as of September 30, 2017, 173 of 689 closed RAD conversions (25 percent) utilized 4 percent LIHTC, 99 (14 percent) utilized 9-percent LIHTC, and 416 (60 percent) did not use LIHTC. By dollar amount, major financing sources were 4 percent LIHTC at $2.4 billion; new first mortgages at $1.8 billion; and 9 percent LIHTC at $1.1 billion.\nConstruction costs constituted the highest-dollar use of financing for RAD conversions, but not all conversions incurred construction costs, as discussed earlier. On average, construction costs per closed conversion were $6.4 million (ranging from no construction costs to $236 million) and nearly $60,000 per-unit converted to RAD. Construction costs represented the highest-dollar use of financing for closed RAD conversions at $4.4 billion followed by building and land acquisition costs, and developer fees. For more information on financing sources and uses, see appendix II.", "PHA officials and developers we interviewed cited various factors that influence financing sources needed for RAD conversions. For example, property needs assessments help establish the level of rehabilitation or new construction that would address the capital needs of the property. In turn, needs assessments can derive from physical assessment results and incorporate federal, state, or local compliance requirements. For instance, rehabilitation or construction would need to address the accessibility requirements of the Americans with Disabilities Act and local building codes, among other requirements.\nPHA officials and developers we interviewed also said they had to consider competition or access to financing for RAD conversions. For example, PHAs noted that tax credit applications and other financing had to be competitive. Some PHAs we interviewed also noted that while the 9 percent LIHTC provides more equity to finance low-income units (finances 70 percent of the costs of the units), there is more competition for the 9 percent LIHTC, while the 4 percent LIHTC can be automatically awarded for certain deals involving tax exempt bonds and federally subsidized projects. Thus, while some PHAs and developers might prefer to obtain 9 percent LIHTC, they often apply for 4 percent LIHTC to increase the chances of obtaining some tax credit equity. For example, one particular PHA that had used both 4 percent and 9 percent LIHTCs noted that in one transaction it had to compete against 74 applicants for 25 available awards of 9 percent credits.", "", "The RAD authorizing statute requires HUD to assess and publish findings regarding the amount of private capital leveraged as a result RAD conversions. A leverage ratio relates the dollars other sources provide to the dollars a program provides to an institution or a project. HUD uses various quantitative, qualitative, and processing and efficiency metrics to measure conversion outcomes. To meet the RAD statutory requirement, HUD published an overall RAD leverage ratio that has fluctuated between 19:1 and 9:1 since 2014. HUD’s most recent leverage ratio in fiscal year 2017 was 19:1, nearly double what the agency reported the prior year. We asked HUD officials why the leverage ratio nearly doubled between 2016 and 2017 and received conflicting information during the course of our audit.\nInitially, officials noted that the ratio was intended to replicate the methodology used by PD&R in its September 2016 report.\nSubsequently, the officials clarified that they did not follow PD&R’s methodology for categorizing financial source data. Specifically, officials did not review or make manual adjustments to the financial data PHAs entered in open source fields to ensure sources actually represented public, private, or other funding categories when calculating the leverage ratio.\nFinally, they noted that they disagreed with the methodology used in the PD&R September 2016 report and stated that there are various ways to calculate leverage. For the purposes of announcing the most recent leverage ratio in 2017, HUD officials decided that a leverage ratio comparing federally appropriated public housing resources would reflect the amount of financing leveraged had RAD not existed.\nWe found, and officials from HUD acknowledged, three limitations to the RAD leverage calculation. First, HUD generally had data on funding sources and amounts a RAD conversion proposed to use (at the time of its application to HUD and at the time of closing of construction financing) rather than data after construction is completed on funding sources and amounts. HUD officials stated that they were reviewing final closing packages to confirm that the data reflect the latest reported information on sources and uses of funds for each conversion at closing. However, sources and uses of funds and amounts at the time the RAD conversion is closed may differ from amounts upon completion of construction. In October 2017, HUD implemented procedures to verify completion of planned construction activities and costs, which we discuss later in this report.\nSecond, HUD’s leverage ratio, published in 2017, did not manually adjust funding source data to accurately account for all sources in calculating the leverage ratio for RAD. Specifically, HUD did not isolate funding sources that were federally appropriated, contributed by the PHA, or contributed by state or local municipalities to calculate leverage. For example, among approximately $2 billion from other financial sources, HUD included Moving to Work (MTW) funding (which may include public housing capital funds, public housing operating funds, and voucher funds) and tax credit equity as leveraged sources. However, these are not necessarily private sources, which we explain later in this report. As a result, HUD’s current calculation does not reflect the amount of private- sector leveraging. HUD calculated and published a RAD leverage ratio in May of 2017 using the following formula: Total leverage ratio = (total dollars from all sources – public housing dollars)\nTo calculate the RAD leverage ratio, HUD uses some but not all financial source data it collects (see app. II for a list of data fields collected by HUD). For example, HUD mistakenly excluded data that capture private funds, reducing the amount of total sources in the numerator. HUD calculates “public housing dollars” by adding data that capture replacement factor funds, public housing operating reserve funds, and prior-year public housing capital funds. HUD considers tax credit equity, new first mortgages, and “other funding” data to be non-public housing dollars (see app. II for a list of fields in HUD’s calculation). PHAs enter a description and amount for other funding sources in “other funding” data fields (see app. II). For example, a PHA may enter a federal financial source in one of the open-entry “other funding” data fields, requiring a manual adjustment to properly account for the financial source. According to HUD, additional fields were included in mid-2016 to better differentiate certain sources such as from the HOME Investment Partnerships Program (HOME) and seller take-back financing. Prior to this point, these financial sources were placed into “other” fields, and the standard resource desk report had not been updated until mid-2017 to include all of these fields.\nThird, HUD does not categorize and report its leveraging by private and public sources. According to HUD officials, informative leverage methodologies could calculate the ratio based on the leveraging of public housing program funds, the leveraging of all federally appropriated funds, or the leveraging of PHA funds (i.e., sources in the transaction that have come from the PHA itself even if not federally appropriated through the public housing program), among other methodologies. The RAD authorizing statute requires HUD to assess and publish findings on the amount of private-sector leveraging. In addition, Standards for Internal Control in the Federal Government require agencies to communicate quality information with external parties, such as other government entities, to make informed decisions and evaluate the entity’s performance in achieving key objectives.\nHUD also does not use final (postcompletion) funding data in another metric of RAD leveraging. Specifically, in June 2017 HUD publicly reported that RAD “has leveraged more than $4 billion in capital investment in order to make critical repairs and improvements.” HUD calculates this figure by summing the construction costs—a subcomponent of total costs—with data from the time a conversion closes and not upon completion of construction. HUD officials we spoke with clarified that this metric solely reports construction investments and does not reflect any conclusion regarding private leverage of public funds. But, HUD publically characterized this measure in different ways, including as the amount of “public-private investment in distressed public housing,” the amount of “construction achieved under RAD,” and the amount of “new private and public funds leveraged by RAD.”\nHUD’s 2016 interim report calculated and published multiple leverage ratios, but chose to highlight a RAD leverage ratio that is consistent with ratios used for other HUD programs. However, the ratio does not specifically follow the prescribed ratio language in the authorizing statute because the report states that the ratio represents the amount of private and public external sources invested for every dollar invested by PHAs but the statutory language only discusses private-sector leveraging. Officials further noted that the statute does not require a particular methodology and HUD relies on PD&R—and its independent contractor— to determine the appropriate methodology for purposes of compliance with the statute. Lastly, the statute does not preclude the use of other leverage metrics for other purposes, such as using the ratio to measure the amount of nonpublic housing funds leveraged in RAD transactions that would not be available to the property absent RAD. As a result, HUD’s leverage metrics announced in May 2017 do not accurately reflect the amount of private-sector leveraging achieved through RAD, do include public funding as private sources, and inconsistently measured sources that were federally appropriated or contributed by PHAs, potentially under- or over-reporting the program’s performance. Additionally, in October 2017, HUD began implementing procedures to collect data after construction is completed and is not yet able to calculate a leverage metric using final (postcompletion) financial sources rather than the financial sources collected at closing. The lack of a consistent metric for private leveraging could also lead to inconsistent reporting of the leverage ratio, as has occurred in prior years.", "We recalculated RAD leverage ratios in a number of different ways, including to correct errors we identified during our review. For example, HUD’s 2016 interim report noted that data on closed transactions do not provide detailed description of “other sources,” requiring a crosswalk between applications and closed transactions to develop estimates for the allocation of “other sources” across financial source categories. Abbreviated descriptions are provided in the form of notes that are not always clear and consistent; therefore public housing sources may include federally appropriated sources, as well state, city, or county sources. Through our estimates, we found that the overall leverage ratio could range from 7.44:1 for a ratio recalculating HUD’s leverage ratio to 1.23:1 for a ratio estimating private-sector leveraging.\nRecalculation with HUD methodology and financial source recategorization. As discussed previously, HUD’s methodology does not account for all financial data collected by HUD and includes “other” funding sources erroneously considered as leveraged funds. Thus, we manually adjusted RAD funding source data and found that nearly $1.2 billion were erroneously considered leveraged funds because they are not private funds. For example, HUD included MTW funds; public housing operating reserves; public housing capital funds; replacement housing factor funds; other federal funds; other state, local, or county funds; and take-back financing funds as leveraged financial sources. For more information, see appendix II.\nWe obtained documentation from HUD to replicate their methodology and recategorized financial sources that corrected errors in the data, and found that the RAD leverage ratio was less than half of HUD’s most recently publicly reported leverage ratio (19:1), approximately 7.44:1 (see app. II).\nRecalculation to exclude LIHTC and other federal sources. We previously reported that LIHTCs are considered a federal source because tax credit equity represents foregone federal tax revenue and, therefore, are a direct cost to the government. Accordingly, we recalculated the RAD leverage ratio by excluding all federal funding sources and obtained a ratio of approximately 1.43:1 (see app. II).\nRecalculation of private-sector leveraging. Lastly, the RAD authorizing statute requires HUD to assess and publish findings on the amount of private-sector leveraging, but HUD’s current calculation does not present the amount of private-sector leveraging and does not include all available data (for example, the “Other Private” funds collected by HUD). We estimated the amount of private-sector leveraging by grouping public housing sources, other public sources, and private sources, resulting in a leverage ratio of approximately 1.23:1 (see app. II).", "In October 2017, HUD implemented procedures to certify completion after developers finish RAD-approved rehabilitation or construction. Previously, HUD had a limited ability to monitor and evaluate final (postcompletion) physical and financial changes in RAD projects with existing data. According to HUD officials, HUD did not implement completion certification procedures before October 2017 because it had been addressing what it considered to be the highest risks first (such as clarifying requirements for RAD participants, resident safeguards, and other procedural and administrative requirements).\nHUD’s October 2017 completion certification procedures include instructions for owners to report final construction costs and documentation on completion of repairs or construction within 45 days of the completion date recorded in the RAD Conversion Commitment. More specifically, HUD requires owners to list a final construction cost amount—a subcomponent of total costs—in the RAD resource desk, describe variances from the approved construction cost amount in a comment box, and describe how increases in costs were addressed. Additionally, a third-party must certify that the repairs in the scope of work were completed by providing an attestation to HUD.\nHowever, HUD’s procedures do not require documentation from the owners to support the final total cost figures, which include not only construction costs but also building and land acquisition costs, and developer fees, among others as noted earlier in this report. These procedures also do not require a certification from owners on all financing sources and costs recorded in the RAD Conversion Commitment.\nStandards for Internal Control in the Federal Government require that management implement control activities through documented policies and procedures to provide reasonable assurance that the objectives of the agency will be achieved, and also communicate quality information with external parties to make informed decisions and evaluate the entity’s performance in achieving key objectives.\nWhile HUD now has certification completion procedures in place, this process provides the agency limited financial information from owners. As a result, HUD is unable to report metrics that reflect final (postcompletion) RAD financial outcomes after construction is completed. Furthermore, HUD is limited in its ability to effectively oversee conversion budget and cost variances, and expenditures that require HUD approval. Lastly, the RAD authorizing statute requires that the Secretary of HUD demonstrate the feasibility of the RAD conversion model to recapitalize and operate public housing properties under various situations and by leveraging other sources of funding to recapitalize properties. Without metrics that reflect the final (postcompletion) financial outcomes of RAD after construction is completed, HUD and congressional decisionmakers are unable to make informed decisions concerning the RAD program.", "HUD has not systematically tracked or analyzed household data on residents in RAD-converted units that are available from its public housing or Section 8 databases or from PHAs or other postconversion owners—the main sources of resident data for the RAD program. In addition, HUD has not yet developed monitoring procedures for all the resident safeguards in the RAD program. Finally, residents told us of some concerns about information they received on RAD conversions, communications opportunities, and the relocation process.", "HUD officials told us that the agency does not systematically track or analyze household-level data on residents in RAD-converted units across existing program databases (HUD maintains household data for the public housing and Section 8 rental assistance programs in two databases). In particular, HUD does not track changes in household characteristics before and after conversion, such as changes in rent, as well as relocations or displacement of individual households.\nHowever, according to HUD officials, their databases are not designed to track the impact of RAD conversion on residents and they are unable to electronically link household information submitted before RAD conversion to information submitted after conversion. Once a property is converted, the property and corresponding household information are removed from the public housing database. Owners of converted properties are to use software to manually enter household information into the databases for the Section 8 program when submitting tenant certifications and information for assistance payments. This procedure is the standard for administration of all project-based Section 8 properties. HUD officials stated that they have explored the possibility of transferring household data from one system to another at the time of a property’s conversion.\nWhile HUD has not systematically analyzed household information from its public housing and Section 8 databases, we were able to perform a limited analysis. We requested and received data from HUD on the households affected by RAD. Using the data provided that were current as of June 2017, we were able to identify about 26,000 households that lived in units that were converted to a PBV subsidy, but we were unable to identify the total number of households converted to a PBRA subsidy. Based on our analysis of 26,000 PBV households, we found about 2,700 (about 11 percent of) households were headed by an about 6,800 (about 26 percent of) households were headed by an individual with a disability; about 2,700 households (about 10 percent of) households were headed by an elderly person who also had a disability; over half (about 14,000 or 54 percent) of the households were headed by an individual identified as black; close to 11,000 households (about 41 percent) were identified as white; and about 1,000 households (about 4 percent) were identified as Asian. Close to 3,100 households (about 12 percent) were headed by an individual identified as Hispanic; about half (about 49 percent) of the PBV households were single- person households; the median annual income of PBV households both before and after RAD conversion was about $10,000; and about 5,300 (about 20 percent) of households were paying a flat rent rather than income-based rent before RAD conversion.\nHowever, the data on PBV households were not comprehensive. For example, while about 10,000 residents (about 57 percent) experienced a rent increase following RAD conversion under PBV, we could not determine if the rent increase was the result of an increase in resident income. We also could not determine changes in location among the PBV households following RAD conversion.\nRather than relying on the public housing and Section 8 databases for tracking household information during conversion, HUD officials indicated that the agency will rely on locally maintained resident logs, which contain household information collected by property owners, as the starting point when HUD determines a compliance review is warranted. The logs will be the primary way the agency collects household information for compliance reviews under the RAD program, according to HUD officials. In November 2016, HUD issued a notice, which requires the PHA or other postconversion owner to maintain a log about every household at a converting project, including information on race and ethnicity, household size, and disability. The notice also requires owners to track residence status throughout the relocation process, including whether the resident has returned, moved elsewhere, was permanently relocated or evicted; relocation dates; and details on any temporary housing and moving assistance provided. Owners are required to make the information available to HUD upon request for audits and other purposes. According to HUD officials, the agency expects the information in the resident logs to be more robust than what they would collect through the public housing and Section 8 databases, which do not track residents while they are relocated.\nHUD officials stated that the agency plans to review selected resident logs as part of an ongoing limited compliance review of about 90 RAD conversion projects. HUD officials told us they are developing procedures for performing compliance reviews—such as developing a mechanism to review a sample of logs on a periodic basis—but they have not yet done so because they have been focusing on developing procedures for activities that present a high risk to the program as described in the following section. HUD has not established a time frame for developing these procedures. However, HUD officials indicated that they plan to select resident logs for review based on risk of noncompliance and do not plan to analyze program-wide information currently collected in the public housing and Section 8 databases for program monitoring. HUD officials also noted that that PD&R is planning to track a sample of residents through its evaluation of the program, which we previously mentioned.\nWhile HUD has decided to rely on resident logs because of the difficulty of tracking household information across its program databases, using resident logs to assess the effects of the RAD program on residents has limitations. While the resident logs would contain detailed household information, they were not required prior to November 2016 and may not contain information on households converted before that date (RAD conversions started in 2013). HUD’s public housing and Section 8 databases contain information on such households. Second, as previously mentioned, HUD plans to review resident logs only when there is a risk of noncompliance, but they collect household information in their databases on a rolling basis. Standards for Internal Control in the Federal Government require agencies to use quality information to achieve their objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring.\nWithout a comprehensive review of household information—one based on information in HUD data systems as well as resident logs—HUD cannot reasonably assess the effects of ongoing and completed RAD conversions on residents and compliance with resident safeguards, as discussed in the next section.", "HUD has not yet developed monitoring procedures for certain resident safeguards under the RAD program. RAD requirements include those intended to ensure that residents whose units are converted through RAD are informed about the conversion process; can continue to live in a converted property following RAD conversion; are afforded certain protections carried over from the public housing are afforded a phase-in of any rent increases under Section 8 program requirements.\nCurrently, based on HUD notice requirements, PHAs must document compliance with three safeguards (PHA plan amendments, resident notification, and procedural rights) in their RAD application and other conversion paperwork. For example, PHAs must submit comprehensive written responses to resident comments received in connection with the required resident meetings with their RAD application. For one safeguard, PHAs are not required to report to HUD but must retain documentation of compliance to be made available to HUD as part of the monitoring for the program. For others, the HUD notice does not specify reporting and monitoring requirements.\nBased on our review of files for selected conversions, which we previously discussed, we found PHAs generally submitted documentation of their efforts to inform residents about RAD conversion, such as providing evidence to HUD of meetings with residents and written responses to resident questions as required. However, the specific documents for these requirements were not available from HUD in all cases. HUD’s review of amendments to PHA plans was documented in all but one of the conversions we reviewed. Documentation requirements for resident relocations have changed since RAD was introduced, which made the documentation more difficult to assess.\nHUD developed and started implementing procedures in October 2017 that require owners to certify and provide data supporting compliance with the resident right-to-return requirements. For example, owners must certify the number of residents who exercised their right to return to a converted property compared with the number of residents who did not return. HUD is also developing standard operating procedures to review each conversion for compliance with RAD relocation provisions. Specifically, the procedures would describe the review steps required at different stages of the conversion process, a process for identifying risks, and how to address instances of noncompliance with RAD requirements. Additionally, HUD noted that they have 2 compliance reviews under way including 1 involving a set of HUD requirements that affect relocations of more than 1 year and the limited compliance review of 90 projects that we previously described.\nHUD officials noted that they are developing additional guidance in other areas. First, HUD officials indicated that as part of an overall update of RAD standard operating procedures, they are developing additional protocols on resident notification and how residents’ comments are addressed through conversion planning. Second, the agency had not been consistently collecting required documentation on “house rules,” which describe the conditions and procedures for evicting residents and terminating assistance at RAD PBRA properties, so it has developed and implemented additional legal review procedures as part of the implementation of RAD resident eviction and grievance procedural rights requirements. According to HUD officials, they have been focusing primarily on right-to-return and relocation requirements because they represent areas of highest risk.\nHUD has not developed separate monitoring procedures for other resident safeguards—the phase-in of tenant rent increases, resident representation through tenant organizations, and choice mobility requirements. However, HUD officials told us that they plan to assess how administrative data can be used to monitor choice mobility as part of the planning for a separate PD&R evaluation of this safeguard. HUD officials also indicated that there are procedures for residents to report complaints to HUD if resident representation and organization requirements are not met. Standards for Internal Control in the Federal Government require agencies to implement control activities through documented policies and procedures to provide reasonable assurance that agency objectives will be achieved. These standards also require agencies to design procedures to achieve goals and objectives, and identify, analyze, and respond to risks related to achieving the defined objectives. Table 1 includes a description and information on implementation of resident safeguards that most directly affect residents’ experience with the conversion process and ability to live at the property following conversion. Appendix III describes these and other RAD resident safeguards.\nHUD officials indicated that the safeguards for the phase-in of tenant rent increases, resident representation, procedural rights, and choice mobility presented a lower risk than the right-to-return requirements, so they were a lower priority, and in some cases were addressed through general monitoring of the Section 8 program. For choice mobility options, HUD indicated that its data systems are not designed to track whether residents are able to exercise these options, such as tracking whether residents left a property to exercise choice mobility or for other reasons.\nAll but two of the resident safeguards do not take effect until after a property has been converted and is part of the Section 8 program. For example, residents are only eligible to use vouchers through choice mobility after they have lived in the converted property for 1 or 2 years depending on the assistance contract involved (PBV or PBRA). Moreover, certain RAD safeguards are not typically available for Section 8 residents. For example, RAD establishes resident representation provisions and procedural rights that are more in line with public housing rather than Section 8 requirements. While HUD has indicated that the Section 8 program has experience administering different types of assistance contracts, RAD nonetheless creates separate requirements for certain provisions from the public housing and Section 8 programs.\nAs previously mentioned, RAD conversions have been completed at an increasing pace in the last 5 years. However, because HUD has not yet developed separate monitoring procedures for certain requirements—the phase-in of tenant rent increases, resident representation through tenant organizations, and choice mobility requirements, many of which take effect after a conversion—and without using all available household data, the agency will not be able to reasonably ensure that these safeguards were implemented.", "Residents who participated in our focus groups expressed some concerns about information they received on RAD conversions, communications opportunities, and the relocation process. Residents indicated that they were notified about RAD conversion in a variety of ways. Residents in 5 of 14 focus groups found the information presented to them on RAD to be helpful. Residents in 7 of 14 focus groups indicated that the information they received was not helpful. Across these focus groups, a range of concerns was expressed, including that the information provided was not always clear or reflective of the final changes resulting from RAD conversion, and that the PHA and management were not always forthcoming with information about the RAD changes.\nResidents in some focus groups also indicated that they were not involved in the RAD conversion. Residents in 5 of 14 groups indicated that they were not given the opportunity to provide input into the RAD changes, while residents in 6 of 14 groups indicated that their concerns were not addressed and their suggestions were not incorporated.\nResidents also described problems with relocations. Some of the concerns expressed by resident focus groups on relocation related to the location of the temporary units (3 of 14 focus groups), the timing of relocation or amount of notice given (7 of 14 focus groups), and moving issues (such as items damaged during moves).\nResidents were asked to describe ways in which RAD conversion improved or harmed their living conditions. Residents in several focus groups indicated that RAD improved their living conditions, including both the condition (7 of 14 focus groups) and appearance of their units or the property in which they lived (6 of 14 focus groups). Some of the changes residents liked included the installation of new appliances, mold and pest removal, and safety and energy efficiency improvements. However, residents in several of the focus groups identified problems with their living conditions following RAD conversion. The problems residents identified included security concerns (10 of 14 focus groups); renovations that were of poor quality (6 of 14 focus groups); and other problems with the units (10 of 14 focus groups), such as pest problems; decreased amenities (8 of 14 focus groups), such as the removal of common areas or in-unit washing machines; and issues with property management (11 of 14 focus groups). For example, in several instances, residents stated that new managers or owners in place following RAD conversion were not responsive to their needs or concerns.\nDuring our site visits, residents described other experiences with RAD conversion. Residents in all of the groups identified being notified about RAD. Residents in 9 of 14 focus groups indicated that their rent was the same following RAD conversion. Residents in a few focus groups indicated that their rent had increased because of changes in their income or conversion from a flat rent. However, residents in a few focus groups experienced challenges in how their income was certified for the purpose of calculating rents, such as problems with requests for information (2 of 14 focus groups) and other issues with the process (4 of 14 focus groups). For example, residents reported having to provide the same paperwork multiple times. No instances in which residents were permanently involuntarily displaced were reported. One resident organization expressed concerns about fewer eviction protections and resident representation after RAD conversion.", "We spoke with 18 PHAs, some of which cited benefits as well as several challenges of RAD participation and some noted HUD responsiveness to their circumstances and concerns. According to many of the PHAs we spoke with, benefits of participating in the RAD program included reducing administrative requirements in Section 8 programs and opening avenues for additional sources of funding. In particular, many of the PHAs noted that RAD allowed them to access tax credit equity and other funding to complete the bulk of their repairs and renovations at once. Over half of the PHAs we spoke with also found HUD to be flexible and responsive to individual PHA circumstances. The majority of PHAs we spoke with indicated that remaining in the public housing program was not tenable because funding for the public housing program was not enough to meet their long-term capital needs.\nPHAs we contacted also noted several challenges of participating in RAD: financing constraints, timing challenges, and evolving requirements.\nFinancing constraints. Some PHAs noted that program rent requirements can limit PHA participation in RAD. Each year, HUD calculates a contract rent—the total rent for a unit, including operating subsidy and resident contribution. PHAs must use the contract rent to calculate Section 8 subsidies for properties converting under RAD. According to HUD and several PHAs, contract rents for RAD-converted Section 8 units are lower than rents in traditional Section 8 assisted units, and are almost always lower than market-rate rents. Several PHAs and HUD officials have described the difficulty of converting units from the public housing program with this rent limitation. For example, when the cost of needed rehabilitation or construction is high, low allowable contract rents might not be sufficient to access appropriate capital for the conversion.\nIn certain localities, PHAs have found solutions to augment rents and have used RAD flexibilities to allow them to convert and plan for operating expenses. For example, the PHA in Tacoma, Washington, used the Moving to Work program flexibilities to increase contract rents and housing officials in San Francisco used an allowable procedure to transfer RAD assistance from converted buildings to properties throughout its portfolio (each is a blend of traditional project-based vouchers with higher contract rents and RAD assistance). In Montgomery County, Maryland, the PHA similarly included RAD assistance in some mixed-finance properties that contain other high-rent subsidies and market-rate rents.\nTiming challenges. Some PHAs said they faced major challenges in coordinating RAD timelines with HUD, lenders, or other parties or with the requirements of the LIHTC process. HUD officials acknowledged that PHAs with more complex transactions, including those involved in the LIHTC process, struggle to implement their conversion plans within RAD time frames. HUD officials noted that because there is a statutory cap on the number of units that can be converted under RAD, they have established time frames to stay under the cap and ensure that PHAs that are planning to convert are ready to participate in the program.\nAdditionally, according to HUD, it has made technical assistance available to all PHAs that receive a Commitment to enter into a Housing Assistance Payment contract during the RAD process to help ensure their readiness for RAD closing and to meet remaining conversion deadlines.\nOn the other hand, some PHAs expressed concern to us about delays in the conversion process that put them at risk for missing state LIHTC deadlines. HUD officials described putting conversions on a fast-track on a case-by-case basis to meet LIHTC deadlines. For example, in one case a PHA relocated residents before closing and without HUD approval. HUD required the PHA to fund an escrow account until it was able to determine any payments that might need to be made to residents and any other necessary corrective action. This was done so that HUD could look into the issue while mitigating additional harm to the residents and continuing to move the PHA toward closing and aligned with tax credit application deadlines.\nThe timing of conversion can also create gaps in the payment of Section 8 funds to PHAs. Section 8 funding should begin in January of the year following conversion. PHAs rely on annual public housing subsidies for the conversion year—public housing program funds are paid to PHAs annually and are not recaptured by HUD following RAD conversion. However, according to some PHAs we interviewed, Section 8 funding did not begin on time. For example, in Baltimore, Maryland, subsidy flow after conversion had not begun as of June of the following year. HUD officials told us inadequate guidance from HUD and confusion from PHAs regarding the necessary steps to request payment in a timely manner have been the major cause of the problems. HUD has tried to remedy delays and updated its notice to provide clearer guidance on the timing of subsidy flow around the time of conversion to Section 8. Moreover, HUD officials indicated that there has been confusion among PHAs on how to request funds, so HUD is currently revising and updating the guidance on steps PHAs must take to request payment under the PBRA program. HUD officials also indicated that it has begun monitoring whether new participants are taking the steps needed well before their first request for funding.\nSome PHAs we contacted also mentioned difficulty in coordinating with HUD on fulfilling internal RAD requirements and reviews. According to some, the different offices involved in RAD conversions within HUD were not well aligned and had different interpretations of the rules. For example, some RAD conversions require a civil rights review by HUD’s Office of Fair Housing and Equal Opportunity Office, including those transactions that require new construction or resident relocations. Some PHAs indicated that such reviews occurred too late in the conversion process even after other HUD offices had approved the conversion. HUD officials acknowledge that different HUD offices have different objectives in the RAD process. HUD officials indicated that the agency is trying to coordinate more effectively among these offices and streamline the conversion process as much as possible.\nEvolving requirements. While the majority of PHAs with which we spoke said that HUD provided clear, sufficient, and timely information, some PHAs noted that it also was challenging to adapt to evolving requirements.\nSome PHAs noted that as HUD identified problems in the early years of the program, it would change the guidance in response. For example, HUD officials explained that it had clarified fair housing review requirements in response to PHA concerns that the fair housing review occurred too late in the process and could affect successful conversion of projects. The most recent RAD notice (effective January 2017) is the third version since 2013 and revisions have involved substantial changes. For example, this notice provided PHAs with greater flexibilities on the funding sources they can use to raise initial contract rents and the ways they can demonstrate ownership and control of a converted property. In addition, HUD introduced a notice in November 2016 to strengthen resident protections.\nSome PHAs told us they found the pace or timing of the evolving requirements difficult to manage and also noted confusion about conversion instructions and guidance due to changing requirements. For example, one PHA indicated that the agency had problems reporting information into a new RAD data field in HUD’s Voucher Management System because there was no guidance at the time on how to complete this field. However, HUD has since included additional instructions in the user’s manual that became effective in April 2017.", "", "The Committee has included language to establish procedures that will ensure that public housing remains a public asset in the that event that the project experiences problems, such as default or foreclosure.\nIn each RAD conversion, HUD and the property owner execute a use agreement, which specifies affordability and use restrictions for the property. The use agreement generally exists concurrently with the HAP contract, which is executed to govern the provision of either the PBRA or PBV subsidy for the unit. The use agreement must be recorded in a superior position to new or existing financing or other encumbrances on the converted property. Under a Section 8 HAP contract, residents pay 30 percent of adjusted household income. In the absence of the HAP contract, the use agreement is set up to control the amount paid: If the HAP contract is removed due to breach, noncompliance, or insufficiency of appropriations, under the use agreement new households in all units previously covered under the HAP contract must have incomes at or below 80 percent of the area median income for households of the size occupying an appropriately sized unit for their family size at the time of admission, and rents may not exceed 30 percent of 80 percent of area median income for the remainder of the term of the use agreement.\nFor new residents at or below 80 percent of the area median income, under the use agreement the resident rent contribution without a HAP contract generally would be higher than that paid under a HAP contract, which is based on household income instead of the universally determined area median income.\nAlthough the use agreement maintains some level of affordability, the owner receives no subsidy under PBRA or PBV without a HAP contract and resident rent contribution is not tied to individual household income but rather based on a universal area income calculation (see fig. 3).\nAccording to HUD officials, other program requirements support the goal of long-term preservation:\nHAP contracts are executed for 20 years for PBRA or 15–20 years for PBV properties and compliance with all affordability requirements in the HAP and statute and regulation governing the PBRA and PBV programs must be maintained while the contract is in force.\nAccording to the authorizing statute, PHAs (for PBV contracts) and HUD (for PBRA contracts) shall offer and project owners shall accept a renewal contract at the expiration of the initial HAP contract and at each subsequent renewal. Each renewal contract will be subject to a RAD use agreement, governing the use of the property consistent with HUD requirements.\nAccording to the RAD notice, the project owner also is to establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The reserve account must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. According to HUD officials, during the conversion, HUD staff review each capital needs assessment to try to determine whether a property’s capital needs can be addressed over the forthcoming 20-year period.\nWe reviewed 31 completed conversion files, the set of documentation required by HUD to enable a PHA to convert units from public housing to a Section 8 subsidy, and associated RAD contracts. In each file, key contractual protections appeared consistent with program requirements. Specifically, in all cases executed use agreements (which included requirements to limit residency eligibility to households making less than 80 percent of area median income) were included and not altered from the HUD template. In most files we reviewed, we found foreclosure riders were included and that they stated that use agreements would survive foreclosure, meaning that any new owners would take ownership subject to the agreements. Executed HAP contracts, requiring that residents’ contributions be set at 30 percent of adjusted household income, also were present in all files we reviewed.\nAccording to HUD officials, PHAs, and two housing groups we spoke with, provisions in the RAD use agreement to keep units affordable appear to be strong, with use and affordability protections designed to survive foreclosure, but the strength of provisions cannot yet be fully determined because the provisions have not yet been tested in foreclosure proceedings or in courts. According to HUD officials, as of October 2017 no RAD properties had entered foreclosure.\nThe RAD authorizing statute requires that ownership be transferred to a capable public entity or, if not one, a capable entity as determined by HUD, or if necessary to fulfill LIHTC requirements for the property, to a HUD-approved for-profit entity (provided the PHA retained sufficient interest in the property). HUD also subjects any subsequent transfer of the property to HUD review and requires the successor ownership to meet these same requirements. As stated in the use agreement, a lien holder must give HUD notice prior to declaring a default and provide HUD concurrent notice with any written filing of foreclosure (providing that the foreclosure sale must not be sooner than 60 days after the notice), but the use agreement does not prohibit a lien holder from foreclosing on the lien or accepting a deed in lieu of foreclosure. The RAD use agreement, which is recorded superior to other liens and places use and affordability restrictions on the property, survives foreclosure. With or without a HAP contract in place, the lender or new owner must maintain the units for low- income households according to the terms of the use agreement. Therefore, according to HUD officials, the lender or new owner has an incentive to identify an appropriate owner and secure HUD approval to avoid a default under the HAP contract, which provides a Section 8 subsidy to the owner. That is, if no HAP contract were in place, the owner would collect only the tenant rent contribution (30 percent of 80 percent of area median income), rather than the tenant rent contribution plus the subsidy.\nHUD has discretion to enforce or waive certain use and affordability protections.\nAccording to the authorizing statute, in the case of foreclosure, bankruptcy, or termination and transfer of assistance for material violation or substantial default, the priority for ownership or control must be provided to a capable public entity, or, if no such entity can be found, to a capable entity as determined by the Secretary of HUD.\nAdditionally, the statute allows the transfer of property to for-profit entities to facilitate the use of LIHTC financing, with requirements to maintain the PHA’s interest, which was discussed above. As of September 30, 2017, about 40 percent of RAD conversions involved LIHTC financing.\nAccording to the RAD notice, in the event of a default of a property’s use agreement or HAP contract, HUD may terminate the HAP contract and transfer assistance to another location to retain affordable units. HUD will determine the appropriate location and owner entity for the transferred assistance consistent with statutory goals and requirements for RAD.\nThe RAD use agreement will remain in effect even in the case of abatement or termination of the HAP contract for the term the contract would have run, unless HUD agreed differently in writing. In this case, the RAD notice limits HUD discretion to terminate the use agreement to only cases involving a transfer of assistance to another property.", "HUD has not yet developed procedures to monitor RAD projects for risks to long-term affordability of units, including default or foreclosure. HUD officials described an ongoing effort to develop oversight procedures it would need to reasonably ensure compliance with RAD agreements and avoid risks to long-term affordability once conversions closed and units moved to Section 8 but, as previously discussed, the agency has not yet completed this effort or fully implemented a monitoring system.\nHUD officials told us they also planned to develop protocols to more closely monitor properties at risk of foreclosure, including developing indicators, procedures, roles, and responsibilities within HUD, but they have not finalized the design of procedures or fully implemented them. To develop protocols, HUD created an asset management working group in September 2016. The officials also stressed that no one can take possession of or foreclose on a property without HUD involvement and approval. For example, HUD officials said they expect few foreclosures among RAD-converted properties because lenders tend to communicate with the agency early so that it can become involved to prevent foreclosure. HUD officials pointed to a robust structure to oversee program properties in the PBRA program, but stated PBV property oversight continues to be developed by the Office of Public and Indian Housing.\nAccording to Standards for Internal Control in the Federal Government, agencies should design procedures to achieve goals and objectives, such as the preservation of unit affordability, and respond to risks, in this case the risk of default or foreclosure or noncompliance with program requirements. Additionally, management should identify, analyze, and respond to risks related to achieving its goals and objectives. According to HUD officials, the agency had not yet fully developed and implemented oversight procedures for postconversion monitoring because since 2012, the agency has focused on RAD start-up and review and oversight procedures for the conversion process. HUD officials also said that many projects would receive ongoing monitoring from other parties, which also could serve as a safeguard for unit affordability and help ensure the appropriate financial and physical condition of the property after RAD conversion. For example, just under half of all RAD properties use LIHTC financing as part of financing packages, which can also include local and state bonds. According to HUD officials, oversight by tax credit allocating agencies, investors, and lenders, while not alone sufficient, helps secure affordable units in a property for the long-term. However, tax credit allocating agencies, investors, and lenders are not signatories to the HAP contract or use agreement and have no formal role in reasonably ensuring that properties meet requirements exclusive to RAD.\nAlthough other entities may exercise some oversight of properties, by not developing and implementing procedures for ongoing oversight, HUD in its role as program administrator will not be able to reasonably ensure that properties adhere to requirements or meet basic program goals. Furthermore, without such monitoring HUD would be limited in its ability to identify and assist with properties at risk of foreclosure.", "RAD was created to demonstrate the feasibility of converting public housing units to other rental assistance programs to help preserve affordable rental units and address the significant backlog of capital needs in the public housing program. However, demonstrating the feasibility of RAD conversion is contingent on collecting and assessing quality information about the conversion projects. HUD has an opportunity to improve the demonstration’s metrics. For instance, implementing robust postclosing oversight and collecting information on financial outcomes upon completion of construction would not only improve HUD’s oversight capabilities but also allow it to report quality information. Moreover, limitations in HUD’s methodology for calculating leverage ratios for RAD may obscure the effect of funding sources used to help fund RAD conversions, potentially under- or over-reporting the program’s capital leveraging. By collecting comprehensive information on final (postcompletion) financing sources and costs and developing quality metrics, HUD would be better positioned to more accurately report the results of the demonstration program.\nAdditionally, a focus on the conversion process itself (and less on its results), and limitations in HUD’s data have contributed to limited monitoring by HUD in other areas. Specifically, by not developing and implementing monitoring procedures to assess the effect of RAD on residents HUD cannot ensure compliance with resident safeguards. Further, HUD collects and maintains household data for the public housing and Section 8 programs, yet it does not systematically use this information to ensure that resident safeguards are in place. Finally, HUD could benefit from additional procedures to assess RAD properties for risks to long-term preservation to be able to respond to property default or foreclosure.", "We are making the following five recommendations to HUD: HUD’s Assistant Secretary for Housing should include provisions in its postclosing monitoring procedures to collect comprehensive high quality data on financial outcomes upon completion of construction, which could include requiring third-party certification of and collecting supporting documentation for all financing sources and costs. (Recommendation 1)\nHUD’s Assistant Secretary for Housing should improve the accuracy of RAD leverage metrics—such as better selecting inputs to the leverage ratio calculation and clearly identifying what the leverage ratio measures—and calculate a private-sector leverage ratio. (Recommendation 2)\nHUD’s Assistant Secretary for Housing should prioritize the development and implementation of monitoring procedures to ensure that resident safeguards are implemented. (Recommendation 3)\nHUD’s Assistant Secretary for Housing should determine how it can use available program-wide data from public housing and Section 8 databases, in addition to resident logs, for analysis of the use and enforcement of RAD resident protections. (Recommendation 4)\nHUD’s Assistant Secretary for Housing should prioritize the development and implementation of procedures to assess risks to the preservation of unit affordability. (Recommendation 5)", "We provided a draft of this report to HUD for comment. HUD provided written comments on the draft report, which are summarized below and reproduced in appendix IV. HUD also provided technical comments, which we incorporated as appropriate.\nIn its comment letter, HUD stated that it agreed with our findings that HUD can improve metrics used to assess program impact and build on existing oversight structures. HUD described actions it intends to take to implement our recommendations to the extent possible and consistent with resource limitations.\nMore specifically, HUD agreed with our first recommendation to ensure it collects comprehensive quality data on financial outcomes in its postclosing monitoring procedures (which could include supporting documentation for all financing sources and costs). HUD agreed it should routinely collect an updated list of funding sources and uses and related documentation when projects had cost overruns or other significant changes. HUD intends to review and revise, as appropriate, required postcompletion certifications. HUD added that in most cases, funding sources and uses do not materially change between closing and construction completion. HUD stated that securing the postclosing information in such cases might be of minimal benefit relative to the additional reporting burden. However, it is not clear how HUD would determine if projects had significant changes in costs or uses because HUD lacks postcompletion information that would show the magnitude of changes. In relation to reporting burden, HUD already has implemented procedures to collect limited financial information following the completion of construction in October 2017. We believe any additional reporting would not be disproportionate to the benefits of improving HUD's oversight capabilities through project completion and enhancing its reporting to more accurately reflect the results of the demonstration program.\nFor our second recommendation to improve the accuracy of RAD leverage metrics and calculate a private-sector leverage ratio, HUD agreed that RAD leverage metrics can be improved. HUD will ensure that the private-sector leverage ratio required by statute is clearly identified and included in its RAD evaluation. HUD also intends to identify a small number of relevant leverage ratios with distinct methodologies and will routinely publish these ratios with clear identification and explanations. In relation to our finding of misidentified funding sources, HUD plans to re- examine its chart of accounts and review prior transaction records to address errors and properly classify transaction sources.\nIn response to our third recommendation to prioritize the development and implementation of monitoring procedures for resident safeguards, HUD agreed that it is important to better document and expedite development and implementation of monitoring procedures. HUD also agreed that additional monitoring was needed to ensure the right of residents to request and move with a tenant-based voucher after a period of residency (choice-mobility). HUD noted that its Office of Policy Development and Research is seeking funding for additional research on RAD with a focus on the use and effect of choice-mobility options, which would inform HUD's monitoring efforts. Finally, while HUD said that we did not find the safeguards to be weak or inadequate, we did not perform an audit designed to assess the safeguards and therefore cannot opine on their adequacy. On the basis of our findings, we found that HUD’s implementation of these safeguards could be strengthened.\nRegarding our fourth recommendation that HUD determine how it can use available program-wide data and resident logs for analysis of RAD resident protections, HUD agreed to examine how it could use its existing data systems to further enhance its monitoring efforts. HUD added that the systems have limitations, so that the agency also uses other mechanisms to track and monitor implementation of resident protections.\nFor our fifth recommendation to prioritize the development and implementation of procedures to assess risks to the preservation of unit affordability, HUD agreed that it is important to assess and mitigate risks to unit affordability. HUD stated that it employs robust underwriting standards prior to permitting conversion, and relies on existing procedures to conduct ongoing oversight of Project-Based Rental Assistance (PBRA) properties, which we discussed in the draft. However, as we noted, HUD has not yet developed procedures to more closely monitor RAD properties at risk of foreclosure, though it plans to establish indicators of foreclosure risk and oversight roles and responsibilities within HUD. HUD said that since the summer of 2017, it has been evaluating what additional oversight procedures might be needed for RAD Project-Based Voucher properties. HUD also described plans to augment its existing oversight procedures to preserve affordable units in the event of foreclosure by developing protocols in the following areas: transfer of property ownership to a capable entity, transfer of the rental assistance to another site, and protection of residents in the event a Housing Assistance Payment contract was terminated.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Housing and Urban Development and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.", "This report examines aspects of the Department of Housing and Urban Development’s (HUD) Rental Assistance Demonstration (RAD) program. More specifically, this report addresses (1) HUD’s assessment of the physical and financial outcomes of RAD conversion to date; (2) how RAD conversions affected residents and what safeguards were in place to protect them, including while temporarily relocated and during conversion; (3) what challenges, if any, public housing agencies (PHA) faced in implementing RAD; and (4) the extent to which RAD provisions are designed to help preserve the long-term affordability of units.\nTo address all four objectives, we analyzed agency documentation and interviewed officials from HUD. The documentation we reviewed included policies and procedures for RAD; manuals describing HUD data systems; draft policies and procedures for implementing postclosing oversight; and reports on RAD performance. We interviewed HUD headquarters officials from the Office of Recapitalization within the Office of Housing, which oversees the administration of RAD, and the Office of Policy Development and Research (PD&R). We also interviewed PHA officials and developers involved in RAD transactions, as well as selected experts and other stakeholders to obtain their perspectives on RAD. Additionally, we conducted a literature search to identify publications related to RAD.\nWe visited a nonprobability sample of eight PHAs in Maricopa County, Arizona; Alameda County, California; Montgomery County, Maryland; and in the cities of San Francisco, California; Baltimore, Maryland; New Bern, North Carolina; El Paso, Texas; and Tacoma, Washington, to observe housing units before, during, or after renovation when possible as well as common areas that had planned or undergone renovation. We selected sites to include varying PHA sizes, RAD subsidy types, planned rehabilitation and resident relocation, numbers and sizes of RAD transactions, closing dates, constructions costs, and geographic locations across the United States. At each site, we conducted semistructured interviews with PHA officials and, when available, developers (5 sites).\nWe also conducted one or two focus-group interviews with groups of 6– 15 residents who lived at the converted properties to obtain their perspectives and experiences. In each location, we asked the PHAs to invite residents to participate in the focus groups based on their availability. We also met with the Resident Advisory Board in each location that had one. For 7 of 8 site visits, we selected two RAD properties to conduct resident focus groups (in Alameda County, California we held one focus group). We conducted a content analysis based on resident focus group interviews to describe resident experiences and the RAD program’s effects on residents. Utilizing the selection criteria noted above, we conducted semistructured telephonic interviews with an additional nonprobability sample of 10 PHAs in Fresno, California; Fort Collins, Colorado; Dekalb County, Georgia; Chicago, Illinois; Ypsilanti, Michigan; Cuyahoga County, Ohio; Philadelphia; Pennsylvania; Spartanburg, South Carolina; McKinney, Texas; and Yakima, Washington. Because we selected a non-probability sample of PHAs to visit and interview, the information we obtained cannot be generalized more broadly to all PHAs. However, it provides context on RAD particularly on implementation challenges and perspectives on physical and financial impacts, long-term affordability, and resident protections.\nWe also selected the following 11 individuals and organizations as experts and stakeholders: 1. Council of Large Public Housing Authorities 2. National Association of Housing and Redevelopment Officials 3. Center on Budget and Policy Priorities 4. Public Housing Authorities Directors Association 5. National Housing Law Project 6. Community Legal Services of Philadelphia 7. Maryland Legal Aid 8. Disability Rights Maryland 9. Jaime Alison Lee, Associate Professor of Law and Director, Community Development Clinic, University of Baltimore School of Law 10. Yumiko Aratani, Assistant Professor, Columbia University Mailman 11. University of California, Berkeley, Terner Center for Housing We interviewed experts and stakeholders on resident impacts and implementation challenges associated with RAD. The entities may not represent all views on these topics, but their views provide insights on RAD. To select these individuals and groups, we met with three major PHA associations and two resident advocacy groups, and asked for referrals for organizations or individuals with expertise in RAD.\nWe also selected a nonprobability, random sample of 31 RAD conversion files to review. Utilizing HUD RAD Resource Desk data, we randomly selected 31 RAD files for properties that had closed conversion as of June 30, 2017 and that planned to incur construction costs. We used the files to help us determine physical changes to RAD conversions and the impacts of RAD on residents through, for example, relocation. We excluded RAD conversions with no construction costs from the random sample because they would not have physical changes and no resident relocation would occur before or during our review.\nTo address our first objective on the physical and financial outcomes of RAD conversion to date and how HUD measured these outcomes, we first obtained and analyzed HUD data on RAD conversions since RAD’s authorization (from fiscal years 2013 through 2017). We assessed the reliability of these data by reviewing system documentation, interviewing knowledgeable officials about system controls, and conducting electronic testing. We determined that the data were sufficiently reliable for the purposes of describing rehabilitation and new construction in RAD projects and evaluating RAD leveraging metrics. We included in our analysis all RAD conversions that were active or closed. We used these data to determine the number of closed RAD conversions, associated financial sources and uses, subsidy types, and type of construction (rehabilitation, new construction, and no rehabilitation or new construction). In addition, during our interviews with PHAs and developers, we obtained their perspectives on potential contributing factors to financial decisions and type of construction pursued through RAD conversion. As noted earlier, we also reviewed 31 randomly selected files of converted properties with construction costs to describe property physical changes in RAD conversions.\nFurthermore, we reviewed HUD documents, such as HUD and PD&R evaluations, publications, and policies and procedures to gain additional context for how HUD measures RAD outcomes. We also interviewed HUD officials, including PD&R and Office of Recapitalization officials, on RAD data and metrics, as well as other performance monitoring activities. We further analyzed data from the HUD RAD Resource Desk to determine how these data support HUD’s metrics and performance monitoring activities. As previously mentioned, we determined that these HUD data were sufficiently reliable for the purposes of this report. Specifically, we assessed and calculated RAD leverage ratio and construction activity. We assessed HUD’s performance monitoring activities and reporting against the RAD authorizing statute, Standards for Internal Control in the Federal Government.\nTo recalculate estimates of the RAD leverage metric, we obtained documentation from the Office of Recapitalization to review the methodology used to calculate their most recent leverage ratio. We aligned the methodology they provided with RAD Resource Desk Transaction Log data that was downloaded on August 7, 2017. We replicated HUD’s methodology and matched the data utilized with the descriptors from the Transaction Log. To isolate financial sources and manually adjust the “other source” data, we compiled matched descriptors and funding amounts and categorized each observation based on the funding source description, as a federal source, state/county/city source, or PHA source, among others. For additional information and results, see appendix II.\nTo determine how RAD affected residents in converted units, we analyzed HUD public housing and Section 8 household data before and after conversion (demographic characteristics of residents and changes in rent, income, and location). Specifically, we examined data from 2013— when the first transactions closed—through June 30, 2017. HUD compiled and provided custom extracts of data on households in RAD- converted properties from the Inventory Management System/Public and Indian Housing Information Center (IMS/PIC) (public housing and Section 8 PBV) and Tenant Rental Assistance Certification System (Section 8 PBRA). We assessed the reliability of the data extracts provided by HUD by (1) performing electronic testing of required data elements, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We determined the data on PBV households were sufficiently reliable for the purposes of our reporting objectives, but that the data on PBRA households was not sufficiently reliable for purposes of describing some characteristics of RAD households. For example, in trying to determine participation in the RAD program by year, we received several thousand PBRA entries that preceded the establishment of the RAD program. Moreover, as we previously mentioned, the postconversion household data for PBRA conversions is in a separate data system, so some variables, such as those related to race, ethnicity, rent, and income, differ from the other household data for that program. Because of these limitations, the data for PBRA households were not reliable for purposes of comparing RAD household characteristics before and after conversion as we had intended. To describe safeguards for residents and help ascertain how HUD implemented protections, we reviewed legal protections and requirements in HUD notices, reviewed selected conversion files, and interviewed HUD officials about monitoring and compliance processes. Finally, as previously described, we held focus groups with residents to better understand any effects on their living conditions and quality of life.\nTo determine challenges PHAs faced in implementing RAD, we reviewed HUD guidance and related documents for PHAs in the program. We also interviewed eight PHAs during our site visits and spoke with another 10 PHAs by telephone about the benefits and challenges of participating in the RAD program.\nTo examine provisions designed to help preserve long-term affordability of units, we reviewed the RAD authorizing statute and amendments and HUD notices and interviewed HUD staff to verify our understanding of agency affordability protections. For a sample of 31 randomly selected properties, we examined templates for contractual agreements for RAD closings and analyzed closing documents and contracts to determine if agreements matched program requirements. We interviewed HUD staff and staff of 18 PHAs to obtain viewpoints on the potential strengths or weaknesses of preservation in the case of default or foreclosure.\nWe conducted this performance audit from February 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The Department of Housing and Urban Development’s (HUD) Office of Recapitalization collects financial sources and use data from Rental Assistance Demonstration (RAD) participants. Table 2 lists the financial source fields collected by HUD.\nTable 3 lists the financial cost fields collected by HUD.\nTable 4 provides additional financial source detail pertaining to HUD’s leverage ratio calculation.\nTable 5 and Table 6 show the total financial source amounts collected by HUD. Specifically, Table 5 shows total financial source amounts prior to recategorization, while Table 6 shows total financial source amounts after manual adjustments. Manual adjustments included isolating funding source observations in “other funding” fields 1-6 and incorporating them into existing fields, as appropriate.\nTable 7 replicates HUD’s methodology for calculating the RAD leverage metrics after manual adjustments in HUD data. See Table 4, above, to compare changes in each category.\nTable 8 recalculates the leverage ratio by deducting federal sources as leveraged sources.\nTable 9 recalculates the leverage ratio by deducting public sources as leveraged sources (compare to Table 8 above).", "The Rental Assistance Demonstration (RAD) program has numerous requirements intended to ensure residents whose units are converted through RAD receive certain protections. The following is a description of these safeguards and their reporting and monitoring requirements.", "", "The Government Accountability Office, the audit, evaluation, and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability.", "The fastest and easiest way to obtain copies of GAO documents at no cost is through GAO’s website (https://www.gao.gov). Each weekday afternoon, GAO posts on its website newly released reports, testimony, and correspondence. To have GAO e-mail you a list of newly posted products, go to https://www.gao.gov and select “E-mail Updates.”", "The price of each GAO publication reflects GAO’s actual cost of production and distribution and depends on the number of pages in the publication and whether the publication is printed in color or black and white. Pricing and ordering information is posted on GAO’s website, https://www.gao.gov/ordering.htm.\nPlace orders by calling (202) 512-6000, toll free (866) 801-7077, or TDD (202) 512-2537.\nOrders may be paid for using American Express, Discover Card, MasterCard, Visa, check, or money order. Call for additional information.", "Connect with GAO on Facebook, Flickr, Twitter, and YouTube. Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. Visit GAO on the web at https://www.gao.gov.", "", "", "", "James-Christian Blockwood, Managing Director, [email protected], (202) 512-4707 U.S. Government Accountability Office, 441 G Street NW, Room 7814, Washington, DC 20548 Please Print on Recycled Paper.", "", "", "In addition to the individual named above, Paul Schmidt (Assistant Director), Julie Trinder-Clements (Analyst in Charge), Meghana Acharya, Enyinnaya David Aja, Alyssia Borsella, Juan J. Garcia, Ron La Due Lake, Amanda Miller, Marc Molino, Barbara Roesmann, Jessica Sandler, MaryLynn Sergent, Rachel Stoiko, and William Woods made major contributions to this report." ], "depth": [ 1, 1, 2, 3, 3, 2, 3, 3, 2, 1, 2, 2, 2, 1, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 3, 2, 2, 2, 2, 2, 1, 2, 2 ], "alignment": [ "h3_full", "h0_title h3_title", "", "", "", "h0_title h3_title", "h0_full h3_full", "h0_full", "", "h1_full", "h1_full", "h1_full", "", "h3_full", "h2_title", "h2_full", "h2_full", "", "", "h2_full", "h0_full h4_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "Why did the Department of Housing and Urban Development put procedures in place?", "What does RAD's authorizing legislation require HUD to do?", "How does HUD measure conversion outcomes?", "What issues does HUD have when measuring conversion outcomes?", "How does HUD track effects of RAD conversions on resident households?", "What procedures for monitoring compliance with resident safeguards has HUD developed?", "What do federal internal control standards require of agencies?", "What does the lack of comprehensive review of household information and procedures for fully monitoring all resident safeguards mean for HUD?", "What possible issues exist in RAD authorizing legislation and RAD's use agreements?", "What has HUD said about how it intends to address these situations?", "What benefits would HUD gain from implementing procedures that address oversight of affordability?", "What does the Public Housing program do?", "Why was the RAD program authorized?", "How does the RAD address unmet capital needs?", "How does converting properties in the public housing program to Section 8 rental assistance programs address capital needs?", "What was GAO asked to review?", "What does the report examine?", "How did GAO go about analyzing public housing conversions under RAD?" ], "summary": [ "The Department of Housing and Urban Development (HUD) put procedures in place to evaluate and monitor the impact of conversion of public housing properties under the Rental Assistance Demonstration (RAD) program.", "RAD's authorizing legislation requires HUD to assess and publish findings about the amount of private-sector leveraging.", "HUD uses a variety of metrics to measure conversion outcomes.", "But, the metric HUD uses to measure private-sector leveraging—the share of private versus public funding for construction or rehabilitation of assisted housing—has limitations. For example, HUD's leveraging ratio counts some public resources as leveraged private-sector investment and does not use final (post-completion) data. As a result, HUD's ability to accurately assess private-sector leveraging is limited.", "HUD does not systematically use its data systems to track effects of RAD conversions on resident households (such as changes in rent and income, or relocation) or monitor use of all resident safeguards. Rather, since 2016, HUD has required public housing agencies (PHA) or other post-conversion owners to maintain resident logs and collect such information.", "HUD has been developing procedures to monitor compliance with some resident safeguards—such as the right to return to a converted property—and begun a limited review of compliance with these safeguards. However, HUD has not yet developed a process for monitoring other safeguards—such as access to other housing voucher options.", "Federal internal control standards require agencies to use quality information to achieve objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring.", "Without a comprehensive review of household information and procedures for fully monitoring all resident safeguards, HUD cannot fully assess the effects of RAD on residents.", "RAD authorizing legislation and the program's use agreements (contracts with property owners) contain provisions intended to help ensure the long-term availability of affordable units, but the provisions have not been tested in situations such as foreclosure. For example, use agreements between HUD and property owners specify affordability and use restrictions that according to the contract would survive a default or foreclosure.", "HUD officials stated that HUD intends to develop procedures to identify and respond to risks to long-term affordability, including default or foreclosure in RAD properties. However, HUD has not yet done so.", "Procedures that address oversight of affordability requirements would better position HUD to help ensure RAD conversions comply with program requirements, detect potential foreclosure and other risks, and take corrective actions.", "HUD administers the Public Housing program, which provides federally assisted rental units to low-income households through PHAs.", "In 2010, HUD estimated its aging public housing stock had $25.6 billion in unmet capital needs. To help address these needs, the RAD program was authorized in fiscal year 2012.", "RAD allows PHAs to move (convert) properties in the public housing program to Section 8 rental assistance programs, and retain property ownership or transfer it to other entities.", "The conversion enables PHAs to access additional funding, including investor equity, generally not available for public housing properties.", "GAO was asked to review public housing conversions under RAD and any impact on residents.", "This report addresses, among other objectives, HUD's (1) assessment of conversion outcomes; (2) oversight of resident safeguards; and (3) provisions to help preserve the long-term affordability of units.", "GAO analyzed data on RAD conversions through fiscal year 2017; reviewed a sample of randomly selected, nongeneralizable RAD property files; and interviewed HUD officials, PHAs, developers, academics, and affected residents." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, -1, 2, -1, 0, -1, -1, -1, 1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 0, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "", "Background", "Bridge Conditions", "Future Bridge Funding Needs", "Federal and State Roles", "Bridge Inspection", "FHWA's Emergency Relief Program", "Issues for Congress", "Federal Pressure for State Bridge Spending", "Providing More Money for Bridges", "Encourage Tolling of Nontolled Bridges", "Redirect Spending Away from Off-System Bridges", "Maintenance", "Oversight and Inspection Issues20", "Risk-Based Approach to Federal Bridge Oversight", "Oversight of State Transportation Implementation Plans (STIPs)", "Inspection Auditing", "Inspector Training and Personnel Qualifications" ], "paragraphs": [ "", "The United States has approximately 608,000 bridges on public roads subject to the National Bridge Inspection Standards mandated by Congress. About 48% of these bridges are owned by state governments and 50% by local governments. State governments generally own the larger and more heavily traveled bridges, such as those on the Interstate Highway system. Only 1.5% of highway bridges are owned by the federal government, primarily those on federally owned land.\nAbout 9% of all bridges carry Interstate Highways, and another 25% serve arterial highways other than Interstates. Interstate and other major arterial bridges carry almost 80% of average daily traffic. The highest traffic loads are on Interstate Highway bridges in urban areas; these account for only 5% of all bridges, but carried 37% of average daily traffic in 2013.", "Federal law requires states to periodically inspect public road bridges and to report these findings to the Federal Highway Administration (FHWA). This information permits FHWA to characterize the existing condition of a bridge compared with one newly built and to identify those that are structurally deficient or functionally obsolete. A bridge is considered structurally deficient \"if significant load-carrying elements are found to be in poor or worse condition due to deterioration and/or damage, or if the adequacy of the waterway opening provided by the bridge is determined to be extremely insufficient to the point of causing intolerable traffic interruptions.\"\nA functionally obsolete bridge, on the other hand, is one whose geometric characteristics—deck geometry (such as the number and width of lanes), roadway approach alignment, and over/underclearances—do not meet current design standards or traffic demands. A bridge can be both structurally deficient and functionally obsolete, but structural deficiencies take precedence in classification. As a result, a bridge that is both structurally deficient and functionally obsolete is classified in the FHWA's National Bridge Inventory as structurally deficient.\nA bridge classified as structurally deficient or functionally obsolete is not necessarily unsafe, but may require the posting of a vehicle weight or height restriction.\nThe proportion of bridges classified as structurally deficient has declined 57% since 1990, and fell almost every year between 1990 and 2013 (see Figure 1 ). In 2013, approximately 64,000 bridges, or 10% of the total number of bridges, were classified as structurally deficient, as compared to 138,000 in 1990. The number of functionally obsolete bridges fell from 100,000 to 84,000 over the same period, a drop of 16%. The share of bridges classified as functionally obsolete in 2013 was 14%. In total, then, almost a quarter of U.S. bridges were deficient in that year.\nBridges on the most heavily traveled roads, such as Interstates and other arterials, are generally in better condition than bridges on more lightly traveled routes. For example, 4.4% of urban Interstate Highway bridges were considered structurally deficient in 2013, about half of the 9.4% structural deficiency rate of urban bridges on local roads. Likewise, 3.8% of rural Interstate Highway bridges were structurally deficient in 2013, about a quarter of the 16.5% structural deficiency rate of bridges on rural roads handling local traffic.\nAs the bridges on local roads are usually owned by local governments, locally owned bridges had more than twice the structural deficiency rate of state-owned bridges in 2013. Some 14.1% of locally owned bridges were categorized as structurally deficient in 2013, versus 6.7% of state-owned bridges. For bridge deficiency and obsolescence rates by state see Appendix A .", "Every two years, FHWA assesses the condition and performance of the nation's highways and bridges, documents current spending by all levels of government, and estimates future spending needs to maintain or improve current conditions and performance. As with any attempt to forecast future conditions, a host of simplifying assumptions, omissions, and data problems influences these estimates. Among other things, they rely on forecasts of travel demand and assume that the most economically productive projects (i.e., projects with the highest benefits relative to costs) will be implemented first. Despite such uncertainties and assumptions, these estimates provide a way to assess the level of current spending compared with what would be needed in the future under different scenarios.\nThe 2013 needs assessment, the most recent available, shows that in 2010 $100.2 billion was spent on capital improvements to the nation's highways and bridges. Of that amount, $82.2 billion was spent on roadways and $18.0 billion was spent on bridges. The vast majority of the expenditure on bridges, $17.1 billion, went to rehabilitate or replace existing bridges, with the remainder devoted to construction of new bridges. The $17.1 billion spent in 2010 was an increase of 35% over the $12.7 billion spent in 2008. The funding increase was largely due to the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ; ARRA).\nBecause of the modeling involved, FHWA's future needs estimates for bridges are limited to fixing deficiencies in existing bridges only when the benefits outweigh the costs. The future needs estimate can therefore be measured against the $17.1 billion expenditure in 2010. The U.S. Department of Transportation (DOT) estimates that fixing all existing bridge deficiencies would cost $106.4 billion (in 2010 dollars).\nOf course, fixing all deficient bridges overnight is not feasible. FHWA, therefore, estimates how this investment backlog will change at various levels of spending over the 2011-2030 period, taking into account the deterioration of existing bridges over that period. The results of this analysis, seen in Figure 2 , are strongly influenced by the ARRA funding. ARRA appropriated general funds for highways to add to the funding from the highway trust fund that had already been authorized. According to FHWA, to keep the backlog at the 2010 level through 2030 would require $8.9 billion annually (in 2010 dollars), less than the level of spending in 2010. To eliminate the backlog by 2030 would require an investment of $20.2 billion annually, implying roughly a 1.6% annual increase in inflation-adjusted spending. Spending between $8.9 billion and $20.2 billion per year, FHWA estimated, would improve the conditions of the nation's bridges but would not entirely eliminate the investment backlog. At the level of spending in 2010, $17.1 billion per year, the total dollar cost of correcting all remaining deficiencies would decline by 93% by 2030.", "Federal assistance for the maintenance, rehabilitation, and construction of highway bridges comes principally through the federal-aid highway program administered by FHWA. FHWA, however, does not make the determination as to which bridges should benefit from federal funding. Almost all funding under the federal-aid highway program is distributed to state departments of transportation, which determine, for the most part, where and on what the money is spent. States must comply with detailed federal planning guidelines as part of the decision-making process, but otherwise are free to spend their federal highway funds in any way consistent with federal laws and regulations. Bridge projects are developed at the state level, and state departments of transportation let the contracts, oversee the construction process, and provide for the inspection of bridges.\nThe 2012 surface transportation reauthorization, the Moving Ahead for Progress in the 21 st Century Act (MAP-21, P.L. 112-141 ), further strengthened the states' ability to determine spending on bridges by eliminating the Highway Bridge Program (HBP), which provided money to the states specifically for bridge construction and rehabilitation. Bridge improvements remain eligible for funding under two programs created by MAP-21 that distribute funds to the states under formulas specified in the law, the National Highway Performance Program (NHPP) and the Surface Transportation Program (STP). Under both programs, the states determine how much of their federal funding goes for bridges as opposed to other uses, primarily highway construction and improvement. These funds may also be used for the seismic retrofitting of bridges to reduce earthquake failure risk.\nFHWA is involved in the project decision-making process in two significant ways. First, MAP-21 (§1111) requires FHWA, in consultation with the states and federal agencies, to classify public road bridges according to \"serviceability, safety, and essentiality for public use ... [and] based on that classification, assign each a risk-based priority for systematic preventative maintenance, replacement or rehabilitation.\" However, none of the MAP-21 programs appear to require the new classification and risk-based priority metric be used to determine program eligibility. In addition to developing this metric, FHWA imposes certain performance measures that states must meet to avoid funding penalties pursuant to MAP-21. For example, if more than 10% of the deck area of a state's bridges on the National Highway System is structurally deficient, the state is subject to a penalty requiring it to dedicate an amount of its NHPP funds equal to 50% FY2009 HBP spending to bridge projects.\nWhile the HBP existed, bridge program apportionments—the money states were entitled to receive each year under the HBP—were trending upward. Spending (obligations) on bridge projects, however, tended to be substantially lower than the apportioned amounts. The transfer by the states of HBP funding to other highway programs, while permitted by law, was controversial following the collapse of the I-35W Bridge in Minnesota in 2007. At the time, critics saw the widening gap between annual apportionments and spending as evidence of state transfer of resources to nonbridge uses. However, bridge spending was an eligible expense under all the core formula programs, not just HBP, and total federal grants obligated for bridge work exceeded HBP apportionments every year between FY2007 and FY2012 ( Table 1 ).\nUnder MAP-21, which eliminated the HBP, the states have even more freedom to decide how much of their federal surface transportation grants to spend on bridges. During FY2013, states obligated roughly 8% more federal-aid highway funds for bridge work than in FY2012. However, the FY2013 level was substantially lower than during FY2008 through FY2011. Those higher levels reflect the availability of stimulus funds during FY2009 through FY2011. Typically, federal-aid highway funds are available for obligation for four years, so through FY2016 the states may continue to obligate funds authorized prior to MAP-21.", "Under the National Bridge Inspection Program (NBIP), all bridges longer than 20 feet on public roads must be inspected by state inspectors or certified inspection contractors, based on federally defined requirements. Federal agencies are subject to the same requirements for federally owned bridges, such as those on federal lands. Data from these inspections are reported to FHWA, which uses them to compile a list of deficient or functionally obsolete bridges. States may use this information to identify which bridges need replacement or repair.\nFHWA sets the standards for bridge inspection through the National Bridge Inspection Standards (NBIS). The NBIS set forth how, with what frequency, and by whom bridge inspection is to be completed. The standards provide the following:\nEach state is responsible for the inspection of all public highway bridges within the state except for those owned by the federal government or Indian tribes. Although the state may delegate some bridge inspection responsibilities to smaller units of government, the responsibility for having the inspections done in conformance with federal requirements remains with the state. Inspections can be done by state employees or by certified inspectors employed by consultants under contract to a state department of transportation. Inspection of a federally owned bridge is the responsibility of the federal agency that owns the bridge. The NBIS set forth the standards for the qualification and training of bridge inspection personnel. In general, the required frequency of inspection is every 24 months. States are to identify bridges that require less than a 24-month frequency. States can also, however, request FHWA approval to inspect certain bridges on an up to 48-month frequency. Frequency of underwater inspection is generally 60 months but may be increased to 72 months with FHWA permission. The most common on-site inspection is a visual inspection by trained inspectors, one of whom must meet the additional training requirements of a team leader. Damage and special inspections do not require the presence of a team leader. Load rating of a bridge must be under the responsibility of a registered professional engineer. Structures that cannot carry maximum legal loads for the roadway must be posted.\nThe vast majority of inspections are done by state employees or consultants working for the states. FHWA inspectors do, at times, conduct audit inspections to assure that states are complying with the bridge inspection requirements. FHWA also provides on-site engineering expertise in the examination of the reasons for a catastrophic bridge failure. However, FHWA bridge engineers have only limited time available for audits and other bridge oversight.", "The Emergency Relief Program (ER) provides funding for bridges damaged in natural disasters or that are subject to catastrophic failures from an outside source. The program provides funds for emergency repairs immediately after the failure to restore essential traffic, as well as for longer-term permanent repairs.\nER is authorized at $100 million per year, nationwide. Funding beyond this is commonly provided for in supplemental appropriations acts. In the case of most large disasters, additional ER funds are provided in an appropriations bill, usually a supplemental appropriations bill.\nThe federal share of emergency repairs to restore essential travel during the first 180 days following a disaster is 100%. Later repairs, as well as permanent repairs such as reconstruction or replacement of a collapsed bridge, are reimbursed at the same federal share that would normally apply to the federal-aid highway facility. Recently, Congress has sometimes legislatively raised the federal share under the ER program to 100% (as happened with the I-35W collapse in Minnesota). As is true with other FHWA programs, the ER program is administered through state departments of transportation in close coordination with FHWA's division office in each state. ER was the source of funds for replacement of the I-5 Skagit River Bridge in Washington State, which collapsed on May 23, 2013, after being struck by a truck that was hauling an oversized load.", "The Skagit River Bridge collapse led to warnings that the large number of structurally deficient bridges indicates an incipient crisis, even though the bridge itself was not structurally deficient. FHWA data do not substantiate this assertion. The numbers of bridges classified as structurally deficient or functionally obsolete have fallen consistently since 1990, and the proportion of all highway bridges falling into one or the other category is the lowest in decades.\nThe condition of roads has not experienced the same degree of improvement as the condition of bridges. This raises the policy question of what priority should go to bridge repairs as opposed to roadway repairs. In MAP-21, Congress implicitly addressed this issue by giving states greater flexibility to use federal funding for roads or for bridges, at their discretion. By doing this, Congress chose not to mandate bridge spending levels sufficient to reduce the number of deficient bridges by a certain date or eliminate deficient bridges altogether (described in Figure 2 ). Instead, responsibility for determining the amount that should be spent on bridges each year was assigned to the states.\nA related issue is one of terminology. The terms \"structurally deficient\" and \"functionally obsolete\" are not synonymous with \"unsafe.\" An effort to eliminate all structurally deficient bridges quickly could lead to inefficient spending if a significant percentage of these bridges do not actually have major safety problems. Under MAP-21, FHWA is to develop performance measures in regard to bridges. The speed of their development and the effectiveness of implementation will be oversight issues for Congress.", "To encourage state spending on structurally deficient bridges, MAP-21 sets a penalty threshold under the NHPP: any state whose structurally deficient bridge deck area on the National Highway System within the state's borders exceeds 10% of its total National Highway System bridge deck area for three years in a row must devote NHPP funds equal to 50% of the state's FY2009 Highway Bridge program apportionment to improve bridge conditions during the following fiscal year and each year thereafter until the deck area of structurally deficient bridges falls to 10% or below. Even if a state were required to spend more of its federal highway funding on bridges (and therefore less on roadway projects) due to this penalty, its mandated spending on deficient bridges would be less than was required prior to the enactment of MAP-21.\nGiven the lags in state reporting and the time required to complete major bridge projects, it is not clear whether the states' desire to spend their STP or NHPP funds on nonbridge projects is obstructing the declared national policy of reducing the number of deficient bridges.", "Federal motor fuel tax revenues, which have provided most of the funding for the federal-aid highway program since 1956, have been insufficient to support the program as authorized by Congress for several years. MAP-21 allocated money from the Treasury's general fund for highway and bridge programs in FY2013 and FY2014. The Highway and Transportation Funding Act of 2014 ( P.L. 113-159 ) also used transfers to extend MAP-21's funding levels and policies for eight months, through May 31, 2015. If Congress wishes to increase spending on bridges in a long-term reauthorization bill, it has a number of options:\nProvide general fund monies to accelerate the repair of structurally deficient and functionally obsolete bridges. Consider resurrecting a stand-alone program for structurally deficient bridges, which would essentially reverse the change made in MAP-21 and would force the states to provide minimum spending levels for bridge maintenance and repair. Raise the fuel taxes that finance the vast majority of surface transportation outlays, possibly with a portion of the increase dedicated to a federal bridge program. Emphasize public-private partnerships (P3s) as a mechanism to help reduce the number of structurally deficient bridges, for example, by allowing states to offer long-term leases of toll facilities to private investors in return for large up-front payments that could be used to supplement normal state and federal spending on bridge replacement and repair.", "Heavily traveled bridges can be attractive targets for conversion to toll facilities: many bridges have no convenient alternatives, so many drivers may be unable to avoid paying whatever toll is imposed. An expansion of tolling could allow for more rapid improvement of major bridges. The revenue stream provided by tolls can also make bridge building and reconstruction an attractive investment for private entities that are interested in participating in a P3 and can help projects become eligible for a federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. Bridge tolls, however, are often very unpopular, and their acceptance varies greatly from region to region. Some states have sought to make bridge tolls more acceptable within a state by charging out-of-state users at a much higher rate than in-state residents, a practice that may face legal challenges.", "Historically, nearly all federal highway funding was restricted to roads and bridges on the federal-aid highway system. The Surface Transportation Assistance Act of 1978 ( P.L. 95-599 ) stipulated that not less than 15% of a state's bridge apportionments nor more than 35% be spent \"off-system.\" Off-system spending of federal bridge funds has been required in every highway authorization bill ever since. Under MAP-21, STP funds equal to at least 15% of the amounts apportioned to a state for the Highway Bridge Program in FY2009 are to be obligated for off-system bridge projects.\nOff-system bridges, by definition, are inherently local in nature. By eliminating the set-aside for off-system bridges, Congress could enable states to spend more of their federal funds on bridges that are more heavily used, but states would not be required to spend funds for that purpose without additional legislation.", "The FHWA requirement that federal funding be directed to bridges with relatively low sufficiency ratings may encourage states to substitute bridge replacement for maintenance-type projects. During FY2012, of the total obligation of federal funds from all FHWA sources, 11% was obligated for new bridges, 55% was obligated for bridge replacement, 4% was for major rehabilitation, and 30% was for minor bridge work. Although these figures indicate that the lion's share of bridge funding has been obligated for new and replacement bridges, these percentages are less than they were in the late 1990s. The percentage spent on minor bridge work has increased significantly since then. Still, the case can be made that as the number of deficient bridges decreases it might make sense to shift spending toward preventive maintenance.", "", "MAP-21 requires that the National Bridge Inventory classify bridges according to serviceability, safety, and essentiality for public use and, based on this classification; assign each bridge a risk-based priority for systematic preventative maintenance, replacement, or rehabilitation. The risk-based approach would provide an additional metric to the traditional focus on bridges that are \"structurally deficient\" and \"functionally obsolete.\" In particular, the risk-based approach, which is still under development by FHWA, could provide statistics that more clearly identify unsafe bridges. An August 21, 2014, report by the Department of Transportation Office of Inspector General Audit Report found that FHWA had not fully implemented all MAP-21 bridge provisions, including the provision that DOT establish a risk-based bridge prioritization process. Once the metric is developed, Congress could consider making its use an eligibility requirement for bridge project funding under NHPP and STP.", "MAP-21 maintains the previous requirement that states' spending of federal funds on bridges be based on priorities established in state transportation implementation plans (STIPs). Following the elimination of the Highway Bridge Program in 2012, Congress may want to examine state spending on bridges under MAP-21 and, in particular, whether STIPs pay adequate attention to bridge needs as opposed to highway needs.", "FHWA could be directed to take a more active role in ensuring that inspections done by the states or their contractors are done in conformance with the National Bridge Inspection Standards, including on-site audits of state inspections. However, to have an impact, FHWA would have to be provided with sufficient funding to hire additional engineers and support personnel at FHWA Division offices and dedicate these resources to oversight of the inspection program.", "MAP-21 included requirements for establishment of minimum inspection standards and an annual review of state compliance with the standards established in the act. Within two years of enactment the Secretary of Transportation is to update the standards for the methodology, training, and qualifications of inspectors. Congress may wish to oversee implementation of these provisions.\nAppendix A. Bridge Condition by State\nAppendix B. Bridge Obligations by FHWA Program: FY2007-FY2013" ], "depth": [ 0, 1, 2, 2, 1, 2, 2, 1, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_title h1_title", "h0_full", "h1_full", "h2_full h1_full", "", "", "h1_full", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What are the statuses of the 608,000 public road bridges in the United States?", "How serious is the problem of structurally deficient and functionally obsolete bridges?", "What events have drawn attention to the condition of bridges on federal-aid highways?", "What might be the result if Congress decides to increase spending on bridge improvements?", "What must happen for the bridge investment backlog to be reduced by 93% by 2030?", "How might the spending rate change if the investment backlog was reduced to near zero by 2030?", "What was the result of the MAP-21 bill?", "How can states use the funds received from the National Highway Performance Program and the Surface Transportation Program?", "How does the FHWA enforce states' use of funds?" ], "summary": [ "Of the 608,000 public road bridges in the United States, about 64,000 (10%) were classified as structurally deficient in 2013, and another 84,000 (14%) were classified as functionally obsolete.", "The number of structurally deficient and functionally obsolete bridges has been declining steadily for more than two decades, and those that remain are not necessarily unsafe.", "Nonetheless, several high-profile bridge failures, including the 2013 collapse of a bridge on Interstate 5 in Washington State, have drawn public attention to the condition of bridges on federal-aid highways.", "As it debates reauthorization of the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), the 2012 law which reauthorized federal surface transportation programs, Congress may consider mandating increased spending on bridge improvements. The choice Congress makes will largely determine how quickly deficient and obsolete bridges will be replaced or improved.", "At the spending level of 2010, which included a significant amount of money provided by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), the Federal Highway Administration (FHWA) estimates that the bridge investment backlog (in dollar terms) would be reduced by 93% by 2030.", "Reducing the backlog to near zero during the same period is estimated to require an annual spending rate about 2% higher than the 2010 level.", "MAP-21 eliminated the former Highway Bridge Program, which distributed federal money specifically for bridge improvements.", "States may use funds received under two major FHWA programs, the National Highway Performance Program and the Surface Transportation Program, for bridge repairs or construction, but the decision about how much of its funding to devote to bridges rather than roadway needs is up to each state.", "FHWA enforces certain planning requirements and performance standards established in MAP-21, but it does not make the determination as to which bridges should benefit from federal funding." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 2, 2, 2 ] }

{ "title": [ "Background", "Space Systems and Acquisition Best Practices", "SLS Has Resolved Some Technical Issues and Matured Its Design, but Pressure Remains on Reduced Cost and Schedule Reserves", "SLS Program Has Made Progress Resolving Some Technical Issues and Maturing Design", "SLS Program’s Management of Known Risks Could Increase Pressure on Already Reduced Cost and Schedule Reserves", "Systems Integration and Testing for EM-1 May Add Even More Pressure to the Already Reduced Cost and Schedule Reserves", "The EGS Program Is Making Progress Completing Modifications, but Technical Challenges Are Consuming Cost and Schedule Reserves", "Selected EGS Systems Are Maturing, but the Program Has Encountered Technical Challenges Leading to the Systems Having Little or No Schedule Margin Remaining", "The Vehicle Assembly Building Has No Schedule Margin Remaining to Meet EGS’s Internal Schedule Goal", "The Mobile Launcher Has No Schedule Margin Remaining and Has Consolidated Future Schedule Activities to Meet Program’s Goals", "Interdependencies with SLS and Orion Have Increased Delays and Risk to EGS’s Software Development Efforts", "EGS Program Overall Has Limited Cost and Schedule Reserves Remaining", "Conclusions", "Recommendation for Executive Action", "Agency Comments", "Appendix I: Exploration Ground Systems Components beyond the Space Launch System and Orion", "Appendix II: Scope and Methodology", "Appendix III: Major Components of Exploration Ground Systems", "Appendix IV: Comments from the National Aeronautics and Space Administration", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The National Aeronautics and Space Administration Authorization Act of 2010 directed NASA to, among another things, develop a Space Launch System as a follow-on to the Space Shuttle and prepare infrastructure at Kennedy Space Center to enable processing and launch of the Space Launch System as a key component in expanding human presence beyond low-Earth orbit. To fulfill this direction, NASA formally established the SLS program in 2011. The agency plans to develop three progressively more capable SLS launch vehicles, complemented by Orion, to transport humans and cargo into space. The first version of the SLS that NASA is developing is a 70-metric ton (mt) launch vehicle known as Block I.\nIn accordance with direction contained in the NASA Authorization Act of 2010, NASA’s acquisition approach for building the initial variant of the SLS is predicated on the use of legacy systems, designs, and contracts from the Space Shuttle and its intended successor Constellation program, which was terminated in 2010 due to factors that included cost and schedule growth. Figure 1 provides details about the heritage of each SLS hardware element and its source as well as identifying the major portions of the Orion crew vehicle.\nNASA plans to use heritage hardware and new designs as follows:\nRS-25 engines remaining from the Space Shuttle program to provide power for up to four flights of the SLS, five-segment solid rocket boosters that were developed under the now-canceled Constellation program to provide thrust during the initial minutes of SLS flight, a cryogenic rocket stage used on United Launch Alliance’s Delta IV launch vehicle modified to operate as the Interim Cryogenic Propulsion Stage (ICPS) to provide in-space power for SLS during EM-1, a new core stage, which functions as the SLS’s fuel tank and structural backbone, derived from the Shuttle’s external tank and Ares I upper stage from the Constellation program, a new launch vehicle stage adaptor to attach and integrate the ICPS to the core stage; and a new multi-purpose crew vehicle stage adaptor to attach and integrate the SLS with the Orion vehicle.\nNASA has committed to be ready to conduct one test flight, EM-1, of the Block I vehicle no later than November 2018. During EM-1, the Block I vehicle is scheduled to launch an uncrewed Orion to a distant orbit some 70,000 kilometers beyond the moon. All three programs—SLS, Orion, and EGS—must be ready on or before this launch readiness date to support this test flight.\nNASA also intends to build 105- and 130-mt launch vehicles, known respectively as Block IB and Block II, which it expects to use as the backbone of manned spaceflight for decades. NASA anticipates using the Block IB vehicles for destinations such as near-Earth asteroids and Lagrange points and the Block II vehicles for eventual Mars missions. When complete, the 130-mt vehicle is expected to have more launch capability than the Saturn V vehicle, which was used for Apollo missions, and be significantly more capable than any recent or current launch vehicle.\nTo enable processing and launch of the SLS and Orion, NASA established the Ground Systems Development and Operations program in 2012 at Kennedy Space Center. The Ground Systems Development and Operations program consists of the 21st Century Space Launch Complex Initiative and the EGS program. NASA created the 21st Century Space Launch Complex Initiative prior to the establishment of the SLS and Orion programs as a way for Kennedy Space Center to continue to make infrastructure improvements to benefit multiple users in the absence of an ongoing major human exploration program. The EGS program was established to renovate parts of Kennedy Space Center to prepare for SLS and Orion. The program consists of nine major components: the Vehicle Assembly Building, Mobile Launcher, Software, Launch Pad 39B, Crawler-Transporter, Launch Equipment Test Facility, Spacecraft Offline Processing, Launch Vehicle Offline Processing, and Landing and Recovery. See figure 2 for pictures of the Mobile Launcher, Vehicle Assembly Building, Launch Pad 39B, and Crawler-Transporter, and appendix III for a description of the nine EGS components.\nAs the SLS and Orion programs began development, NASA shifted focus away from the 21st Century Space Launch Complex Initiative to the EGS program. For example, in fiscal year 2011, Congress appropriated NASA $142.8 million for the 21st Century Space Launch Complex Initiative and this declined to $39 million in fiscal year 2013, which was a year after EGS began receiving funding. Further, in the fiscal year 2017 president’s budget request, NASA requested $12 million to support the 21st Century Space Launch Complex Initiative.", "Space launch vehicle development efforts are high risk from technical and programmatic perspectives. The technical risk is inherent for a variety of reasons, including the environment in which launch vehicles operate, complexity of technologies and designs, and limited room for error in the fabrication and integration process. Managing the development process is complex for reasons that go well beyond technology and design. For instance, at the strategic level, because launch vehicle programs can span many years and be very costly, programs can face difficulties securing and sustaining funding commitments and support. At the program level, if the lines of communication between engineers, managers, and senior leaders are not clear, risks that pose significant threats could go unrecognized and unmitigated. If there are pressures to deliver a capability within a short period of time, programs may be incentivized to overlap development and production activities or delete tests, which could result in late discovery of significant technical problems that require more money and ultimately much more time to address. For these reasons, it is imperative that launch vehicle development efforts adopt disciplined practices and lessons learned from past programs.\nBest practices for acquisition programs indicate that establishing baselines that match cost and schedule resources to requirements and rationally balancing cost, schedule, and performance are key steps in establishing a successful acquisition program. Our work has also shown that validating this match before committing resources to development helps to mitigate the risks inherent in complex acquisition programs such as SLS and EGS. We have reported that within NASA’s acquisition life cycle, resources should be matched to requirements at key decision point (KDP)-C, the review that commits the program to formal cost and schedule baselines and marks the transition from the formulation phase into the implementation phase. Best practices for acquisition programs also indicate that about midway through development, the product’s design should be stable and demonstrate that it is capable of meeting performance requirements. The critical design review is the vehicle for making this determination. These programmatic milestones are called out relative to NASA’s acquisition life-cycle in figure 3 below.\nNASA approved EM-1 cost and schedule baselines for the SLS program in August 2014 and the EGS program in September 2014, following the completion of each program’s respective KDP-C review. The agency baseline commitment for the SLS program is at the 70 percent confidence level and the agency baseline commitment for the EGS program is at the 80 percent confidence level, which are both in line with NASA’s acquisition policies (see table 1). The confidence level is a probabilistic analysis that provides assurance to stakeholders that programs will meet cost and schedule targets.\nIn addition to the committed cost and launch readiness dates, both programs are working towards internal goals of earlier launch readiness dates and lower costs. NASA considers the time between the programs’ internal goals and their committed launch readiness dates as funded schedule reserve, which is extra time, with the money to pay for it, in the program’s overall schedule in the event that there are delays or unforeseen problems. In July 2015, we found that the SLS program’s internal goal for launch readiness for EM-1 had slipped from December 2017 to July 2018. This reduced the program’s schedule reserve from eleven months to four months. In May 2016, the SLS program further delayed its internal goal for launch readiness from July 2018 to September 2018, reducing program schedule reserve to two months. EGS’s internal goal for launch readiness for EM-1 is September 2018, meaning the program currently has two months of funded schedule reserve.", "The SLS program has made solid progress in resolving some technical issues and maturing the SLS design, but the program’s management of known risks as well as the program’s upcoming integration and test phase puts pressure on the program’s reduced cost and schedule reserves. This pressure threatens the program’s committed November 2018 launch readiness goal. The SLS program has made progress in resolving some technical issues that we previously reported on. For example, prime contractor officials for the core stage stated that they had implemented all corrective actions necessary to repair a problem with the stage’s tooling. Further, the program met its design goals by demonstrating the program’s design was stable enough to warrant continuation. As the program continues with final design and fabrication, the program faces known risks. Such risks are not unusual for large-scale programs, especially human exploration programs, but the program’s management of these risks may increase pressure on reduced cost and schedule reserves. For example, the SLS program has not positioned itself well to provide accurate assessments of progress with the core stage—including forecasting impending schedule delays, cost overruns, and estimates of anticipated costs at completion—because, at the time of our review, NASA did not have a performance measurement baseline necessary to support full earned value management reporting on the core stage contract. Finally, unforeseen technical challenges are likely to arise once the program reaches its next phase, final integration for SLS and integration of SLS with its related Orion and EGS human spaceflight programs that will likely place further pressure on cost and schedule reserves.", "The SLS program has made solid technical progress developing its primary elements, but at times, the progress has had associated cost increases or schedule delays. Examples of this development progress— and the unexpected difficulties encountered achieving that progress— include the following:\nCore stage. In November 2015, prime contractor officials for the core stage stated that they had implemented all corrective actions necessary to repair a subcontractor’s improper installation of the welding tool used to manufacture the 212-foot-tall stage. These actions were necessary because, as we reported in July 2015, NASA officials told us that they would have prevented production of the core stage. As we reported in March 2016, identifying and implementing the corrective actions was the major contributor to a decrease in the program’s schedule reserves from 11 months to 4 months. In addition to resolving the tooling’s misalignment, the SLS program is making progress with fabricating test articles for core stage component testing, constructing new test stands where those components will be subjected to structural testing, and modifying an existing test stand to support hot-fire testing of the assembled core stage. SLS program officials stated that they have also made progress fabricating the EM-1 flight engine section.\nRS-25 engines. In 2015, the program successfully tested RS-25 developmental engines and in March 2016 performed hot-fire testing of a flight engine. According to NASA officials, these tests demonstrated the engine could be operated under the conditions it will encounter when integrated into SLS. The program also began production of the new engine controller, which directs the RS-25 engines during flight. The contractor, however, is forecasting a potential cost overrun of $113 million on the engine contract, largely due to overruns stemming from developing the controller. According to NASA officials, however, the potential overrun has not affected the overall program cost or schedule. The factors that contributed to the overrun include higher than expected parts costs, resolving anomalies discovered in developmental test, and increasing staffing levels at the subcontractor to meet schedule demands. NASA officials indicated that the controller design has been tested in development and the controller’s qualification testing is front-loaded to drive out problems early in the test sequence; however, the new controller will not complete all testing before engine deliveries begin. According to NASA, if that testing uncovers the need for modifications to the controller, engines already delivered may have to be brought back from the flight line so that modifications can be implemented.\nSolid Rocket Boosters. The program completed the first qualification test of a fully assembled booster in March 2015. Prior X-ray examination of a booster segment had revealed the presence of unexpected unbonds between the solid rocket propellant, the propellant liner, and the new asbestos-free insulation of the solid rocket boosters that could have potentially caused an explosion. Resolving the unbond issue contributed to a delay of 20 months in full-scale qualification testing and, according to NASA officials, the contractor’s forecast of a potential $129 million cost variance on the contract did not affect the overall program cost or schedule. The program is planning to complete a second qualification test of a fully assembled booster sometime between May and July 2016, which NASA officials anticipate will further confirm resolution of the unbond issue.\nICPS. In October 2015, the SLS program completed work on the test version of the ICPS. Additionally, in December 2015 the SLS program began construction of the ICPS liquid oxygen tank, which will provide liquid oxygen to help power the ICPS.\nIn addition, the program as a whole met best acquisition practices design goals by releasing approximately 92 percent of design drawings for the program-level Critical Design Review (CDR) in July 2015. Because the CDR is the time in a project’s life cycle when the integrity of a project’s design and its ability to meet mission requirements are assessed, it is important that a project’s design is stable enough to warrant continuation with design and fabrication, which is evidenced by release of 90 percent of design drawings at CDR. A stable design allows projects to “freeze” the design and minimize changes prior to beginning the fabrication of hardware. It also helps to avoid re-engineering and rework efforts due to design changes that can be costly to the project in terms of time and funding.", "As the program continues with final design and fabrication, the program faces known risks. Such risks are not unusual for large-scale programs, especially human exploration programs which are inherently complex and difficult. The program’s management of these risks, however, may increase pressure on already reduced cost and schedule reserves.\nAlthough the program is making progress resolving some technical challenges with the core stage, the core stage development schedule remains aggressive and any additional delays will threaten the SLS program’s readiness for its internal goal of launch readiness by September 2018. As of May 2016, the core stage development effort had approximately 50 days of schedule margin—or time within the schedule where activities can be delayed before affecting a key milestone, which for the core stage is delivery to Kennedy Space Center to begin integrated operations with the Orion and EGS programs. Figure 4 shows the approximately 50 days of core stage schedule margin as well as the 2 months of SLS program schedule reserve.\nIn addition, because the core stage is the SLS program’s critical path— the path of longest duration through the sequence of activities that determines the program’s earliest completion date—any delay in its development reduces schedule reserve for the whole program. And with only 2 months of schedule reserve remaining between the program’s internal goal and committed launch readiness date of November 2018, any reduction in program reserves threatens the committed launch readiness date.\nAs of April 2016, the SLS program was tracking core stage risks, including late component delivery and concerns about application of the thermal protection system that provides heat shielding, which could require the program to use some of the core stage’s margin. Further, the SLS Standing Review Board—an independent NASA team responsible for reviewing SLS at each major program milestone—found in a 2015 report that it was unlikely the core stage would be able to support the SLS program’s committed date for launch readiness. The Board cited several factors for its finding, including a steep learning curve for the handling and alignment of such a large the potential for human access issues to avionics and propulsion plumbing once the stage is assembled, and that the green run test—the culminating test of core stage development where the actual EM-1 core stage flight article will be integrated with the cluster of four RS-25 engines and fired for 500 seconds under simulated flight conditions—carries risks because it is the first time the four RS-25 engines cluster will be fired, the first time the integrated engine and core stage auxiliary power units will be tested in flight-like conditions, and the first time flight and ground software will be used in an integrated flight vehicle. Green run test activities are currently scheduled to begin in October 2017.\nBoeing and SLS program officials stated that they are working to establish additional margin within the core stage schedule, but whether the core stage stays on schedule is largely dependent on the success of the green run test. Boeing officials told us that they originally had margin in their schedule for a second green run test if needed, but that it was removed due to the tight schedule. NASA officials acknowledged that this schedule existed; however, they also stated that the contingency test was considered “unauthorized work” for the contractor and the program baseline only calls for one test. Further, NASA officials stated that if the test is not successful, then a re-test may have to occur. Additionally they stated that under current plans, any time required to conduct a re-test would have to come from program schedule margin or reserve. As a result, if the program uncovers unexpected performance issues during green run testing, maintaining the core stage schedule—and thus the program schedule—may prove difficult.\nThe SLS program has also not positioned itself well to provide accurate assessments of progress with the core stage because it has never had a performance measurement baseline for the core stage that is necessary to support full earned value management reporting. Earned value, or the planned cost of completed work and work in progress, can provide accurate assessments of project progress, produce early warning signs of impending schedule delays and cost overruns, and provide unbiased estimates of anticipated costs at completion. The use of earned value management, which integrates the project scope of work with cost, schedule, and performance elements for optimum project planning and control, is advocated by both GAO’s best practices for cost estimating and NASA’s own guidance. According to a SLS program official, when the program and contractor conducted its integrated baseline review—a joint assessment of the performance measurement baseline by the government and contractor—the program realized the contractor’s plans assumed synergies between the core stage and exploration upper stage efforts that would produce cost savings for the contractor but NASA did not have the funding to begin this work under the same time frames identified by the contractor. A SLS program official told us that NASA asked Boeing to start replanning activities with a proposal that removed the exploration upper stage development from this contract action. In May 2016, NASA and Boeing signed the contract replan—with a cost increase of approximately $1 billion, from about $4.2 billion to about $5.2 billion. However, according to program officials it will probably be summer 2016 before the program receives contractor earned value management data derived from the new performance measurement baseline—some 4.5 years after contract award. Without this information, the program has been in a poor position to understand the extent to which technical challenges with the core stage are having schedule implications or the extent to which they may require reaching into the program’s cost reserves. The latter is of concern because as we found in July 2015, NASA maintains low cost reserves for this program—about $50 million per year—because program officials stated it has been necessary to sustain a flat funding profile for SLS as compared to other programs. Further, at SLS’s KDP-C, NASA approved the program to proceed with cost reserves of less than 2 percent leading to launch readiness, even though requirements for Marshall Space Flight Center—the NASA center with responsibility for the SLS program—indicate that standard cost reserves for launch vehicle programs should be 20 percent at KDP-C.\nIn addition to cost and schedule pressures stemming from the core stage, development of the flight software—the software that controls the first phase of SLS flight from liftoff through booster separation and up to main engine cut off—may require more time than the SLS program anticipates because the program made a decision to defer its most rigorous testing until software development nears completion. SLS software developers have been testing flight software at the end of each of the first five primary SLS software releases, with the scope of testing in each release isolated to the set of requirements for that respective release. They plan to perform the most rigorous testing of the software when the development reaches the release that will be used for flight qualification testing, beginning in March 2016, which will include testing against the most comprehensive set of requirements at that point. The deferral of the most rigorous testing until the flight qualification release, however, means that the program’s understanding of the defects to this point may not be as complete as it believes. This may, in turn, delay completion of software development while the program takes the time necessary to resolve defects. As we found in a September 2015 report assessing a Veterans Benefits Administration software-based processing system, successful system testing includes appropriately identifying and handling defects that are discovered during testing. In addition, we found that outstanding defects can delay the release of functionality to end users, denying them the benefit of features. The program has allotted one future contingency release at the end of the software effort for defect repairs, but delaying the discovery of defects increases the risk that potential problems will remain undiscovered until the point when few cost or schedule reserves are available to correct deficiencies.", "Even if the development phase does not consume any additional cost and schedule reserves, the SLS program’s EM-1 integration and test phase may require those resources. Our prior work has shown that this period often reveals unforeseen challenges leading to cost growth and schedule delays. Likewise, although superseded through revision, NASA program management guidance from 2010 states that integration and testing are among the periods of peak spending, when schedule delays are most costly, and that programs should maintain sufficient reserves to address issues encountered during that time, and unknown risks can be managed only by maintaining sufficient reserves. Compounding this already risky time period is that the threat to SLS program reserves is two-fold because SLS EM-1 launch readiness involves in essence two integration efforts. The first integration effort is to assemble SLS as a launch vehicle and the second is a cross-program integration effort, which means integrating SLS, Orion, and EGS to achieve launch readiness in 2018.\nIntegrated launch readiness for EM-1 is dependent on the success of the individual SLS, Orion, and EGS integration efforts. If delays materialize during individual systems integration and testing, for example, there could be a cascading effect of cross-program problems. Booster component shelf life provides a good illustration of this point. According to program officials, there is a limit on the amount of time the SLS boosters may remain in a stacked configuration that, if exceeded, would necessitate destacking and replacement of limited-life items. Program officials told us that NASA will review these limited-life items prior to stacking the integrated vehicle, but if launch is delayed longer than limited-life time frames allow, NASA would have to disassemble SLS from Orion back in the Vehicle Assembly Building. Such an effort could have broad cost and schedule impacts across the three programs.\nNASA’s Human Exploration and Operations Mission Directorate, which oversees development of the SLS, EGS, and Orion programs, plans to conduct a “build-to-synchronization” review in summer 2016 to demonstrate that the integrated launch vehicle, crew vehicle, and ground systems will perform as expected to meet EM-1 objectives. Human Exploration and Operations Mission Directorate officials told us that there is no existing NASA guidance to direct what the build-to-synchronization review should entail, but that they are tailoring requirements, with agency leadership concurrence, from NASA program management guidance for critical design review. According to these officials, the review will serve essentially as an EM-1 integration critical design review for the programs. According to NASA program management requirements, a critical design review for a NASA program would not only evaluate the integrated design, but also evaluate whether it meets mission requirements with appropriate margins and acceptable risk within cost and schedule constraints. As of March 2016, officials leading the planning efforts for the build-to-synchronization review told us that they were currently working on developing the terms of reference—which include review objectives and success criteria—but that they anticipate only limited discussion of cost and schedule because the review will focus first and foremost on the hardware and software design maturity of the three programs. Understanding the technical scope required for EM-1 integrated readiness, however, goes hand-in-hand with knowledge about how much money and time the individual programs will require to achieve that readiness. By foregoing a re-evaluation of cost and schedule reserves at the time it assesses technical scope for EM-1, especially in light of known pressures on the SLS program’s reserves, NASA risks missing an opportunity to reevaluate whether sufficient resources are available to respond to unforeseen challenges during the integration and testing phase.\nBeyond EM-1, the SLS program continues to face technical as well as cost and schedule risks. For example, for Exploration Mission 2 (EM-2), the program will be transitioning from the ICPS in-space propulsion element to an exploration upper stage providing both ascent performance and in-space capability. NASA had intended to use the ICPS for EM-2, which is planned to launch a crewed Orion vehicle beyond the moon to further test performance. However, the ICPS is not certified to support crewed flight and NASA estimated it would have to spend at least $150 million on that effort to fly a crewed mission. The Explanatory Statement to the Consolidated Appropriations Act, 2016, while not law, prohibited the use of NASA funds to human-rate the ICPS. In addition, as part of the fiscal year 2016 NASA Exploration appropriation, Congress provided that no less than $85 million of the appropriations should be used for the development of a new exploration upper stage necessary to build the Block IB vehicle for deployment on EM-2. NASA officials told us that the agency intends to have the exploration upper stage complete for EM-2. They also stated that they are currently developing a test plan, which includes examining the risk of performing only ground testing of the exploration upper stage because current plans do not allow for a separate flight test of the stage prior to EM-2.", "The EGS program is maturing selected systems, but the program is encountering technical challenges that require both time and money to fix. Further, the program has reduced cost and schedule reserves remaining to address risks if they come to fruition. This pressure threatens the program’s committed November 2018 launch readiness goal. Program management has identified the Vehicle Assembly Building and Mobile Launcher as projects along the critical path and software as a high risk component of the EGS program. All three of these projects have experienced delays and the Vehicle Assembly Building and Mobile Launcher have no schedule margin remaining to overcome any future technical challenges. As a result, any future delays would have to be accommodated by using the overall program’s schedule reserve. The program’s schedule reserve, however, has been reduced over time and now has 2 months of reserve remaining. Further, the program is operating with reduced cost reserves to address any future construction and software risks. These reserves will likely be tested further once the program begins integration with SLS and Orion, as delays in any one program can have a cascading effect.", "", "The Vehicle Assembly Building was built in 1966 as a facility to assemble the Apollo program’s Saturn V moon rocket, and part of the building is being refurbished by the EGS program to accommodate SLS and Orion. Updating the building is a large undertaking as it includes removing about 150 miles of Apollo-era cabling, improving the elevators, upgrading cranes, and incorporating fire safety improvements. EGS officials stated that the age of the building adds even more challenges, such as dealing with outdated building drawings and uncertain field conditions. The most significant of the Vehicle Assembly Building projects is the fabrication and installation of 10 new platforms which will allow access to the integrated SLS and Orion vehicles during final assembly. See figure 5 for a photograph of the Vehicle Assembly Building and an illustration of the building’s platforms.\nComplications with the Vehicle Assembly Building’s platform design and installation have required an additional $16 million to resolve—funding which the EGS program used from program reserves and the launch pad project, a project that has development remaining. Additionally, the project has exhausted its schedule margin, and any additional delays would have to be addressed through the use of program level schedule reserves. During testing, NASA observed that the test platform could not roll out properly and the program was forced to modify the design of the platforms midway through construction. Resolution of these design issues involved modifying key mechanical components and installing shims to properly align the platform during rollout. Program officials said that this issue has been addressed and is being implemented on all nine subsequent platforms. NASA is prepared to install additional shimming during platform installation if necessary. NASA’s interim assessment of the design contractor for the platforms highlighted numerous quality issues during design; however, NASA officials ultimately found the design product at an acceptable level of quality with cost and schedule requirements having been met.\nAdditionally, in December 2015, the first platform was installed in the Vehicle Assembly Building, but was removed shortly thereafter because of an installation issue. According to agency officials, the platform “flexed” slightly when it was lifted via crane for installation due to the weight of the platform in relation to the lifting points. This flexing kept the platform from fitting as designed on the bracket that allows the platforms to be moved to different elevations. The program has designed and fabricated an installation tool to prevent the platform from flexing when it is lifted for installation. EGS officials estimate that, if platform design challenges continue, they could delay the completion of the Vehicle Assembly Building by up to 3 months, which would affect the EGS program’s schedule overall. For example, construction on the building’s platforms is slated to end immediately before the Mobile Launcher is moved into the Vehicle Assembly Building; officials said there is no margin for additional delays on the building if it is to be ready for the Mobile Launcher in time. If additional delays materialize with the Vehicle Assembly Building, the program would need to reduce its overall schedule reserve.", "The Mobile Launcher was originally developed as part of the Constellation program, but was never used because of the program’s cancellation in 2010. After the cancellation, EGS began modifying the Mobile Launcher to support what is now SLS. The EGS program is modifying the Mobile Launcher to support the assembly, testing, prelaunch check-out and servicing of the SLS rocket, as well as to transfer SLS and Orion to the launch pad and provide the platform from which they will launch. According to EGS officials, the Mobile Launcher is the most complex EGS component because it contains more than 900 pieces of ground support equipment needed to support SLS and Orion. Ground support equipment includes subsystems for propellant and gases, electronic control systems, communication systems, and access platforms. Figure 6 is a photograph of the Mobile Launcher.\nThe EGS program has experienced delays and design challenges with the Mobile Launcher and has no project-level schedule margin remaining in order to meet the program’s internal goals for operations and launch readiness. Any additional delays would have to be addressed through the use of program level schedule reserves. The EGS program has completed all major structural changes to the Mobile Launcher, such as adding reinforcements to the Mobile Launcher’s structure to accommodate SLS height and weight, but the program must still complete the design and installation of the ground support equipment and the nine umbilicals that connect the Mobile Launcher directly to the SLS and Orion. The program has experienced design challenges and late hardware deliveries with two of these umbilicals: the ICPS umbilical, which supplies power, fuel, and cooling between the SLS upper stage and the Mobile Launcher, and the tail service mast umbilical, which provides liquid hydrogen and oxygen to SLS during launch.\nFurther, there have been ground support equipment and umbilical design changes both during and after the Mobile Launcher’s design phase because of vehicle requirement changes from SLS and Orion. EGS used nearly 22 percent of its schedule margin to accommodate these changes.\nAdditionally, requirement changes during and after ground support equipment subsystems’ design have led to the Mobile Launcher’s ground support equipment being designed concurrently with its installation. The program has identified a program risk that conducting these activities concurrently could lead to a potential cost increase of up to $10 million and schedule delays of up to 8 months. The Mobile Launcher project plans to begin its project-level verification and validation before installation of the ground support equipment and umbilicals are complete because the project has no schedule margin remaining. Officials acknowledged that conducting the mobile launcher’s verification and validation concurrent with ground support equipment systems and umbilicals installation increases risk because of uncertainties regarding how systems not yet installed may affect the systems already installed. EGS officials indicated that these concurrent installations and verification and validation meets all program test objectives and enables the Mobile Launcher effort to stay on schedule to support the program’s internal launch readiness date.", "EGS’s software development efforts—Spaceport Command and Control System (SCCS) and Ground Flight Application Software (GFAS)—are behind schedule as compared to program plans. The development efforts face challenges that include the need for requirements-related information from the SLS and Orion programs. EGS is developing these two software systems concurrently—SCCS is to operate and monitor ground equipment needed to launch and communicate with the integrated SLS and Orion vehicles, and GFAS is to interface with flight systems and ground crews. EGS software was immature at the program’s Critical Design Review, and EGS’s Standing Review Board considers the program’s software development effort the highest risk area. The Standing Review Board found in February 2016 that the SCCS and GFAS developments are currently underperforming, are understaffed, and are waiting on requirements definition from the two flight element programs. SCCS and GFAS’s completion are dependent on the SLS and Orion also finishing work on schedule; however, because SCCS and GFAS are among the last EGS activities scheduled to finish prior to integrated operations, delays in their completion could force a delay in the program’s committed November 2018 launch readiness date.\nSCCS Architecture: SCCS development is behind its planned software release schedule. Program officials attributed the delays, in part, to requirements maturing late from SLS and Orion. For example, according to EGS officials, there were initially supposed to be two content drops, wherein additional functionality is added, for the last two versions of SCCS. However, as of the program’s critical design review in late 2015, the two drops had evolved into six content drops. Program officials stated that the evolution from two drops to six enables content to be released in an as-needed phased approach to meet stakeholders’ needs and utilize resources in a more efficient manner. In March 2016, the NASA Office of the Inspector General reported that SCCS is more than a year behind schedule and significantly over cost, and that, because of cost and timing pressures, several planned software capabilities have been deferred, including the ability to automatically detect the root cause of specific equipment and system failures. The Office of Inspector General concluded that these issues largely result from unanticipated complexity in the way NASA has approached SCCS’s development. Likewise, program officials told us that developers initially expected ground systems, Orion, and SLS to require a total of 300,000 compact unique identifiers, or information fields. However, these officials said that because EGS is developing software as Orion and SLS are developed, complete information on how many information fields were necessary for each program was unavailable at the beginning of the development effort. SCCS officials have identified a risk that there may be a need for more than 300,000 total information fields, which could degrade the software system’s performance and result in cost and schedule overruns.\nAs the program’s Standing Review Board concluded, much of EGS’s software development work is heavily dependent on the final requirements of the SLS and Orion programs, both of which are still in development. Program officials indicated that, as all three programs have developed and EGS has received more information about the requirements of SLS, Orion, and ground systems, SCCS’s complexity has increased. To address the added complexity, the EGS program increased its workforce, but the overall schedule is challenged by hiring difficulties in a highly competitive environment. The EGS program is using the same developers to develop content for multiple phased deliveries, and the next content drop has been threatened by the developers’ delayed transition from prior drops.\nGFAS Application Software: GFAS development is facing challenges because necessary operational requirements from SLS and Orion are not yet available. GFAS officials told us that they were optimistic in their planning regarding the availability of requirements from SLS and Orion to support software development. For example, EGS officials said that they expected more mature information about operational requirements to come out of the Orion and SLS CDRs than what they received. In September 2015, after EGS officials did not receive early information as they had anticipated, the program conducted a schedule replan and said they planned to hire more staff to reduce the risk to the program. GFAS is currently planning on delivering their last content drop in February 2018, after the program has begun integrated operations with SLS and Orion. Figure 7 illustrates the GFAS content drop schedule with EGS’s schedule milestones.\nThe EGS program has identified two program risks that development of GFAS could be delayed by a combined maximum of up to 9 months and costs could increase by up to $3.2 million combined because it is dependent in part on SCCS development progress. According to the program’s Standing Review Board, the risk is that the necessary software will not be available when needed to meet EGS critical milestones and could affect the agency’s November 2018 launch readiness commitment date.", "Overall, the EGS program is operating with limited cost reserves to address any future construction and software risks. The EGS program is operating in fiscal year 2016 with cost reserves of about $13 million, or about 3 percent of its fiscal year 2016 budget. Program budget documents indicate that the program expects its cost reserve posture to improve to 13 percent and 9 percent in fiscal years 2017 and 2018 and to level out at around 5 percent in subsequent years. Kennedy Space Center, which manages the EGS program, does not have guidance for cost reserves. However, other NASA centers, such as the Goddard Space Flight Center—the NASA center with responsibility for managing other complex NASA programs such as the James Webb Space Telescope—have requirements for the level of both cost and schedule reserves that projects must have in place at KDP-C. At KDP-C, Goddard flight projects are required to have cost reserves of 25 percent or more through operational readiness. At EGS’s KDP-C, however, the program had cost reserves of only 4 percent leading to launch readiness.\nAccording to EGS’s Standing Review Board in 2016, the remaining cost risks to EGS are greater than the program’s current reserve balance. Our analysis of the maximum potential impact of Mobile Launcher and Vehicle Assembly Building cost risks on EGS cost reserves support this assessment. For example, based on the program’s February 2016 risk assessment, the EGS program could see maximum cost increases of $10 million for the Mobile Launcher and $11 million for the Vehicle Assembly Building, which is almost double the program’s fiscal year 2016 reserve. Although these cost increases may not occur in only one fiscal year and could be less than the maximum value, they could still impact the program if the planned reserves are either not available as expected or are not sufficient to cover needs.\nThe EGS program is also operating with reduced schedule reserves to address future construction and software issues. At the time NASA established EGS’s agency baseline commitment, the program had 5 months of funded schedule reserve between its internal planning date (June 2018) and its committed launch readiness date (November 2018). The program is now internally planning to a launch readiness date of September 2018, which reduces the program’s schedule reserve to 2 months. However, the EGS program must be ready well in advance of this launch readiness date in order to integrate SLS and Orion at the Kennedy Space Center and the program plans to be ready to begin integrated operations with SLS in January 2018. EGS has 3 months of margin before the start of integrated operations, and 1 additional month of margin before its internal goal for launch. See figure 8 for a timeline of EGS’s lifecycle relative to SLS for EM-1.\nMoving forward, relying on the critical path to determine available reserves may prove problematic because the program’s scheduling practices are fairly limited. The EGS program identifies its critical path as including the Vehicle Assembly Building and the Mobile Launcher in program quarterly management reports, but we were not able to replicate this critical path. Our analysis of the EGS critical path identified inconsistencies between the critical path identified by the software used to create and maintain the program’s integrated master schedule and the critical path called out in the program’s quarterly management reports. Our best practices for scheduling indicate that a program’s integrated master schedule should identify the program’s critical path rather than critical activities being selectively chosen based on what management has determined to be important. Establishing a valid critical path is necessary for examining the effects of any activities slipping along this path. Based on our limited review, the critical path in the program’s integrated master schedule does not match the critical path in the program’s quarterly management reports. EGS program management acknowledged that the two paths did not match, and indicated that they intentionally do not rely solely on the scheduling software’s generated critical path because it includes non-EGS development activities, such as SLS and Orion flight hardware deliveries. We plan to further research the inconsistencies we identified as part of planned future work on NASA’s human exploration systems.\nIntegration of EGS with the SLS and Orion programs will be reviewed by the Human Exploration and Operations Mission Directorate at the build- to-synchronization review in summer 2016. As with the SLS program, the same holds true for EGS that integrated flight readiness for EM-1 is dependent on the technical and programmatic stability of all three human spaceflight programs—EGS, SLS and Orion. Further, threats to the margin and schedule reserve for EGS can occur from delays within the program or delays within the Orion and SLS programs. In particular, if the SLS core stage delivery date to Kennedy Space Center slips beyond the March 2018 date depicted in the above figure, NASA will have less time for integrated operations and that will ultimately threaten the launch readiness date of November 2018.", "NASA established the SLS and EGS programs to support deep space exploration by humans, but the ability to launch its first exploration mission with these programs by the committed date of November 2018 is threatened. In some cases, the threat comes from technical challenges that are not unusual for large-scale projects, but may take more time and money than the program has reserves to address. In other cases, NASA’s approach to dealing with the known risks is exacerbating the challenges. For example, in some cases the SLS program has not positioned itself well to accurately forecast and proactively manage potential schedule delays and cost overruns, which in turn, may ultimately lead to cost and schedule growth that could stretch the program beyond its committed baseline. An opportunity is nearing in NASA’s upcoming build-to- synchronization process to not only determine whether the integrated launch vehicle, crew vehicle, and ground systems will perform as expected to meet EM-1 objectives, but to also revisit whether cost and schedule reserves are sufficient. Given the mission of the EM-1 test flight, NASA does not have to meet a specific schedule window for its launch date as it often does with planetary missions. As a result, NASA is in the position of being able to make an informed decision about what is a realistic launch readiness date. By not re-evaluating the cost and schedule reserves, both programs may continue to make decisions that result in reduced knowledge to meet a schedule that is not realistic. Until such a re-evaluation occurs, the American public and Congress, who are the beneficiaries of NASA’s technological advances, will not have a clear picture of the time and money needed to support these efforts.", "In order to ensure available cost and schedule margins are sufficient to meet the synchronized goals for launch readiness and related activities, we recommend the NASA administrator direct the Human Exploration and Operations Mission Directorate as it finalizes its schedule and plans for EM-1 during the planned build-to-synchronization review to re-evaluate SLS and EGS cost and schedule reserves based on results of the integrated design review in order take advantage of all available time resources and maximize the benefit of available cost reserves, and to verify that the November 2018 launch readiness date remains feasible.", "We provided a draft of this report to NASA for review and comment. Its written comments are reprinted in appendix IV of this report.\nNASA concurred with our recommendation to re-evaluate SLS and EGS cost and schedule reserves based on results of the build-to- synchronization review, but stated that further direction from the Administrator to the program is not necessary, as this activity is already underway. We are encouraged that since our discussions with the program regarding the scope of the build-to-synchronization review, and providing NASA with a draft of this report for comment, the agency has incorporated plans to address the processes and capabilities in place to continue managing the enterprise within cost and schedule constraints, including available margins, as part of the build-to-synchronization review and that the SLS management agreement to EM-1 is being updated to align with program and enterprise execution plans. To further satisfy our recommendation’s intent, we anticipate that NASA’s actions could encompass a full examination of the integrated schedule for the programs, to help ensure that an individual program does not anticipate using limited reserves to meet the planned launch readiness date, if the November 2018 date is not feasible for all the programs. NASA stated that the results of its build-to-synchronization review will be reported to the NASA Program Management Council by November 30, 2016.\nNASA also provided technical comments on the draft report, which we incorporated as appropriate.\nWe are sending copies of this report to NASA’s Administrator and to appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report , please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "According to Exploration Ground Systems (EGS) officials, the program does not track how EGS investments could benefit users beyond the Space Launch System (SLS) and Orion, but we found that the majority of EGS funds are being used to develop major components that will be exclusively used by SLS and Orion or require some modification to be used by another user. We found that EGS components fall into three categories: components that could be used for users beyond SLS and Orion with no modifications, providing they are not in use by SLS and Orion; components that could be used with some modification; and components that are solely for SLS and Orion.\nFor example, the Mobile Launcher has nine umbilicals and, according to EGS officials, over 900 pieces of ground support equipment to support SLS and Orion. According to National Aeronautics and Space Administration (NASA) officials, while the steel structure and platform of the Mobile Launcher could be used for another user, that user would have to meet weight limits of the structure and would need to design and install entirely new specialized equipment. Five components—among them, the Vehicle Assembly Building, Crawler-Transporter, and the Multi-Payload Processing Facility (part of Spacecraft Offline Processing)—have received funding from the 21st Century Space Launch Complex Initiative, which focuses on modernizing the infrastructure to support multiple users at Kennedy, in addition to EGS funding. These components can, with some or no modifications, be used by other users. The Crawler- Transporter, for example, has been upgraded by EGS in order to support the combined weight of the Mobile Launcher, SLS, and Orion, but according to EGS officials could be used by any user to transport equipment as long as the equipment was within the Crawler-Transporter’s carrying capacity.\nThe majority of EGS funds obligated to date are to develop components that require some modifications or will be exclusively used by SLS and Orion. See table 2 for allocation of Ground Systems Development and Operations (GSDO) funding between EGS and 21st Century Space Launch Complex Initiative.\nAs seen in the above table and its accompanying notes, from fiscal year 2012, when the EGS program started, to fiscal year 2015, the EGS program obligated $1,495.4 million to develop components for SLS and Orion. In the same years, $49.8 million from the 21st Century Space Launch Complex Initiative was used for some EGS components that may benefit users beyond SLS and Orion.", "To assess the extent to which the Space Launch System (SLS) program made progress in meeting cost and schedule commitments, we compared current program status with National Aeronautics and Space Administration’s (NASA) cost and schedule baselines for executing Exploration Mission 1 (EM-1) in 2018. We reviewed top SLS program and element-level risks as identified by NASA; analyzed the results of the SLS July 2015 critical design review to determine what software and hardware efforts present the highest risk to program cost and schedule; and reviewed monthly earned value management reports to identify the largest impacts on cost and schedule. In addition, we assessed SLS design production maturity against established knowledge-based, best practice standards. We compared the status of flight software development efforts and progress against NASA’s planned release schedule and reviewed the metrics NASA is using to assess software development status. During the course of our review, we examined other program documents that included program plans, quarterly program status review reports, assessments of SLS preliminary and critical design reviews by the NASA Standing Review Board that reviewed the program’s status at preliminary and critical design review independent from the program; and an assessment of the flight software development by a NASA Independent Verification and Validation team that reviewed software development status independent from the SLS program. We met with the SLS program, element-level and flight software officials at Marshall Space Flight Center in Huntsville, Ala.; representatives from the core stage contractor, Boeing, in Huntsville, Ala.; and officials from the Standing Review Board and the Independent Verification and Validation teams, which are composed of members from various NASA locations.\nTo assess the extent to which the Exploration Ground Systems (EGS) program has made progress in completing modifications to key components and ground support equipment at Kennedy Space Center, we identified EGS’s major components by reviewing program plans, critical design review documents, quarterly program status review documents, and budget materials. We identified the Vehicle Assembly Building, Mobile Launcher, and software as key construction and development efforts for our review because they are among the top program risks or the most expensive EGS projects. We observed EGS components during a site visit to Kennedy Space Center and discussed modification of the components with NASA officials. To evaluate the progress made in preparing these components and software to support the EM-1 test flight, we reviewed program plans and compared them to program status to assess whether EGS components and software were progressing as expected, critical design review documents to determine design maturity, quarterly program status reviews to identify risks, budget information to assess development costs, and contractor progress reports to identify any issues contractors faced that could impact cost and schedule. We also reviewed NASA’s Standing Review Board assessment from EGS’s preliminary and critical design reviews. We also evaluated the program’s integrated master schedule against the GAO’s best acquisition practices for scheduling in order to assess the validity of the EGS program’s critical path. Additionally, to determine the extent to which major ground system components at Kennedy Space Center directly support the SLS and Orion programs, we reviewed NASA budget and accounting data and interviewed agency officials.\nWe conducted this performance audit from September 2015 to July 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "Cristina T. Chaplain (202) 512-4841 or [email protected].", "In addition to the contact named above, Molly W. Traci (Assistant Director), Michael Armes, Matt Bader, Nabajyoti Barkakati, John Bauckman, Erin Cohen, Juana Collymore, Tana Davis, Juli Digate, Jennifer Echard, Laura Greifner, Jason Lee, Sylvia Schatz, Roxanna Sun, and John S. Warren, Jr. made key contributions to this report." ], "depth": [ 1, 2, 1, 2, 2, 2, 1, 2, 3, 3, 3, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "h2_full", "h0_full h3_full h1_full", "h0_full", "h0_full", "h0_full h3_full h1_full", "h0_full h1_full", "", "", "", "", "", "h2_full h1_full", "h0_full", "h3_full h1_full", "h1_full", "h0_full", "", "", "", "", "" ] }

{ "question": [ "How has the SLS evolved since 2015?", "What does this pressure threaten?", "How has the program tried to mitigate pressure?", "What risks does the program face moving forward?", "What are these risks likely to do?", "What does the figure below show?", "What is the EGS program making progress in?", "Which modifications are impeding progress?", "What threatens the EGS's launch readiness goal?", "What does NASA plan to do in 2016?", "How is this review structured?", "How could proceeding without the review negatively impact progress?", "What is NASA in the midst of?", "What will the SLS be?", "What is the EGS program developing to support the SLS?", "How much are these flights expected to cost?", "What did GAO find in July 2015?", "What did the House Committee on Appropriations report include?", "What does this report assess?", "How was the assessment developed?", "What does GAO plan to do in July 2016?" ], "summary": [ "The National Aeronautics and Space Administration's (NASA) new launch vehicle, the Space Launch System (SLS), has resolved some technical issues and matured its design since GAO's July 2015 report, but pressure remains on the program's limited cost and schedule reserves.", "This pressure, in turn, threatens its committed November 2018 launch readiness goal.", "The program has made progress in resolving some technical issues—for example, a major alignment problem with the welding tool for the core stage (SLS's structural backbone and fuel tank) was corrected.", "For example, the SLS program has not positioned itself well to provide accurate assessments of core stage progress—including forecasting impending schedule delays, cost overruns, and anticipated costs at completion—because at the time of our review it did not anticipate having the baseline to support full reporting on the core stage contract until summer 2016—some 4.5 years after NASA awarded the contract. Further, unforeseen technical challenges are likely to arise once the program reaches its next phase, final integration for SLS and integration of SLS with its related Orion and Exploration Ground Systems (EGS) human spaceflight programs.", "Any such unexpected challenges are likely to place further pressure on SLS cost and schedule reserves.", "The figure below shows key events in SLS and EGS launch readiness schedules.", "The EGS program is making progress in modifying selected facilities and equipment to support SLS and Orion, but is encountering technical challenges that require time and money to address.", "Modifications to two main components—the Vehicle Assembly Building, where the SLS is assembled, and the Mobile Launcher, the vehicle used to bring SLS to the launch pad—have already cost more and taken longer than expected as has development of EGS software.", "Like SLS, the program has reduced cost and schedule reserves, which threatens its committed November 2018 launch readiness goal.", "In June 2016, after all the systems necessary to support the first flight test are expected to have a stable design, NASA plans to start an integrated design review to demonstrate that the integrated systems will perform as expected.", "NASA guidance indicates that this type of review should also evaluate whether mission requirements are being met with acceptable risk within cost and schedule constraints. NASA officials stated that this review will have limited discussion of cost and schedule.", "Proceeding ahead without reassessing resources, however, could result in the EGS or SLS program exhausting limited resources to maintain pace toward an optimistic November 2018 launch readiness date.", "NASA is in the midst of developing systems needed to support deep-space exploration by humans.", "SLS will be NASA's first exploration-class launch vehicle in over 40 years to propel astronauts and cargo beyond low-Earth orbit.", "The EGS program is developing systems and infrastructure to support both SLS and the crew capsule, known as Orion.", "Together, the first planned SLS flight, the ground systems for that effort, and the first two Orion flights are estimated to cost almost $23 billion.", "In July 2015, GAO found that SLS's limited cost and schedule reserves were placing the program at increased risk of being unable to deliver the launch vehicle on time and within budget.", "The House Committee on Appropriations report accompanying H.R. 2578 included a provision for GAO to assess the acquisition progress of the SLS, EGS, and Orion programs.", "This report assesses the extent to which (1) SLS has made progress meeting cost and schedule commitments, and (2) EGS has made progress in completing modifications to key facilities and equipment.", "To do this work, GAO examined the results of design reviews, contractor data, and other relevant program documentation, and interviewed relevant officials.", "GAO plans to report separately on the Orion program in July 2016." ], "parent_pair_index": [ -1, 0, 0, -1, 3, -1, -1, 0, -1, -1, 3, 3, -1, -1, -1, 2, -1, -1, 0, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 0, 1, 1, 1, 1 ] }

{ "title": [ "", "Background: The Intelligence Community's Most Authoritative Products", "Congress as a Consumer of NIEs", "The 2002 NIE on Iraqi WMD", "NIE on Trends in Global Terrorism, 2006", "NIE on Prospects for Iraq's Stability, January 2007", "NIE on Iranian Nuclear Intentions and Capabilities", "Conclusion: Useful Products if Limitations Appreciated" ], "paragraphs": [ "", "National Intelligence Estimates (NIEs) represent the highest and most formal level of strategic analysis by the U.S. intelligence community. They are by definition forward-looking; as one participant in the estimative process has written, \"Estimates are not predictions of the future. They are considered judgments as to the likely course of events regarding an issue of importance to the nation. Sometimes, more than one outcome may be estimated.\" NIEs focus on foreign developments; they are not net assessments that directly compare U.S. and foreign capabilities and plans.\nThe responsibility for producing NIEs rests on the National Intelligence Council (NIC), an entity within the Office of the Director of National Intelligence (DNI). The NIC consists of senior analysts from the intelligence community and substantive experts from the public and private sector. After a decision is made to prepare an NIE, terms of reference (TORs) that define the major issues and drafting responsibilities are circulated to relevant intelligence agencies. One or more analysts, either from the ODNI or an intelligence agency, is asked to prepare a draft NIE. The draft estimate is then coordinated by senior officials of all intelligence agencies in a process that can be quite lengthy. Thereafter, NIEs are formally considered by the heads of relevant intelligence agencies and the DNI. The National Security Act requires that NIEs include, \"whenever the Council considers appropriate, alternate views held by elements of the intelligence community.\" Thus they may contain text, or \"footnotes,\" that pose alternative views from the judgments in the NIE. The conclusions of NIEs, however, are understood to reflect the official position of the DNI. Once approved, the NIE is forwarded to the President, senior policymakers, and the two congressional intelligence committees.\nIn drafting NIEs, analysts marshal evidence from all sources available to the intelligence community—human intelligence, signals intelligence, overhead surveillance, and others including the exploitation of open sources (foreign media and websites). The lengthy drafting and coordination process includes participation by agency analysts and occasionally outside experts with varying perspectives. At their best, NIEs provide a careful assessment of an international situation based on extensive collection and careful analysis that provides policymakers with insights into the opportunities and risks that the United States will face.\nIn general, NIEs on topics that involve sensitive collection or analysis of trends that are largely unknown to outside experts are the most valuable. On the other hand, NIEs addressing broad topics such as the future of democracy in the Middle East or the likely evolution of China in the next 20 years may not necessarily yield more accurate conclusions or more perceptive insights than the work of leading academic experts. Some observers argue that intelligence estimates that deal with such topics inevitably suffer from the absence of scrutiny by the wide and disparate community of scholars that challenges and debates conclusions of scholarly works in the open literature and ultimately has an important influence on public opinion. Most NIEs, on the other hand, describe the environment in which national security policy choices will likely be made in the foreseeable future, with analysis incorporating information that is not available to the general public.\nAt a minimum, NIEs require that differences among analysts be confronted and described. This is an important contribution, as policymakers need to know what is known by the intelligence community, what remains unknown, and what conclusions are drawn by the government's most experienced analysts.\nDuring the Cold War, NIEs on Soviet strategic forces provided an agreed-upon set of figures that were an integral part of plans for U.S. force structures and negotiations of a series of arms control treaties. On occasion, U.S. policies have not been coordinated throughout the executive branch or with Congress. Some policy makers assume that their own long experience and extensive personal contacts give them better insights than even the most senior intelligence officials. In considering major new initiatives, there can be an obsessive concern with the potential for leaks that limits discussion to a very small circle of advisers and excludes much of the intelligence community which is independent of political appointees.\nThere are other inherent limitations to the NIE process. NIEs are often prepared on broad issues that may involve not just foreign states or international groups but also the influence of U.S. policy or the interplay of U.S. with foreign actors. Although some NIEs will address the implications of several broad policy options, detailed treatments of U.S. plans have traditionally been defined as beyond the cognizance of intelligence agencies. In many cases, other agencies will have little inclination to share sensitive planning with the substantial number of intelligence analysts involved in the preparation of NIEs. In other cases, U.S. plans will depend more on future initiatives, such as legislation, that intelligence analysts would be unable to predict with accuracy.\nIntelligence agencies are committed—by statute and as a matter of professional integrity—to prepare analyses that are unbiased and nonpartisan. At times, however, the bureaucratic process that produces NIEs can shape the conclusions in ways that reflect agency perspectives; this can be the case, for instance, when intelligence judgments about threat environments have significant implication for U.S. military force structure. Moreover, if NIEs are tied too closely and too publicly to public debates there is a concern that intelligence agencies will either be inclined to emphasize evidence supporting an Administration's preferred policy options or to avoid controversial issues.\nFurthermore, it has been argued that NIEs are not necessarily the most important contribution of intelligence agencies, which produce thousands of assessments of varying complexity in a given year. A 9/11 Commission staff statement noted: \"Some officials, including Deputy DCI [Director of Central Intelligence] John McLaughlin, are skeptical about the importance of comprehensive estimates. McLaughlin has been in charge of the estimate process. He told us such estimates are time-consuming to prepare. Judgments are watered down in negotiations. Conclusions may duplicate those already circulated in more specific papers.\" A review of intelligence on Iraq by senior intelligence officials undertaken for the then-DCI in mid-2004 noted:\nNIEs rarely represent new analysis or bring to bear more expertise than already exists in analytic offices; indeed, drafters of NIEs are usually the same analysts from whose work the NIE is drawn. Little independent knowledge or informed outside opinion is incorporated in estimative products. The preparation of an NIE therefore consists primarily of compiling judgments from previous products and debating points of disagreement....\nThe fundamental question is whether National Intelligence Estimates add value to the existing body of analytic work. Historically, with few exceptions, NIEs have not carried great weight in policy deliberations although customers have often used them to promote their own agendas.", "Pursuant to the National Security Act, NIEs are prepared \"for the Government,\" not just executive branch officials. Accordingly, NIEs are forwarded to the two congressional intelligence agencies (the Senate Select Committee on Intelligence (SSCI) and the House Permanent Select Committee on Intelligence (HPSCI))—and, on occasion, other congressional committees. Use of NIEs by committees will vary. The two intelligence committees oversee the activities of all intelligence agencies, including their analytical efforts, and thus they review NIEs on a continuing basis. Other committees—especially the armed services and foreign affairs and foreign relations committees—may, along with the intelligence committees, be especially interested in NIEs that deal with issues that directly affect upcoming U.S. foreign and military decisions.\nAlthough usually NIEs have been produced at the request of executive branch officials and have been used primarily by executive branch policy makers, NIEs have at times been the subject of considerable congressional interest. Congress has from time to time informally requested NIEs (as was the case with the NIE on Iraqi WMDs produced in 2002, as discussed below), but the House intelligence authorization bill ( H.R. 2082 ) for FY2008 included a provision (§407) mandating an NIE on global climate change. The Bush Administration resisted this provision:\nThis section sets a harmful precedent. The production of intelligence products on topics of interest to the Executive Branch or Congress should be left to cooperative relationships and established dialogue and should not be reflected in law, particularly in a manner that impinges on the flexibility of IC [Intelligence Community] professionals to approach a task in the most appropriate manner.\nSubsequently, the conference report on H.R. 2082 omitted the statutory requirement for an NIE, but noted that the DNI had stated that an assessment on the effects of global climate change was being prepared and the \"conferees expect that the national intelligence assessment will be transmitted to Congress in a timely manner.\" The bill was never enacted but in November 2008 the NIC published an assessment (not an NIE) entitled, Global Trends 2025: A Transformed World that addressed climate change issues, and in 2009 the CIA opened a Center on Climate Change and National Security.\nCongress included a requirement for an NIE on Iran in the FY2007 Defense Authorization Act ( P.L. 109-364 , §1213) to be submitted in classified form. The statute also stated that, \"Consistent with the protection of intelligence sources and methods, an unclassified summary of the key judgments of the National Intelligence Estimate should be submitted.\" The Key Judgments of NIE on Iran: Nuclear Intentions and Capabilities were released in early December 2007 apparently without prior transmittal to Congress. The accompanying statement by Principal Deputy DNI Donald Kerr stated, without reference to the statute: \"The decision to release an unclassified version of the Key Judgments of the NIE was made when it was determined that doing so was in the interest of our nation's security.\"\nSome observers suggest that NIEs could better support congressional deliberations if they were the subject of further hearings by relevant committees. More extensive hearings by relevant committees would provide opportunities for Members to assess the validity of the information on which the NIEs were based and the extent of support for conclusions reached by the drafters of the NIE although there would inevitably be concerns about enlarging the number of persons exposed to highly sensitive intelligence, especially detailed discussion of intelligence sources and methods. Other observers caution, in addition, that making sensitive NIEs the subjects of congressional hearings, especially when an important vote is approaching, could focus media attention on intelligence judgments that are only part of a complex decision-making process. There is a concern that hearings have the potential to undermine the statutory mandate that national intelligence be objective and \"independent of political considerations. \" It is also possible that the mechanics of an NIE might be misinterpreted, especially the ways in which main and alternate views are set forth, and that debate could result in \"cherry picking\" views that are congenial to one position or another.\nNIE production schedules could also be more closely coordinated with the legislative branch to ensure that the intelligence community addresses major topics on which Congress expects to consider legislation. On the other hand, some observers argue that Congress might draw up lists of NIEs that would overly tax limited analytical resources and infringe on the President's authority to direct the work of the intelligence community.\nThe influence of intelligence assessments on congressional debates offers cautionary lessons. In late 1990, intelligence assessments (albeit not an NIE) concluded that Operation Desert Storm (that became the Persian Gulf War of 1991) would last at least six months and cause many casualties.\nLargely on the basis of these dire predictions several Senators on the SSCI—including its chairman, David L. Boren of Oklahoma—as well as the Armed Services Committee Chairman, Sam Nunn of Georgia, ultimately voted against the resolution authorizing the President to send troops to the Gulf. Later, when it turned out that coalition forces achieved immediate air superiority and the ground war ended in a matter of days with relatively few American casualties, the Senators who had voted in the negative were understandably upset. Some had lost considerable political support in their home states as a result of their votes. Senator Nunn later said the vote not only had hurt his credibility as chairman of the SASC [Senate Armed Services Committee] but also had removed any thoughts he might have had about running for President, knowing that his vote would have been a \"major debating point\" in any election campaign. After all, they were Senators supposedly \"in the know\" and yet appeared to have egregiously misread the situation. Most felt \"sandbagged\" by the Intelligence Community.\nA former staffer was quoted as saying that \"the real problem for the committee was that it was never given 'blue team' information [information on U.S. military capabilities]. It was never advised, for example, that stealth aircraft were to be used. It was never provided an assessment of our forces versus theirs.\"", "Intelligence analysis is inherently an intellectual activity that requires knowledge, judgment, and a degree of intuition. These qualities are usually not quantifiable nor can they be simply mandated. Erroneous estimates can occur and have occurred in recent years. The history of the Iraq NIE prepared in 2002, Iraq's Continuing Programs for Weapons of Mass Destruction, is instructive in this regard. The fact that Iraq had had WMD in the past and had previously used them both against Iran and regime opponents within Iraq was well known. That Iraq had violated agreements made after the conclusion of Desert Storm in 1991 and expelled international inspectors in 1998 was also incontestable. It was also evident that Saddam Hussein's regime had demonstrated no eagerness to comply with more recent mandates of the U.N. and to cooperate with U.N. inspectors.\nBecause, however, much of the public debate focused on Iraq's then-current WMD capabilities, the leadership of the Senate Intelligence Committee asked for an NIE \"on the status of Iraq's programs to develop weapons of mass destruction and delivery system, the status of the Iraqi military forces, including their readiness and willingness to fight, the effects a U.S.-led attack on Iraq would have on its neighbors, and Saddam Hussein's likely response to a U.S. military campaign designed to effect regime change in Iraq.\" The NIE was requested on an immediate basis. Prepared under intense pressure, the NIE was drafted and made available to Congress four weeks later, on October 1, 2002. An unclassified White Paper, containing many of the NIE's judgments, was issued shortly thereafter.\nIn large measure the NIE reinforced judgments that had previously been made in earlier intelligence products. The NIE maintained:\nIraq has continued its weapons of mass destruction (WMD) programs in defiance of U.N. resolutions and restrictions. Baghdad has chemical and biological weapons as well as missiles with ranges in excess of U.N. restrictions; if left unchecked, it will probably have a nuclear weapon during this decade.\nBaghdad hides large portions of Iraq's WMD efforts. Revelations after the Gulf war starkly demonstrate the extensive efforts undertaken by Iraq to deny information.\nThere was a consensus of all agencies that the Iraqis were determined to reconstitute their WMD programs and had made some progress in this effort. This judgment was pervasive among intelligence analysts in this country and abroad (indeed even some senior Iraqi military leaders believed Iraq had WMDs). In setting forth the evidence for WMD reconstitution, however, the NIE relied on evidence and analysis that was subsequently determined to be deficient. To a large extent the judgment that Iraq had begun reconstituting its nuclear capabilities depended on information regarding aluminum tubes that most, but not all, agencies judged to be designed for a uranium enrichment effort. There was a fairly wide agreement that Saddam Hussein planned to reconstitute the WMD programs once Iraq got out from under the sanctions regime.\nIn retrospect, few would deny that Saddam Hussein had not relinquished his ultimate goal of having viable WMD capabilities and his failure to comply with U.N. obligations regarding inspections, but it is clear that the intelligence community did not adequately flag the inherent uncertainties of the evidence supporting Iraq's WMD capabilities in mid-2002. Intelligence agencies had provided copious information about Iraqi WMD programs, but ultimately did not reach accurate conclusions. In part, this failure resulted from the difficulty of the target, but it is apparent in retrospect that intelligence officials provided Congress with an over-generalized estimate that relied heavily on widely accepted judgments (a tendency that has been described as \"cognitive bias\") and highly limited collection from human sources (and some of this reporting was wrong), and did not offer a better sense of the ambiguities and limitations of the available evidence. In particular, in this view, the intelligence community conveyed a sense of dynamism in regard to Iraqi WMD programs that was not justified by evidence available.\nThis NIE has been much debated. The Senate Intelligence Committee has reported two extensive, and highly critical, assessments of the NIE. In 2004 the committee concluded that\nMost of the major key judgments in the Intelligence Community's October 2002 National Intelligence Estimate (NIE), Iraq's Continuing Programs for Weapons of Mass Destruction , either overstated, or were not supported by, the underlying intelligence reporting. A series of failures, particularly in analytic trade craft, led to the mischaracterization of the intelligence.\nSubsequently, the Commission on the Capabilities of the United States Regarding Weapons of Mass Destruction, headed by Laurence Silberman and former Senator Charles Robb, also devoted attention to the NIE's shortcomings.\nAfter the collapse of the Saddam Hussein regime, the Iraq Survey Team, composed of experts from various U.S. agencies looked at all evidence available on the ground in Iraq and did not find evidence that Iraq had an active WMD effort. They did agree that there was a likelihood of reconstitution once sanctions were lifted. The Iraq Survey Team concluded that Saddam Hussein saw many benefits to an ongoing WMD program but was primarily concerned with seeing sanctions lifted. The team concluded that Saddam Hussein viewed Iran as Iraq's principal enemy in the region and that he believed WMD were necessary to counter Iran.\nAn important question is the extent to which the faulty NIE influenced the congressional vote on the legislation that was enacted as the Authorization for Use of Military Force against Iraq ( P.L. 107-243 ). The NIE made firm judgments about Iraq's continuing WMD programs, its links to terrorists, etc., and these judgments were reflected in the legislation.\nP.L. 107-243 did not, however, focus solely on WMD; it emphasized a long pattern of Iraqi violations of U.N. resolutions and its \"brutal repression of its civilian population thereby threatening international peace and security in the region.\" It also cited Iraq's support of terrorist organizations that \"threaten the lives and security of United States citizens.\" A problem for the intelligence community was the heavy emphasis on WMD programs in the public debate prior to congressional consideration of the resolution, which tended to obscure other factors that were not dependent on technical analyses of highly limited evidence.", "Also instructive is the more recent NIE, Trends in Global Terrorism: Implications for the United States , prepared in April 2006 with the key judgments officially released in September 2006 after several accounts had appeared in the media. The NIE's Key Judgments reflected the intelligence community's conclusion that the global jihadist movement \"is spreading and adapting to counterterrorism efforts.\" The jihadists, the NIE concluded, \"will use improvised explosive devices and suicide attacks focused primarily on soft targets to implement their asymmetric warfare strategy, and that they will attempt to conduct sustained terrorist attacks in urban environments.\" Much public commentary on the NIE was directed towards its conclusions that the \"Iraq conflict has become the 'cause celebre' for jihadists, breeding a deep resentment of U.S. involvement in the Muslim world and cultivating supporters for the global jihadist movement.\"\nThe detailed analysis that supported these conclusions has not been made public, but it is worth noting that the NIE does give some generalized attention to policy approaches for the United States and its allies that could affect the future of jihadist terrorism. The NIE referred to the possibility of \"greater pluralism and more responsive political systems in Muslim majority nations,\" and the possibility that jihadists in Iraq will be perceived as having failed. It maintains that countering jihadists will require \"coordinated multilateral efforts that go well beyond operations to capture or kill terrorist leaders.\"\nThese brief references hardly exhaust the factors that will affect trends in global terrorism over the next decade. The NIE did not apparently address the question that has been the focus of much outside academic analysis—the overall religious and philosophical challenge by radical Islam to Western values.\nThe conclusions of this NIE may suggest a number of possible responses. Although NIEs can lay out in general terms the possible ramifications of different options, some observers believe that neither the drafters of the NIE nor the intelligence community as a whole should be viewed as best placed to propose alternative approaches for U.S. policy makers. Intelligence analysts can provide tentative assessments of the potential effect of various U.S. initiatives, but, according to this perspective, the full range of options will have to be developed elsewhere. Ultimately, policies are frequently based not only on an appreciation of the international environment and the threat, but also on the capabilities of the United States and its allies and the budgetary and political constraints that they face. These latter factors are not the responsibilities of intelligence analysts.", "Responding to another congressional request, the Office of the Director of National Intelligence forwarded an NIE entitled Prospects for Iraq's Stability: A Challenging Road Ahead in January 2007 with unclassified key judgments released to the public. The Key Judgments were accompanied by several pages of text describing the NIE process and an explanation of estimative language. Changes implemented subsequent to the Intelligence Reform Act of 2004 were noted, specifically new procedures to integrate formal reviews of source reporting and technical judgments and the application of more rigorous standards. The document notes that agency heads are now required to submit \"formal assessments that highlight the strengths, weaknesses, and overall credibility of their sources used in developing the critical judgments of the NIE.\" In addition, a textbox is to be included in future NIEs to explain the meaning of terms such as \"we judge\" or \"we assess\" and the differences between high, moderate, and low confidence in various judgments. The use of such terms has occasionally been a source of confusion when they had come to have accepted meanings among analysts that were not well understood by policymakers.\nWritten at a time of intense congressional concern about the future of Iraq and in response to a congressional request, the NIE's Key Judgments included a finding that the overall security situation in Iraq will continue to deteriorate unless serious efforts are made to reverse existing conditions. The NIE reviewed the various challenges facing the Iraqis—mutually antagonistic ethnic communities, the weakness of Iraqi Security Forces, and the extremist groups such as Al Qaeda that act as \"accelerators\" of the inter-sectarian struggle. The NIE maintained that \"Coalition capabilities, including force levels, resources, and operations, remain an essential stabilizing element in Iraq.\" Looking at the regional environment, the NIE noted that although some of Iraq's neighbors provide support that \"clearly intensifies the conflict in Iraq,\" the involvement of outside actors \"is not likely to be a major driver of violence or the prospects for stability because of the self-sustaining character of Iraq's internal sectarian dynamics.\" Undoubtedly, the classified NIE provides the evidentiary background of these judgments and a discussion of the extent of the intelligence community's confidence in the NIE's conclusions.", "On December 3, 2007, the Office of the Director of National Intelligence released unclassified Key Judgments of an NIE prepared in November 2007, Iran: Nuclear Intentions and Capabilities . Donald Kerr, the principal deputy DNI, stated in a covering memorandum that numerous statements based on a 2005 assessment had been made on the record. \"Since our understanding of Iran's capabilities has changed, we felt it was important to release this information to ensure that an accurate presentation is available.\"\nThe Key Judgments of the 2007 NIE state that \"We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program; we also assess with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons.\" The NIE assessed that the program \"was halted primarily in response to international pressure\" and argued that this assessment \"suggests that Iran may be more vulnerable to influence on the issue than we judged previously.\"\nThe dramatic shift in analytical conclusions received extensive attention from the media and Members of Congress given Iranian policies in the region, Iranian President Ahamdinejad's campaign against Israel's legitimacy, and the efforts of the U.S. and European allies to impose sanctions on Iran until it complies with United Nations Security Council demands that it cease uranium enrichment. A factor in the background may have been media reports that a U.S. strike against Iranian nuclear sites had been under consideration. The NIE's Key Judgments did not indicate that Iran had ceased its nuclear efforts but, in the view of some observers, it undermined the urgency of the Administration's efforts.\nFew would argue that the conclusions drawn by the NIE should not have been brought to the attention of policymakers in the executive branch and Congress, but a number of observers have argued that the Key Judgments overemphasized the importance of the nuclear weapon design and weaponization work at the expense of ongoing uranium conversion and enrichment efforts that would be essential to achieving nuclear weapons capabilities. Dennis Ross, a diplomat with long experience in the Middle East, noted: \"While nothing has changed, the NIE has created a new story line.\" According to Ross, the NIE will unwisely focus public attention on nuclear weapons per se rather than Iran's larger nuclear effort. He writes:\nWeaponizing is not the issue, developing fissionable materials is. Because, compared with producing fissionable material, which makes up the core of nuclear bombs, weaponizing it is neither particularly difficult nor expensive.\nFormer Secretary of State Henry Kissinger argued: \"we could be witnessing not a halt of the Iranian weapons program—as the NIE asserts—but a subtle, ultimately more dangerous, version of it that will phase in the warhead when fissile material production has matured.\"\nA focus of the Key Judgments was the assessment Iran ended its nuclear program \"in fall 2003 ... primarily in response to international pressure.\" Observers have noted that the Key Judgments did not indicate whether such \"international pressure\" included the collapse of Saddam Hussein's regime in April 2003. It is plausible that Iranian officials, like the U.S. intelligence community, may have believed that Iraq had WMD capabilities and, when that turned out to be not the case, made a decision that their own nuclear program was no longer necessary. The released Key Judgments do not, however, address this issue.\nThe NIE's Key Judgments also suggest that \"some combination of threats of intensified international scrutiny and pressures, along with opportunities for Iran to achieve its security, prestige, and goals for regional influence in other ways, might—if perceived by Iran's leaders as credible—prompt Tehran to extend the current halt to its nuclear weapons program.\" This judgment is based on an unacknowledged assumption being that Iran's goals can be accommodated by other countries, including the United States, if they are pursued without an active WMD program. This crucial issue also is not addressed in the released Key Judgments.\nIran nuclear plans remain a major concern of the intelligence community. A new NIE was prepared in early 2011 that revised some of the conclusions of the 2007 effort, but neither the NIE itself or its key judgments was made public. The current DNI, James Clapper, prior to his confirmation hearing in July 2010, indicated that he would ensure that the intelligence committees would be supplied with underlying intelligence reporting for the new NIE. In his actual testimony, Mr. Clapper indicated his belief that there have been \"substantial process improvements\" in preparing NIEs. He referred specifically to efforts to assess the sources that the NIE used, the enlisting of outside readers (\"red teaming\"), and indications of confidence levels of the drafters in the evidence and the extent of collection gaps. Clapper acknowledged the value of the Senate Intelligence Committee's critique of earlier NIEs: The committee \"laid out exactly what went wrong. I can attest since I was there [that] it was not because of politicization or any political pressure. It was because of ineptitude.\"\nTo what extent the release of the Key Judgments of the NIE changed the \"story line\" of U.S. policy remains uncertain. Observers suggest that intelligence analysis with all its inevitable uncertainties and ambiguities seldom yields a water-tight argument for a new policy. Policy builds upon the factual base that intelligence analysis provides, but it is also built upon assessments of our own national interests that are beyond the mandate of the intelligence community. Recognizing that any Iranian success in testing a nuclear weapon in the near future would seriously undermine confidence in its core capabilities, the intelligence community has presented important evidence about current Iranian nuclear efforts. These facts do not change U.S. interests, but only how they are pursued and how they are explained to the public. Although the \"story line\" may have to be adjusted, the realities of U.S. interests and the failure of the Iranian regime to abide by its treaty commitments remain.", "Congress is and will continue to be an important consumer of national intelligence, but there are concerns that mandating NIEs may not support the legislative process to the extent that some have anticipated. NIEs can provide the intelligence community's best evidence and analysis on major issues of national security and can highlight areas where information is lacking, but they usually require lengthy preparation and coordination before they can be disseminated. The history of the NIE on Iraqi WMD suggests that compressing the production schedule can be counterproductive. Moreover, conclusions of NIEs may not be informed by knowledge of initiatives planned or underway by others in the executive or legislative branches. A more public role for NIEs in debates on national security policy issues could obscure their inherent limitations and distort the discussion of the policy issues.\nIn some cases, Congress may find intelligence assessments or briefings prepared in a less structured way and within tighter time constraints better serve its legislative needs than do formal NIEs. The creation of the Office of the DNI provides a focal point from which the analytical capabilities of all intelligence agencies can be brought to bear on given issues, even ones that are narrowly focused. It is considered likely that a combination of NIEs on some topics, supplemented by more limited assessments supported by an ongoing dialogue with intelligence analysts, may provide the most effective support to the legislative process.\nThere appears to be some indication that Congress may be growing more inclined to seek reports from the DNI rather than NIEs. The Senate-passed version of the FY2010 Defense Authorization bill ( H.R. 2647 ) would have required an NIE (§1071) on the nuclear aspirations of non-nuclear weapons states and non-state entities; the conference version of the same bill deleted the requirement for the NIE but asked for biennial reports given that \"the conferees recognize that elements of the required report may be included in other reports prepared by the intelligence community.\" Similarly, Section 1240 of the FY2012 Defense Authorization bill, passed by both chambers in December 2011, requires a report from the Secretary of Defense \"in coordination with the Director of National Intelligence\" on Russian nuclear forces by March 2012.\nThe complicated history of FY2010 intelligence authorization legislation included several different requests for intelligence assessments. The House version of H.R. 2701 reported in June 2009 contained provisions for requiring an NIE on Global Supply Chain Vulnerabilities and either an NIE or a report on the intentions and capabilities of Iran, Syria, and North Korea. A manager's amendment introduced prior to floor consideration in February 2010 changed the requirement from an NIE on the global supply chain to a \"report.\" These requirements were not, however, included in the Senate version that was ultimately enacted. The Senate report submitted in July 2010 stated that requirements for reports had been eliminated \"in the expectation that the information required by these reports would be obtained by the congressional intelligence committees during the course of normal oversight activities. The ODNI has offered to provide the information requested in these reports in briefings or hearings.\" The Senate bill was incorporated in the version of H.R. 2701 that ultimately was enacted in October 2010, becoming P.L. 111-259 .\nNIEs are only one element of the national security decision-making process. They can outline the effects of various policy approaches in general terms, but it is unlikely that they will become the vehicles for detailed consideration of options that depend on the interrelationships of executive branch and congressional decisionmaking. NIEs will arguably be most useful when they offer a thorough assessment of a given international situation, laying out different perspectives among analysts, and providing a realistic indication of the limitations of the evidence available. However ponderous their production may be, NIEs have the advantage of reflecting formal concurrence or nonconcurrence from the heads of relevant intelligence agencies. Less formal products theoretically could allow the DNI to provide analysis without reference to the NIC and without the inclusion of \"alternate views held by elements of the intelligence community\" that are statutorily required in the case of NIEs." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full", "h1_full", "h0_full", "", "", "h1_full", "h2_full" ] }

{ "question": [ "Who are NIEs of interest to?", "What do they represent?", "Are NIEs reliable?", "Where was this demonstrated?", "What is Congress's historical relationship with NIEs?", "Why doesn't Congress often rely on NIEs?", "What did the FY2007 Defense Authorization Act request?", "How was this NIE prepared?", "What did this NIE find?", "How was this NIE received?", "What is the emerging consensus on releasing NIEs?", "Why are there concerns over releasing NIEs?", "How did Congress act on these concerns in 2010?", "How did Congress act on these concerns in 2011?" ], "summary": [ "National Intelligence Estimates (NIEs) are often of considerable interest to many Members of Congress.", "They represent the most formal assessment of a given national security issue by the U.S. intelligence community.", "The intelligence process, however, is not an exact science and, on occasion, NIEs have proved unreliable because they were based on insufficient evidence or contained faulty analysis.", "This was demonstrated in the NIE produced in 2002 on Iraqi Weapons of Mass Destruction, parts of which were significantly inaccurate.", "Traditionally, Congress has not been a principal consumer of NIEs.", "Although Congress has on occasion requested NIEs and expressed interest in their conclusions, the experience with the NIE on Iraqi WMD and other assessments has led some Members to question their usefulness.", "The FY2007 Defense Authorization Act (P.L. 109-364, §1213) specifically requested a comprehensive NIE on Iran.", "The NIE was to be prepared in classified form and an unclassified summary of key judgments forwarded, \"consistent with the protection of intelligence sources and methods.\"", "In early December 2007 the DNI released unclassified key judgments of a NIE, Iran: Nuclear Intentions and Capabilities. The NIE judged \"with high confidence that in fall 2003, Tehran halted its nuclear weapons program.\"", "Even though the NIE did recognize \"with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons,\" the public release of the key judgments at a time of ongoing diplomatic initiatives was widely considered problematical.", "There seems to be an emerging consensus that publicly releasing NIEs, or even unclassified summaries, has limitations.", "Some of the nuances of classified intelligence judgments are lost and there are concerns that public release of an unclassified summary of a complicated situation does not effectively serve the legislative process.", "In passing the FY2010 Defense Authorization Act (P.L. 111-84), Congress chose not to require an NIE on the nuclear ambitions of certain states and non-state actors, but rather to request biennial reports (with unclassified summaries) from the DNI.", "Similarly, the FY2012 Defense Authorization bill, H.R. 1540, passed by both chambers in December 2011, requires a report on Russian nuclear forces to be prepared by the Secretary of Defense \"in coordination with the Director of National Intelligence.\"" ], "parent_pair_index": [ -1, 0, 0, 2, -1, 0, -1, 2, 2, 2, -1, 0, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3 ] }

{ "title": [ "", "Expedited Procedures of the Congressional Review Act", "Congressional Disapproval of Regulations", "Expedited or \"Fast Track\" Procedures", "Statutory Time Frames", "Initiation Period and Action Period", "Initiation Period", "Action Period", "Effect of Sine Die Adjournment", "Waiting Period", "Effects of Counting Time Periods in Different Ways", "Disapproval of Rules After they Take Effect", "Effect on Waiting Period of Action on Disapproval Resolution", "Elements of the Expedited Procedures", "Submission of Rules", "Initiation of Disapproval Resolutions", "Form of Disapproval Resolutions", "Committee Action in the Senate", "Taking Up a Disapproval Resolution in the Senate", "Floor Consideration in the Senate", "Final Congressional Action", "Vetoes and Override Attempts", "Limitations of the Expedited Procedures", "No Expedited Procedures for Initial House Consideration", "Likely Need for Super-Majority", "Possibility of Differing Action in Each House", "Non-Identical Disapproval Resolutions", "Amendment Making Resolution Ineligible for Expedited Procedure", "Lack of Companion Resolutions in Both Houses" ], "paragraphs": [ "", "", "The Congressional Review Act, enacted in 1996, establishes special congressional procedures for disapproving a broad range of regulatory rules issued by federal agencies. Before any rule covered by the Act can take effect, the federal agency that promulgates the rule must submit it to Congress. If Congress passes a joint resolution disapproving the rule, and the resolution becomes law, the rule cannot take effect or continue in effect. Also, the agency may not reissue either that rule or any substantially similar one, except under authority of a subsequently enacted law.\nThe Congressional Review Act establishes special \"expedited procedures\" (also known, more informally, as \"fast track\" procedures) for congressional action on these joint resolutions of disapproval. The expedited procedures established by the Act include several special features, not found in many other statutes providing for expedited procedures, that raise issues about how Congress may apply the procedures in practice. To begin with, most (though not all) of the expedited procedures established by the Act regulate action only in the Senate. The Act also provides for an unusually complex set of action periods and deadlines. Finally, other provisions of the Act impose restrictions that shape and limit the opportunities for action afforded by the expedited procedures.", "An expedited procedure, or \"fast track\" procedure, is a set of statutory provisions that govern congressional consideration of a specified kind of measure. Most expedited procedures regulate consideration of joint resolutions either to (1) disapprove some action that the statute authorizes the President, or an agency of the executive branch, to take only if Congress does not disapprove, or (2) approve some action that a statute authorizes to be taken only if Congress approves a specific request to do so. The purpose of the expedited procedure is to enable timely action on the resolution of disapproval or approval by ensuring that Congress will be able to take it up, and complete action on it, within a limited period of time.\nExpedited procedures that are provided for in a statute function as rules of each house of Congress. These rules, however, are applicable only to the measures specified by the statute. The Constitution confers the power to make procedural rules on each house of Congress separately, but as with any other statute, enactment of a statute that establishes an expedited procedure requires action by both houses and the President. For this reason, expedited procedure statutes usually include language declaring that those procedures are enacted under the constitutional rulemaking authority of each house, and reserving to each house the authority to change those applicable to itself. The Congressional Review Act follows this practice.", "The Congressional Review Act establishes three principal time periods for congressional action on a joint resolution disapproving a rule, or regulation, proposed by the executive branch. Two of these, here called the initiation period and the action period , regulate congressional action on joint resolutions of disapproval under the Act. The third, which this report refers to as the waiting period , affects the possible effective date of certain rules that the Act defines as \"major.\"\nEach of the three time periods nominally runs for 60 days, and all run roughly concurrently. However, the starting point of the initiation period may differ slightly from the others, and the days of the three periods are counted in different ways. These differences (elaborated in the following pages, but summarized below in Table 1 ) play a key role in determining how the Act may operate.\nThe Act also includes procedures governing final action to reconcile House and Senate action on a disapproval resolution submitted and considered in accordance with the Act. These procedures need not occur within the constraints of the time periods specified, and are not associated with any provisions restricting the time at which they must occur.\nPursuant to other provisions of the Congressional Review Act, however, various actions by Congress or the President can elaborate or alter the effect and application of these three basic time periods. Specifically:\nthe sine die adjournment of a session can result in renewal of the initiation period and action period; congressional action to defeat a disapproval resolution can result in termination of the waiting period; and presidential veto of a disapproval resolution can bring about an additional waiting period, whose extent may depend on subsequent congressional action in relation to the veto.\nThe following sections address the operation of these subsidiary time restrictions as well as the three basic ones.", "Even in the absence of the Congressional Review Act, the general legislative powers of Congress would presumably always allow passage of a bill or joint resolution overriding or abolishing a rule or regulation promulgated pursuant to law by an executive branch agency. The effect of the Congressional Review Act is simply to establish expedited procedures for congressional consideration of a joint resolution accomplishing this end. The Act makes these expedited procedures available to Congress if two conditions are met. First, a disapproval resolution may be considered under the expedited procedure only if it is submitted during a specified initiation period. Second, the Senate may consider the resolution under the expedited procedure only during a specified action period. (As discussed later, the resolution must also conform to certain content requirements.)", "To be eligible for consideration under the terms of the Act, a disapproval resolution must be submitted in either house within 60 days after Congress receives the rule. In contrast to both the waiting period and the action period, recess days are excluded in calculating this initiation period. Any day that either house is in adjournment during a recess of more than 3 days does not count toward this time limit. Normally, in other words, weekend days will count toward the initiation period, but district work periods will not.", "The action period applies only to initial consideration in the Senate, because the Act establishes no expedited procedures for initial House consideration. The Senate may use the expedited procedures to complete initial consideration of a disapproval resolution only during the 60 days of session following congressional receipt of the rule (and, if required, its publication in the Federal Register ). Any day on which the Senate does not meet does not count toward the time limit for this action period.", "The Congressional Review Act makes special provision for the action period and initiation period if, within 60 days of session after a rule is submitted, Congress adjourns its session sine die. Under these conditions, both periods start over again in the new session of Congress, beginning in each house on the 15 th day of session after Congress reconvenes.\nThis provision helps ensure that Congress will effectively have the full periods established by law to act on a disapproval resolution under the expedited procedure. Absent this special provision, the initiation period and action period might end up being split between two sessions of Congress, so that in each session Congress would have less than 60 days to act. If a President submitted a proposed rule shortly before a sine die adjournment, Congress might not find it feasible to complete action on a disapproval resolution either in the time remaining before the end of the session, or in the portion of the 60 days remaining at the start of the new session. Completing action could be especially difficult when the new session was the first session of a new Congress, for in that case the disapproval resolution would have to be submitted anew, and proceed through all the stages of the legislative process from its start, in perhaps many fewer than 60 days. Renewal of the full action period and initiation period in the new session is intended to prevent this situation.", "Under the Administrative Procedure Act, a proposed rule may go into effect 30 days after its promulgation in the Federal Register , unless the rule itself provides for a later date. The Congressional Review Act alters this stipulation only for what it defines as \"major rules.\" In general, a rule is \"major\" if the Office of Information and Regulatory Policy, in the Office of Management and Budget (OMB), determines that it will have economic effects of a certain level of significance. The Act provides no means for Congress to alter or override an executive determination that a rule is or is not \"major.\"\nThe Congressional Review Act provides that a \"major rule\" may not take effect until 60 calendar days after the rule has been both published in the Federal Register and submitted to Congress (unless the rule is one for which such publication is not required, in which case the 60 days begins when the rule is simply submitted to Congress). The President may waive this additional waiting period for a \"major rule\" if he determines that, for any of several stated reasons, more expeditious implementation is necessary, and so notifies Congress. If he does so, the \"major rule\" may go into effect subject only to the stipulations of the Administrative Procedure Act.\nIn sum, the 60-day waiting period established by the Congressional Review Act applies only to \"major rules\" for which the President has not waived its application. Rules that are not \"major,\" as well as \"major rules\" for which the President waives the additional waiting period, may take effect, as provided by the Administrative Procedure Act, after 30 days, unless the rule itself provides for a later date.", "The waiting period for \"major rules\" is defined in calendar days. The action period and initiation period are defined in ways dependent on the congressional schedule. As a result, the waiting period will normally expire first, because its \"clock\" runs continuously without interruption. The action period for the Senate normally will expire later, because its \"clock\" pauses on each day the Senate does not meet. The initiation period normally will expire between the other two, because when Congress does not meet, its \"clock\" sometimes runs (during breaks of three days or less) and sometimes pauses (during more extended recesses).\nFor example, suppose that after a \"major rule\" is submitted and published, each house meets for 5 days a week, except for one recess of two weeks. The waiting period expires after 60 calendar days. The recess extends the initiation period to 76 calendar days. The action period elapses only at the rate of 5 days per week when the Senate is in session, and not at all during the recess. It expires after 14 weeks, or 96 calendar days.\nThese differences have significant implications on how the disapproval procedure under the Act may operate. Specifically:\nThe initiation period and action period pause when Congress is not in session. As a result, they cannot expire while Congress is out of session, and so cannot, by the timing of their expiration, prevent congressional action under the expedited procedures of the Act. The action period normally will continue after the initiation period ends. If any disapproval resolution is submitted during the initiation period, some time will normally remain in the action period, during which the Senate can consider the resolution under the expedited procedures of the Act. The initiation period normally will expire before the action period does. If any resolution is submitted after the initiation period expires, Congress will be unable to consider it under the expedited procedures of the Act, even if the action period has not expired. The presence of the waiting period means that Congress will normally have 60 days to use the expedited procedures of the Act to disapprove a \"major rule\" before it becomes effective. Because the action period normally will continue after the waiting period ends (and, by the same token, after the effective date of rules other than \"major rules\"), Congress will normally retain the ability to use the expedited procedures of the Act to disapprove a rule for some period after the rule has already gone into effect.\nThe following two sections pursue the implications of this last circumstance.", "The opportunity for Congress to disapprove a rule that has already taken effect can arise in several different ways. First, the rule may be a \"major rule,\" which normally may take effect when the waiting period expires. In this case the action period for the Senate normally will continue after the waiting period ends. The Senate remains able to act on a disapproval resolution under the expedited procedure during the remainder of the action period.\nSecond, a rule that is not a \"major rule\" is not subject to the waiting period, and so may take effect even earlier in the action period. During the remainder of the action period, the Senate has a correspondingly longer window of opportunity to adopt a resolution, under the expedited procedure, disapproving the rule that has already taken effect.\nThird, Congress may adjourn sine die before the original action period expires. Both the action period and the initiation period begin anew with the 15 th day of session in the following session of Congress. The adjournment, however, does not extend either the waiting period for a \"major rule\" or any other restriction on the effective date of a rule. The date when the rule takes effect is unaffected by the sine die adjournment. In the new session, as a result, the procedures of the Congressional Review Act remain available for Congress to disapprove the rule, even though the rule may already have taken effect.\nFinally, the Congressional Review Act explicitly contemplates that even after the action period has terminated, Congress may still enact a joint resolution disapproving a rule pursuant to the Act. For this purpose the disapproval resolution would have to have been submitted during the initiation period, and would have to meet the content requirements of the Act.\nThe Act also explicitly provides that if Congress enacts a resolution disapproving a rule that has already taken effect, under any of the circumstances just described, the rule \"shall be treated as though [it] had never taken effect.\" The intent seems to be that, in these cases, any consequences the rule had already had would be undone retroactively. This stipulation applies only to a disapproval resolution that was submitted, and received final action, in accordance with the provisions of the Congressional Review Act. If Congress enacted a measure overriding or abolishing a regulation through proceedings that did not meet the procedural requirements of the Act, or in a form that did not meet the content requirements of the Act for a disapproval resolution, it would not have this retroactive effect.", "The Congressional Review Act establishes additional relations between the waiting period and certain actions on a disapproval resolution. If either house rejects a disapproval resolution or sustains a veto of one, the waiting period terminates immediately. On the other hand, if the President vetoes a resolution to disapprove a \"major rule\" to which the waiting period applies, an additional waiting period occurs, during which Congress may override the veto. This additional waiting period is defined as 30 days of session (rather than calendar days, as for the initial waiting period). The Act does not specify how the end of the period is determined if the 30 th day of session in each house occurs on a different day.\nTaking these additional provisions into account, the possible configurations of legislative action and its consequences for \"major rules\" to which the waiting period applies comprise the following:\nNo Congressional Action. If neither house of Congress acts on a disapproval resolution during the original waiting period, the rule takes effect when that period expires (or later, if so provided in accordance with the Administrative Procedure Act or the terms of the rule itself). Rejection by Either House. If either house votes to reject the disapproval resolution, the action presumably ensures that no disapproval resolution will pass both chambers. At that point the waiting period is vitiated, and the rule may take effect immediately (or later, if so required by the Administrative Procedure Act or the rule itself). Passage by Both Houses; No Veto. If both houses pass the disapproval resolution and the President does not veto it, the resolution becomes law, and the rule becomes \"of no force and effect\" (whether or not the waiting period has expired). Passage; Veto; No Attempt to Override. If both houses pass the disapproval resolution and the President vetoes it, the receipt by Congress of the veto message triggers the new waiting period of 30 days of session. If a vote on overriding the veto occurs in neither house, or in only one house, during this new waiting period, the rule takes effect when the 30 days of session expire (or later, if so required by other authorities). Passage; Veto Sustained by Either House. If either house votes to sustain the veto, Congress can no longer override. At that point the additional 30-day waiting period is vitiated, and the rule may take effect immediately (or later, if so required by other authorities). Passage; Veto Overridden. If both houses override the veto, the disapproval resolution becomes law, so that the rule becomes \"of no force and effect.\"\nAs already explained, it is possible that Congress could pass a resolution to disapprove a rule during the action period, but after the rule has already taken effect. If the President then vetoed the disapproval resolution, the rule would presumably be considered to remain in effect pending congressional action on the veto. Under these circumstances, in other words, the additional waiting period would presumably not occur. This interpretation seems consistent with the general intent of the Congressional Review Act that a rule may be vitiated through congressional disapproval even after it has already taken effect.", "", "Under the Congressional Review Act, any agency submitting a covered rule to Congress must do so in a report that also identifies the effective date and whether the rule is \"major.\" At the same time, the agency must provide to each house and to the General Accounting Office (GAO) any available cost-benefit analysis, as well as information about pertinent agency actions pursuant to requirements of the Regulatory Flexibility Act and the Unfunded Mandates Reform Act. Each house provides the report to the chair and ranking minority member of the committees with jurisdiction. All this information is intended to afford Congress a basis for determining whether to proceed with disapproval action while it is still early in the action period for the expedited procedure.\nFor major rules, within 15 calendar days of the rule's submission or publication in the Federal Register (whichever is later), GAO is to make a report to the committees of jurisdiction, assessing compliance of the agency issuing the rule with the above reporting requirements. In practice, this GAO report has not involved substantial additional analysis of agency actions, but has taken the form of a simple checklist.", "The actual disapproval process under the Congressional Review Act begins when a Member of either house submits a joint resolution of disapproval. Unlike some expedited procedure statutes, the Act does not provide that the joint resolution be introduced either automatically, or by specified Members, or at any specified time (except that it must be during the 60-day initiation period if the resolution is to qualify for consideration under the terms of the Act). If no Members wish to see a given regulation disapproved, no disapproval resolution need be submitted. In practice, because the prescribed information is provided to committees of jurisdiction or their leaders, it is leaders or other members of the committee who may be most likely to submit a disapproval resolution.\nIn each house, any disapproval resolution submitted is to be referred to the committee (or committees) with jurisdiction. This step is consistent with the regular procedure in each chamber, and will presumably take place in accordance with normal practice. House resolutions may be referred to a primary committee and also to additional committees with jurisdictional interests in the matter the rule addresses. Senate referrals will normally be to the committee whose jurisdiction predominates in the subject matter.", "To be eligible for consideration under the expedited procedures of the Congressional Review Act, a disapproval resolution must follow a narrowly prescribed form. The text may only identify the subject of the rule and the agency submitting it, and state that Congress disapproves the rule and that it shall have no force or effect. These provisions appear to make the procedures of the Act available only for joint resolutions to disapprove a submitted rule as a whole, so that the expedited procedures of the Act could not be used to vitiate only certain provisions or portions of a rule on a specified subject.\nUnder these standards, a resolution whose text includes any findings or other additional provisions, for example, would be ineligible for consideration under the expedited procedure. Nevertheless, the Congressional Review Act does not specify the contents of the disapproval resolutions it governs as precisely as do some other expedited procedure statutes. For example, although the Act stipulates the form of language for a disapproval resolution, it does not specify the precise terms in which a rule must be described. As a result, resolutions might be submitted in each chamber proposing to disapprove the same rule in different terms, raising the possibility that disapproval resolutions initially approved in the two chambers might not be identical. In the 107 th Congress, for example, S.J.Res. 6 proposed to disapprove \"the rule submitted by the Department of Labor relating to ergonomics (published at 65 Federal Register 68261 (2000)),\" while the House companion measure, H.J.Res. 35 , proposed to disapprove \"the rule submitted by the Occupational Safety and Health Administration on November 14, 2000 (65 Federal Register 68,261 et seq. ) relating to ergonomics.\"\nAgain, the Act does not stipulate that the resolution must contain no preamble. Preambles are uncommon in modern congressional practice, and when a resolution includes them, they are often routinely stricken out at the conclusion of floor proceedings. Yet if either house did adopt a disapproval resolution with a preamble, the resolution might again fail to be identical with a companion measure from the other house. Similar problems might arise in any case in which the two houses adopted resolutions disapproving the same rule, but with different texts. As described later, for example, the Congressional Review Act prohibits amendment of a disapproval resolution only in the Senate. In any case of this kind, no measure could go forward to the President until both houses had agreed on a single version. A House-Senate conference or other process for reaching this agreement might be unable to conclude within the time constraints of the expedited procedure (or at all).\nMany expedited procedures attempt to prevent this situation from arising, either by prescribing the precise form of the measures covered, by forbidding amendment to those measures, or both. The Act deals with this potential problem instead by the way it regulates the process, sometimes called the \"hookup,\" by which a single vehicle is selected for further action after each house has initially adopted its own measure. In addition, however, these problems are at bottom procedural and technical, rather than substantive, and could usually be easily overcome if majorities in both chambers wished to disapprove a rule. For example, Members might often prevent problems of this kind from arising by informally coordinating their efforts, so as to ensure that disapproval resolutions submitted in each house would share the same text.\nIf a disapproval resolution did not meet the content requirements of the Act, or if it were not submitted during the initiation period, Congress could still consider it under its ordinary procedures. If such a resolution were enacted, it would presumably suffice to put the regulation disapproved out of effect. This action, however, apparently would not preclude the issuing agency from proposing a \"a new rule that is substantially the same\" as the disapproved one. The Act applies this prohibition only if the disapproval resolution both conforms to the content requirements specified by the Act and was submitted during the initiation period. For this prohibition to apply, on the other hand, the terms of the Act do not appear to require that the Senate has considered the disapproval resolution either under the expedited procedures, or during the action period.", "For the stages of committee and initial floor consideration, the expedited procedures in the Congressional Review Act apply to the Senate alone. First, the Act attempts to ensure that the Senate will be able to act on the disapproval resolution whether or not the committee of referral reports it. Regardless of when the resolution is introduced, a procedure to discharge the committee from its consideration becomes available beginning 20 calendar days after the rule has been both submitted to Congress and published in the Federal Register . If 30 Senators submit a petition for the purpose, the measure is automatically discharged and placed on the calendar, from which it may be called up for floor consideration.\nThis provision appears to have no close analog among other Senate procedures. Expedited procedure statutes more typically provide that after a specified time period, either the committee is automatically discharged, or a motion to discharge it is privileged (meaning that the motion could be offered on the floor by any Senator, and would not be debatable). By requiring the joint action of 30 Senators, the Congressional Review Act makes discharge somewhat more difficult, ensuring that it can occur only for a disapproval resolution that has significant Senate support.\nAt least in some cases, these features of the expedited procedure may leave the committee little time to act on the disapproval resolution. For example, perhaps no Senator may wish to introduce the resolution until after the Senate receives the GAO report on the rule. But this report may not arrive until 15 calendar days after the rule is submitted, while the discharge procedure will become available after 20 calendar days. The committee might then have 5 calendar days or fewer to take up the resolution before it could be subjected to discharge. If no disapproval resolution is submitted until the discharge procedure has already become available, the motion might be offered even more closely after submission of the resolution.\nIf the committee of jurisdiction favors the disapproval resolution, it may mark up and report the measure before the discharge procedure becomes available. It may also do so thereafter, as long as the discharge procedure has not yet been used. Once the committee reports, it can no longer be discharged, but the resolution goes to the calendar, and a motion to proceed to its consideration can be offered.\nThe Congressional Review Act does not expressly forbid consideration of amendments in committee, but it does prohibit amendments on the Senate floor. A committee can only recommend amendments, which become part of the measure only if adopted on the floor. Because the statute precludes the adoption of amendments on the floor, any recommended by the committee will be moot. For this reason, the committee will in practice find little purpose in acting on amendments to a disapproval resolution, and its markup will presumably consist only of consideration.\nThe committee might circumvent this restriction by reporting an amended version of the disapproval resolution as an original measure, in lieu of the resolution referred. If the text of this new measure met the statutory requirements for a disapproval resolution, and the committee acted before expiration of the initiation period, the measure would presumably be eligible for expedited consideration under the Congressional Review Act. At the same time, however, the resolution initially submitted, not having been reported, would presumably also remain subject to the expedited discharge procedure of the Act.", "Under the procedure provided by the Congressional Review Act, once a disapproval resolution is on the calendar in the Senate, a motion to proceed to consider it is in order. The general procedure of the Senate already permits a motion to consider any measure on the calendar, but only after it has met certain layover requirements. Inclusion of this special provision in the expedited procedure has the effect of waiving these layover requirements.\nThe motion to consider is normally reserved to the Majority Leader, to whom the Senate, in practice, accords responsibility for arranging the floor agenda. Nevertheless, by including the motion explicitly in the expedited procedure, the Act emphasizes that the Senate, in principle, has means of calling up the disapproval resolution, no matter what position the committee or leadership take on it. As with any other measure, of course, a disapproval resolution could also be brought up for consideration by unanimous consent, which would usually be obtained by the Majority Leader.\nSeveral provisions of the expedited procedure protect against various potential obstacles to the Senate's ability to take up a disapproval resolution. Some of these help ensure that the Senate will be able to vote on a motion to proceed, once the motion is pending, by prohibiting:\na motion to postpone its consideration; a motion to amend it (though Senate rules generally prohibit amendment of motions to proceed anyway); or a motion to proceed to consider some other business (which would displace the first motion to proceed).\nAny points of order that might be raised against the measure or its consideration are waived as well. Finally, if the motion to proceed is adopted, a motion to reconsider that action is prohibited.\nThe Congressional Review Act omits one other provision that appears in many expedited procedures for taking up resolutions of disapproval. The Act does not explicitly make the disapproval resolution privileged. It is established Senate practice that a motion to proceed to consider a matter is debatable (and, therefore, subject to filibuster) unless the matter in question is privileged. Senate precedents, however, indicate that if a statute establishes a time limit for the consideration of a specified measure, the provision has the effect of rendering the measure privileged, so that a motion to proceed to its consideration is not debatable. Consistent with this principle, the Senate has treated a motion to consider a disapproval resolution under the Congressional Review Act as not debatable, even though the Act does not explicitly bar debate.", "After the Senate takes up the disapproval resolution itself, a further series of provisions protects the ability of the body to continue and complete that consideration. First, once the motion to proceed is adopted, the resolution becomes \"the unfinished business of the Senate until disposed of,\" and motions to proceed to consider other business, or to postpone consideration of the resolution, are prohibited. Under these conditions other business may interrupt consideration of the disapproval resolution only if the Senate gives unanimous consent. If the Senate does turn to other business by unanimous consent, the disapproval resolution automatically recurs as pending after the interruption, unless the unanimous consent agreement provides that the other business displace the disapproval resolution as the unfinished business.\nSecond, it is not in order in the Senate, under the Act, to move to amend or recommit the disapproval resolution. The Senate sometimes uses the motion to recommit in such a way as to effect an amendment. These provisions therefore help to ensure that the Senate disapproval resolution will remain identical, at least in substantive effect, to any House joint resolution disapproving the same rule. This identity could be destroyed by House action on its own measure, however, inasmuch as the Act includes no prohibition against House amendment of the measure during committee or floor consideration. Also, some expedited procedures explicitly prohibit the Senate from suspending a prohibition on amendment by unanimous consent, but no such additional safeguard appears in the Congressional Review Act.\nThird, Senate debate on the resolution is limited to 10 hours, equally divided between supporters and opponents, so that no filibuster is possible on the resolution itself. In addition, the Act provides that a motion may be offered to limit the time for debate further, and this motion itself is not debatable. Any appeal from a ruling of the chair during consideration of a disapproval resolution (or motion to proceed to its consideration) also is to be decided without debate. This prohibition further inhibits any potential use of appeals for dilatory purposes, though this use is already constrained by the overall cap on debate time. On the other hand, to forbid appeals altogether would have tended to prevent the Senate from exercising its constitutional authority to determine its own rules.\nFinally, the Act provides that at the conclusion of debate, the Senate automatically proceeds to vote on the resolution. No intervening action is permitted, except that one quorum call may take place if any Senator so requests. This quorum call is not required; if not requested, the Senate is to proceed immediately to vote. Absent this provision, however, it might become impossible to stop the Senate from disposing of a disapproval resolution quickly, by voice vote, when few Senators were on the floor. It might also become impossible to secure a roll call vote under these conditions, because not enough Senators might be on the floor to second a demand for one. On the other hand, if the Act did not prohibit other intervening actions at this point, those actions might be used for dilatory purposes. For example, opponents might delay a vote by offering, and obtaining roll call votes on, motions to table the resolution and to adjourn.", "No measure can be presented to the President for approval until both houses have agreed to it in identical form. If each house initially passes its own disapproval resolution, even if the texts are identical, neither can yet go to the President, for neither has been agreed to by both chambers. To prevent this situation, the Congressional Review Act provides that when either house adopts a disapproval resolution and sends it to the other, the receiving house must hold it at the desk, rather than refer it to committee. This action retains the received resolution in a status in which it is available for floor action. The Act then provides that, after the receiving house later considers a disapproval resolution of its own, it shall vote not on its own measure, but instead on the resolution already received from the other house. In this way both houses take final action on the same measure; if both adopt it, the requirements for presentation to the President are satisfied. Unlike the components of the expedited procedure that apply to Senate consideration alone, these provisions govern action whether or not the action period has expired.\nIn one respect, these proceedings reflect normal practice in both houses for carrying out a \"hookup\" between corresponding House and Senate measures. Normally, each house initially considers its own measure, but the house that acts second then takes up and passes the corresponding measure already received from the other. If the two measures are not identical, the house acting second normally amends the measure received from the other with the text of its own measure. This action enables the two houses to proceed, by conference or otherwise, to resolve the differences between these two versions of the same measure. The expedited procedure of the Congressional Review Act avoids this necessity by requiring one chamber to vote directly on the measure received from the other, without amending it.\nIt appears that these provisions of the Act would apply even if the texts of the two measures are not identical, as long as the chair could determine that both would disapprove the same rule, and that they therefore corresponded to each other for purposes of the statutory procedure. In this way, even if the two houses initially consider disapproval resolutions with differing texts, both will ultimately vote on the same text; namely, that approved by whichever house acted first. This mechanism helps to prevent any delay that might arise if the House and Senate could not agree on a final text through conference or amendments between the houses.", "If both chambers adopt a disapproval resolution, the President might normally be expected to veto it, because if his views were not favorable to the regulation in question, the agency would probably not have submitted it to Congress in the first place. This consideration, however, may not apply in situations in which the President under whose administration the rule was submitted has been succeeded by another, who takes a contrary view of the regulatory issue in question. Congressional action on the ergonomics regulation in the 107 th Congress exemplified such a situation.\nExcept for the additional 30-day waiting period already described, however, the Congressional Review Act provides no expedited procedure for overriding a veto. Consideration of veto messages is generally considered privileged in both chambers pursuant to the requirements of the Constitution. The procedures of neither house, however, require a vote on whether to override. In the Senate, an attempt to reach such a vote might be delayed or blocked by filibuster. In other respects, the normal procedures of each house probably would suffice to allow a majority that wished an override vote to secure one.", "Although the expedited procedures of the Congressional Review Act eliminate many of the constraints on action inherent in the normal legislative process, the Act lacks certain provisions found in many expedited procedure statutes. As the preceding discussion shows, these omissions in certain respects limit the ability the Act confers on Congress to enact the disapproval resolutions for which it provides.\nThese limitations may in practice present little obstacle to successful action. Nevertheless, determining how the Act may most effectively be used may require taking them into account. Among the special features described in the preceding sections, three appear potentially the most noteworthy in this connection.", "The expedited procedure in the Act covers committee and floor consideration of disapproval resolutions only in the Senate. Committee and floor consideration in the House of Representatives is to occur under its regular legislative procedures; the Act provides no special mechanisms to help ensure that the House can complete action. In mitigation of this potential obstacle, the House possesses well-established general means to expedite the consideration of measures, which can readily be used for disapprovals under the Congressional Review Act if the leadership and the pertinent committee are supportive.\nSpecifically, the House might likely consider a disapproval resolution pursuant to the terms of a special rule. A special rule is a House resolution, which the Committee on Rules has jurisdiction to report, making a specified measure in order and proposing terms for its consideration. In particular, a special rule for considering a disapproval resolution might be expected to prohibit amendment on the floor. (A special rule providing such a prohibition is often called a \"closed rule.\")", "A joint resolution of disapproval, like any other proposed law, may be enacted only through being presented to the President for approval. If Congress passes a joint resolution disapproving a particular rule, a President who favors the rule can veto the measure. In that case the rule will take effect, unless a two-thirds vote in each house overrides the veto.\nExperience shows that particular circumstances may arise under which this requirement may present little obstacle to congressional action. If, in the interim between promulgation of the rule and congressional action, a new administration unsympathetic to the rule assumes office, any disapproval resolution may not likely be vetoed in the first place. Congressional disapproval in 2001 of the ergonomics regulation proposed by the Clinton Administration in the previous year illustrates this situation. At that time, substantial congressional interest was expressed in using the Congressional Review Act to disapprove numerous other rules promulgated in the last months of the Clinton Administration as well. Although this interest did not result in other legislative action, some of the regulations in question were withdrawn or suspended by the new Bush Administration.", "The provisions of the Congressional Review Act for final congressional action on disapproval resolutions presume that both houses will initially pass measures with substantively similar texts. Yet the overall expedited procedures of the Act do not conclusively ensure:\nthat substantively similar disapproval resolutions will be submitted in each chamber; that neither house will amend a disapproval resolution in a way that makes it substantively dissimilar from the other, or otherwise ineligible for consideration under the expedited procedures for final action; or that each house will take initial action on a disapproval resolution of its own.\nEach of these possibilities might present a different kind of difficulty for achieving final enactment. In practice, however, each kind of difficulty could likely be readily overcome when majorities in both houses are supportive of the disapproval effort. Under most circumstances, coordination of disapproval efforts between the two houses could suffice to avoid potential problems.", "The two houses might initially pass disapproval resolutions with different texts either because:\nthe respective resolutions are initially introduced with different texts, or either chamber amends its resolution in the course of committee or floor consideration.\nThe House could amend a disapproval resolution because the procedure in the Act does not prohibit amendment in that chamber. The Senate would be constrained in such action by the prohibition on amendment contained in the expedited procedure, but might be able either to:\nsuspend that prohibition by unanimous consent, or circumvent the prohibition by acting on a resolution reported from committee as an original measure in lieu of one initially submitted.\nNone of these actions would necessarily prevent expeditious agreement of the two houses on one of the two measures. As long as both measures, as passed, still met the requirements of the Act, final action could undoubtedly occur through the procedures for hooking up the two measures provided by the Act.", "If either House succeeded in amending a disapproval resolution, the amended resolution might cease to meet the statutory requirements for a measure to be considered under the expedited procedure. For example, one house might amend the resolution to disapprove only part of the rule in question, even though the Congressional Review Act is explicit in making its mechanism for expedited disapproval applicable only to a rule as a whole. A disapproval resolution amended in this way would apparently cease to fulfill the requirements for a disapproval resolution to be eligible for the expedited procedure. When received in the other house, the amended resolution would then fail to qualify for the automatic hookup for which the Act provides. Instead, the second house could refer it to committee, which might either report it with or without amendment, or take no action and effectively kill the measure.\nAlternatively, the second house could use its regular procedures either to consider the amended resolution it received, or to consider a measure of its own that it could then hook up with the one received. The easiest way for supporters of disapproval to deal with this difficulty, however, would be to forestall its arising by preventing or defeating any amendment that would have this effect.", "The Congressional Review Act also affords no procedure pursuant to which either house could take up and adopt a disapproval resolution from the other, except after first considering one of its own. Therefore, if a disapproval resolution is submitted only in one house, none can be enacted under the expedited procedure. The house in which the resolution was submitted could adopt it and send it to the other. The receiving house, however, could not act on the received resolution under the expedited procedure, because that procedure provides for such action only after the receiving house first considers its own measure.\nThe same difficulty could arise when disapproval resolutions are introduced in both houses, if, in the House of Representatives, none is reported, or one is reported but not considered on the floor. Because the Congressional Review Act provides no expedited committee or floor procedure in the House, supporters of the disapproval resolution could not discharge the House committee, or bring the measure to the House floor, except under the general rules, which normally leave control in the hands of the committee and leadership. Therefore, the procedure in the Act would still offer no means to bring the House to the point at which it could consider a companion resolution received from the Senate.\nThis situation could be most readily forestalled if supporters of the disapproval effort ensure the submission (as well as consideration and adoption) of corresponding disapproval resolutions in both houses. Also, however, whether or not a companion measure had been submitted in the receiving house, and whether or not the committee of referral in that house had reported the measure or had been discharged from considering it, it would still be possible for the receiving house to act, under its regular procedures, on the measure received from the other and held at the desk. In the 107 th Congress, the House of Representatives took action in this way on S.J.Res. 6 , disapproving the ergonomics rule, while its companion measure, H.J.Res. 35 , remained in committee.\nIn the House, nevertheless, this end too could normally be achieved only with cooperation from the leadership. In the Senate, considering the House measure without the constraints of the expedited procedure would mean that it could be filibustered.\nFinally, the enactment of a disapproval resolution would have the same effect whether it had been considered under the expedited procedure provided by the Act or otherwise. As long as the resolution had been submitted during the initiation period, and satisfied the description provided in the Act, its enactment would render the disapproved rule without force and effect, and would also prohibit the agency from issuing a \"substantially similar\" rule without subsequent legislative authority." ], "depth": [ 0, 1, 2, 2, 1, 2, 3, 3, 3, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_title", "h0_full", "", "h0_title h1_title", "h0_title", "h0_full", "h0_full", "", "h0_full", "", "h1_full", "h1_full", "h0_title h2_title h1_title h3_title", "", "", "h3_full h1_full", "h0_full h2_full", "", "h2_full", "h3_full", "", "h0_title h2_title h3_title", "h0_full h2_full", "", "h3_title", "h3_full", "", "" ] }

{ "question": [ "What did the Congressional Review Act of 1996 establish?", "For whom does this Act provide an expedited procedure?", "How can the Senate use this procedure?", "What must be done to qualify for this procedure?", "What can occur pending action on a disapproval resolution?", "What occurs if a disapproval resolution is enacted before a rule goes into effect?", "What occurs if the rule is already in effect?", "What occurs if the president vetoes the resolution?", "What occurs if a session of Congress adjourns sine die less than 60 days of session after receiving a rule?", "Where do expedited procedures under the Act apply?", "How would the House consider a disapproval resolution?", "How would the senate consider a disapproval resolution?", "What occurs once the committee has reported or been discharged?", "How is floor debate on the resolution limited?", "How does the Act affect the House's treatment of a disapproval resolution?", "How does this affect resolutions adopted by the two houses?", "How does the Act treat such disagreements?", "How does the substantive effect of each decision affect the ultimate effect of the legislation?" ], "summary": [ "The Congressional Review Act of 1996 established expedited (or \"fast track\") procedures by which Congress may disapprove a broad range of regulatory rules issued by federal agencies by enacting a joint resolution of disapproval.", "For initial floor consideration, the Act provides an expedited procedure only in the Senate. (The House would likely consider the measure pursuant to a special rule.)", "The Senate may use the procedure for 60 days of session after the agency transmits the rule to Congress.", "In both houses, however, to qualify for expedited consideration, a disapproval resolution must be submitted within 60 days after Congress receives the rule, exclusive of recess periods.", "Pending action on a disapproval resolution, the rule may go into effect, unless it is a \"major rule\" on which the President or issuing agency does not waive a delay period of 60 calendar days.", "If a disapproval resolution is enacted, the rule may not take effect and the agency may issue no substantially similar rule without subsequent statutory authorization.", "If a rule is disapproved after going into effect, it is \"treated as though [it] had never taken effect.\" If either house rejects a disapproval resolution, the rule may take effect at once.", "If the President vetoes the resolution, the rule may not take effect for 30 days of session thereafter, unless the House or Senate votes to sustain the veto.", "If a session of Congress adjourns sine die less than 60 days of session after receiving a rule, the full 60-day periods for action begin anew on the 15th day of session after the next session convenes.", "Except for submission of disapproval resolutions and final congressional action thereon, the expedited procedures under the Act apply only to Senate consideration.", "The House would consider a disapproval resolution under its general procedures, very likely as prescribed by a special rule reported from the Committee on Rules.", "In the Senate, once the resolution has been before committee for 20 calendar days, the panel is discharged if 30 Senators submit a petition for the purpose.", "Once the committee has reported or been discharged, a motion to proceed to consider the resolution would in practice be nondebatable, and the Act prohibits various other possible dilatory actions in relation to the motion and the resolution.", "Floor debate on the resolution is limited to 10 hours, and no amendment is in order.", "The Act does not preclude amendment of a disapproval resolution in the House, and means may exist of overcoming the prohibition on amendment in the Senate.", "For these reasons, and because the initial texts could differ, the resolutions initially adopted by the two houses might not be identical.", "The Act enables Congress to avoid the need to resolve differences between the two versions by providing that, when either house adopts a disapproval resolution, the other shall first consider its own disapproval resolution and then vote on the resolution received from the first.", "As long as the substantive effect of both is similar, the difference in text should not affect the ultimate effect of the legislation. If the substantive effects differ, presumably the two measures could not be linked in this way by using the expedited procedures of the Act." ], "parent_pair_index": [ -1, 0, 1, 0, 0, -1, 0, 0, 0, -1, 0, 0, 2, 2, -1, 0, 0, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3 ] }

{ "title": [ "Background", "DOD Has Processes in Place for Making All Basing Decisions, Including Those Related to 10 U.S.C. § 2687, and Uses Them Hundreds of Time Per Year", "DOD Has Processes in Place for Making Basing Decisions That Comply with 10 U.S.C. § 2687", "DOD Makes Hundreds of Basing Decisions Annually", "Agency Comments and Our Evaluation", "Appendix I: 10 U.S.C. § 2687", "Appendix II: Comments from the Department of Defense", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "In the early 1960s, the Secretary of Defense, at the President’s direction, developed and implemented a base closure program, with minimal consultation with Congress. This program resulted in hundreds of base closures and realignments, including closure of more than 60 major bases. Subsequently, in 1977, Congress enacted 10 U.S.C. § 2687 to establish procedures that DOD must generally follow when closing or realigning a military installation, in the United States or its territories, where 500 or more civilian personnel were authorized to be employed. In 1978, Congress amended the law by lowering the threshold to 300 or more civilian personnel. In the years following the passage of 10 U.S.C. § 2687, DOD’s attempts to close major installations in the United States did not succeed. Consequently, in 1988 the Secretary of Defense chartered the first BRAC Commission to review and recommend bases for realignment and closure. In 1990, Congress revised the BRAC process, which has, as amended, governed subsequent rounds of realignments and closures in 1991, 1993, 1995, and 2005. Most recently, in its proposed budget for fiscal year 2014, DOD requested authorization for an additional BRAC round.\nIn the absence of authorization to carry out the BRAC process, installation closures and realignments that are subject to the requirements in 10 U.S.C. § 2687 include the closure of any installation with 300 or more direct-hire permanent DOD civilian authorized positions (this includes all authorized positions, regardless of whether they are vacant or filled); and realignment of any installation with 300 or more direct-hire permanent DOD civilian authorized positions (vacant or filled), if the realignment will involve a reduction by (1) 1,000 or more civilian positions, or (2) 50 percent or more of the total civilian authorized positions.\nStatutory requirements for closures or realignments exceeding these thresholds generally include, but are not limited to, congressional committee notification by the Secretary of Defense or military department Secretary of the proposed closure or realignment as part of its annual request for authorization of appropriations, and an evaluation of the fiscal, local economic, budgetary, environmental, strategic, and operational consequences of the closure or realignment. Additionally, in January 2013, 10 U.S.C. § 2687 was amended so as to prohibit closures and realignments at installations with fewer than 300 authorized DOD civilian personnel for 5 years after the date on which a decision is made to reduce the civilian personnel below 300. Figure 1 provides a general overview of the requirements in 10 U.S.C. § 2687.\nTable 1 provides a summary of the definitions of key terms included in the statute and DOD’s interpretation of these terms.", "DOD and the military services have processes in place to meet statutory requirements for basing decisions, and according to DOD officials they use these processes to make hundreds of basing decisions each year that are not subject to 10 U.S.C. § 2687. For example, in addition to closures and realignments, basing decisions can include actions such as reductions in force, disestablishments, changes to mission statements, and other organization changes. According to DOD officials, since the 1977 enactment of 10 U.S.C. § 2687, the department has not closed or realigned any installation pursuant to the procedures set out in 10 U.S.C. § 2687. All closures or realignments since 1977 have either fallen below the thresholds of 10 U.S.C. § 2687 or were undertaken with a statutorily authorized BRAC process. They also told us they do not anticipate that closures or realignments pursuant to this statute will take place in the near future, citing BRAC as the preferred method for implementing basing actions that are above statutory thresholds.", "Each military service has its own processes for evaluating and implementing basing decisions, including proposals to close or realign installations outside of the BRAC process. Generally, the services’ basing decision processes use similar criteria, scope, and methodologies to determine where to locate the services’ force structure, and each process is documented in established guidance. Each service’s process requires a series of analyses, such as analysis of capability and capacity, cost estimates, and environmental considerations. For example, the Army’s process includes publishing a comprehensive strategy, developing feasible alternatives, ensuring that the documentation of alternatives addresses all known costs, informing interested parties of actions, and obtaining decisions and clearance from Army headquarters to announce and execute any actions. Examples of criteria used by Army planners when developing feasible stationing alternatives include operational considerations, budget impact, facilities impact, and environmental impact. Similarly, the Air Force has a centralized basing process that includes the use of quantitative criteria in basing decisions such as mission imperatives, environmental effects, costs, and logistic support.\nEach service’s process also provides for a review of how decisions may affect civilian personnel. According to service officials, this review provides them with data to determine whether the basing action is above or below 10 U.S.C. § 2687 thresholds. Table 2 describes each military service’s guidance and the requirements to evaluate any effect on civilian personnel.\nIn addition to the requirement to provide data on the effect on civilian personnel, each service’s basing decision process includes legal reviews of basing decisions, which, according to service officials, occur at multiple stages throughout the process and ensure compliance with 10 U.S.C. § 2687 as well as all other applicable laws and policies. Service attorneys told us that during reviews of basing actions, if compliance questions arise there is coordination with OSD attorneys to ensure decisions are consistent across the services and comply with all applicable laws. For example, according to officials, service and OSD attorneys are currently discussing how to interpret a provision added to 10 U.S.C. § 2687 in January 2013 that states that no action may be taken to close or realign a military installation within 5 years after the date on which a decision is made to reduce the authorized civilian personnel at that installation below 300. On the basis of our interviews with service and OSD attorneys, there are variations in how to interpret this provision. In the view of OSD and Air Force officials, the new provision is retrospective—that is, any closure or realignment occurring after January 2013 would need to be evaluated to determine whether a service had taken action to reduce civilian positions below the threshold during the previous 5 years. Conversely, Army, Navy, and Marine Corps officials interpret the statute as prospective—that is, if any installation after January 2013 reduces its civilians below 300, DOD is prohibited from closing or realigning that installation for the next 5 years. At the time of our review OSD officials said that they were informally discussing the statute with the services as it relates to proposed realignments and closures; however, OSD officials stated that they have no immediate plans to issue clarifying guidance and stated that generally they play a minimal role in determining how the services manage their organizational needs through basing actions.", "While 10 U.S.C. § 2687 establishes congressional notification and waiting-period requirements that DOD must meet when implementing closures or certain realignments, DOD may close or realign installations without being subject to those requirements if the proposed action falls below specific thresholds. Specifically, closures and realignments that trigger congressional notification and waiting include any: closure of any installation with 300 or more direct-hire permanent DOD civilian authorized positions (this includes all authorized positions, regardless of whether they are vacant or filled); or realignment of any installation with 300 or more direct-hire permanent DOD civilian authorized positions (vacant or filled), if the realignment will involve a reduction by (1) 1,000 or more civilian positions, or (2) 50 percent or more of the total civilian authorized positions.\nAccording to service officials, they undertake hundreds of basing actions each year that do not trigger the requirements in 10 U.S.C. § 2687 because either they do not exceed the thresholds established in the statute, or the action does not qualify as a realignment as defined by the statue. During discussions with OSD and the military services, officials provided some examples of recent realignments that DOD determined were not subject to 10 U.S.C. § 2687. Below we describe three of these examples, which were selected because they demonstrate typical basing actions that are not subject to 10 U.S.C. § 2687.\nThe January 2011 disestablishment of Joint Forces Command led to approved basing decisions that, according to DOD, reduced civilian personnel and eliminated functions at multiple installations, but did not exceed the personnel threshold of 10 U.S.C. § 2687, which would have triggered the congressional notification and evaluation process. For example, one of the installations affected by the disestablishment of Joint Forces Command was Naval Support Activity Norfolk, Virginia—the installation where Joint Forces Command was headquartered. Naval Support Activity Norfolk, according to DOD documents, had approximately 3,200 civilian personnel at the time of the disestablishment, of which 1,058 (about 33 percent) were Joint Forces Command personnel. According to DOD, a significant number of Joint Forces Command functions and positions were eliminated through a reduction in force—an action that is not subject to 10 U.S.C. § 2687—and the remainder were part of a realignment of Naval Support Activity Norfolk, which fell below the statutory thresholds of 1,000 authorized civilian personnel or 50 percent of the total civilian personnel authorized to be employed at the installation.\nThe April 2012 relocation of the Army Intermodal Distribution Platform Management Office from the Tobyhanna Army Depot in Pennsylvania to the Scott Air Force Base in Illinois is another example of an approved basing decision that, according to DOD, did not exceed the personnel thresholds in 10 U.S.C. § 2687. This example demonstrates what the services characterize as a typical realignment. In this example, the Army made a decision—on the basis of an Army Audit Agency report—to relocate the Army Intermodal Distribution Platform Management Office and 14 of its authorized civilian positions from Tobyhanna Army Depot to Scott Air Force Base. At the time, Tobyhanna was authorized to employ over 5,000 civilian personnel, making it potentially subject to compliance with the procedures of 10 U.S.C. § 2687. Additionally, this action would both reduce and relocate functions and civilian personnel positions, thereby meeting the definition of realignment established in 10 U.S.C. § 2687. However, because only 14 civilian authorizations (less than 1 percent of the total positions at the installation) were eliminated from Tobyhanna as a result of this action, and therefore did not exceed the 10 U.S.C. § 2687 threshold, the Army was not required to conduct evaluations and submit congressional notifications pursuant to 10 U.S.C. § 2687.\nThe October 2011 disestablishment of the Center for Naval Engineering in Norfolk, Virginia, and the consolidation of its mission at the Surface Warfare Officers School Command in Newport, Rhode Island, is another example of an approved basing decision that, according to DOD, did not exceed the thresholds in 10 U.S.C. § 2687. This example demonstrates a realignment involving few authorized civilian personnel positions. As a result, the Navy disestablished the Center for Naval Engineering in Norfolk and seven civilian authorized positions were reduced. These authorizations accounted for less than 1 percent of the over 13,000 authorized civilian positions at Norfolk, and therefore did not exceed the 10 U.S.C. § 2687 threshold.\nIn discussing examples of basing actions, DOD officials stated that determining the total number of DOD civilian authorized positions at an installation can be challenging. Specifically, because each service maintains personnel data in different data systems, and because multiple services can be tenants at a single installation, it can be difficult to determine the total number of DOD authorized civilian positions. According to service officials, generally the service initiating the realignment will request the tenant organizations to provide the service with the total number of authorized civilian personnel located at the installation in question. For example, according to an OSD attorney, obtaining civilian personnel data for the Joint Forces Command disestablishment was an arduous process because the services and organizations within the services each have various systems and processes maintaining the necessary data. While collecting these data for Joint Forces Command was not easy, according to the OSD attorney responsible for reviewing the decision, she nonetheless was able to collect the necessary civilian personnel data to ensure compliance with 10 U.S.C. § 2687.\nFurther, we found that the services use caution when considering a basing action at an installation where the total number of personnel falls close to the 300-position threshold. For example, in February 2012, the Air Force considered a proposal to close the Air Reserve Station in Pittsburgh, Pennsylvania. According to an Air Force attorney, the Air Force determined that there were approximately 280 DOD authorized civilian positions at the Air Reserve Station, some of which were vacant. Because this number was close to the threshold established in 10 U.S.C. § 2687, additional steps were taken to ensure that the proposed closure would comply with the law. Specifically, in addition to the total number of authorized civilian positions, officials also determined the number of civilian over-hires at the installation and included these in their count of authorized civilian personnel. While Air Force analysis determined that the overall number of authorized civilian personnel, including over-hires, was still fewer than 300, Air Force officials ultimately decided not to close the Air Reserve Station in Pittsburgh. Instead, according to officials, the Air Force plans on using the Air Reserve Station to house additional aircraft.\nWhile these examples did not exceed the threshold requiring evaluations and congressional notification under 10 U.S.C. § 2687, DOD and the services have established requirements for congressional notification of planned basing actions. For example, the Marine Corps’ process states that its Office of Legislative Affairs should keep Congress advised as appropriate of all changes associated with reorganizations. The Army’s guidance provides that some members of Congress receive notice of approved basing actions before they are announced to the public, and in cases that DOD deems to be politically sensitive, members of Congress may be informed about a basing study that is being initiated at the time of the study’s initiation. Additionally, a 2011 DOD instruction requires notice to Congress of decisions that, among other things, include the release of 50 or more civilian employees from federal employment during a fiscal year at an installation, facility, or activity; a closure or reduction in workforce at an installation that may be expected to be of interest to members of Congress and the public; or the realignment of 50 or more civilian employees outside of the local commuting area.", "We provided a draft of this report to DOD for comment. In its written comments, reproduced in appendix II, DOD stated this report, in general, explains the processes it follows to comply with requirements for closing or realigning installations outside of a congressionally authorized BRAC process. DOD also provided some technical comments. In response, we made editorial changes to specific sections of the report for clarity.\nWe are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force and Commandant of the Marine Corps; and the Director, Office of Management and Budget. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4523 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "(a) Notwithstanding any other provision of law, no action may be taken to effect or implement— (1) the closure of any military installation at which at least 300 civilian personnel are authorized to be employed; (2) any realignment with respect to any military installation referred to in paragraph (1) involving a reduction by more than 1,000, or by more than 50 percent, in the number of civilian personnel authorized to be employed at such military installation at the time the Secretary of Defense or the Secretary of the military department concerned notifies the Congress under subsection (b) of the Secretary’s plan to close or realign such installation; or (3) any construction, conversion, or rehabilitation at any military facility other than a military installation referred to in clause (1) or (2) which will or may be required as a result of the relocation of civilian personnel to such facility by reason of any closure or realignment to which clause (1) or (2) applies, unless and until the provisions of subsection (b) are complied with. (b) No action described in subsection (a) with respect to the closure of, or a realignment with respect to, any military installation referred to in such subsection may be taken unless and until— (1) the Secretary of Defense or the Secretary of the military department concerned notifies the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives, as part of an annual request for authorization of appropriations to such Committees, of the proposed closing or realignment and submits with the notification— (A) an evaluation of the fiscal, local economic, budgetary, environmental, strategic, and operational consequences of such closure or realignment; and (B) the criteria used to consider and recommend military installations for such closure or realignment, which shall include at a minimum consideration of— (i) the ability of the infrastructure (including transportation infrastructure) of both the existing and receiving communities to support forces, missions, and personnel as a result of such closure or realignment; and (ii) the costs associated with community transportation infrastructure improvements as part of the evaluation of cost savings or return on investment of such closure or realignment; and (2) a period of 30 legislative days or 60 calendar days, whichever is longer, expires following the day on which the notice and evaluation referred to in clause (1) have been submitted to such committees, during which period no irrevocable action may be taken to effect or implement the decision. (c) No action described in subsection (a) with respect to the closure of, or realignment with respect to, any military installation referred to in such subsection may be taken within five years after the date on which a decision is made to reduce the civilian personnel thresholds below the levels prescribed in such subsection. (d)This section shall not apply to the closure of a military installation, or a realignment with respect to a military installation, if the President certifies to the Congress that such closure or realignment must be implemented for reasons of national security or a military emergency. (e)(1) After the expiration of the period of time provided for in subsection (b)(2) with respect to the closure or realignment of a military installation, funds which would otherwise be available to the Secretary to effect the closure or realignment of that installation may be used by him for such purpose. (2) Nothing in this section restricts the authority of the Secretary to obtain architectural and engineering services under section 2807 of this title. (f) If the Secretary of Defense or the Secretary of the military department concerned determines, pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), that a significant transportation impact will occur as a result of an action described in subsection (a), the action may not be taken unless and until the Secretary of Defense or the Secretary of the military department concerned— (1) analyzes the adequacy of transportation infrastructure at and in the vicinity of each military installation that would be impacted by the action; (2) concludes consultation with the Secretary of Transportation with regard to such impact; (3) analyzes the impact of the action on local businesses, neighborhoods, and local governments; and (4) includes in the notification required by subsection (b)(1) a description of how the Secretary intends to remediate the significant transportation impact. (g) In this section: (1) The term “military installation” means a base, camp, post, station, yard, center, homeport facility for any ship, or other activity under the jurisdiction of the Department of Defense, including any leased facility, which is located within any of the several States, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, or Guam. Such term does not include any facility used primarily for civil works, rivers and harbors projects, or flood control projects. (2) The term “civilian personnel” means direct-hire, permanent civilian employees of the Department of Defense. (3) The term “realignment” includes any action which both reduces and relocates functions and civilian personnel positions, but does not include a reduction in force resulting from workload adjustments, reduced personnel or funding levels, skill imbalances, or other similar causes. (4) The term “legislative day” means a day on which either House of Congress is in session.", "", "", "", "In addition to the contact named above, Harold Reich (Assistant Director), Greg Marchand, Stephanie Moriarty, Richard Powelson, Tida Reveley, Kelly Rubin, and Amie Steele made key contributions to this report.", "Defense Infrastructure: DOD’s Excess Capacity Estimating Methods Have Limitations. GAO-13-535. Washington, D.C.: June 20, 2013.\nMilitary Bases: Opportunities Exist to Improve Future Base Realignment and Closure Rounds. GAO-13-149. Washington, D.C.: March 7, 2013.\nDOD Joint Bases: Management Improvements Needed to Achieve Greater Efficiencies. GAO-13-134. Washington, D.C.: November 15, 2012.\nMilitary Base Realignments and Closures: The National Geospatial- Intelligence Agency’s Technology Center Construction Project. GAO-12-770R. Washington, D.C.: June 29, 2012.\nMilitary Base Realignments and Closures: Updated Costs and Savings Estimates from BRAC 2005. GAO-12-709R. Washington, D.C.: June 29, 2012.\nMilitary Base Realignments and Closures: Key Factors Contributing to BRAC 2005 Results. GAO-12-513T. Washington, D.C.: March 8, 2012.\nExcess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.: September 19, 2011.\nMilitary Base Realignments and Closures: Review of the Iowa and Milan Army Ammunition Plants. GAO-11-488R. Washington, D.C.: April 1, 2011.\nGAO’s 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011.\nDefense Infrastructure: High-Level Federal Interagency Coordination Is Warranted to Address Transportation Needs beyond the Scope of the Defense Access Roads Program. GAO-11-165. Washington, D.C.: January 26, 2011.\nMilitary Base Realignments and Closures: DOD Is Taking Steps to Mitigate Challenges but Is Not Fully Reporting Some Additional Costs. GAO-10-725R. Washington, D.C.: July 21, 2010.\nDefense Infrastructure: Army Needs to Improve Its Facility Planning Systems to Better Support Installations Experiencing Significant Growth. GAO-10-602. Washington, D.C.: June 24, 2010.\nMilitary Base Realignments and Closures: Estimated Costs Have Increased While Savings Estimates Have Decreased Since Fiscal Year 2009. GAO-10-98R. Washington, D.C.: November 13, 2009.\nMilitary Base Realignments and Closures: Transportation Impact of Personnel Increases Will Be Significant, but Long-Term Costs Are Uncertain and Direct Federal Support Is Limited. GAO-09-750. Washington, D.C.: September 9, 2009.\nMilitary Base Realignments and Closures: DOD Needs to Update Savings Estimates and Continue to Address Challenges in Consolidating Supply- Related Functions at Depot Maintenance Locations. GAO-09-703. Washington, D.C.: July 9, 2009.\nDefense Infrastructure: DOD Needs to Periodically Review Support Standards and Costs at Joint Bases and Better Inform Congress of Facility Sustainment Funding Uses. GAO-09-336. Washington, D.C.: March 30, 2009.\nMilitary Base Realignments and Closures: DOD Faces Challenges in Implementing Recommendations on Time and Is Not Consistently Updating Savings Estimates. GAO-09-217. Washington, D.C.: January 30, 2009.\nMilitary Base Realignments and Closures: Army Is Developing Plans to Transfer Functions from Fort Monmouth, New Jersey, to Aberdeen Proving Ground, Maryland, but Challenges Remain. GAO-08-1010R. Washington, D.C.: August 13, 2008.\nDefense Infrastructure: High-Level Leadership Needed to Help Communities Address Challenges Caused by DOD-Related Growth. GAO-08-665. Washington, D.C.: June 17, 2008.\nDefense Infrastructure: DOD Funding for Infrastructure and Road Improvements Surrounding Growth Installations. GAO-08-602R. Washington, D.C.: April 1, 2008.\nMilitary Base Realignments and Closures: Higher Costs and Lower Savings Projected for Implementing Two Key Supply-Related BRAC Recommendations. GAO-08-315. Washington, D.C.: March 5, 2008.\nDefense Infrastructure: Realignment of Air Force Special Operations Command Units to Cannon Air Force Base, New Mexico. GAO-08-244R. Washington, D.C.: January 18, 2008.\nMilitary Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased. GAO-08-341T. Washington, D.C.: December 12, 2007.\nMilitary Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve. GAO-08-159. Washington, D.C.: December 11, 2007.\nMilitary Base Realignments and Closures: Impact of Terminating, Relocating, or Outsourcing the Services of the Armed Forces Institute of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007.\nMilitary Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency. GAO-08-121R. Washington, D.C.: October 26, 2007.\nDefense Infrastructure: Challenges Increase Risks for Providing Timely Infrastructure Support for Army Installations Expecting Substantial Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007.\nMilitary Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More Than 100 Armed Forces Reserve Centers. GAO-07-1040. Washington, D.C.: September 13, 2007.\nMilitary Base Realignments and Closures: Observations Related to the 2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007.\nMilitary Base Closures: Projected Savings from Fleet Readiness Centers Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29, 2007.\nMilitary Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16, 2007.\nMilitary Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166. Washington, D.C.: January 30, 2007.\nMilitary Bases: Observations on DOD’s 2005 Base Realignment and Closure Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July 18, 2005.\nMilitary Bases: Analysis of DOD’s 2005 Selection Process and Recommendations for Base Closures and Realignments. GAO-05-785. Washington, D.C.: July 1, 2005.\nMilitary Base Closures: Observations on Prior and Current BRAC Rounds. GAO-05-614. Washington, D.C.: May 3, 2005.\nMilitary Base Closures: Assessment of DOD’s 2004 Report on the Need for a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17, 2004.\nMilitary Bases: Review of DOD’s 1998 Report on Base Realignment and Closure. GAO/NSIAD-99-17. Washington, D.C.: November 13, 1998." ], "depth": [ 1, 1, 2, 2, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full h2_full h1_full", "h0_full h2_full h1_full", "h0_full", "h1_full", "", "", "", "", "", "", "" ] }

{ "question": [ "What do the DOD and military services have processes for?", "What do these processes provide?", "What actions can basing decisions include?", "How are each service's basing decision processes similar?", "What does each service's process require and include?", "What do these reviews provide?", "What sorts of closures or realignments has the DOD conducted?", "How was this demonstrated in 2011?", "What installations were affected by this?", "How was the Naval Support Activity Norfolk, Virginia initially structured?", "How was this affected by a reduction in force?", "What further actions does DOD anticipate?", "What may the DOD be required to do?", "How did these requirements affect DOD actions?", "How did the DOD testify in March 2012?", "What did the National Defense Authorization Act for Fiscal Year 2013 mandate?", "What does this report describe?" ], "summary": [ "The Department of Defense (DOD) and the military services have processes to meet statutory requirements for base closures and realignments, and use these processes hundreds of times each year to make basing decisions outside of the Base Realignment and Closure (BRAC) process.", "These processes provide guidance for all types of basing actions, including, but not limited to base closures and realignments.", "For example, basing decisions can include actions such as reductions in force, disestablishments, renaming a command, and other organization changes.", "Generally, each service's basing decision process uses similar criteria, scope, and methodologies to determine where to locate its force structure, and each process is documented in established guidance.", "Each service's process requires a series of analyses, such as analysis of capability and capacity, cost estimates, and environmental considerations. Additionally, each service basing decision process includes legal reviews and an evaluation of the effect on civilian personnel.", "According to service officials, these reviews provide them data to determine whether a closure or realignment is above thresholds established in section 2687 of Title 10, U.S. Code (hereafter 10 U.S.C. 2687), and therefore subject to additional evaluations and congressional notification.", "DOD has conducted closures or realignments that have either fallen below the thresholds of 10 U.S.C. 2687 or were authorized by the BRAC process, according to DOD officials.", "For example, the January 2011 disestablishment of Joint Forces Command was a basing decision that, according to DOD, reduced civilian personnel and eliminated functions at multiple installations, but did not require evaluations and congressional notification pursuant to 10 U.S.C. 2687.", "Specifically, one of the installations affected by the disestablishment of Joint Forces Command was Naval Support Activity Norfolk, Virginia--the installation where Joint Forces Command was headquartered.", "Naval Support Activity Norfolk had approximately 3,200 civilian personnel at the time of the disestablishment, of which 1,058 (about 33 percent) were Joint Forces Command personnel.", "According to DOD, a significant number of Joint Forces Command functions and positions were eliminated through a reduction in force--an action that is not subject to 10 U.S.C. 2687--and the remainder were part of a realignment of Naval Support Activity Norfolk that fell below the statutory thresholds of 1,000 authorized civilian personnel or 50 percent of the total civilian personnel authorized to be employed at the installation.", "Officials also told us they do not anticipate any future closures or realignments pursuant to this statute, citing BRAC as the preferred method for implementing basing actions that are above statutory thresholds.", "DOD may be required to meet specific statutory requirements before closing or realigning installations that are authorized to employ 300 or more DOD civilians.", "In light of these requirements, DOD has historically used the BRAC process for closing or realigning bases that are above statutory thresholds.", "However, in March 2012, the Deputy Under Secretary of Defense (Installations and Environment) testified that because of fiscal and strategic imperatives, in the absence of an additional BRAC round, DOD may be forced to use its existing authorities to begin to realign and close bases.", "Subsequently, the National Defense Authorization Act for Fiscal Year 2013 mandated GAO to review the processes that DOD uses to close and realign military installations outside of the BRAC process.", "This report describes the extent to which DOD has processes in place to implement installation closures and realignments within the United States, and the extent to which DOD has implemented closures and realignments outside of the BRAC process." ], "parent_pair_index": [ -1, 0, 1, 0, 0, 4, -1, 0, 1, 2, 2, -1, -1, 0, -1, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 6, 6, 6, 6, 6, 6, 0, 0, 0, 0, 0 ] }

{ "title": [ "", "Most Recent Developments", "Status", "Overview", "Title I: Army Corps of Engineers", "Background", "An Agency Budget Composed Mainly of Projects", "Supplemental and ARRA Appropriations", "Key Policy Issues—Corps of Engineers", "Construction Funding", "Inland Waterway Trust Fund4", "Everglades", "Savings and Slippage", "Title II: Department of the Interior", "Central Utah Project and Bureau of Reclamation: Budget in Brief", "Key Policy Issues—Bureau of Reclamation", "Background", "Central Valley Project (CVP) Operations", "California Bay-Delta", "San Joaquin River Restoration Fund", "WaterSMART Program", "Title III: Department of Energy", "Key Policy Issues—Department of Energy", "Energy Efficiency and Renewable Energy (EERE)", "New Program Proposed: RE-ENERGYSE", "Key Program Increases Proposed", "Key Program Decreases Proposed", "Electricity Delivery and Energy Reliability Program", "Nuclear Energy", "Reactor Concepts", "Fuel Cycle Research and Development", "Nuclear Energy Enabling Technologies", "Fossil Energy Research, Development, and Demonstration", "Strategic Petroleum Reserve", "Science", "ARPA-E", "Nuclear Waste Disposal", "Loan Guarantees and Direct Loans", "Nuclear Weapons Stockpile Stewardship", "Nuclear Weapons Complex Reconfiguration", "Directed Stockpile Work (DSW)", "Campaigns", "Readiness in Technical Base and Facilities (RTBF)", "Other Programs", "Nonproliferation and National Security Programs", "Cleanup of Former Nuclear Weapons Production Facilities and Nuclear Energy Research Facilities", "Office of Environmental Management", "High-Level Radioactive Waste Facilities", "Uranium Enrichment Facilities", "Office of Legacy Management", "Power Marketing Administrations", "Title IV: Independent Agencies", "Key Policy Issues—Independent Agencies", "Nuclear Regulatory Commission" ], "paragraphs": [ "", "Energy and Water Development funding for FY2010 was provided in H.R. 3183 , which became P.L. 111-85 when signed by President Obama on October 28, 2009. Appropriations for these programs in P.L. 111-85 totaled $33.5 billion. In addition, some of the $44.3 billion included in the American Recovery and Reinvestment Act (the \"Stimulus\" Act, P.L. 111-5 ) to fund numerous programs in the Corps of Engineers, the Bureau of Reclamation, and the Department of Energy, remained to be expended in FY2010.\nPresident Obama's proposed FY2011 budget for Energy and Water Development programs, released in February 2010, totaled $35.3 billion. On July 15, 2010, the House Appropriations Subcommittee on Energy and Water Development approved a bill to fund these programs at $34.7 billion, but the full committee did not report out the bill. In the Senate, the Energy and Water Development subcommittee approved a bill on July 20, and the full Appropriations Committee reported out S. 3635 ( S.Rept. 111-228 ) on July 22, with a total of $35.0 billion. The bill did not come to the floor of either the House or the Senate.\nOn September 30, the Senate and the House passed a continuing resolution ( H.R. 3081 , P.L. 111-242 ), funding government programs at the FY2010 level, until December 3. Later, P.L. 111-322 extended funding through March 4, 2011. H.J.Res. 44 ( P.L. 112-4 ), signed by the President on March 2, amended P.L. 111-242 , extending funding through March 18, 2011, and reducing funding levels for a number of Energy and Water Development programs.\nOn February 14, 2011, H.R. 1 was introduced, continuing funding through the rest of FY2011 at the FY2010 level, but with many specified exceptions in which funding was reduced. The House Appropriations Committee announced that the Energy and Water Development funding level in H.R. 1 was $29.9 billion. On February 19 the House passed H.R. 1 by a vote of 235-189. In the Senate, S.Amdt. 149 was offered as a substitute for H.R. 1 , continuing funding through the rest of FY2011 but with fewer funding reductions, totaling approximately $32.4 billion in Energy and Water Development funding. On March 9 the Senate rejected both the House-passed version of H.R. 1 and the S.Amdt. 149 . After two more short-term extensions, H.R. 1473 was introduced April 11, passed by the House and Senate April 14, and signed by the President April 15 ( P.L. 112-10 ). The bill funds Energy and Water Development programs at approximately $32.2 billion.", "Table 1 indicates the current status of the FY2011 funding legislation.", "The Energy and Water Development bill includes funding for civil works projects of the U.S. Army Corps of Engineers (Corps), the Department of the Interior's Central Utah Project (CUP) and Bureau of Reclamation, the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC).\nTable 2 includes budget totals for energy and water development appropriations enacted for FY2004 to FY2011.\nTable 3 lists totals for each of the bill's four titles. It also lists the total of several scorekeeping adjustments.\nTables 4 through 15 provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy), and Title IV (independent agencies) for FY2010-FY2011. Accompanying these tables is a discussion of the key issues involved in the major programs in the four titles. Funding in H.R. 1 , for S.Amdt. 149 , and for P.L. 112-10 , was derived from the bill texts, and is included in the overall title tables. These bills did not specify funding levels below the major program level.", "", "In most years, the budget request for the Army Corps of Engineers is below the agency's final appropriations. The FY2011 President's request was $4.88 billion, or $564 million below the appropriated level for FY2010. In reporting out the FY2011 spending bill, the Senate Appropriations Committee provided the Corps with $5.32 billion, an increase of $381 million over the Administration's request but slightly below the appropriation for FY2010. The House Appropriations Subcommittee on Energy and Water Development, in marking up its version of the bill, provided $5.28 billion.\nProposed funding for the Corps under the House-passed Continuing Resolution, H.R. 1 , would have reduce overall funding for the Corps to approximately $4.8 billion, or approximately $641 million below the FY2010 enacted level. The Continuing Resolution as passed, P.L. 112-10 , provided $5.05 billion for the Corps, or an increase of $152 million over the President's requested level but $411 million below the FY2010 enacted level.", "Unlike highways and municipal water infrastructure programs, federal funds for the Corps are not distributed to states or projects based on a formula or delivered via a competitive program. Generally about 85% of the appropriations for the Corps' civil works activities are directed to specific projects. Many of these projects are identified in the budget request, and others are added during congressional deliberations of the agency's appropriations. As a result, the agency's funding is often part of the debate over earmarks.\nGenerally, appropriations are not provided to studies, projects, or activities that have not been previously authorized, typically in a Water Resources Development Act (WRDA). Estimates of the backlog of authorized projects vary from $11 billion to more than $80 billion, depending on which projects are included (e.g., those that meet Administration budget criteria, those that have received funding in recent appropriations, those that have never received appropriations). The backlog raises policy questions, such as whether there is a disconnect between the authorization and appropriations processes, and how to prioritize among authorized activities.", "Annual appropriations for the Corps' Civil Works program have been regularly augmented since Hurricane Katrina through supplemental appropriations and through the American Recovery and Reinvestment Act of 2009. Since 2005, the Corps has received approximately $18.7 billion in supplemental appropriations, including approximately $15 billion for post-hurricane emergency repairs in Louisiana and other areas of the Gulf Coast region. For example, in the Supplemental Appropriations Act of 2008 ( P.L. 110-252 ), the agency received $5.76 billion in FY2009 funds for Louisiana hurricane protection. The Supplemental Appropriations Act of 2009 ( P.L. 111-32 ) provided the Corps $797 million in supplemental appropriations for flood control and coastal emergencies, including $439 million for barrier island restoration and ecosystem restoration for the Mississippi Gulf Coast. Separately, the American Recovery and Reinvestment Act of 2009 provided the Corps with an additional $4.6 billion for FY2009 and FY2010.", "", "Construction funding for the Corps receives attention by Congress because of the large number of authorized construction projects that have not received appropriations to date. The FY2011 Obama Administration request included $1.69 billion for construction, a reduction of $341 million below the FY2010 enacted level. The Obama Administration's FY2011 request maintains the previous practice of limiting the number of new construction starts, or \"new starts\" (i.e., projects that have not previously been funded). The FY2011 request included two new starts. This is similar to the previous administration's policy of generally opposing new starts in order to focus funds on completing ongoing activities.\nThe Senate Appropriations Committee's markup of the President's request provided $1.9 billion for the Construction account. The committee proposed using $120 million in unobligated balances from prior year appropriations for construction for the Continuing Authorities Program in order to fund FY2011 construction activities. The Senate Appropriations Committee also included one of the two new construction starts proposed by the Administration, but included no other new starts. The House subcommittee bill would have funded Construction at $1.851 billion.\nP.L. 112-10 provided $1.78 billion for construction, slightly more than the amount requested by the Administration. The enacted bill also included a provision barring the Corps from using appropriations for new starts.", "The Inland Waterway Trust Fund (IWTF) has a looming deficit; needed funding for eligible ongoing work has exceeded the incoming collections. Collections have been roughly $85 million per year, but outlays from the trust fund have exceeded these collections. Current law establishes the expenses associated with construction and major rehabilitation of inland waterways as a federal responsibility (i.e., no local cost-share), with 50% of the federal monies coming from the IWTF and 50% from the federal general revenue fund. The IWTF monies derive from a fuel tax (not indexed for inflation) imposed on vessels engaged in commercial transportation on designated waterways, plus investment interest on the balance.\nFY2009 and FY2010 appropriations included additional federal funding to temporarily ensure solvency of the IWTF. Additionally, previous Administrations (including the FY2010 Obama Request) have included proposals to increase revenues into the IWTF by replacing the current fuel tax with a lock user fee. In the past Congress has criticized this proposal and has requested that the Administration propose an alternative in committee report language.\nIn contrast to prior budgets, the Administration's FY2011 Budget did not assume additional revenue based on a lock user fee proposal. Instead, the FY2011 Budget proposed that IWTF spending be limited to current fuel tax revenues. The Senate Appropriations Committee again rejected the user fee approach in its FY2011 committee report, but also agreed with the Administration's temporary solution of budgeting only current year fuel tax revenues. The committee noted that if a solution is not agreed upon soon, it may be forced to act on this issue.", "The Corps plays a significant coordination role in the restoration of the Central and Southern Florida ecosystem. In addition to funding for Corps activities through Energy and Water Development appropriations, federal activities in the Everglades are also funded through Department of the Interior appropriations bills. Concerns regarding the level of appropriations across the federal agencies and the State of Florida and progress in the restoration effort are discussed in CRS Report RS22048, Everglades Restoration: The Federal Role in Funding , coordinated by [author name scrubbed].\nThe FY2011 Obama Administration request for the Corps' component of south Florida Everglades restoration work totals $180 million. This is the same overall funding level as the FY2010 appropriation for Everglades restoration. The Senate Appropriations Committee bill would have reduced this amount to $155 million. It noted that a reduction of $25 million is needed for the Central and Southern Florida restoration element as a result of the inability of the Corps to utilize the original amount requested for FY2011.", "Since FY2006, the Administration in its budget estimates has not proposed, and Congress has not enacted, an across-the-board reduction for savings and slippage (S&S) within individual accounts (these reductions would be divided up evenly among applicable projects). The savings account for the anticipated slip of spending on projects due to delays caused by weather, non-federal sponsor financing, or a decision not to proceed—or to account for savings from a project costing less than estimated. Before FY2006, the Administration would propose an S&S rate for various Corps accounts, and Congress would maintain or modify these rates during the appropriations process. In FY2006, Congress stopped applying an S&S rate in part to decrease the need for reprogramming allocations among projects.\nThe FY2011 budget request continued the practice of not including reductions to individual accounts for S&S, but the FY2011 Senate Appropriations Committee markup for the Corps included these reductions, including reductions for Investigations (-$16 million), Construction (-$88 million), Operations and Maintenance (-$57 million), and Mississippi Rivers & Tributaries (-$11 million).", "", "The Obama Administration requested $43.0 million for the Central Utah Project (CUP) Completion Account in FY2011, $1 million more than the amount appropriated for FY2010. The FY2011 request for the Bureau of Reclamation totaled $1.064 billion in gross current budget authority. This amount is $22 million less than enacted for FY2010. The FY2011 request for the Bureau of Reclamation includes an \"offset\" of $49.9 million for the Central Valley Project (CVP) Restoration Fund (Congress does not list this line item as an offset), yielding a \"net\" discretionary authority of $1.015 billion. Another $167 million is estimated to be available for FY2011 via \"permanent and other\" funds, for a grand total of $1.182 billion for FY2011. The total discretionary budget request (not including the CVPRF offset) for Title II funding—Central Utah Project and Reclamation—was approximately $1.107 billion. The 2010 enacted bill included $1.129 billion. The Senate bill, S. 3635 , would have appropriated $1.133 billion for Title II programs; the House subcommittee's bill would have appropriated $1.108 billion. P.L. 112-10 appropriated $1.094 billion for these programs.\nReclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, the Dam Safety Program, Water and Energy Management Development, and Fish and Wildlife Management and Development, among others. The Obama Administration requested $913.6 million for the Water and Related Resources Account for FY2011, a reduction from FY2010 of $37.6 million, approximately 4%.\nH.R. 1 , the House-passed Continuing Resolution for the remainder of the fiscal year, proposed funding the Water and Related Resources Account at $911.6 million, or approximately $39 million below the FY2010 enacted level. The House-passed version of H.R. 1 also included several amendments with potentially significant policy impacts. Section 4028 of the bill would have eliminated funding for a dam removal study in the Klamath basin that is tied to larger restoration efforts in the region. Section 4075 of H.R. 1 would have barred funding for two other items. It prohibited federal funding appropriated under the bill for the implementation of biological opinions by the Fish and Wildlife Service and the National Marine Fisheries Service that relate to the operations of the Central Valley Project and the California State Project. It also bars funding for the San Joaquin River Restoration Settlement Act in P.L. 111-11 . (See below for more information on these issues.) These provisions were not included in the final enacted version of P.L. 112-10 .", "", "Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation. Whereas the Army Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs in 17 western states. These projects provide water to approximately 10 million acres of farmland and a population of 31 million. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and fish and wildlife benefits. At the same time, operations of Reclamation facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users.\nAs with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding and relatively few \"programs.\" In FY2010, the House Committee on Appropriations noted that despite Reclamation's past achievements, the agency has become a \"caretaker agency\" and has not exerted leadership in the provision of water supply or maintaining the West's existing water supply infrastructure. The committee noted that the combined challenges of balancing competing needs, increasing demand for water supply, and changing hydrology will require active leadership in western water resource management.", "The CVP in California is one of Reclamation's largest and most complex water projects. Recently, Reclamation has had to limit water deliveries and pumping from CVP facilities due to drought and other factors, including environmental restrictions. In previous appropriations bills, this action has resulted in several amendments, including attempts to prevent Reclamation from implementing new Biological Opinions (BiOps) on the effect of project operations on certain fish species. For example, in FY2010 appropriations, an amendment was offered to prohibit Reclamation or any state agency from restricting operations of the CVP or State Water Project (SWP) due to recent BiOps on project operations.\nThe two BiOps in question have found that continued operation of the projects under a plan developed and implemented in 2004 (Operations Criteria and Plan (OCAP)) would jeopardize the existence of both Delta Smelt and salmon (and other) species in California. These species are protected under the federal Endangered Species Act (ESA) and the California Endangered Species Act. OCAP allowed increased pumping from the Delta, which some believe has further imperiled fish species listed as threatened or endangered under ESA long before the increased pumping plan went into effect. Others note that other factors such as invasive species, pollution, and non-federal withdrawals of water from the Delta have contributed to fishery declines. Critically low numbers of Delta Smelt resulted in a court-imposed limit on pumping at certain times and more recently a new review of project operations and impacts on the economy and species. In the meantime, low water deliveries to certain water districts (e.g., those with junior water rights) are exacerbating unemployment in an area with an economy already challenged by changes in the farming industry, the downturn in housing and financial sectors, and the economy in general.\nThe proposed FY2010 amendments preventing implementation of BiOps in the CVP were not enacted. However, the FY2010 enacted bill included an amendment providing for a two-year authorization of water transfers among certain CVP contractors without meeting particular conditions established by the Central Valley Project Improvement Act (Title 34 of P.L. 102-575 ).", "The Administration requested $40.0 million for the California Bay-Delta Restoration Account (Bay-Delta, or CALFED) for FY2011. The request was equal to the enacted level for FY2010. The bulk of the requested funds are targeted at five program areas: (1) water use efficiency ($7.5 million); (2) water quality ($5.0 million); (3) water storage ($5 million); (4) conveyance ($3.5 million); and (5) ecosystem restoration ($8.5 million). Funding for one CALFED subaccount (conveyance) declined substantially, while funding for water use efficiency and science increased substantially. The enacted Continuing Resolution ( P.L. 112-10 ) provided the same amount as the President's FY2011 budget request (less the 0.2% across-the-board rescission imposed on all programs). (For more information on CALFED, see CRS Report RL31975, CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues , by [author name scrubbed] and [author name scrubbed].)", "Reclamation proposed an allocation of $72.1 million for the San Joaquin River Restoration Fund for FY2011, an increase of $56.2 million over FY2010. The Fund was authorized by the enactment of Title X of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ), the San Joaquin River Restoration Settlement Act. The Fund is to be used to implement fisheries restoration and water management provisions of a stipulated settlement agreement for the Natural Resources Defense Council et al. v. Rodgers lawsuit and is to be funded through the combination of a reallocation of approximately $5.6 million annually in Central Valley Project Restoration Fund receipts from the Friant Division water users and accelerated payment of Friant water users' capital repayment obligations, as well as other federal and non-federal sources.\nAdditional authorization would be required for any allocation of receipts to the fund exceeding the $88 million authorized in P.L. 111-11 . Significant actions planned for FY2011 include releasing interim flows from Friant Dam and completion of planning, environmental compliance, and design for initial channel and structural improvements. Construction of Friant Dam in the 1940s and subsequent diversion of San Joaquin River water to off-stream agricultural uses blocked salmon migration and dewatered stretches of the San Joaquin, resulting in elimination of spring-run Chinook into the upper reaches of the river. One goal of the settlement is to bring back the salmon run; another is to reduce or avoid adverse water supply impacts to Friant Division long-term contractors.\nThe Senate Appropriations Committee markup included an additional $8 million for San Joaquin River restoration. This funding would be in addition to the aforementioned allocation of $72 million in receipts.\nThe House-passed CR ( H.R. 1 ) includes a requirement that no funding be made available for implementation of the settlement agreement in the remainder of FY2011. To date, Reclamation has not commented on the potential impact of this provision. P.L. 112-10 did not specify funding levels for the settlement.", "Reclamation proposed funding for a new program for FY2011—the WaterSMART (Sustain and Manage America's Resources for Tomorrow) Program. The program is part of an effort by the Department of the Interior to focus on water conservation, re-use, and planning, and will be conducted in conjunction with work by the U.S. Geological Survey. The Reclamation portion of the WaterSMART proposal includes the three individual components of the FY2010 Water Conservation Initiative: WaterSMART Grants (formerly known as Challenge Grants), Basin Studies, and Title XVI Projects. For FY2011, Reclamation proposed an increase of $27.4 million over the combined FY2010 enacted level for these three programs. Overall, $62 million was proposed for the Reclamation portion of WaterSMART, including $27 million for WaterSMART/Challenge Grants, $6 million for Basin Studies, and $29 million for Title XVI Projects. The Senate Appropriations Committee markup decreased the funding level for each of these programs, providing $20 million for WaterSMART/Challenge Grants, $4 million for Basin Studies, and $7.7 million for Title XVI projects. P.L. 112-10 did not specify programmatic funding levels for the WaterSMART program, which is carried out within the larger Water and Related Resources account.", "The Energy and Water Development bill has funded all DOE's programs since FY2005. Major DOE activities historically funded by the Energy and Water bill include research and development on renewable energy and nuclear power, general science, environmental cleanup, and nuclear weapons programs, and the bill now includes programs for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, and energy statistics, which formerly had been included in the Interior and Related Agencies appropriations bill.\nThe FY2010 appropriations acts funded DOE programs at $27.1 billion. In addition, some of the $38.7 billion appropriated in the ARRA ( P.L. 111-5 ) for selected DOE programs—primarily Conservation and Renewable Energy, Electricity Delivery, Fossil Energy R&D, Science, and Environmental Clean-Up—remained unexpended in FY2010. For FY2011, the Obama Administration requested $29.6 billion for DOE programs. The House-passed H.R. 1 Continuing Resolution would have funded DOE programs at $24.6 billion. The final legislation, P.L. 112-10 , appropriated $26.3 billion.", "DOE administers a wide variety of programs with different functions and missions. In the following pages, the most important programs are described and major issues are identified, in approximately the order in which they appear in Table 7 .", "DOE's FY2011 request sought $2,355.5 million for the EERE programs. Compared with the FY2010 appropriation, the FY2011 request would have increased EERE funding by $85.6 million, or 3.8%. P.L. 112-10 provided $1,825.6 million for EERE in FY2011, a reduction of $416.9 million, or 18.6 %. Also, DOE requested an additional $189.5 million for Electricity Delivery and Energy Reliability (EDER) programs. Relative to the FY2010 appropriation, that would have been an increase of $13.9 million, or 8.1%. P.L. 112-10 provided $144.7 million for EDER, a cut of $27.3 million, or 15.9%. Table 8 gives the programmatic breakdown of the regular appropriations for EERE and EDER.", "The DOE request sought $50 million to create a new science and engineering education program, RE-ENERGYSE. The mission of the program is \"to provide the education and training necessary to build a highly skilled U.S. clean energy workforce dedicated to solving the world's greatest energy challenges.\" DOE finds that the United States ranks behind other major nations in making the transition required to educate students for emerging energy trades, research efforts, and other professions to support the future energy technology mix. The program aims to educate and train Americans to adapt green technology to their existing industry/trade, to enter thousands of green jobs, and increase U.S. competitiveness. It also seeks to develop leading edge undergraduate and graduate programs at universities and community colleges.\nThe $50 million request included $35 million for a higher education subprogram that would be dedicated to the development of scientists, engineers, and other professionals with the skills needed to enter the clean energy field. It would support fellowships, internships, post-doctoral opportunities, and the development of interdisciplinary masters programs in the area of clean energy.\nAlso, the $50 million request included $15 million for a technical training, education, and outreach subprogram that would support the development of training programs at community colleges and other training centers. The funding would also support a K-12 education activity, designed to assist K-12 students and educators who are eager to contribute their ideas to the solution of long-term environment and energy challenges, but often lack adequate knowledge about the issues or potential career opportunities. The K-12 activity would seek to reach students and educators through campaigns, curricula, competitions, and other efforts aimed at educating, engaging, and inspiring students to pursue clean energy careers and adopt sustainable energy practices that aim to mitigate climate change.\nIn its FY2010 request, DOE first proposed the creation of a RE-ENERGYSE program, with funding of $115 million. Congress did not fund the program. The report of the House Committee on Appropriations found that the FY2010 proposal embraced an \"important set of goals,\" but it expressed concern that the program breadth would be \"more consistent with\" activities of the Department of Education, Department of Labor, and the National Science Foundation. Further, the report stated that\nWhile the Committee supports the desired end-results of the proposed program, the request lacks sufficient details and background research to assure the Committee that the program will be effective and not duplicative if fully funded in fiscal year 2010.\nInstead, the committee recommended $7.5 million for DOE to conduct a study that further defined the education and workforce needs and assessed how such a program could complement related activities at other federal agencies. The committee said it looked forward to the study and to \"further dialogue with the Department to better define the intentions of the proposal and understand what role the Department of Energy should play in a broadly mandated educational initiative.\"\nThe report of the Senate Committee on Appropriations recommends zero funding for the FY2010 RE-ENERGYSE proposal. The conference report provided no funding for the program in FY2010.\nFor FY2011, the Senate Committee on Appropriations again recommended zero funding.", "The Solar Program would have got a net funding increase of $55.4 million in the FY2011 request, or about 22% over the FY2010 appropriation. The Concentrating Solar Power (CSP) subprogram would have got the majority of the increase, $48.5 million, to support a demonstration project. DOE expects that the project would accelerate CSP deployment in the desert Southwest by two to three years, leading to about 1,000 megawatts (mw) of new capacity. This is the first time since the early 1980s that DOE has proposed a major CSP demonstration project. Assessments show a huge CSP resource potential. At the Bureau of Land Management, firms are competing intensely for CSP development permits. Water issues pose a potentially serious barrier to CSP development.\nThe Photovoltaic (PV) R&D Program would have received an increase of $23.5 million, mainly to provide the first year of full funding for the PV Manufacturing Initiative. The Initiative aims to accelerate PV technology cost reduction and commercialization. The Senate Committee on Appropriations recommended $50.0 million for the CSP demonstration project, but otherwise recommends $30.0 million less than the request.\nThe Wind Program would have received a net increase of $42.5 million, or about 53%. A new activity geared to help commercialize offshore wind development would get $49.0 million. Most of that amount would support a competitive solicitation for an offshore wind demonstration project. Financial, regulatory, technical, environmental, and social barriers would be addressed. DOE anticipates that the demonstration would accelerate market deployment of more than three gigawatts (billions of watts, gw) of currently planned offshore projects. This is the first time since the early 1980s that DOE has proposed a major wind demonstration project. The Cape Wind project has been delayed for several years. The Senate Committee on Appropriations would have provided a nearly identical amount as the request, recommending that DOE undertake at least two offshore wind demonstration projects off the Atlantic Coast.\nThe Geothermal Program would have been increased by $11.0 million, or about 25%. Virtually all of that increase would support two activities. One is a collaborative R&D activity with DOE's Office of Science on geophysical R&D and modeling efforts which address induced seismicity, water availability, and other potential lifecycle risks associated with enhanced geothermal systems. The second activity would be an increased effort on low temperature geothermal including fluids co-production from oil and gas operations and fluids from geo-pressured resources. The Senate Committee on Appropriations recommended the same amount as the request and directed DOE to apply at least $5.0 million to low-temperature systems.\nThe Vehicle Technologies Program would have received a net increase of about $13.9 million, which encompasses an increase of about $17.7 million for the Battery/Energy Storage subprogram. That increase is aimed at reaching higher performance and cost goals with lithium batteries for electric vehicles. The Senate Committee on Appropriations recommended nearly the same total amount as the request.\nThe Building Technologies Program would have received a net increase of about $8.7 million. The Energy Efficient Building Systems Design Hub would have got a modest increase from $22.0 million to $24.3 million. Of the three hubs funded in FY2010, this is the only one for which DOE sought more funding in FY2011. The omnibus climate/energy bills H.R. 2454 (§171) and S. 1733 (§205) of the 111 th Congress would have authorized DOE to establish more hubs. The Senate Committee on Appropriations recommended $8.7 million less than the request for the Buildings Program. Most of the difference is reflected in a lower amount, $16.0 million, for the Building Design Hub. Based on reports about problems with the ENERGY STAR program, the committee directed GAO to determine whether new program guidelines are needed.\nThe Industrial Technologies Program would have received a net increase of $4.0 million. A Manufacturing Energy Systems subprogram would have been established with funding of $10.0 million, with goals to enhance innovation, reduce carbon intensity, and spur job creation.\nThe Federal Energy Management Program (FEMP) would have increased by $10.3 million, or about 32%. Most of the increase would support DOE efforts to meet goals established by the Energy Independence and Security Act (EISA, P.L. 110-140 ), and Executive Orders 13423 and 13514. Efforts would focus on DOE sites, emphasizing the following activity areas: (1) comprehensive energy assessments and advanced metering; (2) retro-commissioning, continuous commissioning, and capital projects related to those commissioning efforts; (3) hardware to capture fugitive emissions; and (4) pilot projects for solar, biomass, and alternative fueling stations. The Senate Committee on Appropriations recommended nearly the same funding as the request. Noting problems identified in a recent DOE Inspector General report, the committee directed DOE to deliver an action plan to address the problems.\nThe Weatherization Program would have grown by $90.0 million, or about 43%. Most of that increase, $85.8 million, would have supported the Administration's goal to increase the number of low-income households that are weatherized. DOE estimates an average weatherization cost of $6,500 per household. Thus, $85.8 million would support weatherization of an additional 13,200 households. A modest portion of the overall increase, $4.2 million, would support the completion of the multi-year evaluation of the Weatherization Program. The State Energy Program would have increased by $25.0 million, to expand current activities. For the Weatherization Program, the Senate Committee on Appropriations recommended $100.0 million less than the request, stating that the $5.0 billion appropriated in the Recovery Act (P.L 111-5) was sufficient to carry the program through FY2012.\nThe Facilities Program would have had a net increase of $38.5 million, an increase that would be about double the amount of the FY2010 appropriation. Virtually all of that increase would be used to fund completion of the Energy Systems Integration Facility (ESIF) at NREL and to purchase and/or install research equipment for ESIF. The Senate Committee on Appropriations supported the exact amount requested.\nProgram Direction would have increased by $60.0 million, or about 43%. About $54.8 million of that increase would be used for salaries and benefits associated with a ramp up of the federal workforce to process more than 7,000 active contracts, grants and agreements valued in excess of $4 billion. Due, in part, to residual Recovery Act follow-up, reporting and transparency requirements, risk-management, and accountability work, DOE expects the number of transactions to double during the period from FY2009 through FY2011.\nProgram Support would have received an increase of $42.3 million, or about 94%. Nearly half that increase, $21.0 million, would be applied as an increase to the Strategic Priorities and Impact Analysis (SPIA) subprogram. SPIA conducts analyses to clarify how the sum of EERE's parts, practices and policies can contribute to solutions as a whole. The FY2011 increase would focus on the added workload associated with growing demand for policy analysis of EE and RE technologies as a solution to climate change. Cross-cutting projects previously supported by all EERE programs are incorporated within this subprogram, providing enhanced coordination and value. The proposed funding increase would also incorporate the Low-Carbon Energy Systems project, directly leveraging EERE and SPIA's analytical expertise to help meet climate goals set out at the United Nations' 2009 Climate Change Conference (COP-15) at Copenhagen.\nAnother $15.0 million of the increase for Program Support would be used to expand support for the International subprogram. The subprogram addresses energy security, economic goals, and climate change through partnerships with developing countries (especially China, India, and Brazil) that involve cooperative R&D, market transformation, and assessments of global clean energy potential. The FY2011 increase would support new initiatives focused on global technology deployment and climate change mitigation. DOE anticipates that new activities would include the China and India Clean Energy Research Centers and programs launched under the Major Economies Forum (MEF). The expanded funding would also provide EERE with resources to support increased activity through a variety of regional partnerships, such as the Asia-Pacific Economic Cooperation (APEC), the Energy and Climate Partnership of the Americas (ECPA), Energy Development in Island Nations (EDIN), and a regional energy platform for Africa. Additionally, the increased funding would support a greatly increased level of effort under bilateral partnerships, with countries such as China, India, Russia, Brazil, Canada, and Argentina, that would continue to advance EE and RE technology RDD&D throughout the world.\nThe Senate Committee on Appropriations recommended $57.6 million less for Program Management (Program Direction and Program Support), without specifying any details of differences compared the request.\nFor congressionally directed projects, the Senate Committee on Appropriations recommended $147.6 million to cover 134 activities.", "The Hydrogen/Fuel Cell Program would have been cut by $37.0 million, or about 21%. The Market Transformation subprogram would have been cut by $16.9 million. Under that subprogram, fuel cell deployment and early market activities would be deferred. The Senate Committee on Appropriations recommended restoring DOE's proposed cut, which would put FY2011 funding at the FY2010 level.\nThe Water Power Program would have been cut by $9.5 million, or about 19%. Water power technologies employ marine and hydrokinetic (wave, tidal, current, and ocean thermal) resources, and conventional hydropower resources, to generate electricity. The Program addresses two key areas: technology development and market acceleration. DOE states that FY2010 funds are sufficient to continue resource and technology assessments initiated in 2008 and 2009 and to initiate a number of new projects. DOE expects that the FY2011 request would allow the Program to build upon activities begun in FY2010, as well as begin support for the development of cost-effective incremental hydropower opportunities identified in 2010. The Senate Committee on Appropriations recommended about $20.0 million more than the request, with $15.0 million of that designated for conventional hydropower.\nUnder Industrial Programs, a $7.4 million cut would have terminated subprograms for the steel, aluminum, and forest/paper industries. Also, a $2.4 million cut would have reduced funding for the chemicals industry subprogram by more than half. DOE says it is making a \"shift\" to greater support of cross-cutting technology efforts that are \"more productive\" than specific industry activities. The Senate Committee on Appropriations recommended $14.0 million for the Industries of the Future (Specific) program, which is $1.2 million less than FY2010 funding and $11.4 million more than the request.", "The FY2011 request would have provided $185.9 million to the Office of Electricity Delivery and Energy Reliability, a net increase of $13.9 million (8.1%) above the FY2010 appropriation. The Energy Storage subprogram would grow by $26.0 million, while most other R&D subprograms would be trimmed, yielding a net increase of $19.4 million for R&D. Energy storage has gained attention as a potential answer to key electric power infrastructure issues, including supply congestion, rising penetration of variable renewable energy generation, increased power quality demands, and concern over greenhouse gas emissions. The FY2011 increase for storage would direct new research efforts on lithium-based batteries designed to meet the size and performance requirements of stationary applications. Specifically, research on new electrolytes, power conditioning systems, electrode and separator materials, and integration issues would aim to reduce system capital and life cycle costs. Also, new analytical methods would be developed to identify promising locations for pumped hydro and compressed air energy storage systems.\nThe Senate Committee on Appropriations recommended the exact amount of the request for programs, but added $4.3 million to cover six congressionally directed projects. P.L. 112-10 cut the EDER total appropriation to $144.7 million.", "The Obama Administration's FY2011 funding request for nuclear energy research and development totaled $824.1 million—including advanced reactors, fuel cycle technology, and infrastructure support. The total nuclear energy request was 4.8% above the FY2010 appropriation. P.L. 112-10 provided $732.1 million for those programs. An additional $88.2 million was requested under Other Defense Activities for DOE's Office of Nuclear Energy to pay for safeguards and security at DOE's Idaho nuclear facilities.\nAccording to DOE's FY2011 budget justification, the nuclear energy R&D program includes \"generation, safety, waste storage and management, and security technologies, to help meet energy and climate goals.\" However, opponents have criticized DOE's nuclear research program as providing wasteful subsidies to an industry that they believe should be phased out as unacceptably hazardous and economically uncompetitive.\nAlthough total funding in the FY2011 nuclear energy request was similar to levels in previous years, the Obama Administration has significantly reorganized the budget request and established new priorities. The Nuclear Power 2010 Program, which had assisted the near-term design and licensing of new nuclear power plants, was completed in FY2010 and is receiving no further funding. However, a newly established Reactor Concepts Research, Development and Demonstration Program is to include new programs to develop small modular reactors and extend the lives and improve the operation of existing commercial nuclear power plants.\nFuel Cycle Research and Development was to be boosted 47.8%, to $201 million, and continue the previous year's shift away from the design and construction of nuclear fuel recycling facilities toward an emphasis on longer-term research. Much of the additional funding is to be used for research on spent nuclear fuel disposal and nuclear fuel cycle options, such as partial recycling.\nThe FY2011 budget request also proposed a new program area called Nuclear Energy Enabling Technologies (NEET), to be funded at $99.3 million. This program area includes research that supports a variety of nuclear technologies, advanced nuclear power concepts, and modeling and simulation. Generation IV Research and Development, previously funded as a separate program to develop advanced reactor technology, is being split between NEET and Reactor Concepts RD&D.\nFunding for university nuclear education and research, previously provided under the Integrated University Program, is to be continued at the same level, $5 million, under the DOE-wide RE-ENERGYSE initiative. The budget request also included $3 million for International Nuclear Energy Cooperation, including ongoing international activities by the Global Nuclear Energy Partnership (GNEP), which have continued despite a major refocusing of the domestic portion of the program.", "The Reactor Concepts RD&D program area proposed by the FY2011 budget request includes the existing Next Generation Nuclear Plant (NGNP) demonstration project and research on advanced reactors previously funded under the Generation IV program. New programs are also being established to develop small modular reactors and enhance the \"sustainability\" of existing commercial nuclear plants. The total funding request for Reactor Concepts RD&D was $195 million.\nNGNP is a high-temperature gas-cooled reactor demonstration project authorized by the Energy Policy Act of 2005 (EPAct). The reactor is intended to produce high-temperature heat that could be used to generate electricity, help separate hydrogen from water, or be used in other industrial processes. The Obama Administration's first budget request (for FY2010) had not specifically mentioned the NGNP project, but the House Appropriations Committee called it a high priority, and Congress ultimately provided $169 million. The FY2011 budget request included $103 million for NGNP, including high-temperature fuel development, process heat applications, and materials testing. DOE is to make a decision on moving forward to final design and construction by the end of FY2011. If the project goes forward, a cost-shared contract for final design and construction is not expected to be awarded before FY2012, and therefore no design funds were being requested for FY2011.\nThe newly established Advanced Reactor Concepts program, with a funding request of $21.9 million, is described by the budget justification as \"an expanded version\" of the existing Generation IV Nuclear Energy Systems program. \"The program will focus on reactors that could dramatically improve performance in sustainability, safety, economics, security, and proliferation resistance,\" according to the justification. Nuclear technology development under this program is to include \"fast reactors,\" using high-energy neutrons, and reactors that would use a variety of heat-transfer fluids, such as liquid sodium. International research collaboration in this area would continue under the Generation IV International Forum (GIF).\nDOE requested $38.9 million for its proposed Small Modular Reactors Program. A number of small reactor concepts have recently been proposed as alternatives to existing commercial reactors, which typically exceed 1,000 megawatts of electric generating capacity. Such large sizes have generally been considered necessary to achieve economies of scale. The budget justification contends that small modular reactors (SMRs) could be built in factories to reduce costs and could be installed in small increments, which could make them easier to finance than large plants. DOE plans to hold a competitive solicitation to award cost-shared financial assistance to as many as two SMR designs, according to the justification.\nDOE's new Light Water Reactor Sustainability Program, to receive $25.8 million under the budget request, is to conduct research on extending the life of existing commercial light water reactors beyond 60 years, the maximum operating period currently licensed by the Nuclear Regulatory Commission. The program is to study the aging of reactor materials and analyze safety margins of aging plants. Other research under this program is to focus on improving the efficiency of existing plants, through such measures as increasing plant capacity and upgrading instrumentation and control systems.", "The Fuel Cycle Research and Development Program conducts \"long-term, science-based\" research on a wide variety of technologies for improving the management of spent nuclear fuel, according to the DOE budget justification. The total FY2011 funding request for this program was $201 million, $65 million above the FY2010 appropriation.\nUnder the George W. Bush Administration, when the program was called the Advanced Fuel Cycle Initiative (AFCI), it had focused on near-term development and deployment of a specific type of spent fuel reprocessing technology, UREX, which was intended to recycle plutonium, uranium, and other long-lived radioactive materials into new nuclear fuel. AFCI had constituted the domestic portion of the Bush Administration's GNEP initiative, which had been intended to provide secure nuclear fuel services to discourage the international spread of nuclear fuel cycle technology.\nUnder the Obama Administration, the program is to develop technology options for a wider range of nuclear fuel cycle approaches, including direct disposal of spent fuel (the \"once through\" cycle) and partial and full recycling. \"The program will also conduct scientific research and technology development to enable storage, transportation, and disposal of used nuclear fuel and all radioactive wastes generated by existing and future nuclear fuel cycles,\" according to the justification.\nMuch of the planned research on spent fuel management options is expected to support the Blue Ribbon Commission on America's Nuclear Future, which is developing alternatives to the planned Yucca Mountain, NV, spent fuel repository, which President Obama wants to terminate. In addition to researching potential waste treatment technologies and approaches that may be considered by the Blue Ribbon Commission, the program will study \"a variety of geologic disposal media such as granite, tuff, deep boreholes, clay, shale, salt, and basalt,\" according to the justification.\nOther major research areas in the Fuel Cycle R&D Program include the development of advanced fuels for existing commercial reactors and advanced reactors, improvements in nuclear waste characteristics, and modeling and simulation of fuel cycle options.", "The newly established NEET program is intended to conduct research on \"the full range of nuclear energy technology issues,\" according to the DOE budget justification.\nUnder the category of Crosscutting Technology Development, research is to be conducted on new types of reactor materials, weapons proliferation risks of fuel cycle options, advanced nuclear plant manufacturing methods, and advanced sensors and instrumentation. The Energy Innovation Hub for Modeling and Simulation, created in FY2010, is to be moved from the Generation IV program to NEET with a slight increase in funding, to $24.3 million. The Modeling and Simulation Hub is intended to create a computer model of an operating reactor to allow a better understanding of nuclear technology, with the benefits of such modeling extending to other energy technologies in the future, according to the justification.", "For FY2011, the Obama Administration requested $586.6 million for Fossil Energy Research and Development; which represents a 12.7% decrease ($95.8 million) from the FY2010 appropriation ( Table 9 ). The decrease from the previous year's request reflects the cut in funding for Natural Gas Technologies, Unconventional Fossil Energy Technologies, and Cooperative Research and Development. P.L. 112-10 appropriated $584.5 million.\nThe DOE Office of Fossil Energy intends to propose a new budget structure for the FY2012 Coal subprogram that currently includes CCPI, and Fuels and Power Systems. The proposed change will reflect increased focus on carbon capture and storage (CC&S) technologies.\nIn FY2009, the House Appropriations Committee directed DOE to merge FutureGen and the Clean Coal Power Initiative into a single solicitation for a Carbon Capture Demonstration Initiative, which ARRA funded at $1.52 billion. The FutureGen project originally intended to demonstrate clean coal-based Integrated Gasification Combined Cycle (IGCC) power generation with capture and sequestration of CO 2 emissions.\nThe FY2011 request had no funding for the Carbon Capture Initiative. DOE has also abandoned the FutureGen project concept and instead will use $1 billion in funding to refit and repower an existing plant to capture CO 2 . The money will go to the Futuregen Alliance, Ameren Energy Resources, Babcock & Wilcox and Air Liquide Process & Construction to install new equipment at an Ameren 200-MW unit in Meredosia, IL.\nThe Clean Coal Technology program has only project-closeout activities remaining, so the administration has requested no further funding in FY2011.\nThe Senate Appropriations Committee recommended a 24% increase in the Fossil Energy budget, bringing it up to $725.95 million. The recommendation would have increased the Fuels and Power Systems by $48.15 million, restores the Natural Gas Technologies program, and funds a the new Unconventional Fossil Energy program directed by the previous year's appropriation. The committee added that it supports research and development projects to produce high quality fuels derived from coal/biomass feedstocks that meet military and civilian specifications, albeit greater in carbon lifecycle emissions than conventional petroleum based fuels.", "The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns formed out of naturally occurring salt domes in Louisiana and Texas. The purpose of the SPR is to provide an emergency source of crude oil that may be tapped in the event of a presidential finding that an interruption in oil supply, or an interruption threatening adverse economic effects, warrants a drawdown from the reserve. By early 2010, the SPR was filled to its current capacity of 727 million barrels. The Northeast Heating Oil Reserve (NHOR) established during the Clinton Administration stores 2 million barrels of refined home heating oil in above-ground facilities in Connecticut, New Jersey, and Rhode Island.\nThe federal government has not purchased oil for the SPR since 1994. Beginning in 2000, additions to the SPR were made with royalty-in-kind (RIK) oil acquired by the Department of Energy in lieu of cash royalties paid on production from federal offshore leases. The Procedures for the Acquisition of Petroleum for the Strategic Petroleum Reserve include provisions for acquiring crude oil through direct purchase, by transfer of royalty oil from the Department of the Interior, and by receipt of premium barrels resulting from deferral of scheduled deliveries of petroleum for the Reserve. In May 2008, Congress passed legislation ( P.L. 110-232 ) ordering DOE to suspend RIK fill for the balance of the calendar year unless the price of crude oil dropped below $75/barrel. However, the sharp decline in crude oil prices since spiking to $147/barrel in the summer of 2008 brought about a resumption of fill of the SPR. On January 2, 2009, the Bush Administration announced plans that included the purchase of nearly 10.7 million barrels for the SPR to replace oil that was sold after Hurricanes Katrina and Rita in 2005. In May 2009, RIK fill was resumed at an average volume of 26,000 barrels per day, totaling over 6.1 million barrels to be delivered by January 2010. These activities have brought the SPR to capacity.\nOn September 16, 2009, the Secretary of the Department of the Interior announced a transitional phasing out of the RIK Program. As RIK oil and natural gas sales contracts expire, the oil and natural gas properties will revert to in-value status. As a result of the announcement, the upcoming natural gas sales (Gulf of Mexico and Wyoming) previously advertised will not be conducted.\nThe Energy Policy Act of 2005 (EPAct) required expansion of the SPR to its authorized maximum of 1 billion barrels, and a site in Richton, MS, has been evaluated as a possible location for an additional 160 million barrels of capacity. However, in its FY2011 request, the Administration proposed to suspend spending in support of expansion of the SPR. The budget request proposed redirecting $71 million in balances previously appropriated for expansion, to be used to \"partially fund SPR non-expansion operations and maintenance activities.\" In support of its proposal, the Administration cited, in the budget justification, EIA projections that \"U.S. petroleum consumption and dependence on imports will decline in the future and the current Reserve's projection will gradually increase to 90 days by 2025.\" This has reduced the FY2011 request for the SPR to $138.9 million, a sharp reduction from the $243.8 million appropriated for FY2010.\nCongress approved $11.3 million for the NHOR in FY2010, and the Administration has proposed the same amount for FY2011. The Senate Appropriations Committee recommended $209.9 million for the SPR, and did not support cancellation of $71 million in prior appropriated funds for the proposed expansion of the Richton, MS, SPR site. P.L. 112-10 set the SPR spending level at the Senate Committee figure, $209.9, but rescinded a total of $86.8 million from prior year appropriations.", "The DOE Office of Science conducts basic research in six program areas: basic energy sciences, high-energy physics, biological and environmental research, nuclear physics, advanced scientific computing research, and fusion energy sciences. Through these programs, DOE is the third-largest federal funder of basic research and the largest federal funder of research in the physical sciences. For FY2011, DOE requested $5.121 billion for the Office of Science, an increase of 4.4% from the FY2010 appropriation of $4.904 billion. In the 111 th Congress, the House Appropriations Subcommittee on Energy and Water Development recommended $4.900 billion, and the Senate Appropriations Committee recommended $5.012 billion.\nIn the 112 th Congress, H.R. 1 as passed by the House would have provided $4.018 billion for the Office of Science. The Senate amendment S.Amdt. 149 to H.R. 1 would have provided $4.733 billion. P.L. 112-10 as passed appropriated $4,857.7 billion. None of the 112 th Congress bills specified how the total should be allocated by program. P.L. 1120-10 rescinded $15 million appropriated in prior years but not yet obligated.\nThe President's Plan for Science and Innovation would double the combined R&D funding of the Office of Science and two other agencies over the decade from FY2006 to FY2016. This continues a plan initiated by the Bush Administration in January 2006 as part of its American Competitiveness Initiative. The 4.4% increase requested for FY2011 was less than the 7.2% annual rate required to achieve a doubling in 10 years. The amount appropriated in P.L. 112-10 is less than the FY2010 level.\nThe requested funding for the largest Office of Science program, basic energy sciences, was $1.835 billion, up 12.1% from $1.636 billion in FY2010. Funding for Energy Frontier Research Centers (EFRCs) would have increased by $40 million. EFRCs are \"multi-investigator and multi-disciplinary centers that foster, encourage, and accelerate basic research to provide the basis for transformative energy technologies of the future.\" A new energy innovation hub on materials for batteries and energy storage would have received $34 million, and the existing hub on fuels from sunlight, currently funded by the Office of Energy Efficiency and Renewable Energy, would have received $24 million. The Administration proposed to initiate a total of eight energy innovation hubs in FY2010, but Congress funded only three. The aim of the hubs is \"to address basic science and technology hindering the nation's secure and sustainable energy future\" by assembling multidisciplinary teams of researchers \"spanning science, engineering, and other disciplines, but focused on a single critical national need identified by the Department.\" In the 111 th Congress, the Senate Appropriations Committee recommended $1.739 billion for basic energy sciences. It did not provide the requested increase for new EFRCs. It provided about two-thirds of the requested funding for the two energy innovation hubs.\nFor high-energy physics, the request was $829 million, up 2.3% from $810 million in FY2010. Proposed increases included $17 million for construction of the Long Baseline Neutrino Experiment and the Muon to Electron Conversion Experiment, both at Fermilab. The request would have provided $84 million, an increase of $4 million, in support of the Large Hadron Collider. In the 111 th Congress, the Senate Appropriations Committee recommended $820 million. It expressed support for design work on the two Fermilab construction projects, but directed DOE to provide a report on their expected benefits, strategy, and funding needs.\nThe request for biological and environmental research was $627 million, up 3.8% from $604 million in FY2010. Proposed increases included $16 million for climate and Earth system modeling and $11 million for genomic science. In the 111 th Congress, the Senate Appropriations Committee recommended $614 million. It provided $11 million for an artificial retina project that the request would not continue, and it transferred $15 million to the nuclear physics program for nuclear medicine research. H.R. 1 would have limited FY2011 funding for biological and environmental research to a maximum of $302 million.\nFor nuclear physics, the request was $562 million, up 5.0% from $535 million in FY2010. The balance among the five subprograms would have remained about the same. Construction of an upgrade at the Continuous Electron Beam Accelerator Facility (CEBAF) would have received $36 million, up from $20 million in FY2010. The CEBAF project's total cost and completion date did not changed, but its FY2011 request was less than previously projected because some construction activities previously planned for FY2010 and FY2011 were moved forward and paid for with funding from the Recovery Act. In the 111 th Congress, the Senate Appropriations Committee recommended $554 million, including the $15 million transferred from the biological and environmental research program.\nThe request for advanced scientific computing research was $426 million, up 8.1% from $394 million in FY2010. A proposed increase of $35 million for leadership computing facilities at two of the national laboratories would have been partly offset by a decrease of $6 million for research and evaluation prototypes. The latter decrease results from the conclusion of a partnership with the Defense Advanced Research Projects Agency (DARPA) on high-productivity computing systems. In the 111 th Congress, the Senate Appropriations Committee recommended $418 million.\nThe request for fusion energy sciences was $380 million, down 10.8% from $426 million in FY2010. The U.S. contribution to the International Thermonuclear Experimental Reactor (ITER), a fusion facility under construction in France, would have dropped from $135 million in FY2010 to $80 million in FY2011 because of delays in the construction schedule. The ITER partners are China, the European Union, India, Japan, Russia, South Korea, and the United States. The current estimate for ITER's total project cost is $1.45 billion to $2.2 billion. Between June 2009 and February 2010, the expected start-up date for ITER slipped from 2016 to November 2019. Nevertheless, DOE believes that \"the costs associated with the schedule delays to date ... are manageable within the existing ... cost range.\" In the 111 th Congress, the Senate Appropriations Committee recommended $384 million for fusion energy sciences, including $4 million more than requested for inertial fusion. The committee expressed concern about the cost and schedule of ITER and about U.S. leadership and competitiveness in materials science for fusion.", "The Advanced Research Projects Agency–Energy (ARPA-E) was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. It received its first funding in FY2009, mostly through the Recovery Act, and announced its first round of contract awards in October 2009. DOE budget documents describe ARPA-E's mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. The request for ARPA-E in FY2011 was $300 million. P.L. 112-10 appropriated $179.6 million.", "President Obama's FY2011 budget called for termination of DOE's Office of Civilian Radioactive Waste Management (OCRWM), which was established by the Nuclear Waste Policy Act of 1982 (NWPA, 42 U.S.C. 10101 et seq.) to dispose of highly radioactive waste from nuclear power plants and defense facilities. OCRWM had been developing a permanent nuclear waste repository at Yucca Mountain, NV, as specified by an NWPA amendment in 1987. DOE filed a license application with the Nuclear Regulatory Commission for the proposed Yucca Mountain repository in June 2008.\nThe Obama Administration \"has determined that developing the Yucca Mountain repository is not a workable option and the Nation needs a different solution for nuclear waste disposal,\" according to the DOE FY2011 budget justification. As a result, no funding for Yucca Mountain or OCRWM is being requested for FY2011. P.L. 112-10 provides no funding for the program..\nDOE filed a motion with NRC to withdraw the Yucca Mountain license application on March 3, 2010. An NRC licensing panel rejected DOE's withdrawal motion June 29, 2010, on the grounds that NWPA requires full consideration of the license application by NRC. The full NRC commission is now considering the withdrawal, which is strongly opposed by states that have defense-related waste awaiting permanent disposal.\nAlternatives to Yucca Mountain are to be evaluated by the Blue Ribbon Commission on America's Nuclear Future, which was formally established by DOE on March 1, 2010. Congress provided $5 million for the Commission in the FY2010 Energy and Water Development Appropriations Act. The Commission is to study options for temporary storage, treatment, and permanent disposal of highly radioactive nuclear waste, along with an evaluation of nuclear waste research and development programs and the need for legislation. A draft report is to be issued within 18 months and a final report within two years.\nDOE's Office of Nuclear Energy (NE) has taken over the remaining functions of OCRWM and will \"lead all future waste management activities,\" according to the budget justification. Substantial funding has been requested for NE to conduct research on nuclear waste disposal technologies and options and to provide support for the Blue Ribbon Commission (see \" Nuclear Energy \" section for more details).\nNWPA required DOE to begin taking waste from nuclear plant sites by January 31, 1998. Nuclear utilities, upset over DOE's failure to meet that deadline, have won two federal court decisions upholding the department's obligation to meet the deadline and to compensate utilities for any resulting damages. Utilities have also won several cases in the U.S. Court of Federal Claims. DOE estimates that liability payments would eventually total $11 billion if DOE were to begin removing waste from reactor sites by 2020, the previous target for opening Yucca Mountain. (For more information, see CRS Report R40202, Nuclear Waste Disposal: Alternatives to Yucca Mountain , by [author name scrubbed]; CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed]; and CRS Report R40996, Contract Liability Arising from the Nuclear Waste Policy Act (NWPA) of 1982 , by [author name scrubbed].)", "Congress established the DOE Innovative Technology Loan Guarantee Program with Title XVII of the Energy Policy Act of 2005 (EPAct, P.L. 109-58 ). Sec. 1703 of the act authorized loan guarantees for energy projects using \"new or significantly improved technologies\" to reduce greenhouse gas emissions. Estimated future government costs resulting from the loan guarantees (such as through defaults of guaranteed loans) must be paid up front by each project. These \"subsidy costs,\" which are expected to range from about 1% to 10% of the loan guarantee amount, can be paid with appropriated funds or directly by the project owner.\nThe FY2009 omnibus funding measure ( P.L. 111-8 ) provided DOE with loan guarantee authority of $47 billion, to remain available indefinitely, in addition to previously approved authority of $4 billion. Of the $47 billion, $18.5 billion was for nuclear power, $18.5 billion was for energy efficiency and renewables, $6 billion was for coal, $2 billion was for carbon capture and sequestration, and $2 billion was for uranium enrichment.\nPresident Obama's FY2011 budget request called for nearly tripling the loan guarantee ceiling for nuclear power plants, to $54.5 billion. Because federal loan guarantees are widely considered to be a prerequisite for obtaining financing for new nuclear power plants, the nuclear industry had strongly urged that the loan guarantee ceiling be raised dramatically. DOE announced the first preliminary nuclear loan guarantee on February 16, 2010, to a project to add two reactors to the existing Vogtle nuclear power plant in Georgia. The conditional guarantee agreement, which cannot be implemented before the proposed reactors receive an NRC license, would guarantee a total of $8.33 billion in financing for the two reactors. At that level, the current $18.5 billion nuclear loan guarantee ceiling would be enough for about four reactors, while the proposed increase to $54.5 billion could cover about 13 reactors (depending on their size and the percentage of their costs that would be guaranteed). Nuclear critics have attacked the proposed tripling of nuclear loan guarantees as a \"taxpayer bailout\" that would divert limited financial resources away from cleaner energy technologies such as efficiency and renewables.\nThe American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) created a new, temporary loan guarantee program for renewable energy and electric transmission projects by adding a new Sec. 1705 to EPAct. In establishing the Sec. 1705 loan guarantee program, ARRA included a $6 billion appropriation to cover the subsidy costs, so that up-front payment would not have to be collected from project owners. However, $2 billion of that funding has since been transferred to the \"cash for clunkers\" automobile trade-in program by P.L. 111-47 , and another $1.5 billion was rescinded to help pay for the Education Jobs and Medicaid Assistance Act. If the subsidy costs average 10% of each loan guarantee, then the remaining $2.5 billion of the ARRA subsidy cost appropriation should support loan guarantees totaling $25 billion.\nIn addition to the $2.5 billion in subsidy costs provided by ARRA for the temporary Sec. 1705 program, President Obama requested a $500 million appropriation to pay subsidy costs for energy efficiency and renewable energy loan guarantees under the permanent Sec. 1703 program originally established by EPAct. The DOE budget justification estimates that the $500 million appropriation for subsidy costs would support renewable energy and energy efficiency loan guarantees totaling $3 billion-$5 billion. DOE also requested $58 million for administrative costs, which are to be fully offset by receipts.\nP.L. 112-10 reduced the loan guarantee authority for Section 1703 non-nuclear technologies to $7.3 billion. Including the $2 billion in FY2007 authority that has not been designated for uranium enrichment, the Section 1703 non-nuclear loan guarantee ceiling now stands at about $9.3 billion. Nuclear loan guarantees remain at $18.5 billion, and uranium enrichment totals $4 billion.\nRemaining appropriations for subsidy cost payments under the Section 1705 loan guarantee program are to expire at the end of FY2011. However, P.L. 112-10 provides $170 million, with no expiration, to pay subsidy costs for renewable energy and efficiency projects under the Section 1703 program. P.L. 112-10 also provides authority for up to $1.183 billion in loan guarantees for renewable energy and efficiency projects, in addition to the $31.8 billion in remaining Section 1703 authority provided by earlier appropriations acts. The additional loan guarantee authority and subsidy cost appropriation provided by P.L. 112-10 is available to projects that applied under the expiring Section 1705 before February 24, 2011.\nA related DOE program, the Advanced Technology Vehicles Manufacturing Loan Program, was established by the Energy Independence and Security Act of 2007 ( P.L. 110-140 ). The FY2009 Continuing Resolution appropriated $7.5 billion to allow DOE to issue up to $25 billion in direct loans. The program is to provide loans to eligible automobile manufacturers and parts suppliers for making investments in their plant capacity to produce vehicles with improved fuel economy. DOE requested $10 million in FY2011 to cover the program's administrative expenses, nearly all of which was provided by P.L. 112-10 .", "Congress established the Stockpile Stewardship Program in the FY1994 National Defense Authorization Act, P.L. 103-160 , \"to ensure the preservation of the core intellectual and technical competencies of the United States in nuclear weapons.\" The FY2010 National Defense Authorization Act, P.L. 111-84 , section 3111, amended this language to state that the program is to ensure \"(1) the preservation of the core intellectual and technical competencies of the United States in nuclear weapons, including weapons design, system integration, manufacturing, security, use control, reliability assessment, and certification; and (2) that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing.\" The program is operated by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE that Congress established in the FY2000 National Defense Authorization Act ( P.L. 106-65 , Title XXXII).\nStockpile stewardship consists of all activities in NNSA's Weapons Activities account, as described below. Table 11 presents Weapons Activities funding. NNSA manages two programs outside of that account: Defense Nuclear Nonproliferation, discussed later in this report, and Naval Reactors.\nP.L. 111-84 , section 3113, established a \"stockpile management\" program \"to provide for the effective management of the weapons in the nuclear weapons stockpile, including the extension of the effective life of such weapons.\" Objectives for the program include increasing the reliability, safety, and security of the nuclear weapons stockpile and further reducing the likelihood of nuclear testing. Section 3113 required that any changes to the stockpile shall be made to further the objectives set for the program and shall \"remain consistent with the basic design parameters by including, to the maximum extent feasible, components that are well understood or are certifiable without the need to resume underground nuclear weapons testing.\" The stockpile management program is to support the stockpile stewardship program.\nMost stewardship activities take place at the nuclear weapons complex (the \"Complex\"), which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City Plant, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 Plant, TN); and the Nevada Test Site. NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites.\nThe FY2011 request document includes data from NNSA's Future Years Nuclear Security Program (FYNSP), which, like many programs in the Defense Department, projects the budget and components for FY2012-FY2015 (see Table 12 ).", "Although the \"Complex\" currently consists of eight sites, it was much larger during the Cold War in terms of number of sites, budgets, and personnel. Despite the post-Cold War reductions, many in Congress have for years wanted the Complex to change further, in various ways: fewer personnel, lower cost, greater efficiency, smaller footprint at each site, increased security, and the like. In response, in January 2007 NNSA submitted a report to Congress on its plan for transforming the Complex, \"Complex 2030.\"\nThe House Appropriations Committee, in its FY2008 report, expressed displeasure with this plan and demanded \"a comprehensive nuclear defense and nonproliferation strategy,\" a detailed description translating that strategy into a \"specific nuclear stockpile,\" and \"a comprehensive, long-term expenditure plan, from FY2008 through FY2030\" before considering further funding for Complex 2030 and a nuclear weapon program, the Reliable Replacement Warhead (RRW). It stated that \"NNSA continues to pursue a policy of rebuilding and modernizing the entire complex in situ without any thought given to a sensible strategy for long-term efficiency and consolidation.\" The Senate Appropriations Committee saw an inadequate linkage between warheads, the Complex, and strategy, and \"rejects the Department's premature deployment of the NNSA Complex 2030 consolidation effort.\" The joint explanatory statement accompanying the consolidated appropriations bill said, \"The Congress agrees to the direction contained in the House and Senate reports requiring the Administration ... to develop and submit to the Congress a comprehensive nuclear weapons strategy for the 21 st century.\"\nOn December 18, 2007, NNSA announced its plan, Complex Transformation, a name change from Complex 2030. It would retain existing sites, reduce the weapons program footprint by as much as one-third, close or transfer from weapons activities about 600 structures, reduce the number of weapons workers by 20%-30%, dismantle weapons more rapidly, and build several major new facilities, such as a Uranium Processing Facility at Y-12 Plant, a Weapons Surveillance Facility at Pantex Plant, and a Chemistry and Metallurgy Research Replacement Nuclear Facility at Los Alamos National Laboratory. For details, see the Final Complex Transformation Supplemental Programmatic Environmental Impact Statement released in October 2008, along with two Records of Decision of December 2008.\nThe House Appropriations Committee reiterated its FY2008 views in its FY2009 report:\nBefore the Committee will consider funding for most new programs, substantial changes to the existing nuclear weapons complex, or funding for the RRW [Reliable Replacement Warhead], the Committee insists that the following sequence be completed: (1) replacement of Cold War strategies with a 21 st Century nuclear deterrent strategy sharply focused on today's and tomorrow's threats, and capable of serving the national security needs of future Administrations and future Congresses without need for nuclear testing; (2) determination of the size and nature of the nuclear stockpile sufficient to serve that strategy; (3) determination of the size and nature of the nuclear weapons complex needed to support that future stockpile.\nIn keeping with this approach, the committee recommended eliminating funds for RRW and for several programs described below. In its FY2009 report, the Senate Appropriations Committee also recommended eliminating RRW funds and made some changes to individual programs. It did not provide general comments on Complex transformation. P.L. 111-8 , FY2009 Omnibus Appropriations Act, provided no RRW funds. Neither the FY2010 nor the FY2011 budgets requested RRW funds. A FY2010 budget document stated, \"The Administration proposes to cancel development of the Reliable Replacement Warhead (RRW)—a new design warhead intended to replace the current inventory of nuclear weapons—because it is not consistent with Presidential commitments to move towards a nuclear-free world.\"\nThe FY2011 budget request for Weapons Activities was $7,008.8 million, vs. FY2010 appropriations of $6,384.4 million. The Department of Defense submitted its Nuclear Posture Review Report in April 2010, which set forth the role of U.S. nuclear forces and plans for sustaining the nuclear arsenal. According to a White House document of May 2010, the President provided Congress with a classified report required by the FY2010 National Defense Authorization Act, Section 1251, \"on the comprehensive plan to: (1) maintain delivery platforms [that is, bombers and missiles that deliver nuclear weapons]; (2) sustain a safe, secure, and reliable U.S. nuclear weapons stockpile; and (3) modernize the nuclear weapons complex.\" According to that document, \"the Administration intends to invest $80 billion in the next decade to sustain and modernize the nuclear weapons complex.\" The projections for weapons stockpile and infrastructure costs (billions of then-year dollars) are: FY2011, $7.0; FY2012, 7.0; FY2013, $7.1; FY2014, $7.4; FY2015, $7.7; FY2016, $8.4; FY2017, $8.9; FY2018, $9.0; FY2019, $8.7; and FY2020, $8.8.\nIn the 112 th Congress, H.R. 1 as passed by the House proposed to reduce the requested increase by $312.4 million, about half. This reduction was contentious. A key part of the compromise that the Administration worked out with Senate Republicans to gain their support for the New Strategic Arms Reduction Treaty (New START) was that funding for Weapons Activities would increase substantially over the period FY2010-FY2020 in order to modernize the nuclear weapons complex and maintain nuclear weapons. An Administration document of November 2010 set forth the rationale and a budget plan for this increase. Further, the New START resolution of ratification stated, \"It is the sense of the Senate that—(1) the United States is committed to proceeding with a robust stockpile stewardship program, and to maintaining and modernizing the nuclear weapons production capabilities and capacities, that will ensure the safety, reliability, and performance of the United States nuclear arsenal.... \" The President's FY2012 budget request called for Weapons Activities to increase to $7,629.7 million. A reduction in the FY2011 request for Weapons Activities would raise questions about whether Congress will provide the funds requested for FY2012. The issue was resolved for FY2011 in P.L. 112-10 , which provided $6,946.4 million for Weapons Activities, a further reduction below H.R. 1 of $50 million.", "This program involves work directly on nuclear weapons in the stockpile, such as monitoring their condition; maintaining them through repairs, refurbishment, life extension, and modifications; conducting R&D in support of specific warheads; and dismantlement. Specific items under DSW include the following:\nLife Extension Programs (LEPs). These programs aim to extend the life of existing warheads through design, certification, manufacture, and replacement of components. An LEP for the B61 mods 7 and 11 bombs was completed in FY2009. An LEP for the W76 warhead for the Trident II submarine-launched ballistic missile is ongoing; the life-extended warhead is termed the W76-1. The FY2010 appropriation was $223.2 million, and the FY2011 request was $249.5 million. The Senate Appropriations Committee recommended the requested amount. It required NNSA to submit reports when NNSA completes a study of the LEP for the B61 bomb, stated that one type of B61 LEP would \"extend the life of the weapon for both strategic and tactical missions for 30 years,\" and referred to the \"upcoming\" LEP for the W78 warhead. Stockpile Systems. This program involves routine maintenance, replacement of limited-life components, ongoing assessment, and the like for all weapon types in the stockpile. The FY2010 appropriation was $357.8 million. The FY2011 request was $649.4 million; the Senate Appropriations Committee recommended the requested amount. The largest increase is for the B61 bomb ($92.0 million to $317.1 million); other substantial increases are for the W78 warhead ($48.3 million to $85.9 million) and the W87 warhead ($48.1 million to $62.6 million). B61 funds fall into two categories: B61 system sustainment ($59.5 million for FY2010 to $65.5 million requested for FY2011) and B61 phase 6.2/6.2A study ($32.5 million for FY2010 to $251.6 million requested for FY2011). The former activity conducts maintenance, inspections, assessments, and the like. According to the budget request, funding for the latter would \"[support] a life extension study of the nuclear and non-nuclear components scope, including implementation of enhanced surety, extended service life and modification consolidation.… The study will evaluate options for improving safety and use control features and ensures compatibility and integration with modern aircraft such as the F-35 Joint Strike Fighter.\" The Senate Appropriations Committee recommended the requested amount for Stockpile Systems, of which \"at least $165,000,000 shall be used for surveillance activities,\" i.e., those that monitor the status of nuclear weapons. It stated, \"A robust surveillance program is required to maintain confidence in the performance of nuclear weapons in the absence of underground nuclear testing.\" It expressed concerns that shortfalls in surveillance could jeopardize the annual process for assessing the safety and reliability of nuclear weapons. The B61 bomb has several variants. A study on a new variant, the B61-12, which would modify most variants of B61's into a single common version, was controversial in the FY2010 appropriations cycle. The House bill recommended no funds for it. The House Appropriations Committee \"will not support a major warhead redesign in the absence of clearly defined nuclear weapons strategy, stockpile, and complex plans.\" The Senate bill included the amount requested. The conference bill included $92.0 million for B61 stockpile systems activities, of which $32.5 million was for a study of nonnuclear components for the proposed B61-12, a version of the B61 that would modify various types of B61s into a single common version. The bill provides that \"upon completion of the Nuclear Posture Review and confirmation of the requirement for the B61-12, the NNSA is authorized to reallocate an additional $15,000,000 within the Stockpile Systems activities to support the continuation of the B61-12 non-nuclear upgrade study\" and that \"no funds may be obligated or expended for B61-12 nuclear components without prior approval by the Appropriations Committees of the House and Senate.\" The conference agreement called for two reports on the B61-12. The FY2011 request focused on the possibility of life-extending individual B61 variants, but the proposed appropriations language states, \"Provided further, That upon completion of the Nuclear Posture Review and confirmation of the requirement for the B61-12, the NNSA is authorized to reallocate an additional $15,000,000 within the Stockpile Systems activities to support the continuation of the B61-12 nonnuclear upgrade study, with notification to cognizant congressional committees within 15 days of the implementation of this action.\" For FY2011, the Senate Appropriations Committee recommended the requested amount and directed NNSA to submit a report describing safety and security features that NNSA would add to a refurbished B61 and a cost-benefit analysis of installing these features. It also directed NNSA to submit a revised analysis of B61 LEP alternatives on costs and benefits of combining nuclear and nonnuclear refurbishment of the B61. Weapons Dismantlement and Disposition (WDD). The President and Congress have agreed on the desirability of reducing the stockpile to the lowest level consistent with national security, and numbers of warheads have fallen sharply since the end of the Cold War. Because of the large number of warheads being retired, there is a need to dismantle some warheads and to further break down some components to \"prevent storage problems across the [nuclear weapons] enterprise.\" WDD involves interim storage of warheads to be dismantled; dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). The FY2010 current appropriation is $96.1 million, and the FY2011 request is $58.0 million. According to the budget request, the decrease reflects a reduction in dismantlements and component dispositions, and \"a return to baseline funding after a one-time Congressional increase in FY 2010.\" The Senate Appropriations Committee recommended $64.4 million, an increase of $6.4 million above the request, of which $27.5 million shall be used to help \"restore\" weapons dismantlement activities at Pantex.\nSeveral components of WDD have been moved to different organizations within DOE or to different budget categories within Weapons Activities in the last several years. Within WDD, the major activity for FY2009 was the Pit Disassembly and Conversion Facility (PDCF), which was moved to the Readiness in Technical Base and Facilities account for FY2010. The \"pit\" is the fissile component (usually plutonium) of a nuclear warhead that initiates a thermonuclear explosion. As warheads are dismantled, pits may be stored, but for permanent disposition PDCF would convert the plutonium in pits to plutonium oxide for use in a Mixed Oxide Fuel Fabrication Facility (MFFF), where it would become fuel for commercial light-water nuclear reactors. In FY2008, MFFF was transferred from NNSA to DOE's Office of Nuclear Energy. WDD includes a Waste Solidification Building (WSB) to convert liquid wastes from PDCF and MFFF into solids for disposal off-site. For FY2010, the WSB account has been moved to the Fissile Materials Disposition Program within Defense Nuclear Nonproliferation.\nStockpile Services. This category includes Production Support; R&D Support; R&D Certification and Safety; Management, Technology, and Production; and Plutonium Sustainment. NNSA states, \"Stockpile Services provides the foundation for the production capability and capacity within the nuclear security enterprise. All enduring systems, LEPs, and dismantlements rely on Stockpile Services to provide the base development, production and logistics capability needed to meet program requirements. In addition, Stockpile Services funds research, development and production activities that support two or more weapons-types, and work that is not identified or allocated to a specific weapon-type.\" The FY2010 appropriation was $828.8 million; the FY2011 request was $941.5 million. The largest increase ($141.9 million to $190.3 million) was for Plutonium Sustainment, which \"maintains the plutonium technical base skills which support activities encompassing all capabilities requiring the use and handling of plutonium.\" Further, \"The increase restores the capability to build up to 10 pits per year.\" The Senate Appropriations Committee recommended reducing the request by $30.5 million, and directed that within the funds provided, at least $74.0 million shall be used to support surveillance, no more than $160.0 million shall be used for plutonium sustainment, and $84.1 million shall be used for weapons assembly, disassembly, and dismantlement at Pantex.", "These are \"multi-year, multi-functional efforts\" that \"provide specialized scientific knowledge and technical support to the directed stockpile work on the nuclear weapons stockpile.\" Many campaigns have significance for policy decisions. For example, the Science Campaign's goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct nuclear tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. Campaigns also fund some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. The FY2011 request included five campaigns:\nScience Campaign. According to NNSA, this campaign \"develops improved scientific capabilities and experimental infrastructure to assess the safety, security, reliability, and performance of the nuclear explosives package (NEP) portion of weapons without reliance on further underground testing.\" The FY2010 current appropriation is $295.6 million; the FY2011 request is $365.2 million. The element showing the largest increase in this campaign is Advanced Certification, which would go from $19.4 million to $77.0 million. This program will \"improve the weapons certification process; refine computational tools and methods; advance the physical understanding of surety mechanisms; understand failure modes; assess new manufacturing processes; and study system requirements.\" The increase would fund certain experiments at the Nevada Test Site and at the Dual-Axis Radiographic Hydrodynamic Test Facility at Los Alamos National Laboratory \"to examine options for modernized surety.\" The Senate Appropriations Committee recommended reducing the request by $10.9 million. Of the recommended amount, $53.3 million is provided to the Z facility at Sandia, and another $10.0 million to help that facility conduct experiments on plutonium. The Z facility, in Albuquerque, NM, releases an enormous amount of energy in a brief pulse, and is used, among other things, to study how materials react under high temperature and pressure. The committee describes the facility's activities as \"critical to sustaining a safe, secure, and effective nuclear stockpile.\" Engineering Campaign. This campaign seeks to \"develop capabilities to assess and improve the safety, reliability, and performance of the nuclear explosive package and non-nuclear engineering components throughout a nuclear weapon's lifetime without further underground testing. Additionally, the purpose is to increase our ability to predict the response and have confidence in the design of all components and subsystems to external stimuli …; the effects of aging; and to develop essential engineering capabilities and infrastructure.\" The FY2010 appropriation was $150.0 million; the FY2011 request was $141.9 million. The Senate Appropriations Committee recommended increasing that amount by $8.0 million. Noting that nuclear weapons may have to function in a nuclear environment, the committee provided funds to support capabilities to create or simulate that environment. Inertial Confinement Fusion Ignition and High Yield Campaign. This campaign is developing the tools to create extremely high temperatures and pressures in the laboratory—approaching those of a nuclear explosion—to support weapons-related research and to attract scientific talent to the Stockpile Stewardship Program. NNSA states, \"Virtually all of the energy from a nuclear weapon is generated while in the high energy density (HED) state. High energy density physics (HEDP) experiments on ICF facilities are required to validate the advanced theoretical models that are used to assess and certify the stockpile without nuclear testing. The National Ignition Facility (NIF) will extend HEDP experiments to include access to thermonuclear burn conditions in the laboratory, a unique and unprecedented scientific achievement.\" The centerpiece of this campaign is NIF, the world's largest laser. While NIF was controversial in Congress for many years and had significant cost growth and technical problems, controversy waned as the program progressed. The facility was dedicated in May 2009. According to a press report of January 2010, scientists working at NIF \"successfully fired an array of 192 laser beams [the total number of beams at NIF] at a helium-filled target no larger than a BB shot and instantly heated it to 6 million degrees Fahrenheit. The gas vanished in a tiny explosion. The scientists said that result marked the most important advance yet in more than 10 years of work at the $3.5 billion facility.\" The FY2010 appropriation was $457.9 million; the FY2011 request was $481.5 million. The Senate Appropriations Committee recommended the requested amount. The committee supported creating an independent advisory board to evaluate experiments planned at NIF. Advanced Simulation and Computing Campaign. This campaign develops computation-based models of nuclear weapons that integrate data from other campaigns, past test data, laboratory experiments, and elsewhere to create what NNSA calls \"the computational surrogate for nuclear testing,\" thereby enabling \"comprehensive understanding of the entire weapons lifecycle from design to safe processes for dismantlement.\" Some analysts doubt that simulation can be relied upon to provide the confidence needed to certify the safety, security, and reliability of warheads, and advocate a return to testing. The campaign includes funds for hardware and operations as well as for software. The FY2010 appropriation was $567.6 million; the FY2011 request was $615.7 million. The Senate Appropriations Committee recommended the requested amount. Readiness Campaign. This campaign develops technologies and techniques to improve the safety and efficiency of manufacturing and reduce its costs. The FY2010 current appropriation is $100.0 million; the FY2011 request is $112.1 million. Within the Readiness Campaign, the largest dollar increase ($5.7 million for FY2010, $18.9 million requested for FY2011) is for Stockpile Readiness, a subprogram that \"ensures the availability of future manufacturing capabilities for the production of weapon components containing special materials.\" The increase provides for advances in manufacturing lithium parts at the Y-12 National Security Complex and for ensuring capability remains at the Savannah River Site to produce and test other components (gas transfer system reservoirs). The largest dollar decrease ($68.2 million for FY2010, $50.2 million requested for FY2011) is for Tritium Readiness. NNSA explains that the decrease \"is due to the cyclical nature of the fixed-price contracting approach taken by the program for the manufacture and irradiation of tritium producing burnable absorber rods and other materials. There are no major procurements expected during FY2011.\" The Senate Appropriations Committee recommended reducing one component of this campaign, Tritium Readiness, from $50.2 million requested to $30.2 million and specified that no more than the latter amount could be used for tritium production efforts. \"The Committee is concerned about the technical challenges NNSA is facing with tritium production at the Watts Bar reactor and the slow progress in increasing production capacity.\"", "This program funds infrastructure and operations at Complex sites. The FY2010 appropriation was $1,842.9 million; the FY2011 request was $1,849.0 million. It has six subprograms. The largest is Operations of Facilities (FY2010 current appropriation, $1,348.3.million; FY2011 request, $1,258.0 million). Others are Program Readiness, which supports activities at multiple sites or in multiple programs (FY2010 appropriation, $73.0 million; FY2011 request, $69.3 million); Material Recycle and Recovery, which recovers plutonium, enriched uranium, and tritium from weapons production and disassembly (FY2010 appropriation, $69.5 million; FY2011 request, $70.4 million); and Construction (FY2010 appropriation, $303.9 million; FY2011 request, $399.0 million). Within Operations of Facilities, Institutional Site Support dropped from $120.1 million (FY2010) to $41.0 million (requested, FY2011). NNSA explains the reduction as due mainly to \"the nonrecurring request in FY2010 for direct support of management and operating contractor pension costs.\" The Senate Appropriations Committee recommended increasing RTBF funds by $71.0 million above the request. It expressed concern that the request for Pantex and Y-12 did not contain sufficient funds, and stated, \"The increase in funding will fill significant gaps at these facilities that would avoid layoffs and disruption to dismantlement and life extension schedules.\" Among other things, the committee restored funding for the Los Alamos Neutron Science Center and expressed concern about NNSA's use of funds for a replacement facility for the Kansas City Plant.\nThe most costly item in Construction, and among the most controversial in the Weapons Activities account, is the Chemistry and Metallurgy Research Facility Replacement (CMRR) at Los Alamos National Laboratory (FY2010 appropriation, $97.0 million; FY2011 request, $225.0 million). It would replace the Chemistry and Metallurgy Research (CMR) building, which is over 50 years old. Among other things, CMR houses research into plutonium and supports pit production at Los Alamos. In considering the FY2008 budget, the House Appropriations Committee stated, \"Proceeding with the CMRR project as currently designed will strongly prejudice any nuclear complex transformation plan. The CMRR facility has no coherent mission to justify it unless the decision is made to begin an aggressive new nuclear warhead design and pit production mission at Los Alamos National Laboratory.\" The Senate Appropriations Committee stated, \"The current authorization basis for the existing CMR [facility] lasts only through 2010, as it does not provide adequate worker safety or containment precautions. However, deep spending cuts ... will likely result in delays that will require the laboratory to continue operations in the existing CMR facility.\"\nIn its FY2009 report, the House Appropriations Committee stated, regarding CMRR and another facility at Los Alamos (the Radioactive Liquid Waste Treatment Facility), \"In the absence of critical decisions on the nature and size of the stockpile, which in turn generate requirements for the nature and capacity of the nuclear weapons complex, it is impossible to determine the capacity required of either of these facilities. It would be imprudent to design and construct on the basis of a guess at their required capacity.\" It recommended no funds for either project. The Senate Appropriations Committee recommended $125.0 million, an increase of $24.8 million, for CMRR \"to make up for [previous] funding shortfalls.\"\nAs justification for the increase requested for CMRR for FY2011, NNSA states that capabilities at the CMR \"are currently substantially restricted,\" precluding the level of operations NNSA requires. Others counter that another building at Los Alamos, Plutonium Facility 4 (PF-4), could be modified to conduct some of the work that would be done in CMRR, and that CMRR's capacity is excessive to needs. The Senate Appropriations Committee recommended the requested amount.", "Weapons Activities includes several smaller programs in addition to DSW, Campaigns, and RTBF. Among them:\nSecure Transportation Asset provides for safe and secure transport of nuclear weapons, components, and materials. It includes special vehicles for this purpose, communications and other supporting infrastructure, and threat response. The FY2010 appropriation was $234.9 million. The FY2011 request was $248.0 million; the Senate Appropriations Committee recommended the requested amount. Nuclear Counterterrorism Incident Response \"responds to and mitigates nuclear and radiological incidents worldwide and has a lead role in defending the Nation from the threat of nuclear terrorism.\" The FY2010 appropriation was $221.9 million. The FY2011 request was $233.1 million; the Senate Appropriations Committee recommended the requested amount. Facilities and Infrastructure Recapitalization Program (FIRP) \"continues its mission to restore, rebuild and revitalize the physical infrastructure of the nuclear security enterprise.\" It focuses on \"elimination of legacy deferred maintenance.\" The FY2010 appropriation was $93.9 million. The FY2011 request was $94.0 million; the Senate Appropriations Committee recommended the requested amount. Site Stewardship seeks to \"ensure environmental compliance and energy and operational efficiency throughout the nuclear security enterprise.\" It was a new program for FY2010, consolidating several earlier programs. The FY2010 request was $90.4 million. The House Appropriations Committee said it supported the program but made a reduction due to \"budget limitations.\" The House bill included $62.4 million. The Senate bill included $61.3 million and denied funding for the stewardship planning initiative because \"the mission priorities are poorly defined.\" The FY2010 appropriation was $61.3 million. The FY2011 request was $105.5 million; the Senate Appropriations Committee recommended reducing that amount by $5.0 million.\nSafeguards and Security consists of two elements: (1) Defense Nuclear Security provides operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and the like. The FY2010 appropriation was $769.0 million; the FY2011 request was $720.0 million. According to NNSA, the bulk of the reduction, $38.8 million, is due to \"efficiencies achieved through risk-informed decisions regarding staffing levels to support the enterprise mission, and common procurement of equipment and supplies.\" The Senate Appropriations Committee recommended $668.0, as requested, for Defense Nuclear Security operations and maintenance, but recommended reducing the amount requested for construction by $9.0 million to $43.0 million on grounds that the amount required for the project in question, safeguards and security upgrades, will depend on the size of the CMRR project's nuclear facility. (2) Cyber Security seeks to \"ensure that sufficient information technology and information management security safeguards are implemented throughout the NNSA enterprise to adequately protect the NNSA information assets.\" The FY2010 appropriation was $122.5 million. The FY2011 request was $124.3 million; the Senate Appropriations Committee recommended the requested amount.", "DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These nonproliferation and national security programs are included in the National Nuclear Security Administration.\nFunding for these programs in FY2010 was $2.137 billion, up from $1.482 billion for FY2009. Most of this increase resulted from returning two major construction projects, the Mixed-Oxide (MOX) plant and the Waste Solidification Building, to the Fissile Materials Disposition program from other parts of DOE. For FY2011 the Obama Administration asked for a further increase to return another construction project, the Pit Disassembly plant, to the Fissile Materials Disposition program. (See below.)\nThe Nonproliferation and Verification R&D program was funded at $317.3 million for FY2010. The request for FY2011 was $351.6 million. Nonproliferation and International Security programs include international safeguards, export controls, and treaties and agreements. The FY2011 request for these programs was $155.9 million, compared with $187.2 million appropriated for FY2010.\nInternational Materials Protection, Control, and Accounting (MPC&A), which is concerned with reducing the threat posed by unsecured Russian weapons and weapons-usable material, was funded at $572.1 million in FY2010; the FY2011 request was $590.1 million. Elimination of Weapons-Grade Plutonium Production is aimed at persuading Russia to shut down three nuclear reactors that produce weapons-grade plutonium and also supply power to several communities. Two of the three reactors were shut down in 2008 and their power replaced by a refurbished fossil-fueled facility. The third plutonium-producing reactor, scheduled to be shut down in December 2010, will be replaced by construction of another fossil-fueled facility. The program was funded at $24.5 million for FY2010; no further funding was requested for FY2011.\nThe goal of the Fissile Materials Disposition program is disposal of U.S. surplus weapons plutonium by converting it into fuel for commercial power reactors, including construction of a facility to convert the plutonium to \"mixed-oxide\" (MOX) reactor fuel at Savannah River, SC, and a similar program in Russia. Funding for the U.S. side of the program was controversial for several years, because of lack of progress on the program to dispose of Russian plutonium.\nHowever, for FY2010 the Obama Administration requested and got a total of $701.9 million for Fissile Materials Disposition, noting that \"DOE and its Russian counterpart agency, Rosatom, agreed on a financially and technically credible program to dispose of Russian surplus weapon-grade plutonium in November 2007.\" The program would rely on Russian fast reactors \"operating under certain nonproliferation restrictions,\" according to the budget document. The FY2011 request was $1,030.7 million, to continue construction of the Savannah River project and also to supply $100 million of a promised $400 million for research and development of a gas-turbine modular helium reactor to be built in Russia under the plutonium disposal agreement.\nThe Global Threat Reduction Initiative is aimed at converting research reactors around the world from using highly enriched uranium, removing and disposing of excess nuclear materials, and protecting nuclear materials from theft or sabotage. The FY2011 request for this program was $558.8 million, compared to $333.5 million appropriated for FY2010.", "In 1989, DOE established what is now the Office of Environmental Management to consolidate the cleanup of former nuclear weapons production facilities. Cleanup includes the disposal of large amounts of radioactive and other hazardous wastes, management and disposal of surplus nuclear materials, remediation of soil and groundwater contamination, and decontamination and decommissioning of excess buildings and facilities. The Office of Environmental Management also administers the cleanup of federal civilian nuclear energy research laboratories.\nOver 100 federal facilities across the United States were involved in the production of nuclear weapons and nuclear energy research, encompassing 2 million acres combined. Although planned cleanup actions are complete at the vast majority of these facilities, DOE expects cleanup to continue at the larger and more complex facilities for several years, even decades, especially at facilities where large volumes of high-level radioactive wastes are stored and contamination is more severe. As of the beginning of FY2010, the Office of Environmental Management administered 18 facilities where cleanup was not yet complete. DOE estimates that the outstanding costs to complete cleanup at all of these remaining facilities could range between $192.8 billion and $247.2 billion.\nDOE expects that additional funds beyond these amounts may be needed at many facilities to operate and maintain cleanup remedies once they are in place and to monitor contaminant levels to ensure the effectiveness of the remedies over time. At sites where the cleanup remedies involve the permanent containment of radioactive wastes, such long-term activities may need to be continued indefinitely because of the lengthy periods of time required for radioactivity to decay to acceptable levels set by applicable standards.\nSome of the facilities historically administered under the Office of Environmental Management have been transferred to other offices within DOE and to the Army Corps of Engineers. In 1997, Congress directed the Office of Environmental Management to transfer responsibility for the cleanup of smaller, less contaminated facilities under the Formerly Utilized Sites Remedial Action Program (FUSRAP) to the Corps. The cleanup of FUSRAP sites is funded within the civil works budget of the Corps. (See Table 4 earlier in this report.) Once cleanup of a FUSRAP site is complete, the Corps is responsible for activities that may be needed only for the first two years after the initial cleanup work is completed. After that time, jurisdiction over the site is transferred back to DOE. The Department's Office of Legacy Management administers any long-term operation, maintenance, and monitoring activities that may be needed at FUSRAP sites, and at facilities cleaned up under the Office of Environmental Management. Funding for both of these offices are discussed below.", "Three appropriations accounts fund the Office of Environmental Management: Defense Environmental Cleanup, Non-Defense Environmental Cleanup, and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund. The Defense Environmental Cleanup Account constitutes the vast majority of the funding for the Office of Environmental Management. For these three accounts combined, P.L. 112-10 included a total of $5.69 billion for DOE's Office of Environmental Management in FY2011. The enacted amount is a $358 million decrease below the President's request of $6.05 billion, and a $319 million decrease below the FY2010 enacted appropriation of $6.01 billion. Table 14 presents a breakout of the FY2011 enacted appropriations for each of the three accounts that fund DOE's Office of Environmental Management. The table also provides a comparison to the President's FY2011 request and the FY2010 enacted appropriations for each account.\nIn addition to enacting appropriations for FY2011, P.L. 112-10 also rescinded a total of $22.7 million in unobligated balances of funds appropriated in previous fiscal years for the three accounts that fund DOE's Office of Environmental Management. The $22.7 million rescission in unobligated balances includes $11.9 million from the Defense Environmental Cleanup account, $9.9 million from the Uranium Enrichment D&D Fund account, and $900,000 from the Non-Defense Environmental Cleanup account.", "The pace of cleanup has been of particular concern at DOE's largest nuclear weapons production facilities, where high-level radioactive wastes are stored. These facilities include Hanford in the State of Washington, the \"Savannah River\" Site in South Carolina, and the Idaho National Laboratory. These facilities present some of the most complex cleanup challenges resulting from decades of nuclear weapons production, and therefore present the greatest overall funding needs among the facilities administered by DOE's Office of Environmental Management. In recent years, funding for these three facilities combined has represented over one-half of the total funding for the Office of Environmental Management.\nFunding needs at these three facilities are expected to continue for decades. DOE estimates that cleanup may not be complete at Hanford until as late as 2062, at the Savannah River Site until 2040, and at the Idaho National Laboratory until 2044. These lengthy horizons in part are due to the time that is expected to be needed to treat and dispose of the substantial volumes of high-level radioactive wastes stored at these sites. According to a DOE estimate in 2009, there are 54 million gallons of high-level wastes stored in 177 tanks at Hanford, 33 million gallons in 49 tanks at the Savannah River Site, and nearly 1 million gallons in 4 tanks at the Idaho National Laboratory.\nThese high-level wastes are intended to be permanently disposed of in a geologic repository, but the removal and treatment of the wastes to prepare them for disposal presents many technical difficulties. The lack of availability of a geologic repository presents other challenges. Delays in the construction of waste treatment facilities have raised concern about environmental risks from the potential release of untreated wastes still stored in the tanks. Some of the tanks at Hanford are known or suspected to have leaked wastes into groundwater that discharges into the Columbia River. DOE routinely monitors water quality in the Columbia River to determine whether contaminants are at acceptable levels set by federal and state standards.", "There also has been rising interest in the source of funding for the cleanup of three uranium enrichment facilities administered by the Office of Environmental Management. These facilities enriched uranium both for national defense purposes and for the generation of electricity by commercial nuclear utilities. These three facilities are located at Paducah, KY; Portsmouth, OH; and Oak Ridge, TN. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment D&D Fund to pay for the cleanup of these facilities, and to reimburse uranium and thorium licensees for their costs of cleaning up sites that supported the enrichment facilities. To finance this fund, Congress originally authorized the collection of special assessments from nuclear utilities based on the portion of enrichment services each utility purchased from the federal government. Congress also authorized payments by the federal government to the Uranium Enrichment D&D Fund out of the General Fund of the U.S. Treasury, subject to annual appropriations.\nThe original requirement for both the federal government, and the nuclear utilities that purchased enrichment services, to contribute to the Uranium Enrichment D&D Fund was based on the premise that both the United States and the nuclear utilities benefitted from the production of enriched uranium and therefore should share in the liability for cleanup of facilities involved in these activities. The authority to collect the utility assessments, and the authorization of appropriations for the federal payment, expired on October 24, 2007. Since that time, Congress has continued federal payments to the Uranium Enrichment D&D Fund through the annual appropriations process, without enacting separate reauthorizing legislation.\nWhether to reauthorize the utility assessments and the federal payment has been an issue, as the balance of the fund does not appear sufficient to pay the estimated costs to complete the cleanup of the federal uranium enrichment facilities in the future. The Office of Management and Budget (OMB) reported that $4.5 billion remained available in the Uranium Enrichment D&D Fund for appropriation by Congress, as of the beginning of FY2010. However, this amount is far less than DOE's estimated range of $13.9 billion to $27.7 billion to meet all outstanding cleanup needs over the long-term.\nThe President proposed to reinstate the nuclear utility assessments as part of his FY2011 budget request to increase the resources available for cleanup. Based on this proposal, OMB estimated $200 million in assessments in FY2011, and a total of $2.2 billion over the 10-year period from FY2011 through FY2020. The authority for the federal government to resume collection of the assessments is subject to the enactment of reauthorizing legislation by Congress. In the 111 th Congress, at least two bills were introduced, but not enacted, to reauthorize the nuclear utility assessments, H.R. 2471 and S. 1061 . In the 111 th Congress, the Senate Appropriations Committee questioned the current need for the reinstatement of the assessments in its report on S. 3635 , considering the existing balance of the Uranium Enrichment D&D Fund.\nFor FY2011, the President requested an appropriation of $730.5 million from the Uranium Enrichment D&D Fund for the cleanup of the federal uranium enrichment facilities. The request assumed $200 million in offsetting receipts to the fund in FY2011 from the President's proposed collection of nuclear utility assessments, which Congress had not yet reauthorized. As presented in Table 14 , P.L. 112-10 included $507.0 million in appropriations from the Uranium Enrichment D&D Fund in FY2011, a $223.5 million decrease below the President's request. In the 111 th Congress, the Senate Appropriations Committee had recommended $550.0 million, and noted that legislation to reauthorize the nuclear utility assessments has not been enacted to generate the $200 million in offsetting receipts to support the entire request. At the same time, the committee did highlight that the existing balance which remained available for appropriation from the fund substantially exceeded the request by a few billion dollars.\nAs presented in Table 14 , P.L. 112-10 included $33.6 million (after rescissions) for the federal payment to the Uranium Enrichment D&D Fund in FY2011, whereas the President had requested $496.7 million. The federal payment is made through a transfer of funds from the Defense Environmental Cleanup Account. In the 111 th Congress, the Senate Appropriations Committee had recommended an amount similar to that enacted in P.L. 112-10 , and had indicated that its recommendation for a smaller federal payment was intended to fulfill the remaining balance of the required federal contribution to the fund, as authorized in the Energy Policy Act of 1992. However, the 1992 law still requires DOE to pay the costs of cleanup even if the remaining balance of the Uranium Enrichment D&D Fund is expended, subject to annual appropriations. In effect, additional federal funds still may be necessary in the future under existing law to ensure that the cleanup of the federal uranium enrichment facilities is completed.", "Once a facility is cleaned up under DOE's Office of Environmental Management or the FUSRAP program of the Corps, responsibility for any necessary long-term operation, maintenance, and monitoring activities is transferred to DOE's Office of Legacy Management. This office also manages the payment of pensions and post-retirement benefits of former contractor personnel who worked at these sites. The office is funded within the Other Defense Activities Account. P.L. 112-10 included a total of $788.4 million (after rescissions) for this account in FY2011, but the law did not specify the amount within the account for DOE's Office of Legacy Management. In the 111 th Congress, the Senate Appropriations Committee recommended $188.6 million for the Office of Legacy Management in FY2011, the same as the President requested but slightly less than the $189.8 million appropriation enacted for FY2010. Funding needs for the Office of Legacy Management are likely to rise over time, as the larger and more complex nuclear weapons production facilities are cleaned up and transferred from the Office of Environmental Management for long-term operation, maintenance, and monitoring.", "DOE's four Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA)—were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. In many cases, conservation and management of water resources—including irrigation, flood control, recreation or other objectives—were the primary purpose of federal projects. (For more information, see CRS Report RS22564, Power Marketing Administrations: Background and Current Issues , by [author name scrubbed].)\nPriority for PMA power is extended to \"preference customers,\" which include municipal utilities, cooperatives, and other \"public\" bodies. The PMAs sell power to these entities \"at the lowest possible rates\" consistent with what they describe as \"sound business practice.\" The PMAs are responsible for covering their expenses and for repaying debt and the federal investment in the generating facilities.\nThe Obama Administration's FY2011 request for the PMAs was $118.5 million. This is an overall decrease of $4 million (4%) compared with the FY2010 appropriation. The FY2011 budget request continued the change enacted in FY2010 that reclassified receipts from the PMAs from mandatory to discretionary. This change offsets many of the expenses of WAPA, SWPA, and SEPA that were previously paid for with discretionary appropriations. As a result of the change, two PMAs require discretionary funding in addition to their receipts: SWPA requested $12.7 million and WAPA requested $105.5 million. Receipts for SEPA are expected to offset all operating costs in FY2011. In addition, $220,000 was requested for Falcon and Amistad operations and maintenance, and collections of $23 million from Colorado River basins score as an additional offset toward the net discretionary appropriation. P.L. 112-10 appropriated the requested amount (less a 0.2% rescission).\nBPA is a self-funded agency under authority granted by P.L. 93-454 (16 U.S.C. §838), the Federal Columbia River Transmission System Act of 1974, and receives no appropriations. However, it funds some of its activities from permanent borrowing authority, which was increased in FY2003 from $3.75 billion to $4.45 billion (a $700 million increase). ARRA further increased the amount of borrowing that BPA conducts under the Transmission System Act by $3.25 billion to the current authority for $7.7 billion in bonds outstanding to the Treasury. The FY2011 budget proposed Bonneville accrue expenditures of $3.763 billion for operating expenses, $77 million for Projects Funded in Advance, $758 million for capital investments, and $387 million for capital transfers. The budget has been prepared on the basis of Bonneville's major areas of activity, power and transmission.\nARRA provided $10 million in non-reimbursable appropriations to WAPA to support implementation of activities authorized in section 402 of the act. ARRA also provided WAPA borrowing authority for the purpose of planning, financing or building new or upgraded electric power transmission lines to facilitate the delivery of renewable energy resources constructed by or expected to be constructed after the date of enactment. The authority to borrow from the United States Treasury had not previously been available to WAPA. It is now available on a permanent, indefinite basis, with the amount of borrowing outstanding not to exceed $3.25 billion. WAPA has established a new Transmission Infrastructure Program for this purpose.", "Independent agencies that receive funding from the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission.", "", "The Nuclear Regulatory Commission (NRC) requested $1.053 billion for FY2011 (including $10.1 million for the inspector general's office), a decrease of $13.3 million from the FY2010 funding level. Major activities conducted by NRC include safety regulation and licensing of commercial nuclear reactors and oversight of nuclear materials users. P.L. 112-10 provides $1.052.3 billion, including the inspector general.\nThe NRC budget request included $272.5 million for new reactor activities, a $7.8 million increase from FY2010, largely to handle new nuclear power plant license applications. Until recently, no new commercial reactor construction applications had been submitted to NRC since the 1970s. However, volatile fossil fuel prices, the possibility of controls on carbon emissions, and incentives provided by the Energy Policy Act of 2005 prompted electric utilities and other generating companies to apply for licenses for 30 reactors since September 2007, with several more possible through 2011. However, several license applicants have suspended work on their projects.\nNRC's proposed FY2011 budget also included $10 million from the Nuclear Waste Fund for licensing DOE's previously planned Yucca Mountain nuclear waste repository. Because the Obama Administration wants to cancel the Yucca Mountain project and filed a motion to withdraw the license application on March 3, 2010, the NRC funding request would cover the costs of adjudicating the license withdrawal motion (which is being contested) as well as \"work related to an orderly closure of the agency's Yucca Mountain licensing support activities such as archiving material, knowledge capture and management, and maintenance of certain electronic systems,\" according to NRC's budget presentation. The requested amount was included in P.L. 112-10 .\nFor regulation of operating reactors, NRC's FY2011 budget request included $531.6 million, $10.5 million below the FY2010 level. Those activities include reactor safety inspections, license renewals and modifications, collection and analysis of reactor performance data, and oversight of security exercises. Homeland security spending throughout NRC is to increase by $3.8 million in FY2011, to $26.1 million. (For more information on protecting licensed nuclear facilities, see CRS Report RL34331, Nuclear Power Plant Security and Vulnerabilities , by [author name scrubbed] and [author name scrubbed].)\nThe Energy Policy Act of 2005 permanently extended a requirement that 90% of NRC's budget be offset by fees on licensees. Not subject to the offset are expenditures from the Nuclear Waste Fund to pay for waste repository licensing, spending on general homeland security, and DOE defense waste oversight. The offsets in the FY2011 request would result in a net appropriation of $138.3 million, a $16.4 million decrease from FY2010. P.L. 112-10 provides for a net appropriation of $138.1 million, including the inspector general's office." ], "depth": [ 0, 1, 1, 1, 1, 2, 3, 3, 2, 3, 3, 3, 3, 1, 2, 2, 3, 3, 3, 3, 3, 1, 2, 3, 4, 4, 4, 4, 3, 4, 4, 4, 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 3, 3, 4, 4, 4, 4, 3, 1, 2, 3 ], "alignment": [ "h0_title h1_title", "h0_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "How was the FY2011 Energy and Water Development bill processed in Congress?", "How was funding for the FY2011 Energy and Water Development bill provided?", "What Act was funding for this bill included in?", "What was released in February 2010?", "How was this bill processed by the House?", "How was this bill processed by the Senate?", "What occurred on September 30?", "How did several other resolutions extend funding?" ], "summary": [ "As with other funding bills, the FY2011 Energy and Water Development bill was not taken to the floor in either the House or the Senate in the 111th Congress.", "Funding for its programs was included in a series of continuing resolutions, and at the beginning of the 112th Congress was part of a major debate over overall spending levels.", "Energy and Water Development programs were included in the Department of Defense and Full-Year Continuing Appropriations Act (P.L. 112-10) that became law April 15, 2011.", "President Obama's proposed FY2011 budget for Energy and Water Development programs was released in February 2010.", "On July 15, 2010, the House Appropriations Subcommittee on Energy and Water Development approved a bill to fund these programs, but the full committee did not report out the bill.", "In the Senate, the Appropriations Committee reported out S. 3635 (S.Rept. 111-228) on July 22.", "On September 30, the Congress passed H.R. 3081 (P.L. 111-242), funding government programs at the FY2010 level through December 3.", "Several more continuing resolutions extended funding through March 4, 2011. H.J.Res. 44 (P.L. 112-4) extended funding through March 18, 2011, and reduced funding levels for a number of Energy and Water Development programs." ], "parent_pair_index": [ -1, -1, 1, -1, 0, 0, -1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 5, 5, 5, 5, 5 ] }

{ "title": [ "", "Introduction", "Generic Drugs", "What Are Generic Drugs?", "The GDUFA Proposal", "Proposed GDUFA Legislative Language", "Proposed GDUFA FDA-Industry Agreement", "Biosimilar Products", "What Are Biosimilars?", "The BSUFA Proposal", "Proposed BSUFA Legislative Language", "Proposed BSUFA FDA-Industry Agreement" ], "paragraphs": [ "", "Congress is now considering legislation that would add two new Food and Drug Administration (FDA) user fee programs:\nGeneric Drug User Fee Amendments of 2012 (GDUFA) and Biosimilar User Fee Act of 2012 (BSUFA).\nIn January 2012, Secretary Kathleen Sebelius of the Department of Health and Human Services (HHS) submitted the GDUFA and BSUFA proposals to the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce. With the Prescription Drug User Fee Act (PDUFA) in 1992, Congress authorized FDA to collect user fees from the manufacturers of brand-name prescription drugs and biological products and to use the revenue for specified activities. PDUFA became possible when FDA, industry, and Congress agreed on two concepts: (1) performance goals —FDA would commit to performance goals it would negotiate with industry that set target completion times for various review processes; and (2) use of fees —the revenue from prescription drug user fees would be used only for activities to support the review of human drug applications and would supplement—rather than replace—funding that Congress appropriated to FDA. The added resources from user fees allowed FDA to increase staff to review what was then a backlog of new drug applications and to reduce median standard application review time from 27 months in FY1993 to 12 months in FY1998. For priority applications, median review time decreased from 21 months in FY1993 to 6 months in FY1998. Over the years, Congress has added similar authority regarding medical devices and animal drugs. User fees make up 35% of the FY2012 FDA budget. Their contribution to FDA's human drug program is larger at 51%.\nFollowing the precedent set by PDUFA and taken up in other FDA user fee programs, the two new programs would include both (1) legislation and (2) performance goals agreements developed with representatives of the regulated industry in consultation with representatives of patients and advocates, academic and science experts, and congressional committees.\nFor each of the proposed user fee programs, this report will\npresent some context for agreement among FDA, Members of Congress, industry groups, and patient groups that a user fee program to supplement appropriations provided by Congress would be beneficial; summarize the legislative language that HHS has submitted to the congressional authorizing committees; and summarize the FDA-industry agreement on performance goals and procedures, also submitted by the HHS Secretary.\nBecause authorization for FDA to collect fees and use the fee revenue under PDUFA and the Medical Device User Fee Act (MDUFA) expires on October 1, 2012, the bipartisan leadership of both the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce have voiced the need to reauthorize those programs before then to avoid disruption of FDA drug and device application review and postmarket safety activities. The Senate Committee reported S. 2516 , the Food and Drug Administration Safety and Innovation Act, and Senator Harkin introduced S. 3187 , an amended version of S. 2516 , that is scheduled for floor consideration. The House Committee voted favorably to report H.R. 5651 , the Food and Drug Administration Reform Act of 2012. Both bills include the GDUFA and BSUFA provisions (as Titles III and IV).\nThe GDUFA provisions in S. 3187 , H.R. 5651 , and the HHS-proposed legislative language differ in minimal technical ways and in one reporting requirement. The BSUFA provisions in S. 3187 and H.R. 5651 are essentially identical and differ from the HHS proposal in only minor technical details. GDUFA would add new FFDCA Sections 744A, 744B, and 744C, and BSUFA would add new FFDCA Sections 744G, 744H, and 744I.", "", "The FDA website describes a generic drug as \"identical—or bioequivalent—to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.\" In a new drug application (NDA) to FDA, the sponsor of an innovator (brand-name) drug must submit to FDA clinical data to support its claim that the drug is safe and effective for its intended use. The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L. 98-417 , known as the Hatch-Waxman Act) allows a generic drug manufacturer to submit an abbreviated NDA (ANDA). The ANDA references the detailed scientific and clinical data the innovator company had developed and which FDA has already reviewed. The generic applicant must \"scientifically demonstrate that their product is bioequivalent (i.e., performs in the same manner as the innovator drug).\" Without the cost of years of clinical trials, generic sponsors face much lower drug development costs than do innovators. More than 70% of prescriptions filled in the United States are dispensed as generic products. However, the generic drugs account for a much smaller percentage of spending on prescription drugs because generic retail prices are about 25% of their brand-name counterparts.", "Current law does not authorize FDA to collect user fees from manufacturers of generic drugs. In March 2012, median review time for generic drug applications was approximately 31 months; the backlog included over 2,500 applications. Since its FY2008 budget request to Congress, FDA under various administrations has included a proposed generic drug user fee in its annual request to the congressional appropriations committees. In January 2012, HHS submitted a formal proposal to Congress for generic user fee authority.\nThe HHS GDUFA proposal reflects negotiations with industry groups in consultation with consumer groups. FDA held the first of five GDUFA public meetings in September 2010. It held 17 negotiation sessions with representatives of the Generic Pharmaceutical Association, the Bulk Pharmaceutical Task Force of the Society of Chemical Manufacturers and Affiliates, and the European Fine Chemicals Group between February 28, 2011, and September 9, 2011, when it announced a ratified agreement.\nThe proposal has many conceptual similarities to PDUFA but also includes provisions that reflect components and activities of the generic drug industry and FDA's regulatory approach to generic drugs. The proposal consists of two parts: (1) the draft legislative language and (2) a goals and procedure agreement between FDA and the industry. This is the framework first established for the prescription drug user fee program. The law specifies types of fees, amount of revenue authorized to be collected, and a broad definition of activities on which FDA may use that revenue. The law also refers to the FDA-industry agreement for performance goals and procedures that the fees will support. Tables in Appendix A provide detail of the provisions in the proposed legislative language and the FDA-industry agreement. The next two sections of this report provide an overview of those documents.", "The proposal to Congress would authorize FDA to collect $299 million each year from FY2013 through FY2017 in fees from the generic drug industry and provides formulas for calculating inflation adjustments for the years after FY2013. For the first year of the program, $50 million of the $299 million would come from a one-time backlog fee to be paid by sponsors of currently pending applications. The fee types that would begin in the first year and continue in subsequent years and their percentage of total GDUFA collections are the\ndrug master file (DMF) fee, 6%; abbreviated NDA (ANDA) and prior approval supplement (PAS) fee, 24%; generic drug facility fee, 56%; and active pharmaceutical ingredient (API) facility fee, 14%.\nLike PDUFA, the GDUFA proposal includes limitations, often referred to as triggers, designed to ensure that fees supplement rather than replace congressional appropriations. These require that budget authority (appropriations minus fees) go no lower than the FY2009 amounts, adjusted for inflation, for (1) FDA salaries and expenses overall and (2) human generic drug activities. Again similar to PDUFA, but different from the narrower MDUFA and BSUFA definitions, the GDUFA proposal defines human generic drug activities to include the review of submissions and drug master files, approval letters and complete response letters, letters regarding deficiencies, inspections, monitoring or research, postmarket safety activities, and regulatory science.\nOther provisions include risk-based biennial inspections, parity of domestic and foreign inspection schedules by FY2017, a $15,000–$30,000 higher inspection fee for a foreign facility than for a domestic facility to reflect cost differences, streamlined hiring authority, and required annual performance and fiscal reports. The generic drug user fee authority would cease to be effective October 1, 2017.", "The Agreement begins with an overview of the \"overall program scope, assumptions, and aspirations.\" It then summarizes major program goals over the five-year authorization period to include that FDA will review and act on 90% of complete electronic ANDAs within 10 months of submission; review and act on 90% of all pending applications, amendments, and supplements by the end of FY2017; and commit to risk-adjusted inspections, efficiency enhancements, regulatory science initiatives, and metric goals.\nThirteen topics are listed for a FY2013 regulatory science plan and the Agreement refers to a working group that will recommend areas in which FDA could issue draft guidances to clarify agency recommendations regarding complex product development.", "", "A biosimilar is a biological product that is highly similar to a brand-name (innovator) biological product made by a pharmaceutical or biotechnology company. A biological product, or biologic, is a preparation, such as a drug or a vaccine, that is made from living organisms. In contrast to the relatively simple structure and manufacture of chemical drugs, biosimilars, with their more complex nature and method of manufacture, will not be identical to the brand-name product, but may instead be shown to be highly similar.\nThe biotechnology industry began developing its first biologics for use as human therapeutic agents in the late 1970s and early 1980s. The first FDA approval of a biotechnology drug for human use, human insulin, occurred in 1982. Others followed, including human growth hormone in 1985, alpha interferon in 1986, tissue plasminogen activator in 1987, and erythropoietin in 1989. Biotechnology products are expected to become a larger share of the drugs sold by the pharmaceutical industry to U.S. consumers. However, with no parallel to the generic alternatives for chemical drugs, the cost of therapeutic biologics is often prohibitively high for individual patients. For example, the costs per year (in 2009) of some commonly used biologic drugs are reported as follows: Enbrel for rheumatoid arthritis, $26,000; Herceptin for breast cancer, $37,000; Rebif for multiple sclerosis, $40,000; Humira for Crohn's disease, $51,000; and Cerezyme for Gaucher's disease, $200,000.\nBiological products are, in general, regulated—licensed for marketing—under the Public Health Service (PHS) Act, and chemical drugs are regulated—approved for marketing—under the Federal Food, Drug, and Cosmetic Act (FFDCA). The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L. 98-417 ), often referred to as the Hatch-Waxman Act, provided a mechanism for the approval of generic drugs under the FFDCA but not under the PHS Act.\nOn March 23, 2010, President Obama signed into law a comprehensive health care reform bill, the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148 ). Title VII of PPACA, the Biologics Price Competition and Innovation Act of 2009 (BPCIA), established a new regulatory authority within the FDA by creating a licensure pathway for biosimilars analogous to that which allowed for the approval of generic chemical drugs via the Hatch-Waxman Act. Under the new pathway, a biosimilar may be approved by demonstrating that it is highly similar to a biological product that is already allowed on the market by FDA. The BPCIA also authorized FDA to collect associated user fees.", "In May 2011, FDA requested public input on the development of a biosimilars user fee program. The agency conducted a series of ten negotiation sessions with industry representatives. It also conducted two meetings with public stakeholders, composed of patient advocacy groups and societies of health professionals. Minutes of these meetings are posted on the agency's website. The recommendations for a new biosimilars user fee program, released on January 13, 2012, were modeled after the prescription drug user fee (PDUFA) program. The recommendations are composed of legislative language and the FDA-industry agreement on performance goals and procedures. Both the legislative language and the performance goals document state that the agency goals are contingent on the allocation for each fiscal year of at least $20 million (inflation adjusted value) in non-user fee funds, plus user fees, to support the review of biosimilar biological product applications. Tables in Appendix B provide detail of the provisions in the proposed legislative language and the FDA-industry agreement. The next two sections of this report provide an overview of those documents.", "The proposal to Congress for the biosimilars user fee program would require the collection of six types of fees from industry. Fee amounts would be based on inflation-adjusted PDUFA fee amounts for each fiscal year. There are some unique features of the biosimilars user fee proposal. Because there are currently no marketed biosimilar biological products, the proposal includes fees for products in the development phase to generate fee revenue for the new program and to enable companies to have meetings with FDA in the early development of biosimilar biological products. A company may choose to discontinue participation in the biosimilar biological product development program but must pay a reactivation fee to resume further product development with FDA. The proposed BSUFA fees are\ninitial biosimilar biological product development fee, 10% of the PDUFA human drug application fee; annual biosimilar biological product development fee, 10% of the human drug application fee; reactivation fee, 20% of the human drug application fee; biosimilar biological product application fee, 100% of the human drug application fee minus the cumulative amount paid for product development program fees; biosimilar biological product establishment fee, 100% of the PDUFA prescription drug establishment fee; and biosimilar biological product fee, 100% of the PDUFA prescription drug product fee.\nThe proposed legislative language would allow for the waiver of the biosimilar biological product application fee for the first such application from a small business. A \"small business\" is defined as an entity with fewer than 500 employees, including affiliates, that does not have a drug product that has been approved under a human drug or biosimilar biological application and introduced or delivered for introduction into commerce. The biosimilars user fee authority would cease to be effective October 1, 2017.", "The Agreement delineates proposed performance goals for the review of biosimilar applications by the agency. FDA is to review and act on a targeted percentage of original biosimilar biological product applications within 10 months of receipt and resubmitted applications within 6 months; in both cases, performance targets will start at 70% in FY2013 and rise to 90% in FY2017. FDA is to review and act on 90% of original supplements within 10 months, 90% of resubmitted supplements within 6 months, and 90% of manufacturing supplements within 6 months.\nAside from definitions, the Agreement also covers several other topics including clinical holds, major dispute resolution, special protocol assessment, meeting management, and review of proprietary names to reduce medication errors.\nAppendix A. Generic Drug User Fee Proposal\nAppendix B. Biosimilars User Fee Proposal\nAppendix C. Acronyms" ], "depth": [ 0, 1, 1, 2, 2, 3, 3, 1, 2, 2, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h1_title", "", "h1_full", "h1_full", "h1_full", "h2_title", "", "h2_full", "h2_full", "" ] }

{ "question": [ "What provisions are included in S.3187 and H.R 5651?", "What are the GDUFA and BSUFA titles inspired by?", "Why is the leadership of both the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce intent on passing the legislation before October 1, 2012?", "What is a user fee proposal composed of?", "What does the GDUFA bill language specify?", "What would the bill authorize FDA to do?", "How would the bill ensure that drug user fee supplements rather than replaces congressionally appropriated funds?", "What commitments are outlined in the agreement?", "What companies would the BSUFA proposal collect fees from?", "How would the fee amounts be calculated?", "How would fee revenue be generated for the program?", "What are the agency goals contingent on?" ], "summary": [ "S. 3187 and H.R. 5651 include GDUFA and BSUFA titles in legislative packages that also include the reauthorization of prescription drug (PDUFA) and medical device (MDUFA) user fee authorities, as well as other medical-product provisions.", "The proposed five-year authorities for GDUFA and BSUFA build on the model that has evolved since 1992 with the original PDUFA.", "Because current PDUFA and MDUFA authorities sunset on October 1, 2012, leadership of both the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce have aimed for passage of the legislation enough before then to avoid disruption of FDA drug and device application review and postmarket safety activities.", "Each new user fee proposal consists of two parts: legislative language and an FDA-negotiated agreement with relevant industry groups.", "The GDUFA bill language specifies the types of fees, amount of revenue authorized to be collected, and a broad definition of activities on which FDA may use that revenue. It refers to a required FDA-industry agreement that lays out performance goals and procedures.", "The legislative language would authorize FDA to collect $299 million in generic drug user fees per year.", "To ensure that generic drug user fee revenue supplements, rather than replaces, congressionally appropriated funds, the bill would require that (1) each year's appropriations bill include at least the same level of non-user fee appropriations, adjusted for inflation, as in FY2009 for overall FDA salaries and expenses, and (2) the Secretary allocate at least $97 million, excluding fees and adjusted for inflation, each year for specified human generic drug activities.", "FDA commitments outlined in the agreement include specified timetables for the review of, and action on, the various types of submissions; risk-based inspections of foreign and domestic generic drug facilities; and regulatory science initiatives.", "The BSUFA proposal would require the collection of six types of fees from the regulated industry, which is composed primarily of biotechnology and pharmaceutical companies.", "Fee amounts would be based on inflation-adjusted PDUFA fee amounts for each fiscal year.", "Because there are no currently marketed biosimilar biological products, the proposal includes fees for products in the development phase to generate fee revenue for the new program and to enable companies to have meetings with FDA in the early development of biosimilar biological products.", "Both the legislative language and the performance goals document state that the agency goals are contingent on, in addition to user fees, the allocation for each fiscal year of at least $20 million (inflation adjusted value) in non-user fee funds to support the review of biosimilar biological product applications." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 1, -1, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3 ] }

{ "title": [ "", "Introduction", "Cuban Migration Policy", "Key Legislation and International Agreements", "Cuban Adjustment Act of 1966", "Migration Agreements of 1994 and 1995", "Wet Foot/Dry Foot Policy", "Unauthorized Migration Statistics", "Other Immigration Pathways", "Statistics on Refugee Status and Asylum", "Eligibility for Federal Assistance", "Policy Proposals", "Appendix. Unauthorized Cuban Migration Statistics" ], "paragraphs": [ "", "Cuban migration to the United States is a topic of long-standing congressional interest. U.S. immigration policy toward Cuba is the product of a unique set of circumstances and is unlike U.S. immigration policy toward any other nation in the world. Efforts by the Obama Administration to normalize relations with Cuba following President Obama's December 2014 announcement of a major policy shift toward that country focused increased attention on migration issues, leading some policymakers to reexamine the policies on immigration and federal assistance that apply to Cuban migrants. The November 2016 death of Cuba's Fidel Castro may spur a broader reexamination of these policies. At the same time, concern among some in Cuba about possible changes to current U.S. migration policy is seen as a key factor behind recent upticks in Cuban arrivals to the United States.", "\"Normal\" immigration from Cuba to the United States has not existed since the Cuban Revolution of 1959 brought Fidel Castro to power. For more than 50 years, the majority of Cubans who have entered the United States have done so through special humanitarian provisions of federal law. For example, between 1962 and 1979 hundreds of thousands of Cubans entered the United States under the parole provision in the Immigration and Nationality Act (INA). The INA parole provision authorizes the Attorney General (now the Secretary of Homeland Security) \"to parole into the United States temporarily under such conditions as he may prescribe only on a case-by-case basis for urgent humanitarian reasons or significant public benefit any alien applying for admission to the United States.\" Although the Cubans who arrived in the United States after the Cuban Revolution were paroled in, they were considered to be refugees fleeing persecution. At the time, the INA did not contain the current definition of a refugee or the provisions on refugee admissions and asylum; these were added by the Refugee Act of 1980.\nIn 1980, the INA parole provision was again used when a mass migration of asylum seekers—known as the Mariel Boatlift—brought approximately 125,000 Cubans (and 25,000 Haitians) to South Florida over a six-month period. The Carter Administration described these arrivals as \"Cuban-Haitian entrants.\" The INA parole provision continues to be used today by executive discretion to allow some Cubans to enter the United States.", "U.S. policy on Cuban migration has been shaped by a 1966 law, as amended, and migration agreements between the United States and Cuba, operating in conjunction with the INA.", "The 1966 law commonly known as the Cuban Adjustment Act (CAA), as amended, enables Cubans who have been present in the United States for at least one year to adjust to lawful permanent resident status (becoming lawful permanent residents (LPRs) of the United States) provided they are eligible to receive an immigrant visa and are admissible to the United States for permanent residence. Unlike most other applicants for adjustment to LPR status, Cuban nationals do not have to be sponsored by an eligible family member or employer. The CAA concerns Cubans who are already present in the United States and, as such, is distinct from U.S. policy on Cuban migrants attempting to reach the United States (see \" Migration Agreements of 1994 and 1995 \" and \" Wet Foot/Dry Foot Policy \").\nUnder the CAA:\n[T]he status of any alien who is a native or citizen of Cuba and who has been inspected and admitted or paroled into the United States subsequent to January 1, 1959 and has been physically present in the United States for at least one year, may be adjusted by the Attorney General [now the Secretary of Homeland Security], in his discretion and under such regulations as he may prescribe, to that of an alien lawfully admitted for permanent residence if the alien makes an application for such adjustment, and the alien is eligible to receive an immigrant visa and is admissible to the United States for permanent residence.\nIn FY2014, the most recent year for which data are available, about 40,000 Cubans and their dependents adjusted to LPR status under the CAA.\nThe CAA, which predated the Refugee Act of 1980, arguably reflected a belief that Cuban migrants to the United States were refugees under international law. The treatment of Cuban arrivals as refugees is a recurring theme in U.S. immigration policy toward Cuba.\nThere have been legislative efforts over the years to sunset or repeal the CAA. In 1996, a provision was enacted as part of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) that provides for the repeal of the CAA \"effective only upon a determination by the President ... that a democratically elected government in Cuba is in power.\"", "Negotiated at a time of increasing U.S. Coast Guard interdictions of Cubans trying to reach the United States by sea, the 1994 migration agreement purportedly sought to normalize migration between Cuba and the United States. Under the agreement, both nations agreed to take steps to promote \"safe, legal, and orderly\" migration. Among the agreement's key elements, Cuba agreed to try to prevent unsafe departures from the island, and the United States agreed that Cuban migrants rescued at sea would not be allowed to enter the United States and instead would be taken to safe-haven camps. With respect to legal migration, the United States agreed to admit no less than 20,000 Cuban immigrants annually, excluding the immediate relatives of U.S. citizens. To help achieve this level of admissions, the United States established the Special Cuban Migration Lottery; lottery winners, who are randomly selected among applicants, are considered for immigration parole.\nThe 1995 migration agreement built on the 1994 accord. A key element of this agreement concerned treatment of Cubans intercepted at sea on their way to the United States. Both nations agreed that intercepted Cubans would be returned to Cuba and that this would be done in a manner consistent with \"the parties' international obligations.\"", "The 1994 and 1995 migration agreements, supported by the CAA, have resulted in a so-called \"wet foot/dry foot\" policy toward Cuban migrants. \"Wet foot\" refers to Cubans who do not reach the U.S. shore. They are returned to Cuba unless they cite a well-founded fear of persecution, in which case they are considered for resettlement in third countries. \"Dry foot\" is a reference to Cubans who successfully reach the U.S. shore, are inspected by Department of Homeland Security (DHS) officers, and generally are permitted to stay in the United States. It is important to note that those who are permitted to stay under the \"wet foot/dry foot\" policy are not granted formal admission to the United States. Instead, they are typically granted parole and, as parolees, can apply to adjust to LPR status under the CAA after one year.", "DHS U.S. Coast Guard and U.S. Customs and Border Protection (CBP) data reveal recent increases in unauthorized immigration from Cuba to the United States, which experts attribute mainly to Cuban concerns that the policy of allowing those who reach the U.S. shore to become permanent residents may soon change. As shown in Figure 1 , since FY2013 (the year before the announced shift in U.S. policy toward Cuba), there have been notable increases in U.S. Coast Guard maritime interdictions, in U.S. Border Patrol apprehensions between U.S. ports of entry, and especially in numbers of unauthorized Cubans presenting themselves at official U.S. ports of entry (see Appendix for the yearly data in Figure 1 ). The terms \"unauthorized\" and \"inadmissible\" are used here to describe these Cuban migrants because they do not meet the INA requirements for admission to the United States (although policies may permit them to enter and remain in the country).\nThe U.S. Coast Guard is charged with interdicting unauthorized migrants at sea prior to landfall in the United States. As shown in Figure 1 , the annual number of maritime interdictions of Cubans has fluctuated over the years (see Figure A-1 for yearly data). The trend, however, has been consistently upward since 2010. Between FY2013 (the year before the announced shift in U.S. policy toward Cuba) and FY2016, the number of maritime interdictions increased nearly fourfold, from 1,357 in FY2013 to 5,213 in FY2016. The number of maritime interdictions in FY2016 was higher than in any other year during the FY1995-FY2016 period.\nThe annual number of Cubans apprehended by the Border Patrol between U.S. ports of entry has likewise fluctuated over the years, generally tracking the interdiction data. These apprehensions have risen consistently since FY2012 (see Figure A-2 ). Between FY2013 and FY2016, Border Patrol apprehensions of Cubans increased more than threefold, from 624 to 1,930. The FY2016 figure was the highest since FY2008. Consistent with maritime travel, the vast majority of these encounters have occurred in U.S. coastal areas.\nFar greater than the number of Coast Guard interdictions and Border Patrol apprehensions of Cubans each year combined, at least since FY2004, is the number of Cubans encountered at official U.S. ports of entry (see Figure A-3 ). These data reflect a preference on the part of Cubans to travel to the United States mainly by land. Unlike migrants of other nationalities, Cubans who are not eligible for formal admission are nevertheless generally able to enter and live in the United States in accordance with special immigration policies, as discussed. The number of inadmissible Cubans arriving at ports of entry has grown annually since FY2009. The increases since FY2014 have been marked, with total numbers more than doubling between FY2014 (24,277) and FY2016 (46,590). The majority of these Cubans present themselves at land ports of entry along the southwest border.", "Qualified Cubans can also avail themselves of pathways to permanent residence in the United States available to all nationalities. Cuban asylum seekers, like those of all nationalities, can apply for asylum from within the United States or at a U.S. port of entry, or they can be considered for refugee status abroad. Under the INA, refugees typically have to be outside their home country, but there is an in-country refugee program that enables certain Cubans, including human rights activists, members of persecuted religious minorities, and former political prisoners, to apply to the U.S. refugee program while still in Cuba. Persons granted asylum or admitted to the United States as refugees can apply for LPR status after one year. Among the other pathways to permanent residence, U.S. citizens and LPRs can petition for eligible family members in Cuba to become LPRs through the U.S. family-based immigration system.", "Annual numbers of refugee admissions to the United States from Cuba have varied over the years, revealing no clear trend. With the exception of one year when annual admissions of Cuban refugees exceeded 6,000, refugee admissions from Cuba have numbered less than 5,000 each year since FY1996. Asylum grants have been significantly lower. In FY1996, the peak year for asylum grants in the FY1996-FY2014 period, 886 Cubans were granted asylum. In each year between FY2002 and FY2014, fewer than 100 Cubans received asylum.", "In addition to creating processes for the admission of refugees and the granting of asylum, the Refugee Act of 1980 authorized federal assistance to resettle refugees of all nationalities and promote their self-sufficiency. It established the Office of Refugee Resettlement at the Department of Health and Human Services (HHS) to administer a set of refugee resettlement assistance programs.\nAnother 1980 law, the Refugee Education Assistance Act, enacted at the time of the Mariel Boatlift, addressed the eligibility of Cubans and Haitians for federal assistance and benefits. Section 501(e) of the law defined the term \"Cuban and Haitian entrant,\" which had been used by the Carter Administration to describe Mariel arrivals, for purposes of eligibility for federal assistance:\n(1) any individual granted parole status as a Cuban/Haitian Entrant (Status Pending) or granted any other special status subsequently established under the immigration laws for nationals of Cuba or Haiti, regardless of the status of the individual at the time assistance or services are provided; and\n(2) any other national of Cuba or Haiti—\n(A) who—(i) was paroled into the United States and has not acquired any other status under the Immigration and Nationality Act; (ii) is the subject of removal proceedings under the Immigration and Nationality Act; or (iii) has an application for asylum pending with the Immigration and Naturalization Service; and\n(B) with respect to whom a final, nonappealable, and legally enforceable order of removalhas not been entered.\nThe law directed the President \"to exercise authorities with respect to Cuban and Haitian entrants which are identical to the authorities which are exercised under [the Refugee Assistance provisions of the INA].\" It also allowed the President to provide by regulation \"that benefits granted by any law of the United States ... with respect to individuals admitted to the United States [as refugees] ... shall be granted in the same manner and to the same extent with respect to Cuban and Haitian entrants.\" Another law, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, as amended, made Cuban and Haitian entrants eligible for certain federal public benefits to the same extent as refugees.", "Steps taken by the Obama Administration to date to normalize relations with Cuba have not changed U.S. policy toward Cuban migrants. However, these efforts have raised questions about the potential for changed policies in the future through either executive or congressional action. Much of this attention has focused on the CAA, which, as discussed, grants DHS the discretionary authority to adjust the status of eligible Cubans. Generally speaking, the executive could be said to have some latitude under the CAA to determine whether to exercise this discretion toward individual Cuban migrants or classes of Cuban migrants. With respect to congressional action, bills were introduced in the 114 th Congress to repeal the CAA. If enacted, measures such as these would eliminate the special adjustment of status pathway for Cubans, requiring them to qualify for adjustment of status under the applicable provisions in the INA.\nOther legislation was introduced in the 114 th Congress that would eliminate the special treatment that Cuban entrants receive with respect to federal refugee resettlement assistance and other federal assistance. Proposals limited to ending federal assistance, however, would not change existing immigration policies toward Cubans and, thus, would not directly impact the ability of Cubans to enter the United States or to adjust status under the CAA.", "These three figures provide available data on the migration of unauthorized Cubans to the United States. These are the same data included in Figure 1 . The figures display annual data since FY1995 on U.S. Coast Guard interdictions ( Figure A-1 ) and U.S. Border Patrol apprehensions between U.S. ports of entry ( Figure A-2 ), and annual data since FY2004 on inadmissible Cubans encountered at U.S. ports of entry ( Figure A-3 ). As discussed, the recent increases in all three measures are widely attributed to Cuban concerns that U.S. treatment of Cuban migrants may soon change. The data, however, also reflect considerable variability in earlier years. Observers have identified a number of factors that may have contributed to these annual changes. On the U.S. side, these include U.S. economic conditions (e.g., the 2007-2009 recession and slow recovery) and migration-related policies affecting Cubans (e.g., changes in Coast Guard patrolling methods)." ], "depth": [ 0, 1, 1, 2, 3, 3, 2, 3, 2, 3, 2, 1, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "", "h0_title h2_title h1_title", "h0_full", "h0_full", "", "h0_full", "", "h1_full", "", "h2_full", "h3_full h2_full", "" ] }

{ "question": [ "What shapes the U.S. policy on Cuban migration?", "What is the \"wet foot/dry foot\" policy?", "What happens to \"dry foot\" Cubans?", "How can Cubans gain permanent admission to the United States?", "What can U.S. relatives do to give Cubans permanent admission?", "How can Cubans gain admission from within the United States?", "What additional step must be taken for persons granted asylum or admitted as refugees?", "What allows Cuban migrants in the United States to be eligible for federal assistance?", "How does the act grant assistance to Cuban migrants?", "What does the PRWORA of 1996 do?", "What questions have been raised by the steps taken by the Obama Administration to normalize relations with Cuba?", "What was the purpose of the legislation introduces in the 114th Congress?", "Will Congress enact these measures to repeal the Cuban Adjustment Act?" ], "summary": [ "U.S. policy on Cuban migration has been shaped by a 1966 law known as the Cuban Adjustment Act, as amended, and U.S.-Cuban migration agreements signed in the mid-1990s, operating in conjunction with the Immigration and Nationality Act (INA).", "Among the special immigration policies presently in place is a so-called \"wet foot/dry foot\" policy toward Cuban migrants who try to reach the U.S. shore by sea. \"Wet foot\" refers to Cubans who do not reach the United States. They are returned to Cuba unless they cite a well-founded fear of persecution, in which case, they are considered for resettlement in third countries. \"Dry foot\" is a reference to Cubans who successfully reach the U.S. shore and are generally permitted to stay in the country.", "After one year, these individuals can apply to become U.S. lawful permanent residents (LPRs) under the Cuban Adjustment Act.", "In addition to entering the United States under special policies and becoming LPRs through the Cuban Adjustment Act, Cubans can gain permanent admission to the United States through certain standard immigration pathways set forth in the INA.", "They can be sponsored for U.S. permanent residence by eligible U.S.-based relatives who are U.S. citizens or LPRs through the U.S. family-based immigration system.", "They can also apply for asylum from within the United States or at a U.S. port of entry, or they can be considered for refugee status abroad.", "Persons granted asylum or admitted to the United States as refugees can apply for LPR status after one year.", "Special provisions of law also make Cuban migrants in the United States eligible for federal assistance. The Refugee Education Assistance Act of 1980 defines the term \"Cuban and Haitian entrant\" for purposes of eligibility for federal assistance.", "It makes these entrants eligible for the same resettlement assistance as refugees.", "The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, as amended, makes Cuban and Haitian entrants eligible for certain federal public benefits to the same extent as refugees.", "The steps taken by the Obama Administration to normalize relations with Cuba have raised questions about the possibility of future changes to U.S. policy toward Cuban migrants through either executive or congressional action.", "Regarding the latter, legislation was introduced in the 114th Congress to repeal the Cuban Adjustment Act and eliminate the special treatment that Cuban entrants receive with respect to federal refugee resettlement assistance and other federal assistance.", "It remains to be seen whether Congress will act on any such measures." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, 2, -1, 0, -1, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4 ] }

{ "title": [ "", "Background and History", "The Emergency Concept", "Law and Practice", "Congressional Concerns", "The National Emergencies Act", "Emergency Declarations in Effect and Emergency Declarations No Longer in Effect", "Concluding Remarks" ], "paragraphs": [ "F ederal law provides a variety of powers for the President to use in response to crisis, exigency, or emergency circumstances threatening the nation. They are not limited to military or war situations. Some of these authorities, deriving from the Constitution or statutory law, are continuously available to the President with little or no qualification. Others—statutory delegations from Congress—exist on a standby basis and remain dormant until the President formally declares a national emergency. Congress may modify, rescind, or render dormant such delegated emergency authority.\nUntil the crisis of World War I, Presidents utilized emergency powers at their own discretion. Proclamations announced the exercise of exigency authority. During World War I and thereafter, Chief Executives had available to them a growing body of standby emergency authority that became operative upon the issuance of a proclamation declaring a condition of national emergency. Sometimes such proclamations confined the matter of crisis to a specific policy sphere, and sometimes they placed no limitation whatsoever on the pronouncement. These activations of standby emergency authority remained acceptable practice until the era of the Vietnam War. In 1976, Congress curtailed this practice with the passage of the National Emergencies Act.", "The exercise of emergency powers had long been a concern of the classical political theorists, including the 18 th -century English philosopher John Locke, who had a strong influence upon the Founding Fathers in the United States. A preeminent exponent of a government of laws and not of men, Locke argued that occasions may arise when the executive must exert a broad discretion in meeting special exigencies or \"emergencies\" for which the legislative power provided no relief or existing law granted no necessary remedy. He did not regard this prerogative as limited to wartime or even to situations of great urgency. It was sufficient if the \"public good\" might be advanced by its exercise.\nEmergency powers were first expressed prior to the actual founding of the Republic. Between 1775 and 1781, the Continental Congress passed a series of acts and resolves that count as the first expressions of emergency authority. These instruments dealt almost exclusively with the prosecution of the Revolutionary War.\nAt the Constitutional Convention of 1787, emergency powers, as such, failed to attract much attention during the course of debate over the charter for the new government. It may be argued, however, that the granting of emergency powers by Congress is implicit in its Article I, Section 8, authority to \"provide for the common Defense and general Welfare;\" the commerce clause; its war, armed forces, and militia powers; and the \"necessary and proper\" clause empowering it to make such laws as are required to fulfill the executions of \"the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.\"\nThere is a tradition of constitutional interpretation that has resulted in so-called implied powers, which may be invoked in order to respond to an emergency situation. Locke seems to have anticipated this practice. Furthermore, Presidents have occasionally taken an emergency action that they assumed to be constitutionally permissible. Thus, in the American governmental experience, the exercise of emergency powers has been somewhat dependent upon the Chief Executive's view of the presidential office.\nPerhaps the President who most clearly articulated a view of his office in conformity with the Lockean position was Theodore Roosevelt. Describing what came to be called the \"stewardship\" theory of the presidency, Roosevelt wrote of his \"insistence upon the theory that the executive power was limited only by specific restrictions and prohibitions appearing in the Constitution or imposed by the Congress under its constitutional powers.\" It was his view \"that every executive officer, and above all every executive officer in high position, was a steward of the people,\" and he \"declined to adopt the view that what was imperatively necessary for the Nation could not be done by the President unless he could find some specific authorization to do it.\" Indeed, it was Roosevelt's belief that, for the President, \"it was not only his right but his duty to do anything that the needs of the Nation demanded unless such action was forbidden by the Constitution or by the laws.\"\nOpposed to this view of the presidency was Roosevelt's former Secretary of War, William Howard Taft, his personal choice for and actual successor as Chief Executive. He viewed the presidential office in more limited terms, writing \"that the President can exercise no power which cannot be fairly and reasonably traced to some specific grant of power or justly implied and included within such express grant as proper and necessary to its exercise.\" In his view, such a \"specific grant must be either in the Federal Constitution or in an act of Congress passed in pursuance thereof. There is,\" Taft concluded, \"no undefined residuum of power which he can exercise because it seems to him to be in the public interest.\"\nBetween these two views of the presidency lie various gradations of opinion, resulting in perhaps as many conceptions of the office as there have been holders. One authority has summed up the situation in the following words:\nEmergency powers are not solely derived from legal sources. The extent of their invocation and use is also contingent upon the personal conception which the incumbent of the Presidential office has of the Presidency and the premises upon which he interprets his legal powers. In the last analysis, the authority of a President is largely determined by the President himself.\nApart from the Constitution, but resulting from its prescribed procedures, there are statutory grants of power for emergency conditions. The President is authorized by Congress to take some special or extraordinary action, ostensibly to meet the problems of governing effectively in times of exigency. Sometimes these laws are of only temporary duration. The Economic Stabilization Act of 1970, for example, allowed the President to impose certain wage and price controls for about three years before it expired automatically in 1974. The statute gave the President emergency authority to address a crisis in the nation's economy.\nMany of these laws are continuously maintained or permanently available for the President's ready use in responding to an emergency. The Defense Production Act, originally adopted in 1950 to prioritize and regulate the manufacture of military material, is an example of this type of statute.\nThere are various standby laws that convey special emergency powers once the President formally declares a national emergency activating them. In 1973, a Senate special committee studying emergency powers published a compilation identifying some 470 provisions of federal law delegating to the executive extraordinary authority in time of national emergency. The vast majority of them are of the standby kind—dormant until activated by the President. However, formal procedures for invoking these authorities, accounting for their use, and regulating their activation and application were established by the National Emergencies Act of 1976.", "Relying upon constitutional authority or congressional delegations made at various times over the past 230 years, the President of the United States may exercise certain powers in the event that the continued existence of the nation is threatened by crisis, exigency, or emergency circumstances. What is a national emergency?\nIn the simplest understanding of the term, the dictionary defines emergency as \"an unforeseen combination of circumstances or the resulting state that calls for immediate action.\" In the midst of the crisis of the Great Depression, a 1934 Supreme Court majority opinion characterized an emergency in terms of urgency and relative infrequency of occurrence as well as equivalence to a public calamity resulting from fire, flood, or like disaster not reasonably subject to anticipation. An eminent constitutional scholar, the late Edward S. Corwin, explained emergency conditions as being those that \"have not attained enough of stability or recurrency to admit of their being dealt with according to rule.\" During congressional committee hearings on emergency powers in 1973, a political scientist described an emergency in the following terms: \"It denotes the existence of conditions of varying nature, intensity and duration, which are perceived to threaten life or well-being beyond tolerable limits.\" Corwin also indicated it \"connotes the existence of conditions suddenly intensifying the degree of existing danger to life or well-being beyond that which is accepted as normal.\"\nThere are at least four aspects of an emergency condition. The first is its temporal character: An emergency is sudden, unforeseen, and of unknown duration. The second is its potential gravity: An emergency is dangerous and threatening to life and well-being. The third, in terms of governmental role and authority, is the matter of perception: Who discerns this phenomenon? The Constitution may be guiding on this question, but it is not always conclusive. Fourth, there is the element of response: By definition, an emergency requires immediate action but is also unanticipated and, therefore, as Corwin notes, cannot always be \"dealt with according to rule.\" From these simple factors arise the dynamics of national emergency powers. These dynamics can be seen in the history of the exercise of emergency powers.", "In 1792, residents of western Pennsylvania, Virginia, and the Carolinas began forcefully opposing the collection of a federal excise tax on whiskey. Anticipating rebellious activity, Congress enacted legislation providing for the calling forth of the militia to suppress insurrections and repel invasions. Section 3 of this statute required that a presidential proclamation be issued to warn insurgents to cease their activity. If hostilities persisted, the militia could be dispatched. On August 17, 1794, President Washington issued such a proclamation. The insurgency continued. The President then took command of the forces organized to put down the rebellion.\nHere was the beginning of a pattern of policy expression and implementation regarding emergency powers. Congress legislated extraordinary or special authority for discretionary use by the President in a time of emergency. In issuing a proclamation, the Chief Executive notified Congress that he was making use of this power and also apprised other affected parties of his emergency action.\nOver the next 100 years, Congress enacted various permanent and standby laws for responding largely to military, economic, and labor emergencies. During this span of years, however, the exercise of emergency powers by President Abraham Lincoln brought the first great dispute over the authority and discretion of the Chief Executive to engage in emergency actions.\nBy the time of Lincoln's inauguration (March 4, 1861), seven states of the lower South had announced their secession from the Union; the Confederate provisional government had been established (February 4, 1861); Jefferson Davis had been elected (February 9, 1861) and installed as president of the confederacy (February 18, 1861); and an army was being mobilized by the secessionists. Lincoln had a little over two months to consider his course of action.\nWhen the new President assumed office, Congress was not in session. For reasons of his own, Lincoln delayed calling a special meeting of the legislature but soon ventured into its constitutionally designated policy sphere. On April 19, he issued a proclamation establishing a blockade on the ports of the secessionist states, \"a measure hitherto regarded as contrary to both the Constitution and the law of nations except when the government was embroiled in a declared, foreign war.\" Congress had not been given an opportunity to consider a declaration of war.\nThe next day, the President ordered the addition of 19 vessels to the navy \"for purposes of public defense.\" A short time later, the blockade was extended to the ports of Virginia and North Carolina.\nBy a proclamation of May 3, Lincoln ordered that the regular army be enlarged by 22,714 men, that navy personnel be increased by 18,000, and that 42,032 volunteers be accommodated for three-year terms of service. The directive antagonized many Representatives and Senators, because Congress is specifically authorized by Article I, Section 8, of the Constitution \"to raise and support armies.\"\nIn his July message to the newly assembled Congress, Lincoln suggested, \"These measures, whether strictly legal or not, were ventured upon under what appeared to be a popular and a public necessity, trusting then, as now, that Congress would readily ratify them. It is believed,\" he wrote, \"that nothing has been done beyond the constitutional competency of Congress.\"\nCongress subsequently did legislatively authorize, and thereby approve, the President's actions regarding his increasing armed forces personnel and would do the same later concerning some other questionable emergency actions. In the case of Lincoln, the opinion of scholars and experts is that \"neither Congress nor the Supreme Court exercised any effective restraint upon the President.\" The emergency actions of the Chief Executive were either unchallenged or approved by Congress and were either accepted or—because of almost no opportunity to render judgment—went largely without notice by the Supreme Court. The President made a quick response to the emergency at hand, a response that Congress or the courts might have rejected in law but, nonetheless, had been made in fact and with some degree of popular approval. Similar controversy would arise concerning the emergency actions of Presidents Woodrow Wilson and Franklin D. Roosevelt. Both men exercised extensive emergency powers with regard to world hostilities, and Roosevelt also used emergency authority to deal with the Great Depression. Their emergency actions, however, were largely supported by statutory delegations and a high degree of approval on the part of both Congress and the public.\nDuring the Wilson and Roosevelt presidencies, a major procedural development occurred in the exercise of emergency powers—use of a proclamation to declare a national emergency and thereby activate all standby statutory provisions delegating authority to the President during a national emergency. The first such national emergency proclamation was issued by President Wilson on February 5, 1917. Promulgated on the authority of a statute establishing the U.S. Shipping Board, the proclamation concerned water transportation policy. It was statutorily terminated, along with a variety of other wartime measures, on March 3, 1921.\nPresident Franklin D. Roosevelt issued the next national emergency proclamation some 48 hours after assuming office. Proclaimed March 6, 1933, on the somewhat questionable authority of the Trading with the Enemy Act of 1917, the proclamation declared a \"bank holiday\" and halted a major class of financial transactions by closing the banks. Congress subsequently gave specific statutory support for the Chief Executive's action with the passage of the Emergency Banking Act on March 9. Upon signing this legislation into law, the President issued a second banking proclamation, based upon the authority of the new law, continuing the bank holiday until it was determined that banking institutions were capable of conducting business in accordance with new banking policy.\nNext, on September 8, 1939, President Roosevelt promulgated a proclamation of \"limited\" national emergency, though the qualifying term had no meaningful legal significance. Almost two years later, on May 27, 1941, he issued a proclamation of \"unlimited\" national emergency. This action, however, did not actually make any important new powers available to the Chief Executive in addition to those activated by the 1939 proclamation. The President's purpose in making the second proclamation was largely to apprise the American people of the worsening conflict in Europe and growing tensions in Asia.\nThese two war-related proclamations of a general condition of national emergency remained operative until 1947, when certain of the provisions of law they had activated were statutorily rescinded. Then, in 1951, Congress terminated the declaration of war against Germany. In the spring of the following year, the Senate ratified the treaty of peace with Japan. Because these actions marked the end of World War II for the United States, legislation was required to keep certain emergency provisions in effect. Initially, the Emergency Powers Interim Continuation Act temporarily maintained this emergency authority. It was subsequently supplanted by the Emergency Powers Continuation Act, which kept selected emergency delegations in force until August 1953. By proclamation in April 1952, President Harry S. Truman terminated the 1939 and 1941 national emergency declarations, leaving operative only those emergency authorities continued by statutory specification.\nPresident Truman's 1952 termination, however, specifically exempted a December 1950 proclamation of national emergency he had issued in response to hostilities in Korea. This condition of national emergency would remain in force and unimpaired well into the era of the Vietnam War.\nTwo other proclamations of national emergency would also be promulgated before Congress once again turned its attention to these matters. Faced with a postal strike, President Richard Nixon declared a national emergency in March 1970, thereby gaining permission to use units of the Ready Reserve to assist in moving the mail. President Nixon proclaimed a second national emergency in August 1971 to control the balance of payments flow by terminating temporarily certain trade agreement provisos and imposing supplemental duties on some imported goods.", "In the years following the conclusion of U.S. armed forces involvement in active military conflict in Korea, occasional expressions of concern were heard in Congress regarding the continued existence of President Truman's 1950 national emergency proclamation long after the conditions prompting its issuance had disappeared. There was some annoyance that the President was retaining extraordinary powers intended only for a time of genuine emergency and a feeling that the Chief Executive was thwarting the legislative intent of Congress by continuously failing to terminate the declared national emergency.\nGrowing public and congressional displeasure with the President's exercise of his war powers and deepening U.S. involvement in hostilities in Vietnam prompted interest in a variety of related matters. For Senator Charles Mathias, interest in the question of emergency powers developed out of U.S. involvement in Vietnam and the incursion into Cambodia. Together with Senator Frank Church, he sought to establish a Senate special committee to study the implications of terminating the 1950 proclamation of national emergency that was being used to prosecute the Vietnam War \"to consider problems which might arise as the result of the termination and to consider what administrative or legislative actions might be necessary.\" Such a panel was initially chartered by S.Res. 304 as the Special Committee on the Termination of the National Emergency in June 1972, but it did not begin operations before the end of the year.\nWith the convening of the 93 rd Congress in 1973, the special committee was approved again with S.Res. 9 . Upon exploring the subject matter of national emergency powers, however, the mission of the special committee became more burdensome. There was not just one proclamation of national emergency in effect but four such instruments, issued in 1933, 1950, 1970, and 1971. The United States was in a condition of national emergency four times over, and with each proclamation, the whole collection of statutorily delegated emergency powers was activated. Consequently, in 1974, with S.Res. 242 , the study panel was rechartered as the Special Committee on National Emergencies and Delegated Emergency Powers to reflect its focus upon matters larger than the 1950 emergency proclamation. Its final mandate was provided by S.Res. 10 in the 94 th Congress, although its termination date was necessarily extended briefly in 1976 by S.Res. 370 . Senators Church and Mathias co-chaired the panel.\nThe Special Committee on National Emergencies and Delegated Emergency Powers produced various studies during its existence. After scrutinizing the U . S . Code and uncodified statutory emergency powers, the panel identified 470 provisions of federal law that delegated extraordinary authority to the executive in time of national emergency. Not all of them required a declaration of national emergency to be operative, but they were, nevertheless, extraordinary grants. The special committee also found that no process existed for automatically terminating the four outstanding national emergency proclamations. Thus, the panel began developing legislation containing a formula for regulating emergency declarations in the future and otherwise adjusting the body of statutorily delegated emergency powers by abolishing some provisions, relegating others to permanent status, and continuing others in a standby capacity. The panel also began preparing a report offering its findings and recommendations regarding the state of national emergency powers in the nation.", "The special committee, in July 1974, unanimously recommended legislation establishing a procedure for the presidential declaration and congressional regulation of a national emergency. The proposal also modified various statutorily delegated emergency powers. In arriving at this reform measure, the panel consulted with various executive branch agencies regarding the significance of existing emergency statutes, recommendations for legislative action, and views as to the repeal of some provisions of emergency law.\nThis recommended legislation was introduced by Senator Church for himself and others on August 22, 1974, and became S. 3957 . It was reported from the Senate Committee on Government Operations on September 30 without public hearings or amendment. The bill was subsequently discussed on the Senate floor on October 7, when it was amended and passed.\nAlthough a version of the reform legislation had been introduced in the House on September 16, becoming H.R. 16668 , the Committee on the Judiciary, to which the measure was referred, did not have an opportunity to consider either that bill or the Senate-adopted version due to the press of other business—chiefly the impeachment of President Nixon and the nomination of Nelson Rockefeller to be Vice President of the United States. Thus, the National Emergencies Act failed to be considered on the House floor before the final adjournment of the 93 rd Congress.\nWith the convening of the next Congress, the proposal was introduced in the House on February 27, 1975, becoming H.R. 3884 , and in the Senate on March 6, becoming S. 977 . House hearings occurred in March and April before the Subcommittee on Administrative Law and Governmental Relations of the Committee on the Judiciary. The bill was subsequently marked up and, on April 15, was reported in amended form to the full committee on a 4-0 vote. On May 21, the Committee on the Judiciary, on a voice vote, reported the bill with technical amendments. During the course of House debate on September 4, there was agreement to both the committee amendments and a floor amendment providing that national emergencies end automatically one year after their declaration unless the President informs Congress and the public of a continuation. The bill was then passed on a 388-5 yea and nay vote and sent to the Senate, where it was referred to the Committee on Government Operations.\nThe Senate Committee on Government Operations held a hearing on H.R. 3884 on February 25, 1976, the bill was subsequently reported on August 26 with one substantive and several technical amendments. The following day, the amended bill was passed and returned to the House. On August 31, the House agreed to the Senate amendments, clearing the proposal for President Gerald Ford's signature on September 14.\nIn its final report, issued in May 1976, the special committee concluded \"by reemphasizing that emergency laws and procedures in the United States have been neglected for too long, and that Congress must pass the National Emergencies Act to end a potentially dangerous situation.\"\nOther issues identified by the special committee as deserving attention in the future, however, did not fare so well. The panel, for example, was hopeful that standing committees of both houses of Congress would review statutory emergency power provisions within their respective jurisdictions with a view to the continued need for, and possible adjustment of, such authority. Actions in this regard were probably not as ambitious as the special committee expected. A title of the Federal Civil Defense Act of 1950 granting the President or Congress power to declare a civil defense emergency in the event of an attack on the United States occurred or was anticipated expired in June 1974 after the House Committee on Rules failed to report a measure continuing the statute.\nA provision of emergency law was refined in May 1976. Legislation was enacted granting the President the authority to order certain selected members of an armed services reserve component to active duty without a declaration of war or national emergency. Previously, such an activation of military reserve personnel had been limited to a \"time of national emergency declared by the President\" or \"when otherwise authorized by law.\"\nAnother refinement of emergency law occurred in 1977 when action was completed on the International Emergency Economic Powers Act (IEEPA). Reform legislation containing this statute modified a provision of the Trading with the Enemy Act of 1917, authorizing the President to regulate the nation's international and domestic finance during periods of declared war or national emergency. The enacted bill limited the President's Trading with the Enemy Act power to regulate the country's finances to times of declared war. In IEEPA, a provision conferred authority on the Chief Executive to exercise controls over international economic transactions in the future during a declared national emergency and established procedures governing the use of this power, including close consultation with Congress when declaring a national emergency to activate IEEPA. Such a declaration would be subject to congressional regulation under the procedures of the National Emergencies Act.\nOther matters identified in the final report of the special committee for congressional scrutiny included\ninvestigation of emergency preparedness efforts conducted by the executive branch, attention to congressional preparations for an emergency and continual review of emergency law, ending open-ended grants of authority to the executive, investigation and institution of stricter controls over delegated powers, and improving the accountability of executive decisionmaking.\nThere is some public record indication that certain of these points, particularly the first and the last, have been addressed in the past two decades by congressional overseers.\nAs enacted, the National Emergencies Act consisted of five titles. The first of these generally returned all standby statutory delegations of emergency power, activated by an outstanding declaration of national emergency, to a dormant state two years after the statute's approval. However, the act did not cancel the 1933, 1950, 1970, and 1971 national emergency proclamations, because the President issued them pursuant to his Article II constitutional authority. Nevertheless, it did render them ineffective by returning to dormancy the statutory authorities they had activated, thereby necessitating a new declaration to activate standby statutory emergency authorities.\nTitle II provided a procedure for future declarations of national emergency by the President and prescribed arrangements for their congressional regulation. The statute established an exclusive means for declaring a national emergency. Emergency declarations were to terminate automatically after one year unless formally continued for another year by the President, but they could be terminated earlier by either the President or Congress. Originally, the prescribed method for congressional termination of a declared national emergency was a concurrent resolution adopted by both houses of Congress. This type of \"legislative veto\" was effectively invalidated by the Supreme Court in 1983. The National Emergencies Act was amended in 1985 to substitute a joint resolution as the vehicle for rescinding a national emergency declaration.\nWhen declaring a national emergency, the President must indicate, according to Title III, the powers and authorities being activated to respond to the exigency at hand. Certain presidential accountability and reporting requirements regarding national emergency declarations were specified in Title IV, and the repeal and continuation of various statutory provisions delegating emergency powers was accomplished in Title V.", "Since the 1976 enactment of the National Emergencies Act, various national emergencies have been declared pursuant to its provisions. Some were subsequently revoked, while others remain in effect. Table 1 displays the number of national emergencies in effect (some may refer to these as \"active\") and the number of national emergencies no longer in effect (some may refer to these as \"inactive\"), by President. Detailed information regarding the 31 national emergencies in effect may be found in Table 2 . Similar information regarding the 22 national emergencies no longer in may be found in Table 3 .\nThe second column in Table 2 and Table 3 identifies the national emergency declaration, which is either an executive order (E.O.) or a presidential proclamation (Proc.).\nTable 3 includes declared national emergencies that are no longer in effect.", "The development, exercise, and regulation of emergency powers, from the days of the Continental Congress to the present, reflect at least one highly discernable trend: Those authorities available to the executive in time of national crisis or exigency have, since the time of the Lincoln Administration, come to be increasingly rooted in statutory law. The discretion available to a Civil War President in his exercise of emergency power has been harnessed, to a considerable extent, in the contemporary period.\nDue to greater reliance upon statutory expression, the range of this authority has come to be more circumscribed, and the options for its use have come to be regulated procedurally through the National Emergencies Act. Since its enactment the National Emergencies Act has not been revisited by congressional overseers. The 1976 report of the Senate Special Committee on National Emergencies suggested that the prospect remains that further improvements and reforms in this policy area might be pursued and perfected.\nAn anomaly in the activation of emergency powers appears to have occurred on September 8, 2005, when President George W. Bush issued a proclamation suspending certain wage requirements of the Davis-Bacon Act in the course of the federal response to the Gulf Coast disaster resulting from Hurricane Katrina. Instead of following the historical pattern of declaring a national emergency to activate the suspension authority, the President set out the following rationale in the proclamation: \"I find that the conditions caused by Hurricane Katrina constitute a 'national emergency' within the meaning of section 3147 of title 40, United States Code.\" A more likely course of action would seemingly have been for the President to declare a national emergency pursuant to the National Emergencies Act and to specify that he was, accordingly, activating the suspension authority. Although the propriety of the President's action in this case might have been ultimately determined in the courts, the proclamation was revoked on November 3, 2005, by a proclamation in which the President cited the National Emergencies Act as authority, in part, for his action." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h1_full", "h0_full h1_full", "", "h1_full", "h2_full", "", "h1_full" ] }

{ "question": [ "In which situations can the President use his or her special powers?", "How are these powers granted to the President?", "To what extent has Congress exercised this ability to grant powers?", "What protections does the Constitution have regarding the emergency powers of the President?", "How can the judiciary affect the exercise of emergency powers?", "Does Congress also have this ability?", "How can public opinion affect the emergency powers of the President?", "How did the National Emergencies act come into being?", "What does the report discuss?" ], "summary": [ "The President of the United States has available certain powers that may be exercised in the event that the nation is threatened by crisis, exigency, or emergency circumstances (other than natural disasters, war, or near-war situations).", "Such powers may be stated explicitly or implied by the Constitution, assumed by the Chief Executive to be permissible constitutionally, or inferred from or specified by statute.", "Through legislation, Congress has made a great many delegations of authority in this regard over the past 230 years.", "There are, however, limits and restraints upon the President in his exercise of emergency powers. With the exception of the habeas corpus clause, the Constitution makes no allowance for the suspension of any of its provisions during a national emergency.", "Disputes over the constitutionality or legality of the exercise of emergency powers are judicially reviewable.", "Both the judiciary and Congress, as co-equal branches, can restrain the executive regarding emergency powers.", "Since 1976, the President has been subject to certain procedural formalities in utilizing some statutorily delegated emergency authority.", "The National Emergencies Act (50 U.S.C. §§1601-1651) eliminated or modified some statutory grants of emergency authority, required the President to formally declare the existence of a national emergency and to specify what statutory authority activated by the declaration would be used, and provided Congress a means to countermand the President's declaration and the activated authority being sought. The development of this regulatory statute and subsequent declarations of national emergency are reviewed in this report.", "The development of this regulatory statute and subsequent declarations of national emergency are reviewed in this report." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 1, -1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 2, 2 ] }

{ "title": [ "", "Developments from March 2010-June 2010", "The KIC Survives Inter-Korean Tensions in 2010", "The KIC and Inter-Korean Relations", "Implications for U.S. Interests", "The Development of the Kaesong Industrial Complex", "Issues Related to the Kaesong Industrial Complex", "Labor Issues", "Financial Benefits for Pyongyang", "Kaesong and the Proposed Korea-U.S. Free Trade Agreement", "Negotiating History", "The KORUS FTA's Text", "Congress's Role", "Labor Standards and KIC Potentially Providing a Competitive Advantage", "Kaesong-Made Components and the KORUS FTA", "The Control of Exports to Kaesong", "Long-Term Geopolitical and Economic Issues", "U.S. Interests and Policy Options" ], "paragraphs": [ "", "The Kaesong Industrial Complex (KIC) is an industrial park located in the Democratic People's Republic of Korea (DPRK or North Korea) just across the demilitarized zone from South Korea. As of the end of December 2010, approximately 120 medium-sized South Korean companies were using North Korean labor to manufacture products there, employing over 47,000 workers. (See Table 1 .) Currently, the park has much of the infrastructure (e.g., South Korean-built water, sewage treatment, and electrical facilities) to enable the completion of the complex's first phase, an 800-acre site that would contain roughly 300 foreign manufacturers employing around 100,000 North Korean workers. If the master plan of Hyundai Asan, the co-developer of the project, is followed the KIC eventually will be over 6,000 acres (nearly half the size of Manhattan Island) and include high-technology zones, shopping districts, residential areas, and facilities for tourism and recreation. At present, over 100 companies that have signed lease agreements to open factories have not done so. The complex was planned, developed, and financed largely by South Korea, and it has become a symbol of engagement between the North and the South. In 2010, about $1.4 billion, or 76%, of the $1.9 billion in total trade between the two Koreas was attributable to the KIC.\nThe purpose of this report is to provide an overview of the role, purposes, and results of the KIC and examine U.S. interests, policy issues, options, and legislation.", "Twice in 2010, the KIC's future was thrown into doubt by a marked deterioration in inter-Korean relations. First, on March 26, 2010, a South Korean naval vessel, the Cheonan , sank in waters disputed by the two Koreas. Nearly 50 South Korean sailors died in the incident. A multinational investigation team led by South Korea determined that the ship was sunk by a North Korean submarine. South Korea, backed by the United States and Japan, has said it will take the case before the United Nations Security Council. On May 24, 2010, South Korean President Lee Myung-bak also announced that North Korean ships would no longer be permitted to pass through shipping lanes under South Korean control, and that North-South trade, visits, and exchanges generally would be suspended. Exceptions were made for humanitarian aid to infants and children, and for the KIC. Propaganda radio and loudspeaker broadcasts into North Korea would also be resumed. South Korean Minister of Unification Hyun In-taek announced that new investments in the complex would be stopped and that the number of South Korean personnel at the complex—which had often approached 1,000 people in mid-week—would be reduced by as much as 50%.\nNorth Korea's Committee for the Peaceful Reunification of the Fatherland, the government organ responsible for inter-Korean relations, responded by labeling the actions by the \"puppet\" South Korean government as \"a declaration of war against us\" and announcing that it would abrogate all North-South non-aggression agreements, terminate contact with Lee's government, and \"completely halt\" all North-South cooperation projects, among other steps. However, the Kaesong complex was not shut down, although North Korea threatened to take this step if South Korean loudspeaker broadcasts resumed. (It also threatened to shoot at the loudspeakers.) Instead, several South Korean government workers at the KIC were expelled. South Korea did not restart its broadcasts.\nSecond, on November 23, North Korean artillery units fired over 150 shells onto and around Yeonpyeong Island, across the North-South disputed western sea border. North Korea claimed that the South Korean military had fired first, during routine U.S.-ROK exercises in the area. According to one report, about half the North Korean shells hit the island. The barrage killed four South Koreans (two marines and two civilians), wounded dozens, and destroyed or damaged scores of homes and other buildings. It was North Korea's first direct artillery attack on ROK territory since the 1950-1953 Korean War. South Korea responded by shooting 80 shells at North Korea. An official North Korean media outlet later said that the South Korean civilian deaths were \"regrettable.\"\nThe attacks prompted South Korea and the United States to hold large-scale naval exercises in the Yellow Sea area with the USS George Washington aircraft carrier strike group and led to closer U.S.-South Korea-Japan collaboration on security matters. In a nationally televised speech, Lee announced that South Korea would no longer hold back on retaliating for North Korean provocations. The South Korean defense minister stated that if attacked in the future, South Korea would consider using its air force to strike back in North Korean territory.\nDespite these tensions, it appeared that both Koreas were reluctant to allow the complex to be closed, or at least to be blamed for its closure. Aside from the park's symbolic importance, both sides would incur financial losses if it ceased operating. The KIC provides the North Korean government with a constant revenue stream of around $2 million a month, by virtue of the share the government takes from the salaries paid to North Korean workers. The prospect of triggering social unrest due to depriving families in the Kaesong area, with a population of around 200,000, of high-paying jobs may also be a factor for the North Korean regime of Kim Jong-il, who is trying to pave the way for his son, Kim Jong-un, to succeed him.\nAs for South Korea, a closure could make the central government liable for hundreds of millions of dollars in insurance payments to the South Korean companies that use the park. Although there have been conflicting reports about whether South Korean manufacturers in the park are profitable, it is possible that a number of them would suffer significant financial hardship if the KIC were closed.\nThe up and down treatment of the Kaesong complex in 2010 fits the patterns that have existed for the past three years.", "The KIC is virtually the last vestige of the range of inter-Korean cooperation projects initiated during the period of détente between South Korea and North Korea from 2000-2008. Relations began deteriorating after new developments in both Koreas. In December 2007, a new, conservative South Korean president, Lee Myung-bak, was elected. Lee's administration cancelled a range of large-scale infrastructure inter-Korean projects that his predecessor had promised South Korea would finance, instituted a more \"reciprocity-based\" policy toward North Korea, and was openly critical of human rights conditions in North Korea. Lee has linked progress on a number of items in inter-Korean relations to North Korea's agreement to denuclearize.\nLee's government has been ambivalent about KIC. On one hand, the complex has been physically expanding since Lee took office. As shown in Table 1 , the number of South Korean manufacturers operating in the complex has nearly doubled since his inauguration in early 2008. Under Lee, a number of steps have been taken to support the KIC, including providing special tax breaks to small and medium-sized enterprises that outsource their manufacturing to KIC companies; allowing KIC companies to resell their lots inside the complex; reducing health care premiums by 50% for South Korean workers in the complex; and issuing new loans and trade insurance to KIC companies.\nOn the other hand, the Lee administration has halted plans for a major expansion of the complex. Of the 57 South Korean firms that have opened factories in Kaesong since Lee took office, only 7 received approval from his government. In October 2007, with the complex outgrowing the greater Kaesong area's ability to provide workers, Lee's predecessor, Roh Moo-hyun (2003-2008), promised North Korea that Seoul would build dormitories to house tens of thousands of new North Korean workers. Lee cancelled these plans. It is unclear to what extent his government will link construction of the dorms to North Korea's behavior in nuclear talks and/or to some sort of apology for the Cheonan sinking and the Yeonpyeong Island attack. Alternatively, the Lee government may decide to link the dorms to developments within the park. For instance, many South Koreans want more provisions for the safety of South Korean workers at the complex and to allow greater communication services (such as cell phones, which currently are prohibited at the complex).\nIn North Korea, Kim Jong-il's reported stroke in the summer of 2008 coincided with a more bellicose and provocative stance, including the testing of a nuclear device in May 2009. For roughly a nine-month period from November 2008 through August 2009, the North Korean military appeared to be dictating policy decisions with regard to the KIC. During this time, North Korean authorities imposed a number of restrictions on the KIC, including closing down the border for several days in March 2009, effectively trapping hundreds of South Korean workers at the complex. The restrictions are blamed for the decline in the complex's aggregate production in 2009. The apparent reassertion of civilian control in the late summer of 2009—the time period when Kim Jong-il is commonly thought to have reasserted his authority—brought a relaxation of most of the restrictions. North Korea also stepped back from demands it had made that investors dramatically increase wages and payments.", "The KIC represents a policy dilemma. On the one hand, as mentioned above, the project provides an ongoing revenue stream to the Kim Jong-il regime in Pyongyang. On the other hand, the KIC provides a possible beachhead for market reforms in the DPRK that could eventually spill over to areas outside the park and expose tens of thousands of North Koreans to outside influences and incentives. Expanding the park would exacerbate the dilemma: The regime would reap additional funds, but bringing in workers from areas north of Kaesong could also enhance the park's potential to serve as a \"Trojan horse\" in the medium-to-long term. The original plans for the KIC envisioned the complex eventually housing hundreds of foreign (i.e., non-North Korean) manufacturers, employing hundreds of thousands of North Korean workers.\nThe United States has limited direct involvement in the KIC, which the United States has officially supported since its conception. At present, no U.S. companies have invested in the Kaesong complex, though a number of South Korean officials have expressed a desire to attract U.S. investment. U.S. government approval is needed for South Korean firms to ship to the KIC certain U.S.-made equipment currently under U.S. export controls. The Korea-U.S. Free Trade Agreement (KORUS FTA), which has yet to be submitted to Congress for approval, provides for a Committee on Outward Processing Zones (OPZ) to be formed and to consider whether zones such as the KIC will receive preferential treatment under the FTA (see \" Kaesong and the Proposed Korea-U.S. Free Trade Agreement \" below). The EU-Korea FTA, which was signed in 2009, contains a similar provision.", "The KIC resulted from an initiative led by the Hyundai Group beginning in 1998 that coincided with the Republic of Korea's (ROK) \"sunshine policy\" that attempted to improve relations between South Korea and the DPRK. The KIC is located about 106 miles southeast of Pyongyang and 43 miles north of Seoul just across the demilitarized zone (DMZ) in the DPRK. The purposes of the KIC as stated by South Korea have been to develop an industrial park in which South Korean businesses could manufacture products using North Korean labor, provide an opening for North Korea to liberalize and reform its economy, and ease tensions across the DMZ. Although begun primarily as a private sector venture, both governments are heavily involved in the project. Groundbreaking occurred in June 2003 and again in April 2004. Hyundai Asan and the Korea Land Corporation (both from South Korea) have been developing and managing the complex.\nSouth Korean companies operating in Kaesong receive certain incentives from the ROK government and have certain rights as determined by negotiated agreements with the DPRK. The KIC is a duty-free zone, with no restrictions on the use of foreign currency or credit cards and no visa required for entry or exit. Property and inheritance rights are ensured. South Korean law breakers in Kaesong are not to go on trial in the North. The corporate tax rate is 10% to 14% with an exemption for the first five years after generating profits and a 50% reduction for the ensuing three years. The South Korean government (through its Inter-Korea Cooperation Fund) offered companies that established their operations in the KIC (in the pilot project and first phase) loans with low interest rates equal to those applied to public works projects. These loans totaled about $40 million as of the end of 2005. Out of the first 26 firms to either begin operations or contemplate beginning operations in the near term, 25 of them applied for loans from the Inter-Korea Cooperation Fund. South Korea also provides political risk insurance that will cover financial losses up to 90% of a company's investment in the KIC up to 5 billion South Korean won ($5.4 million). Under a South Korean law passed in April 2007, South Korean small and medium-sized firms operating in the KIC are eligible for state subsidies and other benefits equal to their counterparts at home.\nTable 2 shows the first three phases of the master plan for the project. The first phase encompasses 800 acres with as many as 300 South Korean firms operating in the complex. At the end of phase 3, the plan calls for as much as 4,800 acres in the industrial zone with as many as 1,500 firms employing 350,000 North Korean workers and producing $16 billion worth of products per year. It also includes 2,200 acres in a supporting zone with residential facilities (dorms), commercial establishments (hotels, restaurants, offices, conference rooms), and tourist facilities (golf course, peace park, theme park). The Master Plan also includes an Expansion Zone of 1,600 acres for industrial use and 4,000 acres for support. This would be used after phase 3 and would accommodate an additional 500 companies, 150,000 employees, and estimated production of $4 billion per year. Counting the expansion zone, the grand totals for the Master Plan would be 6,400 acres for the Industrial Zone (10 square miles), 6,200 acres for the Supporting Zone, 2,000 companies, 500,000 workers, and $20 billion per year in products. The industrial and supporting zones together cover an area roughly one-fifth the size of Washington, DC.\nThe KIC aims to attract South Korean companies, particularly small and medium-sized enterprises, seeking lower labor and other costs for their manufactured products as an alternative to establishing subsidiaries in China or other low-wage markets. As indicated in Table 1 , by the end of 2010, about 120 companies had begun operations in Kaesong and were employing over 47,000 North Korean workers.\nOf the $374 million initial cost for the first stage, $223 million was to be provided by the South Korean government. Much of the supporting infrastructure has been built, including a job training center, a water supply plant (which sends about one-quarter of its 60,000 tons/day capacity to Kaesong City), a wastewater treatment plant, and an electricity substation. In December 2006, the Korea Electric Power Corporation connected North Korea and South Korea by a 100,000 kilowatt power-transmission line and in June 2007 began transmission of high-voltage electricity for use by the companies in the KIC. In December 2007, the two Koreas announced what was to be daily train service across the demilitarized zone along a recently reconnected rail line between the two Koreas. Regular train service, however, has not begun. The plan is for the trains to connect the KIC to South Korea in the south and to China in the north. Currently, the trains terminate south of Kaesong, in Bongdong, which does not have loading facilities. Meanwhile, Kaesong is connected to South Korea by a road that has thousands of vehicles per day passing through the checkpoints.\nThe 15 companies operating in the Pilot Industrial Complex in Kaesong in 2006 and their products included Sonoko Cuisine Ware (kitchenware), SJ Tech (semiconductor component containers), Shinwon (apparel), Samduk Trading (footwear), Bucheon Industrial (wire harness), Taesung Industrial (cosmetics containers), Daewha Fuel Pump (automobile parts), Munchang Co. (apparel), Romanson (watches, jewelry), Hosan Ace (fan coils), Magic Micro (lamp assemblies for LCD monitors), JY Solutec (automobile components and molds), TS Precision Machinery (semiconductor mold components), Yongin Electronics (transformers, coils), and JCCOM (communication components).\nAs shown in Table 3 , in 2010, the KIC-produced goods totaled $323.3 million, about a 25% increase from 2009. As of the end of December 2010, a little over half of the cumulative production total had been in textiles and clothing, around 20% had been in electronics products as well as in metals/machinery, and about 10% had been in chemical products. The share of textile and clothing production has increased over time, from 46% in 2007 to 53% in 2009. Examples of the variety of products made in Kaesong include socks, pajamas, shoes, auto parts (four firms), semiconductor parts (two firms), toner cartridges (one firm), fish nets, and motorcycle helmets.\nCurrently, all products made in the KIC are shipped to South Korea for sale there or for export after clearing customs in the ROK. The primary export destinations in 2010 were Australia, the European Union, Russia, and China. Other than labor, land, and site construction materials, there now is no local procurement of inputs into the manufacturing processes in the KIC nor are products manufactured in the KIC sold in North Korean markets. Most companies there use labor-intensive manufacturing processes with raw materials and intermediate goods from South Korea shipped to Kaesong for final assembly. As the KIC is expanded, however, companies could procure some of their manufacturing inputs locally.\nIt is not yet clear whether South Korean companies operating in the KIC are doing so primarily for political purposes or whether their operations in the complex are economically viable. Also, it is not clear whether companies in the complex would be economically viable without South Korean government support in providing infrastructure and loans with below-market interest rates. The KIC does provide small and medium-sized businesses access to labor costs lower than those in China or Vietnam, a workforce that speaks the same language, and proximity to large markets in South Korea. Some companies appear to be using production in Kaesong to replace that in China, South Korea, or elsewhere, but others may be using government-subsidized loans and political risk insurance to invest in politically popular projects. The long list of companies that have applied to enter the KIC, however, indicates that investments there likely are seen as profitable for most businesses. It also should be noted that an estimated 40% of the small and medium-sized South Korean companies that established operations in China have not been successful there. Many have withdrawn from that market. The KIC is viewed as essential for survival by some of these companies.\nThe experience of some of the early investors in Kaesong may be indicative of the economic viability of the project. ShinWon (clothing) established operations in the KIC to take advantage of the dexterity and lower cost of North Korean workers, favorable logistics, and to avoid nontariff barriers in China and Southeast Asia. By manufacturing about 16% of five of its clothing lines there, it expects to accrue considerable savings in production costs. It considers its Kaesong factory to be optimal when compared with those it has in China, Indonesia, Vietnam, and Guatemala.\nSamduk Trading Company produces high-quality shoes in the KIC. Start-up costs were high because of the need to train workers. It took eight months for some production lines to reach 60% of the productivity level of South Korean companies. The Romanson company (watches) finds the KIC superior to production in China because of the common language and low labor costs. It reportedly plans to move 75% of its watch production to the KIC. The Moonchang company (uniforms, seat covers, leisure clothes) faced a rough start in dealing with its North Korean workers but feels it is now on the right track. The Woori Bank is in a difficult situation because of the limited customer base and low demand for personal or business loans. Its main business is currency exchange. It provides zero interest rates on deposits because there are no means to make profits by investing deposits elsewhere in North Korea.", "The KIC has raised several issues with U.S. policy makers. These include labor conditions, financial benefits for Pyongyang, the KIC in the KORUS FTA, and the control of U.S. exports to Kaesong.", "A question with respect to the KIC has been the conditions for North Korean workers there and whether they are being exploited. In January 2007, Jay Lefkowitz, President Bush's special envoy for human rights in North Korea, wrote that one of the concerns he had with the Kaesong Industrial Complex is that authorities take a portion (as much as 45%) of the wages paid by the South Korean companies. He noted that verified details are elusive, and neither the DPRK nor South Korean government, nor any company, has been able to state definitively how much of his or her wage a Kaesong worker is allowed to keep.\nAccording to South Korean officials, average wages and working conditions at Kaesong are far better than those in the rest of North Korea. The monthly minimum wage is $60.78, or between $2 and $3 per day. On top of the minimum wage, companies pay the North Korean authorities a 15% social insurance fee providing for unemployment and occupational hazards. Increases in the minimum wage are capped at 5% per year. The minimum wage has risen from $50 per month when the park opened in 2004. General workers receive the base rate, while team leaders and heads of companies receive more. Workers also receive overtime pay. For extended working hours, the overtime premium is 50% of the hourly wage rate. For public holidays and nighttime work (10 p.m. to 6 a.m.), the overtime premium is 100% of the hourly wage rate. In some cases, North Korean workers have asked for additional night shift or weekend work in order to qualify for additional pay. Companies also may pay cash rewards as a special incentive. Many employees received $20-$30 per month in overtime pay. Thus, adding the minimum wage, the 15% social insurance fee, and the overtime payments, it appears that KIC manufacturers pay around $100 per month for each employee.\nKIC employees receive 14 days per year in vacation time. At first, North Korean workers were reluctant to ask for leave time, but now they do. Female employees receive 60 days paid maternity leave. As of 2006, labor costs in Kaesong are approximately 8% of those in a South Korean metropolitan area. South Korean labor laws extend to South Korean workers in the KIC.\nThe wages of North Korean workers are paid in dollars (or other hard currency other than South Korean won) first to the Central Special Direct General Bureau, a North Korean government agency. Article 34 of the Labor Law of the Kaesong Industrial Complex, however, states that wages must be paid directly to employees in cash. The DPRK claims that this is not being implemented now because of the lack of foreign exchange centers in the KIC. In 2007, the ROK Ministry of Unification stated that of the $57.50 minimum monthly salary at the time, $7.50 or 15% of the base pay went for social insurance. The North Korean government also deducted $15, or 30%, for a socio-cultural policy fee that goes for rental of state-owned housing, education, medical services, social insurance, and social welfare and reportedly is given to the Kaesong City People's Committee. According to the ministry, the remaining $35 was paid to the workers in cash (in North Korean won) or as chits that could be exchanged for daily supplies (food and necessities). At the exchange rate of 140 North Korean won per dollar at the time, the $35 translated into 4,900 won. (A kilogram of rice cost about 44 won if bought from North Korea's public distribution system but as much as 1,000 won if bought on the open market. The average family consumes about 60 kilograms of rice per month.) Companies provide the workers with a way to verify their wages by having them sign a ledger or provide a pay slip when they receive their pay.\nNorth Korean workers commute to the KIC by bus provided by the Kaesong Industrial Complex Management Council and by some 1,000 bicycles also provided for workers living closer to the complex. According to the KIC Management Council, the health condition of workers at the KIC has visibly improved as they have had access to better nutrition.\nThe actual recruitment of workers is done by North Korea's Central Guidance Agency on Special Zone Development, a cabinet level administrative body. The South Korean hiring company, however, may reject any recruit provided or if the recruit does not demonstrate the requisite skills (e.g., sewing), hire the worker as a trainee at 70% or less of the minimum wage. Employers cannot freely punish or fire incompetent workers. They must give instructions through North Korean mid-level managers. Directly scolding employees is regarded as humiliation and prohibited. The experience of many companies, however, is that labor management is a challenge during the start-up phase of a factory in the KIC. Gradually, however, North Korean workers begin to identify with the company, and a level of trust is developed between the South Korean executives and the North Korean managers and workers.\nCurrently, North Korean workers do not have the right to change employers. This promises to keep labor costs from escalating as they have in other developing markets as foreign firms bid for skilled workers. This also provides companies in the KIC with a stable (though aging) workforce. This practice, however, conflicts with what would be consistent with internationally accepted workers' rights.", "A key aspect of the KIC for U.S. interests is how much the North Korean government derives in hard currency from the project, including leasing fees and its share of the wages of North Korean workers. The wages are first paid in hard currency (dollars) to a North Korean government agency that deducts for certain items before paying the North Korean workers in won or in chits to be exchanged for food and necessities. South Korean and U.S. government officials estimate that the North Korean government collects around $2 million per month, primarily from social insurance taxes and a socio-cultural fee deducted from the wages received by North Korean workers (the socio-cultural fee reportedly goes to the Kaesong city, not the central government). In addition, there are land lease fees and other payments to the North Korean government. When the project was initiated, Hyundai Asan paid North Korea $12 million for a 50-year lease on the entire Kaesong site. Hyundai Asan and the Korea Land Co. also purchase sand and gravel and other raw materials from North Korea for use in site development at Kaesong, though these purchases effectively came to a halt in 2010. Companies in the KIC also pay North Korea's job reference agency (recruiting agency) a commission of $17 per employee sent.\nUnder an agreement on taxation, businesses in the KIC are subject to a 10% to 14% corporate income tax, but the tax has an exemption for five years after first generating profits and a 50% deduction for the ensuing three years. This compares favorably to corporate tax rates in South Korea (12% to 28%), China (15%), and in Vietnam (10% to 15%).\nIn 2004, the Hyundai Research Institute estimated that North Korea could receive $9.55 billion in economic gains over the course of nine years if the KIC were to be developed fully and operated successfully. This would include $4.6 billion in foreign currency earnings with $700 million derived directly from the operation of the KIC, $2.5 billion from sales of raw materials and other industrial products, and $1.4 billion from corporate taxes. Considering that in international trade in goods in 2005, North Korea exported $1.8 billion and imported $3.6 billion, the estimated total gains of $9.55 billion over nine years associated with the Kaesong Industrial Complex would be quite significant (provided it progresses according to plan).", "", "During the negotiations on the KORUS FTA, South Korea requested that products exported from the complex be considered to have originated in South Korea in order to qualify for duty-free status under the proposed FTA. Under the South Korea-ASEAN FTA, for example, preferential tariffs are applied to 100 items manufactured in the Kaesong Industrial Complex. The Korea-Singapore and Korea-European Free Trade Association (EFTA) FTA agreements also include products from the KIC. Singapore accepts 88.6% of the traded products from the KIC as long as no products are directly exported from the DPRK. The Korean FTA with EFTA limits coverage to 2.9% of the total trade and only for those exports that have first been brought into the South Korean territory and which have 60% of the total materials cost as South Korean. In the negotiations between South Korea and the European Union, Seoul requested products from Kaesong be covered by the proposed FTA. The final 2009 EU-South Korea FTA, however, contains a provision similar to that included in the KORUS FTA. In 2006, the European Union (15 nations) imported $185.7 million worth of goods from North Korea. Switzerland imported $0.8 million and Singapore $6.6 million.\nFor the United States, however, from the beginning of the FTA negotiations, the U.S. position was that only products originating in South Korea would be included. At a U.S. House International Relations Committee hearing on July 20, 2006, Assistant U.S. Trade Representative Karan Bhatia indicated that the proposed FTA would not cover goods made in a free-trade zone in North Korea.", "The text of the Korea-U.S. Free Trade Agreement (signed by representatives of each government but not yet approved by Congress) does not provide for duty-free entry into the United States for products made in the Kaesong Industrial Complex. Annex 22-B to the proposed FTA, however, provides for a Committee on Outward Processing Zones (OPZ) on the Korean Peninsula to be formed and to \"identify geographic areas that may be designated outward processing zones,\" determine whether any such zone \"has met the criteria established by the Committee,\" and recommend them to the respective governments, which \"shall be responsible for seeking legislative approval for any amendments to the Agreement with respect to outward processing zones.\" The committee also is to \"establish a maximum threshold for the value of the total input of the originating final good that may be added within the geographical area of the outward processing zone.\" Decisions of the committee would require \"unified consent\" (this arguably provides the U.S. side with veto power over any recommendation of the committee). The criteria to be met include but are not limited to \"progress toward denuclearization of the Korean Peninsula; the impact of the outward processing zones on intra-Korean relations; and the environmental standards, labor standards and practices, wage practices and business and management practices prevailing in the outward processing zone, with due reference to the situation prevailing elsewhere in the local economy and the relevant international norms.\" The OPZ committee is to meet at least annually beginning a year after the agreement goes into effect.", "Annex 22-B gives Congress a role in deciding whether the products made in the KIC or other similar North Korean industrial parks would be included in the KORUS FTA. According to the terms of the agreement, the OPZ Committee will pass its decisions to the South Korean and U.S. governments, which then would be responsible for \"seeking legislative approval for any amendments\" to the KORUS FTA. For years, neither the Bush nor Obama Administrations specified what form this \"legislative approval\" would take. In March 2011, the office of the United States Trade Representative (USTR) issued a statement that Congress \"would need to pass, and the President would need to sign, a law to extend any KORUS tariff benefits to products made in Kaesong or any OPZ.\"", "A question has arisen with respect to language in Annex 22-B pertaining to labor standards and practices in the KIC with due reference to the \"situation prevailing elsewhere in the local economy and the relevant international norms.\" Is the local economy in this case that of the DPRK or that of South Korea, and can products from the KIC be produced under conditions contrary to International Labor Organization agreements that lay out basic international standards or worker rights yet still be recommended by the OPZ Committee to be included under the FTA?\nA further issue with respect to the KIC and the KORUS FTA is that if KIC products made with the low-cost North Korean labor are allowed to be treated as South Korean in origin under the proposed KORUS FTA, South Korean exporters would enjoy a large cost advantage over their counterparts in the United States.", "Another issue raised by the KORUS FTA is whether intermediate products made in the KIC can enter the United States under the provisions of the FTA if they are incorporated into products that are manufactured in South Korea and that qualify as originating in South Korea. The same concern exists with respect to products made in China or elsewhere if they have North Korean inputs. Currently, discrete goods of North Korean origin may not be imported into the United States either directly or through third countries, without prior notification to and approval of the Office of Foreign Assets Control of the Department of the Treasury.\nIf enacted, the KORUS FTA would likely have only a marginal impact on whether the United States imports goods that contain KIC-made components. The possibility of goods of South Korean origin with North Korean content exists now. KIC-made content could also increase due to the KORUS FTA increasing U.S. imports of South Korean manufactured goods above current levels. However, whether KIC-made components enter the United States is more likely to be determined by the future evolution of the KIC itself, rather than by the fate of the KORUS FTA. If the complex expands, and/or if KIC factories begin to make more components, then South Korean and other nations' companies could use them in manufacturing final products, which could then be exported to the United States and other countries.", "The United States maintains restrictions on doing business with DPRK entities because of its designation as a state sponsor of international terrorism. All imports from North Korea into the United States require approval from the Office of Foreign Assets Control (OFAC), Department of the Treasury. The Department of Commerce licenses U.S. exports and re-exports, while Treasury grants general and/or specific licenses for financial transactions by U.S. persons with DPRK entities. The Department of Commerce requires a license for the export to North Korea of virtually all commodities, technology, and software, except for technology generally available to the public and gift parcels (not exceeding $400). For instance, in FY2006, the U.S. Bureau of Industry and Security approved two items for export to the DPRK. They were glass (fiber optic) transmission items (5A991) worth $213,919 and software (5D992) for $3,600. The transmission items were telecommunications equipment used by Korea Telecom in setting up the communications lines between the two Koreas and into the KIC.\nThe South Korean government also maintains strict controls over exports to the DPRK. The restricted items include machinery and inspection equipment to produce metal and machines, electronics, optics, laser-related equipment, microorganism cultivating devices and chemical product facilities, and sophisticated high-technology equipment and materials. Even the latest versions of personal computers, commonly available in the South, are restricted and, if their export is approved, they have to be kept under lock and key in the KIC. New high-technology monitoring systems, including tracking devices, are also being used for items with sensitive dual-use technology.\nIn the October 2007 summit between South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il, the North agreed to improvements in how Kaesong operates, including swifter customs clearance for goods crossing its border, and better computer and cell-phone communications connections between Seoul and Kaesong factories. As mentioned above, the Lee government has made North Korea's implementation of these provisions preconditions for paying for the building of the dormitories that appear to be necessary for the KIC to undergo any significant expansion.", "The Kaesong Industrial Complex sits at the hub of spreading concentric sets of economic and geopolitical interests and concerns. At its narrowest sense, the KIC is a business venture in which participants are seeking profits and business advantages. On the South Korean side, the KIC provides small and medium-sized companies with a manufacturing platform and opportunity to access low-cost labor without having to go overseas to establish subsidiaries or to outsource the assembly of their products to China or other markets. On the DPRK side, the KIC provides jobs for workers who can earn relatively higher wages without crossing their borders illegally or working under contract in labor-scarce countries such as those in the Russian Far East or in Middle Eastern countries.\nAt a somewhat wider set of interests, the KIC provides a channel for rapprochement between the DPRK and South Korea. Kaesong developed partly from South Korea's sunshine policy of economic engagement with the North. It can be viewed as a confidence-building measure between two countries whose hostility toward each other has lingered since the 1950-52 Korean War. As has been the case with the extensive economic interchange between China and Taiwan, the KIC may provide a bridge for communication and a catalyst for cultural interaction, and it can create stakeholders in each other's economies with a shared interest in stability, liberalization, and increased communication across the DMZ.\nAt a still wider set of interests, the KIC may be the proverbial camel's nose under the tent in attempts to reform, liberalize, and modernize the North Korean economy. In neighboring China in 1978, foreign businesses were first allowed to operate in special economic zones. Now foreign invested businesses generate more than half of China's exports and imports. The Chinese speak of practicing socialism with Chinese characteristics and, indeed, many state-owned enterprises still encumber the Chinese economic system. The state-owned enterprises that are successful, however, operate much like privately owned enterprises, and one is hard pressed to find other significant differences between the Chinese brand of socialism and market capitalism. In May 2010, Kim Jong-il paid his fifth visit to China to visit special economic zones and to discuss issues. He also visited an industrial site. Likewise, the KIC exposes average North Koreans to modern business methods and to the accouterments of Western industrial society.\nAccording to the Economist Intelligence Unit, the decrepit North Korean economy has \"three crying needs: deeper market reforms, greater openness, and above all, massive investment to modernize decrepit plant and infrastructure.\" The KIC potentially addresses all three of these needs to a limited extent. However, reports from North Korea indicate that the economic reforms there currently are stalled—even being reversed. Unlike China's reforms, moreover, the initiative for the KIC came from abroad, is viewed with suspicion by many, and is an isolated case. Pyongyang, however, has renamed the Rajin-Sonbong region bordering China as Rason and is attempting to attract more Chinese investment there. In sum, it is still too early to tell if Kaesong will succeed, much less have a large effect on the rest of the North Korean economy.\nAt a geopolitical level, Kaesong is one part of the standoff between the DPRK and the United States, China, South Korea, Japan, and Russia, over North Korea's nuclear weapons program. Under the rubric of the six-party talks lie a bundle of strategic issues, such as the ability of North Korea to finance its nuclear program, the need for humanitarian and energy aid, the stability of the Kim Jong-il regime, and the enforcement of various economic sanctions being applied to North Korea. A major goal of the United States in the six-party talks is to halt and verifiably dismantle North Korea's capability to produce nuclear fuel and nuclear bombs or to proliferate nuclear material or technology to potentially hostile countries or groups. The U.S. strategy to accomplish this is a combination of sticks (sanctions, diplomatic isolation, name calling) and carrots (promises of aid, diplomatic recognition, security guarantees) conveyed to North Korea through the six-party talks, bilateral meetings, and occasional media blasts. Under this strategy, there is little reason to provide the DPRK with any financial reward, even if it is to the benefit of South Korea, unless it shows significant progress in its commitments under the six-party talks. This is particularly the case if North Korea carries out attacks against South Korea.\nThe South Korean goals with respect to North Korea, however, not only include the denuclearization of the Korean peninsula but eventual reunification and reconstruction of the DPRK's economy. A major South Korean concern is the potential cost of reunification either in the form of a flood of economic emigrants to the South or in actual budgetary outlays to help rebuild the North's civilian economy. The high cost to West Germany of the integration of East Germany after the fall of the Berlin Wall has provided little comfort to the policy makers in Seoul. The South Korean strategy, therefore, has tended to be longer on carrots (promises of food, fuel, and fertilizer) and shorter on sticks (sanctions) with a heavy reliance on engagement across the interactive spectrum and on diplomacy to resolve the issue. Even after the North Korean nuclear test in 2006, South Korea continued the KIC operations. It only halted its plans to call for new applicants to enter the KIC. Likewise, North Korea's provocations in 2010 did not result in the closing of the complex. Existing production facilities continued to manufacture and expand. Although ROK President Lee Myung-bak has said he will seek more reciprocity in Seoul's dealings with Pyongyang, and he has been somewhat vague about how he will treat the KIC, his statements and actions to date have been widely interpreted to mean that phase 1 of the complex, at a minimum, will continue operating. Undoubtedly, the KIC would be a centerpiece if Lee enacts his \"Grand Bargain,\" under which South Korea would provide massive development assistance if North Korea dismantles its nuclear program.\nFor South Korea, not only does Kaesong provide entry into the decrepit DPRK economy, but it is a key factor in building up and reforming the economy in the North with an eye toward eventual reunification. Beijing's strategy before the return of Hong Kong in 1997 has been instructive to Seoul. A major reason that many of the first economic reforms in China occurred in nearby Guangdong Province, particularly just across the border from Hong Kong in Shenzhen city, was that Beijing tried to stem pressures to immigrate to Hong Kong by raising the standard of living and industrial development in the region abutting the returning territory. This strategy has been so successful that some immigration, particularly of Hong Kong retirees, has been going from Hong Kong to Guangdong Province and not the other way around. Likewise, Beijing has broadened ties with Taiwan through allowing cross-strait investments, travel, business visas, communication, and other business-based activities. In some sectors, particularly in the manufacture of computers and other electronic products, Taiwan and the east coast of China have become one integrated economy. Kaesong arguably could begin a similar process with North Korea.\nSouth Korea also aims to become a hub of East Asia. In order to accomplish this, it would like to be connected to China, Russia, and to Europe via railways that pass through North Korea. As part of the KIC project, North and South Korea have reconnected a railroad line connecting the north and south and have conducted a test run on it. (A second line on the opposite side of the peninsula also was connected.) In terms of logistics, a shipment by rail from South Korea via Kaesong to Hamburg, Germany would take about 27 days by ship, 10 days via the Trans-Siberian Railway, and 7 days via the Trans-China Railway. (See Figure 2 .)", "The three national interests of the United States that form the basis of all policy discussion are security, economic well-being, and value projection. These three national interests all play into consideration of the Kaesong Industrial Complex.\nThe main security concern for the United States is the location of the KIC in the DPRK. U.S. security concerns with respect to North Korea center on two major considerations: (1) the DPRK's nuclear program and (2) potential conflict across the DMZ separating North Korea and South Korea. The KIC has opposing effects upon these security considerations. On one hand, since income in any country is fungible, anything that increases revenue to the Pyongyang regime has the potential to contribute to the DPRK's military (including its missile and nuclear program). It is likely, however, that the DPRK's nuclear program has assured funding from the government. Also, given Kim Jong-il's \"military first\" policy, the North Korean military has top priority in the allocation of scarce economic resources. It also has call on certain economic activities and government subsidies for them. It is not clear how much, if any, income (over that used to pay for expenses related to Kaesong) for Pyongyang from the KIC currently is directed toward the DPRK military or nuclear program. Since the KIC land formerly was a military base that had to be vacated, some arrangement may have been made to compensate the military for relinquishing a strategically important piece of ground. Even if the income from the KIC does not go directly into military purposes, it may bolster funds for civilian purposes that had been cut because of the budgetary demands of the military. The Kim regime, moreover, uses scarce foreign exchange to bolster the loyalty of its inner circle of elites who use it to buy imported luxury goods.\nU.N. Security Council resolutions 1718 (adopted October 2006) and 1874 (adopted June 2009) explicitly prohibit any member state from providing funds that go to support North Korea's nuclear weapons program. Resolution 1718 states in Section 8(d) that all Member States shall, in accordance with their respective legal processes, ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of persons or entities engaged in or providing support for the DPRK's programs related to nuclear weapons, other weapons of mass destruction, and ballistic missile related programs.\nAs for tensions across the DMZ, the KIC already has played an important role in increasing the level of engagement between the DPRK and South Korea and in raising the priority of economic activity relative to security concerns. Even though the border between North Korea and South Korea is heavily guarded and crossings had been rare, the military on both sides have acquiesced to the daily traffic on the North-South highway to Kaesong and the re-connection of two railways across the DMZ (along with limited tourist visits and family reunions).\nIn terms of the second U.S. national interest of economic well-being, the KIC currently has little relevance, although it has some effect through U.S. trade and investment relations with South Korea. U.S. companies have no investments in Kaesong and U.S. trade with North Korea in 2009 was virtually non-existent. South Korea, however, is the seventh-largest trading partner of the United States, and the United States is South Korea's third-largest trading partner. If the six-party talks on the denuclearization of the Korean Peninsula were to re-start and progress far enough, the United States could re-establish diplomatic relations with the DPRK, lift economic sanctions, and eventually grant that country normal trade relations (most-favored nation) status. If so, trade with North Korea could be done on the same basis as trade with most other countries of the world. Absent that development, South Korea's request to treat products made in the KIC as South Korean in origin would seem to be the only way to bring the KIC into the set of industrial locations open to normal or preferential trade with the United States. Meanwhile, South Korean companies exporting KIC products likely will continue to avoid the U.S. market rather than face economic sanctions and high U.S. tariffs. This may give countries that include the KIC in their FTAs with South Korea (such as ASEAN and EFTA) a possible small diplomatic advantage over the United States in dealing with Seoul. Moreover, South Korea is likely to press the United States to change its KIC policy. This could be a source of future U.S.-ROK tension even if the KORUS FTA is passed.\nThe third U.S. national interest is projecting U.S. values such as a market-based economy, representative government, and nations adhering to world standards for working conditions, environmental regulation, and other humanitarian considerations. In this respect, the KIC potentially could play a significant role as a demonstration project to educate North Koreans on the workings of a market-based economy. The KIC provides an opportunity for businesses to operate in North Korea according to what may be higher labor and environmental standards than exist in the rest of the country and to educate North Korean middle managers on how such standards work.\nCurrently, the 40,000 North Koreans employed in the KIC are too few and the project too small to have a significant impact on the development of the North Korean middle class (a factor in the development of a more representative society), and the number of the elites in the DPRK with an economic interest in the complex probably is still relatively small. If the project continues to develop and the DPRK opens other free-trade zones, however, something akin to the economic reforms in China or the economic transformation that is now occurring in Vietnam could occur in North Korea. This could weaken the hold by Pyongyang on the daily lives of citizens and bring the country more into the globalized world. Such economic liberalization also could reduce pressures on North Korea to engage in illicit trade in order to cover its trade deficit and diminish the need for Pyongyang to saber rattle in order to divert attention from its domestic problems.\nIn the short run, however, increased revenues strengthen the regime's hand and make it less vulnerable to outside pressure. Also, spillover effects will depend on North Korea adding much more value to the production processes which it has yet to do. Finally, there is some question about the extent to which KIC is commercially viable, or whether incentives and supports given to South Korean firms are critical as opposed to marginal in their profit and loss calculations. Trade between the DPRK and South Korea tends to be government-based, in contrast to trade between China and North Korea. This may blunt the lessons learned by Pyongyang.\nThe United States currently has a mixed policy with respect to the KIC. Since South Korea is a close ally of the United States, Washington has been supportive of efforts by South Korea to engage the North in inter-Korean projects that benefit South Korea. On the other hand, the United States has been firm in predicating any economic or other concessions on actions by the DPRK to curtail or eliminate its nuclear program.\nMajor policy considerations and options for Congress, given the above U.S. interests, include the following:\nIn considering whether or not to approve the KORUS FTA, Congress may express its support or non-support of the exclusion of the KIC from the FTA as negotiated. Congress may also specify the conditions under which the KIC can or can not be brought under the provisions of the proposed FTA. Congressional disapproval of the proposed KORUS FTA likely would have a large negative impact on prospects for the future of the KIC with respect to the United States. In the debate over the KORUS FTA, Congress may focus attention on labor and other conditions in the KIC and encourage reforms. If the KORUS FTA is approved, Congress may provide close oversight of the Committee on Outward Processing Zones. Since the United States already imposes a range of economic and financial sanctions on the DPRK, the United States could either tighten or loosen them. This could affect non-South Korean businesses in determining whether to invest in the KIC or to purchase products made there. The United States also could tighten (or loosen) U.S. controls on the export of dual-use technology items to the KIC. The United States could impose restrictions on or provide inducements to U.S. business activity in KIC. The U.S. government could encourage other countries (or groups of countries, such as the European Union) to (or not to) include the KIC in their respective FTAs with South Korea. If the DPRK takes the necessary steps to halt its nuclear program as outlined in the six-party talks, support (or oppose) measures leading toward normal trading relations status for the DPRK and the lifting of economic sanctions. The U.S. government could place restrictions on South Korean firms that do business in North Korea.\nAppendix A. List of Manufacturers in the Kaesong Industrial Complex" ], "depth": [ 0, 1, 2, 2, 2, 1, 1, 2, 2, 2, 3, 3, 3, 3, 3, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_title h1_title", "h1_full", "h1_full", "h2_full", "h0_full", "h2_title h1_title", "h1_full", "h2_full", "", "", "", "", "", "", "", "", "h2_full h1_full" ] }

{ "question": [ "What is the purpose of the report?", "What is the KIC?", "How successful are South Korean companies based in Kaesong?", "What products do these companies produce?", "What effect have rising tensions had on the Kaesong industrial complex?", "What events happened in 2010 that could have shut down the KIC?", "What effect did the Cheonan sinking have on inter-Korean economic relations?", "Why has South Korea reduced the number of South Korean workers at the complex?", "Why is the KIC project concerning for U.S. and South Korean policymakers?", "To what extent does the Kim Jong-il regime economically benefit from this arrangement?", "Why is the KIC project beneficial for stability on the peninsula?" ], "summary": [ "This purpose of this report is to provide an overview of the role, purposes, and results of the Kaesong Industrial Complex (KIC) and examine U.S. interests, policy issues, options, and legislation.", "The KIC is a six-year-old industrial park located in the Democratic People's Republic of Korea (DPRK or North Korea) just across the demilitarized zone from South Korea.", "As of the end of 2010, over 120 medium-sized South Korean companies were employing over 47,000 North Korean workers to manufacture products in Kaesong. The facility, which in 2010 produced $323 million in output, has the land and infrastructure to house two to three times as many firms and workers.", "Products vary widely, and include clothing and textiles (71 firms), kitchen utensils (4 firms), auto parts (4 firms), semiconductor parts (2 firms), and toner cartridges (1 firm).", "Despite a rise in tensions between North and South Korea since early 2008, the complex has continued to operate and expand.", "The KIC was not shut down in 2010 despite two violent incidents between the two Koreas that year: the March sinking of a South Korean naval vessel, the Cheonan, which was found to be caused by a North Korean torpedo, and North Korea's artillery attack on a South Korean island in November.", "Indeed, the complex has become virtually the last vestige of inter-Korean cooperation. After the Cheonan sinking, South Korea announced it would cut off all inter-Korean economic relations except the Kaesong complex.", "It also has reduced the number of South Korean workers—primarily government officials and business managers—at the complex because of worries about them being taken hostage by North Korea.", "The KIC represents a dilemma for U.S. and South Korean policymakers. On the one hand, the project provides an ongoing revenue stream to the Kim Jong-il regime in Pyongyang, by virtue of the share the government takes from the salaries paid to North Korean workers.", "South Korean and U.S. officials estimate this revenue stream to be around $20 million per year.", "On the other hand, the KIC arguably helps maintain stability on the Peninsula and provides a possible beachhead for market reforms in the DPRK that could eventually spill over to areas outside the park and expose tens of thousands of North Koreans to outside influences, market-oriented businesses, and incentives." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, -1, 2, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2 ] }

{ "title": [ "Background", "Inventory Compilation Requirements", "Inventory Review and Use Requirements", "Prior GAO Work", "Components’ Reporting of Inventory Review Elements Continued to Improve, but Limitations with the Resulting Information Provided in Certification Letters Persist", "Certification Letters Included More Required Elements but Level of Detail in Review Results Varied", "Components May Continue to Be Underreporting Contractors Performing Closely Associated with Inherently Governmental Functions", "Continued Delays on Key Management Decisions Hinder Efforts to Develop Statutorily Required Plans to Use the Inventory to Inform Workforce and Budget Decisions", "Military Departments Have Not Developed Plans to Facilitate Use of the Inventory", "Slow Pace of Finalizing an Approach for Collecting Inventory Data Hinders Progress in Using Inventory for Decision Making", "Agency Comments", "Appendix I: Past GAO Reports and Recommendations on the Inventory of Contracted Services", "Appendix II: Summary of Prior Findings on the Military Departments’ Implementation of Plans to Facilitate Use of the Inventory", "Strategic Workforce Planning, Workforce Mix, and Insourcing Guidance Generally Do Not Require the Use of the Inventory", "Programming and Budget Decisions Generally Do Not Require the Use of the Inventory, Though Data on Estimated Contractor Full- Time Equivalents (FTE) Are Included in the Budget", "Appendix III: Comments from the Department of Defense", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "In part to improve the information available and management of DOD’s acquisition of services, in 2001 Congress enacted section 2330a of title 10 of the U.S. Code, which required the Secretary of Defense to establish a data collection system to provide management information on each purchase of services by a military department or defense agency. Congress amended section 2330a in 2008 to add a requirement for the Secretary of Defense to submit an annual inventory of the activities performed pursuant to contracts for services on behalf of DOD during the preceding fiscal year.\nThe inventory is to include a number of specific data elements for each identified activity, including the function and missions performed by the contractor; the contracting organization, the component of DOD administering the contract, and the organization whose requirements are being met through contractor performance of the function; the funding source for the contract by appropriation and operating agency; the fiscal year the activity first appeared on an inventory; the number of contractor employees (expressed as FTEs) for direct labor, using direct labor hours and associated cost data collected from contractors; a determination of whether the contract pursuant to which the activity is performed is a personal services contract; and a summary of the information required by subsection 2330a(a) of title 10 of the U.S. Code.\nWithin DOD, USD(AT&L), USD(P&R), and the Office of the Under Secretary of Defense (Comptroller) have shared responsibility for issuing guidance for compiling and reviewing the inventory. USD(P&R) compiles the inventories prepared by the components, and USD(AT&L) is to submit a consolidated DOD inventory to Congress no later than June 30 of each fiscal year. DOD has submitted annual, department-wide inventories for fiscal years 2008 through 2015, the most recent submitted on September 20, 2016 (see table 1).\nSince DOD began reporting on the department-wide inventory of contracted services in fiscal year 2008, the primary source used by most DOD components to compile their inventories, with the exception of the Army, has been FPDS-NG. The Army developed its CMRA system in 2005 to collect information on labor-hour expenditures by function, funding source, and mission supported on contracted efforts, and has used its CMRA as the basis for its inventory. The Army’s CMRA is intended to capture data directly reported by contractors on services performed at the contract line item level, including information on the direct labor dollars, direct labor hours, total invoiced dollars, the functions performed, and the organizational unit for which the services are being performed. In instances where contractors are providing different services under the same contract action, or are providing services at multiple locations, contractors can enter additional records in CMRA to capture information associated with each type of service or location. It also allows for the identification of services provided under contracts for goods.", "Subsection 2330a(e) of title 10 of the U.S. Code requires the secretaries of the military departments or heads of the defense agencies to complete a review of the contracts and activities in the inventory for which they are responsible within 90 days of the inventory being submitted to Congress. USD(P&R), as supported by the Comptroller, is responsible for, among other things, developing guidance for the conduct and completion of this review. As part of this review, the military departments and defense agencies are to ensure that any personal services contracts in the inventory were properly entered into and performed appropriately; the activities on the list do not include any inherently governmental functions; and to the maximum extent practicable, the activities in the inventory do not include any functions closely associated with inherently governmental functions.\nThis review also requires the secretaries of the military departments and heads of defense agencies to identify activities that should be considered for conversion to government performance, or insourced, pursuant to section 2463 of title 10 of the U.S. Code, or to a more advantageous acquisition approach. Section 2463 specifically requires the Secretary of Defense to make use of the inventory to identify critical functions, acquisition workforce functions, and closely associated with inherently governmental functions performed by contractors—and to give special consideration to converting those functions to DOD civilian performance.\nIn addition, subsection 2330a(f) of title 10 of the U.S. Code requires the secretaries of the military departments or heads of the defense agencies responsible for contracted services in the inventory to develop a plan, including an enforcement mechanism and approval process, for using the inventory to inform management decisions (see figure 1).\nCollectively, these statutory requirements mandate the use of the inventory and the associated review process to enhance the ability of DOD to identify and track services provided by contractors, achieve accountability for the contractor sector of DOD’s total workforce, help identify contracted services for potential conversion from contractor performance to DOD civilian performance, support DOD’s determination of the appropriate workforce mix, and project and justify the number of contractor FTEs included in DOD’s annual budget justification materials.", "Over the past five years, we have issued several reports on DOD’s efforts to compile and review its inventory of contracted services and made recommendations on a variety of issues related to the inventories. For example, in January 2011, we found that the military departments had differing approaches to reviewing the activities performed by contractors, and the department stated it had a goal of collecting manpower data from contractors for future inventories. We recommended that the department develop a plan of action to facilitate the department’s intent of collecting manpower data and address other limitations to its current approach to meeting inventory requirements. The department concurred with our recommendation but had not addressed it as of August 2016. In November 2015, we found that the lack of documentation on whether a proposed contract includes closely associated with inherently governmental functions may result in inventory review processes incorrectly reporting these functions, and recommended that DOD require acquisition officials to document, prior to contract award, whether the proposed contract action includes activities that are closely associated with inherently governmental functions. DOD concurred with our recommendation, but has not yet implemented it. A full list of our prior reports on DOD’s inventory of contracted services, the recommendations from those reports, and the current status of those recommendations— including eight that remain open—is included in appendix I.\nOur prior work has also consistently found that the absence of a complete and accurate inventory of contracted services hinders DOD’s ability to improve its management of these services. For example, in a June 2016 report on DOD headquarters personnel reduction efforts, we found that DOD does not have reliable data for assessing headquarters functions and associated costs, including those performed by contractor personnel. We concluded that without reliable information, DOD may not be able to accurately assess specific functional areas or identify potential streamlining and cost savings opportunities. In a December 2015 report on civilian and contractor personnel reductions, we found that limitations in the methodology for contractor FTE estimates in the inventory may hinder efforts to implement statutorily mandated reporting on reductions in contractor personnel. Further, in a February 2016 report on DOD efforts to forecast service contract requirements, we found that existing data on DOD’s future spending for contracted service requirements was not fully captured by DOD’s programming and budget processes, an effort the inventory of contracted services is intended to support. We noted that critical to being more strategic is knowing what DOD is spending today and what DOD intends to spend in the future.", "More DOD components conducted and certified the completion of an inventory review as required by subsection 2330a(e) of title 10 of the U.S. Code and DOD’s guidance, respectively, in fiscal year 2014 as compared to previous years. Overall, we found that the 40 components’ certification letters addressed more of DOD’s required elements in comparison to prior years, with over half of the components including all six of the required elements. In some areas, however, we continued to find limitations with the information provided in the certification letters. For example, the level of detail and input provided on the use of the inventory to inform annual program reviews and budget processes varied. In addition, we continued to find significant differences and potential underreporting in the extent to which components identified instances of contractors providing services that are closely associated with inherently governmental functions in their inventories. For example, through its review process, the Army identified $8.1 billion in invoiced dollars for contracts that include closely associated with inherently governmental functions, nearly three times the amount identified by the Navy, Air Force, and other defense agencies collectively for similar types of contracts.", "USD(AT&L) and USD(P&R)’s December 29, 2014, guidance governing the fiscal year 2014 inventory of contracted services required the military departments and defense agencies to certify—through submission of a certification letter to the USD(P&R)—that their review was conducted in accordance with subsection 2330a(e) of title 10 of the U.S. Code. As of July 2016, 40 DOD components reporting for fiscal year 2014 certified that they had reviewed their inventories. Notably, the Air Force, which represented close to 18 percent of DOD’s contract obligations for services in fiscal year 2014, submitted a review certification letter for the first time since the fiscal year 2011 inventory. The Army submitted an interim certification letter in April 2016 based on a review of the contracted functions performed by 73 percent of its contractor FTEs from its fiscal year 2014 inventory.\nDOD’s guidance for fiscal year 2014, among other things, requires components to include six elements in their certification letters. DOD components’ certification letters have generally improved each year since 2011 in terms of the number of elements addressed. See figure 2 for the list of required elements and the percentage of components that addressed each element in their certification letters for fiscal years 2011 to 2014.\nOverall, in fiscal year 2014 components addressed more of DOD’s required elements in comparison to prior years, as 21 of the 40 components—or over half—addressed all required elements in their certification letters (see figure 3).\nWhile these findings demonstrate that improvements have been made in terms of compliance with the review requirements, review results reported in certification letters varied in terms of the level of detail and insights provided on certain elements, in particular for the element that requires components to provide input on actions being taken or considered with regard to annual program review and budget processes based on the inventory review results. For example, of the 23 components that we found addressed this requirement in their fiscal year 2014 certification letters, the Navy and one other component discussed specific actions taken or plans based on the inventory review results to inform existing or future program and budget processes; nine components, including the Air Force, discussed their existing or planned program review or budget processes, but did not explicitly state how the review results would be used to inform those processes; ten components, including the Army, described the inventory as one source of information available to inform programming and budget matters, but did not provide input on whether specific actions were taken or considered based on those review results; and in two cases, components reiterated language from DOD’s review guidance in their certification letters to affirm that they had addressed the required element, but did so without adding any component- specific information.\nOf the 17 components that we found did not address the requirement in their fiscal year 2014 certification letters, 12 did not include any narrative related to the required element and therefore it is not clear whether the component had considered the use of the inventory in program reviews and budget processes. Three components’ certification letters stated explicitly that no actions were taken or considered based on the fiscal year 2014 review results, nor did they provide additional narrative to indicate whether the inventory review information is used generally to inform programming and budget matters. Two components each submitted a consolidated inventory and certification letter consisting of the collective review results and responses for the components under their purview, in which not all of the individual responses addressed the requirement.", "Similar to our November 2015 report, we found that components may continue to be underreporting instances of contractors providing services that are closely associated with inherently governmental functions in their inventory review. In this regard, our analysis indicates that DOD obligated about $28 billion for contracts in the 17 product service codes that OFPP and GAO identified as more likely to include closely associated with inherently governmental functions. In comparison, of the 40 components reporting for fiscal year 2014, 25 components identified a total of $10.8 billion in obligations or dollars invoiced for contracts that included work identified as closely associated with inherently governmental functions—either within the 17 product service codes or for any other category of service. We also found significant disparity among the components’ reporting of these functions (see figure 4).\nSpecifically, through its review process, the Army identified $8.1 billion in invoiced dollars for contracts that include closely associated with inherently governmental functions. In comparison, our analysis of Army’s inventory data identified $10.2 billion in invoiced dollars for Army contracts in the 17 product service codes. In contrast, the Navy, Air Force, and other defense agencies collectively identified only about $2.7 billion in obligations and invoiced dollars for contracts that include closely associated with inherently governmental functions in their inventories, while our analysis of each component’s inventory data identified $17.9 billion in collective obligations for contracts in the 17 product service codes.\nWe previously found shortcomings with DOD’s annual inventory review guidance, such as a lack of specific guidance on how to identify or review contract functions, and concluded that, as a result, components may be missing opportunities to properly identify contractors performing closely associated with inherently governmental functions. In November 2014, we recommended, in part, that DOD revise its guidance to clearly identify the basis for selecting contracts to review and to provide approaches the components may use to conduct inventory reviews to ensure that the nature of how the contract is being performed is adequately considered. In November 2015, we reported that DOD’s December 2014 guidance for the fiscal year 2014 inventory did not address our recommendation to provide such clarification; however, DOD officials noted that a risk-based approach to select which contracts to review may be appropriate. As such, we recommended that DOD ensure that components review, at a minimum, those contracts within the product service codes identified as requiring heightened management attention and as more likely to include closely associated with inherently governmental functions. DOD’s March 2016 guidance for the review of the fiscal year 2015 inventory—the first issued after our recommendation—requires components to review those contracts; however, it is too soon to determine what effect the revised guidance will have on the components’ forthcoming inventory reviews.\nIn addition to the lack of specific inventory review guidance, our November 2015 review also identified other factors that may also contribute to components incorrectly identifying contracts that may include closely associated with inherently governmental functions during the pre-contract award process. Specifically, we concluded that the lack of a requirement for acquisition officials to document, during the pre- award process, whether a proposed contract includes closely associated with inherently governmental functions hinders a component’s ability to both identify and report on contractors performing such functions. The Army’s pre-award process, specifically the Request for Services Contract Approval form, requires documentation of a determination whether a contract includes closely associated with inherently governmental functions; however, the Air Force and Navy do not have department-wide requirements to document this determination in their contract files. DOD concurred with both of our November 2015 recommendations to require acquisition officials to document, prior to contract award, whether contract actions include such activities, and to provide clear instructions on how the service requirement review boards will be used to identify whether contracts contain such functions. Officials from the Office of Defense Procurement and Acquisition Policy—the office within USD(AT&L) responsible for contracting and acquisition policy—indicated at that time that a forthcoming DOD Instruction on service acquisitions would include direction to consider planned activities under a contract during the service requirement review boards. DOD Instruction 5000.74, issued in January 2016, includes discussion related to identifying closely associated with inherently governmental functions in the inventory, but not in the context of the service requirement review boards.", "The military departments generally have not developed plans to use the inventory of contracted services to inform workforce mix, strategic workforce planning, and budget decision-making processes, as required by the National Defense Authorization Act for Fiscal Year 2012. DOD has recently made progress in identifying accountable officials to develop plans and establish processes for using the inventories in decision making, a step we recommended in November 2014 to help ensure the inventory is integrated into key management decisions. Despite this effort, DOD faces continued delays to key steps in the implementation of the inventory process, including choosing the path forward for its underlying inventory data collection system, staffing its inventory management support office, and formalizing the roles and responsibilities of that office and its relationship to the military departments and other stakeholders. Collectively, these persistent delays hinder the department’s ability to use the inventory of contracted services as intended.", "The military departments generally have not developed plans and enforcement mechanisms as required by subsection 2330a(f) of title 10 of the U.S. Code to use the inventory of contracted services to inform workforce mix, strategic workforce planning, and budget decision-making processes. Our November 2014 report on the fiscal year 2012 inventory found that the military departments—with the exception of the Army, which used the inventory to inform decisions about workforce mix and insourcing—lacked plans and processes to incorporate the inventory into decision making. While DOD’s December 2014 guidance for the fiscal year 2014 inventory more explicitly required components to use the inventory reviews to inform programming and budget matters, and to inform their strategic workforce planning efforts—which carried through to their fiscal year 2015 guidance—our current work found that the military departments generally continue to lack plans and processes to do so. Appendix II presents the findings of the November 2014 report on these plans and processes, with updates, where appropriate.\nAt the department level, in January 2016, USD(AT&L) issued DOD Instruction 5000.74, Defense Acquisition of Services, which establishes policy, assigns responsibilities, and provides direction for the acquisition of contracted services. In commenting on our November 2015 report, DOD stated that this instruction would provide guidance on identifying closely associated with inherently governmental activities. The instruction notes that DOD components will submit an annual inventory of contracted services, and that the inventory and associated review are to be used to inform acquisition planning and workforce shaping decisions, but does not provide any specific guidance as to how the inventories are to contribute to such decisions, including guidance for identifying closely associated with inherently governmental activities. DOD officials more recently stated that this instruction is intended as policy for acquisition officials, not as a document on workforce planning.\nWe previously found that the responsibility for developing plans and enforcement mechanisms to use the inventory for decision-making processes was not clearly assigned and was divided across multiple offices. In our November 2014 report, we recommended that the secretaries of the military departments identify an accountable official to lead and coordinate efforts across the functional communities to develop plans and establish processes for using the inventory for decision making. DOD concurred with this recommendation. No components identified an accountable official with their fiscal year 2014 inventory submission. However, DOD’s March 2016 guidance for the fiscal year 2015 inventory explicitly required the identification of an accountable official to help ensure that the inventory is integrated into key management decisions.\nAs of July 2016, 41 components had submitted their fiscal year 2015 inventories, of which 30 identified an accountable official in their transmittal letter. However, none of the three military departments, which represent 73 percent of service contract obligations reported in the fiscal year 2014 inventory, have yet identified an accountable official. In its transmittal letter for fiscal year 2015, the Air Force stated that it first needs to better understand the roles and responsibilities of the inventory management support office. The Army’s fiscal year 2015 transmittal letter states that it is in the process of identifying an appropriate official. As of July 2016, the Navy has not yet submitted its fiscal year 2015 transmittal letter.", "DOD has twice conducted reviews in the past two years to assess its approach to conducting the inventory. DOD officials noted that, to some degree, these reviews have contributed to delays in choosing the path forward for its underlying inventory data collection system, staffing the support office, and formalizing the roles and responsibilities of that office and its relationship to the military departments and other stakeholders. These delays may, in turn, hinder the development and implementation of plans and enforcement mechanisms for using inventory data to inform workforce and budget decision-making processes.\nAs shown in figure 5, DOD has struggled since 2011 to determine the best way forward for collecting data for the inventories.\nIn September 2014, DOD undertook an internal review of strategic options to identify, develop, and consider all reasonable options, in both the short and long terms, and propose courses of action for appropriate enterprise solutions to facilitate data collection for the inventory. However, DOD’s strategic review of options in 2014 did not lead to a definitive way forward. In November 2014, we found that DOD’s strategic review of options raised questions as to whether DOD will continue to implement ECMRA—a DOD-wide inventory data collection system modeled after the Army’s CMRA system—or attempt to develop a new system. We concluded that, until such time as DOD components are able to collect the required data for their inventories, the utility of the inventory for making workforce decisions will be hindered. We recommended that, should a decision be made to use or develop a system other than the ECMRA system currently being fielded, USD(P&R) should document the rationale for doing so and ensure that the new approach provides data that satisfies the statutory requirements for the inventory. In 2015, the Joint Explanatory Statement to the National Defense Authorization Act for Fiscal Year 2016 mandated that DOD report on the approach the department is taking to comply with the inventory requirement and whether it is producing a product that enhances oversight of service contracting activities. DOD contracted with the RAND National Defense Research Institute in December 2015 to assess the methods used by DOD to produce the inventory of contracted services and to recommend improvements, including alternative methods of collecting, processing, and reporting data on contracted services. RAND provided preliminary briefings to DOD in March and May of 2016, and its final report is expected to be delivered later this year.\nWhile awaiting the results of its internal review and, subsequently, the RAND review, DOD delayed fully staffing its support office and defining its specific roles, authorities, and relationships to the military departments and other stakeholders, as shown in figure 6.\nIn 2014, a USD(P&R) official told us that DOD would defer the use of additional resources for the support office until such time as there had been a decision whether to pursue a new approach or continue forward with implementation of ECMRA. Similarly, in 2016, USD(P&R) officials told us that they wanted to be more confident of the planned direction for the inventories before committing to additional hiring.\nFurther, more than two years since the support office was funded, DOD has yet to define the roles and responsibilities of the office. In November 2015, we recommended that USD(P&R) clearly identify these longer term relationships between the support office, military departments, and other stakeholders with respect to collection and use of inventory data. DOD concurred and told us that the release of a memorandum of agreement between the Assistant Secretary of Defense for Manpower and Reserve Affairs and the Director of the Defense Human Resource Activity on short term roles and responsibilities for the support office would do so, but as of August 2016, the memorandum of agreement had yet to be formalized. Additionally, DOD officials indicated that the memorandum of agreement will not address the roles to be played by the support office, the military departments, and other stakeholders in exploring the longer term solution to collecting contractor manpower data and integrating inventory data within the military departments’ decision-making processes. Supplemental agreements will be necessary to formalize these relationships. The absence of clearly identified relationships between the support office and other stakeholders has hindered efforts to implement ECMRA and integrate the data into decision-making processes that will meet user needs and expectations.\nIn addition to these uncertainties about finalizing an approach to the inventory, our review found that DOD components’ reliance on data captured in their CMRA systems for their inventories has varied. DOD’s March 2014 guidance for the fiscal year 2013 inventory, as well as guidance for subsequent inventories, required components to include the percentage of their total contracts that were reported by contractors in their CMRA system and the extent to which reported data were used to support their inventory submission. Contractors are required to report labor hour data by the end of October for work executed during the period of performance within the one year period beginning October 1 of the prior year and ending September 30. DOD components are then supposed to use this contractor-reported data from CMRA to help develop their inventories. We found that 22 out of the 40 components, comprising about 96 percent of total FTEs reported in the DOD inventory, reported using CMRA data for the fiscal year 2014 inventory submission. In contrast, only nine components reported using CMRA to do so in the fiscal year 2013 inventory. Table 2 identifies changes in use of CMRA data by the military departments from fiscal year 2013 to fiscal year 2015.\nAir Force and Navy both continue to rely heavily on FPDS-NG data to derive the contractor FTEs for those contracts not entered into CMRA. Navy officials stated that they do not view all contractor-reported CMRA data to yet be robust enough to support consistent, reliable use for the inventory. However, as we have previously reported, the FPDS-NG system has several limitations that limit its utility for purposes of compiling a complete and accurate inventory, including not being able to identify and record more than one type of service purchased for each contracting action entered into the system, not being able to capture any services performed under contracts that are predominantly for supplies, not being able to identify the requiring activity specifically, not capturing service contracts awarded on behalf of DOD by non- not being able to determine the number of contractor FTEs used to perform each service.\nSince 2011, we have made 13 recommendations to help improve how DOD collects, reviews, and uses the data from the inventory of contracted services (see appendix I for a complete list and the status of DOD’s actions to address them). We are not making any new recommendations in this report, but rather we underscore the need to address the 8 recommendations that remain open. In particular, DOD needs to resolve the long-standing delays and uncertainties regarding implementation of the ECMRA system—or an alternative to that system—which have hindered efforts to provide reliable and accurate data. Over five years ago, we recommended that DOD develop a plan of action with timeframes and necessary resources to measure DOD’s progress in implementing a common data system and we offered a similar recommendation two years ago when it began to explore options for an appropriate enterprise solution to facilitate data collection. Delays in making that decision have had a cascading effect on fully staffing its management support office, as well as defining the roles, responsibilities, and relationships between this office, the military departments, and other stakeholders. Continued delays in making a decision increase the risk that DOD will remain unable to collect and analyze service contract data and develop associated business processes in a manner that supports workforce and budget planning. Conversely, choosing a path forward, providing a rationale for that choice, and developing a plan of action with implementation timeframes and milestones could help the department move toward an environment in which it can stop endlessly agonizing on whether to use ECMRA or an alternative system and focus on what data to collect and how best to use that data once collected. As we concluded in January 2011, the real benefit of the inventory will ultimately be measured by its ability to inform decision making. We further noted that the absence of a way forward was hindering the achievement of this objective. More than five years later, those conclusions remain unchanged.", "We are not making new recommendations in this report. We provided a draft of this report to the Department of Defense for comment. In its written comments, which are reprinted in appendix III, DOD stated that it is committed to improving its processes surrounding the inventory and to working to close the eight open recommendations discussed in the report. DOD also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense; the Secretaries of the Army, Air Force, and Navy; the Under Secretary of Defense for Personnel and Readiness; and the Under Secretary of Defense for Acquisition, Technology, and Logistics. In addition the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "", "In November 2014, GAO reported on the status of efforts by the military departments to develop plans with enforcement mechanisms to use the inventory of contracted services to inform management decisions in three primary areas: strategic workforce planning; workforce mix; and budgeting. In November 2015, we updated these findings. In those reports, we determined that the military departments generally had not developed plans and enforcement mechanisms to use the inventory to inform these decisions, as required by subsection 2330a(f) of title 10 of the U.S. Code. Our current work found minimal updates to these guidance with specific reference to use of the inventory of contracted services for management decisions. The primary exception relates to budgeting, where the Army’s Command Program Guidance memorandum for the Fiscal Years 2018-2022 Program Objective Memorandum requires the Army to use the inventory review when formulating budget requests for contracted services. The following summarizes the degree to which the Department of Defense (DOD) and the military departments’ guidance currently require the use or consideration of the inventory in these areas and identifies where DOD or the military departments have updated their guidance since our November 2015 report. Updates since our November 2015 report are italicized in the following tables.", "The Under Secretary of Defense for Personnel and Readiness (USD(P&R)) has overall responsibility for developing and implementing DOD’s strategic workforce plan to shape and improve DOD’s civilian workforce, including an assessment of the appropriate total force mix. USD(P&R) issued guidance that designated responsibility for the development of the strategic workforce plan to the Deputy Assistant Secretary of Defense for Civilian Personnel Policy, but did not require use of the inventory. The guidance pre-dates the statutory requirement to use the inventory to inform strategic workforce planning. For example, the Fiscal Years 2013-2018 Strategic Workforce Plan, the most recent plan available at the time of our November 2014 and 2015 reviews, stated that DOD’s plans for identifying and assessing workforce mix will leverage the inventory of contracted services, but did not provide any additional details on using the inventory.\nNone of the three military departments had developed a statutorily required plan or enforcement mechanism to use the inventory of contracted services for strategic workforce planning and generally they had not developed guidance or processes for these purposes (see table 4).\nDOD has two department-wide policies for determining workforce mix— DOD Directive 1100.4 and DOD Instruction 1100.22—but neither currently requires the use of the inventory to inform workforce mix planning. DOD Directive 1100.4, dated February 2005, provides general guidance concerning determination of manpower requirements, managing resources, and manpower affordability. According to USD(P&R) officials, revisions to this directive, which are currently under review, will explicitly require use of the inventory to inform budgeting and total force management decisions. DOD Instruction 1100.22, dated April 2010, provides manpower mix criteria and guidance for determining how individual positions should be designated based on the work performed.\nThis instruction does not direct the military departments to develop a plan to use the inventory to inform management decisions, as DOD issued it before the enactment of the requirement for developing such plans.\nDOD’s primary insourcing guidance is reflected in April 4, 2008, and May 28, 2009, memorandums. These memorandums reiterate statutory requirements by calling for DOD components and the military departments to use the inventory of contracted services to identify functions for possible insourcing and to develop a plan for converting these functions within a reasonable amount of time. Among the military departments, however, only Army has guidance and a process that requires use of the inventory of contracted services for insourcing. However, the military departments have not issued guidance for managing workforce mix that requires the use of the inventory of contracted services (see table 5).", "DOD’s Financial Management Regulation provided, among other things, guidance to the military departments on budget formulation and presentation; however, these regulations did not require the military departments to use the inventory in formulating and presenting their budgets. At the military department level, the Air Force had issued additional instructions in terms of budget formulation and presentation. However, the Air Force’s guidance did not require the use of the inventory. More recently, the Army’s February 2016 guidance, Command Program Guidance Memorandum for the Fiscal Years 2018-2022 Program Objective Memorandum, requires the use of the inventory review certification in budget formulation.\nThe Comptroller issued supplemental guidance requiring, among other things, that the military departments and defense components provide information on the number of FTEs as required under section 235 of title 10 of the U.S. Code, but this guidance did not require reporting the amount of funding requested for contracted services. The Comptroller guidance for budget submissions from all components instructed DOD components to ensure that contractor FTEs reported in the budget exhibit were consistent with those in DOD’s inventory of contracted services. Both Navy and Air Force officials reported that they used the inventory of contracted services to estimate the number of contractor FTEs for inclusion in their budget request. The Army budget office could not identify how the Army estimated FTEs in the Army’s budget submission (see table 6).", "", "", "", "In addition to the contact named above, Janet McKelvey (Assistant Director); Emily Bond; Virginia Chanley; Mackenzie Doss; Kristine Hassinger; Julia Kennon; Scott Purdy; and Roxanna Sun made significant contributions to this review." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h1_title", "h1_full", "", "", "h2_full", "h2_full", "", "h0_full h1_full", "h0_full", "h1_full", "", "", "h2_full", "", "", "", "", "", "" ] }

{ "question": [ "What progress have military departments made to use the inventory to inform workforce planning?", "How has the DOD followed a recommendation made by GAO in 2014?", "In which areas does DOD face continued delays?", "Why did Congress require DOD to review an annual inventory of its contracted services?", "What decision-making processes did DOD use the inventory for?", "What has GAO previously reported on?", "How well has DOD addressed GAO's recommendations?", "What was in the provision that Congress included for GAO?", "What does the report assess?", "How did GAO accomplish the review of DOD?" ], "summary": [ "The military departments have not yet developed plans to use the inventory to inform workforce mix, strategic workforce planning, and budget decision-making processes, as statutorily required.", "DOD has made some recent progress on requiring components to identify an accountable official to lead efforts to develop plans and establish processes for using their inventories in decision making, a step GAO recommended in November 2014.", "However, DOD faces continued delays in deciding on the path forward for its underlying inventory data collection system, staffing its inventory management support office, and formalizing the roles and responsibilities of that office and stakeholders (see figure).", "In 2008, Congress required DOD to compile and review an annual inventory of its contracted services to identify the number of contractors performing services and the functions contractors performed.", "In 2011, Congress required DOD to use that inventory to inform certain decision-making processes, including workforce planning and budgeting.", "GAO has previously reported on the challenges DOD faces in compiling, reviewing, and using the inventory.", "Since 2011, GAO made 13 recommendations intended to improve DOD's use of the inventory. Of these, DOD has yet to fully address 8 open recommendations.", "Congress included a provision in statute for GAO to report on DOD's required reviews and plans to use the inventory.", "This report assesses the extent to which DOD components (1) reviewed contracts and activities in the fiscal year 2014 inventory of contracted services, and (2) developed plans to use the inventory for decision making.", "GAO reviewed relevant laws and guidance and 40 components' inventory review certification letters, and interviewed DOD acquisition, manpower, and programming officials." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 0, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "", "Context, Caveats, and Methodology", "Post-World War II Assistance to Germany", "Post-World War II Assistance to Japan", "Current U.S. Assistance to Iraq", "Comparative Overview" ], "paragraphs": [ "Some Members of the 111 th Congress may question whether U.S. assistance to Iraq in the wake of the military action of 2003 has been adequate, others whether it might be excessive. One point of comparison that is often invoked is the assistance that the United States provided to Germany and Japan during military occupations of those countries after World War II. This report provides data through September 30, 2006 (the end of FY2006), at which point U.S. aid to Iraq had surpassed U.S. aid to Germany and Japan during the post-World War II occupations.\nThe following information and attached tables compare assistance to Iraq during the first three and a half years after the fall of Baghdad on April 9, 2003, with U.S. assistance during the occupations of those two countries. In brief, although the context of the military occupation of Iraq is markedly different from that of the other two, the total amount of U.S. assistance allocated for Iraq through FY2006 appears to be about a fifth higher than the amount provided to Germany and somewhat more than double that provided to Japan for the seven years after World War II. (This represented the overlapping periods of direct military government and the Marshall plan assistance in Germany and the entire period of the military occupation of Japan.)\nBreakdowns for specific purposes are difficult, as the costs were covered under different categories and in different ways. One area in which a rough approximation is possible, however, is funding for the reconstruction and improvement of critical economic infrastructure. This figure is particularly important to some Members as they consider the tradeoffs between funding spent on Iraq and funding available for similar purposes in the United States. Comparisons of funding for other purposes, such as government, education, and humanitarian relief are difficult, as the needs were different in each case and/or the assistance was provided in different ways that do not facilitate comparison. This report does not attempt to compare indirect forms of assistance, such as debt relief, and funding provided by other donors.\nAid allocations for Iraq appropriated from FY2003 through FY2006, all of which is grant assistance, totaled $35.7 billion. Of this, about $11.8 billion (33%) was for the repair and improvement of critical economic infrastructure. The total figure is almost a fifth higher than total assistance provided to Germany from FY1946-1952 ($29.3 billion in 2005 dollars) and somewhat more than double that provided to Japan ($15.2 billion in 2005 dollars). U.S. funding provided specifically for economic infrastructure in Iraq appears to be greater than the proportion provided for economic reconstruction in both Germany and Japan.\nFigure 1. U.S. Assistance to Iraq (FY2003-FY2006), Germany, and Japan (1946-1952), Total and for Economic ReconstructionSource: Congressional Research Service. Data from U.S. Department of State, appropriations bills, and other sources.", "The circumstances in which the U.S. occupations of Germany and Japan began were quite different from those under which the U.S. entered Iraq in 2003. Germany and Japan had both declared war on the United States and during at least the first year after World War II, U.S. policymakers were inclined to provide only a survival level of food and other assistance to its defeated enemies in order to avert starvation and prevent massive outbreaks of disease. U.S. objectives in the post-World War II occupations were characterized as the four \"Ds\".\nThe United States' primary objective in both Germany and Japan was demilitarization . In Japan, the next two were disarmament and decentralization of the economy through the dismantling of powerful economic groups. In Germany, the next two were denatzification and deindustralization , the later in the expectation that Germany could become an agricultural country. The fourth \"D\" in both cases was democratization , although many U.S. policymakers and occupation planners were skeptical that the Germans and Japanese had the necessary cultural background and psychological disposition for flourishing democracies. Both countries were expected to be responsible for their own economic recovery. Within a few years, however, the United States had recognized the need to provide assistance for economic recovery and reconstruction in Germany and Japan. Programs with that objective commenced in 1948.\nIn Iraq, in contrast, U.S. policymakers have made economic and political reconstruction and development priorities from the outset. Democracy-building became the primary objective of U.S. assistance to Iraq very early in the occupation, as no caches of biological and chemical weapons were found. Unlike the cases of Germany and Japan, there was no massive humanitarian crisis requiring aid in Iraq.\nIt is impossible to precisely compare the amount of aid that the United States has provided to post-war Iraq with the amounts spent during the occupations of Germany and Japan. For one, there is no record of the amount spent on political and social welfare reconstruction and development in Germany and Japan. Much of the political and social welfare institution-building assistance that is being provided by U.S. contractors in Iraq now was either not provided in the cases of Germany and Japan, was paid for by those countries (which made payments to the United States for occupation costs), or was done by occupation troops or others whose salary costs were not calculated. No precise calculation of assistance for economic reconstruction can be made in the cases of Germany and Japan without surveying the papers from the occupations for that specific purpose, as information available in the U.S. Agency for International Development (USAID) data base, the standard source for figures on U.S. government assistance, is aggregated according to accounts, not purposes. In addition, in the case of funding for Iraq, accounts may contain a mix of assistance types, and even specific grants may have multiple humanitarian, political, and economic purposes. Nevertheless, very rough comparisons of assistance for economic reconstruction are possible.\nFor the purposes of rough comparison, this report compared figures from the web version of the standard source for U.S. foreign aid funding, U.S. Overseas Loans and Grants as the source for figures on U.S. aid to Japan and Germany. CRS converted these figures to constant 2005 dollars using the Gross Domestic Product (GDP) Price Index of the U.S. Bureau of Economic Analysis. (These aid figures do not reflect the net amount of U.S. assistance to these countries, as they do not offset amounts that the conquered countries paid in reparations. Nor do they account for the amounts paid by those countries for feeding and housing occupation troops.) The four tables at the end of this report show these figures. In addition, further information is supplied in the sections below from a Marshall Plan document in the case of Germany and from occupation documents in the case of Japan.", "U.S. assistance to Germany totaled some $4.3 billion ($29.6 billion in 2005 dollars) for the years of direct military government (May 1945-May 1949) and the overlapping Marshall Plan years (1948/1949-1952). Initial funding, primarily under the Government and Relief in Occupied Areas (GARIOA) program was directed primarily at humanitarian relief. (GARIOA provided funding for the basic relief supplies necessary for \"the prevention of disease and unrest prejudicial to the occupying forces,\" and was \"limited to food, fertilizers, seed, and minimum petroleum requirements.\" ) GARIOA grants and loans—totaling $2.2 billion in current dollars ($15.4 in constant 2005 dollars)—made up just over half of the total and virtually all of the funding for about the first three years, although a small amount of other relief aid and some military surplus property was also provided during that period. The Marshall Plan, through which aid to Germany began in 1948/1949 and continued through 1952, provided about a third of total U.S. aid to that country. Some military aid grants, related to the new security environment, was provided in the last Marshall Plan years. (The West German government eventually repaid one-third of total U.S. assistance to Germany during this period, even though loans formally comprised only 28% of total funds provided to Germany.)\nThe Marshall Plan provided the first funding for Germany with the specific objective of promoting economic recovery. The official figure for total Marshall Plan assistance to Germany is almost $1.4 billion in current year dollars ($9.3 billion in 2005 dollars, of which $7.8 billion was grants and $1.5 billion was loans). [This corresponds to the categories of USAID Predecessor Grants and USAID Predecessor Loans in the tables below.] The entire amount of Marshall Plan aid is usually considered economic reconstruction funding, even though much of the aid provided, in the first year particularly, was foodstuff to feed workers whose productivity was compromised by malnourishment. (The severe winter of 1946-1947 in Europe made hunger a greater problem at that point than it was right at the end of the war and made apparent the need for increased food and other assistance.) The economic effect of Marshall Plan assistance was enhanced by the Plan's requirement that recipients match U.S. funding with \"counterpart\" contributions in national currencies. These were invested in the areas that national governments determined, in consultation with Marshall Plan officials, would best stimulate national economies.\nAccording to an interim report to Congress prepared by the Economic Cooperation Agency (the agency which administered the Marshall Plan), food accounted for nearly half (i.e., 46%) of the commodities delivered in the first three-plus years (i.e., between April 3, 1948, and June 30, 1951). (Deliveries during this period accounted for perhaps 80% of total deliveries under the Marshall Plan.) Inputs to industry (i.e., raw materials and semi-finished products) comprised 40% of the total. Of those inputs, nearly 60% was cotton; most of the rest was metals and chemicals. Petroleum and petroleum products accounted for 4%. About 2½% was for machinery and vehicles, and 6 ½% was for miscellaneous, mostly tobacco.", "Total U.S. assistance to Japan for the years of the occupation, from 1945-1952 was roughly $2.2 billion ($15.2 billion in 2005 dollars), of which almost $1.7 billion was grants and $504 million was loans. The Greenbook presents these figures as provided under five headings. Over three-quarters (77%) of these funds were provided through GARIOA grants. Most of the remainder (i.e., 23%) was $490 million in related funds that Japan repaid and is classified as a loan. There is no information in the Greenbook or readily available published sources regarding how much of this was provided for economic reconstruction, although the intent of the occupation after 1948 was to promote economic recovery.\nFigures for Japan compiled by a CRS analyst who examined occupation papers and related documents in that country show that about 40% of the U.S. assistance may well be considered as having been targeted at economic infrastructure reconstruction, broadly defined. It should be noted that the total value of U.S. aid from the occupation documents and other documents that this analyst drew on is just slightly over $2.0 billion in current dollars—slightly lower than the Greenbook total of $2.2 billion. This was a figure that was agreed upon in the 1960s by Japanese and U.S. officials as part of the negotiations on the amount of U.S. assistance that Japan would repay. (The Greenbook figure is for funds appropriated, whereas the lower negotiated figures derives from estimates of goods actually received plus administrative costs.) Using this as a base, the net value of the grant and loan aid as actually received by Japan would be $1.9 billion after deducting for the administrative expenses that the United States charged against the funds.\nOf the negotiated $2.0 billion in current year dollars ($13.4 in constant 2005 dollars), $655 million ($4.3 billion in constant dollars) or 32%, went to categories that would mostly contribute directly to economic reconstruction, that is, industrial materials, including machinery and raw goods ($310 million or 15%); petroleum, oils, and lubricants ($95 million or 5%); and transportation, vehicles, and equipment ($249 million or 12%). It is also likely that much of the funds categorized as payment of civilians ($67 million) and miscellaneous ($63 million ) also could be considered as contributing to economic reconstruction, especially as Japanese labor was provided incentives in order to encourage production. (The total in 2005 dollars for these payments to civilians and miscellaneous is $0.86 billion.) These categories of aid total $785 million in current dollars and $5.2 billion in constant dollars.\nOf the remaining $1.2 billion, $1.19 billion ($7.9 billion in 2005 dollars and 59% of the total) went to agricultural equipment, foodstuffs, and food supplies. This was aimed at helping to feed the Japanese population. The remainder ($49 million in current dollars, $324 million in 2005 dollars) were expenditures for medical and sanitary supplies (under 1% of the total), education (under 1%), and clothing, textiles and shoes (a little over 1%).", "U.S. assistance to Iraq appropriated from FY2003 through FY2006 totaled some $35.7 billion. All of it is grant assistance. While most funds were appropriated to a special Iraq Relief and Reconstruction Fund (IRRF, $21 billion) and an Iraq Security Forces Fund ($10.4 billion), additional sums from the budgets of DOD, USAID, and other agencies have been used for reconstruction purposes. The Departments of State and Defense as well as USAID are the key entities responsible for implementing Iraq assistance programs.\nAbout one-third of total funding, roughly $11.8 billion, has been aimed at restoring economically critical infrastructure, including airports, roads, bridges, railroads, seaports, electric power, water and sanitation, telecommunications, and essential buildings. Another $8.3 billion, representing about 23% of total aid, has been allocated to assist democratization (including civil society), education and health and the expansion of the private sector. A small amount of emergency relief and food aid was provided, especially in the early stages of the post-U.S. invasion period. Together, the infrastructure reconstruction assistance—which best corresponds to the bulk of aid provided to Germany and Japan—and the social, economic, and political development aid—which is more characteristic of current U.S. assistance around the world—make up nearly more than one-half of total Iraq funding for economic and political reconstruction to date. The remaining $15.5 billion in aid, nearly 44% of the total, is targeted at bolstering Iraqi security. Most of it provides training and equipment to the various security forces, including police and army, but funds are also used to provide facilities for security and law enforcement.", "While the total amount of aid to Iraq—roughly $36 billion—now appears to be almost a fifth higher than that spent during the occupation of Germany and somewhat more than double that during the occupation of Japan, the total amounts and percentages of U.S. assistance targeted specifically at economic infrastructure reconstruction for Germany and Japan over the FY1949-FY1952 period appear to be lower than the amounts and percentages currently directed at such reconstruction in Iraq. In constant 2005 dollars, U.S. aid targeted at economic infrastructure reconstruction was some $9.3 billion in Germany, or about one-third of total U.S. assistance to that country, and some $5.2 billion in Japan, or a little under 40% of total U.S. assistance there. If one were to consider food aid for Japanese workers as part of assistance for reconstruction there in order to make it more comparable with Marshall Plan reconstruction aid to Germany, the Japan figure would be considerably higher (about $13.1 billion in constant 2005 dollars).\nThe amount and proportion of assistance for roughly equivalent infrastructure reconstruction in Iraq appears higher, probably about $11.8 billion. This would indicate that the actual (adjusted) dollar amounts of U.S. aid for economic infrastructure reconstruction in Iraq thus far is roughly a third greater than that provided to Germany and perhaps more than double that provided to Japan. One explanation for the difference may be that aid for economic reconstruction in Germany and Japan consisted of financing through loans and grants in order to enable those countries to carry out their recoveries largely on their own. In Iraq, the United States is providing not only the material assistance, but also is paying for the necessary labor.\nFor these three countries, infrastructure assistance is the most comparable element. Other aid sectors are difficult to compare because the situations varied greatly. A large proportion of U.S. assistance to Germany and Japan consisted of food aid because of the humanitarian crisis which ensued after the war. Food and housing shortages were critical in both Germany and Japan for several years after World War II, and early U.S. assistance focused on providing a subsistence level of nutrition. Massive humanitarian relief was necessary. In Iraq, humanitarian aid has been a minor part of the assistance program because there was little need for food or other immediate relief assistance for most of the population. Democracy, security, and other governance efforts are also difficult to compare. In Germany and Japan they were conducted by occupation forces and separate accounts were not maintained.\nAssistance in these three cases varied greatly, not only because of the conditions in which the occupations took place. The size of the country and economy and the degree of economic development is different in each of the cases, as were the states of the economic infrastructure at the end of and after the war.\nIn 1940, before the United States entered World War II, it had a population of 132.6 million and a GDP that was 2½ times greater than that of Germany (with a population of 69.8 million) and about 4½ times greater than that of Japan (with a population of 73 million). After the war, the differences were much greater: U.S. per capita income was one-third higher than that of Germany in 1940 and over 4 times higher in 1946; it was almost 2½ times higher than that of Japan in 1940 and well over 6 times higher in 1946. At the end of the Marshall Plan period in 1952, recovery to pre-war levels had occurred in both countries. In 1952, U.S. per capita income was 2¼ times higher than that of Germany and almost 4½ times that of Japan.\nRegarding economic infrastructure, some sectors of Germany's infrastructure were left surprisingly intact according to recent analyses: \"At the end of the war, the industrial capacity in the Western zones was in theory not markedly less than that of the same territories in 1936.... The coal, iron, and steel industries were relatively lightly damaged, whereas most manufacturing was much more seriously impaired.\" Severe damage to public utilities—especially power stations and transportation facilities —slowed the restoration of production, as did malnutrition and disease.\nSimilarly, recent analyses of the state of Japan's economic infrastructure showed that, overall, industry was not demolished: \"If we look at industries by sector, we can see that although the rate of capacity in the consumer goods industries was damaged because many factories had been converted to war production, by contrast, the damage rate was relatively low in the heavy and chemical industries. The steel and electric power generation industries even emerged from the war with plant capacity above prewar levels.\"\nObservers may note that the Iraqi people and the international community most likely have much higher expectations of what the United States should contribute to economic reconstruction in Iraq than what the United States was expected to contribute to Germany and Japan, as the disparities are much greater between the United States and Iraq than between the United States and its World War II adversaries. The United States, with a current population of 300 million, has a GDP more than 200 times greater than that of Iraq, population 26 million ($11,750 billion compared to $54.4 billion, 2004 estimate). U.S. GDP per capita was almost 20 times that of Iraq in 2004 ($40,100 compared to $2,100). While U.S. military action did little damage, by design, to much of Iraq's economic infrastructure, it did damage Iraq's electrical grid, which also had an effect on the availability of water. In addition, Iraq's infrastructure had greatly deteriorated over the previous years. The existence of an insurgency in Iraq which deliberately sabotages the economy and reconstruction efforts is an important consideration in comparing Iraq's economic reconstruction requirements with those of post-war Germany and Japan, which had no resistance movements." ], "depth": [ 0, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "", "h1_full", "h2_full", "h0_full", "h0_full h3_full" ] }

{ "question": [ "What does the report compare?", "How was the U.S. aid sent to Iraq allocated?", "How does the proportion of Iraqi aid spent on reconstruction compare to aid spent on Germany and Japan?", "How does the total amount of aid U.S. provided to Iraq compare to Germany and Japan?", "What was the distribution in assistance that the U.S. provided Germany from 1946-1952?", "What was the objective of the Marshall Plan?", "What was the total aid for the Marshall Plan used for?", "How was U.S. assistance provided to Japan for 1946-1952?", "What did the majority of the aid go to?", "How was the rest of the aid distributed?", "Why did U.S. assistance to Germany and Japan largely consist of food-related aid?", "How is U.S. assistance different in Iraq compared to Germany and Japan?", "How is the damage dealt to Iraq different from Germany and Japan?", "What additional difficulties does Iraq face in its reconstruction efforts?" ], "summary": [ "This report compares aggregate data on U.S. assistance to Iraq through FY2006 with U.S. assistance to Germany and Japan during the seven years following World War II.", "About $11.8 billion (33%) went for economic infrastructure assistance. The remaining $23.8 billion was targeted at bolstering Iraqi security ($15.5 billion) and traditional political, social, and economic reform assistance ($8.3 billion).", "A higher proportion of Iraqi aid has been provided for economic reconstruction of critical infrastructure than was the case for Germany and Japan.", "Total U.S. assistance to Iraq as September 30, 2006 (the last day of FY2006), was about a fifth more than total assistance (adjusted for inflation) provided to Germany—and somewhat more than double that provided to Japan—from 1946-1952.", "For Germany, in constant 2005 dollars the United States provided a total of $29.3 billion in assistance from 1946-1952 with 60% in economic grants and nearly 30% in economic loans, and the remainder in military aid.", "Beginning in 1949, the Marshall Plan provided $1.4 billion with the specific objective of promoting economic recovery.", "Adjusting for inflation, the constant 2005 dollar total for Marshall Plan aid was $9.3 billion, of which 84% billion was grants and 16% was loans. (West Germany eventually repaid one-third of all U.S. assistance it received.)", "Total U.S. assistance to Japan for 1946-1952 was roughly $15.2 billion in 2005 dollars, of which 77% was grants and 23% was loans. Most of these funds were provided through GARIOA grants.", "Of the $2.2 billion in total aid, an estimated $655 million, or almost a third, went to categories that would mostly contribute directly to economic recovery (industrial materials, including machinery and raw goods; petroleum and products; and transportation, vehicles, and equipment).", "Most of the rest went for agricultural equipment, foodstuffs, and food supplies with smaller amounts spent on medical and sanitary supplies, education, and clothing.", "U.S. assistance to Germany and Japan largely consisted of food-related aid because of severe war-induced shortages and the need to provide minimum subsistence levels of nutrition.", "U.S. assistance to Germany and Japan largely consisted of food-related aid because of severe war-induced shortages and the need to provide minimum subsistence levels of nutrition. In Iraq, humanitarian aid has been a minor part of the assistance. Expectations also have changed. Countries today have much higher expectations of what the United States should contribute to reconstruction in Iraq relative to what was expected following World War II.", "Germany and Japan also are larger than Iraq—both population and size of their respective economies—and the extent of war damage to each country's industrial capacity was different.", "Iraq also faces an insurgency that deliberately sabotages the economy and reconstruction efforts, whereas there were no resistance movements in either Germany or Japan." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, 1, -1, -1, 1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3 ] }

{ "title": [ "", "Introduction", "Chronology of Events: River of Grass Acquisition", "Analysis of Potential Consequences", "Potential Consequences of Land Purchase", "Potential Effect on Federal/State CERP Projects", "Potential Effect on Phosphorus Reduction", "Issues for Congress", "Appendix. Chronology and Maps of Purchase." ], "paragraphs": [ "", "The Florida Everglades is a unique network of subtropical wetlands that is now half its original size. The federal government has had a long history of involvement in the Everglades, beginning in the 1940s with the U.S. Army Corps of Engineers constructing flood control projects that shunted water away from the Everglades. Many factors, including these flood control projects and agricultural and urban development, have contributed to the shrinking and altering of the wetlands ecosystem.\nFederal agencies began ecosystem restoration activities in the Everglades more than 15 years ago, but it was not until 2000 that the majority of restoration activities became coordinated under an integrated plan. With the Water Resources Development Act of 2000 (WRDA 2000; P.L. 106-541 ), Congress approved the Comprehensive Everglades Restoration Plan (CERP) as a framework for Everglades restoration. The legislation authorized $700 million for the federal share of appropriations for initial projects. According to the process established in WRDA 2000, additional Everglades projects are to be presented to Congress for authorization as their planning is completed. Once authorized, the projects will be eligible to receive federal appropriations, but must also receive appropriations from the State of Florida in order to be completed. In WRDA 2007 ( P.L. 110-114 ), three additional projects were authorized.\nIndirectly related to combined federal and state work under CERP is a subset of Everglades restoration projects being undertaken by the state. These projects may contribute to Everglades restoration, but are not formally credited toward non-federal requirements under CERP. The River of Grass acquisition by the State of Florida is the most recent of these \"non-CERP\" projects by the state. It involves a proposed land acquisition agreement by the South Florida Water Management District (SFWMD) to purchase large tracts of land south of Lake Okeechobee from the U.S. Sugar Corporation. The goal of the purchase is to acquire lands that will improve water quality and help regulate outflows from Lake Okeechobee. Under the plan, SFWMD would remove U.S. Sugar land from cultivation for sugarcane and citrus farming, and use it to move, store, and treat water flowing south to the Everglades. This proposal is of interest to Congress because it could affect the state's ability to contribute funding under CERP and, as a result, has the potential to alter the schedule of work on some CERP projects.", "The River of Grass land acquisition dates to mid-2008, and has been revised on multiple occasions since then. In June 2008, Florida Governor Charlie Crist and the U.S. Sugar Corporation announced that the State of Florida would pursue purchasing all of the firm's agricultural lands and assets (including 187,000 acres of farmland and additional associated sugar and citrus processing facilities) at a cost of $1.75 billion. The acquired sugarcane and citrus farmland around Lake Okeechobee would be used to store and treat water flowing south toward the Everglades and eventually into Florida Bay.\nBased on subsequent real estate evaluations, a slightly scaled-back version of the original proposal (180,000 acres) was approved by the SFWMD Governing Board in December 2008, at an estimated cost of $1.34 billion. The land acquisition would be financed by the sale of bonds issued by SFWMD, which would be repaid from a portion of the property taxes collected by the 16 counties that comprise SFWMD. Under Florida law, these bonds are subject to judicial review to determine whether they serve a \"valid public purpose.\"\nIn May 2009, SFWMD announced an amended proposal that further scaled back the original proposal. (See Table A-1 .) Under the amended proposal, SFWMD would purchase 40% of the lands originally envisioned (i.e., 73,000 acres) for $536 million. Notably, U.S. Sugar would lease back some of the land sold to SFWMD for a minimum of seven years, with provisions that would allow this arrangement to be extended for up to 20 years. SFWMD would have the option to acquire the other 107,000 acres included in the initial plan at a fixed price per acre during the first three years, and at the appraised market value during the next seven years.\nAs a result of a combination of factors, including ongoing financial difficulties, SFWMD announced in August 2010 a second amended purchase agreement. This purchase, which proposes to scale down the River of Grass acquisition yet again, was approved by the SFWMD Governing Board on August 12, 2010. Under the revised agreement, SFWMD will purchase 26,800 acres immediately at a cost of $197 million. (See Figure A-2 .) The acreage consists primarily of sugarcane and citrus acreage in Hendry and Palm Beach Counties, and the majority of it will be leased back to U.S. Sugar Corporation until restoration projects can be fully designed. The remainder of the land from the initial proposed purchases (153,200 acres) would be available for optional purchases over a 10-year period. In contrast to previous versions of the acquisition, this land would be bought directly with SFWMD funds, and will not be funded through bonds.\nSince late 2008, opponents have filed objections in state court to the bonds initially issued by SFWMD. These opponents claim that SFWMD did not have authority to finance the transaction because the acquisition is not a \"valid public purpose.\" A major sugar producing firm, Florida Crystals, has argued that the purchase gives an unfair advantage to its main competitor at taxpayer expense. Additionally, the Miccosukee Tribe of Indians, whose reservation lies south of U.S. Sugar lands, has argued that SFWMD is not financially able to meet the terms of the deal, which does not provide public benefits in the form of Everglades restoration. Supporters, including SFWMD and some environmental groups, argue that the land acquisition is in the public interest and will contribute significantly toward ecosystem restoration goals. On April 7, 2010, the Florida Supreme Court heard arguments from all sides on the opponents' appeal of an earlier court ruling that limits the amount of bonds the District could issue. The court's final decision could affect the latest version of the land acquisition, which will not be finalized until October 11, 2010.", "Several questions have been raised regarding previous versions of the proposed land acquisition by the State of Florida. Some questions center on the potential advantages and disadvantages of the land sale for restoring the Everglades, the effect of the land acquisition on Florida's role in implementing restoration projects under CERP, and the overall effect of the land acquisition on reducing excessive phosphorus in the ecosystem.", "Proponents of the land purchase point out several restoration benefits that they expect to result from the land acquisition. As currently proposed, the purchase would eventually take approximately 42 square miles of land in the Everglades Agricultural Area (EAA) out of production. This land was chosen for its high value and ability to contribute to other restoration goals. For instance, the 17,900 acres proposed for purchase in Hendry County are noted by SFWMD to be in the C-139 basin, an area with historically high phosphorus loads. Once this land is taken out of production, lower phosphorus inputs into the ecosystem are expected. Lands taken over by SFWMD could also be used to enlarge stormwater treatment areas that mitigate phosphorus outflows coming from Lake Okeechobee. If storage structures are built on this land at some point in the future, they could allow for increased flexibility to manage water during floods and droughts, as well as for ecosystem restoration.\nThere are several concerns associated with the proposed land acquisition. These concerns range from the location and continuity of the land parcels to the timing and benefits of the purchase itself. Most of the remaining 26,800 acres that currently are planned for purchase are in two tracts south of Lake Okeechobee, with approximately 86% of the original acreage proposed for purchase in 2008 remaining under cultivation for the foreseeable future. (See Figure A-2 .) The fragmentation of land parcels may make it difficult to achieve some of the broader restoration objectives, including the original objective to restore a flow-way south to Everglades National Park that replicates the historical flow of the \"River of Grass.\" Additionally, some contend that the land proposed for purchase is infested with canker (typically a microbial disease that affects the woody tissue of plants), rendering it useless for restoration.\nSome also note that potential benefits of the land purchase in restoring the Everglades are tempered by potential delays in land transfers and the initiation of actual restoration projects. Some have pointed out that under the terms of the deal proposed with U.S. Sugar, the majority of the land proposed for immediate purchase under the River of Grass acquisition will actually stay in production. Any delay in removing this land from cultivation and beginning restoration projects will lower the overall restoration value of the land, as the current effects of farming would continue. For example, a 10-year schedule could delay freeing up land for restoration projects until 2020, after most other restoration activities are expected to be well underway. Concerns about delays in restoration and a desire for near-term progress are shared by many stakeholders. According to the National Research Council (NRC), delays in restoring the Everglades are affecting the state of the ecosystem and closing opportunities for restoration. The NRC emphasized that \"unless near-term progress is made, the Everglades ecosystem may experience irreversible losses to its character and function.\"", "Some question the effect of the proposed land acquisition on the implementation of CERP. The proposed acquisition by the State of Florida is not being carried out under CERP, and according to SFWMD, the purchase will not be credited toward the 50:50 state/federal cost share mandated under CERP. While SFWMD has publicly argued for the overall benefits of the land transfer for Everglades restoration, it has not directly linked the land purchase to any existing CERP projects, and it is unclear if the purchase is intended to benefit any future CERP projects.\nSome contend that the current purchase (and any future purchase of option lands) could affect other Everglades restoration projects, including those federal projects that require a non-federal cost-sharing partner under CERP. In 2008, the state suspended construction on the A-1 reservoir, a CERP storage reservoir in the EAA. The decision to abandon the project along with the announcement of the original proposed River of Grass purchase caused some to conclude that the River of Grass land acquisition was replacing a CERP project, and the suspension of construction on the reservoir was at issue in a recent lawsuit before the U.S. District Court in Miami. In his March 2010 ruling in this case, Judge Federico Moreno ordered that the A-1 reservoir project be reinstated. This ruling may further constrain financing for other restoration projects.\nSome also note that the land purchase could indirectly affect other CERP projects by creating a funding shortfall for these projects. State funding for all restoration activities, including CERP, is expected to decline in the coming years. In light of this, some have questioned whether the proposed funding for the land acquisition deal might be better spent on CERP projects. For instance, some have noted that the L-8 reservoir (a CERP project) may be a potential item for reduction. Significantly, state funding decisions for these projects will not be finalized until the end of the current fiscal year in September 2010. It is unknown whether the state will be able to fund its cost-share requirements for all ongoing CERP projects in FY2011.", "Some are concerned about the effect of the proposed land acquisition on phosphorus loading into the Everglades ecosystem. As discussed earlier, the proposed land acquisition has the potential to reduce phosphorus entering the Everglades ecosystem if stormwater treatment areas are constructed and sugar and citrus farms are taken out of production. The treatment areas would capture nutrient-rich outflow and runoff from agricultural areas and Lake Okeechobee itself, thereby reducing loads into other parts of the ecosystem. The state notes that some of the areas proposed for acquisition are known for previously having high nutrient loads. However, it is unclear if the 26,800 acres currently planned for purchase are strategically located to maximize phosphorus reduction. The ability of land to reduce phosphorus depends on its proximity to flows out of Lake Okeechobee, as well as other factors.\nAdditionally, if purchasing the land delays other restoration projects intended to reduce phosphorus, phosphorus loads might not meet previously set targets. For example, the A-1 reservoir, discussed above, is intended to capture releases of water from Lake Okeechobee and reduce phosphorus input into the Everglades ecosystem. Delaying or abandoning this project could affect phosphorus mitigation.", "The proposed land acquisition is an investment in restoration that may be realized over a longer time horizon than many restoration projects that are currently planned or under construction, including federally authorized CERP projects. The impact of the land acquisition on other Everglades restoration projects will depend on budgetary decisions made in late September 2010, which could potentially reduce or delay state funding for some CERP projects.\nNear-term delays resulting from any funding reductions for CERP projects could affect the Everglades ecosystem, including those efforts pertaining to phosphorus mitigation and planned water storage capacity. Congress may have to decide whether currently planned CERP activities should be reconsidered in light of these circumstances.", "" ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 1, 2 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full", "h0_title h1_full", "", "h1_full", "h0_full", "", "" ] }

{ "question": [ "What is the River of Grass acquisition?", "Why does the state support the River of Grass acquisition?", "How has the original proposal been modified?", "What is the most recent revision of the original proposal?", "What questions have been raised regarding the proposed acquisition?", "What are some potential consequences of the land purchase agreement?", "Why have some questioned if the proposed funding could be better spent on other CERP projects?" ], "summary": [ "The River of Grass acquisition is a proposed land acquisition by the State of Florida, which has the potential to affect the implementation of CERP. The proposal is to purchase tracts of land south of Lake Okeechobee from the U.S. Sugar Corporation.", "The state argues that the purchase would reduce phosphorus loads and help restore the historic north-south flow of water from Lake Okeechobee to the Everglades.", "Initially, acquisition of 187,000 acres was announced by Florida Governor Charlie Crist and subsequently approved by the South Florida Water Management District (SFWMD) in December 2008. Since then, the original proposal has been downsized on multiple occasions, both in terms of the size of the purchase and the purchase price.", "Most recently, a revised land purchase agreement was announced and approved by the SFWMD in August 2010. SFWMD now proposes a direct cash purchase of 26,800 acres, or approximately 14% of the original purchase proposed by the governor in 2008. The purchase would cost SFWMD $197 million.", "Questions have been raised regarding the proposed acquisition. Some of these questions center on potential positive and negative consequences of the land purchase agreement. These include the effectiveness of the land acquisition in reducing nutrient loads that are detrimental to the Everglades and in restoring historic flows, as well as the effect of the initiative's funding requirements on Florida's other restoration projects, including projects with a non-federal cost share requirement under CERP.", "These include the effectiveness of the land acquisition in reducing nutrient loads that are detrimental to the Everglades and in restoring historic flows, as well as the effect of the initiative's funding requirements on Florida's other restoration projects, including projects with a non-federal cost share requirement under CERP.", "Since state funding for CERP activities is expected to decline in the coming years, some have questioned whether the proposed funding for the land acquisition deal might be better spent on CERP projects." ], "parent_pair_index": [ -1, -1, -1, 2, -1, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2 ] }

{ "title": [ "Background", "The FEHBP", "Premiums and Financing", "OPM’s Offices with Responsibilities Involving Fraud and Abuse within the FEHBP", "OPM’s Requirements and Guidance for FEHBP Carriers’ Fraud and Abuse Programs", "OPM’s Contracting Office Monitors Compliance with Fraud and Abuse Program Requirements and Guidance by Reviewing Information and Conducting Site Visits", "Reviews of Annual Reports Submitted to OPM’s Contracting Office", "Site Visits of Carriers", "Review and Resolution of OIG Audit Findings", "Reviews of Disputed Claims and Enrollee Complaints", "OPM Contracting Office Staff Use Information from Monitoring Activities When Determining Carriers’ Service Charges or Penalties", "OPM Contracting Office Staff Review Fraud and Abuse Program Outcomes, but Several Factors Contribute to the Challenge of Assessing Program Effectiveness", "Agency Comments", "Appendix I: Requirements for Carriers and OPM to Report Information about Potential Fraud and Abuse", "Requirements and Procedures for Reporting by Carriers", "Reporting to the OIG", "Reporting to the Contracting Office", "Requirements and Procedures for Reporting by OPM", "Reporting to Carriers That Notified the OIG of Potential Fraud or Abuse", "Reporting to Other Law Enforcement Entities", "Reporting to Congress and Federal Agencies", "Communication with Carriers and Antifraud Entities", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The FEHBP is the largest employer-sponsored health insurance program in the country. In 2012, it provided $42.6 billion in health care benefits to about 8 million individuals. OPM contracts with carriers to provide this coverage. Carriers offer plans in which eligible individuals may enroll to receive health care coverage. For the 2012 plan year, FEHBP options included 10 fee-for-service plans that were available nationwide, 4 plans available only to employees of certain federal agencies (e.g., the Foreign Service), 164 plans offered by health maintenance organizations that were available in certain regions (but not the entire country), 15 high- Most enrollees could deductible plans, and 13 consumer-driven plans.choose from about 6 to 15 plans. The majority of FEHBP policyholders— more than 60 percent—were in plans offered by the Blue Cross and Blue Shield Association. The next largest carriers or groups of carriers in terms of FEHBP enrollment were GEHA and Kaiser Permanente, each with between 5 percent and 10 percent of FEHBP policyholders.", "Through their contributions toward premiums, the federal government and enrollees bear a portion of the cost of FEHBP fraud and abuse programs. Generally, as set by statute, the government pays 72 percent of the average premium across all FEHBP plans, but no more than 75 percent of any particular plan’s premium. Enrollees pay the balance. Premiums are intended to cover enrollees’ health care costs, plans’ administrative expenses (including expenses associated with fraud and abuse programs), reserve accounts specified by law, plan profits, and OPM’s administrative costs. OPM negotiates plan premiums with carriers and establishes premiums in one of two ways:\nExperience-rated carriers set their premiums based on their experience, that is, their actual costs of providing health care services and the costs of administrative services. Experience-rated carriers may offer fee-for-service plans or they may be local health maintenance organizations. Of the $42.6 billion in expenses incurred by the FEHBP in 2012, the majority—84 percent—was for the benefits and administrative expenses of experience-rated carriers.\nCommunity-rated carriers are generally health maintenance organizations that set their FEHBP premiums based on a documented methodology that is applied to other groups of insured individuals in the same geographic community. These carriers receive fixed payments—the premiums—for each enrollee, rather than receiving payments for services rendered. Administrative costs are included in the payment rate. In fiscal year 2012, the FEHBP paid $6.7 billion to community-rated carriers.\nCarriers’ costs for fraud and abuse programs are included with other administrative costs (for experience-rated carriers) or within the fixed payments (for community-rated carriers). As a result, the amounts that carriers spend to prevent, detect, or correct fraud and abuse are not clearly identifiable.\nOPM is required to administer contingency reserve funds for FEHBP carriers, which can help avoid major fluctuations in the FEHBP premiums from year to year. OPM administers a contingency reserve fund in the U.S. Treasury for each FEHBP plan, and unexpended contingency reserves are carried forward. Experience-rated carriers may draw upon their individual contingency reserve funds if claims are larger than anticipated, or, if the balance is large enough, to avoid or reduce a premium increase for the following year. For community-rated carriers, OPM may negotiate an adjustment to the plan’s rates under certain circumstances and use the contingency funds to pay for the adjustment. For example, if the community rate changes between the time the carrier estimated its rates (generally in spring) and the time that coverage through the plan became effective (the following January), OPM negotiates an adjustment.\nOPM can adjust carriers’ profits based on performance, including the performance of fraud and abuse programs, using mechanisms that differ by the type of plan. There is no minimum profit. For experience-rated carriers, OPM negotiates the plan’s profit rate by determining a service charge using a process outlined in regulation that takes the plan’s The service charge (or profit) for performance into consideration. experience-rated carriers may not exceed 1.1 percent of the plan’s projected claims and administrative fees. For community-rated carriers, profits reflect the difference between the premiums and the actual costs. Because they are not capped at a percentage of projected costs, profits for community-rated carriers may be greater than profits for experience- rated carriers.\nRegulations specify a process for OPM to consider a community-rated plan’s performance and assess a penalty of up to 1 percent of the total premium payment. These penalties, which reduce the carrier’s profits, may be assessed for noncompliance with contract requirements, including fraud and abuse program requirements. (Service charges apply only to experience-rated plans, while penalties apply only to community-rated ones.)\nFraud and abuse in FEHBP plans affect the government, enrollees, and carriers because fraud and abuse can add to premium costs, reduce program reserves, or both. incentive to minimize fraud and abuse because raising premiums may make their plans less appealing to potential enrollees than plans offered by FEHBP carriers that have less fraud and abuse. Community-rated carriers, which receive fixed payments for each enrollee rather than payments for services rendered, have an additional financial incentive to establish effective fraud and abuse programs because they can keep any savings above and beyond the cost of establishing and maintaining the programs.\nIn general, however, carriers have an All carriers are susceptible to fraud and abuse, although the specific vulnerabilities vary by the type of carrier. Experience-rated carriers that offer fee-for-service plans are at particular risk for forms of fraud or abuse associated with excess payments for care, for example, through billing for services that are not medically necessary. Community-rated carriers, which receive fixed payments for each enrollee rather than payments for services rendered, are at particular risk for forms of fraud or abuse that reduce the costs of providing care, for example, through inappropriate dilution of medications.\nIf a carrier’s reserves are insufficient to cover its costs, including costs associated with fraud or abuse, the carrier must fund its losses. According to OPM officials, losses due to fraud and abuse would have to be substantial relative to legitimate costs for a carrier’s reserves to prove insufficient.", "Two offices within OPM have key responsibilities involving fraud and abuse within the FEHBP.\nThe Healthcare & Insurance—Federal Employee Insurance Operations office, the contracting office, is responsible for administering the FEHBP, contracting with carriers, and overseeing carriers’ compliance. Oversight of carriers’ compliance with requirements and guidance related to fraud and abuse is part of the broader responsibility to ensure compliance. According to OPM officials, 7 contract officers, 16 contract specialists, and 7 audit resolution staff within the contracting office have general and discrete oversight responsibilities, in addition to staff in the office’s supporting branches (such as those providing program analyses and systems support).\nThe OIG has responsibilities that involve two aspects of FEHBP fraud and abuse efforts. First, as a law enforcement agency, the OIG’s Office of Investigations may investigate potential fraud and abuse within the FEHBP. (App. I provides information on carrier and OIG fraud and abuse reporting requirements.) Second, as an oversight entity, the OIG’s Office of Audits conducts audits of FEHBP carriers. OIG officials told us that until recently the OIG’s audits of FEHBP carriers generally focused on audits of carriers’ claims and payments and not on the extent to which the plans comply with fraud and abuse program requirements. The OIG has begun including an in-depth examination of a carrier’s fraud and abuse program in some of its audits. These audits have included reviews of policies and procedures and reviews of files to determine whether potential fraud and abuse cases were reported as required. After conducting in-depth audits of the fraud and abuse programs of three of the larger FEHBP experience-rated carriers, the OIG questioned their effectiveness, in part because the programs’ outcomes, in terms of the prosecution of fraud cases and recovery of defrauded funds, were minimal. The OIG's findings from these audits included instances of failure to provide required notice of potential fraud or abuse, failure to report the amount of all recoveries of defrauded funds, and failure to include all relevant expenses when reporting the cost of anti-fraud activities.", "OPM requires FEHBP carriers to establish programs to prevent, detect, and eliminate fraud and abuse. FEHBP contracts contain minimum requirements for fraud and abuse programs; according to officials from OPM’s contracting office, these requirements accommodate differences in carrier characteristics and so allow flexibility in fraud and abuse program implementation. Each carrier is required by contract to: conduct a program to assess vulnerability to fraud and abuse; operate a system designed to detect, eliminate, and follow up on fraud submit a report on fraud and abuse by March 31 of each year; demonstrate that a statistically valid sampling technique is used routinely to compare FEHBP claims against the carrier’s quality assurance standards and its fraud and abuse prevention standards; maintain records of fraud prevention activities; implement any corrective actions ordered by an OPM contracting officer to correct a deficiency in its fraud prevention program; provide timely notification to the OIG of credible evidence of a violation of federal criminal law involving fraud found in Title 18 of the U. S. Code by a principal, employee, agent, or subcontractor; and provide timely notification to the contracting officer of any significant event, including fraud, that might reasonably be expected to have a material effect on the carrier’s ability to meet its obligations.\nOPM also uses letters to carriers to issue requirements and guidance. For example, one carrier letter imposes requirements for reporting potential fraud and abuse when a carrier has a reasonable suspicion that fraud against the FEHBP has occurred or is occurring. (As indicated above, app. I provides more information on carrier and OIG fraud and abuse reporting requirements.) Another carrier letter presented guidance on certain nonrequired standards for fraud and abuse programs. Specifically, OPM identified a set of eight industry standards for fraud and abuse programs (see text box), and in 2003, it issued a letter to carriers indicating that it would like carriers to implement these standards.\nFederal Acquisition Regulations require that each FEHB carrier must perform the contract in accordance with prudent business practices, which include timely compliance with OPM instructions and directives. 48 C.F.R. § 1609.7001(b)(1), (c)(4). Therefore, carriers must comply with requirements contained in carrier letters.", "OPM’s contracting office staff conduct several activities to monitor carriers’ compliance with fraud and abuse program requirements and agency guidance, including reviewing carriers’ annual reports to OPM’s contracting office, conducting site visits, reviewing and resolving OIG audit findings, and reviewing disputed claims and enrollee complaints. Contract officers use the information from these efforts to oversee carriers and to determine carriers’ service charges and penalties.", "Officials from OPM’s contracting office told us that contracting office staff assess carriers’ compliance with fraud and abuse program requirements and guidance, and monitor carriers’ performance by reviewing annual reports from carriers.\nIn one routinely submitted report, the carrier describes its fraud and abuse program, including operational information; organizational structure; certain budget and cost allocation information; and performance indicators, such as how the carrier measures the performance of its antifraud efforts. Officials from OPM’s contracting office told us that they review this report and assess the information contained in the report against fraud and abuse program requirements to determine the extent to which carriers met, and were thus in compliance with, requirements. For example, OPM contracting office staff assess the reported information, such as the criteria the carrier uses for notifying the OIG of a potential fraud case, against OPM’s requirements for reporting cases of potential fraud to the OIG.\nA second report, specifically required by contract, provides additional information about the carrier’s fraud and abuse program and the carrier’s fraud and abuse activities and outcomes involving the FEHBP during the year. The report contains a checklist showing which of the nonrequired fraud and abuse industry standards the carrier and any subcontractors implemented. Officials from OPM’s contracting office told us that they assess this information against the fraud and abuse program guidance to determine the extent to which carriers implemented the recommended standards and to follow up with those that have not implemented them. For example, according to officials from OPM’s contracting office, a contracting officer contacts a carrier whose report indicates that it did not implement one of the components of a fraud and abuse program, such as having an antifraud policy statement. In following up with the carrier, the contracting officer indicates that OPM expects the carrier to implement the component and may conduct a site visit, request an OIG audit, or meet with the carrier to review evidence to confirm that the carrier has come into compliance with OPM’s expectation.\nOur review of a summary of carriers’ reports containing their responses to the industry standards checklist for 2012 indicated that most carriers submitted the report as required and their responses indicated compliance with fraud and abuse program guidance. Officials from OPM’s contracting office told us that, as part of their oversight, contracting officers follow up with carriers whose reports suggest possible noncompliance for the purpose of bringing them into compliance. However, OPM contracting office staff did not follow up with carriers that had not submitted their reports or whose reports indicated program deficiencies until July 2013, after we inquired about these carriers’ reports. Specifically, although 5 carriers did not submit reports by March 31, as required by contract, OPM contracting office staff did not begin following up with 4 of these carriers until July 2013, in response to our inquiry about OPM’s follow-up actions to obtain these reports. Based on 2011 enrollment data, we estimate that these carriers together accounted for about 0.1 percent of FEHBP enrollees. Most carriers submitted timely reports indicating that either they or a subcontractor had implemented the recommended, nonrequired industry standards for fraud and abuse programs. However, 7 carriers submitted reports indicating that neither they nor a subcontractor had implemented one or more of those standards. For example, 2 of the 7 carriers indicated that neither they nor a subcontractor had implemented a strategy for educating enrollees about fraudulent and abusive practices and 1 of these carriers had not published an antifraud policy statement or conducted formal fraud awareness training with all its employees. Based on 2011 enrollment data, we estimate that these 7 carriers together accounted for 0.8 percent of FEHBP enrollees. OPM contracting staff did not begin following up with these carriers until July 2013, after our inquiry, and as of August 2013 were still following up with 1 of these carriers.", "OPM contracting office staff also assess carriers’ compliance with fraud and abuse program requirements and guidance during periodic site visits. In contrast to the reviews of annual reports, which are performed remotely, site visits provide an opportunity for contracting office staff to collect, inspect, and follow up on fraud and abuse program information on-site. During site visits, OPM contracting office staff review carriers’ fraud and abuse program documents and information systems, conduct face-to-face meetings with carrier staff, and evaluate the extent to which the carrier’s program meets fraud and abuse program requirements and guidance. For example, during a site visit, OPM contracting office staff may review the carrier’s program and system for fraud prevention and detection, staffing, fraud awareness training, and examples of fraud and abuse program activities. As a result of their review, contracting office staff may recommend areas for improvement or note best practices.\nOPM contracting office staff conducted site visits that covered 96 carriers’ plans from 2008 through 2012 using a risk-based site selection strategy that included carrier type, enrollment, and special circumstances. Officials from OPM’s contracting office told us that although contracting officers select experience-rated carriers for site visits every 3 to 5 years, they may also select any experience-rated carrier for a site visit if the carrier experiences consistent or urgent problems. According to officials from OPM’s contracting office, in 2012, the 20 experience-rated carriers selected for site visits accounted for 69 percent of FEHBP enrollment.addition, the officials told us that OPM contracting office staff select community-rated carriers, which generally have smaller enrollments, for In site visits at their discretion and as OPM resources allow.7 community-rated carriers selected for site visits accounted for 0.55 percent of FEHBP enrollment, according to OPM contracting office officials.", "OPM contracting office staff review and resolve OIG audit findings as part of their oversight of carriers’ fraud and abuse programs. In comparison to reviews of annual reports of carriers’ self-reported compliance by OPM contracting office staff, OIG audit findings identify areas of noncompliance through an independent, on-site evaluation. Although site visits by both OPM contracting office staff and the OIG assess carrier compliance, only OIG audits assess the extent to which requirements and guidance have been implemented as the agency intended, according to OPM contracting office and OIG officials. OIG audits may also result in recommendations to OPM contracting officers to oversee carriers’ implementation of corrective actions intended to bring carriers into compliance. OPM contracting office staff provide input to the OIG on planned audits as part of the OIG’s risk-based audit selection strategy and may also request that the OIG conduct a special audit on an area of concern. For example, OPM contracting staff asked the OIG to assess one carrier’s internal controls for preventing and detecting illegal practices and made a request for a special audit to ensure one carrier’s compliance with contractual requirements. In June 2013, OIG officials told us that they had conducted eight audits that included findings related specifically to a carrier’s compliance with fraud and abuse program requirements.\nOPM contracting office staff address audit recommendations by overseeing carriers’ implementation of corrective action(s) in response to audit findings. To do so, contracting office staff review OIG audit findings and carriers’ responses to audit findings, including corrective actions and documentation supporting their implementation. For example, in one audit we reviewed, the OIG recommended that an OPM contracting officer verify that a carrier implements current policies and procedures regarding communication of information about potential fraud and abuse and develops and implements criteria for follow-up actions on reported cases of potential fraud or abuse. Officials from OPM’s contracting office told us that the carrier provided extensive documentation of its corrective actions in response to audit findings. The officials also reported that OPM contracting office staff are working with other carriers to address findings from recent audits and close the resulting recommendations.\nIn addition to oversight of individual carriers, officials from OPM’s contracting office told us that audit findings and recommendations help them identify fraud and abuse program areas to focus on more broadly. For example, OPM contracting office staff identified carriers’ sharing of information about potential fraud and abuse as an area of concern after audit findings indicated that certain carriers were not communicating information about their fraud and abuse program activities as required. As a result, officials from OPM’s contracting office told us that they are reviewing documents from the OIG related to reporting and are in the process of working to determine whether the current reporting requirements are sufficient. As of August 2013, officials did not have a timeline for completion of this activity.", "OPM contracting office staff review disputed claims and enrollee complaints to identify indicators of potential fraud or abuse, among other things. Officials told us that contracting officers’ reviews of disputed claims may reveal suspicious patterns of drug utilization, multiple complaints involving a single provider, or other indicators of potential In addition to reviews of enrollees’ disputed claims, fraud or abuse.OPM contracting office staff review enrollees’ complaints about other aspects of the FEHBP, which could also indicate potential fraud or abuse, and they intervene as necessary. For example, in response to an FEHBP enrollee’s complaint regarding a carrier’s request for sensitive information, OPM contracting office staff examined and confirmed the legitimacy of the request.", "OPM’s contracting office staff use information from their monitoring activities—including their reviews of carriers’ annual reports, site visits, reviews of OIG audit findings, and reviews of disputed claims and enrollee complaints—when they determine carriers’ service charges or penalties. Officials from OPM’s contracting office told us that service charges or penalties may be adjusted to reflect noncompliance with fraud and abuse program requirements. For experience-rated carriers, up to 45 percent of the service charge is based on contractor performance, which includes failure to comply with contractual requirements. For community-rated carriers, 30 percent of the penalty determination is based on compliance with contractual requirements, with about half of that based on the timeliness of report submissions, including submissions of fraud and abuse reports. Officials from OPM’s contracting office provided us with several examples of their use of information from their monitoring activities when determining service charges:\nOPM contracting office staff used an experience-rated carrier’s failure to meet site visit scheduling, goals, and turn-around time as a negative factor and the carrier’s reduction in the total number of disputed claims submitted to OPM as a positive factor when determining the carrier’s 2012 service charge.\nOPM contracting office staff used the OIG’s audit findings that a carrier was not in compliance with fraud and abuse reporting requirements as a negative factor when determining the service charge for that carrier in 2013.", "OPM contracting office staff review certain outcomes of carriers’ fraud and abuse programs, but program outcomes do not provide complete information about program effectiveness. Instead, the program outcomes that OPM contracting office staff review provide partial information about carriers’ fraud and abuse programs and may be useful for reporting program accomplishments. For example, in 2011, carriers reported that the outcomes of their fraud and abuse programs included 29 criminal convictions and more than $23 million in recoveries to FEHBP. However, program outcomes do not measure the success of strategies intended to prevent or minimize fraud and abuse such as systems for preauthorization or precertification. OPM officials reported that although they are concerned about program outcomes that reflect the past, they place emphasis on ensuring that carriers have preventive antifraud strategies, such as prepayment controls (including system edits, preauthorizations, and precertifications), in place to prevent future occurrences of fraud and abuse. OPM contracting office staff also collect information about how carriers assess their antifraud activities, in part to determine whether carriers routinely assess their own antifraud programs.\nOPM contracting office staff reported that they have not adopted specific measures of program effectiveness for FEHBP fraud and abuse programs because they have not identified an appropriate way to measure the effectiveness of antifraud programs. Several factors contribute to difficulties in developing a measure of the effectiveness for health care antifraud programs. These factors include the following:\nA lack of information about the baseline amount of fraud and abuse in health care. We have previously reported that there is no reliable baseline estimate of the amount of health care fraud in the United States. Similarly, officials from OPM’s contracting office told us that they cannot estimate the amount of fraud within FEHBP. A baseline estimate could provide an understanding of the extent of fraud and, with additional information on fraud and abuse program activities, could help to clarify the effectiveness of antifraud program activities.\nThe difficulty of establishing a causal link between antifraud activities and the amount of health care fraud or abuse. Although the efforts of federal agencies and nongovernment entities may help to reduce health care fraud, it is difficult to isolate the effect of any individual action or to clearly establish that any change in the amount of fraud was due to any specific cause. Thus, for example, a carrier’s implementation of a specific fraud detection strategy may deter certain types of fraud, but a reduction in those types of fraud could also have been due to other causes, such as changes in laws or in prosecutorial practice.\nThe difficulty of measuring the effect of efforts to prevent or deter fraud and abuse. Officials from OPM’s contracting office reported that they believe that FEHBP fraud and abuse program requirements and their oversight of these programs have helped to limit the amount of fraud in FEHBP. Officials and industry experts said, however, that it is difficult to measure how much fraud or abuse is deterred or prevented. For example, FEHBP carriers may place restrictions on their provider networks to prevent individuals who are intent on fraud from enrolling as providers, but it is difficult to measure the amount of fraud or abuse that was prevented as a result of such restrictions.\nDespite the challenges involved in assessing the effectiveness of antifraud activities, OPM officials acknowledged the importance of ensuring the prevention, detection, and correction of fraud and abuse within the FEHBP. Others in the health care sector also acknowledge the importance of measuring the effectiveness of antifraud activities and are working to develop appropriate measures. For example, CMS recently began an effort to estimate probable fraud involving specific home health care services in Medicare that could provide information on the extent of fraud that currently exists and, in coming years, how it has changed over time. Establishing a baseline may make it feasible to study how antifraud activities affect the level of home health care fraud. In addition, OPM told us that they are continuing to monitor public and private sector efforts to develop measures of the effectiveness of antifraud activities. If reliable and valid measures of the effectiveness of antifraud programs are identified, it will be important for OPM to determine whether those measures are appropriate for the FEHBP.", "OPM and the OPM OIG reviewed a draft of this report and provided technical comments, which we incorporated as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Acting Director of OPM, appropriate congressional committees, and other interested parties. The report also will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.", "There are requirements and procedures for reporting potential fraud and abuse that apply to both the carriers that offer health care plans through the Federal Employees Health Benefits Program (FEHBP) and the Office of Personnel Management (OPM). These requirements and procedures include communication between the carriers and OPM as well as communication with law enforcement agencies and others, such as Congress.", "Carriers are required to report to both OPM’s Office of the Inspector General (OIG) and OPM’s Healthcare & Insurance—Federal Employee Insurance Operations office, which we refer to as the contracting office.", "Carriers are required to report potential fraud and abuse to the OIG. According to a letter OPM sent to carriers in 2011, carriers are required to provide written notice to the OIG within 30 working days of becoming aware of possible fraud or abuse. Carriers are to notify the OIG regardless of the amount of money involved and without waiting to determine whether there is sufficient evidence to substantiate the allegation. The notice is generally to include information about the identity of the suspected health care provider(s) or enrollee(s) and a brief description of the allegation, among other things. The notice may request that the OIG monitor a case being developed in preparation for a pending referral, or it may request that the OIG decline the case so that the carrier may participate in a class action lawsuit. According to OIG officials, the notice may also include a referral to the OIG (i.e., a request that the OIG evaluate the case).\nAs shown in figure 1, the carrier’s reporting requirements after providing initial notice of potential fraud or abuse depend on the OIG’s response: If the OIG decided to monitor the case and asked the carrier to continue its investigation, then the carrier is to provide the OIG with written status updates when it has additional information to substantiate or refute the allegation.\nIf the OIG declined the case, the carrier may proceed with its investigation without further contact with the OIG unless (1) the carrier develops significant new information and believes that the OIG should reconsider; (2) the case is accepted for investigation by one or more other federal, state, or local law enforcement agencies; or (3) the case is accepted for prosecution at the federal level, such as by a U.S. Attorney’s Office or by the Department of Justice. If any of these events occurs, the carrier is to provide the OIG with a written status update.\nIf the OIG requested a referral, the carrier is to submit the referral within 120 days or to provide monthly status updates starting on day 121.\nUpon request, all carriers must furnish the OIG with FEHBP claims information and supporting documentation relevant to open criminal, civil, or administrative investigations and, absent extenuating circumstances, must do so within 30 calendar days. The carrier may refer the case to the OIG at any time and does not need a request from the OIG to do so.\nCarriers are to submit status updates, which summarize new information, to the OIG when: the carrier develops significant new information that the carrier believes would aid the OIG in determining whether to request a referral or decline the case; the carrier determines that the allegation had no merit or that no false or fraudulent activity took place as alleged; the carrier closes its inquiry; the carrier wishes to proceed with administrative debt collection, recovery, or settlement of an FEHBP overpayment; or the OIG requests a status update.\nWhen the carrier refers the case to the OIG (whether the referral was solicited by the OIG or not), the referral is to be in writing and to include (among other things) information about the identity of the suspected health care provider(s) or enrollee(s); a comprehensive description of the suspected fraud or abuse; and copies of any analyses, documents, or other information the carrier has that is relevant to the allegation.", "Each carrier files two annual reports with the OPM contracting office; these reports provide information about the carrier’s fraud and abuse program and summarize relevant activities.\nIn one report, the carrier is to respond to a questionnaire that OPM’s contracting office staff use to obtain information about the carrier’s procedures for reporting potential fraud, including its criteria for notifying law enforcement agencies and the OIG of potential fraud and how it manages referrals from hotlines, law enforcement agencies, and others. (This annual report also covers other aspects of the carrier’s fraud and abuse program—its organization, certain budget information, performance indicators, and other operational information.)\nA second report provides additional information about the fraud and abuse program and covers the carrier’s fraud and abuse activities and outcomes involving the FEHBP during the year—the number of cases it opened, dollars recovered, number of criminal convictions, and so forth.", "OPM is required to provide information to the carriers that notified it of potential fraud or abuse and, depending on the case, may be required to report information to other law enforcement entities. In addition, OPM may share information about fraud or abuse with other carriers and antifraud entities.", "When the OIG receives a carrier’s notification of potential fraud or abuse, or when the OIG receives a status update about an instance of potential fraud and abuse from a carrier, the OIG is to respond in writing within 30 calendar days to inform the carrier of its level of interest in the case. Specifically, the OIG may (1) monitor the case, asking the carrier to continue investigating and provide status updates as appropriate, (2) decline the case, or (3) request a referral. (The OIG does not need a referral from a carrier to pursue a case; it has the authority to pursue any allegations of fraud or abuse that involve the FEHBP.) According to OIG officials, when reaching a decision about its response to the carrier, the OIG weighs information about patient safety; the type of fraud that is potentially at issue (e.g., whether it seems to involve a pattern of potentially fraudulent activity or not and whether it seems to be local or is potentially widespread); the evidence in support of the allegation; the dollar value of the alleged fraud or abuse; the resources that would likely be required to pursue the case; and whether a prosecutor is likely to pursue the case.", "Depending on the case, there may be requirements or procedures for the OIG to report information about potential fraud or abuse to other law enforcement entities, including the Federal Bureau of Investigation (FBI), U.S. Attorneys, or state or local prosecutors. According to the OIG’s investigative manual, preliminary evaluation of information regarding potential health care fraud involves determining whether there is enough risk of patient harm or enough risk of financial exposure to continue investigating the allegation. The OIG may also initiate a preliminary inquiry proactively, for example, when its review of information about a program yields information that suggests potential fraud or abuse. If a preliminary inquiry indicates credible evidence that a criminal, civil, or administrative violation may have occurred, the OIG decides whether to initiate an investigation, refer the allegation to another law enforcement agency, or seek to conduct a joint investigation with another law enforcement agency.\nThe OIG may refer the allegation to another law enforcement agency when (1) the subject matter is by law investigated by another agency; (2) the allegation does not involve OPM employees, contractors, programs, or property; (3) the allegation involves OPM indirectly, while having a major impact on another agency; or (4) the allegation involves a According to the OIG’s threat to the safety of a high government official.investigative manual, these referrals are to include a presentation of the complaint or allegation and any facts developed by the OIG.\nReporting to the FBI. According to the OIG’s investigative manual, the OIG is to refer a case to the FBI when appropriate. In addition, if the OIG determines that there is sufficiently credible evidence to convert a preliminary inquiry into a criminal investigation, guidance from the Office of the Attorney General specifies that the OIG is to notify the FBI within 30 days, absent exigent circumstances. According to OIG officials, when reaching a decision about whether to convert a preliminary inquiry into a criminal investigation, the OIG weighs patient safety, the extent of likely FEHBP exposure, the extent to which the allegations appear to be supportable, and the likelihood of prosecution (either criminal or civil).\nReporting to U.S. Attorneys. According to the OIG’s investigative manual, if the OIG determines that a case should be referred to a U.S. Attorney’s Office, a formal presentation normally occurs after the OIG has completed its investigation. The OIG expects its agents to establish and maintain working relationships with U.S. Attorneys’ Offices, and expects them to consult as soon as they have information that indicates that an investigation may corroborate an allegation. According to the OIG, early consultation allows the OIG to focus its investigative efforts on and support prosecutive potential. If early consultation results in acceptance of a case for prosecution, the OIG is to provide the prosecutor with a preliminary investigation report.\nReporting to state or local prosecutors. If a case is declined by U.S. Attorneys, the OIG may refer the case to state or local prosecutors.", "Under the Inspector General Act of 1978, as amended, the OIG is required to report its activities and accomplishments (including those related to fraud and abuse) to Congress semiannually, and the agency is required to submit a response to each semiannual report. The OIG may also prepare reports in response to requests from other federal agencies (including GAO) or from congressional committees or members.", "The OIG may notify multiple carriers of suspected fraud or abuse and may share information about potential fraud and abuse through participation in interagency health care fraud task forces or other fraud detection and prevention organizations.\nConsistent with the Health Insurance Portability and Accountability Act, which encourages coordination and information sharing between federal, state, and local law enforcement programs to control health care fraud and the sharing of related information with the private sector,shares information with several antifraud entities:\nThe OIG participates as a law enforcement liaison to the National Health Care Anti-Fraud Association (NHCAA). According to OIG officials, the OIG works with the NHCAA and its members (which include many FEHBP carriers) on training, education, and sharing information about trends in health care fraud and participates in NHCAA-sponsored training and conferences, and the OIG liaison to the NHCAA participates on NHCAA committees and meets with the NHCAA on a regular basis.\nThe OIG organizes and operates an FEHBP Carrier Task Force that includes the OIG and representatives of the largest FEHBP carriers. According to OIG officials, this task force meets on a quarterly basis to share information about cases and fraud trends and to discuss emerging fraud-related issues.", "", "", "In addition to the contact named above, key contributors to this report were Kristi Peterson, Assistant Director; Kristen Joan Anderson; George Bogart; and Jennel Lockley." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 1, 1, 1, 2, 3, 3, 2, 3, 3, 3, 3, 1, 2, 2 ], "alignment": [ "h0_title h2_title h3_title", "h2_full", "h2_full", "h0_full", "h0_full h3_full h2_full", "h3_full h0_title", "h0_full", "", "", "", "", "h3_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What is the purpose of the Office of Personnel Management?", "What are the requirements that FEHBP carriers must comply by?", "What guidance does OPM give to carriers?", "Why do program outcomes not provide complete information about program effectiveness?", "What did OPM contracting office staff report?", "What were some factors behind the difficulties that office staff experienced with measuring the effectiveness of antifraud programs?", "What does the FEHBP do?", "How does the FEHBP allow carriers to provide health care?", "What is the purpose of OPM in negotiating contracts?", "What effect does fraud or abuse have on the FEHBP?", "What does the report describe?", "How did the GAO compile the report?", "How did GAO measure the effectiveness of antifraud programs?" ], "summary": [ "The Office of Personnel Management (OPM) Healthcare & Insurance--Federal Employee Insurance Operations office, which we refer to as OPM's contracting office, monitors Federal Employees Health Benefits Program (FEHBP) carriers' compliance with requirements and other guidance for preventing, detecting, and eliminating fraud and abuse.", "These requirements include establishing a program to assess vulnerability to fraud and abuse, reporting annually on program outcomes, reporting potential fraud to OPM's Office of Inspector General (OIG), and implementing corrective actions to address deficiencies in fraud prevention programs.", "OPM's guidance encourages carriers to implement certain program standards, such as formal fraud awareness training for all employees.", "Program outcomes in 2011 included 29 criminal convictions and more than $23 million in recoveries to the FEHBP, but program outcomes do not provide complete information about program effectiveness because they do not measure the success of efforts to prevent or minimize fraud and abuse.", "OPM contracting office staff reported that they have not adopted specific measures of program effectiveness for FEHBP fraud and abuse programs because they have not identified an appropriate way to measure the effectiveness of antifraud programs.", "Several factors contribute to difficulties in assessing the effectiveness of health care antifraud programs. These factors include lack of information about the baseline amount of fraud and abuse, difficulty establishing a causal link between antifraud activities and the amount of fraud and abuse, and difficulty measuring the effect of efforts to prevent or deter fraud and abuse.", "The FEHBP provides health care coverage to millions of federal employees, retirees, and their dependents through health insurance carriers that contract with OPM.", "Carriers offer plans in which eligible individuals may enroll to receive health care benefits.", "OPM negotiates these contracts; requires that each carrier establish a program to prevent, detect, and eliminate fraud and abuse; and oversees carriers' fraud and abuse programs.", "Although the extent of fraud and abuse in the FEHBP is unknown, any fraud or abuse that does occur contributes to health care costs and may be reflected in the premiums for FEHBP enrollees.", "GAO was asked to review OPM's oversight of FEHBP fraud and abuse programs. This report describes (1) oversight of fraud and abuse programs by OPM's contracting office and (2) the OPM contracting office's approach to measuring the effectiveness of FEHBP carriers' fraud and abuse programs.", "To do so, GAO reviewed documents that specify program requirements and guidance, such as carrier contracts and letters from OPM to carriers; documents that assist oversight of fraud and abuse programs, such as annual reports that OPM requires from carriers; and documents demonstrating oversight of carriers, such as memos to carriers from OPM contracting office staff regarding carriers' compliance.", "GAO also reviewed published work about measuring the effectiveness of antifraud programs. GAO interviewed OPM officials and officials from entities with expertise related to antifraud programs and measurement." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 1, -1, 0, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 7, 7, 7, 0, 0, 0, 0, 1, 1, 1 ] }

{ "title": [ "Background", "EPA Awards Different Categories of Grants", "Multiple Federal and EPA Requirements and Guidelines Apply to Monitoring Grant and Grant Program Results", "EPA Monitors Performance Reports and Data to Ensure Grants Achieve Results, but Certain Practices Hinder EPA’s Ability to Efficiently Monitor Results", "EPA Monitors Written Performance Reports and Program-Specific Numeric Data to Ensure Grants Achieve Results", "Certain EPA Monitoring Practices Hinder EPA’s Ability to Efficiently Monitor Some Results and May Increase EPA’s and Grantees’ Administrative Burden", "EPA Collects a Variety of Information about Grant Results, but Some of the Information Is Not Readily Accessible", "EPA Collects Certain Information from Grantees Twice", "One Program Office Transfers Relevant Program Results Data from Its Databases to EPA’s National Database Manually", "Our Review of Performance Reports Identified a Variety of Monitoring Issues That May Hinder EPA’s Ability to Efficiently Identify Factors Affecting Grantee Results", "Project Officers May Interpret EPA’s Environmental Results Directive Differently Because the Directive Is Unclear", "Some Grantees Did Not Include References to the Planned Results in Their Work Plans to Demonstrate Progress", "Because Grantees Generally Submit Written Performance Reports, There Are No Built-In Quality Controls", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Additional Information on GAO’s Review of 23 EPA Grant Programs", "Appendix III: Comments from the Environmental Protection Agency", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "EPA provides financial assistance to a variety of recipients, including states, tribes, and nongovernmental organizations, through assistance agreements such as grants. EPA awards these grants to recipients to meet local environmental priorities and national objectives established in federal law, regulations, or EPA policy. As we have previously reported, most federal grant-making agencies, including EPA, generally follow a life cycle comprising various stages—preaward (announcement and application), award, implementation, and closeout—for awarding grants, as seen in figure 1.\nThe federal laws establishing EPA’s grant programs generally specify the types of activities that can be funded, objectives to be accomplished through the funding, and who is eligible to receive the funding. In addition to these statutory requirements, EPA has issued regulations governing its grants, which may impose additional requirements on recipients. EPA either notifies the public of the grant opportunity or notifies eligible state agencies about available grants, and applicants must submit applications to the agency for its review. In the preaward stage, EPA reviews applications to determine or verify which meet eligibility requirements and awards funding. EPA assigns project officers—who manage the technical and program-related aspects of the grants—and grant specialists—who manage the administrative aspects of grants—in program and regional offices to oversee the implementation stage of the grants.\nThe implementation stage includes development of a grant work plan that outlines EPA and grantee agreed-upon goals, objectives, activities, and time frames for completion under the grant, such as developing certain water quality standards by the end of the year. It also includes payment processing, agency monitoring, and grantee reporting on the results of its individual grant as well as its contribution to program results. For example, results for an individual water quality grant might include the grantee using funds to develop water quality standards, whereas program results might include the grantee’s contribution to the number of water quality permits issued under the program as a whole. Grantees submit information on grant results to EPA through performance reports and progress reports, depending on the grant program. The closeout phase includes preparation of final reports, financial reconciliation, and any required accounting for property.", "EPA generally awards three types of grants:\nFormula grants. EPA awards these grants noncompetitively to states in amounts based on formulas prescribed by law to support water infrastructure projects, among other things. For example, grants from the Clean Water and Drinking Water State Revolving Funds can be used to support infrastructure, such as water treatment facility construction, and improvements to drinking water systems, such as pipelines or drinking water filtration plants. According to EPA data, in fiscal year 2015, EPA awarded about $2.25 billion of $3.95 billion (about 57 percent) of grant funds as formula grants, as shown in figure 2.\nCategorical grants. EPA generally awards these grants—which EPA also refers to as continuing environmental program grants— noncompetitively, mostly to states and Indian tribes to operate environmental programs that they are authorized by statute to implement. For example, under the Clean Water Act, states and tribes can establish and operate programs for the prevention and control of surface water and groundwater pollution. EPA determines the amount of funding each grantee receives based on agency-developed formulas or program-specific factors. In fiscal year 2015, EPA awarded about $1.09 billion of $3.95 billion (about 28 percent) of grant funds as categorical grants, according to EPA data.\nDiscretionary grants. EPA awards these grants—competitively or noncompetitively—to eligible applicants for specific projects, with EPA program and regional offices selecting grantees and funding amounts for each grant. EPA primarily awards these grants to states, local governments, Indian tribes, nonprofit organizations, and universities for a variety of activities, such as environmental research, training, and environmental education programs. According to EPA data, in fiscal year 2015, EPA awarded about $0.513 billion of $3.95 billion (about 13 percent) of grant funds as discretionary grants.\nEPA also awarded $0.09 billion of $3.95 billion (about 2 percent) of grant funds to special appropriations act projects for specific drinking water and wastewater infrastructure projects in specific communities.", "Multiple federal and EPA requirements—established in laws and regulations—and EPA guidelines apply to monitoring the results of individual EPA grants and, more broadly, the results of EPA grant programs.\nThe following requirements and guidelines form the basis of how EPA aligns individual grants to achieve the agency’s public health and environmental objectives:\nFederal laws: Authorizing statutes for certain EPA grant programs, most notably the Clean Water Act, require states—which receive grants from EPA to capitalize state clean water revolving funds—to report annually to EPA on how they have met the goals and objectives identified in their intended use plans for their revolving funds.\nEPA regulations: EPA regulations require grantees to submit performance reports to EPA as specified in their grant agreements at least annually and typically no more frequently than quarterly. Under EPA’s regulations, the grantee’s performance should be measured in a way that will help improve grant program outcomes, share lessons learned, and spread the adoption of promising practices. Additionally, under EPA’s regulations, the agency should provide grantees with clear performance goals, indicators, and milestones, and should establish reporting frequency and content that allow EPA to build evidence for program and performance decisions, among other things.\nAgency-wide policies and guidance: EPA policies, such as its environmental results directive, call for grant work plans and performance reports to link to the agency’s strategic plan and include outputs and outcomes. The environmental results directive, the Policy on Compliance, Review, and Monitoring, and related guidance also call for EPA program officials to review interim and final performance reports—or for certain programs, use a joint evaluation process—to determine if the grantee achieved the planned outputs and outcomes, and document the results of these reviews in EPA’s grants management databases. Additionally, the environmental results directive calls for EPA program offices to report on significant grant results through reporting processes established by national program managers, such as data submissions to EPA databases.\nProgram-specific guidance: EPA program offices provide biennial guidance on each program’s priorities and key actions to accomplish health and environmental goals in EPA’s strategic plan. According to EPA officials, this guidance includes annual commitment measures, which guide implementation with EPA regions, states, tribes, and other partners. Many annual commitment measures include regional performance targets, which contribute to meeting EPA annual budget measures, and in turn, long-term strategic measures, according to EPA officials. EPA regional offices use these performance measures and targets to guide their negotiations with grantees on individual grant work plan outputs and outcomes.\nGrant-specific requirements: EPA incorporates requirements related to grantee reporting frequency, content, and reporting processes (i.e., written performance report, data submissions to an EPA database, or both) into individual grant terms and conditions as part of the final grant agreement. EPA and grantees also negotiate grant-specific outputs and outcomes, which grantees incorporate into their grant work plans.", "EPA monitors performance reports and program-specific data from grantees to ensure that grants achieve environmental and other program results, but certain practices hinder EPA’s ability to efficiently monitor some results. In addition, we identified a variety of monitoring issues that may hinder EPA’s ability to efficiently identify factors affecting grantee results.", "According to EPA policies and officials, after EPA approves grantee work plans that identify agreed-upon environmental and other results for each grant, grantees generally report information on their progress and grant results to EPA in two ways: (1) submitting performance reports— generally written—that describe the grantees’ progress toward the planned grant results in their work plans, such as using grant funds to provide technical assistance to local officials, and (2) electronically submitting program-specific data—generally numeric—on certain program measures, such as the number of hazardous waste violations issued, which EPA tracks in various program databases. According to an EPA official, the information streams from grantees differ in that the performance reports go to EPA project officers for the purpose of managing individual grants, whereas EPA program managers use the electronic data to monitor regional and program progress on EPA’s performance measures.\nPerformance reports. At least annually, grantees are to submit performance reports to EPA as specified in their grant agreements. EPA policies include general guidelines about what performance reports should include, such as a comparison between planned and actual grant results, but allow the frequency, content, and format of performance reports to vary by program and grant. For more information on the performance reports we reviewed, see appendix II.\nAccording to EPA officials, EPA project officers monitor these reports to review grantee progress toward agreed-upon program results, such as providing outreach to communities about hazardous waste. Project officers conduct two types of routine grants monitoring: (1) baseline monitoring, which is the periodic review of grantee progress and compliance with a specific grant’s scope of work, terms and conditions, and regulatory requirements, and (2) advanced monitoring, which is an in- depth assessment of a grantee or a project’s progress, management, and expectations. EPA assigns a certain number of advanced monitoring reviews to each regional and program office annually. In 2015, OGD assigned program and regional offices to perform advanced monitoring for at least 10 percent of their active grantees, which program and regional offices select based on criteria such as the size of the grant and the experience level of the grantee, among others.\nEPA project officers document the results of their monitoring—for example, whether grantees have made sufficient progress and complied with grant terms and conditions—in EPA’s grants management databases at least annually. Based on their baseline monitoring review, EPA project officers may impose more frequent or intensive grant monitoring, such as advanced monitoring, to address any identified concerns. According to EPA data, project officers recommended additional grant monitoring for 78 out of 2,987 reviews (about 3 percent) in 2015. Additionally, program and regional offices summarize any significant grants management- related observations or trends from their advanced monitoring reviews as part of their annual postaward monitoring plans.\nProgram-specific information. According to program officials, grantees also electronically submit program-specific information—generally numeric data—on certain results, such as the acres of brownfield properties made ready for reuse. According to EPA policy and program officials, program officials monitor these data to track and report program accomplishments, at the regional and agency levels, and, as applicable, to assess the agency’s progress meeting its performance measure targets in support of agency strategic goals. According to EPA officials, generally grantees or EPA program officials—depending on the database—are to enter grant results, such as the number of enforcement actions, into EPA’s program-specific data systems at agreed-upon intervals, such as quarterly. These requirements may be part of a grant’s terms and conditions.\nEPA Performance Measures and Data Systems The number of performance measures and data systems that the Environmental Protection Agency (EPA) uses to collect and analyze data on environmental and other program results in 2016—including incorporating performance data from grantees as relevant—varies across the three program offices we reviewed. For example, the Office of Water collects or analyzes grantee data on results for 13 of its 15 grant programs using 20 data systems, and integrates the results as appropriate into its reporting on 111 annual commitment measures. The Office of Land and Emergency Management collects or analyzes grantee data on results for 10 of its 13 grant programs using 4 systems, and integrates the results as appropriate into its reporting on 34 annual commitment measures. The Office of Air and Radiation collects or analyzes grantee data on results for 7 of its 9 grant programs using 3 systems, and integrates the results as appropriate into its reporting on 54 annual commitment measures.\nAccording to EPA officials, there is not always a direct link between individual grantee results and EPA’s annual budget and annual commitment performance measures. However, officials told us that each regional or program office considers information from its program- specific data systems that is relevant to program- or agency-level performance measures, interprets it, and enters the results as appropriate into EPA’s national performance tracking systems. For example, Office of Water officials use data collected from grantees in its Drinking Water National Information Management System database to report annually in EPA’s national performance tracking system the number of Drinking Water State Revolving Fund projects that have started operations.\nEPA officials said that reporting grant and program results to EPA has improved over time, as EPA has transitioned from collecting data in hard copy and expanded electronic reporting by grantees. Additionally, officials we spoke with from several states said that electronic reporting had certain benefits. EPA officials told us that collecting certain information electronically from grantees allows EPA to access and analyze grant and program results more efficiently than it can for results collected in a written format, because EPA officials do not have to manually enter information into a data system for analysis. Additionally, in response to information-sharing problems—such as incompatible computer systems, manual data entry, and differing data structures across program offices— EPA and the Environmental Council of States formed the Environmental Information Exchange Network (Exchange Network) in 1998, an information-sharing partnership that uses a common, standardized format so that EPA, states, and other partners can share environmental data across different data systems. As a result, EPA and its partners may access and use environmental data more efficiently, according to Exchange Network documents. For example, officials we interviewed from each of the eight state environmental agencies we reviewed said that they use the information they collect for EPA to either manage their programs or inform the public. Additionally, even with some technical issues with individual databases, officials from six of these eight agencies said that electronic reporting has several benefits, such as improving data timeliness, greater efficiency, and reduced administrative burden.\nFurthermore, based on our review of agency policy, analysis, and planning documents, we found that current and past EPA initiatives have taken steps to reduce the reporting burden on grantees and others. For example:\nSince 1996 EPA has been authorized to issue performance partnership grants, which allow states, Indian tribes, interstate agencies, and intertribal consortia grantees to combine funds from certain EPA grant programs into a single grant. EPA designed this system to provide grantees with greater flexibility to address their highest environmental priorities and reduce administrative burden and costs, among other objectives. In 2015, EPA issued a policy to increase awareness and encourage the use of these grants.\nIn 2008, EPA issued a policy to reduce reporting burdens for states awarded grants under 28 grant programs by establishing general frequencies for grant work plan progress reports and specifying that EPA regional offices could only require more frequent progress reports in certain circumstances.\nIn 2012, EPA’s OGD contracted with external experts to review its grants management processes and identify improvements as part of EPA’s Grants Business Process Reengineering Initiative. This initiative seeks to streamline and standardize the grants management process at EPA and develop an improved business process to be implemented through EPA’s new grants management data systems. The study identified several potential high-level improvements, such as reducing manual activities and expanding standardization in documents to ensure greater consistency and reduce administrative burden.\nIn 2013, EPA and states established a leadership council for E- Enterprise for the Environment—a joint initiative to streamline and modernize business processes shared between EPA and regulatory partners, such as states, and reduce reporting burden on regulated entities, among other goals. For example, in 2015, EPA and states initiated the Combined Air Emissions Reporting project, which seeks to streamline multiple emissions reporting processes at the federal, state, and local levels, according to EPA’s website. The project will establish a single, authoritative data repository that will reduce the industry and government transaction costs for reporting and managing emissions data through features such as autopopulated forms and data sharing across regulatory agencies.\nIn 2015, EPA finalized an electronic reporting rule that requires, among other things, states that receive grants to issue National Pollution Discharge Elimination System permits to substitute electronic reporting for paper-based reports, saving time and resources for states, EPA, and permitted facilities. According to an EPA economic analysis, when fully implemented, the new rule will eliminate 900,000 hours of reporting across regulated entities and state agencies. According to EPA’s fiscal year 2017 budget, the agency plans to further reduce the reporting burden by 1 million hours by the end of fiscal year 2017.\nIn 2016, EPA’s OGD issued its 2016-2020 Grants Management Plan, which includes several streamlining efforts specific to grants. For example, under Goal 2: Streamline Grants Management Procedures, EPA plans to evaluate its grants management processes and assess opportunities to streamline its procedures. Under this goal, EPA also plans to provide a mechanism for staff to submit feedback about existing burdens and new requirements or procedures. Furthermore, under Goal 4: Ensure Transparency and Accountability and Demonstrate Results, EPA plans to improve its process for monitoring grants and will collect input from external stakeholders, such as states and grantees, about how to address burdens.", "Based on our review of the three program offices that award the majority of EPA grant funding, we found that certain EPA monitoring practices in these offices hinder EPA’s ability to efficiently monitor some results and may increase EPA’s and grantees’ administrative burden. First, EPA collects a variety of information about grant results, but some of the information is not readily accessible. Second, EPA collects certain information from grantees twice, once in a written report and once in an electronic database. Third, one program office transfers data relevant to its annual performance measures from its program-specific databases to EPA’s national database manually rather than electronically. EPA officials and officials from several state environmental agencies who we interviewed said that these practices increase their administrative burden.", "EPA collects a variety of information about grant results through grantee performance reports and program-specific databases. However, some of the information was not readily accessible to project officers or grantees. Based on our review of performance reports across 23 grant programs, we found that the types of results that grantees reported, such as data collection and management, covered a variety of topics and were generally similar across programs, as shown in table 2. Additionally, we found that grantees electronically report a variety of information about grant results to program-specific databases, such as enforcement actions and environmental benefits of water infrastructure projects. However, only some of the information reported by grantees was readily accessible, either to the public through user-defined searches on EPA’s website or to grantees through accessing an EPA database directly. This is because the information in grantees’ performance reports is stored as file attachments to database records and EPA’s legacy grants management databases do not have the capability to search data stored in this format. For instance, a program manager that wanted to obtain information on the number and types of training activities funded by a particular grant program—and that are not reported to a program-specific database—would need project officers to open each performance report individually and manually review it for relevant information. OGD officials told us that—depending on the availability of funds—they plan to develop a web-based portal for grantees to submit documents, including their performance reports, centrally as part of their new grants management database.\nUnder EPA’s regulations, grantee performance should be measured in a way that will help improve grant program outcomes, share lessons learned, and spread the adoption of promising practices. EPA has procedures in place to collect this information through its program-specific databases and performance reports. However, we have previously found that for performance information to be useful, it should meet users’ needs for consistency, relevance, accessibility, and ease of use, among other attributes. EPA’s 2014 internal analysis of its grants management business processes identified improvements that if implemented into EPA’s planned web-based portal, could improve the accessibility and usefulness of information in grantee performance reports for EPA, grantees, and other users. For example, the analysis found that incorporating expanded search capabilities into EPA’s new grants management database, such as keyword searches, could improve users’ access to relevant information. However, it is unclear to what extent, if at all, these features will be applied to the web-based portal because the high-level analysis does not specify how performance reports will be stored and accessed through the web-based portal.\nBecause EPA, grantees, and other users cannot readily access information in performance reports about grant results and how different grantees achieve them, these reports are less useful for sharing lessons learned and building evidence for demonstrating grant results. Making the information that EPA collects in these reports more accessible by incorporating expanded search capability features, such as keyword searches, into its proposed web-based portal for collecting and accessing performance reports, could improve its usefulness to EPA and grantees in identifying successful approaches to common grantee challenges. Additionally, improved accessibility could facilitate EPA’s ability to assess and report environmental and program results achieved through its grants by reducing the need to manually open and review each performance report to identify relevant information.", "EPA collects certain information from grantees twice—once in a written report and once in an electronic database—and in some cases, we found varying degrees of overlap between the content of the performance reports and program-specific databases that we reviewed. Specifically, of the performance reports we reviewed across 23 grant programs, we found that one or more grantee performance reports included information that grantees also report to EPA through a program-specific database for 12 programs, as shown in table 3. For 10 of these programs, the content in 15 of the performance reports we reviewed had some overlap with data submitted through relevant program-specific databases, and for 5 of the programs, 12 reports we reviewed had substantial overlap. For more information on the program-specific databases we reviewed, see appendix II.\nAdditionally, officials we interviewed from five of the eight state environmental agencies we reviewed confirmed that under current reporting requirements, they reported the same information to EPA twice—once electronically and once in a written performance report, which increased their administrative burden. Specifically, these state officials provided the following examples:\nMuch of grantee reporting for the Clean Water State Revolving Fund—information reported electronically to EPA—is also reported separately in the written state revolving fund annual performance report.\nGrantees report the same activities in the Public Water System Supervision program that they report separately to EPA’s state revolving fund databases for the state program set-asides, funded by the Drinking Water State Revolving Fund.\nUnder the State Hazardous Waste Management Program, EPA calls for grantees to include permitting, compliance, enforcement, and corrective action activities and accomplishments—already reported to EPA electronically—in their performance reports.\nBecause of different programmatic and reporting needs for water program grants, officials often find themselves reporting the same data multiple times in different formats.\nGrantees submit data on actions to address nonpoint source pollution to EPA electronically throughout the year—which grantees also report separately to EPA in the annual performance reports for Nonpoint Source Pollution Grants, as required by the Clean Water Act.\nOfficials we interviewed from five of the eight state environmental agencies said that EPA could work with states to evaluate how grantees report and further streamline reporting and data collection. Officials we interviewed from one state agency said that with limited resources, they have no capacity for additional reporting requests, without some modification to reporting schedules or simplification of the reporting process.\nAccording to EPA officials, EPA’s reporting process has evolved over time in response to statutory changes, such as amendments to the Government Performance and Results Act of 1993—which generally requires that agencies develop performance goals that are expressed in objective, quantifiable, and measurable form and annually report on their performance in meeting those goals. Additionally, to facilitate grantees’ timely reporting and access to environmental data, EPA and its partners have expanded electronic reporting to program-specific databases through the Exchange Network data-sharing partnership with states and others, according to EPA and Exchange Network documents. Furthermore, EPA officials told us that collecting information in both written performance reports and program-specific databases is beneficial because the information serves different purposes. Specifically, EPA officials said that performance reports are designed to provide project officers with information in the format they need for monitoring grantee progress, for example, narrative information on grantee activities to achieve results. Similarly, program-specific databases are designed to provide program managers with information in the format they need for monitoring program progress, for example, information that will allow them to report national-level results. However, officials from two of the three program offices we reviewed said that project officers either currently used, or could use, data within some program-specific databases to help monitor grantee progress.\nBecause EPA collects certain information in both performance reports and program-specific databases for 12 of the programs we reviewed, some grantees have an increased administrative burden, which may result in fewer resources dedicated to activities that directly protect human health and the environment. Our prior work and EPA analyses of its business processes have shown that duplication of efforts can increase administrative costs and reduce the funds available for other priorities. By identifying grant programs where existing program-specific data reporting requirements can meet EPA’s performance reporting requirements for grants management purposes, the agency can help reduce duplicative reporting for grantees in a manner consistent with EPA’s ongoing streamlining efforts.", "Because one program office we reviewed, the Office of Water, transfers certain data relevant to program results from its program-specific databases to EPA’s national database manually, this office does not benefit from greater data quality control, accessibility, and administrative efficiencies reported by another program office that electronically transfers data relevant to program results. Specifically, the Office of Land and Emergency Management transfers data relevant to most of its annual commitment measures from its program-specific databases to EPA’s national database electronically, using EPA’s Performance Assessment Tool business intelligence software. According to Office of Land and Emergency Management officials, the software provides several advantages to manual data transfer, including improved accuracy, efficiency, the ability to trace data between the different data systems, and improved data accessibility for EPA program managers.\nIn contrast, the Office of Water manually transfers data relevant to its annual commitment measures from its program-specific data systems to EPA’s national performance database—the Budget Automation System— using a spreadsheet. According to Office of Water officials, they are not currently planning to develop the capability to transfer data electronically because EPA is in the process of replacing its Budget Automation System with a new system. Instead, these officials said that the office is using other technology tools—such as collaboration software—to make the data transfer within EPA more efficient and reduce errors. However, an Office of Water official acknowledged that the quality assurance process for data transferred manually is lengthy.\nStandards for Internal Control in the Federal Government states that control activities can be implemented in either an automated or a manual manner but that automated control activities tend to be more reliable because they are less susceptible to human error and are typically more efficient. Furthermore, EPA planning documents and analyses demonstrate the potential benefits of improving efficiency in government operations by using automated control activities, such as reduced administrative burden and cost savings. However, by transferring data from its program-specific databases to EPA’s agency-wide system manually, the Office of Water does not benefit from the greater data quality control, accessibility, and administrative efficiencies available from electronic transfer of data. By adopting software tools, as appropriate, to electronically transfer relevant data on program results from program- specific databases to EPA’s new national performance system, the Office of Water could reduce its administrative burden.", "Our review of 49 written performance reports across 23 grant programs identified a variety of monitoring issues related to EPA’s environmental results directive. First, we found that project officers may interpret EPA’s environmental results directive differently because the directive is unclear. Second, in some cases, grantees did not include references to the agreed-upon outputs and outcomes from their work plan to demonstrate progress achieving planned results. Third, because grantees submit performance reports in a written format, there are no built-in quality controls to ensure these reports’ consistency with EPA’s directive. Each of these issues may have contributed to the inconsistencies we found in the reports we reviewed. Inconsistencies in grantee reports may make it more difficult for EPA project officers to efficiently identify or report patterns in factors affecting grantee’s achievement of their agreed-upon results.", "We found that individual project officers may be interpreting EPA’s environmental results directive differently because the directive is unclear. Specifically, we found that reports’ consistency with the directive varied by grantee and across some of the grant programs we reviewed. One reason for these variations may be that project officers have different interpretations of EPA’s directive, as the directive does not provide specific criteria for evaluating performance reports’ consistency.\nEPA’s environmental results directive establishes EPA’s policy to ensure that grant outputs and outcomes are appropriately addressed in grantee performance reports, to the maximum extent practicable. Specifically, it calls for program offices to review performance reports and determine whether the grantees achieved the environmental or other outputs and outcomes in their grantee work plans, which includes assessing whether grantee explanations for unmet outputs or outcomes are satisfactory. According to the directive, the results of this review should be included in EPA’s official project file for each grantee.\nHowever, the directive does not specify what factors the project officers who manage grants should consider when determining whether the grantees’ addressing of outputs and outcomes in their performance reports is appropriate. Based on our review of performance reports, we found that the level of detail in grantees’ descriptions of how they addressed grant outputs and outcomes varied across the reports we reviewed. For example, some grantees reported completing or providing training activities without including additional information on the topic, date, or number of attendees. In contrast, other grantees provided specific information on training, such as which employees attended training, the various courses, and dates of classes.\nSimilarly, the directive does not specify what factors project officers should consider when determining whether a grantee’s explanation for an unmet output or outcome in a performance report is satisfactory. For example, we found that 17 of 49 (about 35 percent) grantee performance reports were consistent with EPA’s directive because they included explanations for each outcome they did not achieve, and 20 of 49 (about 41 percent) grantee performance reports were partially consistent with the directive because they did not include explanations for all missed outcomes. For the remaining 12 grantee performance reports (24 percent), we could not determine whether the reports were consistent with EPA’s environmental results directive because they did not include any references to the agreed-upon outputs and outcomes from the grantee work plan. (See table 4.)\nAccording to federal standards for internal control, management should implement control activities through policies. Additionally, these standards state that each unit within an agency also is to document policies in the appropriate level of detail to allow management to effectively monitor the control activity. With its environmental results directive, EPA has implemented certain control activities through its policy to help ensure that grantee performance reports appropriately address planned results from grantee work plans. However, the inconsistencies we found in our review of performance reports may indicate that the guidelines within EPA’s environmental results directive may not be at a sufficient level of detail for EPA to effectively monitor its implementation. By clarifying its directive or guidance to discuss the factors project officers should consider when determining whether reports appropriately address planned results and include satisfactory explanations for unmet results, EPA would have better assurance that project officers are implementing its environmental results directive consistently. In turn, implementing its directive consistently may help EPA demonstrate the achievement of environmental results from its grants, and also help project officers better identify or report patterns in factors that are affecting grantees’ achievement of planned results.", "For 12 of the 49 (24 percent) performance reports we reviewed, grantees did not include references to the agreed-upon outputs and outcomes from their work plan to demonstrate progress in achieving planned grant results. Because some grantees did not include information from their work plans in their performance reports, we could not determine whether these grantees achieved their planned results or provided explanations for any results they did not achieve, in accordance with EPA’s environmental results directive (see table 4). To assess these grantees’ progress, the project officer managing the grant would have to manually compare the information in each grantee’s performance report against the grantee’s work plan to determine if the actual results matched the planned results.\nDuring a 2010 EPA-contracted review of performance reports’ consistency with EPA’s environmental results directive, the contractor identified the same issue with several performance reports. Specifically, although the contractor found that 147 out of 157 (about 94 percent) performance reports were greater than 60 percent consistent with EPA’s directive, for 55 of these performance reports, the contractor determined their consistency by inference because the performance reports did not contain explicit linkages to planned outcomes within the grantee work plans. Consequently, to improve the consistency of performance reports with EPA’s environmental results directive, the contractor recommended that EPA consider encouraging grantees to more clearly label the planned outputs and outcomes from their work plans in their performance reports.\nIn fiscal year 2013, EPA implemented a policy for certain categorical grant programs that calls for grantee performance reports to include certain elements, including an explicit reference to the planned results in the work plan and projected time frame. However, this policy does not apply to all EPA grants, including formula grants and other categorical grants. Expanding aspects of this policy, specifically, the call for performance reports to include an explicit reference to the planned results in the work plan and projected time frames, could achieve several benefits identified in the 2010 review. By increasing the extent to which grantees clearly label the planned results from their work plans in their performance reports, EPA would facilitate project officers’ review of grantee progress, reduce the subjectivity of the review, and increase transparency between EPA and grantees about planned grant results.", "Because grantees generally submit written performance reports, there are no built-in data quality controls, such as those for certain electronic reporting formats, to ensure that these reports are consistent with EPA’s environmental results directive. In contrast, we found that some of EPA’s program-specific databases include built-in quality controls, such as required fields, drop-down menus, or other data entry rules designed to ensure that the information entered is complete, accurate, and consistent. Because there are no built-in quality controls for written performance reports, EPA project officers must manually review each performance report to determine consistency with EPA’s directive.\nAn OGD official told us that OGD plans to develop a web-based portal for grantees to submit documents, including their performance reports, electronically as part of its new grants management database. However, the business process analysis underlying the web-based portal feature of the new database does not specify whether these reports would continue to be uploaded by grantees as attachments or input directly into an application with built-in data quality controls, such as required fields, to ensure consistency with EPA’s directives. The OGD official said that the office will not explore options for the web-based portal, including a timeline, until it has migrated from the old database to the new system, which it expects to complete in fiscal year 2018.\nAccording to federal standards for internal control, control activities may be manual or automated. EPA has manual control activities for implementing its environmental results directive, which is consistent with these standards. However, a 2014 analysis of EPA’s grants management business processes found that EPA relied heavily on manual processes and could incorporate several improvements into its new grants management database system, including using electronic templates to increase information consistency and reduce the administrative burden of manual activities. By incorporating built-in data quality controls for performance reports into its planned web-based portal, EPA could improve these reports’ consistency with the environmental results directive and potentially reduce project officers’ administrative burden in performing manual reviews. Furthermore, improved consistency in performance reports could help EPA project officers to more efficiently identify or report patterns in factors that are affecting grantees’ achievement of their agreed-upon results.", "EPA has adopted a number of good practices for monitoring environmental and other program results from the nearly $4 billion dollars it distributes each year in grants, in part to implement environmental statutes and regulations. Furthermore, EPA continues to pursue opportunities to streamline its processes and reduce the reporting burden for regulated entities and grantees. Yet certain monitoring practices— collecting some grant results in a format that is not accessible, collecting some information from grantees twice, and manually transferring data between databases—increase EPA and grantees’ administrative burden in monitoring and reporting environmental and program results. By incorporating expanded search capability features, such as keyword searches, into its proposed web-based portal, EPA can improve the accessibility of information in grantees’ performance reports and make them more useful for sharing lessons learned and building evidence for demonstrating grant results. In addition, by identifying grant programs where existing program-specific data reporting can meet EPA’s performance reporting requirements for grants management purposes, the agency can eliminate duplicative reporting by grantees in a manner consistent with EPA’s ongoing streamlining efforts. Furthermore, by adopting software tools, as appropriate, to electronically transfer relevant data on program results from program-specific databases to EPA’s new national performance system, the Office of Water could reduce its administrative burden.\nEPA has also implemented certain internal controls, such as its environmental results directive, to ensure that grantees achieve the environmental and other planned results in their work plans. However, we identified a variety of monitoring issues related to EPA’s environmental results directive—such as unclear guidance, the omission of references to planned results in performance reports to document progress, and written grantee performance reports that do not have built-in quality controls— that may undermine these efforts. By clarifying its directive or guidance to discuss the factors project officers should consider when determining whether performance reports are consistent with EPA’s environmental results directive, EPA would have better assurance that project officers are implementing its directive consistently. In addition, expanding aspects of EPA’s policy for certain categorical grants, specifically, the call for performance reports to include an explicit reference to the planned results in grantees’ work plans and their projected time frames for completion to all grants, would among other things facilitate project officers’ reviews of grantee progress results. Finally, by incorporating built-in data quality controls for performance reports into its planned web-based portal, EPA could improve these reports’ consistency with the environmental results directive and potentially reduce project officers’ administrative burden in performing manual reviews.", "We recommend that the EPA Administrator direct OGD and program and regional offices, as appropriate, as part of EPA’s ongoing streamlining initiatives and the development of a grantee portal, to take the following six actions: Incorporate expanded search capability features, such as keyword searches, into its proposed web-based portal for collecting and accessing performance reports to improve their accessibility.\nIdentify grant programs where existing program-specific data reporting can meet EPA’s performance reporting requirements for grants management purposes to reduce duplicative reporting by grantees.\nOnce EPA’s new performance system is in place, ensure that the Office of Water adopts software tools, as appropriate, to electronically transfer relevant data on program results from program-specific databases to EPA’s national performance system.\nClarify the factors project officers should consider when determining whether performance reports are consistent with EPA’s environmental results directive.\nExpand aspects of EPA’s policy for certain categorical grants, specifically, the call for an explicit reference to the planned results in grantees’ work plans and their projected time frames for completion, to all grants.\nIncorporate built-in data quality controls for performance reports into the planned web-based portal based on EPA’s environmental results directive.", "We provided a draft of this report to EPA for its review and comment. In its written comments, reproduced in appendix III, EPA stated that it agreed with our findings and six recommendations. EPA also provided technical comments, which we incorporated into the report as appropriate.\nEPA agreed with our recommendation that the agency incorporate expanded search capability features into its proposed web-based portal for performance reports and stated that incorporating such features would enable easier access to performance report information. EPA also noted that the web-based portal is a long-term initiative, subject to the agency’s budget process and replacement of its existing grants management system, which the agency expects to complete in fiscal year 2018.\nEPA generally agreed with our recommendation that the agency identify grant programs where existing program-specific data reporting by grantees can also meet EPA’s separate performance reporting requirements, to reduce duplicative reporting by grantees. EPA stated that it will work with recipient partners to identify where duplicative reporting can be reduced and anticipates completing this effort by the end of fiscal year 2017. However, EPA noted that program-specific data cannot be relied upon to meet all of the agency’s grants management needs and that performance reports often contain other information that allows EPA project officers to monitor a recipient’s progress in meeting work plan commitments, which cannot be gleaned from output data entered into the agency’s program-specific tracking systems. Additionally, EPA said that not all project officers have access to program-specific databases which would require the agency to consider expanding project officer access to those databases to enhance grant performance monitoring.\nEPA agreed with our recommendation that the agency ensure that the Office of Water adopts software tools to electronically transfer relevant data from program databases to EPA’s national performance system, as appropriate. EPA stated that it will also apply this recommendation to all program-specific databases—not just Office of Water databases—where appropriate and cost-effective. EPA also noted that in some cases, not all data from program-specific databases may be appropriate for direct electronic transfer because some individual grant data may need to be analyzed before being summarized at the national level.\nEPA agreed with our recommendation that EPA clarify the factors project officers should consider when determining whether performance reports are consistent with EPA’s environmental results directive. EPA stated it will modify the implementation guidance for the directive in fiscal year 2017.\nEPA agreed with our recommendation that EPA expand aspects of EPA’s policy for certain categorical grants, specifically, the call for an explicit reference to the planned results in grantee work plans and their projected time frames for completion, to all grants. EPA stated it will revise the existing policy in fiscal year 2017.\nEPA generally agreed with our recommendation that the agency incorporate built-in quality controls for performance reports into the planned web-based portal based on EPA’s environmental results directive. However, EPA noted that identifying and deploying the appropriate data quality controls is a long-term effort subject to budgetary considerations, completion of the agency’s replacement of its existing grants management system, and extensive collaboration with internal and external stakeholders. EPA also stated that full achievement of built-in quality controls, such as electronic templates, as envisioned in the draft report would require standardized work plan and performance report formats subject to clearance from the Office of Management and Budget. Additionally, EPA noted that grant recipients and EPA program offices have considered but generally not supported standardizing work plans and performance reports in the past. As a first step in implementing this recommendation, EPA stated that it would seek feedback from the recipient and program office community and will initiate this process in fiscal year 2017.\nWe recognize that EPA has considered standardizing work plans and performance report formats in the past, and we reviewed the agency’s 2009 “lessons learned” analysis as part of this report (see footnote 29, page 15). We are not recommending that EPA repeat its previous effort and develop a template with standardized program-specific measures to improve reports’ consistency. Specifically, implementing built-in quality controls for performance reports in EPA’s web-based portal would not necessarily require grantees to measure and report the same information across grants. For example, EPA could design an electronic template that follows the guidelines of its existing policies for work plans and performance reports—such as allowing grantees and EPA to negotiate appropriate outputs and outcomes for each grant. If grantees entered their grant-specific outputs and outcomes directly into EPA’s web-based portal as an electronic version of their work plan, the portal could use the information to prepopulate an electronic performance report and reduce manual data entry. Additionally, the electronic performance report could include required fields, such as an explanation field, if the grantee did not meet a particular output or outcome from its work plan. We continue to believe that such controls would improve the consistency of grantee performance reports with EPA’s environmental results directive, and that both EPA project officers and grantees could benefit from the reduced administrative burden associated with submitting and reviewing performance reports electronically.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Administrator of the Environmental Protection Agency, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3841or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "This report examines (1) how the Environmental Protection Agency (EPA) awards grants, (2) the federal and EPA requirements and guidelines for monitoring grant and program results, and (3) how EPA monitors its grants to ensure that environmental and other program results are achieved.\nTo examine how EPA awards grants and the federal and EPA requirements and guidelines for monitoring grant and program results, we reviewed relevant federal laws, regulations, and EPA’s policies and guidance for awarding and monitoring grants. Additionally, we reviewed our prior work on grants management. We also spoke to officials from EPA’s Office of Grants and Debarment (OGD) about how EPA awards grants and EPA’s policies for monitoring grants, and the three program offices that award the majority of EPA grant dollars—the Office of Water, Office of Land and Emergency Management, and Office of Air and Radiation—about EPA program-level guidance for monitoring grant results.\nTo examine how EPA monitors its grants to ensure that environmental and other program results are achieved, we reviewed EPA’s monitoring processes for grants in the three program offices that award the majority of EPA grant dollars. We identified 45 grant programs awarded by the three program offices, from the Catalog of Federal Domestic Assistance, a clearinghouse for information on federal grant opportunities. We identified an initial list of program-specific databases for the grant programs using information from EPA and its partners’ Environmental Information Exchange Network and EPA’s Central Data Exchange websites. For each grant program we identified, we requested information from EPA program offices, including any corrections to the list of grant programs and associated program-specific databases, whether EPA or grantees enter data into the databases, and how grantees submit data. For these 45 programs, we searched EPA’s Integrated Grants Management System and State Grant Information Technology Application for relevant performance reports.\nBased on our search results, we selected a nongeneralizable sample of 49 performance reports across 23 grant programs using the following criteria: (1) whether a performance report was electronically available, (2) whether different EPA regions were represented, (3) whether the grantee was a state grantee that we had interviewed, and (4) whether other documentation—such as an EPA routine monitoring report—was available. Although the results of our review cannot be projected agency- wide because our sample was nongeneralizable, the performance reports represent a broad array of grant programs and include grantees in each EPA region. For each of the 23 grant programs for which we obtained a report, we also collected information on the program-specific database associated with the program, as applicable. We collected information on the content of EPA’s program-specific databases from the Environmental Information Exchange Network and the Central Data Exchange websites, EPA documents collected by a prior GAO team, and EPA’s internal and external websites. Two analysts reviewed the reports and coded them in the following ways: (1) type of content and format of the report, (2) degree of consistency with EPA’s environmental results directive, and (3) degree of overlap between the content of the performance reports and information collected from grantees in EPA’s program-specific databases. To ensure consistency in our review, each analyst reviewed the other’s work and resolved any differences.\nTo describe the grant results reported in performance reports, we reviewed the content of the performance reports we collected and developed nine mutually exclusive categories of information that grantees typically provide to EPA in these reports. To determine performance reports’ consistency with EPA’s environmental results directive, we reviewed each report against the directive’s call for EPA to review performance reports to (1) determine whether the grantees achieved the planned outputs and outcomes in their work plans and (2) explain any unmet outputs and outcomes. From this review, we developed four categories: 1. Consistent—the report describes progress against outputs or outcomes from the grantee’s work plan and explains all missed targets, if any. 2. Partially consistent—the report includes progress against some, but not all, outputs or outcomes from the grantee’s work plan or explains some, but not all missed targets, if any. 3. Not consistent—the report does not describe progress against outputs or outcomes from the work plan. 4. Could not determine—the report describes grantee activities without an explicit reference to outputs or outcomes from the work plan to demonstrate progress or to allow a reviewer to identify missed outputs or outcomes requiring explanations.\nWe did not review any other documentation from EPA’s official project file or grants management databases, which is consistent with the methodology described in a 2010 EPA-contracted study examining performance reports’ consistency with EPA’s environmental results directive.\nTo determine whether grantees reported the same information to EPA twice, we reviewed the content of the performance reports and compared the report content against the information we collected describing data elements in EPA’s program-specific databases for that grant, as applicable. Based on this review, we created four categories of overlap between the report content and the data fields in EPA’s databases: 1. No overlap—no matches between content. 2. Minimal overlap—one to two matches between content. 3. Some overlap—three to five matches in content. 4. Substantial overlap—six matches or more between content.\nWe interviewed officials from EPA’s OGD, Office of Water, Office of Air and Radiation, Office of the Chief Financial Officer, Office of Land and Emergency Management, and lead regional offices for certain programs to discuss EPA’s processes for monitoring environmental and other program results from grants. We also provided program offices with a standard set of follow-up questions about how they collect and monitor environmental and other program results from grantees. Additionally, we interviewed representatives from the Environmental Council of States— an association of state environmental agency leaders—and a nongeneralizable sample of officials from environmental agencies in eight states—California, Hawaii, Maryland, Michigan, New York, North Carolina, Pennsylvania, and West Virginia—to obtain their perspectives on EPA’s monitoring processes for grants. We selected these eight states because they received the greatest amount of funding from the federal government, according to an Environmental Council of States’ analysis of state environmental budgets data in 2012, the most recent publicly available data. The results of our interviews with officials from these agencies cannot be generalized to those of states not included in our review.\nWe conducted this performance audit from August 2015 through July 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Table 5 summarizes the scope of our review of grantee performance reports.\nTable 6 provides information on which program-specific databases we reviewed.", "", "", "", "In addition to the contact named above, Michael Hix (Assistant Director), Amy Bowser, Cindy Gilbert, Taylor Hadfield, Thomas James, Benjamin Licht, Kimberly McGatlin, Alison O’Neill, Danny Royer, Jeanette Soares, Sara Sullivan, Kiki Theodoropoulos, and Lisa Van Arsdale made key contributions to this report." ], "depth": [ 1, 1, 1, 1, 2, 2, 3, 3, 3, 2, 3, 3, 3, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "h0_full h3_full", "h2_full h1_full", "h2_full h3_title", "", "h2_full", "", "h2_full", "", "h2_full h3_title", "h3_full", "", "h2_full", "", "h2_full", "", "h3_full", "", "", "", "", "" ] }

{ "question": [ "How does the EPA classify the grants it awards?", "Why did the EPA award formula grants to states?", "How were the categorical grants EPA awarded utilized?", "How does EPA determine the amount of funding each discretionary grant receives?", "What activities did the EPA award discretionary grants for?", "How do EPA regulations monitor grant program results?", "What does EPA do with these annual reports?", "What does EPA put into grant terms and conditions?", "Why does EPA monitor performance reports?", "Which practices might hinder EPA's ability to efficiently monitor results?", "Which practices might hinder EPA's ability to efficiently identify factors affecting results?", "What improvements could be gained by incorporating built-in data quality controls?", "Why does EPA provide guidance through directives?", "What does the report examine?", "What was the process GAO used to collect the information in the report?" ], "summary": [ "The Environmental Protection Agency (EPA) generally awards three different categories of grants: formula, categorical, and discretionary.", "According to EPA data, in fiscal year 2015, EPA awarded the majority of its grant funds— $2.25 billion of $3.95 billion (57 percent)—as formula grants, primarily to states to support water infrastructure based on funding formulas prescribed by law.", "EPA awarded $1.09 billion (about 28 percent) of its grant funds as categorical grants. These grants were generally awarded noncompetitively, mostly to states and Indian tribes to operate environmental programs.", "EPA determines the amount of funding each grantee receives based on agency formula or program factors.", "EPA awarded $0.513 billion (about 13 percent) in discretionary grants for specific activities, such as research. EPA also awarded $0.09 billion (2 percent) in grant funds to special appropriations act projects for specific drinking water and wastewater infrastructure projects in specific communities.", "Multiple federal and agency requirements and guidelines apply to monitoring grant and grant program results. For example, under EPA regulations, grantees must submit performance reports to EPA at least annually.", "EPA policies and guidance, such as its environmental results directive, call for EPA program officials to review performance reports to determine if the grantee achieved the planned results and for program offices to report on significant grant results through other processes, such as submissions to EPA databases.", "EPA incorporates requirements related to grantee reporting frequency, content, and reporting processes into grant terms and conditions.", "EPA monitors performance reports and program-specific data from grantees to ensure that grants achieve environmental and other program results.", "However, GAO found that certain practices may hinder EPA's ability to efficiently monitor some results and increase administrative burden. For example, EPA collects some information from grantees twice—once in a performance report and once in a database—because EPA uses the information for different purposes. GAO's prior work and EPA analyses have shown that duplication of efforts can increase administrative costs and reduce the funds available for other priorities. By identifying grant programs where existing data reporting can meet EPA's performance reporting requirements, the agency can help reduce duplicative reporting for grantees.", "Also, GAO's review of grantee performance reports found issues that may hinder EPA's ability to efficiently identify factors affecting grantee results. For example, because grantees submit performance reports in a written format, there are no built-in quality controls to ensure these reports' consistency with EPA's environmental results directive. Rather, EPA officials must perform a manual review. A 2014 analysis of EPA's grants management processes found that EPA relied heavily on manual processes and could incorporate improvements into its new grants management database system. EPA officials said they plan to develop a web-based portal for grantees to submit documents, such as performance reports.", "By incorporating built-in data quality controls, such as required fields, for performance reports into its planned web-based portal, EPA could improve these reports' consistency with the environmental results directive and reduce the administrative burden of performing manual reviews.", "EPA provides guidance through directives that seek to ensure the appropriate use of funds and achievement of environmental results or public health protection, among other purposes.", "GAO was asked to review how EPA monitors environmental and other grant results. This report examines (1) how EPA awards grants, (2) the federal and EPA requirements for monitoring grant and program results, and (3) how EPA monitors its grants to ensure that environmental and other program results are achieved.", "GAO analyzed relevant federal laws, regulations, and EPA guidance; reviewed processes for ensuring that environmental results are achieved for the three EPA program offices that award the majority of EPA grant dollars; and interviewed EPA officials and officials from eight state environmental agencies—selected based on the amount of environmental funding they receive from EPA." ], "parent_pair_index": [ -1, -1, -1, -1, 3, -1, 0, -1, -1, -1, 1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3, 0, 0, 0 ] }

{ "title": [ "Background", "BOP Population and Institutions", "BOP Discretionary Authorities That Can Reduce a Prisoner’s Period of Incarceration or Time in BOP Custody", "BOP’s Use of Authorities That Can Reduce a Federal Prisoner’s Period of Incarceration Varies", "Eligible Prisoners Can Participate in RDAP in Time to Complete the Program; Few Receive the Maximum Sentence Reduction", "BOP Has Used Other Authorities Less Frequently to Reduce Federal Prisoners’ Periods of Incarceration", "Inmate Eligibility and Lack of Capacity Impact BOP’s Use of Certain Flexibilities", "Certain Inmates’ Ineligibility for Community Corrections Impacts BOP’s Use of RRCs and RDAP", "Lack of Available Capacity Impacts BOP’s Use of RRCs and RDAP", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Federal Bureau of Prisons", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "In fiscal year 2012, BOP had a budget of about $6.6 billion for salaries and expenses and as of December 2011, BOP had a staff of about 38,000, which includes administrative, program, and support staff responsible for all of BOP’s activities nationwide. BOP houses inmates across six geographic regions in 117 federal institutions, 15 privately managed prisons, 185 RRCs (also known as halfway houses), and home detention. At the close of fiscal year 2011, about 94 percent of BOP’s inmate population was incarcerated in either federal institutions or privately managed prisons, operating at four different security level designations: minimum, low, medium, and high. The designations depend on the level of security and staff supervision the institution is able to provide such as the presence of security towers; perimeter barriers; the type of inmate housing, including dormitory, cubicle, or cell-type housing; and the staff-to-inmate ratio. Some BOP institutions include multiple prison facilities with different security classifications under common management, in part to increase cost efficiencies. According to BOP, privately managed low-security facilities primarily house criminal aliens. Figure 1 shows the distribution of BOP institutions, privately managed prisons, and RRCs across BOP’s six geographic regions.\nTo house inmates in community corrections locations, BOP contracts with private organizations to manage 185 RRCs around the country. These RRCs allow BOP to house inmates outside of a prison environment to either serve out their full sentence or their remaining sentence prior to release in the community. Inmates are authorized to leave for approved activities, such as seeking employment, working, counseling, visiting, or recreation, but are monitored 24 hours a day through sign-out procedures, regular head counts, staff visits to the approved locations, and random phone contacts. Inmates in RRCs are also required to work, or be actively seeking work, and to pay a percentage of their salaries as a subsistence fee to cover some of their expenses at the RRC. Some federal inmates are placed on home detention at the end of their prison term, either directly from an institution, or following some time in an RRC. Home detention describes all circumstances under which an inmate is serving a portion of his or her sentence while residing in his or her home. Home detention inmates are held to strict schedules and curfews and are monitored by a nearby RRC or the U.S. Probation Office through random staff visits, phone contacts, and occasionally through the use of electronic monitoring.inmate population was housed in RRCs or home detention.", "BOP has a number of discretionary authorities it can use to impact the period during which an inmate is incarcerated or remains in BOP custody. According to BOP officials, many of the programs that arise from these authorities are primarily intended to rehabilitate inmates and prepare them for reentry into society, as well as encourage good behavior while in BOP custody. The authorities can be classified into two main categories: (1) authorities that reduce the length of the inmate’s sentence, and (2) authorities that allow BOP to transfer an inmate out of prison to serve the remainder of his or her sentence in an RRC or home detention. Table 1 provides the statutory provisions allowing for BOP discretion to reduce a federal prisoner’s period of incarceration.", "", "BOP is required, subject to the availability of appropriations, to provide residential substance abuse treatment and make arrangements for appropriate aftercare for all eligible prisoners. Generally, the process to determine inmate eligibility for RDAP participation begins when inmates express interest in the program.nonviolent participants a sentence reduction incentive of up to 12 months In June 1995, BOP began offering for successful completion of the program. The amount of sentence reduction awarded upon completion is based on the length of an inmate’s sentence.complete RDAP, and receive a sentence reduction if eligible.\nEarned GCT credit does not vest until an inmate’s release date, meaning that all credit is vulnerable to forfeiture for disciplinary cause. generally considered for departures.offenses and being taken advantage of as common mitigating circumstances. One DHO we spoke with reduced a newer inmate’s disallowance because the inmate was manipulated by a fellow inmate to make a prohibited phone call for him. DHOs cited repeated offenses, egregious acts, and violence against correctional officers as common aggravating circumstances. One DHO we spoke with recalled forfeiting over 300 days of an inmate’s earned GCT credit after the inmate was involved in a prison riot. The six DHOs we spoke with told us that the disallowance guidelines were clear, and that the discretion to depart from the guidelines offered them sufficient flexibility and latitude to successfully impact inmate behavior.\nFor example, DHOs cited first-time Although most prisoners receive all of their potential GCT credit, BOP’s method of awarding GCT credit at the end of each year an inmate serves results in a maximum of 47 days of GCT credit earned per year of sentence imposed rather than the 54 days that inmates who have contested BOP’s method in court maintain was the original intent of the statute. sentence guidelines with the understanding that inmates would receive GCT credit so that their actual time served would be 85 percent of the length of the sentence imposed by the judge, assuming good behavior. BOP’s method of awarding GCT, however, results in inmates serving more than 85 percent of their imposed sentences, even after earning the maximum GCT credit, as can be seen in table 4, for a hypothetical sentence of 10 years imposed by the sentencing judge.\nAs authorized in statute, 18 U.S.C. § 3624(b), BOP awards “up to 54 days at the end of each year of the prisoner’s term of imprisonment,” or 54 days per year of sentence served. As applied by BOP, this results in 47 days earned per year of sentence imposed because inmates do not earn GCT credit for years they do not ultimately serve due to being released early.\nInmate released during 9th year, after completing 8 years and 260 days 38 (GCT for the remaining 298 days is prorated to conform to the ratio of 54 days per 365 served)\nTotal GCT days granted 470 Total GCT days granted per year of sentence imposed Total time served (days)\nThe U.S. Supreme Court upheld BOP’s methodology against a challenge brought by inmate petitioners. However, BOP officials told us that the agency was supportive of amending the statute, and had submitted a legislative proposal to Congress such that 54 days would be provided for each year of the term of imprisonment originally imposed by the judge, which would result in inmates serving 85 percent of their sentence.\nBOP provided us estimates in December 2011 showing that if the GCT credit allowance was increased by 7 days, as proposed, BOP could save over $40 million in the first fiscal year after the policy change from the early release of about 3,900 inmates. As of December 2011, the legislative proposal had not been introduced on the floors of the House or Senate.", "Modification of an imposed sentence: BOP has authority to motion the court to reduce an inmate’s sentence in certain statutorily authorized circumstances, but that authority is implemented infrequently, if at all.\nThe court, upon motion of the Director of BOP, may reduce the term of imprisonment after considering certain statutory factors to the extent that they are applicable, if it finds that “extraordinary and compelling reasons warrant such a reduction” (also known as “compassionate release”) and the reduction is consistent with applicable policy statements issued by the USSC. According to BOP officials, the Director has motioned sentencing judges for inmates’ early releases in a limited number of cases. For instance, BOP has historically interpreted “extraordinary and compelling circumstances” as limited to cases where the inmate has a terminal illness with a life expectancy of 1 year or less or has a profoundly debilitating medical condition. The USSC issued guidance that listed a number of additional circumstances, such as the death or incapacitation of the inmate’s only family member capable of caring for the inmate’s minor child or children. As of December 2011, BOP had not revised its written policy to explicitly include all of the circumstances noted in the USSC guidance although, according to BOP officials, the agency is reviewing two cases that would fall within these circumstances. Where “extraordinary and compelling circumstances” may exist, inmates generally must submit a request explaining their circumstances and their plans for housing, financial support, and medical care if granted an early release. The request is to proceed through multiple layers of review, including the inmate’s warden, the Regional Director, BOP’s Office of General Counsel, and the BOP Director, who may ultimately motion the court. BOP officials recorded that from calendar years 2009 through 2011, 55 requests for early release were approved by the BOP Director and brought as motions to a sentencing judge out of 89 requests approved at lower levels and received at BOP headquarters.\nThe court, upon motion of the Director of BOP, may reduce a prison term after considering certain statutory factors to the extent that they are applicable, if (1) an inmate is over 70 years old, (2) has served at least 30 years in prison pursuant to certain sentences imposed by statute, (3) a determination has been made by the BOP Director that the inmate is not a danger to the safety of any other person or the community as provided by statute, and (4) such a reduction is consistent with applicable policy statements issued by the USSC. However, according to BOP officials, since the authority was enacted, BOP has had no inmates in its custody meeting these criteria and is considering how to implement this authority in the future if an inmate qualified.\nGenerally, where a term of imprisonment is based upon a sentencing range that has subsequently been lowered by the USSC, upon motion of the BOP Director, the court may reduce the term of imprisonment.\nAccording to BOP officials the BOP Director does not directly motion the sentencing judge because this is generally accomplished by the U.S. Attorney’s Office as the litigating body of DOJ. In addition, BOP officials also stated that it is not necessary for the BOP Director to motion the judge because inmates and their counsel generally initiate the process. BOP supports the process in other ways, including educating inmates about the relevant guidelines changes, notifying the U.S. Attorneys Offices if inmates who appear to be eligible are missed, and processing inmate sentence reductions if granted by a sentencing judge. BOP has estimated that the retroactive change to the sentencing guidelines for crack cocaine offenses that went into effect on November 1, 2011, will result in 2,391 additional inmates being released from BOP custody from fiscal years 2012 through 2014, yielding an estimated cost savings of $160 million.\nEarly release prior to a weekend or holiday: BOP releases inmates on the last preceding weekday prior to a release date that falls on a Saturday, Sunday, or legal holiday.\nShock Incarceration Program: Although BOP retains the authority to operate the shock incarceration program, also known as boot camps, it discontinued the program in 2005 due to its cost and research showing that it was not effective in reducing inmate recidivism. Nonviolent, volunteer, minimum-security inmates serving sentences of more than 12 months but not more than 30 months were eligible for the program, which combined features of military basic training with traditional BOP correctional values to promote personal development, self-control, and discipline. Throughout the typical 6-month program, inmate participants were required to adhere to a highly regimented schedule of strict discipline, physical training, hard labor, drill, job training, educational programs, and substance abuse counseling. BOP provided inmates who successfully completed the program and were serving sentences of 12 to 30 months with a sentence reduction of up to 6 months. All inmates who successfully completed the program were eligible to serve the remainder of their sentences in community corrections locations, such as RRCs or home detention. A study of one of BOP’s shock incarceration programs, published in September 1996, found that the program had no effect on participants’ recidivism rates. According to BOP officials, those and other evaluation findings and the cost of the program led BOP to discontinue its use in 2005.\nElderly Offender Pilot Program: Authorization for BOP’s elderly offender home detention pilot program expired in September 2010. Generally, the 2-year pilot program enabled BOP to transfer to home detention inmates who were at least 65 years old, had served at least 10 years and 75 percent of their non-life sentences, had no history of violence, sexual offenses, or escape or attempted escape from a BOP institution, and who BOP determined would be of no substantial risk of engaging in criminal conduct or endangering any person or the public if released and with respect to whom BOP had determined that release to home detention will result in a substantial net reduction of costs to the During the program, 71 inmates were transferred to federal government. home detention. The statute requires the Attorney General to monitor and evaluate each eligible elderly offender placed on home detention, and report to Congress concerning the experience with the program. According to BOP officials, this report has not been completed. We have ongoing work looking at the results and costs of the pilot in more detail, which we will report on later this year.\n42 U.S.C. § 17541(g)(5)(A). federal sentencing judge orders that they run concurrently. This includes cases when a federal judge has not stated whether a state and federal sentence should run concurrently or consecutively. However, BOP may review, or the inmates may petition BOP to review, their cases to determine a federal sentencing judge’s intent. BOP reviews the inmate’s sentencing documents and custody history, and may also contact the federal sentencing judge to determine whether the judge intended that the state and federal sentences should be served consecutively or concurrently. For example, of the 538 cases BOP reviewed in fiscal year 2011, 99 requests to serve sentences concurrently were granted, for a total of about 118,700 days of sentence credit, 386 were not granted, and 53 were still under review as of the end of fiscal year 2011.\nCredit for criminal custody: BOP has the authority to grant credit for time served in criminal custody (such as time spent awaiting trial), and according to BOP policy, it considers detention by Immigration and Customs Enforcement (ICE) for the purposes of deportation to be administrative custody until criminal charges are brought against a detainee. According to BOP officials, BOP reviews inmate records for any criminal custody time that could be credited towards an inmate’s federal sentence. BOP reviewers may contact ICE for clarification of an inmate’s custody record, but, according to BOP officials, the various ICE districts keep records differently and a clear determination of when a federal charge was filed and an inmate’s criminal custody began may be difficult to achieve.", "", "BOP officials cited inmate ineligibility for placement in community corrections as the number one reason that all inmates do not get released through RRCs and one of the chief reasons that some inmates are precluded from participating in RDAP. Specifically, BOP’s RRC program statement prohibits certain inmates from placement in an RRC. For example, inmates with detainers, with sentences of 6 months or less, who refuse to satisfy BOP’s Financial Responsibility Program, or who are in civil commitment status are all ineligible for RRC placement. According to BOP, inmates with detainers are deemed inappropriate for placement in community corrections due to the increased risk of escape and for those with immigration detainers, the likelihood of deportation. Moreover, all inmates who have financial obligations, whether court-ordered restitution, court fees, or tax liabilities, must comply with the Financial Responsibility Program to participate in programming including community corrections. This ineligibility for RRC placement also disqualifies an inmate from placement in home detention. Figure 4 shows the number of inmates ineligible for RRC placement from April 2008 to March 2011.\nBOP officials stated that certain offenses committed by inmates may also make it difficult for BOP to place them in RRCs. For example, according to BOP officials, some RRCs are required to enter into agreements with communities regarding the type of inmates they will house and some communities have enacted local laws that prohibit the placement of certain inmates such as sex offenders and arsonists in a communal setting. Other reasons inmates may not be placed in RRCs include the inmate’s refusal to be placed or the inmate’s medical or mental health needs that could not be accommodated at the RRC. According to BOP officials, inmates may refuse RRC placement for a variety of reasons but the reasons for refusal cited most often by officials during our site visits to BOP facilities included: some RRC accommodations are perceived by some inmates to be subpar compared to prisons; some minimum-security and low-security inmates do not want to reside in RRCs with higher security inmates; and some inmates do not want to pay the 25 percent subsistence fee.\nTo participate in RDAP, inmates must be able to complete both the institution and the RRC components of the program. As a result, inmates who are prohibited from transferring to RRCs are excluded from RDAP. For instance, BOP estimates that 2,500 criminal aliens would participate in RDAP each year, but are ineligible due to immigration detainers. Prior to a 1996 BOP policy change, inmates with detainers could complete the program by participating in transitional treatment within a BOP institution. However, according to BOP officials, transitional treatment within an institution is ineffective because the inmate remains sheltered from the partial freedoms and outside pressures experienced during an RRC placement.\nRealizing that potential cost savings could result from early releases of criminal aliens, among other reasons, BOP is considering changing its policy and allowing eligible nonviolent criminal aliens to complete the RDAP program without the RRC component and receive sentence reductions of up to 1 year for successful completion. According to BOP, this policy shift would require a rule change and the development of procedures to ensure that no U.S. citizen was displaced from participating in RDAP. BOP officials stated that decisions on this issue would not be made until expanded program capacity becomes available, which is currently uncertain.", "A lack of RRC beds limits BOP’s ability to further utilize RRC placements. Based on the most recently available data, in fiscal year 2010, about 29,000 inmates spent time in an RRC prior to release from BOP custody. Although BOP officials at institutions we visited stated that they assessed inmates on a case-by-case basis to determine the appropriate RRC placement length, the officials stated that referrals can be reduced due to RRC capacity constraints. According to BOP officials, in fiscal year 2010, about 2.7 percent of eligible inmates were denied placement due to a lack of bed space. BOP faces challenges in increasing its RRC bed space capacity, which limits its ability to increase the length of RRC placements. According to BOP community corrections officials, BOP has difficulty acquiring new RRC contracts and increasing its RRC capacity because of local zoning restrictions and the unwillingness of many communities to accept nearby RRCs.\nAlthough the Second Chance Act increased BOP’s flexibility to place inmates in RRCs for up to 12 months, as reported by BOP officials, challenges facing the expansion of its RRC capacity limit the impact of this increased flexibility. As of November 2011, BOP reported that available contracted RRC bed space was 8,859 estimated beds. For each available RRC bed, BOP can transfer one inmate to the RRC for a maximum of 12 months, or BOP could send multiple inmates for shorter placements (e.g., three inmates for 4 months each). As such, for this increased flexibility to have an impact on the average length of RRC placements, RRC capacity would need to increase. To provide all eligible inmates with the maximum allowable 12 months in an RRC, BOP would require about 29,000 available beds annually.\nSome inmates are more affected by capacity constraints than others, such as those with criminal records of sex offenses or those being released into urban areas with few RRCs. According to BOP, only a limited number of RRCs are able to accept sex offenders, and thus BOP, at the onset, has a limited number of RRC beds for sex offender placement. In addition, inmates releasing to urban areas may have their placement lengths reduced due to capacity constraints. For example, BOP staff we interviewed during our site visits identified shortages of RRC beds in Southern California, North Carolina, and the Washington, D.C. metropolitan area affecting the length of RRC placements. When referring inmates for RRC placements, BOP considers the inmate’s original sentencing location to facilitate transition and successful reentry. As such, BOP’s utilization of RRC placements is limited in geographical areas that do not have enough RRC beds to accommodate returning inmates.\nAccording to BOP officials, systemwide program capacity similarly constrains BOP’s utilization of RDAP sentence reductions—specifically, BOP’s ability to admit RDAP participants early enough to earn their maximum allowable sentence reductions. BOP officials stated that the RDAP sentence reduction incentive caused a backlog for entry into the program. Long wait lists resulted in inmates entering RDAP with insufficient time to complete the program in time to receive the maximum sentence reduction. In fiscal years 2007 and 2008, BOP reported to Congress that long wait lists (over 7,600 systemwide) prevented some eligible inmates from participating in the program at all—20 percent and 7 percent unable to participate, respectively. RDAP capacity, as measured by the number of program slots open to inmates at one time throughout BOP (6,685 in fiscal year 2011), has grown at a relatively steady rate since the program began in fiscal year 1989, and increased by 400 slots from fiscal years 2009 to 2011. According to BOP officials, as program capacity has increased in recent years, wait lists have been reduced, even with continued growth in the inmate population. This has enabled inmates to enter the program sooner and resulted in an increase in the percentage of eligible inmates who complete RDAP and receive the maximum sentence reductions from 14 percent in fiscal year 2009 to 25 percent in fiscal year 2011. However, according to BOP officials, RDAP is still catching up to the increased demand and continues to have wait lists.\nAccording to BOP officials, wait lists for entry into RDAP are currently prioritized in accordance with statute based on inmates’ proximity to their projected release dates which include GCT credit expected to be earned, but do not include the potential RDAP sentence reduction that eligible participants may earn. Two subject matter experts who advocate for inmate interests whom we spoke with stated that BOP could consider including the potential RDAP sentence reduction in inmates’ projected release date calculations. This could ensure that eligible inmates would enter the program sooner and in enough time to receive the maximum reduction. For example, if two inmates have the same projected release date, after accounting for GCT credit, but one inmate would be eligible for a 1-year sentence reduction on completion of RDAP while the other would not be eligible for a sentence reduction upon completion of RDAP, the inmate eligible for the sentence reduction would have a higher position on the wait list for entry into RDAP than the inmate ineligible for a sentence reduction. BOP has stated that if it were to prioritize RDAP entry in this way, some inmates who are not eligible for the sentence reduction would not be able to enter the program at all, as they would continually be displaced on the wait lists by inmates who are eligible for the sentence reduction. BOP is required by statute, subject to the availability of appropriations, to provide residential substance abuse treatment for all eligible inmates, regardless of their eligibility for the sentence reduction incentive, and thus must ensure that all eligible inmates are able to participate in the program prior to their release from custody. However, BOP was unable to provide documentation that including RDAP sentence reduction in computation of the projected release date would continually displace inmates eligible for RDAP but ineligible for the associated sentence reduction.\nBOP’s fiscal year 2012 budget request included an increase of $15 million for RDAP, which was not funded. According to BOP, the funding would have reduced RDAP wait lists and enabled eligible inmates to enter the program early enough to earn their maximum allowable sentence reductions. BOP stated that the $15 million increase would have covered 125 new drug treatment staff positions and would have allowed an BOP officials also additional 4,000 inmates to complete RDAP annually.told us that if BOP changes its policy to allow criminal aliens to participate in RDAP, the funding increase for RDAP proposed in the 2012 budget request would have been sufficient to allow this additional inmate population to participate in RDAP without impacting the ability of U.S. citizens to participate and receive the maximum available sentence reductions.\nTimely program admission would result in future cost savings through additional sentence reductions. For example, if every eligible RDAP participant who completed the program in fiscal year 2011 had received their maximum sentence reduction, BOP would have been responsible for 15,729 fewer months of inmate incarceration, yielding an estimated cost savings of about $13.2 million. BOP estimated that allowing criminal aliens to participate in RDAP and earn sentence reductions could offer about $25 million of additional cost savings each year.", "Federal inmate populations have been increasing and BOP is operating at more than a third over capacity. In addition, the absence of parole in the federal system and other federal statutes limit BOP’s authority to modify an inmate’s period of incarceration. Inmates, who earn their good conduct time, as most do, end up serving about 87 percent of their sentences. BOP’s housing of inmates in community-based facilities or home detention is a key flexibility it uses to affect a prisoner’s period of incarceration. However, BOP does not require its RRC contractors to separate the price of home detention services from the price of RRC beds. As a result, BOP lacks information on the price of home detention that could assist it in weighing the costs and benefits of alternative options for supervising inmates in home detention. While BOP is working to develop a process to require contractors to submit separate prices for the price of RRC beds and home detention services, without establishing a plan, including a time frame for development, BOP does not have a road map for how it will achieve this goal.", "To determine the cost of home detention and potentially achieve cost savings, we recommend that the Director of BOP establish a plan, including time frames and milestones for completion, for requiring contractors to submit separate prices of RRC beds and home detention services.", "We provided a draft of this report to DOJ for its review and comment. BOP provided written comments on the draft report, which are reproduced in full in appendix I. BOP concurred with the findings in the report. Prior to receiving BOP’s comment letter, on January 20, 2012, BOP’s audit liaison requested that the wording of our recommendation be changed from “requiring contractors to identify RRC costs and home detention costs separately” to “requiring contractors to submit separate prices of RRC beds and home detention services.” He stated that BOP was requesting this change because contractors are not required to disclose financial information, such as the actual costs to them of providing services to inmates, to BOP. Furthermore, the liaison stated that obtaining separate prices of RRC and home detention services will enable BOP to determine the price reasonableness of these services. We believe that BOP’s proposed language addressed the intent of our recommendation, and thus we modified the recommendation language. BOP concurred with our recommendation, as revised, and also provided technical comments which we incorporated into the report, as appropriate.\nWe are sending copies of this report to the Attorney General, selected congressional committees, and other interested parties. In addition, this report will also be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any further questions about this report, please contact me at (202) 512-9627 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II.", "", "", "David C. Maurer, (202) 512-9627 or [email protected].", "In addition to the contact named above, Chris Currie, Assistant Director; Tom Jessor; Bintou Njie; Michael Kniss; Billy Commons, III; Pedro Almoguera; and Lara Miklozek made significant contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "h0_full", "h0_full", "h0_title", "", "h0_full", "h0_title", "", "h0_full", "h0_full", "", "", "", "h0_title", "", "h0_full" ] }

{ "question": [ "What is BOP responsible for?", "What are results of reducing the amount of time inmates remain in prison?", "What was GAO asked to address?", "How did GAO get this information?" ], "summary": [ "The Department of Justice’s Federal Bureau of Prisons (BOP) is responsible for the custody and care of federal offenders.", "BOP has some statutory authorities and programs to reduce the amount of time an inmate remains in prison, which when balanced with BOP’s mission to protect public safety and prepare inmates for reentry, can help reduce crowding and the costs of incarceration.", "GAO was asked to address: (1) the extent to which BOP utilizes its authorities to reduce a federal prisoner’s period of incarceration; and (2) what factors, if any, impact BOP's use of these authorities.", "GAO analyzed relevant laws and BOP policies; obtained nationwide data on inmate participation in relevant programs and sentence reductions from fiscal years 2009 through 2011; conducted site visits to nine BOP institutions selected to cover a range of prison characteristics and at each, interviewed officials responsible for relevant programs; and visited four community-based facilities serving the institutions visited." ], "parent_pair_index": [ -1, -1, -1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0 ] }

{ "title": [ "Background", "TRIO Modernization Project", "Best Practices for Conducting Analysis of Alternatives and Managing Risks", "DHS Did Not Always Follow Best Practices for Analyzing Alternatives for TRIO Components’ Choice of Modernized Financial Management System", "DNDO Substantially, and Coast Guard and TSA Partially, Met Best Practices for Conducting AOAs", "TRIO Components Used Key Factors, Metrics, and Processes to Analyze Alternatives and Related Results", "DHS Met Three and Partially Met Four Best Practices for Managing the Risks of Using IBC for the TRIO Project", "Key Factors and Challenges Impacting the TRIO Project and DHS’s Path Forward", "Key Factors and Challenges Impacting the TRIO Project", "Significant TRIO Project Changes Resulting from Challenges and Steps Implemented for the Path Forward", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Best Practices for the Analysis of Alternatives Process", "Appendix III: GAO Assessment of TRIO Components’ Alternatives Analyses", "Appendix IV: Comments from the Department of Homeland Security", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Since DHS’s creation in 2003, significant internal control and financial management system deficiencies have hampered its ability to reasonably assure effective financial management and to manage operations. These deficiencies contributed to our decision to designate DHS’s management functions, including financial management, as high risk. To help address these deficiencies, DHS initiated a decentralized approach to upgrade or replace legacy financial management systems and has been evaluating various options for modernizing them, including the use of SSPs. DHS initiated three projects for modernizing the systems of selected DHS components, including its TRIO modernization project. The TRIO project has focused on migrating the financial management systems of Coast Guard, DNDO, and TSA to a modernized solution provided by IBC. DHS’s efforts to effectively assess and manage risks associated with this project are essential to DHS’s realizing its modernization goals.\nIn 2013, OMB issued a memorandum directing agencies to consider federal SSPs as part of their AAs. Also, in May 2014, Treasury and OMB designated IBC as one of four federal SSPs for financial management to provide core accounting and other services to federal agencies. This designation was based on Treasury and OMB’s evaluation of the four service providers’ ability to assist federal agencies in meeting their accounting and financial management needs, including experience with implementing financial management systems and providing other financial management services to customers, cost of services provided, compliance with financial management and internal control requirements, commitment to shared services, capacity, and long-term growth strategy. FIT’s responsibilities related to the governance and oversight of federal SSPs were subsequently transferred to USSM after USSM was established in October 2015.", "Because of concerns that its Core Accounting System (CAS) Suite was outdated, inefficient, and did not reliably meet requirements, Coast Guard completed an AA in January 2012 to assist in developing a path forward for modernizing its financial management system. In August 2012, Coast Guard established its CAS Replacement project team to further evaluate two of the alternatives considered in its AA and develop a recommended course of action. In addition, Coast Guard determined that hosting, owning, operating, and managing a financial management system were not among its core competencies. Because TSA and DNDO also relied on CAS as their primary accounting system, they also conducted AAs to identify the best alternative for transitioning to a modernized financial management system solution.\nThe AAs conducted by the TRIO components during 2012 and 2013 considered the use of federal and commercial SSPs and other options. In addition, Coast Guard completed additional market research including further analysis of commercial SSPs in June 2013. In July 2013, the TRIO components determined that migrating to a federal SSP was the best course of action and subsequently conducted discovery phase efforts with IBC from November 2013 through May 2014 to further explore the functional requirements for procurement, asset, and financial management services. Based on these efforts, in July 2014, the TRIO components recommended that they proceed with implementation of the IBC shared services solution. In August 2014, FIT and OMB concurred with this recommendation, and DHS entered into an interagency agreement (IAA) with IBC for implementation. Figure 1 shows a timeline of these key events.\nThe IAA for implementation and related performance work statement included a description of the services that IBC is to provide and the roles and responsibilities of DHS, the TRIO components, and IBC. The IAA also required IBC to prepare a detailed project management plan describing how the requirements would be managed and updated and an integrated master schedule (IMS) for identifying tasks to be completed, duration, percentage completed, dependencies, critical path, and milestones.\nAccording to the February 2015 project management plan, DNDO, TSA, and Coast Guard were expected to go-live on the IBC solution in the first quarter of fiscal years 2016, 2017, and 2018, respectively. However, in May 2016, DHS and IBC determined that TSA’s and Coast Guard’s planned implementation dates were not viable because of various challenges impacting the TRIO project and recommended a 1-year delay for their respective implementation dates. Figure 2 summarizes planned and completed key implementation events for the TRIO project as of May 2016.", "GAO, SEI, and other entities have developed and identified best practices to help guide organizations in effectively planning and managing various activities, including acquisitions of major information technology systems. These include GAO’s identified best practices for the AOA process and best practices identified by SEI for risk management.\nGAO-identified best practices for AOA process. GAO identified 22 best practices for a reliable, high-quality AOA process that can be applied to a wide range of activities in which an alternative must be selected from a set of possible options, as well as to a broad range of capability areas, projects, and programs. These practices can provide a framework to help ensure that entities consistently and reliably select the project alternative that best meets mission needs. Not conforming to these best practices may lead to an unreliable process, and the entity will lack assurance that the preferred alternative best meets the mission needs. Appendix II provides additional details on GAO’s identified AOA process best practices and how they can be applied to a wide range of activities in which an alternative must be selected from a set of possible options, as well as to a broad range of capability areas, projects, and programs.\nSEI’s risk management practices. SEI’s practices for the risk management process area call for the identification of potential problems before they occur so that risk-handling activities can be planned throughout the life of a project to mitigate adverse impacts on achieving objectives. These practices are determining risk sources and categories, defining parameters used to analyze and categorize risks and to control the risk management effort, establishing and maintaining the strategy to be used for risk identifying and documenting risks, evaluating and categorizing each identified risk using defined risk categories and parameters and determining its relative priority, developing a risk mitigation plan in accordance with the risk monitoring the status of each risk periodically and implementing the risk mitigation plan as appropriate.", "Although the TRIO components conducted AAs to identify the preferred alternative for modernizing their financial management systems, their efforts did not always follow best practices. For example, Coast Guard’s and TSA’s AAs supporting their selection of migrating to a federal SSP for modernizing their financial management systems did not fully or substantially meet all four characteristics of a reliable, high-quality AOA process. In addition, we found that DHS guidance did not fully or substantially incorporate five of GAO’s identified best practices for conducting an AOA process. The TRIO components’ AAs included descriptions of the key factors, such as scores for each alternative against the selection criteria used to assess it. Based on these AAs, DHS and the TRIO components selected the federal SSP alternative as their preferred choice and subsequently selected IBC as their federal SSP. However, because Coast Guard’s and TSA’s AAs did not fully or substantially meet all four characteristics of a reliable, high-quality AOA process, they are at increased risk regarding their decision on the solution that represents the best alternative for meeting their mission needs.", "Based on the extent to which the DHS TRIO components followed the GAO-identified 22 best practices for conducting an AOA process, we found that DNDO’s AA process substantially met the four characteristics of a reliable, high-quality AOA process while the Coast Guard and TSA AA processes both substantially met one and partially met three of these four characteristics. For example, we found that TSA’s AA partially met the “well-documented” characteristic, in part, because risk mitigation strategies, assumptions, and constraints associated with each alternative were not discussed in its AA. In addition, we found that Coast Guard’s AA partially met the “credible” characteristic, in part, because there was no indication that it contained sensitivity analyses, an evaluation of the impact of changing assumptions on its overall costs or benefits analyses. Our overall assessment is summarized in table 1. Appendix III provides additional details on our assessment of the TRIO components’ AAs for each of the GAO-identified 22 AOA best practices.\nFurther, in comparing DHS AOA and AA guidance to the GAO-identified 22 AOA process best practices, we found that although DHS’s guidance for conducting both AOAs and AAs fully or substantially incorporated 17 of the identified best practices, the guidance did not fully or substantially incorporate 5 of these practices. For example, although the guidance addressed risk management in general terms, it did not detail the need to document risk mitigation strategies for each alternative. Not documenting the risks and related mitigation strategies for each alternative prevents decision makers from performing a meaningful trade-off analysis necessary to choose a recommended alternative. In addition, while DHS guidance describes the need for an AA or AOA review, it describes reviews conducted within the organizational chain of command and does not address the need for an independent review—one of the most reliable means to validate an AOA process. Further, although the guidance noted that weights for selection criteria may become more subjective when they cannot be derived analytically, additional guidance on weighting selection criteria was limited. Our overall assessment is summarized in table 2.\nBecause of these limitations in guidance, and because Coast Guard and TSA did not fully adhere to the GAO-identified best practices, Coast Guard’s and TSA’s AAs did not fully or substantially reflect all four characteristics of a reliable, high-quality AOA process. As a result, Coast Guard and TSA increased their risk of selecting a solution that may not represent the best alternative for meeting their mission needs.", "Documentation supporting TRIO components’ AA efforts included descriptions of the key factors, metrics, and processes involved in conducting their analyses, including the (1) alternatives considered, (2) market research conducted, (3) three alternatives evaluated, (4) selection criteria used by each and how the criteria were weighted, (5) scores for each alternative against the selection criteria, and (6) alternatives that scored the best under the AOA evaluation.\nThe TRIO components conducted market research to develop reasonable alternative solutions for consideration. For example, through its market research, TSA identified OMB-designated federal SSPs and commercial entities as potential alternatives for hosting and implementing a modernized and integrated financial management system. According to its AA, TSA was able to gain an understanding of the offerings, capabilities, and related costs associated with these alternatives through reviews of documentation and interviews.\nAfter developing a diverse range of financial system modernization alternatives for consideration, each of the TRIO components assessed them for viability using various factors—such as measures of effectiveness, cost, risk, and value—and identified the three top-rated alternatives for further evaluation. For example, Coast Guard identified nine alternatives for consideration and analyzed, scored, and ranked them to determine its top three alternatives for further analysis: incrementally improve the current CAS Suite and remove certain outdated components, host the financial management system internally using software and tools already owned, and use an SSP to host the financial management system.\nEach component identified its three alternatives for further evaluation and used defined selection criteria to rate them. For example, DNDO’s selection criteria included four categories of operational effectiveness that were weighted according to their level of importance. Based on their evaluations, each component identified the best alternative for its respective financial management system needs.\nAccording to Coast Guard’s November 2012 decision memorandum, Coast Guard further narrowed the alternatives it focused on to (1) using an SSP to host its financial management system and (2) hosting the system internally using already-owned software and tools, and it also gathered rough order of magnitude cost estimates for both alternatives. Based on its evaluation, Coast Guard determined that the two alternatives were comparable. According to this memorandum, Coast Guard further determined that owning, hosting, operating, and managing a financial management system were not among its core competencies. Based on this determination, OMB direction to agencies to use (with limited exceptions) shared services, and other factors, Coast Guard decided that migrating to an SSP was the best alternative. TSA found in its February 2013 analysis that the differences between federal and commercial SSP alternatives were not significant and, as a result, recommended that a competitive procurement be conducted to better evaluate each alternative. However, DHS officials told us that TSA subsequently determined that a competitive procurement was not warranted and chose to migrate to a federal SSP. This determination was based on additional OMB guidance issued in March 2013 directing agencies to consider federal SSPs as part of their AAs and stating that commercial SSPs are an appropriate solution and would be funded by OMB only in instances in which the agency’s business case demonstrates that a commercial SSP can provide a better value for the federal government. In addition, DNDO determined that migrating to a federal SSP was its best alternative in May 2013.\nBecause its preliminary research focused primarily on the federal SSP marketplace, Coast Guard conducted additional market research to include a more robust analysis of commercial SSPs. Coast Guard’s June 2013 market research report described the results of this effort, including its evaluation of responses from 11 commercial SSPs. Coast Guard reported that none of the commercial SSPs that responded could meet all 44 specific financial management system requirements and the extent to which they could meet them varied significantly. Based on these results, Coast Guard determined that there was a lack of maturity in the commercial SSP market for federal financial management. According to the report, this overall assessment was based on various considerations of information provided by commercial SSP respondents, including the wide variety of proposed configurations, solutions, prices, and implementation schedules, the lack of federal experience and service for agency-wide capabilities, and insufficient length of service to establish positive trends in audit performance; the lack of similar offerings that implied a lack of strong competition between comparable products that would exert downward pressure on cost; and the lack of like product offerings, which increases the likelihood of higher switching costs in the case of poor performance because of increased difficulty in moving from one “turnkey” service to another.\nIn July 2013, the TRIO components and DHS selected the federal SSP alternative as their preferred choice and subsequently selected IBC as their federal SSP. DHS officials told us that IBC was selected based on (1) DHS’s reliance on OMB and Treasury’s designation of IBC as a federal SSP, (2) OMB guidance to consider the use of federal SSPs, and (3) a review of the availability of the four federal SSPs indicating that IBC was the only one available to meet the requirements and implementation schedule at that time. In August 2013, DHS notified OMB that the TRIO components had performed extensive market research and finalized their respective AAs and independently concluded that migrating to a federal SSP was in the best interests of the government. Also, in August 2013, FIT notified OMB regarding the TRIO components’ AA efforts and that the TRIO components would proceed to the discovery phase with IBC. According to FIT’s notification memorandum to OMB, the TRIO components’ AAs demonstrated that migrating to a federal SSP was the best value to the federal government and that the components identified IBC as a suitable partner based on the results of their market research into federal SSPs.", "Risk management best practices call for the identification of potential problems before they occur so that risk-handling activities can be planned throughout the life of the project to mitigate adverse impacts on achieving objectives. These best practices involve (1) preparing for risk management, (2) identifying and analyzing risks, and (3) mitigating identified risks. Preparing for risk management involves determining risk sources and categories and developing risk mitigation techniques. Identifying and analyzing risks includes determining those that are associated with cost, schedule, and performance and evaluating identified risks using defined risk parameters. Mitigating risks includes determining the levels and thresholds at which a risk becomes unacceptable and triggers the execution of a risk mitigation plan or contingency plan; determining the costs and benefits of implementing the risk mitigation plan for each risk; monitoring risk status; and providing a method for tracking open risk-handling action items to closure.\nBased on our evaluation, we found that DHS processes generally reflected three of seven specific risk management best practices and partially reflected the remaining four practices. Table 3 summarizes the extent to which DHS followed these seven best practices for managing TRIO project risks. Additional details on DHS and TRIO component efforts to address these practices are summarized following this table.\nPrepare for risk management. Key aspects of processes established by DHS and TRIO components related to the three best practices associated with preparing for risk management:\nDetermine risk sources and categories. This practice calls for a basis for systematically examining circumstances that affect the ability of the project to meet its objective and a mechanism for collecting and organizing risks. DHS and the TRIO components established processes that met this best practice. For example, DHS reviewed the integrated master schedule that IBC prepared to identify sources of risk and defined risk categories in TRIO project policies.\nDefine risk parameters. Risk parameters are used to provide common and consistent criteria for comparing risks to be managed. The best practice includes defining criteria for evaluating and quantifying risk likelihood and severity levels and defining thresholds for each risk category to determine whether risk is acceptable or unacceptable and to trigger management action. DHS partially met this best practice. DHS’s risk management program defined rating scales to provide consistent criteria for evaluating and quantifying risk likelihood and severity levels. However, DHS’s Risk Management Planning Handbook and related template for developing risk management plans for projects did not address the need for thresholds relevant to each category of risk to facilitate review of performance metrics in order to determine when risks become unacceptable or to invoke selected risk-handling options when monitored risks exceed defined thresholds.\nEstablish a risk management strategy. A risk management strategy addresses specific actions and the management approach used to apply and control the risk management program, including identifying sources of risk, the scheme used to categorize risks, and parameters used to evaluate and control risks for effective handling. DHS met this best practice. DHS and IBC established risk management policies and plans for the TRIO project based on DHS acquisition guidance, which provided a framework for a risk management program. Collectively, these policies and plans constitute a risk management strategy. DHS and IBC have periodically updated these documents to maintain the scope of the risk management effort; the methods and tools to be used for risk identification, risk analysis, risk mitigation, risk monitoring, and communication; the prioritization of risks; and the allocation of resources for risk mitigation.\nIdentify and analyze risks. Key aspects of processes established by DHS and the TRIO components related to the two best practices associated with identifying and analyzing risks: Identify risks. Risk identification should be an organized, thorough process to seek out probable or realistic risks to achieving objectives. This practice recognizes that risks should be identified and described understandably before they can be analyzed and managed properly. Using categories and parameters developed in the risk management strategy and identified sources of risk guides the identification of risks associated with cost, schedule, and performance. To identify risks, best practice elements include reviewing the work breakdown structure (WBS) and project plan to help ensure that all aspects of the work have been considered. Best practices for documenting risks include documenting the context, conditions, and potential consequences of each risk and identifying the relevant stakeholders associated with each risk.\nDHS partially met this best practice. DHS’s July 2016 risk register contained a wide range of risks associated with defined risk categories. It also reflected DHS’s review of the TRIO project’s integrated master schedule that IBC prepared based on the WBS and work plans that IBC also developed. The risk register documented the context, conditions, potential consequences, and relevant stakeholders associated with each risk. However, DHS’s documented risk management processes did not identify all significant risks or reflect its efforts to revisit risks that had previously been closed. For example, DHS officials told us that IBC was unable to provide sufficient, reliable cost and schedule information for project monitoring; however, a risk reflecting these concerns was not included on its July 2016 risk register. Further, the risk register included certain closed risks related to the need for a governance structure and strategy for ensuring that IBC met performance, cost, and schedule objectives. Although DHS had ongoing concerns about its ability to ensure that IBC met these objectives, the risk register did not reflect efforts to revisit these risks to determine whether their status needed revision or if other risks should be included on the risk register to address its accountability concerns. In addition, DHS did not always take timely action to document its consideration of risks identified by its independent verification and validation (IV&V) contractor for potential inclusion on its risk register. For example, the IV&V contractor identified a risk related to inefficiencies in DHS’s document review process in June 2015 that was not included on DHS’s risk register until February 2016. DHS officials indicated that a crosswalk between the DHS risk register and IV&V contractor risk management observations was performed weekly; however, results of these weekly reviews were not documented.\nEvaluate, categorize, and prioritize risks. Risk assessment uses defined categories and parameters to determine the priority of each risk to assist in determining when appropriate management attention is required. Best practices for analyzing risks include categorizing risks according to defined risk categories, evaluating identified risks using defined risk parameters, and prioritizing risks for mitigation. DHS’s processes met this practice. For example, the documented risk management program included application of defined risk categories and parameters for all identified risks, providing a means for reviewing risks and determining the likelihood and severity of risks being realized. The TRIO project’s Joint Risk Management Integrated Project Team provided consistency to the application of parameters by reviewing risk assessments when risks were first identified. By determining exposure ratings for each identified risk, DHS prioritized risks for monitoring and allocation of resources for risk mitigation.\nMitigate risks. Key aspects of processes established by DHS and the TRIO components related to the two best practices associated with mitigating risks:\nDevelop risk mitigation plans. Risk mitigation plans are developed in accordance with the risk management strategy and include a recommended course of action for each critical risk. The risk mitigation plan for a given risk includes techniques and methods used to avoid, reduce, and control the probability of risk occurrence; the extent of damage incurred should the risk occur; or both. Elements of this practice include determining the levels and thresholds that define when a risk becomes unacceptable and triggers the execution of a risk mitigation plan or contingency plan, identifying the person or group responsible for addressing each risk, determining the costs and benefits of implementing the risk mitigation plan for each risk, developing an overall risk mitigation plan for the work to orchestrate the implementation of individual risk mitigation plans, and developing contingency plans for selected critical risks in the event impacts associated with the risks are realized.\nDHS partially met this best practice. DHS’s risk management program documentation reflected the development of risk response plans for most risks, including all those determined to be of medium and high exposure level. DHS identified those responsible for addressing each risk. However, DHS and IBC did not always develop sufficiently detailed risk mitigation plans including specific risk-handling action items, determination of the costs and benefits of implementing the risk mitigation plan for each risk, and developing contingency plans for selected critical risks in the event that their impacts are realized. For example, a risk associated with IBC’s capacity and experience for migrating large agencies the size of Coast Guard and TSA was identified in July 2014. Although DHS developed plans to help mitigate this risk, a contingency plan was not developed prior to realizing the adverse impact of not implementing Coast Guard and TSA on IBC’s modernized solution. Rather, a contingency plan working group (CPWG) to address this and other concerns was established in January 2017, over 2 years after the risk was initially identified. Further, thresholds were not used within the risk management program to define when a risk becomes unacceptable, triggering the execution of a risk mitigation plan or contingency plan.\nImplement risk mitigation plans. Risk mitigation plans are implemented to facilitate a proactive program to regularly monitor risks and the status and results of risk-handling actions to effectively control and manage risks during the work effort. Best practice elements include revisiting and reevaluating risk status at regular intervals to support the discovery of new risks or new risk-handling options that can require reassessment of risks and re-planning of risk mitigation efforts. Elements also include providing a method for tracking open risk-handling action items to closure, establishing a schedule or period of performance for each risk-handling activity, invoking selected risk-handling options when monitored risks exceed defined thresholds, and providing a continued commitment of resources for each risk mitigation plan.\nDHS partially met this best practice. Risk monitoring of the TRIO project consisted of reviews performed by DHS and TRIO component officials responsible for risk management and oversight functions. These reviews considered significant risks, risks approaching realization events, and the effect of management intervention on the resolution of risks. These reviews also relied, in part, on data contained in DHS’s risk register, which represents the official repository of TRIO project risks and information on the status of risks and related risk mitigation efforts.\nHowever, other aspects of DHS’s efforts to implement risk mitigation plans did not fully adhere to certain elements associated with this best practice. For example, we identified certain issues that raised questions concerning the accuracy of data contained in the risk register, such as (1) the lack of clear markings indicating when the accuracy of data on each risk was last confirmed, including risk records that had not been modified in the previous 3 months, and (2) certain risks for which the estimated risk impact date had already occurred but its status risk according to DHS’s risk register did not reflect that it had been realized and become an issue. In addition, DHS officials stated that IBC did not provide sufficiently detailed, reliable cost and schedule information that could have been used to monitor TRIO project risks more effectively. DHS’s ability to monitor cost, schedule, and other performance metrics was also limited because of the lack of thresholds for management involvement, as noted above. DHS’s implementation of risk monitoring plans was further limited by other issues, including (1) a period of performance for each risk-handling activity, which includes a start date and anticipated completion date to control and monitor risk mitigation efforts, was not always established and (2) an inability to fully track open risk-handling action items to closure existed because of the lack of sufficient detail on specific risk-handling activities in the DHS risk register.\nAccording to DHS officials, DHS relied heavily on IBC to manage risks associated with the TRIO project and, in particular, those for which IBC was assigned as the risk owner. They also acknowledged DHS’s responsibility for overseeing IBC’s TRIO project risk management efforts and described various actions taken to address growing concerns regarding IBC’s efforts. For example, DHS created the Joint Risk Management Integrated Project Team, in part, to provide a forum in which IBC could obtain assistance in developing risk responses and discuss DHS’s risk mitigation concerns. Further, to help reduce exposure of underlying risks, DHS offered assistance to IBC’s project management functions, such as developing the integrated master schedule and performing quality control checks on project deliverables. Despite these efforts, DHS officials stated that challenges associated with the IAA structure and terms of the performance work statement with IBC on the TRIO project limited DHS’s visibility into IBC’s overall cost, schedule, and performance controls and ability to oversee IBC’s risk management efforts. For example, they stated that the performance work statement did not specify the level of reporting to be provided by IBC on cost, schedule, and performance in sufficient detail to effectively monitor progress on achieving key project objectives.\nFurther, the limitations to managing risks related to the best practices we assessed as partially met were largely attributable to limitations in DHS and TRIO project guidance and policies. For example, DHS’s Risk Management Planning Handbook and related template for developing risk management plans for projects does not address the need to define thresholds to facilitate review of performance metrics to determine when risks become unacceptable. Also, TRIO project policies did not address the need to periodically revisit consideration of risk sources other than IMS-related milestones, specify periods of performance for specific risk- handling activities, or define an interval for updating and certifying risk statuses. In addition, DHS guidance and TRIO project policies did not describe the need to consider and document risks specifically related to the lack of sufficient, reliable cost and schedule information to properly manage and oversee the project or for timely disposition of risks that its IV&V contractor identified. Further, TRIO project risk management policies and management tools used to implement them address best practice elements such as determination of the costs and benefits of implementing risk mitigation plans, developing contingency plans, and developing specific risk-handling action items. However, these policies do not require, and the risk register was not designed to specifically capture, these elements in documented risk mitigation plans. By not adopting important elements of risk management best practices into project guidance, DHS and the TRIO components increase the risk that potential problems would not be identified before they occur and that activities to mitigate adverse impacts would not be effectively planned and initiated.", "Although DHS has taken various actions to manage the risks of using IBC for the TRIO project, including some that were consistent with best practices, the TRIO project has experienced challenges raising concerns regarding the extent to which its objectives will be achieved. In connection with these challenges, the TRIO components notified DHS during April 2016 through January 2017 that certain baseline cost and schedule objectives had not been, or were projected to not be, achieved as planned. According to these notifications and DHS officials we interviewed, several key factors and challenges significantly impacted DHS’s and IBC’s ability to achieve TRIO project objectives as intended. In addition, IBC, FIT, and USSM officials identified similar issues impacting the TRIO project. In connection with these challenges, DHS and IBC began contingency planning efforts in January 2017 to identify and assess viable options for improving program performance and addressing key TRIO project priorities. Plans for DHS’s path forward on the TRIO project, as of May 2017, involve significant changes, such as transitioning away from using IBC and a 2-year delay in completing Coast Guard and TSA’s migration to a modernized solution.", "We grouped the key factors and challenges impacting the TRIO project that DHS, IBC, FIT, and USSM officials and OMB staff identified into five broad categories: (1) project resources, (2) project schedule, (3) complex requirements, (4) project costs, and (5) project management and communications. The key factors and challenges related to each category are summarized below.\nProject resources: Concerns about IBC’s experience and its capacity to handle a modernization project involving agencies the size of Coast Guard and TSA were identified as significant risks in July 2014, resulting from discovery phase efforts completed prior to DHS and IBC’s entering the implementation phase in August 2014. According to DHS officials, status reports, and other documentation, key TRIO project challenges related to resources included concerns that (1) IBC encountered federal employee hiring challenges and was unable to ramp up and deploy the resources necessary to meet required deliverables, and (2) IBC experienced significant turnover of key stakeholders which adversely impacted its ability to achieve TRIO project objectives.\nIn connection with DHS’s decision to use IBC for the TRIO project, DHS officials told us that DHS relied heavily on OMB and Treasury’s designation of IBC as a federal SSP and their related assessment of IBC’s capacity and experience. DHS officials also told us that DHS relied on FIT’s federal agency migration evaluation model during discovery phase efforts that focused on assessing the functionality of the software rather than assessing IBC’s (1) capacity, experience, and capability; (2) ability to address more complex software configurations and interfaces associated with large agencies; and (3) cost, schedule, and performance metrics. DHS officials stated that issues related to IBC’s capacity and experience represented the most significant challenge impacting the TRIO project.\nIBC officials acknowledged that IBC was unable to ramp up its resources until after the project had begun and that the IBC project team experienced significant turnover in key leadership and TRIO project positions over the course of the project. IBC officials also acknowledged that during its early efforts on the TRIO project, assigned IBC staff lacked the experience and expertise necessary for managing large-scale projects and, as a result, many of the risks initially identified were not effectively addressed. FIT and USSM officials and OMB staff also acknowledged that resource challenges significantly impacted the TRIO project. A FIT official acknowledged that assessing software functionality, rather than implementation, was emphasized during the discovery process. Although DHS relied on OMB and Treasury’s designation of IBC as a federal SSP, this FIT official also told us that because agencies’ specific needs can vary significantly, agencies are responsible for conducting sufficient due diligence to assess a federal SSP’s ability to meet their requirements.\nProject schedule: DHS, IBC, FIT, and USSM officials acknowledged that migrating the TRIO components to IBC within original time frames was a significant challenge given the overall magnitude and complexity of the TRIO project. According to DHS officials and TRIO project documentation, DHS identified delays in completing various tasks and milestones including providing design phase technical documentation and design processing proposed change requests; meeting proposed baseline schedules for implementing Coast Guard and TSA on the modernized IBC solution; and achieving initial operating capability requirements and stabilizing the production environment after DNDO’s migration to IBC because of various issues related to reporting, invoice payment processing, contract management processes, and resolving help desk tickets in a timely manner.\nDHS officials also stated that IBC did not consistently update the IMS to ensure that it accurately reflected all required tasks, the completion status, and the resources required to complete them. Concerns related to meeting milestones and updating the IMS were discussed during periodic status update meetings that included DHS, IBC, OMB, FIT, and USSM officials. IBC and DHS officials acknowledged that processes for communicating and resolving issues were not always efficient and contributed to schedule delays. In addition, in November 2016, USSM noted several concerns based on its review of a draft IMS supporting TSA’s re-planning efforts to go-live in October 2017. USSM’s concerns included an incomplete project scope and schedule and need for additional discovery to determine cost and level of effort, an extremely aggressive schedule with very limited contingencies for the lack of interim checkpoints or oversight on tasks exceeding 30 days, the need for a resource-loaded IMS that incorporates an appropriate level of detail, and the need for an expedited program governance strategy and escalation path that DHS and IBC leadership could use to make program decisions within the time allotted on the schedule.\nComplex requirements: DHS, IBC, FIT, and USSM officials acknowledged the overall complexity of the TRIO project and that the lack of a detailed understanding of the components’ requirements earlier in the project impacted IBC’s and DHS’s ability to satisfy the requirements as planned. For example, USSM and FIT officials told us that under the shared services model, the approach for onboarding new customers usually involves migrating to a proven configuration of a solution that is already being used by the provider’s existing customers. However, rather than taking this approach, DHS and IBC agreed to implement a more recent version of Oracle Federal Financial software (version 12.2) with integrated contract life cycle and project modules. Under this approach, IBC’s plans included migrating other existing customers to this upgraded environment. USSM officials told us that migrating TRIO components to a new solution that required configuring new software and related applications and developing related interfaces introduced additional complexities that contributed to issues on the TRIO project. According to a FIT official, the functionality of this more recent version of software is very different than that of the version IBC’s existing customers used. This official stated that IBC did not have the needed government personnel with knowledge and experience associated with this new software, a condition that likely contributed to the challenges experienced on the TRIO project. IBC officials acknowledged that IBC’s lack of familiarity with Oracle 12.2 increased the complexity of the TRIO project.\nIn addition, DHS and IBC perspectives on the need for changes differed because of the lack of clarity regarding TRIO project requirements. DHS officials told us that many change requests on the TRIO project reflected the need for required functionality based on previously stated requirements. They also told us that they did not consider DNDO-related requirements to be overly complex when compared to those associated with IBC’s similarly sized customers. However, DHS officials stated that as of June 2017, IBC has not yet met DNDO’s needs to deliver a functioning travel system interface and other requirements. According to IBC officials, TRIO project change requests to address components’ requirements were extensive and included significant customizations to meet unique requirements that were not aligned with the federal shared service model. IBC officials noted additional challenges in addressing TRIO project requirements related to DHS’s efforts to address certain organizational change management and business process reengineering responsibilities. According to IBC officials, in some instances, the TRIO components provided conflicting requirements related to the same process that would have been more consistent had DHS completed more of its business process reengineering efforts prior to providing them to IBC.\nProject costs: According to the July 2014 discovery report, proposed implementation costs for the TRIO project totaled $89.9 million. However, according to DHS officials and TRIO project documentation, estimated costs significantly increased because of schedule delays, unanticipated complexities, and other challenges. In January 2017, DHS prepared a summary of estimated TRIO project implementation costs associated with its IAA with IBC. According to this summary, estimated IBC-related TRIO project implementation costs through fiscal year 2017 increased by approximately $42.8 million (54 percent) from the $79.2 million provided in the original August 2014 IAA with IBC as a result of modifications required, in part, to address challenges impacting the project. DHS officials also expressed concerns regarding increases in estimated operations and maintenance costs for the IBC solution. For example, according to a December 2016 memorandum to DHS on action items associated with failing to meet the baseline schedule date for initial operational capability, DNDO stated that IBC’s updated projected costs of operations and maintenance of its system were unaffordable. In connection with these costs, DHS officials also stated that IBC determined that separate, rather than shared, help desk resources were required to support the TRIO project because it was significantly different from the solution that IBC’s existing customers used. As a result, the officials indicated that these costs were more than originally expected. However, IBC officials told us that a portion of the increase in help desk- related costs was also due to DNDO employees not using the system properly because they were not sufficiently trained on it before it was implemented. In addition, challenges impacting the TRIO project have contributed to significant changes in the path forward on the project; as a result, the extent to which overall TRIO project modernization costs will be impacted going forward has not yet been determined.\nProject management and communication: According to DHS officials, various program management-related challenges impacted the TRIO project. For example, they expressed concerns regarding the effectiveness of IBC’s project management efforts including cost, schedule, and change management as well as IBC’s allocation of resources and slow decision-making process. They also stated that DHS provided significant time and resources to make up for fundamental project management activities that were under IBC’s control and not performed. In addition, DHS officials identified limitations associated with (1) poorly defined service level agreements and program performance metrics, (2) poor quality control plan, and (3) the lack of mechanisms for measuring delivery and addressing concerns regarding IBC’s performance. DHS officials told us that although various mechanisms can be used to hold commercial vendors accountable—such as cure notices, quality assurance surveillance plans, and incentives or disincentives to monitor performance—few mechanisms are available to hold federal agency service providers accountable for performance concerns.\nDHS officials also acknowledged challenges in their project management and communication efforts and identified lessons learned to help improve future efforts, including the need to establish a performance-based contract to determine objective and enforceable activity level metrics; be more prepared for organizational changes; improve vendor, project, and schedule management efforts; better understand SSP resource plans and monitor SSP efforts to help ensure that sufficient resources are secured timely; and centralize program management for financial system modernization functions, rather than continuing with the structure used on the TRIO project—for example, the TRIO project’s program management structure consisted of program management offices at the component level performing cost, schedule, and technical monitoring activities with DHS headquarters’ involvement focused on governance and oversight, resulting in duplicate efforts across components.\nIBC officials acknowledged challenges concerning IBC’s lack of sufficient resources and turnover, as described above. However, they told us that DHS’s approach to project management often resulted in duplicative meetings and a lengthy decision-making process involving several officials and multiple review and approval processes. According to USSM officials, the TRIO project team focused an unbalanced portion of its efforts on the delivery of technology at the expense of organizational change management, communication management, and other project management areas. For example, the failure to incorporate lessons learned from DNDO’s deployment adversely affected subsequent TRIO project implementation efforts, as change management activities did not address previously encountered risks. An OMB staff member concurred with the lessons learned that DHS identified, including those indicating the need for stronger project management. While the project is ongoing, the OMB staff member noted the importance of DHS having well-defined requirements for the project and better coordination to achieve the desired outcomes.", "In connection with TRIO project challenges, DHS officials told us that IBC notified DHS in April 2016 that it would not be able to meet the planned October 2016 implementation date for TSA. In response, DHS and IBC established the TSA Replan Tiger Team to perform a detailed assessment of potential courses of action. According to DHS officials, DHS and IBC subsequently took various actions to help address these and other challenges impacting the TRIO project, as summarized below.\nMay 2016: IBC requested additional funding for fiscal year 2016 for 14 additional IBC and contractor personnel to strengthen program coordination and management support. According to DHS officials, DHS provided this requested funding along with additional funding to establish a business integration office to help strengthen cross organizational communication. DHS determined that plans for migrating TSA and Coast Guard to IBC during the first quarter of fiscal years 2017 and 2018, respectively, were not viable. As a result, their planned migrations were each extended an additional year.\nJune 2016: DHS and IBC developed a comprehensive remediation plan to track progress on efforts to resolve numerous issues associated with DNDO’s production environment that continued to hamper its stability since going live in November 2015. According to DHS officials, these issues related to invoice payment and interest accruals, contract life cycle management, reporting, and other activities and have required numerous work-arounds to execute business processes.\nAugust to October 2016: DHS, Coast Guard, and IBC determined that a similar replanning effort was needed for Coast Guard’s successful migration to IBC. According to DHS officials, IBC indicated that it was unable to simultaneously provide DNDO production and TSA implementation support while also addressing the complexities related to Coast Guard. DHS officials told us that another Tiger Team established to address Coast Guard issues failed to complete the scope of its charter, and as a result, Coast Guard was forced to assume a minimum of a 2- year delay (rather than the 1-year delay previously determined in May 2016) and that this significantly increased program costs. They further stated that some of the team’s deliverables have not been initiated or remain outstanding as of June 2017.\nDecember 2016: IBC communicated to DHS that it cannot support the discovery phase with DHS’s CUBE modernization project. In addition, DHS approved the establishment of a Joint Program Management Office to serve as the overarching program management for DHS financial systems modernization projects. According to DHS officials, using a department-wide approach will enable DHS to more effectively leverage the resources and expertise across all modernization projects.\nJanuary 2017: IBC communicated to DHS that it cannot support Coast Guard implementation in October 2018, and DHS and IBC established a joint CPWG to assess viable options for improving program performance and addressing stakeholder concerns and key TRIO project priorities.\nFebruary 2017: DHS and IBC issued a joint memorandum to provide an update on contingency planning discussions. DHS and IBC shared commitments and determinations included (1) stabilizing the DNDO production environment and executing TSA implementation activities, (2) delivering the best value for the government and ensuring mutual success to the greatest extent possible, (3) preserving and protecting the current investment, and (4) making TSA implementation the first priority. In addition, DHS and IBC presented two options as representing the best opportunities for success in improving program performance and addressing stakeholder concerns: (1) continue with the status quo plan for Coast Guard implementation in October 2019, with significant improvements to program management and overall support capability and capacity, or (2) platform replacement. Platform replacement was presented as the preferred path toward meeting the needs of both DHS and IBC. Under this option, DHS and IBC would proceed with TSA implementation and work toward an orderly transition of TRIO components to an alternate service provider, hosting location, or both.\nMarch 2017: According to DHS officials, DHS, IBC, and USSM officials met to review certain critical success criteria for TSA’s implementation. Based on these discussions, it was determined that TSA would not go live with IBC in fiscal year 2018 given the high-risk schedule and critical criteria involved and the Coast Guard implementation would also be delayed accordingly. Further, TSA release 3.0 would be delivered in October 2017 or as soon as possible thereafter. In addition, the CPWG would continue working to identify an alternative path forward, and DHS and IBC would identify and evaluate critical transition activities and timelines.\nApril 2017: The CPWG recommended moving away from IBC to a commercial service provider leveraging the cloud as the best course of action to complete TRIO project implementation and as the most fiscally responsible approach from a long-term sustainment and cost perspective. The CPWG’s recommendation was based on its analysis of six options and proposed a transition timeline, including key activities, as shown in figure 3.\nMay 2017: During its May 3, 2017 briefing of the Financial Systems Modernization Executive Steering Committee, DHS indicated that two of the options that the CPWG considered were no longer viable, including the CPWG’s recommendation to transition to a commercial cloud service provider because the software was not yet cloud-ready. DHS ranked the remaining four options using 13 OMB risk factors as selection criteria and determined that migrating the solution to a DHS data center represented the best option going forward. In addition, DHS decided to move forward with discovery efforts related to this option. According to its briefing presentation and DHS officials, the notional timeline of planned key events for the TRIO project included various items, as shown in figure 4.\nDHS officials indicated that DHS expects to present the findings and recommendations resulting from discovery efforts associated with this new path forward to USSM and OMB for concurrence. As of August 2017, results of this effort were under review by DHS leadership.", "The TRIO project represents a key element of DHS’s efforts to address long-standing deficiencies in its financial management systems and further improve financial management. Following best practices to manage risks effectively can help provide increased assurance that large, complex projects—such as the TRIO project—will achieve planned objectives. DNDO’s AA process substantially met the four characteristics of a reliable, high-quality AOA process. However, Coast Guard’s and TSA’s AAs substantially met one and partially met three of these four characteristics. Further, DHS did not always follow best practices for managing the risks of using IBC for the TRIO project. As a result, TRIO components faced an increased risk that the solution they chose would not represent the best alternative for meeting their mission needs and that the risks impacting the TRIO project would not be effectively managed to mitigate adverse impacts. In addition, significant challenges have impacted the TRIO project, raising concerns about the extent to which objectives will be achieved as planned. Plans for DHS’s path forward on the TRIO project, as of May 2017, involve significant changes, such as transitioning away from IBC and a 2-year delay in completing Coast Guard’s and TSA’s migration to a modernized solution. Without greater adherence to best practices for analyzing alternatives and managing project risks, DHS continues to face increased risk that its financial management system modernization project will not provide reasonable assurance of achieving its mission objectives.", "We are making the following two recommendations to DHS: The DHS Under Secretary for Management should develop and implement effective processes and improve guidance to reasonably assure that future AAs fully follow AOA process best practices and reflect the four characteristics of a reliable, high-quality AOA process. (Recommendation 1)\nThe DHS Under Secretary for Management should improve the Risk Management Planning Handbook and other relevant guidance for managing risks associated with financial management system modernization projects to fully incorporate risk management best practices, including defining thresholds to facilitate review of performance metrics to determine when risks become unacceptable; identifying and analyzing risks to include periodically reconsidering risk sources, documenting risks specifically related to the lack of sufficient, reliable cost and schedule information needed to help properly manage and oversee the project, and timely disposition of IV&V contractor-identified risks; developing risk mitigation plans with specific risk-handling activities, the costs and benefits of implementing them, and contingency plans for selected critical risks; and implementing risk mitigation plans to include establishing periods of performance for risk-handling activities and defining time intervals for updating and certifying the accuracy and completeness of information on risks in DHS’s risk register. (Recommendation 2)", "We provided a draft of this product to DHS and the Department of the Interior for comment. In its comments, reprinted in appendix IV, DHS concurred with our recommendations and provided details on its implementation of the recommendations as discussed below. In addition, DHS provided technical comments, which we incorporated as appropriate. The Department of the Interior only provided technical comments, which we incorporated as appropriate.\nDHS stated that it remains committed to its financial system modernization program. Specifically, regarding our first recommendation to develop and implement effective processes and improve guidance to reasonably assure that future AAs fully follow AOA process best practices and reflect the four characteristics of a reliable, high-quality AOA process, DHS stated that it agrees that effective processes and guidance are necessary to assure best practices. DHS also stated that it is important to note that the GAO-identified best practices were published more than 2 years after the TRIO components’ AAs were completed. While this is the case, as discussed in our report, these best practices are based on long- standing, fundamental tenets of sound decision making and economic analysis and were identified by compiling and reviewing commonly mentioned AOA policies and guidance that are known to and have been used by government and private sector entities.\nDHS also stated that it has already implemented this recommendation through its issuance of guidance and instructions in 2016 and that a copy of this additional guidance and instructions was provided to GAO. However, the documentation provided by DHS does not fully address our recommendation. As part of our recommendation follow-up process, we will coordinate with DHS to obtain additional information on its efforts to address our recommendation.\nWith regard to our second recommendation to improve the Risk Management Planning Handbook and other relevant guidance, DHS stated that it concurred and agreed that the Risk Management Planning Handbook required updating to fully incorporate risk management best practices. In addition, DHS described actions it will take, and has taken, to revise and publish an updated handbook.\nWe are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Homeland Security, the DHS Under Secretary for Management, the Acting DHS Chief Financial Officer, the Secretary of the Interior, and the Director of the Interior Business Center. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-9869 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V.", "To determine the extent to which the Department of Homeland Security (DHS) followed best practices in analyzing the alternatives used in choosing the preferred alternative for modernizing TRIO components’ financial management systems, we reviewed information that the TRIO components provided as part of their alternatives analysis (AA) process, referred to as the AA body of work, which includes the AA and other supporting documentation that is not specifically included in the AA. In addition, we discussed the DHS AA process with the TRIO components and DHS officials. We evaluated each TRIO component’s AA body of work and assessed this information against the GAO-identified 22 analysis of alternatives (AOA) process best practices. We then scored each AA against those best practices. In appendix II, these GAO- identified best practices are described in detail.\nOur evaluation comprised the following steps: (1) two GAO analysts separately examined the AA information received for each component, providing a score for each of 18 best practices; (2) a third GAO analyst resolved any differences between the two analysts’ initial scoring; and (3) a GAO specialist on AOA best practices, independent of the audit team, reviewed the team’s AA documentation, scores, and analyses for consistency. The GAO specialist also assessed the four best practices related to cost estimating.\nWe used the average scores for each best practice to determine an overall score for four summary characteristics—well-documented, comprehensive, unbiased, and credible—of a reliable, high-quality AOA process at each TRIO component. Next, we shared our preliminary analysis with the TRIO components and DHS, and requested their technical comments and any additional information for our further consideration. For those characteristics of the AA process that received a score of partially met or below, we met with TRIO component and DHS officials to discuss potential reasons that an AA did not always conform to best practices. Finally, using the same methodology and scoring process explained above, we performed a final assessment based on our preliminary analysis and the comments and additional information received. The best practices were not used to determine whether DHS made the correct decision in selecting Department of the Interior’s Interior Business Center (IBC) to implement the financial management systems modernization solution or whether the TRIO project would have arrived at a different conclusion had it more fully conformed to these best practices.\nWe also reviewed DHS guidance for conducting AOAs and AAs against the GAO-identified 22 AOA process best practices using the same methodology described above for reviewing the TRIO components’ AAs. In the course of applying these best practices to a TRIO component’s AA and to DHS guidance for the AA process, we assessed the reasonableness of the information we collected. We determined that the information from the DHS AA process was sufficiently reliable to use in assessing the TRIO components’ AAs and DHS guidance against these 22 best practices.\nTo determine the key factors, metrics, and processes used by the TRIO components in developing and evaluating DHS’s alternative solutions and final choice for financial system modernization, we reviewed each component’s AA, including a description of (1) the alternatives considered, (2) the market research conducted, (3) the three alternatives evaluated, (4) the selection criteria used and how the criteria were weighted, (5) how each alternative scored against the selection criteria, and (6) the alternative that scored the best according to the component’s evaluation.\nTo determine the extent to which DHS managed the risks of using IBC consistent with risk management best practices, we reviewed DHS’s and TRIO components’ risk management guidance and other documentation supporting their risk management efforts, including risk registers, mitigation plans, status reports, and risk management meeting minutes. We also met with officials to gain an understanding of the key processes and documents used for managing and reporting on TRIO project risks. We assessed the processes against best practices that the Software Engineering Institute (SEI) identified. The practices we selected are fundamental to effective risk management activities. These practices are identified in SEI’s Capability Maturity Model® Integration (CMMI®) for Acquisition, Version 1.3.\nIn particular, the key best practices for preparing for risk management are determine risk sources and categories, define risk parameters, and establish a risk management strategy.\nThe key best practices for identifying and analyzing risks are evaluate, categorize, and prioritize risks.\nThe key best practices for mitigating identified risks are develop risk mitigation plans and implement risk mitigation plans.\nWe applied the criteria from the CMMI risk management process area to determine the extent to which the expected practices were implemented, or future activities were planned for, by the program office. The rating system we used is as follows: (1) meets, or generally satisfies all elements of the specific practice; (2) partially meets, or generally satisfies a portion of specific practice elements; and (3) does not meet, or does not satisfy specific practice elements.\nIn the context of the best practices methodology, we assessed the reliability of TRIO project risk data contained in DHS’s risk register. We interviewed officials on how the risk register was developed and maintained, including key control activities used to provide reasonable assurance of the accuracy of the information reported in the register. We reviewed DHS’s July 2016 risk register and minutes from risk management committee meetings (one meeting per quarter, randomly selected). Of 120 TRIO project risks on the July 2016 risk register, we found 13 risks with missing data. Of 47 active risks identified, 28 risk records had not been modified in the previous 3 months and the register did not indicate when their accuracy was last confirmed and 35 risks were beyond their indicated impact dates but had not been marked as issues. We concluded that the pervasiveness of these data reliability problems decreased the usefulness of the risk register in connection with managing TRIO project risks.\nTo determine the key factors or challenges that have impacted the TRIO project and DHS’s plans for completing remaining key priorities, we met with DHS, IBC, Office of Financial Innovation and Transformation, and Unified Shared Services Management office officials and Office of Management and Budget staff to obtain their perspectives. In addition, we reviewed documentation provided by these officials, including TRIO project status reports and memorandums, leadership briefings, and other presentations.\nWe conducted this performance audit from March 2016 to September 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Many guides describe an approach to an analysis of alternatives (AOA); however, there is no single set of practices for the AOA process that has been broadly recognized by both the government and private sector entities. GAO has previously identified 22 best practices for an AOA process by (1) compiling and reviewing commonly mentioned AOA policies and guidance used by different government and private sector entities and (2) incorporating experts’ comments on a draft set of practices to develop a final set of practices. These practices are based on longstanding, fundamental tenets of sound decision making and economic analysis.\nIn addition, these practices can be applied to a wide range of activities in which an alternative must be selected from a set of possible options, as well as to a broad range of capability areas, projects, and programs. These practices can provide a framework to help ensure that entities consistently and reliably select the project alternative that best meets mission needs. The guidance below is an overview of the key principles that lead to a successful AOA process and not as a “how to” guide with detailed instructions for each best practice identified.\nThe 22 best practices that GAO identified are grouped into the following five phases: 1. Initialize the AOA process: Includes best practices that are applied before starting the process of identifying, analyzing, and selecting alternatives. This includes determining the mission need and functional requirements, developing the study time frame, creating a study plan, and determining who conducts the analysis. 2. Identify alternatives: Includes best practices that help ensure that the alternatives to be analyzed are sufficient, diverse, and viable. 3. Analyze alternatives: Includes best practices that compare the alternatives to be analyzed. The best practices in this category help ensure that the team conducting the analysis uses a standard, quantitative process to assess the alternatives. 4. Document and review the AOA process: Includes best practices that would be applied throughout the AOA process, such as documenting all steps taken to initialize, identify, and analyze alternatives and to select a preferred alternative in a single document. 5. Select a preferred alternative: Includes a best practice that is applied by the decision maker to compare alternatives and to select a preferred alternative.\nThe five phases address different themes of analysis necessary to complete the AOA process, and comprise the beginning of the AOA process (defining the mission needs and functional requirements) through the final step of the AOA process (selecting a preferred alternative).\nWe also identified four characteristics that relate to a reliable, high-quality AOA process—that the AOA process is well-documented, comprehensive, unbiased, and credible. Table 4 shows the four characteristics and their relevant AOA best practices.\nConforming to the 22 best practices helps ensure that the preferred alternative selected is the one that best meets the agency’s mission needs. Not conforming to the best practices may lead to an unreliable AOA process, and the agency will not have assurance that the preferred alternative best meets mission needs.", "The Department of Homeland Security’s TRIO components—the U.S. Coast Guard (Coast Guard), Transportation Security Administration (TSA), and Domestic Nuclear Detection Office (DNDO)—conducted alternatives analyses (AA) during 2012 and 2013 to determine the best alternative for transitioning to a modernized financial management system solution. We evaluated the TRIO components’ AA processes against analysis of alternatives (AOA) best practices GAO identified as necessary characteristics of a reliable, high-quality AOA process (described in app. II).\nGAO’s assessment of the extent to which Coast Guard’s, TSA’s, and DNDO’s AAs met each of the 22 best practices is detailed in tables 5, 6, and 7.", "", "", "", "In addition to the contact named above, James Kernen (Assistant Director), William Brown, Courtney Cox, Eric Essig, Valerie Freeman, Matthew Gardner, Jason Lee, Jennifer Leotta, and Madhav Panwar made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "h0_full", "", "h0_title", "h0_full", "", "h1_full", "h2_full", "h2_full", "h2_full", "h0_full h1_full", "", "", "h1_full", "", "h0_full", "", "", "", "" ] }

{ "question": [ "What is the purpose of the TRIO project?", "What did GAO find about DNDO's AA?", "What did GAO find about Coast Guard's and TSA's AAs?", "What is the best alternative for the TRIO components based on AAs?", "How did DHS not follow best practices for managing project risks?", "What is an example of DHS not following best practices?", "What is the result of DHS not following best practices in this example?", "What is the overall problem of DHS not following best practices?", "What action did DHS, IBC, OMB, and other federal oversight agencies take?", "What challenges did these agencies identify regarding TRIO?", "How will these challenges be addressed?", "What did DHS identify as the best solution for TRIO?" ], "summary": [ "The Department of Homeland Security's (DHS) TRIO project represents a key effort to address long-standing financial management system deficiencies.", "GAO found that DNDO's AA substantially met the four characteristics—well-documented, comprehensive, unbiased, and credible—that GAO previously identified for a reliable, high-quality analysis of alternatives (AOA) process.", "However, Coast Guard's and TSA's AAs did not fully or substantially meet three of these characteristics, and DHS guidance for conducting AAs did not substantially incorporate certain best practices, such as identifying significant risks and mitigation strategies and performing an independent review to help validate the AOA process.", "Based on these analyses and other factors, the TRIO components determined that migrating to a federal shared service provider (SSP) represented the best alternative, and in 2014, DHS selected the Department of the Interior's Interior Business Center (IBC) as the federal SSP for the project.", "Specifically, DHS followed three of seven risk management best practices, such as determining risk sources and categories and establishing a risk management strategy. However, it did not fully follow four best practices for defining risk parameters, identifying risks, developing risk mitigation plans, and implementing these plans largely because its guidance did not sufficiently address these best practices.", "For example, although DHS created joint teams with IBC and provided additional resources to IBC to help address risk mitigation concerns, it did not always develop sufficiently detailed risk mitigation plans that also included contingency plans for selected critical risks.", "As a result, although IBC's capacity and experience for migrating large agencies the size of Coast Guard and TSA was identified as a risk in July 2014, a contingency plan working group to address this concern was not established until January 2017.", "By not fully following risk management best practices, DHS is at increased risk that potential problems may not be identified or properly mitigated.", "DHS, IBC, Office of Management and Budget (OMB), and other federal oversight agencies identified various challenges that have impacted the TRIO project and contributed to a 2-year delay in the implementation of Coast Guard's and TSA's modernized solutions.", "These challenges include the lack of sufficient resources, aggressive schedule, complex requirements, increased costs, and project management and communication concerns.", "To help address these challenges, DHS and IBC established review teams and have taken other steps to assess potential mitigating steps.", "In May 2017, DHS determined that migrating the solution from IBC to a DHS data center represented the best option and initiated discovery efforts to further assess this as its path forward for the TRIO project." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, 1, 0, -1, -1, 1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4 ] }

{ "title": [ "Background", "Severely Underfunded Plans Have Cut Benefits to Current Employees and Increased Employer Contributions, but Financial Outlook for Some Plans Remains Bleak", "Critical Status Plans Have Established a Range of Contribution Increases and Benefit Cuts", "Plan Officials Indicated That Efforts to Improve Funding Will, in Some Cases, Require Significant Sacrifices by Employers and Active Participants", "Impact of Contribution Increases", "PBGC Provides Financial Assistance to a Greater Number of Plans Each Year, Endangering the Multiemployer Program and Guaranteed Retiree Benefits", "Total PBGC Financial Assistance to Plans Increased More Rapidly in Recent Years, and Current and Projected Plan Insolvencies Will Exhaust the Insurance Fund", "Increases in PBGC Loans and Other Financial Assistance", "Benefits of Many Retirees Are Reduced under PBGC Guarantees, and May Be Further Reduced If PBGC Multiemployer Insurance Program Becomes Insolvent", "Key Options to Reduce Liabilities and Change Plan Designs Could Help Improve Financial Stability, but Pose Trade-offs", "Changes to Plan Design and Other Options Could Address Challenges of Withdrawal Liability and Improve Long-Term Financial Stability", "Addressing the Problems Associated with Withdrawal Liability Policies", "Conclusions", "Matters for Congressional Consideration", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Pension Benefit Guaranty Corporation", "Appendix III: GAO Contacts and Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Multiemployer defined benefit (DB) pension plans are created by collective bargaining agreements between labor unions and two or more employers, and generally operate under the joint trusteeship of unions and employers. Such plans typically exist in industries with many small employers who may be unable to support an individual DB plan, or where seasonal or irregular employment results in high labor mobility between employers. Industries where multiemployer plans are prevalent include trucking, construction, retail, and mining and manufacturing. Like single- employer DB plans, multiemployer DB plans pay retirees a defined benefit after retirement.\nUnder the Employee Retirement Income Security Act of 1974 (ERISA), as amended, the benefits of multiemployer plans are insured by PBGC. As shown in table 1, PBGC’s multiemployer fund is financed by insurance premiums paid by plans, with each multiemployer plan paying an annual premium of $12 per participant to PBGC as of 2013. In return, PBGC provides financial assistance in the form of loans to plans that become insolvent, that is, plans that do not have sufficient assets to pay pension benefits at the PBGC guaranteed level for a full plan year. Although such financial assistance is referred to as a “loan,” and is by law required to be repaid, in practice such loans have almost never been repaid, as plans generally do not emerge from insolvency. Before PBGC will provide the loans, participants’ retirement benefits must be reduced to a level specified in law. Even after insolvency, the plan remains an independent entity managed by its board of trustees. This contrasts with the agency’s single-employer program under which PBGC does not provide assistance to ongoing plans, but instead takes over terminated underfunded plans as a trustee, and pays benefits directly to participants.\nCongress included provisions directed at imposing greater financial discipline on multiemployer plans in the Pension Protection Act of 2006 (PPA). Specifically, as outlined in table 2, this law includes new provisions designed to compel multiemployer plans in poor financial shape to take action to improve their financial condition over the long term. The law established two categories of troubled plans—endangered status (commonly referred to as “yellow zone,” and which includes an additional subcategory of “seriously endangered”) and a more seriously troubled critical status (commonly referred to as “red zone”). PPA further requires plans in these categories to develop strategies that include contribution increases, benefit reductions, or both, designed to improve their financial condition in coming years. Multiemployer plans in endangered status are to document these strategies in a funding improvement plan, and multiemployer plans in critical status plans are to do so in a rehabilitation plan. The plan trustees can offer the bargaining parties multiple schedules from which to choose, but one of these must be designated as the “default schedule,” which is to be imposed if the bargaining parties do not select one of the schedules within a specified timeframe. Once plan trustees have adopted a funding improvement or rehabilitation plan, bargaining parties are to select one of the available benefit and/or contribution schedules through the collective bargaining process. The multiemployer plan is then required to report on progress made in implementing its funding improvement or rehabilitation plan.\nBecause of the greater severity of critical status plans’ funding condition, such plans have an important exception to ERISA’s anti-cutback rule in that they may reduce or eliminate certain so-called “adjustable benefits” such as early retirement benefits or subsidies, certain post-retirement death benefits, and disability benefits for plan participants who have not yet retired. For example, if a critical status plan were to adopt a rehabilitation plan that proposed to eliminate an early retirement benefit, appropriate notice was provided, and the reduction agreed to in collective bargaining, then participants not yet retired would no longer be able to receive that early retirement benefit.\nPPA funding requirements took effect in 2008 just as the nation was entering a severe economic crisis. The dramatic decline in the value of stocks and other financial assets in 2008 and the accompanying recession broadly weakened multiemployer plans’ financial health. In response, Congress enacted the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) which contained provisions designed to help pension plans and participants by providing funding relief to help them navigate the difficult economic environment. For example, WRERA relief measures allowed multiemployer plans to temporarily freeze their funding status at the prior year’s level, and extend the timeframe for plans’ funding improvement or rehabilitation plans from 10 to 13 years. In addition, Congress enacted the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA), which provides additional funding relief measures for multiemployer plans as long as a plan meets certain solvency requirements. Generally, PRA allows a plan to amortize the investment losses from the 2008 market collapse over 29 years rather than 15 years, and to recognize such losses in the actuarial value of assets over 10 years instead of 5 years, so that the negative effects of the market decline on asset values are spread out over a longer period.\nOverall, since 2009, multiemployer plans have experienced improvements in funding status, but a sizeable portion of plans are still critical or endangered. According to plan-reported data—current through 2011—from the IRS (see fig. 1), while the funding status of plans has not returned to 2008 levels, the percentage of plans in critical status declined from 34 percent in 2009 to 24 percent in 2011. Similarly, the percentage of plans in endangered status also declined, and to a greater extent, from 34 percent in 2009 to 16 percent in 2011. However, based on the 2011 data from the IRS, despite these improvements, 40 percent of plans still have not emerged from critical or endangered status.", "The large majority of the most severely underfunded multiemployer plans—those in critical status—have, according to a 2011 survey, both increased required employer contributions and reduced participant benefits in an effort to improve plans’ financial positions. Plan officials explained that these changes have had or are expected to have a range of effects, and in some cases may severely affect employers and participants. While most critical status plans expect to recover from their current funding difficulties, about 25 percent do not and instead seek to delay eventual insolvency.", "A 2011 survey of 107 critical status multiemployer plans conducted by the Segal Company shows that the large majority developed rehabilitation plans that included a combination of both contribution increases and benefit reductions to be implemented in the coming years. Further, plans proposed to take these measures regardless of whether the bargaining parties adopt the preferred schedule or the default schedule. As figure 2 illustrates, of the preferred schedules of 107 critical plans surveyed, 81 included both contribution increases and benefits cuts, while 14 proposed contribution increases only, and 7 included benefit reductions only. Most default schedules also include both increased contributions and reduced benefits, but compared to the preferred schedules, a much larger percentage chose to reduce benefits only. The reason for this difference is not clear, but Segal Company officials noted that because prompt adoption of an acceptable schedule is desirable, some plans may take special steps to make the default plan especially unappealing.\nMost plans—95 out of 107—developed preferred schedules that called for contribution increases and, while the range of these increases varied widely among plans, some were quite high. As figure 3 shows, most plans proposed increases of 10 percent or more in the first year of the collective bargaining agreement, and a little over a quarter of plans proposed increases of 20 percent or more. The median first-year contribution increase was 12.5 percent. Overall, the range of first-year increases was quite broad however, ranging from less than 1 percent to 225 percent. These data tell only a partial story, however, because rehabilitation plans may mandate a series of contribution increases in subsequent years. Of the eight critical status plans we contacted, the rehabilitation plans of seven increased contribution rates, and six of these specified a series of contribution increases over subsequent years. For example, one plan proposed contribution increases of 10 percent compounded annually over 10 years, so that at the end of this period, a contribution rate of $2.00 per hour, for example, would have been increased to $5.25 per hour, or by 162 percent.\nThirty-two plans developed rehabilitation plans that reduced the rate of future benefit accruals. As figure 4 illustrates, 15 of these plans reduced future benefit accruals by 40 percent or more, and another 12 plans reduced future benefit accruals 20-40 percent. The median reduction for all 32 plans was 38 percent. As with contribution increases, the survey data on reductions to benefit accrual rates paint only a partial picture. Reductions in the benefit accrual rate are more common among troubled multiemployer plans than these data show because such reductions were often made prior to the rehabilitation plan. For example, findings from the Segal Company’s survey show that, of the plans that expected to exit critical status within the specified timeframes, about one-third had cut future accrual rates before preparation of the rehabilitation plan, either directly or by a plan amendment that excluded recent contribution increases from the benefit formula.\nAlso, a large majority of plans—88 out of 107—reduced one or more types of the adjustable benefits as outlined by the PPA. Typically, these reductions applied to both vested but inactive and active participants, but some plans applied them to only one or the other.", "", "Officials of seven of the eight critical status plans we contacted increased contributions rates, and several of these plans indicated that contribution increases could be absorbed without undue stress to the plan. For example, one plan representing maintenance workers proposed to increase the weekly employer contribution rate for each worker from $82.75 per employee in 2011 to $130.75 per employee in 2023, a 58 percent increase over 12 years. While this makes some significant demands on employers, they are nonetheless in agreement, and the reaction of both employers and participants to the rehabilitation plan has been constructive. Similarly, officials of another plan covering sheet metal workers said that the annual contribution increases ranging from 30 percent in 2009-2010 to 5.8 percent in 2015-2016 can be absorbed by plan employers without great difficulty.\nIn contrast, officials of some plans and contributing employers we contacted said that contribution increases would have very severe negative effects on some employers and possibly the plan itself. For example, officials of one plan told us that a proposed series of annual increases of 10 percent (compounded) represents a significant increase in labor costs. Plan officials said contributing employers are competing against firms outside of the plan that do not have comparable pension or health insurance costs, and contribution increases put them at a competitive disadvantage. Similarly, an official of a long-distance trucking firm said that the high contribution rates of underfunded multiemployer plans have greatly affected this firm’s cost structure and damaged its competitive position in the industry. In other cases, plans may have been unable to increase contributions as much as necessary. For example, our review of one plan’s rehabilitation plan revealed that the 15 percent contribution increase resulted from a difficult balance between, among other factors, adequately funding the plan and avoiding excessive strain on employers. According to the plan administrator, plan trustees determined that many contributing employers were in financial distress and that a significant increase in contributions would likely lead to business failures or numerous withdrawals. After the rehabilitation plan was adopted, five employers withdrew from the plan.\nContribution increases could have a significant impact on participating workers as well as employers because in some cases at least a portion of the increases will be funded through reductions in pay or other benefits. For example, officials of one large national plan with hundreds of contributing employers in a variety of industries told us that employers will pass a substantial part of the higher contributions to employees in the form of lower wages. They noted that workers’ wages have been stagnant for 10 years, so the need to return to full funding so quickly in accordance with the Pension Protection Act of 2006 (PPA) requirements is hurting workers in the short term. More broadly, a recent report developed by a construction industry consortium notes that higher contributions make less money available for wage increases and other benefits. The report further notes that in some cases the additional contribution comes directly from the existing wage package, so a worker’s take home pay may remain stagnant or even be reduced. In other cases, the contribution increases will not have an immediate impact on participants’ pay, but will affect other portions of their benefit package. For example, one plan opted to increase pension contributions by diverting 2 percent of employers’ contributions from another benefit account. An official of another plan explained that the plan funded increased pension contributions by, for example, reducing contributions to a health benefit plan. Instead of directly reducing current wages, these actions will likely lead to higher health care costs or reduced benefits for employees.\nAmong plans we contacted that had reduced future benefit accruals in recent years, the cumulative impact varied. For example, officials of one plan covering sheet metal workers explained that since 2003 the plan had reduced future benefit accruals by 75 percent per each dollar contributed to the plan. Another plan covering mine industry workers completely eliminated future benefit accruals for new, inexperienced miners hired on or after January 1, 2012, even though a contribution of $5.50 per hour of work will be made on their behalf. Another plan made no changes to benefit accrual rates but made a series of changes to eligibility and thresholds for retirement credits, with the result that some employees will have to work longer to accrue the same benefit they would have before adoption of the rehabilitation plan.\nThe reduction or elimination of adjustable benefits, such as those outlined in table 3, were also significant and controversial in some cases. Officials of several of the plans that we contacted told us that the reduction or elimination of early retirement benefits for participants working in physically demanding occupations would be particularly difficult for some workers. As one official explained, working longer can be a grim scenario for older workers who have a hard time bearing the physical demands of labor, such as in a paper mill, for example. At the same time, some plans also eliminated or imposed limitations on disability retirement, so that, as officials of one plan noted, even workers who have developed physical limitations will have to either continue to work, or retire on substantially reduced benefits. Representatives of one plan said that there was considerable resistance from workers to the cuts in early retirement benefits. The officials explained, however, that these benefits had been established in the early 1990s when the plan was very well funded and that these promises had to be withdrawn in light of the plan’s current poor financial picture.\nBenefit reductions can affect employers as well as plan participants. For example, representatives of one construction industry plan told us that the reduced benefits outlined in the rehabilitation plan had reduced their ability to recruit and train new apprentices. These representatives explained that the prospect of earning only $50 of monthly retirement benefit per year of work—which after a 30-year career would result in only $1,500 payment per month in retirement—is not very appealing to prospective employees. While this does present a barrier to recruitment, a plan representative told us it is mitigated by an attractive hourly wage of $31.40, and the fact that many of the younger workers today are thankful for a paycheck in the current economic environment.\nSome rehabilitation plans also included provisions designed to protect the plan from employer withdrawals. For example, as table 4 outlines, two of the eight critical status plans we contacted impose much more severe benefit reductions on employees of firms that subsequently choose to withdraw from the plan. According to one of the rehabilitation plans, maintaining the contribution base of the pension plan is essential to the success of the rehabilitation plans and hence for plan participants and their families. Officials of this pension plan said that the pension plan cannot survive if it continues to lose contributing employers, and penalizing their employees is one way of discouraging withdrawals.\nThe Segal survey of critical status plans indicates that while most plans aimed to eventually emerge from critical status, a significant number reported that they do not and instead project eventual insolvency. As figure 5 illustrates, of the 107 plans surveyed, about 67 expect to emerge from critical status within the statutory time frames of either 10 to 13 years, and 12 others in an extended rehabilitation period. However, 28 of the surveyed plans had determined, as the authors of the survey noted, that no realistic combination of contribution increases and benefit reductions would enable them to emerge from critical status, and that their best approach is to forestall insolvency for as long as possible. Among these plans, the average number of years to expected insolvency was 12, with some expecting insolvency in less than 5 years and others not for more than 30 years. The majority of these plans expected insolvency in 15 or fewer years.\nAmong the plans we contacted, four expected to eventually become insolvent. In general, officials of these plans told us that a combination of massive investment losses and deterioration in contribution bases were primary causes of their financial difficulties. For example, officials of one plan cited the closure of paper mills from which the plan previously derived a substantial share of contributions as a cause of the plan’s financial distress. Officials of these plans explained that their analyses concluded that no feasible combination of contribution increases or benefit reductions could lead them back to a healthy level of funding. Several officials indicated that an effort to do so would likely accelerate the demise of the plan. For example, our review of plan documents revealed that the actuary of one fund determined that mathematically the fund would be able to emerge from critical status if contribution rates were increased by 24 percent annually for each of the next 10 years, ultimately increasing to a rate that would be about 859 percent of the then-current contribution rate. The trustees of this plan determined that such a proposal would be rejected by representatives of employers and workers, and would likely lead to negotiated withdrawals by plan employers. This, in turn, could result in insolvency of the plan, possibly as early as 2019. Instead, this plan opted for measures that officials believed are most likely to result in continued participation in the fund, yet which nonetheless are projected to forestall insolvency until about 2029. Similarly, according to officials of another plan, plan trustees concluded that the significant contribution increases necessary to avoid insolvency were more than employers in that geographic area could bear. In addition, the plan considered the impact of funding the necessary contribution increases through reductions to base pay. The plan determined that this also would not be feasible because of the rising cost of living facing these employees and their families. Consequently, the plan trustees adopted a rehabilitation plan that forestalls insolvency until about 2025.\nOfficials of plans that we contacted expressed a number of concerns about the future, including concerns about financial market returns, the overall economy, and the stability of contributing employers. For example, officials of one plan that expected to emerge from critical status within the next 10 years said that this could be impeded if investment returns were below expectations, and especially if another collapse in the financial markets occurs. Officials of the seven other critical status plans we contacted echoed this concern, and several mentioned that overall economic conditions affect hours worked and hence overall contributions. For example, officials of a plan covering construction industry workers expressed concerns that because of the economic downturn, the reduction in demand for infrastructure and construction maintenance work has greatly reduced the number of active workers in the plan.\nFinally, officials of several plans expressed concerns about attracting and retaining contributing employers. An official of a safe status or “green- zone” plan, for example, said that it is essential that the plan continue to attract new employers and that the ability to do so is a key basis for the plan’s overall financial health. An official of a critical status plan that is attempting to forestall insolvency told us that it is very concerned about the financial well-being of its remaining contributing employers and that plan insolvency could be hastened if one of these employers were to fail or otherwise cease making contributions. As PBGC officials and a construction industry organization noted, because the contribution base of multiemployer plans can overlap, financial stress in one plan has the potential to spill over to other plans. If, for example, the burden of increased contributions in one plan causes a large employer economic distress, it may impair its ability to remain competitive as well as make sufficient contributions to other plans. As shown in figure 6, this contagion effect could negatively affect the funded status of other plans.\nIf the events of coming years are more favorable than the assumptions on which rehabilitation plans are based, some plans may emerge from critical status earlier than planned, and some may be able to avoid insolvency. However, the opposite is true as well—if future events are less favorable than assumed, contributing employers and plan participants may have to make additional sacrifices or additional plans could face insolvency. Our discussions with eight critical status and two endangered status plans show that while some plans believed they had flexibility to make further adjustments, others did not. For example, officials of one plan trying to avoid insolvency said that even the contribution increases included in the funding improvement plan will be very difficult to bear for employers and workers, and further concessions are not realistic. An official of a large national plan said that the ability of employers and participants to absorb more sacrifices varied considerably among the plan’s 900 participating groups, but that in general, additional concessions would be very difficult to accept. They said that it would almost certainly erode the plan’s contribution base, which would mean a slow progression towards insolvency.", "PBGC’s financial assistance to multiemployer plans has increased significantly in recent years, and projected plan insolvencies may exhaust PBGC’s multiemployer insurance fund. In fact, PBGC expects that, under current law, based on plans currently booked as liabilities (current and future probable plan insolvencies), the multiemployer insurance program is likely to become insolvent within the next 10 to 15 years, although the exact timing is uncertain and depends on key factors, such as investment returns and the timing of individual plan insolvencies. Additionally, PBGC estimates that if the projected insolvencies of either of two large multiemployer plans were to occur, the insurance fund would be completely exhausted within 2 to 3 years. While retirees of insolvent plans generally receive reduced monthly pension payments under the PBGC pension guarantee, this amount would be further reduced to an extremely small fraction of what PBGC guarantees, or nothing, if the multiemployer insurance fund were to be exhausted.", "", "As more multiemployer plans have become insolvent, the total amount of financial assistance PBGC has provided has increased markedly in recent years. Overall, for fiscal year 2012, PBGC provided $95 million in total financial assistance to help 49 insolvent plans cover pension benefits for about 51,000 plan participants. Generally, since 2001, the number of multiemployer plans needing financial assistance has steadily increased, as has the total amount of assistance PBGC has provided each year, slowing the increase in PBGC’s multiemployer insurance program funds.\nMoreover, as figure 7 indicates, the number of plans needing PBGC’s help has increased significantly in recent years, from 33 plans in fiscal year 2006 to 49 plans in fiscal year 2012. Likewise, the amount of annual PBGC assistance to plans has increased from about $70.1 million in fiscal year 2006 to about $95 million in fiscal year 2012 (a decrease in assistance, due to fewer plan closeouts, compared with about $115 million in fiscal year 2011). From fiscal years 2005 to 2006 alone, annual PBGC assistance increased from about $13.8 million to more than $70 million.\nLoans to insolvent plans comprise the majority of financial assistance that PBGC has provided to multiemployer plans. As figure 8 illustrates, based on available data from fiscal year 2011, loans to insolvent plans totaled $85.5 million and accounted for nearly 75 percent of total PBGC financial assistance. However, the loans are not likely to be repaid because the plans are insolvent. To date, only one plan has ever repaid a PBGC loan. In addition to providing loans to insolvent plans, PBGC provided $13.7 million in fiscal year 2011 to help support two plan partitions, which enabled those plans to carve out the benefit liabilities attributable to “orphaned” employees whose employers filed for bankruptcy, while keeping the remainders of the plans in operation. Once a plan is partitioned, PBGC assumes the liability for paying benefits to the orphaned participants. Additionally, PBGC provided $15.1 million in fiscal year 2011 to help plan sponsors close out five plans, which occurs when plans either merge with other multiemployer plans or purchase annuities from private-sector insurers for their beneficiaries. Plans considering a merger must provide notice to PBGC and may request a compliance determination; PBGC officials said they carefully consider each merger to ensure that the merger would not result in a weaker combined plan than the separately constituted plans.\nPBGC monitors the financial condition of multiemployer plans to identify plans that are at risk of becoming insolvent and that may require its financial assistance from the multiemployer insurance program. Based on this monitoring, PBGC maintains a contingency list of plans that are likely to become insolvent and make a claim to PBGC’s multiemployer insurance program. PBGC classifies plans on its contingency list according to the plans’ risk of insolvency. PBGC also assesses the effect that insolvencies among the plans on the contingency list would have on the multiemployer insurance fund. Table 5 outlines the various classifications and definitions based on risk.\nBoth the number of multiemployer plans placed on PBGC’s contingency list and the amount of PBGC’s potential financial assistance obligations to those plans have increased steadily over time, with the greatest increases recorded in recent years. According to PBGC data, the number of plans where insolvency is classified as “probable”—plans that are already insolvent or are projected to become insolvent within 10 years—increased from 90 plans in fiscal year 2008 to 148 plans in fiscal year 2012. Similarly, the number of plans where insolvency is classified as “reasonably possible”—plans that are projected to become insolvent 10 to 20 years in the future—increased from 1 in fiscal year 2008 to 13 in fiscal year 2012.\nAlthough the increase in the number of multiemployer plans on PBGC’s contingency list has risen sharply, the present value of PBGC’s potential liability to those plans has increased by an even greater factor. For example, as illustrated in figure 9, the present value of PBGC’s liability associated with “probable” plans increased from $1.8 billion in fiscal year 2008 to $7.0 billion in fiscal year 2012. By contrast, for fiscal year 2012, PBGC’s multiemployer insurance fund only had $1.8 billion in total assets, resulting in net liability of $5.2 billion, as reported in PBGC’s 2012 annual report.\nAlthough PBGC’s cash flow is currently positive—because premiums and investment returns on multiemployer insurance fund assets exceed benefit payments and other assistance—PBGC expects plan insolvencies to more than double by 2017, placing greater demands on the multiemployer insurance fund and further weakening PBGC’s overall financial position.\nPBGC expects that the pension liabilities associated with current and future plan insolvencies will exhaust the multiemployer insurance fund. Under one projection using conservative (i.e., somewhat pessimistic) assumptions for budgeting purposes, PBGC officials reported that the agency’s projected financial assistance payments for plan insolvencies that have already occurred or are considered probable in the next 10 years would exhaust the multiemployer insurance fund in or about 2023. PBGC officials said that the precise timing of program insolvency is difficult to predict due to uncertainty about key assumptions, such as investment returns and the timing of individual plan insolvencies. Based on a range of estimates provided by multiple projections, PBGC officials said the multiemployer insurance program is likely to become insolvent within the next 10 to 15 years. Furthermore, exhaustion of the insurance fund may occur sooner because the financial health of two large multiemployer plans has deteriorated. According to PBGC officials, the two large plans for which insolvency is “reasonably possible,” have projected insolvency 10 to 20 years in the future. PBGC estimates that, for fiscal year 2012, the liability from these two plans accounted for $26 billion of the $27 billion in liability of plans in the “reasonably possible” category. Taken in combination, the number of retirees and beneficiaries of these two plans would represent about a six-fold increase in the number of people receiving guarantee payments in 2012. PBGC officials said that the insolvency of either of these two large plans would exhaust the insurance fund in 2 to 3 years.", "Generally, retirees who are participants in insolvent plans receive reduced pension benefits under PBGC’s statutory pension guarantee formula. In most cases, PBGC’s pension guarantee (see fig. 10) does not offer full coverage of the monthly pension benefits that a retiree of an insolvent plan has actually earned. When a multiemployer plan becomes insolvent and relies on PBGC loans to pay for benefit payments to plan retirees, retirees will most likely see a reduction in their monthly pension benefits. PBGC uses a formula that calculates the maximum PBGC benefit guarantee based on the amount of a plan participant’s pension benefit accrual rate and years of credit service earned. For example, if a retiree has earned 30 years of credit service, the maximum coverage under the PBGC guarantee is about $1,073 per month, which yields an annual pension benefit of $12,870.\nGenerally, retirees receiving the highest pensions experience the steepest cuts when their plans become insolvent and their benefits are limited by the pension guarantees. According to PBGC, in 2009, the average monthly pension benefit received by retirees in all multiemployer plans was $821. However, as shown by PBGC in a hypothetical illustration of benefit distributions (see fig. 11), the line that spans the bar chart indicates that the range of pension benefits varies widely across retirees, and, with $692 as the median pension, about half of the plan’s retirees will experience 15 percent or greater reductions in their pensions under the PBGC guarantee. Additionally, under this illustration, one out of five retirees will experience 50 percent or greater reductions in their pensions under the PBGC guarantee. Ultimately, regardless of how long a retiree has worked and the amount of monthly benefits earned, any reduction in pension benefits—no matter the amount—may have significant effects on retirees’ living standards.\nAccording to PBGC, in the event that the multiemployer insurance fund is exhausted, affected participants then relying on the PBGC pension guarantee would receive an extremely small fraction of their already- reduced guarantees or, potentially, nothing. According to PBGC officials, once the insurance fund’s cash balance is depleted, the agency would have to rely solely on the annual insurance premium receipts, which totaled $92 million for fiscal year 2012. The precise effect that the insolvency of the multiemployer insurance fund would have on retirees receiving the PBGC guaranteed benefit depends on a number of factors—primarily the number of guaranteed benefit recipients and PBGC’s annual premium income at that time. The impact would, however, likely be severe. For example, if the insurance fund were to be drained by the insolvency of one very large and troubled plan, under one scenario, we estimate that the benefits paid by PBGC would be reduced to less than 10 percent of the PBGC guarantee level. In this scenario, a retiree who once received a monthly pension of $2,000 and whose pension was reduced to $1,251 under the PBGC guarantee, would see the monthly pension income further reduced to less than $125, or less than $1,500 per year. Additional plan insolvencies would further depress already drastically reduced income levels. Our contacts with plan officials and other stakeholders also suggested that the exhaustion of the PBGC multiemployer insurance fund would have effects well beyond direct financial impacts. For example, officials of another plan said that the exhaustion of the insurance fund could bring about the loss of public confidence in the multiemployer plan system’s ability to provide retirement security for plan participants and their beneficiaries.", "Experts and stakeholders we interviewed cited two key policy options to avoid the insolvencies of severely underfunded plans and the PBGC multiemployer insurance fund, and a number of other options for longer term reform of the multiemployer system (see fig. 12). To address the impending insolvency crisis, they proposed allowing severely troubled plans to reduce accrued benefits, including benefits of retirees, and providing PBGC with additional resources to prevent insolvencies that might otherwise threaten the fund. Longer term options would provide plans with flexibilities and resources to help attain financial stability in the future. These include encouraging the adoption of flexible benefit designs and reforming withdrawal liability policies.\nVarious experts and plan representatives stressed the necessity of modifying ERISA’s anti-cutback rule to allow severely distressed plans to reduce the accrued benefits of active participants as well as retirees. They noted that this flexibility is essential because 1) the most severely distressed plans will be unable to avoid insolvency using traditional methods—increasing employer contributions and/or reducing future benefit accruals or adjustable benefits—and 2) benefit reductions will occur in any case and will be more severe in the event of plan insolvency, especially in the event of the insolvency of PBGC’s multiemployer insurance fund. As described in the first section of this report, the most severely distressed plans we contacted have already adjusted contributions and benefits and several stated that further adjustments would accelerate plan insolvency. In particular, the demographics of many multiemployer plans limit their ability to reduce liabilities through contribution increases or reductions in future benefit accruals because they are typically based on hours worked. For example, the majority of participants in one of the largest multiemployer plans have already retired or are inactive and no longer contributing to the plan—as of 2012, the plan had about 4.86 retired or otherwise inactive participants for every active worker. In light of the sacrifices already made by active participants—some of whom are absorbing the cost of significant contributions to support benefit payments at a level they will likely never see for themselves—some stakeholders noted that adjustments of retiree benefits would be equitable. Moreover, experts, as well as employer and plan representatives also noted that allowing plans to reduce accrued benefits now could avoid more severe reductions in the future. For example, representatives from an association of actuaries and from a large plan noted that for some plans, the alternative to reductions in accrued benefits is eventual plan insolvency, which would result in the much lower benefit level guaranteed by PBGC compared to the current benefits paid and, possibly, little to no benefit at all if PBGC’s multiemployer insurance fund became insolvent. Finally, some experts and a plan representative stressed the urgency of obtaining such flexibility because the longer the delay, the greater the eventual required benefit reductions.\nNonetheless, allowing plans the flexibility to reduce accrued benefits for current workers and retirees would significantly compromise one of the founding principles of ERISA and could impose significant hardship on some retirees. While some plan representatives and other stakeholders told us that a very modest benefit reduction would be sufficient to avoid insolvency, others noted that reductions would be very painful for retirees who worked for many years and planned their retirements around a promised benefit. Representatives of one of these plans referred to appeal letters to the plan that had been submitted by participants and/or their spouses, noting that older workers or retirees can be in some financially difficult situations, and cuts to accrued benefits would deepen and increase the number of such hardships. Some also noted that while younger retirees may be able to obtain employment to supplement income, older retirees, especially in physically demanding industries like mining and construction would likely not have that option. Finally, some stakeholders indicated that the flexibility to reduce accrued benefits would harm the multiemployer system by undermining the credibility of multiemployer plans and diminishing their ability to attract and retain employers and participants.\nPlan representatives and experts we contacted proposed a number of considerations and limitations that could mitigate some concerns with allowing plans to reduce accrued benefits. As described in table 6, these measures include eligibility criteria and options for oversight, along with other key features. For example, given the sacrifice it would impose on participants, several experts and plan representatives said that allowing reductions in accrued benefits should only be considered as a last resort for plans headed for insolvency.\nEven with these protections and considerations, the flexibility to reduce accrued benefits would not occur without considerable sacrifice, and may not be sufficient to help some plans avoid insolvency. Several plan representatives and experts said the suggested benchmark for reducing accrued benefits—PBGC’s guarantee level of $12,870 on an annual basis for 30 years of service—is relatively low and could result in steep benefit cuts. For example, given the magnitude of financial challenges facing some severely underfunded plans, accrued benefits may be reduced by one-third or more of their original value. Moreover, in the case of at least one plan, PBGC officials said that reductions to the maximum guaranteed level may still not represent sufficient savings to avert insolvency. For example, representatives of one large plan told us that while reducing accrued benefits might be an option for some plans, it was not an option for their plan because the benefits were already quite modest—average retirement benefits in 2010 were about $600 per month. Further, plan representatives said it would be unconscionable to reduce benefits for a retiree with a work-related illness, such as a respiratory ailment, who may be barely surviving on current benefit levels.\nAccording to several experts, in an effort to save plans and conserve PBGC assets in the long term, PBGC could provide financial assistance to qualifying plans headed for insolvency through a partition. If a plan qualifies and its application is approved by PBGC, the partition population includes only orphaned participants—those whose employer left the plan due to bankruptcy—and their benefits are reduced to the guaranteed level. According to industry experts, partitions would allow plans with a substantial share of orphaned liabilities to avoid further benefit reductions for active participants and other beneficiaries. By removing the burden of the legacy costs associated with orphaned participants, the plan would be in a better position to adequately fund benefit obligations with ongoing contributions. In addition, one expert said that partitions could reduce the total liability for PBGC because extending the solvency of the plan means that fewer participants would rely on benefit payments from the PBGC than if the whole plan were to become insolvent.\nWhile partitions may prevent qualifying plans from becoming insolvent, neither PBGC’s current partitioning authority nor its financial resources are sufficient to address the impending insolvency of large, severely underfunded plans. In its entire history, PBGC has performed partitions for only two plans. According to PBGC officials, plan representatives, and experts, there are a number of reasons why partitions have not been more widely used:\nThe magnitude of potential reductions for orphaned participants has dissuaded some plans from applying for help. Payments for the partitioned population will be reduced to the PBGC guarantee level, which could be a sizable reduction in some cases.\nPBGC does not have sufficient resources to cover orphaned liabilities of large severely underfunded plans.\nPlans may not meet the four statutory criteria to be eligible for a partition. For example, a plan must demonstrate that it is headed for insolvency due to a reduction in contributions due to employer bankruptcies, which numerous plan representatives and experts said may exclude plans in need of assistance. Some plan representatives said that many of their contributing employers are small businesses that do not have the wherewithal to go through formal bankruptcy proceedings, but instead close without paying their full share of liabilities. In other cases, contributing employers may have left when the plan was adequately funded, but, as a result of the market crash in 2008, the funded status deteriorated. Consequently, the plan is not able to collect any ongoing contributions from those employers to offset the poor investment returns, but the plan is still responsible for paying the full amount of vested benefits for their workers.\nWhile the reasons employers leave a plan may vary, their departure can result in significant legacy costs that experts said impair the ability of the plan to remain solvent or recover from funding shortfalls. For example, according to officials from one of the largest plans, about 40 percent of benefit payments go to orphaned participants and current employer contributions amounted to only about 25 percent of total annual benefit payments as of 2009. To address this issue, several experts said that partitions should be made more widely available so that, for example, orphaned liabilities could include any participants whose contributing employer left the plan without paying their full share of unfunded vested benefits. However, to cover the cost of these benefits, several experts noted that PBGC would need additional funding—the agency does not have nearly sufficient resources to pay even the reduced benefit levels for potential partition populations from some large plans.\nAs an example, representatives of one of the largest plans for which insolvency is reasonably possible in the mining industry indicated they may not be eligible for assistance through a partition because the plan was sufficiently funded until the 2008 financial crisis. In the absence of a partition, some members of Congress have proposed financial assistance using an existing separate source of funds established from reclamation fees paid by coal companies for abandoned coal mines. According to plan representatives, this fund currently provides money to pay for health benefits of three related plans, which have not used the full amount of those funds. The proposal would transfer any remaining funds that are not needed for health benefits to improve the solvency of the pension plan. The representatives also noted that this financial assistance is essential and the only way the plan can avoid insolvency. Pension benefits for this plan are relatively low—retirees received an average pension of about $600 a month in 2010, which limits the plan’s ability to improve its funded status even if reductions to accrued benefits were allowed.\nNumerous industry experts and plan representatives emphasized the importance of providing timely assistance to severely underfunded plans, but some experts also cited drawbacks of providing additional financial assistance beyond PBGC’s multiemployer insurance fund. Regarding advantages, several experts and plan representatives said providing additional financial assistance sooner rather than later could prevent entire plans from going insolvent and reduce the number of participants relying on guaranteed payments from PBGC in the long term. Beyond the scope of an individual plan, representatives from a construction industry group said additional financial assistance could also prevent more widespread negative effects. Because employers across various industries contribute to some of the large severely underfunded multiemployer plans, as well as other plans, the continued decline of such a plan could trigger a contagion effect. Contributing employers may face large liabilities (e.g., increased contributions, increased withdrawal liability) that could prevent them from fulfilling obligations to other currently well-funded plans and some employers may be forced out of business. Moreover, a plan representative and an expert said additional financial assistance is necessary to prevent the insolvency of the multiemployer insurance program, which, as described in the previous section, would leave thousands of participants with a small fraction of their vested pension benefits. However, other experts cited drawbacks for providing additional financial assistance. In particular, some experts said that a partition may not be a permanent fix for the plan. For example, if the on-going portion of the plan continues to lose employers, it may still become insolvent and require financial assistance from PBGC. In addition, some experts expressed concern about the size of the burden federal financial assistance could potentially place on taxpayers.\nConsidering the resources that may be needed to provide financial assistance to troubled plans, PBGC and others have identified increased premiums as a potential source of additional revenue for PBGC. According to projections in a recent PBGC report, doubling the insurance premium from the current level of $12 per participant to $24 per participant would reduce the likelihood of PBGC insurance fund insolvency in 2022 from about 37 percent to about 22 percent. The analysis also found that a tenfold increase to $120 per participant would virtually eliminate the likelihood of multiemployer insurance fund insolvency by 2022, although the analysis did not look beyond that timeframe.\nHowever, some stakeholders we spoke with noted that increased premiums also have limitations and drawbacks. Some stakeholders said further premium increases alone were not a feasible solution because they would be insufficient to solve PBGC’s long-term funding shortfall and would further stress employers in severely underfunded plans who have already borne considerable contribution increases. According to a PBGC analysis, even a ten-fold increase in the current premium would not prevent significant growth in the agency’s deficit. Under this analysis, PBGC estimates that the FY2012 deficit of $5.2 billion would still nearly triple, amounting to about $15 billion in 2022. Moreover, it is unclear what impact such premium increases would have on plans of varying financial health, especially plans seeking to delay eventual insolvency. PBGC officials acknowledged that, although premiums are generally not a significant percentage of plan costs, the most severely underfunded plans may not be able to afford any increases. PBGC officials also said that, given the range of financial circumstances across plans, a premium structure that would ensure affordable and appropriate premiums for all plans could help address this concern. In prior work, we assessed changing the premium structure for PBGC’s single-employer program to allow premiums to vary based on risk. However, we have not assessed the implications or implementation of increased premiums or a risk-based premium structure for PBGC’s multiemployer program. Given the distinctive features of the multiemployer plan design and program described earlier in this report, the development of a risk-based premium structure for multiemployer plans would entail unique considerations and require further analysis.", "", "ERISA requires that employers wishing to withdraw from a multiemployer plan pay for their share of the plan’s unfunded liabilities. As explained in the following text box, this requirement for withdrawal liability payments is intended to prevent employers from walking away from liabilities they have created, and, thus, help protect plan participants and other employers. However, despite the necessity of such a safeguard, plan representatives and other industry experts said changes are needed to address key challenges related to current provisions regarding withdrawal liability.\nIn the event an employer seeks to leave a multiemployer plan and the plan has a funding shortfall, the employer is liable for its share of unfunded plan benefits, known as withdrawal liability. A plan can choose from several formulas established in the law for determining the amount of unfunded vested benefits allocable to a withdrawing employer and the employer’s share of that liability. Under three of these formulas, the employer’s proportional share is based on the employer’s share of contributions over a specified period. In addition, the plan can apply for approval from PBGC to use variations on these methods. Liabilities that cannot be collected from a withdrawing employer, for example, one in bankruptcy, are to be “rolled over” and eventually funded by the plan’s remaining employers—frequently referred to as orphaned liabilities. As we previously reported, this means that an employer’s pension liabilities can become a function of the financial health of other employer plan sponsors. These additional sources of potential liability can be difficult to predict, increasing employers’ level of uncertainty and risk. However, while the total amount of withdrawal liability is based on the unfunded vested benefits for the plan as a whole, a particular employer’s annual payments are strictly based on its own contributions and are generally subject to a 20-year cap.\nCurrent federal withdrawal liability policies give rise to three main problems, according to stakeholders and experts. First, plans often collect far less than the full value of liabilities owed to the plan. In the event of an employer bankruptcy, several experts said plan sponsors often collect little or no withdrawal liability payments. For example, several experts explained that in the recent Hostess Brands bankruptcy, the firm—a contributing employer to many plans—is likely to pay very little of its withdrawal liability obligations. One service provider said this bankruptcy doubled the unfunded liabilities attributable to remaining employers in some plans. Separately, the method of calculating withdrawal liability payments may not capture an employer’s full share of unfunded liabilities because a plan’s withdrawal liability obligation is based on its prior contributions rather than on attributed liabilities, and is also subject to a 20-year cap. In particular, some stakeholders said the 20-year cap on withdrawal liability payments limits the amount of money collected by plans. If the amount of the employer’s prior contributions is small relative to the size of their total withdrawal liability, the annual payments may not be sufficient to pay off their total withdrawal liability over the 20-year period.\nSecond, existing withdrawal liability rules deter new employers from joining a plan with existing unfunded liabilities. Plan representatives said attracting new employers is essential to the long-term health of the plan, but an employer group said the existence of potential withdrawal liability strongly deters prospective employers who may otherwise want to join. Moreover, fear of greater withdrawal liability in the future may encourage current contributing employers to leave the plan. For example, in late 2007, UPS paid about $6 billion to withdraw from one of the largest multiemployer plans.\nThird, the presence of withdrawal liability can negatively affect an employer’s credit rating and ability to obtain loans for their business. For example, representatives from one large employer said their total withdrawal liability exceeds the net worth of their company and this has made it difficult for them to obtain loans and other financing, which might help revitalize their business. Table 7 describes options to address these problems identified through our contacts with various stakeholders, including plan and employer representatives.\nA comprehensive remedy to the problems arising from withdrawal liability is particularly elusive because a solution to one issue can exacerbate another. For example, eliminating the current 20-year cap may help allow plans to collect withdrawal liability payments until the full amount has been paid. However, increasing the amount of withdrawal liability that plans can collect may also discourage new employers from participating in a plan because it increases the potential withdrawal liability they could be required to pay. On the other hand, options that could reduce the deterrent effect on new employers—such as the proposal to omit contributions required by funding improvement or rehabilitation plans from withdrawal liability calculations—could reduce a plan’s ability to collect sufficient withdrawal liability.\nNumerous plan representatives, experts, and the NCCMP Commission recommend the adoption of a more flexible DB model to avoid a repetition of the current challenges facing multiemployer plans. While the specific plan design can vary, in general, this model allows trustees to adjust benefits based on key factors—such as the plan’s funded status, investment returns, or plan demographics—to keep the plan well-funded. Importantly, it reduces the risk that contributing employers would face contribution increases if the plan experiences poor investment returns or other adverse events. Investment risk is thus primarily shared by participants and the plan is designed to avoid incurring any withdrawal liability. Overall, the trustees of the plan would have greater flexibility than under a traditional DB plan to adjust benefits to keep the plan well- funded. See table 8 for a comparison of two alternative flexible DB plan designs, although other models could also be used. In addition, the NCCMP Commission’s proposal would also give more flexibility for traditional DB plans by allowing these plans to adjust the normal retirement age to harmonize with Social Security’s normal retirement age.\nNotably, the Cheiron proposal would also use more conservative approaches to investment and funding policy because it uses a relatively lower assumed rate of return and a contingency reserve fund. The Cheiron proposal calls for a more conservative asset allocation and, in addition to sharing some of the investment risk with participants through the flexible benefit design, would also reduce the overall amount of investment risk through the more conservative asset allocation. In addition, the Cheiron model would use a contingency reserve fund that could provide a cushion against unfavorable investment or demographic experience.\nThe design of a flexible DB plan offers several key benefits, which some stakeholders said are essential to the long-term survival of the multiemployer system. In particular, several stakeholders cited limiting employer liability as a key benefit. Representatives of several employers said it is imperative to limit their liability to enable them to be competitive against competitors. By minimizing risks to employers, a flexible DB model may strengthen employers’ commitment to the plan and reduce incentives for them to leave. Similarly, reducing risk may also help attract new employers to these plans, which may improve a plan’s demographics and help it stay well-funded and viable in the long term. Additionally, a group of employer representatives said that a flexible DB plan, such as the one developed by Cheiron, in conjunction with the United Food and Commercial Workers (UFCW) International Union, provides trustees more tools to prudently manage the plan to keep it well-funded and able to pay promised benefits even when faced with adverse events, such as poor investment returns or demographic shifts. Moreover, some stakeholders said that a flexible DB plan reduces risk while also avoiding challenges associated with defined contribution (DC) plans. Specifically, representatives of a construction industry group said a flexible DB plan would still offer pooled and professionally managed investments, along with risk sharing among participants, which can mitigate some of the individual risks faced by participants in DC plans, such as investment risk and longevity risk. Given the potential long-term benefits of a flexible DB model, some experts said regulatory agencies could do more to help plans adopt a design with these features. For example, one expert said that PBGC could hold a conference on best practices in plan design. In addition, this expert said that PBGC could charge such plans lower premiums commensurate with their lower risk to encourage adoption of these plan design features; however, PBGC lacks the legal authority to do so.\nSome plan representatives and experts also noted that a flexible DB model entails tradeoffs. In particular, representatives from an actuarial firm and from an industry group said that while this approach shows promise for addressing prospective challenges, it does not help resolve problems for plans that already have financial shortfalls. Union and employer representatives said that plans may first need to address existing shortfalls before they could adopt a flexible DB model. Thus, new design options are unlikely to help large plans that are already severely underfunded. Further, in the flexible benefit models described in table 8, investment risk is primarily borne by participants. Representatives from an actuarial firm also said that this model may be relatively expensive when comparing the amount of contributions needed to attain a certain level of accrued benefits. For example, in order to minimize the risk of underfunding, a flexible DB plan may use a relatively low assumed rate of return—and, correspondingly, a more conservative investment strategy— than is more commonly used by multiemployer plans. Over the long term, this may result in a lower level of accrued benefit. However, representatives of one actuarial firm said that higher assumed rates of return used by some multiemployer plans may be too high and could entail a greater risk of the plan becoming underfunded. And, as recent events show, participants already assume a lot of risk in the event a plan becomes severely underfunded. As a result, a flexible benefit model that reduces risk might provide a somewhat lower promised benefit, but one that is more secure.\nFacilitating more plan mergers or allowing plans to form alliances may also help address financial challenges facing multiemployer plans, according to some plan representatives and industry experts. In a merger, two or more plans are combined into a single plan, including both plan assets and administration. Several stakeholders said that this consolidation helps plans—especially smaller plans—achieve more favorable economies of scale to reduce costs. For example, in a merger, plans can reduce costs by consolidating administrative services, such as annual audits and legal services. In some cases, PBGC provides financial assistance to facilitate a merger by paying a plan that is insolvent or nearing insolvency a portion of the present value of PBGC’s net liability for that plan, which serves as an incentive for a well-funded plan to take on the assets and liabilities of a less well-funded plan. PBGC officials said that they are careful to provide financial assistance only in the case of mergers expected to be successful and, thus, avoid paying financial assistance twice to the same plan. While PBGC has helped to facilitate some mergers, several plan representatives and a representative from an actuarial firm said more plans could merge if PBGC provided additional financial assistance. Alternatively, other stakeholders said similar cost- saving benefits from consolidation could be achieved by allowing plans to form alliances. In contrast to a merger, alliances allow plans to combine administrative and investment management services, but retain separate liabilities and funding accounts. Consequently, in an alliance, each plan would retain its own liabilities and withdrawal liability obligations would not be shared across plans.\nAlong with cost savings from consolidating administrative services, plan representatives and industry experts said mergers and alliances can offer other important benefits. In particular, a merger or alliance would provide plans a larger asset pool that can also help plans reduce investment management fees. According to a representative from an actuarial firm, combined with administrative cost savings, consolidating investment management services can significantly reduce costs for small plans and may save some from insolvency. For example, some of their small plan clients pay between 30 and 40 percent of contributions towards administrative and investment management expenses while a larger plan would pay closer to 5 percent. However, another expert said cost savings for some plans may be negligible depending on the plan’s circumstances. For example, if a plan is already sufficiently large and efficiently managed, cost savings from merging with another plan may be relatively small. In addition, several stakeholders said that by helping plans avoid insolvency, PBGC may also benefit from plan mergers or alliances because the participants of these plans would continue to receive benefits from the plan rather than becoming insolvent and relying on benefit payments from PBGC. Consequently, the cost PBGC incurs to facilitate such arrangements may be more than offset by preventing the plan from becoming insolvent.\nWhile mergers can provide cost-savings and other benefits, plans face barriers to implementing them. For example, representatives from one of the largest plans said that due to the relatively large size of their plan and the amount of their funding shortfall, a merger is not an option for them. Several stakeholders said a merger between a plan that is relatively well- funded and a financially weaker plan poses concerns for plan trustees who have a fiduciary duty to act in the best interests of their plan’s participants. One employer representative said that a merger poses risks to the healthier plan and may not be in the best interests of those participants. To address potential risks to the healthier plan, some stakeholders said PBGC should be given greater resources to facilitate more mergers. In addition, some employer representatives said plans that undertake mergers could be afforded legal protection under a safe harbor to further alleviate concerns over fiduciary responsibility. While alliances may avoid some of these concerns—they would not require plans to harmonize their funding status as each plan retains its own liabilities— such arrangements are not currently permitted and would therefore require a change in law according to NCCMP.", "Despite unfavorable economic conditions, most multiemployer plans are currently in adequate financial condition and may remain so for many years. However, a number of plans, including some very large plans, are facing very severe financial difficulties. Many of these plans reported that no realistic combination of contribution increases or allowable benefit reductions—options available under current law to address their financial condition—will enable them to emerge from critical status. As a result, without Congressional action, the plans face the likelihood of eventual insolvency. While the multiemployer system was designed to limit PBGC’s exposure by having employers serve as principal guarantors, PBGC remains the guarantor of last resort. However, given their current financial challenges, neither the troubled multiemployer plans nor PBGC currently have the flexibility or financial resources to fully mitigate the effects of anticipated insolvencies. Should a critical mass of plan insolvencies drain the PBGC multiemployer insurance fund, PBGC will not be able to pay either current or future retirees more than a very small fraction of the benefit they were promised. Consequently, a substantial, and in some cases catastrophic, loss of income in old age looms as a real possibility for the hundreds of thousands of workers and retirees depending on these plans.\nCongressional action is needed to avoid this scenario, and stakeholders suggested a number of key policy options. For example, various stakeholders suggested that, as a last resort to avert insolvency, Congress could enact legislation permitting plans—subject to certain limitations, protections, and oversight—to reduce accrued benefits of both working participants and retirees. In addition, some stakeholders suggested that Congress could give PBGC the authority and resources to assist the most severely underfunded plans. Stakeholders acknowledged that each of these options poses tradeoffs. Providing PBGC with additional resources, as well as other more direct financial assistance to plans, would create yet another demand on an already strained federal budget. Similarly, reducing accrued benefits for active workers, and especially for those already in retirement, could result in significant reductions in income for a group that may have limited income alternatives and may be too infirm to return to the labor force. Such an option would also significantly compromise one of the key founding principles of ERISA—that accrued benefits cannot be reduced— essentially rupturing a promise to workers and retirees who have labored for many years, often in dangerous occupations, and in some of the nation’s most vital industries.\nThe scope and severity of the challenges outlined by stakeholders suggest that a broad, comprehensive response is needed and Congress faces difficult choices in responding to these challenges. However, as the recent tri-agency federal report on multiemployer plans noted, unless timely action is taken to provide additional tools for the multiemployer plan trustees to stabilize the financial conditions of their plans, more costly and intrusive measures may later be necessary. Nevertheless, this situation can also be viewed as an opportunity both to protect the benefits of hundreds of thousands of older Americans and stabilize a pension system that has worked fairly well for decades. Without a comprehensive approach, efforts to improve the long-term financial condition of the multiemployer system may not be effective.", "Given the serious challenges facing PBGC’s multiemployer insurance fund and critically underfunded multiemployer plans, and to prevent the significant adverse effects of PBGC insolvency on workers and retirees, Congress should consider comprehensive and balanced structural reforms to reinforce and stabilize the multiemployer system. In doing so, Congress should consider the relative burdens, as identified by key stakeholders, that each reform option would impose on the competing interests of employers, plans, workers and retirees, PBGC, and taxpayers.", "We provided a draft of this report to the Department of Labor, the Department of the Treasury, and the PBGC for review and comment. We received formal written comments from the PBGC, which generally agreed with our findings and analysis. During the review period, PBGC officials raised the potential role that increased multiemployer insurance program premiums could play in strengthening the program, and hence in helping to ensure that participants in insolvent plans received some financial protection in the long term. In addition, the issue of PBGC premiums was raised repeatedly during a March 5, 2013 hearing held by the House Subcommittee on Health, Employment, Labor and Pensions, Committee on Education and the Workforce. In light of the level of interest on this issue, we included a brief discussion of the matter of premiums in the final version of our report. PBGC, Labor, and Treasury also provided technical comments which we incorporated as appropriate. PBGC’s formal comments are reproduced in appendix II.\nAs agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from its issue date. At that time, we will send copies of this report to relevant congressional committees, PBGC, the Secretary of Labor, the Secretary of the Treasury, and other interested parties. In addition, the report will be made available at no charge on the GAO Web site at http://www.gao.gov.\nIf you have any questions about this report, please contact Charles Jeszeck at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are found in appendix III.", "Our objectives were to answer the following research questions: 1) What actions have multiemployer plans in the weakest financial condition taken in recent years to improve their long-term financial position? 2) To what extent have plans relied on PBGC assistance since 2009, and what is known about the prospective financial condition of the multiemployer plan insurance program? 3) What options are available to address PBGC’s impending funding crisis and enhance the program’s future financial stability?\nWe sought to answer the first question in two primary steps. First, we obtained data on the results of a survey of critical status plans performed by The Segal Company, a large actuarial firm that has a client base consisting of about 25 percent of all multiemployer plans, representing about 30 percent of all multiemployer plan participants. As figure 13 below illustrates, the industry distribution of Segal’s client base substantially parallels that of the broader multiemployer universe. Included as an addendum to Segal’s annual survey of plan funded status, the survey instrument requested information about the nature and size of contribution increases and benefit reductions, whether plans expected to emerge from the critical zone within statutory time frames, and the estimated number of years until emergence from the critical zone or, for plans not expecting to emerge, the number of years to plan insolvency. The information pertaining to each of the 107 critical plans in the survey was completed by Segal’s professional actuaries responsible for those clients. The survey was initiated in December 2010, and responses were received through February 2011. Through a review of the methodology underlying the survey, and discussions with a Segal representative knowledgeable about the survey, we determined that the results were reliable and useful for our research. Second, we supplemented this data with in-depth interviews with representatives of 13 multiemployer plans— 8 were in critical status, 2 in endangered or seriously endangered status, and 3 in neither critical nor endangered status. We selected the plans to ensure that we included a range of plan sizes, industries, geographical areas, and funding status. Plans selected ranged in size from about 2,000 participants to more than 531,000 participants and represented a variety of industries including those featuring some of the largest concentrations of multiemployer plans—construction, manufacturing, and transportation. Before speaking with plan officials, we reviewed available data, including rehabilitation or funding improvement plans, and other relevant documents. Our in-depth discussions with plan representatives covered various issues, including plans’ use of and views regarding funding relief, the nature and size of the contribution increases and benefit reductions, and the probable impact of contribution increases and benefit reductions on employers and plan participants.\nTo answer the second question, we interviewed officials and analyzed data from PBGC, including recent PBGC annual reports and data books. We also developed several data requests for PBGC that were tailored to this objective, and reviewed information provided by PBGC in response. For example, we obtained data on the amount of PBGC’s annual assistance to plans due to plan insolvencies, plan partitions, and assistance granted for other reasons, such as plan mergers or closures. We also obtained and analyzed updated data regarding PBGC’s overall financial position and the size of its long-term deficits. Specifically, we obtained data on the liabilities attributable to plans on PBGC’s list of plans that are insolvent or considered likely to become insolvent in the next 10 years, as well as those thought likely to become insolvent in the next 10 to 20 years. To better understand the consequences of plan insolvency on retirees, we interviewed relevant PBGC officials and requested data regarding the impact of insolvency on retirees of various wage levels and tenures. Finally, we discussed the impact of potential PBGC insolvency in our discussions with multiemployer plan officials.\nTo answer the third objective, we distinguished between options that would address the more immediate funding crisis facing plans headed toward insolvency and options that may enhance the long-run stability of the multiemployer system for plans that may not be headed for insolvency, but, nevertheless, face financial challenges. We assessed the tradeoffs of various options for current workers, retirees, and employers, as well as the federal government. To identify and assess available options, we interviewed a wide range of pension experts—including academics, actuaries, attorneys, plan trustees and administrators, employers and trade associations, unions, advocacy organizations, government officials, and other relevant stakeholders. We also reviewed relevant research and documentation, including a proposal by the National Coordinating Committee for Multiemployer Plans (NCCMP) and research by other industry experts.\nAs appropriate for each of our objectives, we reviewed existing literature and relevant federal laws and regulations.\nWe conducted this performance audit from March 2012 through March 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, David Lehrer (Assistant Director), Michael Hartnett, Sharon Hermes, and Kun-Fang Lee made key contributions to this report.\nIn addition, support was provided by Frank Todisco, GAO Chief Actuary, James Bennett, David Chrisinger, Julianne Cutts, Jessica Gray, Theresa Lo, Ashley McCall, Sheila McCoy, and Walter Vance." ], "depth": [ 1, 1, 2, 2, 3, 1, 2, 3, 2, 1, 2, 3, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_full", "", "h0_title", "h0_full", "h1_full", "h1_title", "h1_full", "h1_full", "h2_full", "h2_title", "h2_full", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What steps have distressed multiemployer plans taken?", "What specifically have these plans done?", "How can contribution increases be harmful?", "How can reductions in benefits be harmful?", "What is the problem with plan insolvencies?", "How has PBGC's financial assistance to multiemployer plans changed?", "What does PBGC estimate?", "What will occur if these estimates are true?", "What policy options did experts and stakeholders cite to avoid insolvencies?", "What is a problem with these options?", "How can long term financial stability be improved?", "What is a key part of the alternative plan experts and stakeholders recommend?" ], "summary": [ "The most severely distressed multiemployer plans have taken significant steps to address their funding problems and, while most plans expected improved financial health, some did not.", "A survey conducted by a large actuarial and consulting firm serving multiemployer plans suggests that the large majority of the most severely underfunded plans--those designated as being in critical status--either have increased or will increase employer contributions or reduce participant benefits.", "For example, several plan representatives stated that contribution increases had damaged some firms' competitive position in the industry, and, in some cases, threatened the viability of such firms.", "Similarly, reductions in certain benefits--such as early retirement subsidies--may create hardships for some older workers, such as those with physically demanding jobs.", "The Pension Benefit Guaranty Corporation's (PBGC) financial assistance to multiemployer plans continues to increase, and plan insolvencies threaten PBGC's multiemployer insurance fund's ability to pay pension guarantees for retirees.", "Since 2009, PBGC's financial assistance to multiemployer plans has increased significantly, primarily due to a growing number of plan insolvencies.", "PBGC estimated that the insurance fund would be exhausted in about 2 to 3 years if projected insolvencies of either of two large plans occur in the next 10 to 20 years. More broadly, by 2017, PBGC expects the number of insolvencies to more than double, further stressing the insurance fund. PBGC officials said that financial assistance to plans that are insolvent or are likely to become insolvent in the next 10 years would likely exhaust the insurance fund within the next 10 to 15 years.", "If the insurance fund is exhausted, many retirees will see their benefits reduced to an extremely small fraction of their original value because only a reduced stream of insurance premium payments will be available to pay benefits.", "Experts and stakeholders said that, in limited circumstances, trustees should be allowed to reduce accrued benefits for plans headed toward insolvency. Also, some experts noted that, in their view, the large size of these reductions for some severely underfunded plans may warrant federal financial assistance to mitigate the impact on participants.", "For example, reducing accrued benefits could impose significant hardships on some retirees, and any possible financial assistance must be considered in light of the existing federal debt.", "Options to improve long term financial stability include changes to withdrawal liability--payments assessed to an employer upon leaving the plan based on their share of unfunded vested benefits--to increase the amount of assets plans can recover or to encourage employers to remain in or join the plan.", "In addition, experts and stakeholders said an alternative plan design that permits adjustments in benefits tied to key factors, such as the funded status of the plan, would provide financial stability and lessen the risk to employers." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, -1, 2, -1, 0, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5 ] }

{ "title": [ "", "Introduction: An Outdated System", "The Next Generation: NG9-1-1", "Summary of 911 Legislation and Policy", "The 911 Act and Federal Communications Commission Regulations", "FCC Study: The Hatfield Report", "The ENHANCE 911 Act of 2004", "The NET 911 Improvement Act of 2008", "Funding and Grants", "Investment in Infrastructure", "Wireless Devices", "Local Networks", "Call Centers", "Interfaces with First Responders", "Federal Grants", "Creating the Base for Change", "NG9-1-1 Transition: Department of Transportation", "NG9-1-1 Transition: NENA", "NG9-1-1 Transition: FCC", "The Potential Role of the Department of Homeland Security", "National Emergency Communications Plan", "Regional Emergency Communication Coordination", "National Broadband Plan", "Congressional Policy for NG9-1-1" ], "paragraphs": [ "", "The underlying systems for 911 calls today operate almost exclusively on analog technology, using an architecture of circuits and switches developed when the American Telephone & Telegraph Company was a regulated monopoly providing most of the nation's telephone service. Modern communications innovations such as digitization, packet switching, and Internet Protocol (IP) standards are alien concepts in an outdated system design that, critics maintain, \"literally chokes off the use of all but the most rudimentary features of modern end-user devices and stifles the development of more specialized equipment and services.\" Systems for 911, unable to accommodate the latest advances in telecommunications technology, are increasingly out-dated, costly to maintain, and in danger of failure.\nConsumer expectations for accurate and timely response to 911 calls are based on the advanced features available on most communications devices, not on the reality of a faltering legacy system. The analog system cannot carry text messages, for example. Calls are delayed or dropped when analog and digital systems do not mesh. Information on the location of the call is lost because the digital details cannot be transmitted by the underlying telecommunications infrastructure or understood by the computers at Public Safety Answering Points (PSAPs). As summarized in a National Emergency Number Association (NENA) report, \"Simply put, the 9-1-1 system has not kept up with technology and is badly in need of modernization.\"", "There is a general consensus that present and future digital communications for 911 services would be best supported by Next Generation 911 technology (NG9-1-1). The term NG9-1-1 is widely used to refer to the modernization of all parts of the 911 system, including hardware, software, data, and operational policies and procedures, all supported by multi-purpose emergency service networks. These IP-enabled networks rely on the same type of network connections as business and consumer access to the Internet and can share capacity with other users. A broadband connection built to a school, library, or hospital, can also reach a 911 call center. Deploying NG9-1-1 is seen as an integral part of national broadband policy. Network facilities dedicated to 911, or even exclusively to public safety, are not considered cost-effective. Future decisions about the technology, deployment, and funding of NG9-1-1 must therefore take into consideration the opportunities for sharing resources with other broadband initiatives.\nImplementing NG9-1-1 will require not only the development of an IP-enabled network and systems but will also entail changes in operational procedures, training, funding models, and state—and possibly federal—regulations and laws. The National Emergency Number Association (NENA) began planning for the future of 911 under the banner of NG9-1-1 in 2000. NENA started work on standards development for NG9-1-1 in 2003 and since then has taken the lead in defining, designing, and developing NG9-1-1 systems and solutions in partnership with other associations, as well as representatives from industry, government, and the public safety community. Support for NG9-1-1 now comes from a relatively broad base, including\nState and local managers for emergency communications and 911. Associations such as NENA, COMCARE, the National Association of Regulatory Utility Commissioners (NARUC), the Association of Public-Safety Communications Officials International, Inc. (APCO), and the National Association of State 911 Administrators (NASNA). Many other international, national, and state and local associations are also actively involved in supporting NG9-1-1. Alliances such as the 911 Alliance, the Alliance for Telecommunications Industry Solutions (ATIS), the Internet Engineering Task Force (IETF), and the E9-1-1 Institute, which provides support to the Congressional E9-1-1 Caucus. Corporations and other commercial organizations serving public safety and emergency communications. The Intelligent Transportation Systems (ITS) Public Safety Program and the National Highway Traffic Safety Administration (NHTSA) within the U.S. Department of Transportation (DOT).\nNotably, NENA and DOT have partnered to encourage the deployment of NG9-1-1. Among DOT's contributions in support of NG9-1-1 was the funding and supervision of five proof-of-concept pilots to test key components of NG9-1-1 in PSAPs. In addition to the pilots established by DOT, at least six states and the District of Columbia are reported to have IP-based networks for emergency communications that will support NG9-1-1 systems.\nThe emergency communications network being tested is envisioned as IP-based, using standardized protocols, and providing a nationwide overlay of system links that can operate at the national, regional, tribal, state, or local level to best meet the needs of specific circumstances. A network overlay for 911 systems can, for example, facilitate interoperability and system resilience by bringing extra resources to devastated areas where 911 call centers are damaged or overwhelmed with calls. On a daily basis, it can provide foreign language assistance at any time, anywhere. Other benefits include better connections between 911 call centers, emergency responders, and alert and warning systems; more robust capacity; and the flexibility to receive calls for help in any format.", "This section summarizes how past federal 911 legislative and policy actions have established a base for the transition to IP-enabled systems. Three major laws supporting improvements in the handling of 911 emergency calls have been enacted since 1999. These and other laws support policy objectives and strategies that provide the base upon which future policy might be built. Analyzing the legislation as a continuum, these key goals emerge: equality of service and access to 911; mechanisms to improve funding for PSAPs and monitor collections and disbursements; federal leadership in developing better 911 capabilities; and transition to IP-enabled 911 systems. The major bills enacted into law are\nThe Wireless Communications and Public Safety Act of 1999 ( P.L. 106-81 ), often referred to as the 911 Act. The Ensuring Needed Help Arrives Near Callers Employing 911 Act of 2004 ( P.L. 108-494 ), also titled the ENHANCE 911 Act of 2004. The New and Emerging Technologies 911 Improvement Act of 2008 ( P.L. 110-283 ), also titled the NET 911 Improvement Act of 2008.\nProvisions in other recently enacted laws have also contributed to the growing base of legislation in support of 911.\nThe 21 st Century Emergency Communications Act, Title VI, Subtitle D, in the Department of Homeland Security Appropriations Act, 2007 ( P.L. 109-295 ) required that PSAPs be included as members of Regional Emergency Communications Coordination Working Groups established by the act. The Homeland Security Appropriations Act, 2007 ( P.L. 109-295 ) required the FCC to prepare a report on state, local, and tribal plans for backup service for 911 and E-911 when PSAPS are disabled. The Deficit Reduction Act ( P.L. 109-171 ), as amended by the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) and the NET 911 Improvement Act of 2008, provided up to $43.5 million for grants for 911. The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) included financial support of PSAPs as eligible uses for Urban Area Security Initiative and State Homeland Security Grant programs. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-234 ) included language that authorized loans to improve 911 and other emergency communications capabilities in rural areas.", "To assist the effort to provide comprehensive 911 services nationwide, Congress in 1999 passed the Wireless Communications and Public Safety Act ( P.L. 106-81 ), often referred to as the 911 Act. This act mandated 911 as the national emergency number and provided for parity of wireless 9-1-1 services with the protections and authorizations already extended to wireline services. Among its provisions, the law required the FCC to work with the states and the many other affected parties to deploy comprehensive wireless enhanced 911 (W-E911) service. Enhanced 911 service provides 911 call centers with Automatic Number Identification (ANI) and Automatic Location Identification (ALI). Most wireline phone services provide ANI/ALI information.\nThe 911 Act set the broad goal of facilitating \"the prompt deployment throughout the United States of a seamless, ubiquitous, and reliable end-to-end infrastructure for communications, including wireless communications, to meet the Nation's public safety and other communications needs.\" The FCC had taken a first step toward adopting rules for wireless enhanced 911 in 1996, citing provisions of the Communications Act as the basis for its action. After Congress passed the 911 Act, the FCC plotted a course for reaching wireless in two phases. For Phase I, the wireless carriers were given a year to prepare for PSAP requests for Automatic Number Identification (ANI) and location-finder capabilities using technology existing at the time. By 2001, for Phase II, the carriers were to have identified and implemented new location-finder technologies (ALI). A 1999 FCC ruling established October 1, 2001, as the deadline for wireless carriers to meet guidelines for connecting 911 calls to PSAPs.", "Delays and complications in implementing rules for 911 prompted the FCC to commission a study to examine deployment of 911 services in general and the cause of problems with wireless 911 calls in particular. The report—known as the Hatfield Report, from its author, Dale N. Hatfield—was submitted to the FCC on October 15, 2002. Observations in the report that later became the basis for Congressional initiatives included\nThe critical nature of location information in enhanced 911 in supporting first responders in emergencies. The \"seriously antiquated\" condition of the infrastructure that underlies 911 for both wireline and wireless emergency calls. The need for a national 911 office to act as a \"champion\" at the federal level.\nA follow-up study was published in 2007 with support from the 9-1-1 Alliance, an industry group.", "Congress responded to the issues raised by the 2002 Hatfield Report, the 9/11 Commission, and by others, with the Ensuring Needed Help Arrives Near Callers Employing (ENHANCE) 911 Act of 2004 ( P.L. 108-494 ). The act identified and addressed a number of concerns about the deployment of 911, including compliance, coverage in rural areas, and the use of fees levied by states and localities to help cover the cost of providing 911 services.\nIn response to the Hatfield Report's call for a federal champion, the act created the E-911 Implementation Coordination Office (ICO) to be jointly administered by the National Telecommunications and Information Administration (NTIA) and the NHTSA. Among other responsibilities, the ICO was to oversee a grants program for the \"implementation and operation of Phase II E-911 services.\" Although funds were authorized in the law, no appropriations were forthcoming until a sum was allocated by the Deficit Reduction Act of 2005. In FY2008, DOT budgeted $1.25 million for the operation of the ICO.", "In the 110 th Congress, both the House and Senate passed bills focused on ensuring access to 911 call centers for users of Voice Over Internet Protocol (VOIP) services, and improving the delivery of 911 services nationwide. These bills became the New and Emerging Technologies (NET) 911 Improvement Act of 2008 ( P.L. 110-283 ). The key provisions of the law are\nDuty to provide 911 and E-911 as established in the 1999 law extended to include IP-enabled voice services in accordance with existing FCC regulations at the time of passage of the act or as modified in the future. Parity of access to communications networks needed to complete 911 calls. Parity of protection from liability—provided for wireline and wireless carriers—extended to include communications through VOIP providers and other emergency service providers. National plan for migration to an IP-enabled 911 network, developed by the E-911 Implementation Coordination Office. Protection of the rights of states and other political subdivisions to levy fees on 911 services. Requirement that FCC report annually on collection of state fees and other levies on 911 and E-911 services.\nPrior to the passage of the 911 Act in 1999, the FCC had already established regulations for 911 compliance for a new category of service providers—wireless carriers. Similarly, the FCC had established requirements for VOIP—another new category of service provider—in advance of the passage of the NET 911 Improvement Act of 2008. The act confirmed the FCC's authority to require VOIP service providers to comply with 911 connectivity requirements established for wireline and wireless voice and to include VOIP calls in its regulatory and oversight activities for 911. In accordance with requirements to issue regulations covering parity of access and related technical needs and capabilities for VOIP calls, the FCC issued a Report and Order on October 21, 2008.", "Among the multiple factors and challenges of implementing NG9-1-1 are the costs of planning, replacing, and upgrading systems, and maintaining and operating these new systems. Policies and legislation intended to improve 911 service may need to address the substantial investments required to provide these improvements, including, for example, financial assistance in acquiring the needed technology. The twin policy goals of quality and equality may have bumped against the limits of the technologies currently in place. Significant new gains in accessibility and level of service appear to depend on implementing new technologies that are not supported by the current network architecture.\nAn analysis of cost, value, and risk prepared for DOT, by the consulting firm Booz Allen Hamilton, found that capital and operating costs for improving the existing 911 system would be comparable to the cost of migrating to NG9-1-1 under several scenarios. Furthermore, several trends were identified that would provide additional value, primarily\nNG9-1-1 provides greater opportunities for cost savings and increased operational efficiencies than the current 911 environment. NG9-1-1 has greater potential to meet the public's expectations for accessibility than the current 911 environment. NG9-1-1 has greater scalability and flexibility than the current 911 environment. NG9-1-1 has greater potential to increase public and responder safety through inter-connectivity and interoperability than the current 911 environment.", "The costs to improve 911 through investments in infrastructure can be categorized by several major and distinct functions of 911. For the purposes of this analysis, four cost centers and typical sources of funding are summarized below. These are: devices, local networks, call centers, and interfaces with first responders.", "The cost of developing cell phones and other wireless devices that comply with FCC requirements for caller information for 911 calls are borne by the communications service providers and their suppliers, and by their customers. Some programs, primarily state and local, offer assistance to consumers to help cover the costs of owning and operating a wireless device.", "To accommodate the needs of enhanced 911, local networks that provide routers and other infrastructure invest in upgrades to their facilities. Expenditures by these networks for investments to route 911 calls may be reimbursed through a state's 911 fund or may be passed on to the PSAPs that purchase access to the lines. Charges to PSAPs for communications services tend to rise as more features are added by their local exchange. In some areas of the country there is little competitive pressure to upgrade these links; the lack of access to an up-to-date infrastructure is one reason why some areas of the country do not have enhanced 911 or even basic 911 services. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) provided for grants for investments in broadband infrastructure. Public safety agencies are included under the act as potential beneficiaries of funding. The infusion of grant money to build broadband and IP-enabled networks will help to expand the potential reach of NG9-1-1. ARRA did not, however, address the long-term funding needs to develop and maintain a national NG9-1-1 system. The FCC's National Broadband Plan (also a requirement of the ARRA) did address in part the question of upgrading local networks to handle broadband transmission and of funding the deployment of broadband and NG9-1-1, as noted below, \"Creating the Base for Change.\"", "To accommodate the information delivered through enhanced 911, PSAPs are required to invest in call-processing equipment, computers, databases, and other equipment. The capital for these investments may come from 911 or E-911 fees paid by subscribers into state 911 funds; the funds are also used for operating costs. State grants and local fund-raising initiatives are other sources for capital investment and operating costs.", "The final step in processing a 911 call is to relay information to emergency responders. After the point of interface into the local first responder network, the effectiveness of the 911 system depends on the capacity of the response network. The emergency communications networks for public safety are also often constrained by the capabilities of old equipment as well as other operational limitations, such as insufficient radio frequency spectrum and lack of communications interoperability among different first responder groups. The upgrading of these networks are often considered by state and local policy makers as separate from improvements in 911 systems although some states have used 911 funds to help pay for public safety communications networks.", "The federal grant program administered by the ICO awarded over $40 million in matching grants on September 25, 2009. Grants were available to all states, Washington, DC, Puerto Rico, and the U.S. Territories; however, not all states met eligibility requirements and some states chose not to apply. States receiving funds must use them within three years. Twenty-eight states, Puerto Rico, and American Samoa received grants. Grant funds may be used for purchases of hardware and software for enhanced 911 and IP-enabled systems, as well as training in connection with these investments, as identified in each plan submitted by a State. Grant funds may also be used to acquire alerting systems that can send warning messages to wireless devices.", "Through the laws that it has enacted, Congress has established the principle that 911 calls should provide the same level of information and responsiveness no matter what the communications device, the location of the call, or the physical abilities of the caller. Congressional actions and FCC regulations have sought to expand the capacity of the existing 911 infrastructure to accommodate more types of devices, to improve caller location information, to provide wireless support in more areas—with more precision—and to accommodate persons with disabilities.\nPrivate and public sector investments in IP-enabled systems support the twin goals of equality and quality. Only a digitized system with seamless IP-based connectivity can fully support the needs of groups that are currently poorly served by 911 systems, including those with disabilities, residents and travelers in rural areas, and workers and residents in high rise buildings. The current analog system, for example, can only support text messages to 911 in work-around arrangements; yet, text messaging is ideal for people with certain types of disabilities and many consider it to be a more viable means of communication than voice in times of high demand and widespread service outages, situations that often follow a disaster. Better information on the source of a call, made possible by IP technologies, might be a boon for rural and urban areas, where different technological problems lead to the same consequence: inadequate location identification for incoming 911 calls.\nThe NET 911 Improvement Act of 2008 required the ICO to \"develop and report to Congress on a national plan for migrating to a national IP-enabled emergency network capable of receiving and responding to all citizen-activated emergency communications and improving information-sharing among all emergency response entities.\" The plan was to have been delivered no more than 270 days after enactment of the bill, a late April 2009 deadline. The plan was to be developed in consultation with a broad range of representatives for public safety, persons with disabilities, equipment and service providers and others. Congress required in the NET 911 Improvement Act of 2008 that the National Plan \"assess, collect, and analyze the experiences\" of trial deployments such as those conducted for NG9-1-1 by the Department of Transportation. The various analyses of IP-based systems prepared as part of DOT's NG9-1-1 assessment provided the core of the ICO's national plan for migrating to IP-enabled 911.\nThe national plan prepared by the ICO was required to describe positive steps to include 911 in the transition to IP-enabled technologies and to provide recommendations where congressional action could facilitate the process. The plan as submitted describes a number of steps for governance but it is not clear what role, if any, a federal department or agency will have in deploying the new technologies. The transition could occur through the combined efforts of states with little participation by the federal government.\nBased on the legislation calling for the 911 transition plan, Congress had expected the plan to make recommendations, including congressional actions, if needed. Instead, the plan reiterated DOT's framework for areas where action might be taken without providing specific guidance to Congress. The plan was presented on September 25, 2009, leaving no time for the ICO to develop more detailed plans for action before its authority ended on September 30.", "As an extension of its Emergency Medical Service (EMS) mission, the National Highway Traffic Safety Administration (NHTSA), within the U.S. Department of Transportation (DOT), has provided the bulk of federal support in assisting wireless E-911. In 2002, under the leadership of then-Secretary of Transportation Norman Y. Mineta, DOT created the Wireless E9-1-1 Steering Council to foster cooperation and dialog among key participants. In 2005, DOT announced plans to produce a national framework and deployment plan for an NG9-1-1 system, to be developed over a three-year period. The new initiative built on earlier wireless 911 projects within DOT. The NG9-1-1 program has been administered within the Research and Innovative Technology Administration (RITA), part of DOT's Intelligent Transportation Systems (ITS) program. Management of the program has been shared between the ITS Public Safety Program and NHTSA, with assistance from the consulting firm, Booz Allen Hamilton.\nDOT has published technical requirements and a concept of operations for NG9-1-1, has implemented a strategic outreach plan, has worked to develop and validate requirements for the NG9-1-1 system, has produced a system design document, and has developed a transition plan. In the concept of operations, DOT stated\nThe primary goal of the NG9-1-1 System is to save lives, health, and property by improving emergency services access and response in the United States. The state of the NG9-1-1 System also has a major effect on transportation security, mobility, and efficiency.\nThe major features of the envisioned NG9-1-1 System that support this goal are described as\nQuicker receipt of more robust information. Better and more useful information from any networked communications device. Geographic-independent call access, transfer, and backup among PSAPs and between PSAPs and other authorized emergency organizations. Increased coordination and partnerships within the emergency response community. Increased aggregation and sharing of data, resources, procedures, and standards to improve emergency response. Maximized use of available public capital and operating costs for emergency communications services.\nNHTSA continues its commitment to working with emergency responders and the 911 community. It plans to build on the relationships it has developed with local, state, federal, and private stakeholders to support the development of NG9-1-1. Among its immediate objectives is managing a national 911 resource center to support the development of new emergency access systems, including a model state 911 law and a compilation of NG9-1-1 standards.", "NENA has prepared a handbook that identifies six transition policy issues that could be could be considered starting points in the transition to NG9-1-1. NENA has urged that these issues be considered as part of a larger review of strategy and implementation plans. To this end, the handbook has listed proposed actions, implementation checklists, and other specific steps in support of each goal. The objectives are\nEstablish a state-level organization to plan, coordinate, and implement a ubiquitous Next Generation 9-1-1 system. Provide sufficient resources to implement and operate the NG9-1-1 system. Modify and update current legislation, regulations, and tariffs to ensure a competitive E9-1-1 environment and a transition to a full NG9-1-1 system. Establish statewide Emergency Services IP networks (ESInets), and ensure that state and regional authorities recognize the need for statewide IP-enabled networks for NG9-1-1 and other emergency services. Verify that information delivered over Next Generation 9-1-1 Systems can be appropriately delivered to PSAPs and shared with emergency response organizations while conforming to applicable confidentiality, disclosure, and information retention statutes and rules. Assure that state and federal liability statutes cover all public and private entities involved in the end-to-end provisions of NG9-1-1 and emergency communications systems and services.\nTo achieve these objectives and carry out the recommended activities, NENA has suggested the formation of regional, state, or multi-state working groups. The handbook has emphasized that decisions about delivering 911 services at the local level would remain with the PSAPs. The ESInets that the handbook has proposed would require a higher level of governance to assure functions such as coordination and interoperability.\nAlthough NG9-1-1 is being developed as an open standards/open interface system it is necessary to establish standards that assure full interoperability among all systems and system components. To this end, NENA has established a Certification and Accreditation program for NG9-1-1. To draw all stakeholders into the process, NENA sponsored its first Industry Collaboration Event, to test equipment and standards, in November 2009.", "The ARRA required the FCC to prepare a national broadband plan. Among the requirements for the plan, Congress specified that it should include\na plan for use of broadband infrastructure and services in advancing consumer welfare, civic participation, public safety and homeland security, community development, health care delivery, energy independence and efficiency, education, worker training, private sector investment, entrepreneurial activity, job creation and economic growth, and other national purposes.\nThe National Broadband Plan (NBP) was submitted to Congress on March 16, 2010. In line with instructions from Congress, the plan included a section on public safety broadband communications that covered NG9-1-1, the Emergency Alert System, broadband radio networks for first responders, cybersecurity, and protection of critical infrastructure.\nIn most sections of the NBP, the FCC has recommended actions for Congress and for other agencies, as well as laying out new steps that the FCC could take. As regards NG9-1-1, the plan suggested that Congress might consider enacting a federal legal and regulatory framework for NG9-1-1. It requested that the FCC be given the authority to implement this framework. To help meet funding requirements, the report suggested that Congress might take actions to assure that fees collected to fund 911 services are not used for other purposes. The plan also recommended that Congress consider reauthorizing the ICO to \"help ensure that NG9-1-1 is deployed in an interoperable and reliable fashion.\"\nThe NBP requested that, by December 1, 2011, NHTSA prepare a report to identify the costs of deploying NG9-1-1 and sources of funding. The NBP specified that the report should detail costs for particular 911 requirements and specify how costs would be shared among PSAPs, broadband service providers, and third-party providers for NG9-1-1. The FCC proposed that the report also include a technical analysis and cost study of different delivery platforms, including VOIP. Based on the information compiled for the report, NHTSA should make recommendations to Congress for public funding, according to the FCC proposal.\nThe plan also provided specific actions for the FCC to take. The NBP announced the FCC's intentions to address IP-based NG9-1-1 by refreshing a current proceeding on location technology and opening a new proceeding to address how NG9-1-1 can accommodate communications technologies, networks, and architectures beyond traditional voice-centric devices. The plan also recommended consideration of a national strategy for NG9-1-1 deployment and how it should meet consumer expectations; a Notice of Inquiry seeking comment on next-generation 911 deployment was released December 21, 2010.", "The Department of Homeland Security Appropriations Act, 2007 ( P.L. 109-295 ) provided for coordination of emergency communication grants, and for the formation of Regional Emergency Communications Coordination (RECC) Working Groups. The requirement to establish regional working groups responded in part to requests from the public safety community to include the second tier of emergency workers in planning for interoperable communications. Non-federal members of the RECC groups are to include first responders, state and local officials and emergency managers, and 911 call center personnel. The Department of Homeland Security (DHS) is the lead agency for the RECC plans and for other emergency communications planning initiatives, notably the National Infrastructure Protection Plan, FEMA Disaster Emergency Communications planning, and the National Emergency Communications Plan.", "As part of the grants process for interoperable communications, Congress required the preparation of a National Emergency Communications Plan (NECP). DHS issued the NECP in July 2008. The primary purpose of the plan is to provide an overarching strategy for emergency communications preparedness. To meet preparedness goals, the NECP provides guidelines and deadlines for emergency managers at all levels of government. The improvement of 911 systems and PSAP communications is among the plan's objectives for Disaster Communications Capabilities. Specifically, Initiative 7.2 of the NECP states that agencies with operational responsibilities \"should evaluate the readiness posture of communications centers (e.g., Public Safety Answering Points)\" for vulnerabilities. According to the plan, \"System planning activities should account for the availability of alternative and backup communications solutions and redundant pathways (i.e., provided by different vendors) to support communications if primary capabilities become unavailable.\" A recommended first milestone for this initiative is for RECC Working Groups to work with state and local agencies to assess priority vulnerabilities that could weaken critical mission response. Later milestones that apply to PSAPs and 911 systems include\nDevelop plans and procedures to enhance emergency 911 systems and PSAP communications. Identify alternate and/or backup capabilities in emergency communications plans defined by all federal, state, local, and tribal agencies.\nThese goals for states to improve 911 systems are compatible with DOT's efforts with 911 and NG9-1-1; the DOT programs are referenced in the plan.", "Title VI of the Homeland Security Appropriations Act, 2007 ( P.L. 109-295 ). Title VI—the Post-Katrina Emergency Management Reform Act of 2006—reorganized the Federal Emergency Management Agency (FEMA), gave the agency new powers, and clarified its functions and authorities within DHS. Among the new initiatives required by the law was the creation of Regional Emergency Communications Coordination (RECC) Working Groups as part of ten Regional Offices. These groups could provide a platform for coordinating emergency communications plans among states and were intended to include representatives from many sectors with responsibility for public safety and security.\nThe formation of the regional working groups, the RECCs, responded in part to requests from the public safety community to expand interoperable communications planning to include the second tier of emergency workers. Non-federal members of the RECC are to include first responders, state and local officials and emergency managers, and PSAPs. Additionally, RECC working groups are to coordinate with a variety of communications providers (such as wireless carriers and cable operators), hospitals, utilities, emergency evacuation transit services, ambulance services, amateur radio operators, and others as appropriate.\nThe RECC Working Groups could play a part in forming future policies for the transition to NG9-1-1. The working groups could provide another opportunity for federal leadership in assisting 911, especially in coordinating the transition to IP-enabled emergency communications with the deployment of new broadband infrastructure.", "Broadband is generally used to refer to fast transmission speeds, and the National Broadband Plan (NBP) establishes benchmarks for minimum speeds for broadband services. The NBP also equates broadband with the characteristics of ubiquity, efficiency, and effectiveness. Much of the plan emphasizes the importance of having broadband access to the Internet to meet social and economic goals. IP-enabled networks for emergency communications require broadband infrastructure to operate effectively; however, they need not connect with the Internet. Using the Internet Protocol, an IP-enabled network provides applications that meet specific needs. An IP-enabled network for emergency communications has been defined as an \"emergency communications network or system based on a secured infrastructure that allows secured transmission of information, using Internet Protocol, among users of the network or system.\" Such a network, if fully realized, could support many types of emergency communications needs, including first responder networks and emergency alerts.\nThe NBP has discussed some of the ways that federal investment in broadband infrastructure might be leveraged for community and state broadband services and it has explored the impact of broadband technology on emergency communications services. The plan has recognized the common elements of broadband use in emergency communications but it has not explicitly addressed the possibility of unifying them as a common infrastructure project. In the NBP, the FCC has made recommendations that support the transition to NG9-1-1 but it has not provided a policy statement that captures the vision of shared capacity, with many applications riding on the same infrastructure. Others, however, have described the future as a grid (Global Information Grid, Department of Defense) or an Emergency Services Internet (ESInet, NENA).", "The implementation of IP-enabled NG9-1-1 embraces many complex and inter-related decisions about, for example, governance, standards and technology, funding, and leadership. Congress has addressed some of these issues in the context of existing 911 infrastructure and technology, and has recognized the need to plan for the transition to the next generation. This transition will, over time, present many new policy issues. Congressional policy goals for the future could include\nAddressing emergency communications needs and goals with a policy that recognizes the convergence of technologies, especially IP-based networks and standards, that will place first responder networks, 911 systems, and emergency alert systems on common, interoperable platforms. Identifying the federal role in implementing national policies for emergency communications without eroding state or local authority. Defining the role of the Department of Homeland Security, especially the Regional Emergency Communications Coordination Working Groups that it supports, in guiding policies to sustain and improve 911 as part of its Emergency Communications Plan. Reviewing the federal regulatory role in promoting competition in the provision of network services to PSAPs. Designating radio frequency spectrum to provide connectivity to PSAPS, for example by using wireless technologies such as microwave transmission in place of fiber-optic cables. Addressing the quality of interfaces with other emergency communications networks, especially the radio links to first responders, and their spectrum needs. Providing funding solutions. Establishing national guidelines or requirements for minimum levels of 911 service. Establishing a program to assure that the quality of 911 services improves steadily, nationwide.\nEmergency communications professionals in the public and private sector deem it essential that the full potential of a broadband emergency communications grid, what NENA calls the ESInet, be recognized and supported by policy makers at all levels of government.\nAppendix A. 911 Legislation and Policy\nThis section provides further detail and documentation about 911 requirements enacted by Congress and related administrative activities.\nEquality of Service and Access to 911\nMany of the FCC's regulatory efforts have supported this principle by requiring that different providers of voice communications services be able to provide 911 facilities with basic information about a caller, specifically call-back number (Automatic Number Information, ANI) and location (Automatic Location Identification, ALI).\nEquality of Access Devices\nThe 911 Act assured that wireless carriers would have similar obligations and protections in transmitting 911 calls as the wireline common carriers. The NET 911 Improvement Act of 2008 extended these obligations and protections to include Voice Over Internet Protocol (VOIP). The Federal Communications Commission (FCC) is responsible for promulgating and enforcing regulations to assure that cell phone and VOIP calls, as well as those from wireline phones, convey required information to the appropriate Public Safety Answering Point (PSAP). Providing position information that locates cell phone or VOIP callers in a manner comparable to wireline information is one of the challenges for parity among devices.\nAnother challenge is presented by connections to third-party service providers. For example, telematics systems installed in cars, such as OnStar; direct emergency calls automatically to a customer service operator who then places the call to 911, usually identifying the appropriate call center from a database. Video Relay Service for the hearing impaired is another example of an intermediary placing the call to a PSAP. Access to PSAP contact information for third-party service providers continues to be an issue of concern to companies that provide services that include contacting 911 for assistance. To address this concern, the National Emergency Number Association (NENA) maintains a registry of PSAP information that it makes available to validated call centers as well as PSAPs. The NET 911 Improvement Act of 2008 specifically authorized, but did not require, the FCC to compile a list of contact information of public safety answering points and make the information available where releasing it would benefit public safety. The NET 911 Improvement Act of 2008 also extended parity of protection to duly authorized emergency communications service providers that voluntarily offer these services.\nEquality of Coverage\nThe location of a caller often determines the level of response from a PSAP. The likelihood of a 911 call being completed with accurate information depends on two essential components: the capacity of the network and systems to capture and deliver the needed information and the capability of the PSAP to receive it. Providing location information in rural areas, for example, can be difficult for wireless carriers, partly because of inadequate infrastructure. Reflecting concerns that some carriers would stop serving remote areas rather than invest in improving location identification capabilities, the ENHANCE 911 Act of 2004 directed the FCC to grant waivers to Tier III wireless carriers in situations where strict enforcement would decrease access to emergency services.\nThe ENHANCE 911 Act of 2004 also required the FCC to study the situation of Tier III wireless carriers regarding the waiver process and to provide information on effective technologies for implementing Phase II of W-E911. The FCC submitted a detailed report in April 2005 but made no recommendations regarding technology.\nImproving Location Information\nIn addition to problems in rural areas, noted above, high-density urban areas also have location problems, such as when a 911 call is made from inside a high-rise building. Even if wireless E-911 is in place at the appropriate PSAP, location identification can provide a street address but not a floor level. Location information is readily available for wireline phone subscribers, as most telephone service providers have identifiable addresses stored in their databases. (Many rural areas have invested in converting generic rural addresses, such as rural routes or post office boxes, into house-specific coordinates for 911 location information.)\nThe Association of Public-Safety Communications Officials International, Inc. (APCO) conducted an independent test of the accuracy of location information received by PSAPs that indicated many failings in the provision of location information from wireless calls. Partially in response to the APCO study, the FCC opened a new proceeding and in November 2007 proposed rules for carriers to provide more accurate location information to PSAPs. Verizon, AT&T, and other carriers and industry groups questioned whether the FCC's ruling was technically feasible and recommended a 911 working group to develop and agree upon standards for location accuracy and other features of 911. The FCC withdrew the contested rules and in September 2008 sought comments on new service rules for location accuracy. The FCC has not issued a final ruling and ex parte comments continue to be posted.\nThe NET 911 Improvement Act of 2008 directed the FCC to work with PSAPs, the industry, and the E-911 Implementation Coordination Office to improve standards and best practices for a number of goals related to location identification. The NET 911 Improvement Act of 2008 also requires that the National Plan identify location technologies for nomadic devices and for office buildings and multi-dwelling units.\nImproving PSAP Capabilities\nTo meet anticipated new requirements for location information at the PSAP level, wireless carriers will need to improve the technology they use. PSAPs must also invest in technology in order to receive more detailed information. Guidance and assistance for these tasks are provided primarily at the state and local level. NENA and APCO are active in providing frameworks for decision-making, and technical reports. The Seventh National Reliability and Interoperability Council (NRIC), a federal advisory committee to the FCC, provided best practices and other analyses for PSAPs to improve 911 operations. It also urged the development of a common platform that would link 911 to an interoperable communications network based on Internet technologies. The FCC's February 2008 summit for 911 circulated a list of best practices for PSAPs. The 2009 summit for 911 discussed deployment and operational guidelines for next generation IP-enabled 911. To address PSAP needs, the National Plan required by the NET 911 Improvement Act of 2008 must contain \"specific mechanisms for ensuring the IP-enabled emergency network is available in every community.... \"\nEquality for the Disabled\nThe NET 911 Improvement Act of 2008 has required the National Plan to identify solutions for providing 911 support and access to those with disabilities. The FCC currently enforces Title IV of the Americans with Disabilities Act ( P.L. 101-336 ) for access to telecommunications services. Requirements for wireless carriers to accommodate TTY calls to 911 have been part of the FCC regulations since rules were first promulgated in 1996. The FCC is endeavoring to improve 911 support provided through Internet-based forms of the Telecommunications Relay Service that allow persons with hearing and speech disabilities to communicate with hearing users of telephone services.\nMechanisms to Improve Funding for PSAPs\nThe ENHANCE 911 Act of 2004 provided a mechanism for funding 911 with a program of matching grants. Authorizations of up to $250 million annually for program activities and grants were established for fiscal years 2005 through 2009, with authority for authorizations set to expire on October 1, 2009. Despite the authorization, no appropriations were made, although some funding was provided through the Digital Transition and Public Safety Fund, created by the Deficit Reduction Act of 2005 ( P.L. 109-171 ). The National Telecommunications and Information Administration (NTIA) is responsible for administering distributions from the fund, as designated by Congress in the act. Up to $43.5 million was designated specifically for 911, payable from the proceeds of spectrum auctions that took place in early 2008. The Implementing Recommendations of the 9/11 Commission Act of 2007 authorized the NTIA to borrow against the $43.5 million from spectrum auction proceeds and included an amendment that favors Public Safety Answering Points not capable of receiving 911 calls. There are 91 counties in the United States where emergency calls are handled without the benefit of any 911 technology. The NET 911 Improvement Act of 2008 further amended the guidelines for grant eligibility by adding \"migration to an IP-enabled emergency network\" as a qualifying program for grant funds. The program will be administered by the NHTSA. In addition to establishing a grants program to help PSAPs install 911 systems, the ENHANCE 911 Act of 2004 provided a mechanism to penalize states and other jurisdictions that diverted fees collected for 911 to other purposes. This provision was in response to reports of abuses documented by CTIA - The Wireless Association in 2003; later abuses have also been documented. To discourage this practice, the ENHANCE 911 Act of 2004 structured its matching grants program to refuse federal grants to jurisdictions where funds collected for 911 were used for other purposes. As required in the act, the Government Accountability Office prepared a report about state and local 911 systems that included an analysis of surcharges and their uses.\nThe NET 911 Improvement Act of 2008 established an annual requirement for the FCC to prepare a survey of the collection and disbursement of fees collected for 911 and by states and political subdivisions and to report if fees are diverted. The purpose of the reporting requirement is to \"ensure efficiency, transparency, and accountability.\" The act also specifically allows states to collect a fee on VOIP services with the proviso that the fees must be used for 911 or E-911.\nFederal Funding for 911 in Rural Areas\nThe Food, Conservation, and Energy Act of 2008 ( P.L. 110-234 ), referred to as the 2008 Farm Bill, included language that can provide loans to improve 911 and other emergency communications capabilities in rural areas. The provision amends the Rural Electrification Act lending authority to include\n\"facilities and equipment to expand or improve in rural areas—\n\"(1) 911 access;\n\"(2) integrated interoperable emergency communications, including multiuse networks that provide commercial or transportation information services in addition to emergency communications services;\n\"(3) homeland security communications;\n\"(4) transportation safety communications; or\n\"(5) location technologies used outside an urbanized area.\"\nThe bill allows government-collected fees such as state and local fees for 911 to be used as surety against loans. It also permits loans to companies that will provide communications equipment, if local governments with jurisdiction are not allowed to acquire the debt.\nFunding for 911 by States and Communities\nA large share of the costs for implementing 911 services is covered by the telecommunications industry and by state and/or local taxes or surcharges assessed on wireline and wireless telephone bills. Most states have some form of 911 or E-911 fund that receives revenue from telephone bill surcharges and distributes it to various jurisdictions; some states also compensate telephone companies for 911-related expenses. Another source of funding, at the local or county level, is an increase in property taxes with the additional monies going to PSAPs. Call center operators also hold fund-raisers like fish fries and bake sales.\nFederal Leadership in Improving 911 Capabilities\nLanguage in support of a leadership role by a federal agency to guide 911 policy appears in each of the major bills that Congress has passed. The ENHANCE 911 Act of 2004, for example, stated\nEnhanced 911 is a high national priority, and it requires Federal leadership, working in cooperation with state and local governments and with the numerous organizations dedicated to delivering emergency communications services.\nThe ENHANCE 911 Act of 2004 recognized the role of the U.S. Department of Transportation (DOT) in providing sustained support of 911 by making it a co-administrator of the E-911 Implementation Coordination Office (ICO). The FCC has also played a visible role in supporting 911, much of it through regulation.\nThe Role of the FCC\nCharged in the 911 Act of 1999 to take positive steps to address the implementation of 911 services, the FCC has primarily played the role of regulator of wireless communications service providers, promulgating and enforcing regulations to provide ANI/ALI information. Beginning in 2003, the FCC has held occasional public forums to discuss 911 deployment and possible actions.\nAfter the establishment of the Public Safety and Homeland Security Bureau in 2006, the FCC took action on another requirement of the 911 Act: to \"encourage each State to develop and implement coordinated statewide deployment plans, through an entity designated by the governor, and to include representatives of the foregoing organizations and entities in development and implementation of such plans.\" It has contacted each state governor and requested information about points of contact for emergency communications. As these are provided, the FCC posts them on a website established for that purpose.\nThe 2007 appropriations bill for the Department of Homeland Security included a requirement that the FCC submit a report to Congress on the capacity, nationwide, for rerouting 911 calls when call centers are disabled by disaster. The law specified that the report would cover the \"status of efforts of State, local, and tribal governments to develop plans for rerouting 911 and E911 services in the event that public safety answering points are disabled during natural disasters, acts of terrorism, and other man-made disasters.\"\nIn the required report, the FCC focused on administrative mechanisms not system capacities, indicating that most states had some form of backup plan. The report did not explore the limitations of existing technology nor consider possible changes to improve backup capacity. The report was submitted to Congress in September 2007 but has not been made public.\nThe Role of the E-911 Implementation Coordination Office\nThe keystone of the ENHANCE 911 Act of 2004 was the mandate to establish a program \"to facilitate coordination and communications between Federal, State, and local emergency communications systems, emergency communications personnel, public safety organizations, telecommunications carriers, and telecommunications equipment manufacturers and vendors involved in the implementation of E-911 services.\" The act designated the director of the National Telecommunications and Information Administration (NTIA) and the Administrator of the National Highway Traffic Safety Administration (NHTSA) to direct the program as co-administrators of an E-911 Implementation Coordination Office. The two offices were to develop a management plan to be submitted to Congress. Once the office was established, the co-administrators were required to report to Congress annually on activities \"to improve coordination and communication with respect to the implementation of E-911 services.\" Absent funding from specifically-designated appropriations, the program as required by Congress was not established at the time. NHTSA, in conjunction with DOT's Intelligent Transportation Systems program, moved forward with the Next Generation 911 Initiative. Once funding became available as part of the Deficit Reduction Act, the NTIA moved to sign a memorandum with DOT and prepare regulations for the grants programs for public comment. The NET 911 Improvement Act of 2008 gave the ICO the new responsibility of creating a National Plan for the migration to IP-enabled emergency communications network to support 911 and other citizen-activated calls. Citizen-activated calls for help currently go to 911, to 311, to 211, and to other call centers in both the public and private sector.\nTransition to IP-Enabled 911 Systems: The NET 911 Improvement Act of 2008\nThe NET 911 Improvement Act of 2008 has required that the ICO \"shall develop and report to Congress on a national plan for migrating to a national IP-enabled emergency network capable of receiving and responding to all citizen-activated emergency communications and improving information-sharing among all emergency response entities.\" The plan was to have been delivered in April 2009. The plan was to have been developed in consultation with a broad range of representatives for public safety, person with disabilities, equipment and service providers and others. Some of the requirements for the plan have been referenced in the preceding sections of this report. They are recapped below, organized by the policy goal that each provision would support.\nEquality\nProvide mechanisms to ensure that the IP-enabled emergency network is available in every community and is coordinated at the local, state, and regional level. Identify location technology for nomadic devices and for office buildings and multi-unit dwellings. Identify solutions for those with disabilities, steps to be taken, and a timeline for action. Analyze efforts to provide automatic location information and provide recommendations for necessary regulatory or legislative changes.\nFunding\nIdentify barriers that must be overcome and funding mechanisms to address barriers.\nTransition to IP-Enabled Networks\nOutline the potential benefits of migrating to a national IP-enabled emergency network for citizen-activated calls. Include a proposed timetable, an outline of costs, and potential savings for the transition to IP technologies. Provide specific legislative language, if necessary, for achieving the plan. Provide recommendations on any legislative changes, including updating definitions, necessary to facilitate a national IP-enabled network. Assess, collect, and analyze information from trial deployments of IP-enabled emergency networks.\nAppendix B. Citizen-Activated Calls: 211\nThe term citizen-activated emergency call refers generally to calls placed by individuals seeking assistance in an emergency. These calls are differentiated from alerts sent by authorities to warn communities of potential danger or to provide instructions after a disaster. Citizen-activated calls for help currently go to 911, to 311, to 211, and to other call centers in both the public and private sector. The 311 code was created by the Federal Communications Commission (FCC) in 1997 to take non-emergency police calls as a means to reduce congestion on 911 lines. The 211 dialing code is reserved by the FCC on a provisional basis as a universal number for community information and referral. The 211 call centers support a variety of social service hot lines—including assistance in foreign-languages—and can also be used to provide information and guidance in emergency situations. A large part of the U.S. population has access to 211 call services but no state has statewide service. Many cities have adopted shared-service communications hubs handling 211 and 311 calls. Service levels and response times for all types of citizen-activated calls would benefit from a transition to IP-enabled networks and in many cases could share infrastructure with 911 networks\nCall Centers and Post-Disaster Response\nCall centers are identified as a pivotal link in an end-to-end network of emergency communications, information, response, and post-incident care. A report by the Wireless Emergency Response Team (WERT) discussed the valuable help provided to victims of the September 11, 2001, World Trade Center attack through call center services donated by BellSouth. Over 400 hotlines were established in New York City after 9/11, however, creating a confusing network for victims and volunteers.\nAfter Hurricane Katrina, call centers, including 211 call centers, were used to help locate displaced victims and direct them to shelters and social services. A post-hurricane evaluation by the Federal Emergency Management Agency (FEMA) after the 2005 season recommended that states establish 211 systems as part of their plans for response and recovery.\nA study of the role of 211 call centers during the Florida hurricane season of 2004 documented a number of ways that the call centers were of assistance:\nexpanded the capacity of Emergency Operations Centers by providing trained information and referral specialists; offered additional access points for public information; managed information about the availability of services; identified unmet and emerging needs; helped prioritize and direct resources; provided reassurance and crisis support; helped mobilize and manage volunteers and donations; served as intake points for government agencies and non-profit organizations; offered sustained support for long-term recovery efforts.\nIn addition to disaster recovery efforts, 211 call centers respond to a wide range of social service needs for information and counseling, such as parent support, suicide prevention, health information, traveler's aid, tracking and helping welfare clients, and housing assistance.\nCall Centers and Federal Policy\nIn 2008, the Department of Homeland Security (DHS) awarded a grant to Texas A&M Research Foundation to study 211 calls, initiating what DHS calls the Public Needs Project. The objective of the research was to provide information for state call centers to develop systematic approaches to responding to calls after major disasters. The study was to analyze calls for assistance made to the 26 211 call centers in Texas during a four-month period before, during, and after Hurricanes Katrina and Rita. The study's conclusions could provide the basis for incorporating 211 call centers into federal planning for emergency response and funding for infrastructure. The target date to provide initial conclusions from the study was year-end 2009. The WERT report issued after the September 11 attacks urged that national planning for emergency preparedness and response include the mobilization of private-sector call centers to field calls for information and assistance for non-life-threatening needs.\nCall Centers and Congress\nLegislation introduced in the 111 th Congress includes two bills covering 211 call centers: S. 211 (Senator Clinton) and H.R. 211 (Representative Eshoo). Both would authorize funds and require improvements in the capacity of 211 help lines operated by nonprofit call centers. A question for the 111 th Congress might be whether federal funding for 211 call centers meshes with other goals that are expected to have priority, such as job creation and investment in infrastructure. Recommendations from the DHS study on 211 might advocate additional funding for 211 services because of their role in emergency response. This could provide a different viewpoint for Congress to evaluate funding programs.\nAppendix C. Grants Awards for 911 Programs\nFollowing is the list of award recipients of federal grants for 911 and related programs." ], "depth": [ 0, 1, 1, 1, 2, 3, 2, 2, 1, 2, 3, 3, 3, 3, 2, 1, 2, 2, 2, 1, 2, 2, 1, 1 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full", "h1_full", "h1_full", "", "h1_full", "", "", "", "", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "h0_full h1_full" ] }

{ "question": [ "What is today's 911 system built on?", "What has been the problem with efforts to improve the 911 technology?", "What do 911 callers wrongly assume?", "What is the new technology that will be used with 911?", "How will this new technology work?", "What is the general purpose of the bills Congress has passed for 911?", "What is the purpose of the Wireless Communications and Public Safety Act?", "What is the purpose of the NET 911 Improvement Act?", "What was the purpose of ICO?" ], "summary": [ "Today's 911 system is built on an infrastructure of analog technology that does not support many of the features that most Americans expect to be part of an emergency response.", "Efforts to splice newer, digital technologies onto this aging infrastructure have created points of failure where a call can be dropped or misdirected, sometimes with tragic consequences.", "Callers to 911, however, generally assume that the newer technologies they are using to place a call are matched by the same level of technology at the 911 call centers, known as Public Safety Answering Points (PSAPs). However, this is not always the case.", "As envisioned by most stakeholders, these new technologies—collectively referred to as Next Generation 911 or NG9-1-1—should incorporate Internet Protocol (IP) standards.", "An IP-enabled emergency communications network that supports 911 will facilitate interoperability and system resilience; improve connections between 911 call centers; provide more robust capacity; and offer flexibility in receiving and managing calls. The same network can also serve wireless broadband communications for public safety and other emergency personnel, as well as other purposes.", "Recognizing the importance of providing effective 911 service, Congress has passed three major bills supporting improvements in the handling of 911 emergency calls.", "The Wireless Communications and Public Safety Act of 1999 (P.L. 106-81) established 911 as the number to call for emergencies and gave the Federal Communications Commission (FCC) authority to regulate many aspects of the service.", "The most recent of these laws, the NET 911 Improvement Act of 2008 (P.L. 110-283), required the preparation of a National Plan for migrating to an IP-enabled emergency network.", "Responsibility for the plan was assigned to the E-911 Implementation Coordination Office (ICO), created to meet requirements of an earlier law, the ENHANCE 911 Act of 2004 (P.L. 108-494)." ], "parent_pair_index": [ -1, -1, -1, -1, 3, -1, 0, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1 ] }

{ "title": [ "Background", "Other Mortgage Market Participants", "Foreclosure Process", "REO Disposition Process", "REO Program Structures and Use of Contractors", "The Housing Crisis Increased the Volume of REO Properties", "Changes to Its Disposition Practices Could Help FHA Improve Results", "FHA and Other Federally Related Entities Have Similar Goals and Strategies for Disposing of REO Properties", "FHA’s Returns on REO Sales Slightly Lagged Those of the Enterprises and Dispositions Took Substantially Longer to Complete", "FHA Uses a Single Assessment of Market Value in Setting List Prices, but Other Entities Use Multiple Sources", "FHA’s Use of Nonmarket- Based Price Reductions Differs from Other Entities’ Practices and May Contribute to Lower Returns", "FHA Could Further Improve Its Monitoring and Evaluation of REO Contractors", "FHA’s Lack of Current Policies and Procedures for REO Disposition May Create Inefficiencies", "FHA Has Yet to Implement a Uniform System for Evaluating Contractor Performance", "FHA’s Contractor Oversight Lacked Key Activities Used by Other Entities", "FHA Has Not Assigned Work to Contractors Based on Evaluations of Their Performance", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Housing and Urban Development", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Established by the National Housing Act of 1934, FHA’s single-family mortgage insurance program helps home buyers obtain home mortgages by providing insurance on single-family mortgage loans. The mortgage insurance allows FHA-approved private lenders to provide qualified borrowers with mortgages on properties with one to four housing units and generally compensates lenders for nearly all of the losses incurred on such loans. FHA insures mortgages on properties that meet its criteria, providing guarantees for initial purchases, construction and rehabilitation, and refinancing. To support the program, FHA imposes up-front and annual mortgage insurance premiums on home buyers. The agency has played a particularly large role among minority, low-income, and first-time home buyers. In 2012, about 78 percent of FHA-insured home purchase loans went to first-time home buyers, about 32 percent of whom were minorities.", "A number of other federal and private sector entities participate in the mortgage market. Along with FHA, the VA Loan Guaranty Service and RHS administer federal government programs that insure or guarantee single-family mortgages made by private lenders. In addition to these government agencies, private companies insure lenders against losses on home mortgages, and private lenders make loans without mortgage insurance. The enterprises also participate in the U.S. housing market by purchasing mortgages from lenders.\nVA’s Loan Guaranty program is an entitlement program that provides eligible veterans, active duty military personnel, and certain other individuals with housing benefits. The VA guaranty program allows mortgage lenders to extend loans to eligible borrowers on favorable terms—for example, with no down payment—and provides lenders with financial protections against the losses associated with such mortgages. To help support the program, borrowers are required to pay a funding fee that equals a certain percentage of the loan amount, although service- connected disabled veterans are exempt from paying this fee. The program may also receive congressional appropriations if needed.\nRHS operates guaranteed and direct loan programs to help rural Americans with very low incomes, low incomes, and in some cases moderate incomes purchase single-family homes. The purpose is to provide financing with no or low down payments at favorable rates and terms. The loans are generally for the purchase, construction, rehabilitation, or relocation of a dwelling and related structures. RHS- guaranteed loans are made through approved local lenders, with RHS providing the lenders substantial financial protections against associated losses. The loans are available to qualifying borrowers who meet applicable household income limits and seek to buy properties in eligible rural areas. Under its direct loan program, RHS extends loans to qualified borrowers—who must have low incomes and be without adequate housing—for the purchase of properties that are modest in size, design, and cost.\nCongress established the enterprises as for-profit, shareholder-owned corporations. They share a primary mission to stabilize and assist the U.S. secondary mortgage market and facilitate the flow of mortgage credit. To accomplish this goal, the enterprises purchase conventional mortgages that meet their underwriting standards, obtaining their funds through borrowing or by issuing mortgage-backed securities, which are securities backed by pools of mortgages. The enterprises hold some of the purchased mortgages in their portfolios, but they package most of them for sale to investors in the secondary mortgage market. In exchange for a fee, the enterprises guarantee these investors the timely payment of principal and interest. Both enterprises are also required to purchase mortgages that serve low- and moderate-income families. On September 6, 2008, the Federal Housing Finance Agency placed the enterprises into conservatorship out of concern that the enterprises’ deteriorating financial condition threatened the stability of financial markets.\nInstitutions that originate home mortgages generally do not hold such loans as assets on their balance sheets but instead sell them to other financial institutions for the purpose of securitizing the mortgage. These securities pay interest and principal to their investors, which include financial institutions and pension funds, among others. In the past, institutions originating mortgage loans took care of all the activities associated with servicing them—including accepting payments, initiating collection actions for delinquent payments, and foreclosing if necessary. With the advent of securitization, entities known as mortgage servicers— which can be large mortgage finance companies or commercial banks— typically undertake such activities on behalf of the current owners of the loans.", "If a borrower defaults on a mortgage loan secured by the property, the mortgage note holder is generally entitled to pursue foreclosure to obtain title to the property. The foreclosure process is governed by state laws and differs across states, but foreclosed properties are typically sold at auction, as shown in figure 1. Once the borrower is in default, the mortgage servicer—often in conjunction with the borrower and entities with an interest, such as mortgage guarantors and insurers—must decide whether to pursue a home retention workout or other foreclosure alternative or to initiate foreclosure. The mortgage owner or servicer generally initiates foreclosure once the loan becomes 90 days or more delinquent unless the borrower can resolve the loan’s delinquency by paying the outstanding amount or some other resolution occurs, such as a borrower repayment plan or loan modification. If the foreclosure process is completed and no third party purchases the home at the foreclosure sale, the home usually becomes the property of the loan holder or servicer as part of an REO inventory.\nHowever, certain states provide the previous owners of foreclosed properties with a right of redemption that allows them to pay amounts owed to the lender and reclaim ownership. During redemption periods, the previous borrower or current occupant is allowed to remain in the residence and the REO property owner or servicer generally is not permitted to pursue activities such as evicting property residents or securing properties. Some states may have a confirmation process to complete the foreclosure process and transfer title that may also delay possession and marketing of an REO property. Typically, the redemption or confirmation period begins after the foreclosure sale and lasts from around 1 to 6 months or more. However, if properties become vacant, some state laws may permit the shortening of redemption periods and allow the REO property owners or servicers to take control of foreclosed properties.\nThe acquisition of REO properties differed across the entities that we reviewed. When a servicer forecloses on an FHA-insured property that is not sold to a third party, the foreclosure is held in the lender’s or servicer’s name, and the lender or servicer is responsible for the property until it is conveyed to FHA. FHA requires servicers to oversee properties during redemption periods, to evict residents if properties not in redemption periods are occupied, and to perform critical maintenance on properties. The servicer files a claim with FHA, and FHA conducts its inspections before accepting the title. The length of time between the foreclosure sale and entry of a property into FHA’s REO inventory depends in part on state foreclosure laws as well as the actions of the loan’s servicer. According to FHA rules, a servicer needs marketable title before it can convey a property to FHA, and the title is generally considered to be marketable only after the borrower has left the home or been evicted, any redemption period has expired, and other required actions have taken place. After conveyance to FHA, the property is assigned to FHA’s contractors, which begin the process of preparing the REO property for sale.\nOther federally related entities that acquire REO properties take custody of and are responsible for them closer to the time of the foreclosure sale. For example, the enterprises require servicers to convey properties to them within 24 hours of foreclosure sales, while VA requires servicers to provide notice of their intent to convey properties within 15 days of foreclosure sales, although servicers have 60 days (or longer in certain jurisdictions) to provide evidence of acceptable title to conveyed properties. RHS’s REO process varies, depending on whether the property has had a guaranteed or direct loan. With direct loans, RHS takes possession of the property after the foreclosure sale and manages the entire REO process. With guaranteed loans, the lender receives title to the property and maintains, markets, and disposes of the property, and RHS oversees the process. Because RHS acquires and disposes only of REO properties related to its direct loans, we generally considered only these types of properties when discussing RHS’s REO disposition.", "Disposing of REO properties can involve various activities, although the disposition process is generally similar across entities. While a property is held as part of an entity’s REO inventory, the entity is responsible for maintenance, including cleaning, lawn care, snow removal, and security. If a property has a tenant or is otherwise occupied, eviction proceedings may need to occur before it is offered for sale. After any redemption periods expire and evictions take place, properties are usually assessed to determine their market value. The market value is used to determine the selling, or listing, price. A listing real estate broker is usually chosen to market the property publicly, generally through a multiple listing service system—a database set up by a group of real estate brokers to provide information about properties for sale. If a property does not attract interest at its initial listing price, the price can be reduced. Once a purchase offer is accepted, the sale closing process occurs, and ownership is transferred to the new owner.", "Since 1999, FHA has been outsourcing to private sector contractors the maintenance and disposition of its REO properties. Entities that dispose of REO properties typically use various types of contractors, including those that manage the marketing or maintenance activities for a large number of properties. These larger contractors often use subcontractors to provide specific services related to the marketing or maintenance of properties, such as listing the property for sale or cutting the lawn. In June 2010, FHA launched the third generation of its Management and Marketing (M&M) contractor program, known as M&M III. Under prior arrangements, FHA’s M&M contractors were responsible for both the maintenance and marketing of FHA’s REO properties. However, under M&M III these functions are performed by separate contractors, including maintenance contractors that are responsible for preserving properties and marketing contractors that are responsible for selling the homes. Under the M&M III structure, FHA also uses contractors called Mortgagee Compliance Managers that protect FHA’s interests in foreclosed properties that lenders have not yet conveyed to FHA. The M&M III structure was also meant to include an additional contractor to serve as an oversight monitor to assist FHA in overseeing its REO program’s performance, including the other M&M III contractors.\nFHA conducts its mortgage loan insurance programs and its REO disposition program through four regional operating locations called homeownership centers, or HOCs. The homeownership centers are located in\nAtlanta, Georgia;\nDenver, Colorado;\nPhiladelphia, Pennsylvania; and\nSanta Ana, California.\nEach of these homeownership centers oversees FHA operations in the states within their region (see fig. 2). Under M&M III, FHA contracts with entities to provide the necessary maintenance or marketing services in multiple areas that cover several states. Within each of these contract areas, multiple entities generally will receive either maintenance or marketing contracts as a way of fostering competition among the contractors to improve their responsiveness, reduce risk, and increase net returns to FHA. FHA staff—known as government technical representatives—in each of these locations oversee the maintenance and marketing contractors, including monitoring and evaluating their performance and providing technical guidance and assistance.\nOther entities also use contractors to manage and dispose of REO properties, but to varying degrees. For example, officials from one of the enterprises said that it used three nationwide contractors for property maintenance, with each operating in different states. According to these officials, contractors inspect the properties, but field-based quality control employees also do property inspections. For disposition, this enterprise has its own internal management group that markets and sells REO properties using its own network of listing brokers. The enterprise’s officials said that to help adjust capacity based on REO inventories, the enterprise had also contracted with external asset management companies that did not use its broker network. The officials noted that the enterprise recently ended its use of these contractors, as its REO inventories had declined.\nThe other enterprise has used contractors to manage and dispose of its REO properties since 2008. According to officials, this enterprise initially used one sales management contractor but added two more in March 2011. These officials explained that each of the three contractors operated in every geographic area, allowing the enterprise to more easily change the contractor managing a property if necessary. The enterprise’s officials also said that it managed the network of service providers—such as listing brokers, property maintenance companies, and repair contractors—that its sales management contractors used to ensure a consistent process and minimize potentially adverse relationships among contractors. Officials said that the enterprise primarily maintained relationships with local service providers rather than nationwide providers because markets differed at the local level. The enterprise’s oversight structure includes several different groups, including oversight monitors that review specific areas of contractor performance, individual business teams that also review performance across all contractors, and vendor oversight teams that serve as liaisons between the business units and contractors.\nVA and RHS use different approaches. VA staff told us that the agency used a single contractor to manage the maintenance and disposition of its entire REO inventory. This contractor uses numerous subcontractors to maintain and market properties and manage the subcontractors. According to its staff, VA wanted one company to manage everything so that it could have a single point of interaction and accountability. RHS uses both contractors and its own staff to dispose of REO properties, according to agency officials. For its direct loans, RHS staff manage the disposition of any foreclosed properties for which it takes possession in about half of the states, while a central RHS office oversees contractors that manage and dispose of properties in the remaining states. Officials said that for several years RHS had been transitioning from using its own staff to using contractors to dispose of properties. For its guaranteed loans, RHS does not use contractors but relies on lenders that take possession of the REO properties with some RHS oversight. If a lender completes foreclosure or a deed-in-lieu of foreclosure on a loan that RHS guarantees, the lender receives title to the property and maintains, markets, and disposes of the property.", "As a result of the large number of loan defaults arising during the housing crisis, FHA and the other entities have generally experienced significant growth in their REO property disposition activities. As shown in the figure below, each of the entities disposed of an increasing number of REO properties during that time. RHS was not included in the figure because it had no more than 218 direct loan REO property dispositions in any quarter during the time period.", "Our review of FHA and other federally related housing entities found that they pursued similar goals and strategies for disposing of REO properties, including seeking to sell most properties to owner-occupants—individuals planning to occupy the homes as primary residences. But data for REO dispositions from January 2007 through June 2012 showed that FHA’s returns from selling its REO properties generally trailed the returns earned by the enterprises. This difference declined when differences in property characteristics, such as location and value, were considered. In addition, we found that FHA, on average, took significantly longer to sell its properties than the enterprises and VA—more than 130 and 70 additional days, respectively. We also evaluated how the method used to sell properties and the type of purchaser affected FHA’s performance. The large majority of FHA’s dispositions were retail sales to owner- occupants or investors, and our analysis of FHA’s performance indicated that the agency achieved higher returns on sales to owner-occupants than on sales to investors and other buyers. However, FHA had a smaller share of owner-occupant sales than the enterprises. We also found that, in making these sales, FHA did not follow several practices that other entities used in disposing of REO properties that could potentially increase the agency’s returns, including repairing properties to increase their market value, using multiple inputs to set list prices, and using market-based information to make subsequent list price reductions.", "FHA’s goals for disposing of its REO properties were similar to those of the other entities we reviewed. According to staff from FHA, VA, and the enterprises, each entity aims to maximize the financial return of REO dispositions while minimizing each property’s time in inventory. Specifically, FHA’s regulatory goals for its REO program are to dispose of properties in a manner that expands home ownership opportunities, strengthens neighborhoods and communities, and ensures a maximum return to the mortgage insurance fund. Currently, the performance of FHA’s REO program is assessed against three formal goals: reducing the average number of days from acquisition to listing REO properties for sale by 2 percent from the prior fiscal year’s average, reducing the average number of days in inventory by 2 percent from the prior fiscal year’s average, and conducting at least 12 REO workshops/meetings to promote acquisition and reuse of foreclosed properties in Neighborhood Stabilization Program areas.\nWhile not having a formal goal addressing the expected return on its REO sales, FHA staff told us that they attempted to improve the solvency of FHA’s insurance fund by targeting a gross execution rate—that is, a property’s sale price as a share of its assessed value, or list price—of 100 percent although they said they use a specific target of at least 80 percent when evaluating homeownership center performance. VA staff said that it advises the contractors that market its REO properties that their execution rate target is 80 percent—based on a property’s net sales proceeds rather than gross sales price—but offers additional compensation incentives for a rate of 88 percent or better. One of the enterprises has a procedural manual for REO sales that notes that its goal is to sell properties for “as close to 100 percent of the list price as possible.”\nFHA and the other entities we reviewed pursued similar strategies to achieve their goals. Staff from these entities explained that they attempted to sell their REO properties primarily via retail sales to either owner-occupants or to investors, who would likely renovate them for resale or rentals. Retail REO sales usually are conducted by private real estate brokers that market the properties the same way they market other properties—for example, listing them in a multiple listing service. Officials from these entities explained that they pursued retail sales because such sales produced higher net returns than other methods of selling the properties, such as selling multiple properties at once—bulk sales—or selling individual or multiple properties at auctions. Officials of some of these entities said that they generally pursued these alternative disposition strategies only after retail sales had proven unsuccessful and that often such sales involved low-value properties or properties with problems that made sales through retail methods difficult.\nOfficials from FHA and other federally related housing entities said that they preferred retail sales not only because of their higher returns, but also because such sales generated more purchases by owner-occupants. Further, some of the officials and representatives of some nonprofit organizations said that owner-occupant sales were better for stabilizing communities and protecting home values. Owner-occupants are assumed to have more incentive to maintain their properties than investor owners that may be absent or focused primarily on maximizing rental income. They also said that owner-occupant sales generally yielded a higher financial return than sales to investors. FHA staff noted that selling to owner-occupants helped to achieve one of HUD’s overall agency goals— to expand home ownership opportunities—and said that FHA required sales records for REO properties to reflect the type of buyer. To further promote sales to owner-occupants, FHA and some of the other entities often use methods such as exclusive access periods. For example, FHA accepts offers on properties that qualify for FHA insurance only from owner-occupants for the first 30 days of the listing.\nIn some cases, FHA also disposes of REO properties at a discount through certain programs intended to further its agency’s mission goal of creating strong, sustainable, inclusive communities and quality affordable homes. These discount sale programs represented only a small fraction of FHA’s total REO dispositions from January 2007 through June 2012. They include the Asset Control Area program, discount sales to nonprofit organizations and government entities, the Good Neighbor Next Door program, and the $1 Home Sale program.\nAsset Control Area. Properties located in areas that HUD has designated for revitalization based on the area’s household incomes, home ownership rates, and level of FHA-insured mortgage foreclosure activity can be offered to sale to municipal government entities or approved nonprofits through this program. These properties are offered at discounts of at least 50 percent of the appraised value of the property for properties valued at over $25,000.\nProperties valued at less than that amount may be sold for as little as $100.\nDiscount sales to nonprofit organizations and government entities.\nQualified nonprofit organizations and government entities may also purchase FHA properties at a discount. Discounts range from 10 to 30 percent, depending on the property’s FHA insurability status, location, and other factors. For example, one initiative provides grantees participating in the Neighborhood Stabilization Program exclusive access to newly conveyed REO properties that are located in their designated areas for 2 days after the grantee is notified that an appraisal has been obtained.\nGood Neighbor Next Door. Under this program, properties in revitalization areas can also be offered to police officers, teachers, fire fighters, and emergency medical technicians at 50 percent off of the list price. $1 Home Sale. Sales of “aged inventory” (properties listed for sale for more than 6 months) can also be made for $1 plus closing costs to local governments to support local housing and community development initiatives.", "FHA’s returns from selling its REO properties generally have trailed the returns of the two enterprises but its performance has improved recently. FHA also took longer to dispose of properties than the enterprises but showed recent improvement in this area. Each of these entities achieved better results when conducting retail sales of individual properties than when using other disposition methods and when selling properties to owner-occupants rather than to investors and other buyers. All of the entities, including private REO servicers, that we interviewed assessed their performance in disposing of REO properties using a variety of metrics. For example, execution rates gauge success in maximizing a property’s sale prices. They can be calculated by comparing either a property’s gross sales price or net sales proceeds with some measure of the property’s value, such as an assessed value from an independent appraiser or the price at which the property was listed for sale. Properties that sell for larger percentages of the assessed value or listed price generate higher returns for the seller. We analyzed data from REO properties disposed of from January 2007 through June 2012 to determine FHA’s and the enterprises’ net execution rates based on independently assessed value, which represents the entities’ net sales proceeds as a percentage of those values. Our analysis showed that the aggregate net execution rate for FHA was 4 and 6 percentage points lower depending on the enterprise (see fig. 4).\nTo account for the possibility that the performance differences were attributable to differences in the property characteristics of each of these entities’ REO inventories, we developed a regression model to control for the effects on the net execution rates of certain property characteristics— such as location, value, and local real estate market conditions—that were beyond the entities’ control. Based on this analysis, we estimate that FHA’s aggregate independently assessed value net execution rate still trailed that of the enterprises by 2 and 5 percentage points.\nSimilarly, FHA’s aggregate net execution rate based on initial list prices for the entire period was worse than enterprise 2’s and enterprise 1’s by 3 and 6 percentage points, respectively, as shown in figure 5. After controlling for the effects of certain property characteristics—as we did for the independently assessed value net execution rate—we estimate that FHA’s net execution rate based on initial list prices was less than that of enterprise 2 and enterprise 1 by 2 and 4 percentage points, respectively.\nWhen comparing aggregate execution rate performance based on gross sales prices rather than net sales proceeds, the difference between FHA and the enterprises widened slightly for both independently assessed values and initial list prices. Both FHA’s net and gross execution rates improved relative to the enterprises during the first half of 2012 and for the list price ratio, FHA’s performance was equal to that of the enterprises.\nAlthough the difference in aggregate net sales returns between FHA and the enterprises over the entire period was 6 percent or less, a small improvement in performance can yield substantial amounts of additional revenue because FHA disposes of tens of thousands of properties each year. For example, if FHA had achieved a similar net execution rate based on independently assessed value as enterprise 2, it would have received over $400 million in additional revenue for 2011 alone. And if FHA’s aggregate net execution rate for 2011 had been 1 percentage point higher, FHA would have received over $90 million in additional revenue.\nFHA took significantly longer to sell its properties than the enterprises and VA, but the differences decreased in the first half of 2012. For each entity, we analyzed the time in days that elapsed between the date of the foreclosure sale of the property to the closing date of the REO sale. Based on this analysis, FHA took on average about 340 days from the foreclosure sale to sell its REO properties based on dispositions from January 2008 through June 2012, compared with just over 200 days for the enterprises and about 270 for VA (fig. 6). This difference between FHA and the enterprises in average REO timelines persisted after controlling for the average effects of certain property characteristics such as location, value, and local real estate market conditions.\nLonger disposition times can create additional costs for items such as taxes, insurance, home owners’ association fees, maintenance costs, and other expenses (holding costs) and leave properties exposed to an increased risk of vandalism and other property damage. We found that if FHA’s average number of days from foreclosure sale to REO disposition had equaled those of the enterprises, it could have avoided around $600 million in extra holding costs for 2011 alone. Furthermore, the negative impact of vacant properties on neighborhoods and property values has been identified in prior GAO reports and other sources, underscoring the importance of minimizing the amount of time required to dispose of properties after the foreclosure sale.\nThe differences in the length of time FHA took to dispose of REO properties relative to the other entities was largely attributable to differences in one specific period—the time from the foreclosure sale until the date of the initial REO valuation. FHA and the other organizations obtain the initial value assessment once a property is ready to be listed for sale and marketed to potential buyers. The assessment is typically made after the expiration of any redemption period after the foreclosure sale and any necessary eviction action, as well as cleaning, maintenance, and repair of the property. FHA’s average for this period was 184 days, while the enterprises’ averages were 69 (enterprise 1) and 66 days (enterprise 2). As discussed previously, FHA acquires its REO properties from mortgage servicers at a later date after the foreclosure sale than the enterprises and other entities. Having multiple entities complete its postforeclosure sale activities, such as eviction, could be one reason that FHA’s average time from foreclosure to initial valuation was longer than the times for the other entities. As we stated in our 2002 report on FHA’s process for selling REO properties, the enterprises, VA, and RHS have one entity that is responsible for the custody, maintenance, and sale of foreclosed properties, but FHA divides these responsibilities among its mortgage servicers and REO contractors, all of which operate largely independently of one another. This divided approach to property custody could delay the initiation of critical steps necessary to sell REO properties quickly. As a result, in 2002 we recommended that HUD establish unified property custody as a priority for FHA and that it determine and implement the optimal method for establishing unified property custody. In their response at the time of the report, HUD said that it agreed that a unified custody approach may streamline processes and oversight, reduce holding time, and increase net return. HUD also said that the agency intended to continue research to determine the feasibility of unified custody within the framework of existing statutory requirements and explore statutory changes that would increase efficiencies in the property disposition program. However, HUD subsequently determined that it would not be advisable for the agency to establish unified property custody as an objective for the agency and it did not implement our recommendation. The analysis in this report once again highlights the need for FHA to consider whether the potential benefits from unified property custody, such as shorter REO disposition timelines and lower holding costs, outweigh any costs and challenges associated with acquiring REO properties from servicers closer to the foreclosure sale date.\nOnce the initial value assessment was completed, it took FHA an average of 168 days to sell a property, which was more comparable to the enterprises’ average timelines of 142 and 132 days. And in the first half of 2012, FHA had a shorter average time from initial valuation to completed REO sale than the enterprises, as shown in figure 7.\nSome of this difference may be due to the time taken to list a property for sale. From January 2008 through June 2012, FHA took an average of 32 days to list a property for sale after receiving the value assessment, compared to 13 days for enterprise 1 and 24 days for enterprise 2. In the first half of 2012, however, FHA’s average had fallen to 18 days. Similarly, FHA took slightly longer to sell its properties once they were listed—an average of 136 days compared to 119 for enterprise 1 and 118 for enterprise 2. But in the first half of 2012, FHA’s average time from listing to sale was shorter than the enterprises’. FHA officials indicated that its lagging performance prior to 2012 may have been due, at least in part, to limitations in their ability to adjust the level of homeownership center staff resources in response to increases in inventory that occurred in the years prior to 2012. FHA’s recent performance relative to the enterprises may also reflect continued progress in implementing its new M&M III contractor program structure that began in the middle of 2010.\nWe tested certain factors that were to some degree under FHA’s and the enterprises’ control to explore whether these factors helped to explain the differences in REO disposition performances. We included these factors (time from foreclosure sale to REO disposition, ratio of initial list price to initial valuation amount, disposition method, and buyer type) in additional regression models to determine whether their inclusion significantly changed the results. These models indicated that the length of time from the foreclosure sale to the REO sale was associated with FHA’s lower net execution rate relative to the enterprises. Specifically, when our regression models included the time from the foreclosure sale to the REO sale, FHA’s relative performance deficit in terms of the independently assessed value net execution rate was eliminated completely. Such a result indicates that the longer time FHA requires to acquire and sell properties could be an important factor in explaining differences in execution rate performance. However, an actual causal relationship is difficult to isolate and prove, as additional factors—such as deteriorated property conditions or variations in market conditions within ZIP code areas—that were not incorporated into our regressions could also explain both the performance difference and the difference in the average total disposition time between FHA and the enterprises.\nAligning with their stated preferences for retail sales, the predominant share of FHA’s and the enterprises’ REO property dispositions were through retail sales of individual properties to owner-occupants or investors (fig. 8). From January 2007 through June 2012, retail sales were about 97 percent of FHA’s dispositions, about 99 percent of enterprise 1’s, and 91 percent of enterprise 2’s. Enterprise 2 had the highest share of bulk and auction sales over the time period, representing almost 7 and 2 percent of its total dispositions, respectively. Less than 4 percent of FHA’s dispositions from January 2007 through June 2012, on average, were for programs related to its housing mission goals (e.g., discounts and donations). Dispositions through the enterprises’ programs that market properties to nonprofits and public entities (e.g., discounts and donations) accounted for less than 0.5 percent of total dispositions from January 2007 through June 2012.\nRetail sales also generated higher returns than other disposition methods. For example, FHA’s independently assessed value and initial list price execution rates (net sales proceeds as a share of property values or list prices) were both 30 percent higher for its retail sales than for its mission program dispositions for sales from January 2007 through June 2012. The enterprises, particularly enterprise 2, also generally had higher execution rates for retail sales than other disposition methods over the same period. Specifically, enterprise 2’s independently assessed value execution rate for retail sales was 52 percent higher than for its auction sales, 95 percent higher than for its bulk sales, and 62 percent higher than for its nonprofit and public entity sales. For enterprise 1, retail sales were 36 percent, 40 percent, and 1 percent higher, respectively, than sales using these methods.\nWe also examined FHA’s performance in selling REO properties to different types of buyers. Our analysis of data for all dispositions from January 2007 through June 2012 showed that FHA achieved higher returns on sales to owner-occupants than on sales to investors and other buyers, although it had a smaller share of these types of dispositions than the enterprises. FHA’s independently assessed value and initial list price net execution rates both were 25 percent higher for sales to owner- occupants than for sales to nonowner-occupant investors. The enterprises experienced smaller return premiums—ranging from 10 to 19 percent—from owner-occupant sales as measured by these sales return measures.\nFHA’s and the enterprises’ overall returns on owner-occupant sales were generally comparable. Specifically, FHA’s net execution rate based on independently assessed value was the same as enterprise 1’s and four percentage points less than enterprise 2’s. Based on initial list price, FHA’s net execution rate was 2 percentage points less than enterprise 1’s and the same as enterprise 2’s. Yet FHA sold a smaller share of its properties to owner-occupant buyers than the enterprises. Specifically, about 58 percent of FHA’s sales from January 2007 through June 2012 were to owner-occupant buyers, compared to 63 and 68 percent for the enterprises. FHA’s share of owner-occupant sales increased to about 64 percent in the first half of 2012. Figure 9 shows FHA’s and the enterprises’ percentage of REO property sales to owner-occupants, based on our analysis of data from sales of REO properties from January 2007 through June 2012.\nProperties that FHA sold to owner-occupants also had higher average sales prices and were sold more quickly than properties that were sold to other buyers. For example, the average price of FHA’s sales to owner- occupants from January 2007 through June 2012 was more than $77,000, compared to less than $50,000 for sales to nonowner- occupants. Likewise, it took FHA an average of 42 fewer days to dispose of properties sold to owner-occupants during the same time period than were needed to complete sales to investors and other buyers, as measured from the foreclosure sale date. The average sale prices of the enterprises’ owner-occupant sales were around twice the average amount of their sales to investors and other buyers, but the timelines were similar for both types of sales.\nResults from our regression models also indicated that the type of buyer was associated with FHA’s lower independently assessed value net execution rate—which gauges success in maximizing a property’s sale price. When we controlled for differences in the share of sales to owner- occupants in our regression models, FHA’s performance deficit relative to the enterprises for independently assessed value net execution rate was reduced. However, this association does not necessarily mean that this factor caused the performance difference. For example, additional factors—such as deteriorated property conditions or the existence of certain amenities that might attract owner-occupants—that were not controlled for in our regressions could also explain the differences in performance and share of owner-occupant sales between FHA and the enterprises.\nBased on our analysis of all dispositions from January 2007 through June 2012, the enterprises repaired more properties than FHA and experienced higher returns than on properties that they did not repair. Our review of data for all REO dispositions during this period showed that the enterprises spent at least $1,000 on repairs for 29 percent (enterprise 1) and 23 percent (enterprise 2) of the properties they sold. FHA, however, spent at least that amount on only about 5 percent of its properties. Based on our analysis, we found that properties repaired by the enterprises netted higher independently assessed value net execution rates, after accounting for repair costs, and also achieved higher list price net execution rates. Specifically, the enterprises’ net execution rates based on independently assessed value—including the cost of repairs— were 3 to 4 percentage points higher over the entire period for properties with at least $1,000 in repair costs than for properties with repair costs less than that amount. The difference for the net execution rate based on list price over the entire period was 3 percentage points for each of the enterprises. However, the enterprises’ properties with at least $1,000 in repair costs sold an average of 33 to 47 days more slowly than properties with lower repair costs, as measured from the initial valuation date. These differences may reflect the time required to complete repairs or a greater willingness to market the property for a longer period.\nOur analysis also showed that FHA netted higher returns on sales of REO properties that were in better condition—that is, that met minimum property standards to qualify for FHA insurance. To be eligible for an FHA-insured loan, a property must be in a condition and location free of known hazards and adverse conditions that could affect occupants’ health and safety or the structural soundness of any improvements or that could impair the use and enjoyment of the property. For example, FHA requires properties to have adequate heating, hot water, and electricity. Based on our analysis of data for all REO dispositions from January 2007 through June 2012, FHA received higher sales returns for properties that were eligible for FHA insurance (eligible) than it did for properties that were deemed ineligible because their condition did not meet these standards (ineligible). FHA’s independently assessed value net execution rate was 12 percentage points higher for eligible properties than for ineligible properties for all dispositions during this period. Furthermore, eligible properties sold faster than ineligible properties, which took an average of 88 additional days—26 percent longer—from the foreclosure sale date to sell.\nFHA staff told us that while they generally did not repair REO properties to increase the sale value, some properties are repaired to address health and safety concerns and to preserve the property’s condition. FHA officials also noted that while the agency might conduct these types of repairs when necessary, FHA does not repair properties specifically to meet its minimum property standards. FHA officials explained that FHA had a long-standing policy of not repairing properties. They said that the agency does not conduct repairs because of concerns about having to oversee contractors that perform the work and HUD’s inability to obtain volume discounts on replacement appliances or other home fixtures because of the agency’s preference for using small contractors. They also said that having to comply with HUD procurement guidelines and the Davis-Bacon Act made it more difficult for FHA to engage in construction projects to repair properties and increase sale returns. However, officials noted that in 2011 FHA had begun a small pilot program in its Atlanta homeownership center to assess the impact of repairs on properties’ marketability. This program selected favorable properties— that is, relatively high-quality properties in a few counties in the Atlanta metropolitan area—to repair and officials indicated that results had generally been positive. The pilot involved about 50 completed sales and around 80 additional properties as of September 2012, according to FHA officials. However, the officials also said that FHA had not analyzed the sale prices of the repaired properties to determine whether it was achieving higher returns than it could achieve without conducting repairs. Additionally, one FHA official expressed concern that the existing policy not to repair properties prevented FHA from capturing the additional returns that can come from selling repaired properties for higher prices. Instead, the official said that selling properties without making repairs intended to increase the sale value allowed investors to purchase them, make the repairs, and capture the additional returns.\nSimilarly, VA and RHS staff said that their agencies generally did very few repairs to REO properties and that most generally were sold without repairs intended to increase the sale value, largely because repairs did not generally result in higher returns. In some cases, VA has conducted minor (cosmetic) repairs in order to improve returns, according to VA staff. However, staff noted that in general the costs associated with making these repairs have not been fully recovered by the eventual sale proceeds. They further noted that some cosmetic repairs—such as fixing windows, painting, or installing new carpeting—may increase sale returns, but major repairs often reduced returns, at least in part because of the additional costs of repairs and holding the property longer. The VA officials told us that a few years ago they conducted a small case study of repair work done for six properties and found no positive result from doing the repairs. RHS officials also said that RHS did not make repairs for the majority of its direct loan REO properties unless repairs were needed for safety. For properties in its guaranteed loan program, RHS generally has not had lenders complete cosmetic repairs but may consider repairs to increase returns on a case-by-case basis. RHS officials also said that lenders completed repairs on guaranteed properties for safety reasons and to preserve and protect the property.\nIn contrast to FHA, VA, and RHS direct loan properties, the enterprises and the three private mortgage servicers we contacted did make case-by- case determinations on conducting cosmetic repairs to improve returns, increase the likelihood of an owner-occupant purchase, or meet neighborhood standards. Officials from these entities said that they did repairs on between about 20 to 40 percent of their REO properties, although staff from one of the private mortgage servicers indicated that they had been repairing up to 80 percent of their properties due to the lengthy foreclosure process. One of the enterprise’s officials told us that it had been repairing more REO properties as a way to improve the impact on neighborhoods as well as to earn the highest possible return. For example, the officials said that about 80 percent of repaired properties were sold to owner-occupants compared to about 50 percent of unrepaired properties. They also explained that repair decisions were based on numerous factors, including neighborhood conditions, potential buyers, and the costs of the repairs. As the length of time that an unsold property remains on the market increases, the enterprise may reassess the repair decision to see if performing repairs could add value and facilitate a sale. Officials also said that the enterprise repaired properties based on expected returns, regardless of value. The other enterprise also makes decisions on whether and to what extent to do repairs on a property-by-property basis, primarily to increase returns, according to staff. This enterprise’s staff said that they viewed repairing properties as a way to maximize the properties’ value and increase the chances of selling them to owner-occupants. They said that the enterprise also tried to ensure that properties conformed to neighborhood standards and were competitive with other properties for sale in the area. In some areas where the potential for vandalism was high, they said that the enterprise would be less likely to make repairs early in the REO process but would complete them just prior to closing.\nAmong the goals that FHA staff described for the agency’s REO disposition program were maximizing net returns to the mortgage insurance fund and increasing home ownership, but FHA may be failing to take advantage of the opportunity for increased financial returns by not repairing more properties. FHA’s policy to limit repairs only to those related to health and safety concerns may in part explain why it sells fewer properties to owner-occupants than is the case for the enterprises. Repairing properties only to address health and safety concerns would not necessarily result in a property that meets standards for FHA eligibility, and as a result FHA may be selling fewer properties to owner- occupants, many of whom may be interested in FHA loans. As we have shown, FHA’s sales of eligible properties yield higher returns than those that are not in an eligible condition. If FHA repaired ineligible REO properties to make them eligible, the agency might be able to realize higher sales returns, avoid the holding costs related to the longer disposition time frames for ineligible properties, and further its mission of increasing home ownership.", "FHA uses only one input to set list prices—an appraisal, or professional appraiser’s estimate of the property’s fair market value based on market research and analysis as of a specific date. Other entities use additional, generally accepted methods for establishing a listing price for their properties, including obtaining an estimate from a real estate broker— known as a broker’s price opinion (BPO). BPOs are estimates of the market value of a particular property prepared by a real estate broker, agent, or sales person. In addition, market values for properties can also be estimated using automated valuation models (AVMs), computerized programs that estimate property values using proprietary and public data, such as tax records and information kept by county recorders and multiple listing services, and other real estate records.\nFHA’s marketing contractors set REO property list prices at the appraisal value, although their marketing contractors also have access to BPOs. FHA’s regulations require the use of an independent appraiser when setting a price for an REO property, and FHA staff told us that properties typically are listed at the appraised value. Based on our review of property dispositions from January 2007 through June 2012, the list prices of more than 98 percent of FHA’s properties equaled the appraised market value. However, FHA field staff told us that the agency’s marketing contractors often also ordered BPOs to evaluate and review list prices and were required to obtain BPOs when requested by FHA. These additional valuations are not used to change the list price; however, FHA staff said that the listing brokers used BPOs to evaluate and support list price reductions when properties did not sell. Staff from one of FHA’s four homeownership centers noted that its marketing contractors often have properties’ listing brokers complete a BPO during the listing process to assess the accuracy of the appraisal value used in setting the list price.\nThese staff said that if the BPO value differed greatly from the appraisal value, the marketing contractor might discuss the valuation with the appraiser and request that the value be reconsidered. Although they said that they could only recall one or two instances of appraisers changing their valuations after these discussions, the staff at this office considered comparing the appraisal value to a BPO value to be an effective practice on a case-by-case basis. A review of the plans of selected marketing contractors showed that contractors were to obtain BPOs during the listing process and also when considering subsequent list price reductions. For example, some contractors’ marketing plans called for an initial BPO when the property was listed for sale and every 30 days thereafter as a way to evaluate the appraised value and appraiser performance and to analyze market data. The contracts between FHA and its marketing contractors also state that the contractor must obtain an independent BPO when directed by FHA staff.\nIn contrast, the enterprises, VA, RHS, and the three private mortgage servicers we interviewed all use at least two methods—either an appraisal and BPO or two BPOs—to estimate the market value of their REO properties as part of determining a list price. The enterprises also use an AVM to provide an additional value estimate and incorporate additional information and analysis beyond the supplemental valuation information into their list price decisions. For example, the enterprises produce list price guidance based on factors such as location, market conditions, comparable sales, REO sales trends, and input from listing agents. Following this guidance, the enterprises may set a list price above or below the estimated market value based on whether the property is located in a depreciating or appreciating market. For property dispositions from January 2007 through June 2012, one enterprise set the initial list price for less than 1 percent of its properties at the independent BPO value, and 28 percent were within 5 percent of the BPO value. The other enterprise set initial list prices at the appraised market values for fewer than 10 percent of the REO properties that it disposed of during this period, and 28 percent of initial list prices were within 5 percent of the appraised value.\nUsing multiple information sources could improve the accuracy of FHA’s market value estimates and list prices. Officials from other federal housing agencies and the enterprises said that multiple inputs increased accuracy by providing a range of independently valued assessments. Providers of appraisals and BPOs use different approaches to valuing properties and combining the two methods produces the best results, according to officials from some entities. For example, appraisals are to be conducted by trained and certified independent professionals with no interest in the outcome of the sales, but these appraisals focus on past sales and listings and may not reflect current price trends. BPOs, although conducted by brokers who may have an interest in the outcome, may reflect more knowledge of the properties and local markets. In addition, appraisers may have difficulty finding comparable property sales in some rural areas, and officials said that appraisals are more costly to obtain than BPOs. If estimates from different sources vary, entities reconcile them to produce a market value estimate that reflects a broader and more diverse base of information and analysis than an estimate from a single source. Our analysis of the enterprises’ reconciled value estimates—which incorporate all of their market value inputs such as appraisals, BPOs, and AVMs—indicated that the reconciled values generally were lower than independent value assessments reflecting a single source such as an appraisal or BPO and accordingly reflected final sale prices somewhat more accurately. For all dispositions from January 2007 through June 2012, the enterprises’ reconciled value estimates were closer to gross sale prices than their independent value assessments were by 1 and 7 percentage points overall.\nThe use of multiple valuation methods could help FHA more accurately estimate the market values of its REO properties, increasing the likelihood of selling properties more quickly and at prices that best reflect current market conditions. FHA officials indicated that BPOs and AVMs could reduce costs and increase the accuracy of FHA’s market value assessments by better reflecting recent market trends. A senior official from FHA’s single family housing program also said that using AVMs could improve FHA’s ability to identify the most appropriate marketing and disposition strategies for certain properties by providing more accurate and timely market value estimates. In early 2013, FHA’s Santa Ana homeownership center began a pilot program to evaluate the use of AVMs in validating appraised market values, according to agency officials. The officials explained that the pilot program uses a model that incorporates results from multiple AVMs to assess the independent appraisals. They said that the model has helped to identify opportunities for FHA to increase list prices based on market analysis. The officials also said that they were considering other options to establish accurate list prices and reduce risks from appraised market values that were unnecessarily low relative to market conditions. They stated that FHA was working with HUD’s Office of General Counsel (OGC) to determine if the regulatory requirement that list prices be based on an appraisal allowed them to be based on multiple sources that include an appraisal rather than solely on the appraised market value.", "FHA generally did not take into account market conditions when reducing the list prices for REO properties that do not sell. FHA’s marketing contractors determine when and by how much the list prices should be reduced. FHA’s marketing contractors create plans for each of the geographic contract areas in which they operate that describe how they intend to market and sell FHA properties and submit these plans to FHA’s homeownership centers for approval. The marketing plans include a schedule identifying time frames and percentage thresholds for reducing list prices. For example, a schedule might indicate that for properties that have been listed for sale for between 30 to 60 days, the list price should be set at 90 percent of appraised value. These schedules vary by marketing contractor and FHA homeownership center. For example, the schedules’ quantitative thresholds for the amount and timing of price reductions can differ, although most plans use one of two standard amounts. Some schedules describe a reduction of “up to” a certain percentage of the appraised value or current list price, while others specify that properties will be listed for an amount “no less than” a percentage of the appraised value or current list price. Our analysis of each of the 23 marketing plans used by FHA’s marketing contractors showed that all but one used a schedule for price reductions.\nHowever, FHA lacks a clear and consistent policy for how price reductions should be conducted, allowing each of its homeownership centers to approve marketing contractors’ plans for reducing list prices. FHA headquarters and homeownership center officials whom we interviewed differed on the extent to which price reductions required review and approval by FHA staff. Officials from FHA’s headquarters said that marketing contractors had to provide supporting documentation to justify why a price reduction was necessary and receive prior approval from homeownership center staff for all proposed reductions, even if they were following a schedule. However, officials we spoke with at each of the centers said that their marketing contractors typically did not need and did not obtain prior review and approval from FHA staff as long as they followed the approved price reduction schedules in their marketing plans. They added that marketing contractors only needed to provide documentation to FHA homeownership center staff and receive homeownership center approval for price reductions that exceed marketing plan thresholds. Further, staff from homeownership centers described to us different practices that they followed when considering price reductions in excess of marketing plan schedules. For example, the Atlanta and Denver offices allowed exceptions to the schedule for individual properties, but the Santa Ana office does not allow any price reductions in excess of the schedule, according to staff.\nAnalysis of FHA’s REO property dispositions indicated that marketing contractors generally followed the price reduction schedules systematically when reducing properties’ list prices. To assess the extent to which list price reductions on FHA’s properties followed these schedules, we analyzed list price data from FHA’s REO property dispositions from June 2011 through June 2012 and compared the price changes to the schedules in contractors’ marketing plans. Based on this analysis, we found that almost half of the properties that FHA sold over the period had at least one price reduction. Of these, about 75 percent of the initial reductions were for a scheduled amount. Most price reduction schedules based this amount on one of two specific percentages.\nOnly one of FHA’s four homeownership centers—Denver—preferred its marketing contractors to base list price reductions on evaluations of market conditions rather than on a schedule. Denver center officials said that they encouraged marketing contractors to base price reduction decisions on evaluations of individual property-level market data. The Denver center also requires its marketing contractors to provide supporting documentation for all price reductions on REO properties, and its staff review the documentation for a small sample of these reductions, according to officials. Furthermore, one contractor’s price reduction schedule for the Denver center included a threshold range for price reductions rather than a specific percentage. One marketing contractor in the region did not have a price reduction schedule in its marketing plan and instead analyzed market conditions, the appraisal, and other information to determine a new list price.\nNone of the marketing contractors in the other centers used a range for price reductions or had marketing plans that did not include a price reduction schedule. Officials from one homeownership center indicated that automated reductions were easier, quicker, and required fewer resources. Those from another center noted that following such reductions helped to find the right price in a structured fashion. In contrast, officials from the Denver center identified several disadvantages to using systematic price reductions and said that they attempted to have the schedules removed from contractors’ marketing plans at the beginning of the M&M III program. However, they explained that officials at FHA headquarters at that time strongly resisted the change. Although differences in disposition performance cannot be attributed solely to pricing practices, the Denver homeownership center performed better both in terms of sales returns and speed of sales than either the Philadelphia or Atlanta centers even when we controlled for regional differences, as we discuss later in the report. And compared to the enterprises’ performance in the states where each center operates, the Denver center’s performance compared more favorably with the enterprises’ performance than did that of the other centers, which lagged the enterprises.\nWhile homeownership centers generally reduced REO properties’ list prices with similar frequency, some differences existed in the degree to which contractors’ price reductions followed marketing plan schedules. Based on our analysis of data on all property dispositions from June 2011 through June 2012, each of the homeownership centers reduced prices for close to the overall average of 47 percent. However, the Denver center reduced prices by scheduled amounts less frequently than the other centers, consistent with its preference that contractors base price reduction decisions on evaluations of market conditions. For example, almost 90 percent of the Santa Ana center’s initial price reductions were for a scheduled amount, compared with 58 percent for the Denver center. The Atlanta and Philadelphia centers had figures of 81 percent and 76 percent, respectively.\nOther federally related housing entities with REO inventories generally based their decisions to reduce prices on evaluations of property-level information and market conditions. According to officials from the enterprises and VA documents that we reviewed, these entities used individual assessments of market conditions rather than predetermined schedules when considering the timing and amount of list price revisions. These entities also defined thresholds to identify when reductions required additional levels of approval. RHS follows a schedule for its direct loan program, but agency officials acknowledged limitations with this approach including a lack of flexibility. Market participants that we interviewed, including real estate brokers, an industry consultant, and a nonprofit organization, identified disadvantages with systematic price reductions, such as the potential for interested buyers to adjust the timing and amount of their bids in anticipation of a discounted price. The limited use of price reduction schedules may provide certain advantages by establishing clear benchmarks for determining when to evaluate a property’s market situation and which reduction amounts should require review and approval by FHA staff. However, reducing list prices based solely on a schedule may lower prices at times and by amounts that are not optimal, potentially lowering FHA’s net return. For example, a property whose list price is reduced excessively or hastily may sell at a price that is unnecessarily low based on market conditions, leading to lower returns for FHA. Also, mispriced properties may take longer to sell thereby increasing FHA’s holding costs. In contrast, a strategy of basing price reductions more comprehensively on evaluations of property-level information and market conditions would likely be more flexible and could provide more accurate prices. Further, because many marketing contractors already obtain BPOs and other assessments of market conditions and are sometimes required to do so, such an approach would likely not involve significant costs for FHA.", "FHA does not have a current and complete set of policies and procedures for its current REO disposition program as required by internal control standards. Federal internal control standards require agency management to conduct monitoring of program quality and performance through the establishment and review of performance measures and indicators. Under the new contract structure that FHA introduced in 2010, the agency intended that its staff conduct specific activities to assess whether its contractors were meeting minimum requirements under the contracts, but these reviews have not been occurring. Further, while FHA is in the process of implementing procedures to better ensure that FHA homeownership centers perform consistent oversight activities, it has not implemented a critical component of the plan—a scorecard to evaluate contractor performance against standard metrics that would allow it to compare the quality of its contractors’ activities. Our review also showed that FHA was not conducting as many or as frequent in-person property inspections as other entities that dispose of REO properties and that it was not taking steps to determine that listing brokers were located sufficiently close enough to the properties they were selling to ensure local market knowledge. Finally, although assigning work to contractors in part on the basis of their performance was intended to have been a key quality assurance mechanism under the new contract structure, FHA has encountered various obstacles to implementing this condition.", "FHA does not have a current and complete set of policies and procedures for its current REO disposition program, as required by internal control standards. These standards require formally documented policies and procedures that are clear and readily available. Such materials can be used to provide guidance to staff in the performance of their day-to-day help ensure that activities are performed consistently across an help ensure that the agency complies with federal laws and agency, communicate management’s directives, and regulations.\nThese control standards require that policies and procedures be reviewed regularly and updated when necessary. In keeping with these requirements, the enterprises have well-documented policies and procedures for their REO disposition programs. One of the enterprises has consolidated its guidance and expectations for its staff and contractors in a single, comprehensive guide that it updates as needed.\nThe other enterprise does so using multiple documents that are accessible from a single location.\nHowever, while FHA has an REO Disposition Handbook that outlines policies, procedures, and key controls for REO activities, the agency has not updated the handbook since 1994. FHA describes the Disposition Handbook’s objectives as providing comprehensive guidance that reflects program requirements and that stresses the importance of internal controls, incorporates fiscal procedures, and provides clear statements of policy for field office staff. However, the handbook does not reflect the current structure, processes, or requirements that FHA uses to dispose of properties. Nevertheless, FHA’s contracts reference it as a source of applicable guidance. FHA headquarters staff told us that the disposition handbook was outdated and did not reflect the current REO program structure, including the use of the multiple types of contractors and their responsibilities. But staff from one FHA homeownership center told us that they continued to use the handbook for policy guidance in certain areas, such as broker registration, contract extensions, rental agreements, and the closing agent monitoring checklist.\nInstead of updating its Disposition Handbook, FHA relies on mortgagee letters, housing notices, and contracts to document its current policies and procedures. FHA headquarters staff told us that they had not taken steps to update the program handbook and that they used these letters and notices to provide new and revised guidance to their staff and contractors. FHA officials also indicated that the terms of its contracts with service providers served to document the REO process and performance expectations. However, as mentioned earlier, these contracts refer to the outdated Disposition Handbook as a source of reliable guidance. Also, using multiple contracts rather than a single consolidated document as a source of policies and expectations for staff and contractors creates the potential for inconsistencies. In addition, FHA has a decentralized REO disposition process managed through four homeownership centers, underscoring the need for a single source of guidance on policies and procedures for headquarters and field staff. FHA’s contractors may have multiple contracts overseen by different centers, and in a February 2013 report, HUD’s Office of the Inspector General (OIG) found that one of FHA’s REO contractors faced different procedural requirements across the various HUD operating regions in which it was active. According to HUD OIG staff, they had also found a lack of consistent expectations for contractors across homeownership centers. For example, some centers were requiring maintenance contractors to pay any homeownership association fees and other unpaid bills before sale closings, but other centers expected marketing contractors to make these payments. In some cases, FHA faced delayed sales closings for failing to pay these fees on a timely basis.\nLack of consistent and updated guidance on policy and procedures may also make oversight of contractors less efficient and may increase the REO program’s operating costs. FHA staff in two homeownership centers told us that they spent significant amounts of time responding to policy inquiries from contractors and seeking answers to questions about policy within the agency. Staff from one of these homeownership centers indicated that more guidance on policy matters would be beneficial and said that they needed additional support for procedures. The lack of a single, up-to-date form of guidance for the REO program leaves FHA without important internal controls, has resulted in extra costs in time and resources for FHA staff, and has created a burden for some contractors who face differing requirements across regions.\nFurther, the lack of consistent guidance may be a factor in the execution rate performance of the four homeownership centers. For instance, some centers may be using practices that increase contractor performance that other centers have not tried. As discussed previously, our analysis of FHA’s property dispositions revealed differences in performance levels across its homeownership centers. For instance, aggregate sales returns based on independently assessed value and list price execution rates for all properties disposed from January 2007 through June 2012 were 13 and 12 percentage points higher for the Santa Ana and Denver centers than for the Philadelphia center and 7 percentage points higher than for the Atlanta center. Each year within the overall period showed similar patterns with the Santa Ana and Denver centers typically having higher execution rates than the Atlanta and Philadelphia centers. Even after controlling for the average effects of certain property characteristics, such as value and changes in local housing prices, Santa Ana and Denver had higher execution rates than Atlanta and Philadelphia.\nBecause regional housing market differences could affect performance of the homeownership centers even after controlling for certain property characteristics, we compared the performance of the homeownership centers with the performance of the enterprises in the states where each center operates. For all dispositions from January 2007 through June 2012, the Denver center’s aggregate independently assessed value net execution rate was comparable to that of the enterprises in the states where it was responsible for REO property dispositions. The Santa Ana and Atlanta centers lagged the enterprises by 2 to 6 percentage points for dispositions in their respective states, while the Philadelphia center lagged the enterprises by 8 and 11 percentage points (fig. 10). After controlling for the average effects of certain property characteristics, such as value, ZIP code, and changes in local housing prices, differences in the homeownership centers’ performance relative to the enterprises generally persisted. However, Santa Ana’s performance decreased while Philadelphia’s increased such that their performance differences relative to the enterprises were similar. Denver’s performance declined slightly but remained comparable to that of the enterprises and the Atlanta center’s performance improved but still lagged that of the enterprises.\nThe average number of days to complete an REO disposition from the date that FHA acquired properties also varied, from 164 for the Denver center to 212 for the Philadelphia center for all dispositions from January 2008 through June 2012. Other time frames—such as from the initial list date to the completed sale—also illustrated performance differences among the homeownership centers, as did the results for individual years. Even after controlling for the average effects of certain property characteristics, such as value and changes in local real estate prices, these differences persisted. Because regional housing market differences also could affect the time required to dispose of properties, we compared the homeownership centers’ time frame performance with that of the enterprises in the states where the centers operate. For all dispositions from January 2008 through June 2012, the Denver center’s average number of days from a property’s initial valuation to the completed REO sale was generally equivalent to that of the enterprises. The Santa Ana, Atlanta, and Philadelphia centers, in order, took longer to sell properties than did the enterprises in the states in which they operate (fig. 11). After we controlled for the average effects of certain property characteristics, such as value, ZIP code, and changes in local housing prices, the average number of days from initial valuation to completed sale for each of the homeownership centers generally exceeded that of the enterprises to an even greater extent. The Denver center exceeded the enterprises by the least number of days, while Philadelphia exceeded the enterprises by the most.\nReturns on sales of FHA’s REO properties also varied across marketing contractors, as did the time that the contractors required to complete dispositions. From 2010—when FHA implemented its new contract structure—to 2012, the difference between the contractors with the best and worst execution rates based on independently assessed value was between 12 percent and 19 percent each year. Of the seven marketing contractors, one had the best execution rate in each of the last 2 years and another had the worst rate for each of those years. Likewise, the difference between the contractors with the best and worst time frame for the number of days from acquisition to completed sale ranged from 11 percent to 40 percent each year. Again, one contractor—not the same one that had the best execution rate—had the best time frame in each of the last 2 years and another—the same one that had the worst execution rate in each of the last two years—had the worst time frame for each of the last 2 years.\nThese differences raise questions about the guidance that FHA provides to its homeownership centers and contractors tasked with managing and selling REO properties. For instance, FHA has not identified optimal practices and included them in a single consolidated handbook, although some centers could be using practices that could benefit others. According to an FHA headquarters official, staff in each homeownership center analyze their office’s performance against the overall agency goals of reducing the time that REO properties are in inventory and the time it takes to list properties for sale, steps that should decrease the costs associated with dispositions. According to this official, each center analyzes this data monthly and takes corrective action as deemed necessary, and recently the performance across homeownership centers on these timeline measures have been similar. The official also noted that homeownership center staff complete standard contractor monitoring activities monthly to identify and address potential problems with disposition performance. Although having each homeownership center evaluate its own performance is an important internal control step, it does not replace an independent performance assessment across all of FHA’s centers, nor does it address the causes of any differences in performance across centers. FHA has yet to conduct any analysis to identify differences in execution rate performance across homeownership centers and the factors that may account for such differences, although doing so could help to improve performance at all centers and reduce costs across the REO program.", "Under the new contract structure—known as M&M III—created in 2010, FHA expected that its staff and an oversight contractor would conduct a number of specific activities to monitor its REO maintenance and marketing contractors’ performance, including (1) assessing whether its contractors are meeting minimum contractual requirements, and (2) using standard metrics in a scorecard to evaluate the level of contractors’ performance. Federal internal control standards require agency management to monitor program quality and performance through the establishment and review of performance measures and indicators. Also, HUD contracting standards and guidelines require the periodic evaluation of a contractor’s performance to help ensure that services conform to the contract’s quality and quantity requirements.\nUnder the new M&M III program structure FHA homeownership center staff were expected to evaluate maintenance and marketing contractors monthly to determine whether they were meeting minimum contract standards. Staff were expected to perform this analysis using a tool—the performance requirements summary—that assessed the contractors against several minimum standards. However, staff at FHA’s four homeownership centers have not been performing the systematic reviews envisioned in HUD guidelines and the M&M III program structure to determine whether contractors are meeting minimum performance requirements. FHA staff in the four centers told us that they had not been using the planned assessment tool as intended and instead had just been reviewing the quality of contractors’ performance more informally and subjectively. FHA homeownership center staff explained that they did not complete formal performance requirements summary reports to be shared with contractors because FHA did not have a standard reporting mechanism. Instead, they informally assess contractors by examining performance trends, reports on properties exceeding suggested time frames for disposition, property inspections, and public feedback. FHA homeownership center staff indicated that the tool was not available because the methodology for producing it was to have been developed by the oversight monitor contractor, but the initial firm chosen for this role did not produce results that FHA deemed usable and FHA did not renew its contract when it expired in 2011. FHA headquarters officials also said that the original contractor oversight plans were not implemented because this contract was not renewed. By not completing these assessments, FHA has not systematically or uniformly determined whether contractors have been performing as intended. Without a comprehensive system to evaluate whether contractors are meeting minimum performance standards, FHA risks not being able to ensure the most efficient and effective disposition of its properties.\nAdditionally, FHA has failed to implement another critical component of its M&M III program structure—a uniform tool known as a performance scorecard—that was to have been used to compare the level of contractor performance with that of other contractors. FHA intended to use contractor performance scorecards to determine which contractors would continue to receive new assignments of REO properties, and how many they would receive. However, FHA officials said that they never implemented use of a contractor performance scorecard because of the terminated relationship with its oversight monitor contractor that was responsible both for developing the scorecard and for the actual monitoring. While the performance requirements summary was a tool to identify minimum contractor performance, the scorecard would allow FHA to evaluate the level of contractor performance using standard metrics and to better compare the relative quality of a contractor’s activities against that of other contractors. For example, other entities use a scorecard to rank contractors on their overall performance as well as on certain component metrics that together comprise their overall score. Component metrics used by these entities include measures such as the average time to complete certain tasks or services or the results of oversight inspections.\nMore recently, FHA has taken some steps to increase the consistency of its monitoring activities. A 2012 report by HUD’s OIG found that staff in FHA’s four homeownership centers had developed their own contractor oversight procedures that had led to inconsistent oversight of REO contractors. During the course of the OIG audit, FHA headquarters staff developed standardized plans—one for monitoring maintenance contractors and one for monitoring marketing contractors—that the homeownership centers were to begin using in June 2012. Each of these two standardized monitoring plans includes various contract monitoring tasks, such as measuring performance in key areas and reviewing disposition status reports for properties that exceed certain REO processing time frames (e.g., that have been in the REO inventory for more than a year). As part of these plans, FHA included a contractor performance scorecard that its staff had developed. However, FHA officials said that the scorecard was not implemented due in part to difficulties renewing FHA’s contract with the provider of its REO data management system. To assist in its development of a standard method of evaluating contractor performance, including scorecards, FHA officials said that a new contractor was hired in September 2012. FHA officials said that the scorecards would likely require the approval of each of the maintenance and marketing contractors, as it was not included in their original contracts as a basis for performance evaluation.\nIn contrast, the enterprises and private sector mortgage servicers that we interviewed had been using scorecards to evaluate and compare contractor performance and as a basis for assigning work to contractors. These scorecards generally tracked a variety of metrics related to quality and time frames, such as the number of days that a property was listed for sale, different measures of sales returns, and completion of maintenance and repair work. For example, one of the enterprises uses performance results from monthly scorecards and quarterly report cards to ascertain whether its contractors are meeting its standards for performance. Its officials and those from two private mortgage servicers we spoke with said that they also used scorecard results to make decisions about reducing or ending their use of poorly performing contractors. Officials from some of these entities said that they also used scorecards to compare the performance of individual contractors to the performance of all contractors in a similar geographic area. These officials also said that the contractors knew how the scorecards were being used to assess their performance and that their business relationship with the company and the volume of work they received depend on the assessments.\nIn the absence of a scorecard, FHA homeownership center staff indicated that they were taking steps to evaluate contractors individually and to provide feedback on their performance. But homeownership centers were using different processes that were inconsistent, fragmented, and informal. For example, staff at two centers said that they relied on individual measures of performance such as case reviews and summary reports of properties’ progression through different stages of the disposition process. Staff from one of these centers explained that while they had a sense of whether a contractor was doing a good job or not, they did not have the ability to formally compare performance across contractors. Staff from one center told us that some staff members had created a scorecard-like tool to evaluate the performance of contractors for which they had oversight responsibilities, but had been told by HUD contracting officials that they could not share the results with the contractors until FHA introduced a standard scorecard nationwide. However, staff from a different office said that they had shared certain individual contractor performance information with their contractors.\nWithout a functioning, standardized scorecard, FHA does not have a uniform tool for evaluating the overall level of its contractors’ performance and cannot effectively make distinctions about relative performance differences across contractors or tell contractors how their performance compares to their peers. This shortcoming also limits FHA’s ability to identify and address underperforming contractors and creates the risk that FHA cannot ensure the most efficient and effective disposition of its properties.", "Our review also showed that FHA was not conducting certain contractor oversight activities performed by some other entities that dispose of REO properties. Specifically, FHA was not conducting as many or as frequent in-person property inspections as other entities and was not taking steps to ensure that listing brokers were close enough to the REO properties they were chosen to market to know local market conditions and efficiently access the properties. One of the ways that FHA’s oversight activities varied from other federally related housing entities and private mortgage servicers was the extent to which it conducts in-person property inspections. HUD’s Contract Monitoring Guide states that inspections are the best way to determine the quality of a contractor’s performance. FHA and other entities typically have their contractors visit properties regularly to inspect the properties’ condition and to perform routine maintenance such as lawn cutting. However, they also have their own staff or third- party contractors that visit properties for oversight purposes, including ensuring that contractors are performing their required duties and maintaining properties to expected standards. According to staff from one of FHA’s homeownership centers, performing in-person property inspections is critical because they allow FHA staff to review contractor performance, identify problems needing resolution, and conduct quality assurance checks, especially in the absence of a uniform scorecard. FHA’s standard monitoring plans include property site visits to help ensure that maintenance contractors are conducting their own routine inspections and maintaining the condition of assigned properties in accordance with their contractual requirements. They also are meant to help ensure that marketing contractors are following required standards and procedures when conducting sales activities. FHA’s plans call for in- person inspection of 2 percent of properties three times per year. However, FHA homeownership center staff had varying interpretations of FHA headquarters’ expectations for the amount and timing of property inspections. For example, staff in some centers told us that they aimed to inspect 2 percent of properties annually, while staff in another center said they targeted 6 percent of properties annually. The timing of the inspections also varied across the homeownership centers from a certain percentage each month to a certain percentage in three of the four quarters of the fiscal year.\nAccording to FHA officials, a lack of adequate travel funds and staff capacity has created challenges for homeownership centers in conducting in-person property inspections. Staff at some centers said that a lack of available funds could delay some inspections until the end of the fiscal year, when funds might become available. Others noted that in the past they had inspected more properties within proximity to the homeownership center when travel funds were not available. However, waiting to conduct inspections until the end of the fiscal year and restricting them to a limited geographic area limits their effectiveness, as the inspections may not target properties in certain locations or contractors equally. Further, contractors may become aware that they are unlikely to have properties inspected early in the year or in certain locations.\nTo supplement the in-person inspections, FHA attempts to use other means of monitoring whether its contractors are complying with its expectations, but the effectiveness of these efforts is also uncertain. For example, FHA homeownership center staff may conduct reviews of the evidence, such as photographs of the property, that contractors submit to document that they have performed routine inspections and other activities. However, in 2012 HUD OIG audits found that contractors could upload pictures that do not accurately depict a property’s condition or incomplete reports that limited the effectiveness of these reviews. To supplement its own staffs’ monitoring efforts, FHA’s contractors that are responsible for marketing REO properties also complete some inspections as part of their quality control plans. Additionally, property listing agents employed by the marketing contractors inspect the work of maintenance contractors for all properties that are listed and sold. However, the effectiveness of these reviews may be limited because FHA staff told us that the property listing agents have often been reluctant to submit negative reports on maintenance contractors’ performance because of fear of damaging working relationships with these other contractors.\nThe number of in-person inspections that FHA completes may not be sufficiently effective to ensure that FHA’s contractors are conducting their activities in compliance with contractual requirements. In multiple reports issued between March 2012 and February 2013, HUD’s OIG found that contractors responsible for maintaining and marketing FHA’s REO properties were often not performing the required work at all or were not performing to the expected level of quality. For example, a September 2012 HUD OIG report examined a Las Vegas, Nevada, FHA contractor and found that it did not secure or properly maintain 40 percent of the 96 properties that the OIG examined. Another report from September 2012 reviewed 125 properties nationwide and determined that FHA’s contractors did not properly maintain 75 of them, as evidenced by unmaintained yards, unclean conditions, lack of security, and water leaks. The review also found that for 100 of the 125 properties, FHA’s maintenance contractors did not conduct routine inspections in a timely manner. Furthermore, this OIG audit revealed that FHA’s maintenance contractors nationwide were paid for inspections for which they had not completed the required documentation and may not have conducted. One of FHA’s homeownership centers developed a report to identify these missing routine inspections and, in coordination with HUD’s procurement office, requested reimbursement of fees paid to five of its contractors totaling more than $1.3 million for more than 10,000 inspections from June 2011 through February 2012.\nIn contrast to the amount of in-person inspections done by FHA, other federally related housing entities and private mortgage servicers we spoke with indicated that they conducted in-person inspections of much larger percentages of their REO properties and conducted them more frequently. For example, staff from one of the enterprises told us that it performed in-person oversight inspections of 25 to 30 percent of its REO properties monthly using an independent inspection firm. The other enterprise said that it completed in-person inspections of around 35 percent of properties monthly, using both an independent inspection firm and its own staff. VA officials noted that it conducted in-person inspections on at least 10 to 20 percent of its REO properties annually and in fiscal year 2012 the agency inspected over 40 percent. In addition, staff from one of the private mortgage servicers we interviewed told us that its own field agents inspected about 40 percent of its properties, while two other private mortgage servicers said that they inspected about 7 and 10 to 12 percent of their properties on a monthly basis throughout the year.\nFederal internal control standards require that agency management conduct effective monitoring to assess program quality and performance over time and work to address any identified deficiencies. Other entities, whether federally related or private, found that frequent in-person property inspections were an effective way to better ensure that contractors were performing required activities and to assess the quality of their work. As a result of not conducting in-person inspections of a greater share of its REO properties and not inspecting them more frequently, FHA may not discover potential maintenance and disposition problems, potentially resulting in poorly maintained properties that sell for lower prices.\nIn addition, FHA does not have the procedures that the enterprises have to ensure that properties are assigned to listing brokers located close enough to the properties to have sufficient knowledge of the local market. Using listing brokers that are close to and familiar with properties and the surrounding communities improves the chances that the properties will be shown as often as possible and will be well maintained. FHA’s contracts require its marketing contractors to use local real estate professionals whose primary place of business is within reasonable proximity of the listed property. However, FHA does not have either a definition of “reasonable proximity” or formal guidelines or procedures for determining whether properties are assigned to local listing brokers, according to officials. FHA headquarters officials said that they had an informal goal of using brokers located within 20 miles of a listed property, but noted that consistently defining what constitutes reasonable proximity could be difficult. For example, distances that would be considered reasonable in an urban area might not be realistic in a rural location. FHA homeownership center staff said that headquarters had not yet implemented clear criteria or controls for the marketing contractors that assigned properties to brokers.\nIn the absence of clear criteria from FHA headquarters, homeownership centers often made their own determinations on using brokers within reasonable proximity to properties. For instance, FHA staff at one center told us that after discovering as part of unrelated inspections that listing brokers for some of its properties were not local, the center and its marketing contractors had decided that “local” generally meant within 50 miles, with exceptions for sparsely populated areas. Centers also varied in their reviews of listing brokers’ proximity to their listed properties. One center noted that such reviews were part of annual inspections of marketing contractors. However, officials at another center said that they did not believe the proximity of listing brokers was a major concern and did not monitor it closely and instead placed more emphasis on overall performance. Officials from one listing broker that has sold properties for two of FHA’s marketing contractors said that there had been many instances of listed properties being more than 50 miles from the listing broker’s office. They also noted that many of these more-distant listing brokers were not members of the listing service that includes properties for those local markets, which resulted in a lack of proper exposure for FHA’s properties. Without clear guidance from FHA on the use and oversight of listing brokers, homeownership centers may continue to make their own determinations on what constitutes “reasonable proximity” to listed properties and may not be able to ensure that properties are being effectively marketed by knowledgeable agents.\nIn contrast, the enterprises have established guidelines for the selection of local listing brokers and conduct monitoring to ensure brokers’ proximity to the listed properties. For example, one of the enterprise’s REO sales guidelines states that properties should be no further than 25 miles from the listing broker, although this threshold is used more often for rural areas, according to officials. In urban areas the goal is to assign a broker as close as 5 miles to the property. The officials also told us that the enterprise used reports to monitor the distances between listing brokers and their assigned properties and addressed situations involving longer distances on a case-by-case basis. Officials from the other enterprise emphasized the importance of using listing brokers located close to listed properties because of local brokers’ market knowledge. This enterprise has a goal for broker proximity of about 15 to 20 miles, according to these officials, but the distances can vary in rural areas. The officials also told us that the enterprise had an Internet-based REO management system that assigned properties to listing brokers by geographic area. The enterprise’s staff define the geographic areas within which its listing brokers can receive property assignments when it adds them as approved service providers and conduct reviews of listing brokers’ office locations.", "As part of the new M&M III program structure it introduced in 2010, FHA intended to implement a key quality control—assigning contractors work according to the quality of their performance—but has encountered obstacles to implementing this mechanism. The Federal Acquisition Regulation (FAR) stipulates a strong preference for using multiple contractors for the types of contracts that FHA has used to manage and dispose of REO properties. With respect to the types of contracts that FHA has used to manage and dispose of REO properties, the FAR provides that the agency must provide each contractor with a fair opportunity to be considered for the work. FHA designed its M&M III contract structure to include 10 geographic areas with multiple maintenance and marketing contractors operating within most areas. During the first year of the M&M III contracts, FHA assigned equal percentages of REO properties to each contractor in a contract area to satisfy the minimum guarantee under the contract. After the first year, FHA intended to use performance evaluations to help determine the shares of its REO properties within a contract area that it would assign to each of the multiple contractors operating in that area, with the high- performing contractors receiving the largest allocations of properties.\nFHA planned to divide property assignments within the overall contract on a percentage allocation basis, so that all individual contractors in an area would receive a minimum share of the work as long as the contractors met minimum performance requirements.\nHowever, FHA has been unable to implement this system as intended for two reasons. First, until it implements the planned scorecards or other uniform evaluation method, FHA has no way to systematically generate the information needed to assign work based on performance. Second, after implementing the new M&M III program structure, FHA encountered challenges in ensuring that its performance-based allocation contract structure complied with the FAR. In late 2011, HUD’s OGC advised FHA that the process of allocating a minimum share of property assignments to each of its contractors was not compliant with the FAR rules requiring that each contractor have a fair opportunity to compete and win all the work for which it is competing. FHA officials said that the performance- based competitions that OGC determined would be compliant with federal acquisition rules, with contractors winning either all or none of the work assignments, would jeopardize the financial viability of some contractors. These officials explained that contractors have high overhead costs and could go out of business if they did not receive at least some property assignments for more than a few weeks.\nAs the result of these obstacles to implementing performance-based allocations as planned, FHA has continued to assign properties to marketing contractors based on equal allocations in a contract area. It also assigns work to maintenance contractors solely on the basis of the cost. FHA staff told us that they could not identify an acceptable alternative to assigning work among multiple contractors that was also compliant with federal acquisition rules. Instead, FHA plans to award new contracts that give all property assignments in a contract area to a single contractor for at least a year. FHA staff said that if the contractor performed poorly or was unable to provide the necessary services, the property assignments could be shifted to a contractor in a neighboring area by redefining the contract area. However, the practical difficulties and challenges involved in redefining contract areas and reassigning all properties among contractors could make implementing this option difficult. Further, it is not clear that FHA has fully explored other options that are compliant with federal acquisition rules.\nIn terms of performance incentives, FHA officials said that its discretion in determining whether to renew annual contracts was the most important. However, this particular incentive may be less powerful than the frequent reallocation of work envisioned under the M&M III contract structure. According to officials, FHA has never failed to renew an annual contract for the 50-plus maintenance and marketing contracts that have been part of the current contract structure since 2010. FHA staff told us that under the maintenance and marketing contracts’ terms, they could reassign properties to another contractor or suspend property assignments to a poorly performing contractor, but these options have rarely been used. According to agency officials, since 2010 FHA has suspended a contractor’s assignments only once for a period of 1 month and has not yet reassigned properties from one contractor to another on the basis of poor performance. FHA officials said that they had not defined standard criteria for the number of instances of deficient performance that would be required before these actions were taken. Rather, FHA staff perform a risk assessment, and the contractor is given an opportunity to address any deficiencies.\nFHA has tried to create other incentives for superior performance. It pays marketing contractors a percentage of a property’s sale price at the time of sale based on the disposition price and time frame. These payments are higher for properties with sale prices above a set percentage of the initial listing price and within a certain time frame. Over the second half of 2012, almost one-third of FHA’s sales met the thresholds for the higher fee amount, according to FHA data. However, FHA procurement officials told us that the bonus fee structure was not a normal contract incentive and that FHA also was considering including more typical performance incentives and disincentives in contracts. They explained that the only specific disincentive or performance penalty in the current contracts is FHA’s ability to assess late fees if contractors delay sale closings. Without performance-based work assignments, however, FHA’s ability to motivate contractor performance is limited because it has few other incentives and disincentives and uses them infrequently. As a result, FHA cannot ensure that its maintenance and marketing contractors are performing at the highest possible levels.\nIn contrast, the enterprises and private market servicers we interviewed use performance-based work assignments to align contractor incentives and promote high performance. None of these entities are required to follow federal acquisition regulations. Officials from one of the enterprises explained that if one of its contractors consistently performed better than others based on scorecard assessments, the high-performing contractor would receive more work assignments, with the amount dependent on capacity considerations. This system applies to its national marketing contactors, listing brokers, maintenance contractors, and other service providers. The other enterprise also considers performance when assigning properties to contractors such as listing brokers, according to its officials. Officials from two private mortgage servicers we interviewed told us that they assigned additional work to contractors with better performance on their scorecard indicators and that poor contractor performance could lead to fewer work assignments or termination.", "The housing crisis has increased the number of REO properties in FHA’s inventory. The agency’s ability to effectively dispose of these properties in ways that maximize sales proceeds and minimize holding time could help increase the government’s financial returns. We found that FHA’s disposition performance and the time required to complete sales of REO properties lagged the performance of the government-sponsored enterprises. Our analysis of FHA’s REO activities revealed that the agency was not employing some of the disposition practices that the enterprises and other housing entities used. These practices could be a factor in other entities’ ability to dispose of REO properties for higher returns and with less holding time and include: using multiple means of assessing property values to better assure that REO properties are fairly valued and thus more likely to sell faster and at the highest price, making improvements to properties with characteristics that are more likely to result in a higher sales price if repaired, and basing price reductions for properties that do not sell at the original list price on market conditions rather than on a predetermined schedule.\nIf FHA could perform as well as the enterprises in disposing of REO property, it could potentially generate hundreds of millions of dollars in additional sales proceeds and reduce maintenance and other holding costs from its future REO activities.\nFederal internal control standards call for agencies to have comprehensive policies and means to help ensure that program objectives are being met and that expected activities are being completed. However, FHA has not taken the actions necessary to ensure that its controls and oversight activities are effective in several areas. Specifically,\nFHA lacks comprehensive guidance for its REO program and a process for updating this guidance as policies and procedures change. Having such guidance could better ensure consistent practices across homeownership center staff and uniform oversight of the numerous contractors that carry out maintenance and marketing activities. Further, having a robust revision process would allow FHA to incorporate best practices that it identifies by analyzing differences in performance across homeownership centers, something it currently does not do.\nFHA has fully implemented neither mechanisms for evaluating contractors’ activities against minimum expected standards nor a scorecard that would allow staff to compare contractor performance to identify high- and low-performing contractors. Addressing this issue is critical to better ensuring contractors are performing as expected and meeting program goals.\nGiven the FHA Inspector General’s findings that REO properties were not always being well-maintained as required by the service providers’ contracts, the number of in-person inspections currently being undertaken by FHA does not appear to be effective.\nFHA lacks controls to help ensure that the brokers marketing its properties meet FHA contractual requirements that brokers be in reasonable proximity to their properties. As a result, FHA risks having brokers that do not have the expected level of local market knowledge and cannot conduct effective marketing activities because they are too far away.\nFHA contracts generally lack incentives and disincentives that would encourage performing high-quality work consistent with other entities’ practices. Implementing a more frequent performance-based assessment and assigning work on the basis of performance could improve returns on REO properties and reduce property holding times.\nCollectively addressing these issues could improve FHA’s oversight of its contractors by, for example, ensuring that their properties are inspected regularly and that they face consequences for not meeting program requirements.", "To increase the potential for higher financial returns from FHA’s disposition of REO properties, the Secretary, HUD, should direct the Commissioner, FHA, to identify and implement changes in current practices or requirements that could improve REO disposition outcomes, including requiring the use of multiple estimates of market value when determining initial list prices, considering whether conducting repairs could increase the amount of net proceeds from specific property sales, and ensuring that the timing and amount of price reductions for its listed properties are made on the basis of an evaluation of market conditions rather than on standardized schedules.\nTo improve its oversight of the REO disposition program, the Secretary, HUD, should direct the Commissioner, FHA, to update its REO program disposition handbook, or equivalent document, to include a current and consolidated set of policies and procedures for managing and disposing of FHA’s REO properties; establish a process for analyzing differences in disposition performance and practices across homeownership centers that can be used to periodically update this handbook or equivalent documentation to reflect current policy and procedures; implement a mechanism for systematically reviewing contractors’ compliance with minimum performance requirements through the use of standard metrics; ensure the completion and implementation of the scorecard currently being developed, including ensuring that performance metrics included in the scorecard are consistent with those used to review contractors’ compliance with minimum performance requirements; determine more effective ways, including increased use of in-person inspections, to better ensure that contractors comply with expected requirements; implement controls to ensure that listing brokers are located within close enough proximity to their listed properties to effectively market REO properties; and take steps to develop a legally acceptable means of assigning work to REO contractors that uses more frequent assessments of past performance.", "We provided a draft of this report to HUD, FHFA, Fannie Mae, Freddie Mac, VA, and RHS for their review and comment. HUD provided written comments, which are reprinted in appendix II. Fannie Mae, Freddie Mac, and VA provided technical comments on the draft report, which we incorporated as appropriate. In a letter from the Assistant Secretary for Housing – Federal Housing Commissioner, HUD agreed with our recommendations. HUD also identified actions that it has taken or planned to take in response to our recommendations. For example, HUD wrote that FHA plans to update its REO disposition handbook. In addition, in response to our recommendation that FHA establish a process for analyzing differences in disposition performance and practices across homeownership centers that can be used to periodically update the handbook, HUD pointed to the monitoring plan that FHA has implemented for its contractors that will analyze disposition performance and practices across homeownership centers. HUD also wrote that any identified best practices will be noted, discussed, and communicated to homeownership centers and contractors. It will be important for FHA to also periodically update the handbook to reflect these changes in practices, as we recommended. HUD acknowledged that budgetary constraints affect implementation of contractor performance scorecards—critical elements in three of our recommendations—and limit its ability to make increased use of in-person property inspections that we suggested could be used to better ensure that contractors comply with expected requirements. While recognizing that FHA’s scope for action may be limited by available budgetary resources, we emphasize the importance of considering not just the costs to undertake these steps but also the potential savings and improved disposition outcomes that would be realized from enhanced contractor oversight.\nIn response to our recommendation to develop a legally acceptable means of assigning work to REO contractors that uses more frequent assessments of past performance, HUD said that FHA has taken steps in its new REO contracts to provide incentives to high-performing contractors and disincentives to lower-performing contractors by transitioning inventory among them based on performance and price. When implementing such a contract structure, we encourage FHA to consider inventory transitions on a frequent basis, such as quarterly, to align with the frequency of the scorecard performance assessments.\nIn technical comments, the Director of Regulatory Affairs of Fannie Mae noted that the REO execution rate performance information that our report presents was inconsistent with publicly disclosed loss severity rates published by FHA. Although loss severity rates—which measure loss on a defaulted loan as a percentage of the unpaid principal balance—can be presented when discussing REO performance, we did not include such analysis in our report because this measure reflects factors beyond the control of the REO programs of these entities. For example, loss severity rates can be affected by the original loan-to-value ratio, loan amortization schedule, origination date, changes in market values, or the existence of mortgage insurance. We therefore do not use loss severity rates to assess REO performance. Fannie Mae also noted that the performance execution information that uses independent valuations may not be comparable across entities because not all REO sellers use the same valuation methodology. Our report notes that the entities use different methods for obtaining an independent valuation— including an independent appraisal for FHA and one of the enterprises and an independent BPO for the other enterprise—and that any systematic differences between the appraisals and BPOs could affect the performance results. We also calculated execution rate results using list prices and these calculations showed similar results.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, HUD, FHFA, Fannie Mae, Freddie Mac, VA, and RHS. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your offices have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "Our objectives were to examine (1) real estate-owned (REO) property disposition practices used by the Housing and Urban Development Department’s (HUD) Federal Housing Administration (FHA) and other federally related housing entities and how FHA’s effectiveness compares to that of these entities, and (2) how FHA oversees its REO disposition program.\nTo examine the disposition practices, we reviewed REO program regulations, requirements, and policies to determine the goals and strategies for these activities of FHA and other federally related housing entities, including the Department of Veterans Affairs (VA), the Department of Agriculture’s Rural Housing Service (RHS), and two housing government-sponsored enterprises (the enterprises)—Fannie Mae and Freddie Mac. We interviewed HUD and FHA staff in the agency’s Washington, D.C., headquarters and staff in the four regional homeownership centers that oversee REO activities in their areas. We also interviewed staff from other federally related housing entities about the goals and strategies of their REO activities. We also discussed REO goals and strategies with staff from three large private-sector mortgage servicers that also acquire and dispose of REO properties. We selected these servicers because they were among the largest servicers of home mortgages. To obtain additional information on REO activities, we also interviewed staff from the National Association of Realtors, two local realtors identified as knowledgeable about REO properties by that association, and community groups or government housing entities in various cities with large REO concentrations. We also interviewed the National Community Stabilization Trust, which administers a database of REO properties for purchase by community groups, and an appraisal group responsible for promoting appraisal standards.\nTo assess the effectiveness of FHA’s REO dispositions, we obtained and analyzed REO disposition data from FHA and the other federally related housing entities, including all REO properties disposed of from January 1, 2007, through June 30, 2012, as well as properties in inventory at the end of the period. Specifically, we obtained data from the data management systems of FHA, the enterprises, VA, and RHS. We did not include RHS in our analysis of REO property disposition performance because it only obtains and manages REO properties through its direct loan program and these are very small in number compared to the other entities. For example, in the period of analysis, RHS’s direct loan property dispositions represented less than 1 percent of FHA’s REO dispositions. RHS also did not have property-level data available for many of the data elements that we included in our analyses. Table 1 shows the number of dispositions for each entity that occurred during this time period based on the data that we received and analyzed. For RHS, we used data on its direct loan properties because it only acquires and disposes of REO properties related to its direct loans and does not do so for properties from its guaranteed loan program.\nWe assessed the reliability of these data by reviewing agency data documentation, interviewing officials, and testing for missing values, outliers, and obvious errors. VA and RHS did not have property-level data available that were necessary for some of the calculations in this report. In particular, VA and RHS did not have data available on initial REO valuation dates, type of sales method, and type of buyer. Additionally, VA did not have data on initial REO appraisal amounts and RHS did not have data on net sales proceeds. We excluded VA and RHS from calculations that used these data elements and noted these instances as applicable. We addressed missing data by excluding those properties with missing data elements from analyses that relied on those elements as necessary. Finally, in analyses using the net sales proceeds data element, we excluded properties with net sales proceeds of $0, as this is an unlikely value for that element and could indicate missing data. We excluded additional properties from our regression models, as described below. In no instance did we exclude more than 13 percent of all properties. After making the necessary qualifications, corrections, and related assumptions, we believe that the data were reliable for our purposes as described in this appendix.\nTo determine the performance in maximizing the sales price of REO dispositions by the entities, FHA homeownership centers, and FHA asset managers, we calculated various execution rates. These rates included the ratio of REO dispositions’ gross sales prices (for gross execution rates) or net sales proceeds (for net execution rates) to one of several estimated property valuations. The measures of property values that we used included (1) the sum of an independent assessment of a property’s value—an independent appraisal or BPO conducted by a third party if the entity did not use appraisals—plus any repair costs for that property, and (2) the initial list price for the REO property. We calculated aggregate execution rates for each organization by dividing the sum of their property dispositions’ net sales proceeds by the sum of the properties’ independently assessed values or initial list prices. We used aggregate execution rates because, by showing the net return on the total estimated value of properties in an entity’s portfolio, the aggregate rates better reflect the entity’s overall performance than an average of the execution rates of individual properties. The aggregate rate calculates execution rate performance on a value-weighted basis, with higher value properties having a greater impact on the aggregate rate than low-value properties. An average of individual properties’ execution rates gives equal weight to properties of different values despite their unequal effects on total net returns.\nTo assess the timeliness of the entities’ REO property dispositions, we calculated the average number of days from the foreclosure sale to the day on which they sold or otherwise disposed of the property, as well as the number of days they took to move properties between various points within the REO process.\nTo account for the possibility that differences in performance results between FHA and the enterprises might be due to differences in the characteristics of the properties that each entity acquired and disposed of in their REO programs, we used the data on the REO property dispositions from January 1, 2007, through June 30, 2012, to create various regression models. The general regression specification for these models was: y is the performance measure being assessed, such as net execution as a percent of independently assessed value or time from foreclosure to REO sale closing; organization is an indicator variable for the entity holding the property;\nX is a series of control variables related to the property and represents the relationship between variable j and the outcome variable, independent of the other variables in the model; zip is an indicator variable for the property’s ZIP code; valuation indicates the range of the property’s independently assessed value; α, β, and γ are the parameters of interest; and e represents an error term.\nWe interacted the ZIP code and valuation category variables to allow the average effect of the valuation category on the performance measure to vary between ZIP codes. The parameters of interest were the coefficients for each organization.\nWe used the following additional property characteristics as control variables in the regressions: number of bedrooms (as a categorical variable), number of units for the property (as a categorical variable), year the property was built (as a categorical variable), the change in the FHFA House Price Index for the property’s ZIP code from the month of the initial valuation to the month one quarter after the initial valuation, and the change in the FHFA House Price Index for the property’s ZIP code from the month of the initial valuation to one month after the initial valuation month.\nIn addition, for regressions with an execution rate as the outcome variable, we included the month and year of REO acquisition as a categorical control variable. For regressions with the number of days from the foreclosure sale to the REO disposition as the outcome variable, we included the number of weeks from the scheduled date of the last completed payment to the date of the foreclosure sale as a categorical control variable.\nFor the regression models with an execution rate as the outcome variable, we weighted every property by the amount of the property’s independently assessed value. This was done so that the percentage point differences resulting from the regressions would be similar to overall aggregate differences for models where only the entity dummies were included. Weighting by property value also reduced the effect of heteroskedasticity that was likely present over the range of valuations.\nTo reduce the effect of outliers on the regression estimates, we excluded certain property records that had irregular values for a few data elements. For the regression models with an execution rate based on either the independently assessed value or reconciled value as the outcome variable, we excluded properties with independently assessed value net execution rates greater than 300 percent or less than negative 300 percent. Such large or small execution rates suggest a highly inaccurate valuation or otherwise irregular data such as a very low property value or sales price. For models with execution rate based on initial REO list price as the outcome variable, we excluded properties with the highest and lowest 1 percent of values for the ratio of initial REO list price to independently assessed value for all properties. In total, we excluded fewer than 12 percent of all properties in our data for each of the net execution models.\nDue to these exclusions, the population of properties used in the net execution regression models was smaller than the full population that was used when calculating the aggregate results. As a result, to estimate the percentage point difference in net execution rates between FHA and the enterprises for the full population, we multiplied the percentage point differences from the aggregate execution rates by the ratio of the percentage point differences resulting from the full regression model to the percentage point differences resulting from a regression model with only entity variables.\nFor the models where the time from the foreclosure sale to the completed REO property disposition was the performance measure, we excluded properties that had a negative value for the number of days from the foreclosure sale to the completed REO property disposition. In total, we excluded less than 13 percent of all properties for the time frame models.\nWe took various steps to test these regression models for robustness.\nWe used various thresholds for the exclusion of property records from the net execution models. For example, we tested results when the models excluded properties with independently assessed values above and below certain amounts rather than properties with execution rates above and below certain amounts.\nWe used various specifications for certain property and market characteristics. For example, we tested models where the categorical variable for independently assessed value was not interacted with ZIP code, where it was specified as a log, and where it was specified as a polynomial. We also tested models where the change in the FHFA House Price Index in each ZIP code was specified as the change in the index in the year prior to the disposition date and in the month prior to that date.\nWe included additional property characteristics as a control variable in the models or excluded some of the property characteristics. For example, we tested models where a property’s occupancy status at REO acquisition was included as a control variable. This variable ultimately was not included in our final models because a significant percentage of FHA’s property dispositions were missing data for this variable.\nThese models showed qualitatively similar results for the reduction in the performance difference between FHA and the enterprises relative to regressions with only entity variables. However, the final model for net execution rates had one of the largest reductions in the performance difference between FHA and the enterprises. This appeared to be due to the interaction of properties’ independently assessed values and ZIP codes.\nTo identify factors that could help explain differences in FHA’s REO performance relative to that of the enterprises, we also created models that included various factors (time from foreclosure sale to REO disposition, ratio of initial list price to initial valuation amount, disposition method, and buyer type) at least partially under the entities’ control and examined how their inclusion affected estimates of the performance difference between the entities as measured by net execution rates.\nTo compare the performance of FHA homeownership centers and contractors, we computed execution rates and average time frames for the properties they managed. When examining time frames, we focused on the time frame from a property’s initial valuation to completion of the disposition because initial valuation was the date available from both FHA and the enterprises that most closely reflected when FHA’s homeownership centers begin managing and overseeing the disposition of REO properties. In addition, when comparing homeownership center performance, we developed regression models to account for the possibility that differences in performance results between the homeownership centers might be due to differences in the characteristics of the properties that each center disposed of in their REO programs. To further control for regional differences that our nationwide regression models may not have been able to capture, we compared the performance of the homeownership centers to the performance of the enterprises in the states where each center operates. For this analysis, we also conducted separate regressions for each homeownership center region to account for differences in the characteristics of properties between homeownership centers and the enterprises in those states. For the regression models used to compare the performance of the homeownership centers, we controlled for the same property and housing market characteristics that we included in our regression models comparing FHA’s overall performance to that of the enterprises. However, we did not include ZIP code in the models directly comparing homeownership center performance because the homeownership centers operate in regions with mutually exclusive ZIP codes.\nTo examine the price reduction strategies used by FHA, we also obtained additional data on all listing prices for properties that FHA disposed of from June 30, 2011, through June 30, 2012. To determine if price reductions occurred at a scheduled amount, we compared the price reductions reflected by these data to the price reduction schedules, if any, listed in FHA contractors’ marketing plans. One contractor did not have a price reduction schedule in its marketing plan so we considered price reductions for properties managed by this contractor to be according to schedule if they occurred at one of the two standard reduction percentages that appeared in most other contractors’ marketing plans. In addition, some marketing plans for one contractor specified a range for the price reduction amount. In these cases, we considered a price change to be for a scheduled amount if the price was reduced by one of the two standard reduction percentages that appeared in most contractors’ marketing plans. Finally, for marketing plans that specified that price changes could be up to a certain amount, we considered a price change to be for a scheduled amount only if the price change was for the maximum amount, since the goal of this analysis was determine how often price changes were for particular, predictable, amounts.\nTo determine how the entities oversee their REO programs, including the contractors they use to perform various REO-related activities, we interviewed staff from FHA and the housing entities. We also reviewed program regulations, requirements, and policies related to oversight. We also discussed REO oversight activities with the staff from the three private sector mortgage servicers.", "", "", "", "In addition to the individual named above, Cody Goebel, Assistant Director; Kevin Averyt; Stephen Brown; Emily Chalmers; William R. Chatlos; Robin Ghertner; DuEwa Kamara; John Karikari; Jon Menaster; Alise Nacson; Jessica Sandler; Jena Sinkfield; Jack Wang; William T. Woods; and Ethan Wozniak made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "", "h0_title h1_title", "h0_full h1_full", "h0_full h1_full", "", "h1_full", "h2_title", "h2_full", "", "h2_full", "h2_full", "h0_full h3_full h2_full", "", "", "h3_full h1_full", "", "", "", "" ] }

{ "question": [ "How did FHA's performance in selling REO fare?", "How specifically was FHA's performance less successful than government-sponsored enterprises?", "After controlling for differences, how specifically was FHA's performance less successful than government-sponsored enterprises?", "How did the time of foreclosure between enterprises and FHA differ?", "Why might FHA have taken more time to foreclose?", "What does FHA not use that may have resulted in decreased performance?", "What does FHA do instead of these actions?", "What did GAO find if FHA's execution rate and disposition time frame had equaled those of the enterprises?", "What is the problem with FHA's oversight of contractors?", "Why does FHA need to update its REO disposition handbook?", "What is the result of not having an updated handbook?", "What has prevented FHA from assigning work according to contractors' performance?", "What steps has FHA not taken regarding listing brokers?", "Why is FHA faced with disposing high volume of REO properties?", "What did GAO examine to assess relative effectiveness of FHA's REO dispositions?", "What did GAO analyze to get this information?", "What other information did GAO collect?" ], "summary": [ "The Federal Housing Administration's (FHA) performance in selling its foreclosed properties--known as real estate-owned (REO) properties--lagged the performance of both of the government-sponsored enterprises (enterprises), Fannie Mae and Freddie Mac.", "Its combined 2007-2012 returns, measured by the net execution rate (net sales proceeds divided by independently assessed property values) were about 4 to 6 percentage points below the enterprises' returns.", "After controlling for certain differences in their properties' characteristics (e.g., value, location, and local market conditions), differences in combined returns between FHA and the enterprises persisted at an estimated 2 to 5 percentage points.", "Further, while the enterprises took an average of around 200 days after foreclosure to dispose of REO properties, FHA took about 340 days--more than 60 percent longer . A similar pattern persisted even after controlling for certain property differences.", "For FHA, unlike the others, a significant part of the time between the foreclosure sale and REO sale is taken by loan servicers who must complete certain activities before conveying title to FHA.", "For example, FHA does not repair its properties to increase their marketability, something both enterprises do. And unlike the enterprises, FHA does not incorporate information from multiple sources in setting list prices or consistently take into account market conditions when reducing prices.", "Instead, it relies on one appraisal in setting initial prices and often reduces them by set amounts.", "GAO found that if FHA's execution rate and disposition time frame had equaled those of the enterprises in 2011, it could have increased its proceeds by as much as $400 million and decreased its holding costs--which can include items such as taxes, homeowners' association fees, and maintenance costs--by up to $600 million for the year.", "In addition, FHA’s oversight of the contractors that it uses to maintain and dispose of REO properties has weaknesses, and it does not use some of the oversight tools other entities use that might prove effective.", "First, government internal control standards require complete, updated policies and procedures to guide program oversight. But FHA has not updated its REO disposition handbook since 1994, even though the agency implemented a different program and contractor structure in 2010.", "In the absence of a central source of updated guidance, GAO and FHA internal auditors found inconsistencies in both contractor activities and staff oversight across FHA’s four regional homeownership centers.", "For instance, FHA has yet to implement a proposed version of the type of scorecard that the enterprises use to assess differences in contractor performance. Also, its planned incentive structure for contractors has been found not to comply with federal contracting rules. These two shortcomings have prevented FHA from assigning work according to contractors’ performance—a key quality control in its new REO program structure.", "Finally, FHA has not taken steps to ensure that the listing brokers marketing its REO properties are located close enough to the properties to have adequate knowledge of local markets.", "With mortgage foreclosures at historic levels in recent years, FHA is faced with disposing of a high volume of REO properties.", "To assess the relative effectiveness of FHA’s REO dispositions, GAO examined (1) FHA’s disposition goals, strategies, practices, and effectiveness in disposing of properties compared with those of the enterprises and private servicers; and (2) FHA’s oversight of the contractors that maintained and marketed its REO properties.", "GAO analyzed REO disposition data from FHA and the enterprises, including modeling to control for property differences across the entities.", "GAO also collected requirements, policies, and interviews on each entity’s oversight of its REO dispositions." ], "parent_pair_index": [ -1, 0, 0, -1, 0, -1, 2, -1, -1, -1, 1, -1, -1, -1, -1, 1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 0, 0, 0, 0 ] }

{ "title": [ "", "Overview", "Introduction", "Congressional Activity", "Policy Tensions", "Arguments that Temporary Migration is Profitable", "Arguments that Temporary Migration is Costly", "Arguments that Temporary Migration Strengthens the United States", "Arguments that Temporary Migration Presents Vulnerabilities", "Broad Categories of Nonimmigrants", "Diplomats and Other International Representatives", "Visitors as Business Travelers and Tourists", "Visa Waiver Program", "Border Crossing Card or \"Laser Visa\"", "Multinational Corporate Executives and International Investors", "Temporary Workers", "Cultural Exchange", "Foreign Students", "Family-Related Visas", "Law Enforcement-Related Visas", "Aliens in Transit and Crew Members", "Exclusion and Removal", "Inadmissibility", "Presumption of the Intent to Settle Permanently", "Termination of Nonimmigrant Status", "Periods of Admission", "Length of Stay", "Duration of Visa", "Employment Authorization", "Permission to Work", "Labor Market Tests", "Statistical Trends", "Analysis of Nonimmigrants by Category", "Temporary Visas Issued", "Temporary Admissions", "Analysis of Nonimmigrants by Region", "Temporary Visas Issued", "Temporary Admissions", "Visas and Admissions Trends", "Estimates of the Resident Nonimmigrant Population", "Pathways to Permanent Residence", "Nonimmigrant Visa Overstays", "Delineating Current Law" ], "paragraphs": [ "", "", "The United States has long distinguished temporary migration from settlement migration. The Immigration and Nationality Act (INA) provides that foreign nationals may be admitted to the United States temporarily or may come to live permanently. Those admitted on a settlement basis are known as immigrants or legal permanent residents (LPRs), while those admitted on a temporary basis are known as nonimmigrants. Nonimmigrants are admitted for a designated period of time and for a specific purpose. Nonimmigrants include a wide range of people, such as tourists, foreign students, diplomats, temporary agricultural workers, exchange visitors, internationally-known entertainers, foreign media representatives, intracompany business personnel, and crew members on foreign vessels.\nU.S. immigration policy, embodied in the INA, presumes that all aliens seeking admission to the United States are coming to live permanently. As a result, nonimmigrants must demonstrate that they are coming for a temporary period and for a specific purpose. The U.S. Department of State (DOS) consular officer, at the time of application for a visa, as well as the Department of Homeland Security (DHS) immigration inspectors, at the time of application for admission, must be satisfied that the alien is entitled to a nonimmigrant status. The burden of proof is on the applicant to establish eligibility for nonimmigrant status and the type of nonimmigrant visa for which the application is made.\nIf a nonimmigrant in the United States wishes to change from one nonimmigrant category to another, such as from a tourist visa to a student visa, the foreign national must file a change of status application with the U.S. Citizenship and Immigrant Services (USCIS) in DHS. If the foreign national leaves the United States while the change of status is pending, the foreign national is presumed to have relinquished the application.\nThis report begins with a discussion of the policy tensions surrounding temporary admissions. It follows with a synthesis of the nonimmigrant categories according to the purpose of the visa. It discusses the periods of admission and length of stay and then summarizes grounds for inadmissibility and removal as well as reasons for termination of status. It also describes the circumstances under which nonimmigrants may work in the United States. The second portion of the report analyzes trends in temporary migration. It describes changes over time in nonimmigrant visas issued and nonimmigrant admissions. Various data on nonimmigrants who establish residence in the United States are also discussed. The report concludes with two detailed tables analyzing key admissions requirements across all nonimmigrant visa types.", "Interest in nonimmigrant visas as a group soared immediately following the September 11, 2001, terrorist attacks, which were conducted by foreign nationals admitted to the United States on temporary visas. At that time, policy makers raised a series of questions about aliens in the United States and the extent to which the federal government monitors their admission and presence in this country. The Enhanced Border Security and Visa Entry Reform Act ( P.L. 107-173 ), provisions in the Homeland Security Act ( P.L. 107-296 ), and provisions in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), for example, included broad reforms of immigration law to tighten procedures and oversight of aliens temporarily admitted to the United States.\nLegislative activity, nonetheless, usually focuses on specific visa categories. The temporary worker provisions as well as the foreign student provisions have garnered considerable interest over the years. In addition, legislative revisions to temporary visa categories have usually occurred incrementally. For example, in the 111 th Congress several laws included provisions addressing aspects of temporary admissions, including Division A, Title XVI, §1611 of P.L. 111-5 , which required those employers receiving Troubled Asset Relief Program (TARP) funding to comply with more rigorous labor market rules when recruiting temporary foreign workers, and P.L. 111-230 , which temporarily increased certain fees by $2,000 to $2,250 per nonimmigrant. This report, however, does not track legislation.", "There is agreement that temporary migration is important to the U.S. economy and cultural life. There is also agreement that temporary migration should be managed more effectively. While revisions to temporary migration do not stoke the same intensity of debate that reform of permanent immigration or mechanisms for legalization do, they do provoke some controversies and concerns. The arguments sketched below are illustrative of the policy tensions surrounding temporary migration generally.", "In 2009, the United States had a positive $21.9 billion trade surplus in travel and tourism spending because foreign visitors spent more in the United States than U.S. tourists spent abroad. International students contribute nearly $20 billion to the U.S. economy through their expenditures on tuition and living expenses, according to the U.S. Department of Commerce. Almost 70% of all international students' primary funding comes from sources outside of the United States. Expanding temporary worker programs would boost economic output and create new middle class job opportunities for native-born Americans.", "The user fees paid by foreign nationals on temporary visas do not cover the costs of maintaining the aging infrastructures at ports of entry, nor do they cover the costs for managing the flow of 163 million annual admissions to the United States. The concentration of inspection activity at the border means that significant resources must be present in order to ensure efficient operations. Inefficiencies not only cause congestion, but they can be costly to businesses, both at the border and in the interior. Temporary workers have a deleterious effect on the salaries, compensation, and working conditions of U.S. workers, especially during periods of high unemployment.", "Tourism and international education and cultural exchange programs foster democratic principles and spread American values across the globe. Foreign visitors to the United States bring energy, ideas, and often fresh perspectives. U.S. employers need the \"best and the brightest\" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. The ability to hire foreign temporary workers is an essential ingredient for economic growth and is typically based on the human capital needs of the national economy. Appropriately designed temporary worker visas strengthen natural security by re-directing potentially unauthorized migrants into guest workers, relieving the pressure on the border, and enabling DHS Customs and Border Protection (CBP) to focus on terrorists, organized criminals, and violent felons.", "National security may be put at risk when there is a high volume of nonimmigrants. There is considerable pressure to provide rapid processing of nonimmigrant visas and temporary admissions. Expedited processing, however, can lead to missed opportunities for interdicting threats. It is estimated that each year, hundreds of thousands of foreign nationals overstay their nonimmigrant visas and, as a consequence, become unauthorized aliens. The most recent estimates range from 31% to 57% of the unauthorized population, or approximately 3.3 million to 6.2 million nonimmigrant overstays. DHS Office of Immigration Statistics (OIS) published a report estimating that 1.8 million nonimmigrants had established residence in the United States in 2008. Not only are their ties to the United States tenuous, long-term temporary residents may also weaken support for the common good (e.g., public investments in education, infrastructure, and social programs) among the citizenry.\nThat each of these arguments has some basis in fact is due to the multiplicity of temporary migration categories and their divergent purposes. Positive attributes of one nonimmigrant category may not apply to another. Similarly, critiques of one nonimmigrant category may not hold for another.", "There are 24 major nonimmigrant visa categories, and 87 specific types of nonimmigrant visas are issued currently. Most of these nonimmigrant visa categories are defined in §101(a)(15) of the INA. These visa categories are commonly referred to by the letter and numeral that denotes their subsection in §101(a)(15); for example, B-2 tourists, E-2 treaty investors, F-1 foreign students, H-1B temporary professional workers, J-1 cultural exchange participants, and S-4 terrorist informants. These temporary visas may be grouped under the broad labels described below.", "Ambassadors, consuls, and other official representatives of foreign governments (and their immediate family and servants) enter the United States on A visas. Official representatives of international organizations (and their immediate family and servants) are admitted on G visas. Those nonimmigrants entering under the auspices of the North Atlantic Treaty Organization (NATO) have their own visa categories. Aliens who work for foreign media use the I visa.", "B-1 nonimmigrants are visitors for business and are required to be seeking admission for activities other than purely local employment or hire. The difference between a business visitor and a temporary worker also depends on the source of the alien's salary. To be classified as a visitor for business, an alien must receive his or her salary from abroad and must not receive any remuneration from a U.S. source other than an expense allowance and reimbursement for other expenses incidental to temporary stay.\nThe B-2 visa is granted for temporary visitors for \"pleasure,\" otherwise known as tourists. Tourists, who are encouraged to visit as a boon to the U.S. economy, have consistently been the largest nonimmigrant class of admission to the United States. A B-2 nonimmigrant may not engage in any employment in the United States.", "Many visitors, however, enter the United States without nonimmigrant visas through the Visa Waiver Program (VWP). This provision of the INA allows the Secretary of Homeland Security to waive the visa documentary requirements for aliens coming as visitors from countries that meet certain statutory criteria. Currently, foreign visitors from 36 countries have VWP privileges. In FY2009, 16.2 million people entered under the VWP, constituting 50.5% of all temporary visitors and 44.9% of all nonimmigrant admissions.", "The border crossing card (BCC), or \"laser visa,\" is issued to citizens of Mexico to gain short-term entry (up to six months) for business or tourism into the United States. It may be used for multiple entries and is good for at least 10 years. Mexican citizens can get a laser visa from the Department of State's Consular Affairs if they are otherwise admissible as B-1 (business) or B-2 (tourism) nonimmigrants, and the laser visa issued is a combined BCC/B-1/B-2 nonimmigrant visa. Current rules limit the BCC holder to visits of up to 30 days within the border zone of 25 miles along the border in Texas, New Mexico, and California and visits up to 30 days within a border zone of 75 miles in Arizona.", "Intracompany transferees who are executive, managerial, and have specialized knowledge and who are continuing employment with an international firm or corporation are admitted on the L visas. The L visas enable multinational firms to transfer top-level personnel to their locations in the United States for five to seven years. To be eligible for the L-1 visa, the foreign national must have worked for the multinational firm abroad for six months prior to transferring to a U.S. location. The spouses of L-1 nonimmigrants (i.e., L-2 nonimmigrants) are also allowed to work while they are in the United States.\nTo qualify as an E-1 treaty trader or E-2 treaty investor, a foreign national first must be a citizen or national of a country with which the United States maintains a treaty of commerce and navigation. The foreign national then must demonstrate that the purpose of coming to the United States is one of the following: to carry on substantial trade, including trade in services or technology, principally between the United States and the treaty country; or to develop and direct the operations of an enterprise in which the national has invested, or is in the process of investing, a substantial amount of capital. Unlike most nonimmigrant visas, the E visa may be renewed indefinitely. Both the E-1 and E-2 visas require that a treaty exist between the United States and the principal foreign national's country of citizenship.\nThe E-3 treaty professional visa is a temporary work visa limited to citizens of Australia. It is usually issued for two years at a time. Occupationally, it mirrors the H-1B visa in that the foreign worker on an E-3 visa must be employed in a specialty occupation.", "The major nonimmigrant category for temporary workers is the H visa. The current H-1 categories include professional specialty workers (H-1B) and nurses (H-1C). Temporary professional workers from Canada and Mexico may enter according to terms set by the North American Free Trade Agreement (NAFTA) on TN visas. There are two visa categories for temporarily bringing in seasonal workers (i.e., guest workers): agricultural guest workers enter with H-2A visas and other seasonal/intermittent workers enter with H-2B visas. The law sets numerical restrictions on annual admissions of the H-1B (65,000), the H-1C (500), and the H-2B (66,000); however, most H-1B workers enter on visas that are exempt from the ceiling. There is no limit on the admission of H-2A workers.\nPersons with extraordinary ability in the sciences, the arts, education, business, or athletics are admitted on O visas. Extraordinary ability in the fields of science, education, business, or athletics means a level of expertise indicating that the person is one of a small percentage who has risen to the very top of the field of endeavor. Extraordinary ability in the field of arts means distinction (i.e., renowned, leading, or well-known in the field of arts).\nInternationally recognized athletes or members of an internationally recognized entertainment group come on P visas. An athlete on a P-1 visa must have achieved significant international recognition in the sport. Those P-1 visas for a sports team must likewise be distinguished, and it requires the participation of athletic teams of international recognition. To qualify for P-1 visas for entertainment groups, the group must be internationally recognized, having a high level of achievement in a field evidenced by a degree of skill and recognition substantially above that encountered ordinarily. There are also P visas for performers in exchange programs and culturally unique performers.\nAliens working in religious vocations enter on R visas. Religious work is currently defined as habitual employment in an occupation that is primarily related to a traditional religious function and that is recognized as a religious occupation within the denomination.", "The broadest category for cultural exchange is the J visa, which is also know as the Fulbright program. The J visa includes professors and research scholars, students, foreign medical graduates, teachers, resort workers, camp counselors, and au pairs who are participating in an approved exchange visitor program. The U.S. Department of State's Bureau of Educational and Cultural Affairs is responsible for approving the cultural exchange programs. J visa holders are admitted for the period of the program. Many foreign nationals on J-1 visas are permitted to work as part of their cultural exchange program participation. Their spouses and children may accompany them as J-2 nonimmigrants.\nThe Q visa is an employment-oriented cultural exchange program, and its stated purpose is to provide practical training and employment as well as share history, culture, and traditions. U.S. Citizenship and Immigration Services (USCIS) approves the Q cultural exchange programs, and only employers are allowed to petition for Q nonimmigrants.", "The most common visa for foreign students is the F-1 visa. It is tailored for international students pursuing a full-time academic education. To obtain an F-1 visa, prospective students must be accepted by a school that has been approved by the government. They must also document that they have sufficient funds or have made other arrangements to cover all of their expenses for 12 months. Finally, they must demonstrate that they have the scholastic preparation to pursue a full course of study for the academic level to which they wish to be admitted and must have a sufficient knowledge of English (or have made arrangements with the school for special tutoring or to study in a language the student knows). Their spouses and children may accompany them on F-2 visas. Students on F visas are permitted to work in practical training that relates to their degree program, such as paid research and teaching assistantships. They are also permitted to engage in Optional Practical Training (OPT), which is temporary employment that is directly related to an F-1 student's major area of study.\nThose students who wish to pursue a non-academic (e.g., vocational) course of study apply for an M visa. Much like the F students, those seeking an M visa must show that they have been accepted by an approved school, have the financial means to pay for tuition and expenses and otherwise support themselves for one year, and have the scholastic preparation and language skills appropriate for the course of study. Their spouses and children may accompany them as M-2 nonimmigrants.", "Fiancés and fiancées of U.S. citizens may obtain K visas. The intending bride and groom must demonstrate that they intend to marry within 90 days of the date the K visa holder is admitted to the United States. Moreover, they must both be free to marry, and any previous marriages must have been legally terminated by divorce, death, or annulment.\nThe V visa is a transitional nonimmigrant visa for immediate relatives (spouse and children) of LPRs who have had petitions to also become LPRs pending for three years. This visa enables families to reunite while they wait for their LPR visas to be processed. Only those immediate family members who filed Form I-130, Petition for Alien Relative, on or before December 21, 2000, are eligible.", "The law enforcement-related visas are among the most recently created. The S visa is used by informants in criminal and terrorist investigations. Victims of human trafficking who participate in the prosecution of those responsible may get a T visa. Victims of other criminal activities, notably domestic abuse, who cooperate with the prosecution are eligible for the U visa.", "Two miscellaneous nonimmigrant categories were some of the earliest nonimmigrant categories to be enacted. The C visa is for aliens traveling through the United States en route to another destination, and the D visa is for alien crew members on vessels or aircraft.", "", "The Departments of State (DOS) and Homeland Security (DHS) each play key roles in administering the law and policies on the admission of nonimmigrants. Although the DOS's Consular Affairs is responsible for issuing visas, the Customs and Border Protection (CBP) in DHS inspects all people who enter the United States. Both DOS consular officers (when the alien is petitioning abroad) and CBP inspectors (when the alien is entering the United States) must confirm that the alien is not ineligible for a visa under the so-called \"grounds for inadmissibility\" of the INA. These criteria categories are\nhealth-related grounds; criminal history; security and terrorist concerns; public charge (e.g., indigence); seeking to work without proper labor certification; illegal entrants and immigration law violations; lacking proper documents; ineligible for citizenship; and aliens previously removed.\nThe law provides waiver authority of these grounds (except for most of the security and terrorist-related grounds) for nonimmigrants on a case-by-case basis.", "Specifically, §214(b) of the INA generally presumes that all aliens seeking admission to the United States are coming to settle permanently; as a result, most foreign nationals seeking to qualify for a nonimmigrant visa must demonstrate that they are not coming to reside permanently. During the period from FY1995 to FY2008, the §214(b) presumption was the most common basis for rejecting a nonimmigrant visa applicant. There are three nonimmigrant visas that might be considered provisional, in that the visa holder may simultaneously seek LPR status. As a result, the law exempts nonimmigrants seeking any one of these three visas—H-1 professional workers, L intracompany transfers, and V accompanying family members—from the requirement that they prove they are not coming to live permanently.", "Consistent with the grounds of inadmissibility, the legal status of a nonimmigrant in the United States may be terminated based upon the nonimmigrant's behavior in the United States. Specifically, the regulations list national security, public safety and diplomatic reasons for termination. If a nonimmigrant who is not authorized to work does so, that employment constitutes a failure to maintain a lawful status. A crime of violence that has a sentence of more than one year also terminates nonimmigrant status. Nonimmigrants who violate the terms of their visas or who stay beyond the period of admission are considered unauthorized aliens. As such, they are subject to removal proceedings and deportation.", "The time period that a visa lasts has two elements. One element addresses the question of how long the foreign national can stay in the United States. The other element answers the question of how long the visa is valid for entries into the United States.", "Congress has enacted amendments and the executive branch has promulgated regulations governing areas such as the length and extensions of stay. For example, A-1 ambassadors are allowed to remain in the United States for the duration of their service, F-1 students to complete their studies, R-1 religious workers for up to three years, and D crew members for 29 days. Many categories of nonimmigrants are required to have a residence in their home country that they intend to return to as a stipulation of obtaining the visa. The law actually requires J-1 cultural exchange visa holders to go home for two years prior to returning to the United States (with some exceptions).", "Separate from the length of stay authorized for the various nonimmigrant visas is the validity period of the visa issued by DOS consular officers. These time periods are negotiated country-by-country and category-by-category, generally reflecting reciprocal relationships for U.S. travelers to these countries. For example, a B-1 and B-2 visitor visa from Germany is valid for 10 years while B-1 and B-2 visas from Indonesia are valid for five years. The D crew member visa is valid for five years for Egyptians, but only one year for Hungarians.", "", "With the obvious exception of the nonimmigrants who are temporary workers (e.g., Hs, Os, Ps, Rs, and Qs), treaty traders (e.g., Es), or the executives of multinational corporations (e.g., Ls), most nonimmigrants are not allowed to work in the United States. Exceptions to this policy are noted in Table 2 , which follows at the end of this report. As stated above, working without authorization is a violation of law and results in the termination of nonimmigrant status.", "The H-2 visas require that employers conduct an affirmative search for available U.S. workers and that the U.S. Department of Labor (DOL) determine that admitting alien workers will not adversely affect the wages and working conditions of similarly employed U.S. workers. Under this process—known as labor certification—employers must apply to the DOL for certification that unemployed domestic workers are not available and that there will not be an adverse effect from the alien workers' entry.\nThe labor market test required for H-1 workers, known as labor attestation, is less stringent than labor certification. Any employer wishing to bring in an H-1B nonimmigrant must attest in an application to the DOL that the employer will pay the nonimmigrant the greater of the actual compensation paid to other employees in the same job or the prevailing compensation for that occupation; the employer will provide working conditions for the nonimmigrant that do not cause the working conditions of the other employees to be adversely affected; and, there is no strike or lockout. Employers recruiting H-1C nurses must attest that their employment will not adversely affect the wages and working conditions of similarly employed registered nurses; H-1C nurses will be paid the wage rate paid by the facility to similarly employed U.S. registered nurses; the facility is taking significant steps to recruit and retain sufficient U.S. registered nurses; and the facility is abiding by specified anti-strike and layoff protections.\nThere are no labor market tests for foreign nationals seeking these employment-related visas: E investors and treaty traders; J cultural exchange visitors; L intracompany transfers; O extraordinary ability in the sciences, arts, education, business, or athletics; P internationally recognized athletes or members of an internationally recognized entertainment group; Q international cultural exchange participants; and R religious workers.", "In the United States, data are collected on visa issuance and alien admission, both of which have strengths and shortcomings. While the number of visas issued shows the potential number of foreign nationals who may seek admission to the United States, admissions depict the actual entries of foreign nationals into the United States. The admissions data, however, simply enumerate port of entry inspections, thus counting frequent travelers multiple times. The lack of an exit registration system in the United States makes an actual count of out-migration impossible. Thus, the level of net migration of nonimmigrants (or the exact number of nonimmigrants in the United States at a given time) is unknown. The following sections present both admissions and issuance data for analysis of nonimmigrants by category and by geographic region. The latest estimates of the number of nonimmigrants who have established a residence in the United States are also presented.", "", "In FY2009, the DOS consular officers issued 5.8 million nonimmigrant visas. Combined, visitor visas issued for tourism and business comprised the largest group of nonimmigrants in FY2009—about 4.1 million, down from 5.7 million in FY2000. Cumulatively, all the categories of visas other than temporary visitors accounted for 29.3% of the visas issued in FY2009. Notable among the non-tourist categories of visas issued in 2009 were the 0.7 million students and exchange visitors (12.3%) and the 0.5 million temporary workers, managers, executives, and investors (8.7%). Figure 1 presents a more detailed breakdown of these categories and specifically displays students at 6.3%, exchange visitors at 6.0%, and workers at 5.9%.\nVisa issuances declined from their FY2001 peak of 7.6 million to a low point of 4.9 million in FY2003, and they stood at 5.8 million in FY2009. Figure 2 shows ebb and flow over the past decade, as the number of visas issued increased by 32.0% from FY2003 through FY2007 and then fell by 2.9% in FY2009. Visas issued to visitors for tourism fell by 40.7% from FY2000 to FY2003, rose by 34.3% from FY2004 to FY2007, and then dropped slightly, by 8.5%, in FY2009. The number of student visas issued experienced a less dramatic fluctuation, falling by 23.9% from FY2000 to FY2003 and then rising by 51.5% through FY2009. Visas issued to diplomats and to representatives of international organizations increased steadily, by 25.0% and 24.1%, respectively, over the decade.\nTrends in the number of employment-based nonimmigrant visas issued during this period illustrate the impact of the economic recession. These trends are more visible in Figure 3 , which excludes the B visas issued to tourist and business visitors. The number of temporary worker visas issued increased by 48.1% from 2000 to 2007 and then dropped by 33.9% from 2007 to 2009. Similarly, visas issued to intracompany transfers (Ls) rose by 38.2% from 2000 to 2007 and decreased by 19.8% from 2007 to 2009. The number of investor and treaty trader (E) visas issued increased by 11.3% from 2000 to 2007 and dropped by 14.8% from 2007 to 2009. Interestingly, the cultural exchange visas steadily increased by 36.7% from FY2000 to FY2007 and only dropped recently, by 8.1% in FY2009.", "The other source of nonimmigrant data, which comes from DHS's Customs and Border Protection (CBP), has two important caveats. First, not all nonimmigrant admissions are recorded in the CBP admissions data. Less than one-quarter of nonimmigrants entering the United States are required to fill out the arrival records, which are colloquially called I-94 admissions because I-94 is the immigration form number. Mexican nationals with border crossing cards and Canadian nationals traveling for business or tourist purposes are specifically excluded in the I-94 admission totals. Second, the I-94 data record the admissions rather than the persons. Since many types of visas allow people to depart and re-enter the United States, the CBP data record multiple admissions during the same year.\nDuring 2009, CBP inspectors tallied 163 million nonimmigrant admissions to the United States. Mexican nationals with border crossing cards and Canadian nationals traveling for business or tourist purposes accounted for the vast majority of admissions to the United States in FY2009, with approximately 126.8 million entries. The remaining categories and countries of the world contributed the 36.2 million I-94 admissions in FY2009.\nAs with the visa issuance data, temporary visitors dominate the admissions data depicted in Figure 4 . Over three-quarters of all I-94 admissions were tourists in FY2009 and another 12.1% were business visitors. Similar to the visa issuance data, the other substantial categories are students (2.6%) and the employment based (e.g., workers (2.6%), executives and investors (2.0%), and cultural exchange (1.3%)).\nTo more clearly observe the trends in temporary visitors, Figure 5 analyzes them separately. The FY2002-FY2009 trend data reveal that a large majority of such nonimmigrants are admitted for tourism (or \"pleasure\") purposes. The number of tourist entries on B-2 visas increased by 44.5% from FY2002 to FY2009, and the number of VWP tourists rose by 31.7% over this same period. The number of visitors for business, whether it was on B-1 visas or through the VWP, remained stable over the decade. The Guam Visa Waiver Program covers foreign nationals who were solely entering and staying in Guam for a period not to exceed 15 days.\nAs expected, the FY2000-FY2009 trends in \"other than visitor\" nonimmigrant admissions depicted in Figure 6 are similar to FY2000-FY2009 trends in \"other than visitor\" visas issued depicted in Figure 3 . The admissions data, however, fluctuated less frequently and exhibited smoother trends. Overall, the I-94 admissions increased by 7.6%, from 33.7 million in FY2000 to 36.2 million in FY2009. Admissions peaked at 39.4 million in FY2008.\nThe employment-based admissions mirrored the employment-based visas by tracking the economic recession. Admissions of temporary workers rose by 42.4% from FY2000 to FY2007 and then fell by 16.3% in FY2009. Similarly, admissions of intracompany transfers, exchange visitors, and treaty traders and investors increased by 24.4%, 39.1%, and 42.0%, respectively, and then dropped by 7.0%, 6.1% , and 4.0%, respectively. The I-94 admissions of students deviated from the overall trend and steadily rose by 36.0% over the decade, including a 13.1% gain from FY2007 to FY2009.", "", "As Figure 7 shows, there was a larger percentage of visas issued to foreign nationals from Asia than to any other region, accounting for 36.4%, or 2.1 million, nonimmigrant visas issued in FY2009. North American nonimmigrants (which included people from Mexico, Central America, and the Caribbean) accounted for the next-largest group of visa issuances at 22.2%, or approximately 1.3 million individuals. South America accounted for the third-largest groups with 19.9% of the nonimmigrant visa issuances, and Europe comprised 15.6% of the visas. Africa contributed 5.0% of the visas, while visa issuances for Oceania accounted for 0.8% of the total visa issuances in FY2009.\nWhen analyzing the times series data for visa issuances as depicted in Figure 8 below, the number of visas issued by DOS in FY2009 had fallen by 18.7%, from 7.1 million in FY2000 to 5.8 million in FY2009. Visas issued to foreign nationals from North America fell by 45.3%, from 2.4 million in FY2000 to 1.3 million in FY2009. Visas issued to Europeans also dropped from 1.1 million to 0.9 million (-17.1%) over the decade. Exhibiting a similar trend, visas issued to Asians decreased by 14.1%, from 2.5 million in FY2000 to 2.1 million in FY2009. South America was the only region of the world that saw an increase (of 40.0%), as visa issuances rose from 0.8 million in FY2000 to 1.2 million in FY2009.", "Foreign nationals from Europe had the plurality of I-94 admissions in FY2009, with 13.2 million admissions, or 36.5%, of all I-94 admissions ( Figure 9 ). That 26 of the VWP countries are European was likely a factor in that region's dominance of I-94 admissions. Although foreign nationals from Asia led in terms of visas issued in FY2009 at 36.4%, they contributed only 20.0%, or 7.2 million, I-94 admissions . In 2009, South Korea joined Brunei, Japan, and Singapore as the VWP participating countries from Asia. North American countries accounted for 29.3% of the I-94 admissions in FY2009, but these data do not incorporate the 126.8 million entries of Mexican nationals with border crossing cards and Canadian nationals traveling for business or tourist purposes.\nFigure 10 depicts the regional pattern of I-94 admissions into the United States between FY2000 and FY2009 and reveals a shift from Asia to North America. In FY2000, there were 8.7 million I-94 admissions from Asia and 7.8 million from North America. By FY2009, there were 10.6 million I-94 admissions from North America and only 7.2 million from Asia. The admission of foreign nationals from North America had increased by 36.2% in 10 years, while those from Asia fell by 17.2%. Furthermore, the European I-94 admissions increased from 12.4 million in FY2000 to 13.2 million in FY2009. The admissions of foreign nationals from Oceania reached 1.0 million for the first time in FY2008, and again in FY2009.", "As noted above, visas issued by DOS and I-94 admissions recorded by CBP capture different measures of temporary migration. Certain types of visas are valid for multiple entries and for multiple years. These time periods are negotiated country-by-country and category-by-category, generally reflecting reciprocal relationships for U.S. travelers to these countries. In addition, foreign visitors from 36 countries have VWP privileges, enabling visitors for business or for pleasure from these countries to seek admission to the United States without obtaining a visa in advance.\nOne method of analyzing the relationship between visas issued and I-94 admissions is to calculate the ratio of the two data points. The overall ratio of visas issued by DOS to I-94 admissions recorded by CBP has fallen slightly from a 10-year high of 0.23 in FY2001 to 0.16 in FY2009. In other words, there were a total of 7.6 million visas issued and 32.8 million admissions in FY2001, in contrast to a total of 5.8 million visas issued and 36.2 million admissions in FY2009. This trend of ratios is depicted as the black line in Figure 11 .\nFigure 11 illustrates further that the ratio of visas to I-94 admissions is lowest for regions of the world that include most of the VWP countries: Europe and Oceania. The ratio of visas to I-94 admissions is highest for foreign nationals coming from Africa, and South America and Asia follow as a distant second and third, respectively. All three of the regions have ratios higher than the overall total.\nThe ratio trend in Figure 11 suggests that foreign nationals coming from Africa—and to a somewhat lesser extent, those coming from South America and Asia—are not as likely to have visas that are valid for multiple entries and for multiple years as are foreign nationals from Europe and Oceania. Africans may also be less likely to make frequent return visits given the distance and cost of travel.\nPerhaps most interesting is the downward trend in the ratio of visas to I-94 admissions for foreign nationals from North America. Visas issued to foreign nationals from North America have fallen from a high of 2.8 million in FY2001 to a 10-year low of 1.3 million in FY2009. Meanwhile, the number of I-94 admissions rose from a 10-year low of 7.8 million in FY2000 to a high of 11.6 million in FY2007, and it stood at 10.6 million in FY2009. This change over time was due in large part to the issuance of biometric B-1 and B-2 border crossing cards to visitors from Mexico, which are good for 10 years. In FY2000 and FY2001, DOS issued 1.5 million B-1 and 2.0 million B-2 border crossing cards to Mexicans. The number of B-1 and B-2 border crossing cards issued to Mexicans fell to 0.7 million in FY2009.", "Not all nonimmigrant visas are for brief visits, and some lengths of stay are sufficiently long for a person to establish residence. As noted above, A-1 ambassadors are allowed to remain in the United States for the duration of their service, F-1 students are allowed to complete their studies, R-1 religious workers are allowed to remain for up to three years. The term \"resident nonimmigrant\" refers to those foreign nationals admitted on nonimmigrant visas whose classes of admission are associated with stays long enough to establish a residence (e.g., diplomats, students, and workers).\nIn 2010, the DHS Office of Immigration Statistics (OIS) published a report that estimated the size and characteristics of the resident nonimmigrant population in the United States in 2008. OIS demographer Bryan Baker estimated the average daily population of resident nonimmigrants in the United States to have been 1.8 million in 2008. Of the 1.8 million nonimmigrants, 50.8% (0.93 million) were temporary workers and their families, 32.2% (0.59 million) were students and their families, 13.1% (0.24 million) were exchange visitors and their families, and 3.8% (0.07 million) were diplomats, other representatives, and their families. Figure 12 depicts these data.\nGiven that the resident nonimmigrant population is dominated by workers, students, and exchange visitors, it is not surprising that OIS estimated that 25.6% were ages 18 to 24, and 54.6% were ages 25 to 44. More than half (55.7%) of resident nonimmigrants were male.\nAs Figure 13 shows, slightly more than half (53%) of resident nonimmigrants were foreign nationals from Asian countries. Europe and North America comprised another 17.6% and 17.0%, respectively. The top six countries accounted for 56.8% of the total, and these countries are depicted in Figure 14 . As a major source country for both students and professional workers, India led with 21.9% of resident nonimmigrants in 2008. The other major sending countries were Canada (8.2%), South Korea (7.7%), China (6.6%), Mexico (6.6%), and Japan (6.0%).\nIn addition to the estimates of the resident nonimmigrant population , OIS also reports on annual admissions of resident nonimmigrants. The latest report indicated that the number of resident nonimmigrant admissions decreased from 3.7 million in 2008 to 3.4 million in 2009, a 6.8% drop. Nonetheless, OIS states that the annual number of resident nonimmigrant admissions nearly tripled over the 20-year period from 1989 to 2009.", "As discussed above, most foreign nationals seeking to qualify for a nonimmigrant visa must demonstrate that they are not coming to reside permanently. Only three nonimmigrant visas permit the visa holder to simultaneously seek legal permanent residence (LPR) status: H-1 professional workers, L intracompany transfers, and V accompanying family members. Nonetheless, USCIS adjusted 667,776 foreign nationals to LPR status in 2009, which was 59.0% of all LPRs that year. Presumably, many of these foreign nationals had originally entered the United States as nonimmigrants. As Figure 15 illustrates, most of these adjustments are family members of citizens or persons who are in the United States legally.\nThe H-1B visa often provides the link for foreign students (F, M) to become employment-based LPRs. Many anecdotal accounts tell of foreign students who are hired by U.S. firms as they are completing their programs. The employers obtain H-1B visas for the recent graduates, and if the employees meet expectations, the employers may also petition for the nonimmigrants to become LPRs through one of the employment-based immigration categories. Some policy makers consider this a natural and positive chain of events, arguing that it would be foolish to educate these talented young people only to make them leave to work for foreign competitors. Others consider this \"F-1 to H-1B to LPR\" pathway an abuse of the temporary element of nonimmigrant status and a way to circumvent the laws and procedures that protect U.S. workers from being displaced by immigrants.\nResearch conducted in 2005 by B. Lindsay Lowell of the Institute for the Study of International Migration estimated that approximately 7% of foreign students adjusted to LPR status directly, and that an additional 7% to 8% of students adjusted to LPR status following a stint as an H nonimmigrant worker. In 2000, Lowell also published an analysis of all H-1Bs who ultimately became LPRs and estimated that about half of them did so at that time.\nAlthough the USCIS asks those who are adjusting to LPR status what their last nonimmigrant status was, there has been a data quality problem for many years. According to the DHS Office of Immigration Statistics, the data collected on last nonimmigrant status are missing on more than 40% of the adjustment of status records. Nonetheless, Jeanne Batalova of the Migration Policy Institute published analysis of the limited data that were available from FY1998 through FY2002. Batalova's analysis found that the percentage of foreign students adjusting remained rather flat, and may have diminished, but that the percentage of adjustments who were H nonimmigrant workers grew notably from FY1998 through FY2002.\nMore recently, the conventional route has become Optional Practical Training (OPT), which is temporary employment that is directly related to an F-1 student's major area of study. In 2008, the Department of Homeland Security (DHS) reported that there were 23,000 F-1 foreign students engaged in OPT in science, technology, engineering, or mathematics (STEM) fields. To qualify for the 17-month extension, F-1 students must have received STEM degrees included on the STEM Designated Degree Program List, be employed by employers enrolled in E-Verify, and have received an initial grant of post-completion OPT related to such a degree. According to DHS, \"This extension of the OPT period for STEM degree holders gives U.S. employers two chances to recruit these highly desirable graduates through the H-1B process, as the extension is long enough to allow for H-1B petitions to be filed in two successive fiscal years.\"", "It is estimated that each year, hundreds of thousands of foreign nationals overstay their nonimmigrant visas and, as a consequence, become unauthorized aliens. According to the latest estimates by the DHS Office of Immigration Statistics, about 10.8 million unauthorized aliens were living in the United States in January 2009, down from a peak of 11.8 million in January 2007. Reliable estimates of the number of nonimmigrant overstays are not available. The most recent sample estimates (based on 2006 data) range from 31% to 57% of the unauthorized population, or approximately 3.3 million to 6.2 million nonimmigrant overstays.", "The law and regulations set terms for nonimmigrant lengths of stay in the United States, typically have foreign residency requirements, and often limit what the aliens are permitted to do in the United States (e.g., gain employment or enroll in school). The two tables that follow, among other things, illustrate the complexity and diversity of policy on temporary admissions and the challenge for policy makers who may seek to revise it. Table 1 indicates whether the INA or regulations set any limits or requirements on how long nonimmigrants may stay in the United States and whether they must maintain a residence in their home country for each of the 87 visa classifications. Table 2 details whether there are any labor market tests or any limits on the numbers of aliens who can enter the United States according to each of the 87 visa classifications. Table 2 also presents DOS data on the number of nonimmigrant visas issued in FY2009. When a cell in the table is blank, it means the law and regulations are silent on the subject ." ], "depth": [ 0, 1, 2, 2, 2, 3, 3, 3, 3, 2, 3, 3, 4, 4, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 2, 3, 3, 1, 2, 3, 3, 2, 3, 3, 3, 2, 2, 2, 1 ], "alignment": [ "h0_title h1_title", "h0_title", "h0_full", "", "", "", "", "", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What are nonimmigrants?", "What groups of people do nonimmigrants consist of?", "What visa categories are there for nonimmigrants?", "How has the issuing of nonimmigrant visas changed overtime?", "What was the largest group of nonimmigrant visas in FY2009?", "What other groups made up a significant portion of nonimmigrant visas?" ], "summary": [ "U.S. law provides for the temporary admission of various categories of foreign nationals, who are known as nonimmigrants.", "They include a wide range of visitors, including tourists, foreign students, diplomats, and temporary workers.", "These visa categories are commonly referred to by the letter and numeral that denotes their subsection in the Immigration and Nationality Act (INA); for example, B-2 tourists, E-2 treaty investors, F-1 foreign students, H-1B temporary professional workers, J-1 cultural exchange participants, or S-4 terrorist informants.", "In FY2009, DOS's consular officers issued 5.8 million nonimmigrant visas. Nonimmigrant visas issued abroad had dipped to 5.0 million in FY2004 after peaking at 7.6 million in FY2001.", "Combined, visitor visas issued for tourism and business comprised the largest group of nonimmigrant visas in FY2009, with about 4.1 million, down from 5.7 million in FY2000.", "Other notable groups were 0.7 million students and exchange visitors (12.3%) and 0.5 million temporary workers, managers, executives, and investors (8.7%)." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 3, 3, 3 ] }

{ "title": [ "Background", "History of Cost Growth and Schedule Delays", "Current JWST Organization", "Revised JWST Cost Estimate Is Not Fully Consistent with Best Practices for Reliable and Credible Estimates and the Integrated Master Schedule Is Not Finalized", "Complete Schedule Not Finalized; Full Assessment of Schedule Needed", "Technically Challenging JWST Project Lacks the Schedule Reserve Flexibility and Commensurate Oversight of Integration and Test Efforts", "Test and Integration Schedule Lacks Schedule Reserve Late in the Process", "Despite Overcoming Several Technical Challenges, JWST Has a Significant Amount of Work with Complex Technical Challenges Remaining", "Independent and Management Oversight during Test and Integration May Not Be Commensurate with JWST Test and Integration Complexity", "JWST Project Has Taken Steps to Enhance Communications with and Oversight of Its Contractors", "NASA Responded to Recent Independent Review Panel Report with Increased Communication and Oversight", "Travel Budget Reductions May Hamper Planned Oversight Activities", "NASA Headquarters Independent Review of the JWST Program Identified Concerns and Recommends Indicators to Measure Progress", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Subsystems of the JWST Observatory", "Appendix III: Our Evaluation of JWST’s Cost Estimate Process", "Appendix IV: Comments from the National Aeronautics and Space Administration", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Initially referred to as the “Next Generation Space Telescope,” JWST is a large deployable, infrared-optimized space telescope intended to be the successor to the aging Hubble Space Telescope. JWST is designed to be a 5-year mission to find the first stars and trace the evolution of galaxies from their beginning to their current formation, and is intended to operate in an orbit approximately 1.5 million kilometers—or 1 million miles—from the Earth. In a 2001 decadal survey, the National Research Council rated the JWST as the top-priority new initiative for astronomy and physics. With its 6.5-meter primary mirror, JWST will be able to operate at 100 times the sensitivity of the Hubble Space Telescope. A tennis-court-sized sunshield will protect the mirrors and instruments from the sun’s heat to allow the JWST to look at very faint infrared sources. The Hubble Space Telescope operates primarily in the visible and ultraviolet regions.", "JWST has experienced significant increases to project costs and schedule delays. Prior to being approved for development, cost estimates of the project ranged from $1 billion to $3.5 billion with expected launch dates ranging from 2007 to 2011. In March 2005, NASA increased the JWST’s life-cycle cost estimate to $4.5 billion and slipped the launch date to 2013. We reported in 2006 that about half of the cost growth was due to schedule slippage—a 1-year schedule slip because of a delay in the decision to use a European Space Agency-supplied Ariane 5 launch vehicle and an additional 10-month slip caused by budget profile limitations in fiscal years 2006 and 2007. More than a third of the cost increase was caused by requirements and other changes. An increase in the program’s contingency funding accounted for the remainder—about 12 percent—of the growth. NASA Headquarters chartered an Independent Review Team to evaluate the project that same year. In April 2006, the review team’s assessment confirmed that the program’s technical content was complete and sound, but expressed concern over the project’s contingency reserve funding—funding used to mitigate issues that arise but which were previously unknown—reporting that it was too low and phased in too late in the development life cycle. The team reported that for a project as complex as the JWST, a 25 to 30 percent total contingency was appropriate. At that time, JWST’s total contingency was about 19 percent. The team cautioned that this contingency compromised the project’s ability to resolve issues, address risk areas, and accommodate unknown problems. The team also concluded that the 2013 launch date was not viable for the project based on its anticipated budget. It recommended that before the project was formally approved for development and baselined, NASA should take steps to provide the JWST project with adequate time-phased reserve funding to secure a stable launch date. Additional reserves were added and the project was baselined in April 2009 with a life-cycle cost estimate of $4.964 billion and a launch date in June 2014.\nShortly after JWST was approved for development and its cost and schedule estimates were baselined, project costs continued to increase. In 2010, Senator Barbara Mikulski, chair of the Senate Committee on Appropriations, Subcommittee on Commerce, Justice, Science, and Related Agencies, asked NASA to initiate another independent review in response to the project’s cost increases and reports that the June 2014 launch date was in jeopardy. The Independent Comprehensive Review Panel (ICRP) was commissioned by NASA and began its review in August 2010. In October 2010, the ICRP issued its report and cited several reasons for the project’s problems including management, budgeting, oversight, governance and accountability, and communication issues. The panel concluded JWST was executing well from a technical standpoint, but that the baseline funding did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project. The review panel recommended that additional resources be considered along with organizational and management restructuring. Following this review, the JWST program underwent a replan in 2011. In November 2011, the JWST project was reauthorized, but not before it was recommended for termination by the House Appropriations Committee. On the basis of the replan, NASA announced that the project would be rebaselined at $8.835 billion—a 78 percent increase to the project’s life-cycle cost from the confirmed baseline—and would launch in October 2018—a delay of 52 months. The revised life- cycle cost estimate included 13 months of funded schedule reserve. In the President’s Fiscal Year 2013 budget request, NASA reported a 66 percent joint cost and schedule confidence level associated with these estimates. A joint cost and schedule confidence level (JCL) is the process NASA uses to assign a percentage to the probable success of meeting cost and schedule targets and is part of the project’s estimating process.", "The JWST project is divided into three major segments: the launch segment, the ground segment, and the observatory segment. The launch segment is primarily provided by the European Space Agency (ESA), which is contributing the Ariane 5 launch vehicle and launch site operations in French Guiana. The ground segment will be responsible for collecting the data obtained by JWST in space and making it usable for scientists and researchers. This includes the development of software that will translate data into usable formats as well as operation of the software once the telescope is in space. The Space Telescope Science Institute, operated by the Association of Universities for Research in Astronomy (AURA) on a contract awarded by NASA, which currently performs science operations for the Hubble Space Telescope, is developing the science and operations and flight operations center for JWST and will conduct the first 6 months of flight and science operations. The NASA contract with the Space Telescope Science Institute extends through the first 6 months of JWST operations. A contract to manage the long term operations of JWST is planned to be awarded approximately 2 years prior to launch. The observatory segment will be launched into space and includes five major subsystems. These subsystems are being developed through a mixture of NASA, contractor, and international partner efforts. See figure 1.\nJWST is a single project program reporting directly to the NASA Associate Administrator for programmatic oversight and to the Associate Administrator for the Science Mission Directorate for technical and analysis support. Goddard Space Flight Center is the NASA center responsible for the management of JWST. See figure 2 for the current JWST organizational chart.", "Our analysis of JWST’s revised cost estimate showed that it is not fully consistent with best practices for developing reliable and credible estimates, although project officials took some steps in line with best practices in the development of the estimate. For example, as part of its cost estimation process, the project conducted a joint cost and schedule risk analysis, or joint cost and schedule confidence level (JCL), which assigned a 66 percent confidence level to the estimate. In addition, we found that the cost estimate included all life cycle costs for the project. Although NASA’s methods for developing the JWST cost estimate reflect some features of best practices, our review of the estimate showed that based on best practice criteria, it did not fully meet the four characteristics of a reliable estimate. See figure 3.\nSpecifically, the project’s estimate was found to substantially meet the best practice criteria for being comprehensive, and the remaining three characteristics of being well documented, accurate, and credible were found to be only partially met. For example, the accuracy of the cost estimate, and therefore the confidence level assigned to the estimate, was lessened by the schedule used in the JCL analysis because it prevented us from, among other things, identifying the activities that were on the critical path—defined as time associated with activities that drive the overall schedule. The credibility of the estimate was lessened because project officials did not perform a sensitivity analysis that would have identified key drivers of costs, such as workforce size. Although NASA is not required to adhere to these best practices, our prior work has shown that not following best practices for cost estimating can make the cost estimate less reliable, putting projects at risk of experiencing cost overruns, missed deadlines, and performance shortfalls. The best practices stem from practices federal cost estimating organizations and industry use to develop and maintain reliable cost estimates, including the Department of Defense and NASA. According to program officials, it would have been difficult, if not impossible, for the project to have met all of the best practice criteria given the complexity of the project and that some elements of the project are quite mature in their development. Instead, the program manager stated that the project followed a tailored process to develop the cost estimate that was appropriate for the project. Furthermore, officials report the project is currently meeting a majority of its milestones and executing as planned to the revised estimates for the JWST.\nA work breakdown structure reflects the requirements and what must be accomplished to develop a program, and it provides a basis for identifying resources and tasks for developing a program cost estimate. The work breakdown structure should be used to define all program activities and tasks to ensure that the schedule encompasses the entire work. two was not compatible. Finally, although the project outlined and documented the ground rules and assumptions, we were unable to determine whether risks associated with any assumptions were identified and traced to specific elements.\nWell documented: The JWST cost estimate only partially met the criteria for being well documented because it did not include a step-by-step description of how the estimate was developed, the raw data used to develop the estimate, or the calculations and estimating methodology for specific cost elements of the work breakdown structure. Without good documentation, a cost analyst unfamiliar with the program will not be able to replicate the estimate, because he or she will not understand the logic behind it. Good documentation, for example, assists management and oversight in assessing the credibility of the estimate, helps to keep a history of reasons for cost changes and to record lessons learned, defines the scope of the analysis, and answers questions about the approach or data used to create the estimate. Project documentation, however, does provide evidence that NASA management reviewed and accepted the cost estimate because managers were briefed on the technical aspects of the estimate and were provided an overview of the joint cost and schedule risk analysis that was conducted.\nAccurate: The JWST cost estimate only partially met the criteria for being accurate because the projected costs of schedule reserve did not reflect actual data, the summary schedule used to derive the JCL prevented us from sufficiently understanding how risks were incorporated, and the project did not provide evidence that it regularly updates the estimate or plans to conduct another JCL. For example, using historical actual cost data from Northrop Grumman, we estimated that 13 months of schedule reserve is likely to be $204 million instead of NASA’s estimate of $121 million—a potential underestimation of 69 percent related to the schedule reserve. Project officials, however, believe they have adequate reserves available to offset any underestimation. In addition, the summary schedule the project used as an input to the JCL, although deemed acceptable by NASA, contained many long-duration activities, some with 1,000 days or more. Because of these long durations in the summary schedule used for the JCL, the lack of detail prevented us from identifying the activities that were on the critical path, as well as which risks were applied to remaining activities. As a result, there is no way to ensure that risks were appropriately assigned to activities in the schedule to account for the impact of the risks during the JCL analysis.\nFinally, it was unclear whether the cost estimate was regularly updated to reflect material changes in actual costs and in the project itself, such as when schedules or other assumptions change, due to a lack of detailed documentation for the cost estimate. Project officials stated that in keeping with NASA policy they do not plan, nor are they required, to conduct another JCL analysis. GAO’s cost estimating best practices call for estimates to be continually updated through the life of the project, ideally every month as actual costs are reported in earned value management reports, and that a risk analysis and risk simulation exercise—like the JCL analysis—be conducted periodically through the life of the program, as risks can materialize or change throughout the life of a project. Unless properly updated on a regular basis, the cost estimate cannot provide decision makers with accurate information to assess the current status of the project. NASA officials state that the life-cycle cost estimate is updated annually for the budgeting process, and that historical records such as earned value data were used to develop the estimate. They also stated that this information is updated in several different documents being provided to management; however, we were unable to determine how this information was used in updating the cost estimate on a regular basis.\nCredible: The JWST cost estimate only partially met the criteria for being credible because project officials did not adequately test and verify the reasonableness of the cost estimate and the schedule used in conducting the JCL did not have a valid critical path and contained durations that were too long to properly account for risks. For example, project officials said they did not perform a sensitivity analysis for the cost estimate. A sensitivity analysis identifies key elements that drive cost and permits analysis of different outcomes and is often used to develop cost ranges and risk reserves. NASA officials stated that the largest cost driver for the JWST project is the size of the workforce, which could have been subjected to a sensitivity analysis; yet, the cost model did not include a sensitivity analysis that would show how staff increasing or decreasing over time affects cost. In addition, NASA officials believe that all risks were sufficiently accounted for when conducting the JCL, however, the software used to conduct the JCL analysis does not recognize certain risks that officials had placed on activities in the project schedule and, therefore, some risks were discarded during the simulation.\nThe schedule used to conduct the JCL was also summarized at such a high level that the durations were too long to effectively model the risks. For example, one of the activities that drove the launch date was over 4 years in duration and should have been broken down further prior to conducting the simulation. Moreover, the critical path in the JCL schedule consisted of six level of effort activities all with the same duration of 2,238 Level of effort activities should never be on the critical days in length.path because support activities should never drive any milestone finish date. As a result of the schedule used in the JCL not fully meeting best practices, we question the results of the analysis. Furthermore, the risk of having to carry the JWST workforce to support the project if delayed was not included since a sensitivity analysis was not performed. Project officials report that, instead, risk associated with the workforce was factored in when establishing cost reserves.\nIn addition, project officials did not commission an independent cost estimate, which is considered one of the best and most reliable estimate validation methods because it shows whether other estimating procedures produce similar results, and it provides an independent view of expected program costs that tests the program office’s estimate for reasonableness.independent cost estimate has an increased risk of being underfunded An estimate that has not been reconciled with an because the independent cost estimate provides an objective and unbiased assessment of whether the project estimate can be achieved. Notably, however, project officials provided evidence that an independent cost assessment was done for the project at the request of the JWST Standing Review Board, the independent review team for the project, and the assessment was within 2 percent of the project’s estimated cost for the rebaseline. Project officials contend that the approach they used in developing the life-cycle cost estimate for the project is more accurate than the types of approaches often used to develop and independent estimate.", "We did not conduct a full schedule assessment to determine the reliability of the revised schedule based on best practices due to on-going contract negotiations. The project has an integrated master schedule developed as part of the replan; however, it is not finalized because major contract modifications have yet to be negotiated and definitized. Specifically, the modification to the Northrop Grumman contract, which accounts for approximately 40 percent of the total project cost and spans much of the work on the spacecraft and OTE, remains undefinitized more than a year after the project was rebaselined. Once the project completes negotiations for the contract modification and all schedule dates are set, the project can then have a measurable integrated master schedule. Project officials stated that the negotiation process and updating of associated schedules are planned to be complete in January 2013 for the Northrop Grumman contract modification—a year after submission of the latest update to its proposal for the replan. The project also reported that multiple audits of the proposals submitted by Northrop Grumman and its subcontractor by the Defense Contract Audit Agency have delayed definitization. Negotiations for the modification to NASA’s contract with the Space Telescope Science Institute to incorporate the October 2018 launch readiness date are not scheduled to be complete until spring 2013.\nOnce all the contracts have been definitized and the project’s integrated master schedule is baselined, we plan to conduct a comprehensive best practices assessment of the reliability of the project’s schedule estimates.", "Project officials report that the JWST schedule has 14 months of reserve, which meets Goddard guidance for schedule reserve; however, only 7 of the 14 months are likely to be available for the last three of JWST’s five complex integration and test efforts. GAO’s prior work shows that it is during integration and test where problems are commonly found and schedules tend to slip. Given that JWST has a challenging integration and test schedule, this could particularly be the case. The project has made some significant progress in the past year, notably successfully completing development of the 18 primary mirror segments—considered JWST’s top technical risk. Nevertheless, ongoing challenges are indicative of the kinds of issues that can require a significant amount of effort to address. For example, instrument challenges have delayed the first integration and test effort. In addition, key long-term risks on subsystems with a significant amount of work remaining will not be retired until 2016. Currently, NASA’s plan for project oversight calls for one independent system integration review about 13 months before launch. While this is consistent with what NASA requires for its projects, this approach may not be sufficient for a project as complex as JWST. As a result, the current plan may be inadequate to ensure key technical and management issues are identified early enough to be addressed within the current integration and test phase schedule.", "JWST has a complex and lengthy integration and test phase, which includes five major integration and test efforts—ISIM, OTE, OTIS, spacecraft, and observatory. See figure 4 for the project reported dates for the major integration and test efforts and the schedule reserve allocated for each effort.\nOverall, project officials report that the critical path schedule has 14 months of reserve with 7 months after the ISIM and OTE integration and test efforts. If these efforts are delayed beyond those 7 months, they will impinge on the schedule for the remaining three integration and test efforts. Project officials stated that the baseline plan is for the OTIS integration and test effort to not begin earlier than May 2016. These officials reported it is likely that all of the 7 months of schedule reserve held by the OTE subsystem will be utilized during its integration and test prior to delivery to OTIS and that the OTE effort is on the critical path for the project. Therefore, the remaining integration and test efforts—OTIS, Spacecraft, and Observatory—will likely have at most 7 months divided among them to use if issues are found during integration and test.\nIn addition to not likely being able to conserve any of the unused first 7 months of schedule reserve, the project has limited time allocated to the final three integration and test efforts, with between 2 to 4 months for each. This time could be used easily by the project if an issue were to arise during integration and test. An example of this is seen in the OTIS integration and test schedule, which currently has 3 months of schedule reserve. The final event in the OTIS integration and test effort is a lengthy cryo-vacuum test—the first time that the optics integrated with the instruments will be tested at operational temperatures near absolute zero (less than -400 degrees Fahrenheit)—that takes approximately 3 months, due to the requirements of the test. If an issue were to arise during this test that requires shutting the test down and working on the hardware, the chamber would have to be slowly warmed to a temperature safe for removal of the hardware from the chamber, work would be performed, and the 3-month test process would need to begin again. This could easily exhaust the available schedule reserve. Prior GAO work shows that it is during integration and test when problems are commonly found, and schedules tend to slip. A project official confirmed that this is the case because during integration and test the process is more sequential and there is less flexibility to move work around if problems are found. A NASA Inspector General report on the Mars Science Laboratory, another complex and high-cost mission, found that historically the probability that schedule-impacting problems will arise is commensurate with the complexity of the project. JWST is one of NASA’s most technologically complex projects to date.", "The project has made significant progress overcoming several technical challenges over the last year. In December 2011, for example, the project completed development of the 18 segments of the primary mirror—the project’s primary technology risk—approximately 6 weeks ahead of schedule. In addition, project officials stated that during the last year they were also able to accelerate other optics-related work, which added one month of funded reserve to the schedule, bringing the total to 14 months. Finally, the project successfully addressed an increase in the estimated amount of heat on the instruments, which otherwise could have pushed observatory temperatures close to where the optics would not function correctly.\nAlthough technical challenges are being overcome, the project will likely continue to experience additional challenges over the remainder of the project, given the significant portion and complexity of the work remaining. Four of six major subsystems have nearly 50 percent or more of their development work remaining based on its current budget information, although the dollar amounts associated with the work vary. See figure 5.\nCurrently, the project is experiencing several technical issues that have required a significant amount of time and effort to address. For example, the spacecraft subsystem, which experienced delays in development prior to the replan, is currently estimated to be heavier than its mass limit.Spacecraft development has lagged behind other subsystems because it was viewed as a lower risk part of the project and was therefore not allocated funding when budgets were limited prior to the replan. In March 2010, the project passed its mission critical design review, which evaluated the project design and its ability to meet mission requirements and indicated that the design was ready for fabrication phase; however, the spacecraft was not included in this review due to its delayed development. Under the initial replan, which had constrained funding in fiscal years 2011 and 2012, the spacecraft critical design review was scheduled for June 2014; however, due to additional funding in the final agency-approved replan, the project was able to accelerate work and this review is now planned for December 2013.\nProject officials have been concerned with the mass of JWST since its inception because of the telescope size and the limits of available launch vehicles. Accordingly, mass limits have been allocated for each subsystem, including the spacecraft. Project officials stated that they expected to encounter mass growth on the spacecraft, but that the magnitude of the mass growth on the spacecraft was unexpected. As shown in figure 6, the current spacecraft projected mass exceeds its mass allocation.\nPrimary drivers of the mass growth on the spacecraft are increases in the estimated weight of the wiring harnesses, which distribute power and electric signals between different parts of the observatory, the solar array, and other structures that make up the spacecraft. The burden to find ways to reduce mass has been primarily placed with the spacecraft because it was assessed by the project to have the least technical risk and because it is the least mature subsystem and can more easily accommodate design changes. Over 100 kilograms, or 220 pounds, of mass savings options are being evaluated by the project and Northrop Grumman, which is developing the spacecraft. Potential mass solutions have been identified by Northrop Grumman and the project; however, cost and risk vary with each solution and the project is still evaluating the trade-offs of the various solutions. Project officials stated that final decisions for all tradeoffs will need to occur before spacecraft critical design review in December 2013.\nThe ISIM subsystem is experiencing technology and engineering challenges that resulted in the use of 18 of ISIM’s 26 months of schedule reserve. The schedule for the instruments needed for ISIM continues to slip, which could result in use of more schedule reserve. Based on the replan, all four instruments were to be delivered by September 2012; however, only two instruments were delivered by that time and those still have issues that must be addressed. The remaining two instruments are currently scheduled to be delivered at least 11 months late. See table 1 below for the instrument specific issues.\nIn addition to the instrument delays, two other technical challenges associated with ISIM are: (1) the detectors used by three of the four instruments to capture infrared light in space are degrading and may need to be replaced, resulting in the addition of another round of cryo- vacuum testing—in which a test chamber is used to simulate the near absolute zero temperatures in space, and (2) issues with the development of the cryo-cooler system that removes heat and cools MIRI. In December 2010 the project became aware that the detectors in three of the instruments were degrading.million and 15 months of schedule reserve to replace the detectors were included in the replan. These additions covered the cost of manufacturing the detectors; fabrication, assembly, and test of new focal plane assemblies; changing the detectors on three instruments, and the addition of a third ISIM cryo-vacuum test. The manufacturing process for new detectors takes approximately 30 months, which means that they cannot be delivered until after the second round of ISIM cryo-vacuum testing in 2014. As a result, $2 million of the $42 million in the replan was used to add a third round of cryo-vacuum testing for ISIM. The third test will validate the performance requirement of the ISIM and is the only time the instruments are tested with the flight detectors. Changing the detectors requires disassembling the instruments from ISIM, a process that will risk damage to the structure and instruments. Project officials stated that they will continue to monitor the degradation rate of the current detectors because if the degradation rate is low, they may not replace the detectors.\nAs a result, approximately $42 Development issues with a part of the cryo-cooler needed for MIRI have delayed its delivery to ISIM. In 2010, project officials realized that an essential valve in the cryo-cooler was leaking at rates that exceeded requirements. Following the results of a failure review board, the contractor manufactured a newly designed valve, but it also did not meet leak rate requirements. Project officials stated that a new valve design will not be manufactured in time for use in the first ISIM cryo-vacuum test. The project is concurrently developing three alternatives and authorized manufacturing for one of the alternatives in October 2012. Project officials stated that the MIRI cryo-cooler is particularly complex because it spans approximately 10 meters—or approximately 33 feet—through the entire JWST observatory. These issues combined required the use of 18 months of schedule reserve, which reduced ISIM’s schedule reserve from the 26 months established in the replan to 8 months before it is needed for integration with the OTIS subsystem.\nThese types of issues are not uncommon among NASA programs as technical issues tend to arise when disparate parts are integrated and tested together for the first time. Given the complexity and cutting edge technology developed and used on JWST, it is expected that these kinds of issues will continue to materialize as the program moves through its complex integration and test program. Figure 7 shows the delay of instrument deliveries as well as changes to the ISIM integration and test and final delivery dates over the last year.\nUntil the project is able to overcome the major issues with the instruments and other parts of the ISIM, it is likely that the schedule would continue to slip and may begin to affect the overall project schedule. ISIM still has 8 months of schedule reserve before the slipping of its schedule would affect the schedule for the remainder of the project. The instrument, detector, and cryo-cooler issues have all contributed to the delay in the ISIM integration and test schedule and the reduction of objectives that can be achieved in the first two rounds of cryo-vacuum testing. The first round of testing will not include two instruments, a final design of the cryo- cooler hardware, or new detectors. As a result project officials will only be able to gather risk reduction information on the FGS/NIRISS, MIRI, test procedures, and test support equipment from the first cryo-vacuum test.\nThe project also has several known long term risks and challenges remaining. For example, risks related to OTIS, the sunshield, and the ground system subsystems are not scheduled to be addressed until late in project development. As of October 2012, seven of the top 10 project risks were related to the long-term risks associated with the OTIS and sunshield, most of which will not be resolved until 2016 or later. For example, several risks relating to OTE are not scheduled to be closed until the OTIS testing in the chamber at Johnson Space Center in February 2017. Project officials are adding risk mitigation through early and additional testing, where possible, to these subsystems. Prior to the replan, the ground system software was at high risk for not being completed before launch and many tasks were planned for completion after launch. Space Telescope Science Institute officials stated that the replan allows them to plan for completion of their work before launch on a more realistic time schedule, which decreases schedule and operational risk. A continuing challenge on the ground system is that some development and testing is dependent on the final design of subsystems such as the instruments, which continue to slip delivery dates.", "The project plans to hold independent and management reviews required for all projects during the integration and test phase, but this phase for JWST is particularly complex. JWST has five major integration and test efforts that span 7 years and only one independent mission-level technical review—the system integration review. The system integration review evaluates the readiness of the project and associated supporting infrastructure to begin system assembly, integration, and test, and evaluates whether the remaining project development can be completed within available resources. For JWST, this review is scheduled in September 2017, only 13 months prior to launch. Projects we reviewed that had recently launched, however, held their system integration review on average approximately 22 months prior to launch. The project has an internal review with participation from standing review board members planned before the beginning of OTIS integration and test activities begin, and it will be subject to independent lower level reviews conducted by the Goddard Systems Review Office of the integration and test process. In addition, key decision point D (KDP-D)—when the senior agency decision authority would approve the project to proceed into the system integration and test phase—is scheduled for December 2017, 3 months after the commencement of the final major integration and test activity. According to NASA policy, this review should be held prior to the start of the system integration and test phase of the project.shows that over 90 percent of expected integration and test funding will be spent on four major integration and test activities prior to the scheduled mission-level system integration review and KDP-D approval by NASA senior management. As a result, the current plan may be inadequate to ensure that key technical and management issues are identified early enough to be addressed within the current integration and test phase schedule.", "The JWST project has taken steps to improve communications and oversight of its contractors as part of the replanning activities. For example, based on recommendations from the ICRP, the project has instituted meetings at various levels throughout NASA and its contractors and subcontractors. In addition, the project has added personnel at contractor facilities, which has allowed for more direct interaction and quicker resolution of issues. The project also assumed responsibility of the mission-level systems engineering function from Northrop Grumman, a move that shifts the authority to make trades or decisions to NASA. An independent NASA review of the project conducted in May 2012 found, however, that agencywide reductions in travel budgets have put the effectiveness of the JWST project’s oversight plans in jeopardy. While the project received partial relief from travel budget reductions in fiscal year 2012, project officials are concerned that the current level of oversight will not be sustained if similar cuts in travel funding occur in future years as anticipated. The project is also taking steps to enhance its oversight of project risks by implementing a new risk management system. The new project manager found that the previous system lacked rigor and was relatively ineffective for managing project risks, especially for a project as complex as JWST. The new system should allow for better tracking of risks than did the previous system. While these enhancements to the oversight of the project are steps in the right direction, it will take time to assess their effectiveness.", "Based on recommendations in the ICRP report, NASA has taken action to enhance oversight and communications. See table 2 for the ICRP recommendations and actions taken by NASA in response.\nNASA has taken steps to increase communication between the project and its contractors and subcontractors in an effort to enhance oversight. According to project officials, the increased communication has allowed them to better identify and manage project risks by having more visibility into contractors’ activities. The project reports that a great deal of communication existed across the project prior to the ICPR and replan; however, improvements have been made. For example, monthly meetings between project officials at Goddard and all of the contractors have continued on a regular basis and include half-day sessions devoted to business discussions. The project reports that these meetings have benefits over other forms of communication. For example, it was through dialogue with several technical leads at Northrop Grumman during detailed reviews of analytical models that the project identified that the mass issue on the spacecraft was likely to occur.\nIn addition, the project has increased its presence at contractor facilities as necessary to provide assistance with issues. For example, the project has had two engineers working on a recurring basis at Lockheed Martin to assist in solving problems with the NIRCam instrument. The ISIM manager said that these engineers have insight into Lockheed Martin’s work and are having a positive effect as they offer technical help and are involved in devising the solutions to issues. He added that that these engineers have authority to make decisions on routine issues to allow the work flow to continue, but decisions that are more complex or require a commitment of funds are communicated to project management for disposition. The project reports that the Jet Propulsion Laboratory, responsible for NASA contribution to the MIRI instrument and its associated cryo-cooler, has an in-house representative in the responsible Northrop Grumman division to monitor the work being performed on the cryo-cooler.\nThe JWST project also assumed full responsibility for the mission system engineering functions from Northrop Grumman in March 2011. NASA and Northrop Grumman officials both said that NASA is better suited to perform these tasks. Project officials stated the systems engineering requires the ability to make trades and decisions across the entire observatory, and because Northrop Grumman is only responsible for portions of the observatory, it did not have the authority to make trades or decisions for areas outside of its control. Although responsibility for the overall mission systems engineering function was removed from Northrop Grumman, it retains system engineering responsibility for work still under its contract, such as development of the spacecraft and sunshield. The ICRP noted that a highly capable, experienced systems engineering group is fundamental to project success and appropriate to ensure accountability especially for a project of JWST’s complexity and visibility.\nWhile these enhancements to the oversight of the project are steps in the right direction, it will take time to assess their effectiveness. In addition, sustainment of these efforts on the part of the project will be important. Project and contractor officials we spoke with believe that the increased communication has had a positive effect on the relationships between them. We will continue to monitor the interaction between the project and its contractors and its frequency in future reviews to identify whether the changes have had the desired results.", "The JWST project reported that its travel budget was reduced by approximately $200,000 from the $1.2 million planned in fiscal year 2012 as a result of NASA’s implementation of an Executive Order to promote According to project officials, the changes in more efficient spending.oversight necessitated by a reduction in travel funds represent a major shift away from the management paradigm adopted during the replan. Proposed reductions in future fiscal years could significantly reduce the project’s travel budget. The project reports that the travel requirements for fiscal years 2013 through 2015 are $1.6 million, $1.7 million, and $1.8 million, respectively. Officials reported that while travel is a small percentage of the project’s annual budget, the majority of expected travel—about 87 percent—is for oversight functions put in place as a result of the ICRP recommendations, such as having a permanent on-site presence at Northrop Grumman. These oversight functions include attending and participating in contractor monthly programmatic and technical reviews, technical interface meetings, recurring on-site presence at contractor facilities for quality assurance reviews and inspection of hardware. JWST project officials are concerned that decreased oversight could translate into the project increasing its use of cost and schedule reserves as they will not be conducting planned oversight to better ensure success. A recent NASA Office of Evaluation review concluded that by not having an adequate travel budget, the project is at risk of cost/schedule growth and/or technical risk due to the late identification of issues or timely resolution strategies. The project has made adjustments to absorb the reduction in fiscal year 2012 and plans to identify instances of increased cost or schedule risk due to late identification of issues. However, the project does not have a strategy to address anticipated future reductions. Ensuring adequate oversight is particularly important as the project begins its complex and lengthy test and integration phase, where issues will likely surface.", "As part of NASA’s approach to increase oversight of the project at headquarters, NASA’s Office of Evaluation recently conducted an independent review of the JWST project to assess the progress since the September 2011 rebaseline was approved. According to the Director of the Office of Evaluation, the goal of the review was not to reproduce the replan assessment, but rather to assess progress based on cost, schedule, and technical performance of the project and the status of oversight functions within NASA headquarters, the JWST Program Office, and Goddard Space Flight Center. The intended outcome of the review was 1) to obtain a snapshot of performance to determine if the program was progressing in accordance with its plan, and 2) to identify leading indicators for upper management to use when tracking future performance. The review team identified several areas of concern within the program, many of which we have highlighted, and recommended a list of leading indicators that project management should consider tracking.\nThe Director of the Office of Evaluation said that the project is generally performing the activities and maintaining the schedule set forth in the replan; however, the team identified key areas that should be monitored as the project moves forward. The review team also recommended a set of leading indicators for project management to consider tracking to measure and monitor progress. The Director added that these indicators are for the project to use and would not be specific criteria for use by independent review boards such as the Standing Review Board. These indicators are a positive step to ensure that NASA management has the information necessary to monitor the progress of the JWST project. See table 3 below for the concerns raised by the review team.\nThe new JWST project manager re-emphasized the importance of the project’s risk management system and, in August 2012, a new risk management database was implemented to support the system. The project manager told us that he evaluated the risk management system being utilized by the project when he assumed his position and found it to be ineffective and not robust, especially for a project as complex as JWST. While the basic risk management methodology remains unchanged, the project manager wanted a more regimented system. For example, the project utilizes a hierarchy of risk boards that periodically reviews and provides disposition of all new and existing risks. These risk boards reviewed and assessed new risks and lower level risk board actions and met on an ad hoc basis. The project manager instituted a more regimented system that re-emphasized and revised the weekly project risk board meetings. Lower level risk boards meet a minimum of once a month depending on activity.\nThe project manager also determined that a new risk management database needed to be put in place that would bring more rigor to the risk management process. The project manager told us that he directed an overhaul of the risk management database to provide more complete information to management on the purpose and history for each risk. The goal was to improve consistency in how the project determined the potential for a risk to occur and its impact, and provide greater detail on mitigation and better tracking of the status for each risk. For example, the new system puts more emphasis on understanding and capturing the key events in the mitigation plan that are intended to result in a change in likelihood or consequence of a risk. The new system has a provision where the mitigation plan will be entered and updated over time, and the capability to store data such as mitigation steps throughout the life of the risk. In addition, the new system now archives data automatically to provide a traceable history of the risk. The prior data system did not have as robust of an archiving function. Furthermore, the project manager wanted to improve the linkage between the risk database entries and financial records to ensure consistency of the data in the risk database with regard to cost and schedule for risk mitigations with project office financial records. As the changes to the risk management system and database, as well as other changes we identified that were put in place to enhance oversight were just recently implemented, we will continue to monitor their continued use and assess the impact they may be having on the project.", "The JWST project is among the most challenging and high-risk projects NASA has pursued in recent years. It is also one of the most expensive, with a recent major replan resulting in a total cost of $8.8 billion. The reasons for cost and schedule growth were largely recognized by an independent review team to be rooted in ineffective funding, management, communication, and oversight. NASA has invested considerable time and resources replanning the project and instituting management and oversight improvements in order to ensure that it (1) can be executed within its new estimates and (2) has addressed the majority of issues raised in the recent independent review. It appears that communications with contractors and within NASA have improved, that a more robust risk mitigation system is in place, that more is known about what it will take to complete the project and how much it will cost, and that the project is currently meeting the majority of its milestones. Nevertheless, over the course of the next several years, the project will be executing a large amount of work with several extremely complex and challenging integration and test efforts. Because three major test and integration efforts must be completed in the last 2 years of the JWST schedule, it is essential that issues are identified and addressed early enough to be handled within the project’s current schedule. While the JWST oversight plan is consistent with NASA’s requirements for all project’s required reviews, a single independent review scheduled just over a year before launch may not be sufficient to identify and resolve problems early for a project of this magnitude. A key element of overseeing project progress is monitoring how the project is executing to its cost baseline. To that end, while NASA took some steps that were in line with best practices to develop its revised baseline, some of the deficiencies we found in its process could impact the reliability of the cost estimate and the joint cost and schedule confidence level that was provided to headquarters decision-makers. Without higher-fidelity, regularly updated information related to costs, as well as an oversight regime during later phases of test and integration that is commensurate with the complexity of that effort, NASA risks late identification of technical and cost issues that could delay the launch of JWST and increase project costs beyond established baselines. Also important to oversight for the remainder of the project is the ability of officials to sustain improvements to communication with and oversight of contractors. Anticipated travel restrictions, however, could decrease the project team’s ability to sustain these actions. Without a plan to address such reductions in future years, the project could once again become susceptible to communication and oversight problems identified in earlier reviews, which could also have a detrimental impact on continued project performance.", "To ensure that the JWST life-cycle cost estimate conforms to best practices, GAO recommends that the NASA Administrator direct JWST officials to take the following three actions to provide high-fidelity cost information for monitoring project progress: improve cost estimate documentation and continually update it to reflect earned value management actual costs and record any reasons for variances, conduct a sensitivity analysis on the number of staff working on the program to determine how staff variations affect the cost estimate, and perform an updated integrated cost/schedule risk analysis, or joint cost and schedule confidence level analysis, using a schedule that meets best practices and includes enough detail so that risks can be appropriately mapped to activities and costs; historical, analogous data should be used to support the risk analysis.\nTo ensure that technical risks and challenges are being effectively managed and that sufficient oversight is in place and can be sustained, GAO recommends that the NASA Administrator direct JWST officials to take the following three actions: conduct a separate independent review prior to the beginning of the OTIS and spacecraft integration and test efforts to allow the project’s independent standing review board the opportunity to evaluate the readiness of the project to move forward, given the lack of schedule flexibility once these efforts are under way, schedule the management review and approval to proceed to integration and test (key decision point D or KDP-D) prior to the start of observatory integration and test effort, and devise an effective, long-term plan for project office oversight of its contractors that takes into consideration the anticipated travel budget reductions.", "NASA provided written comments on a draft of this report. These comments are reprinted in appendix IV. NASA also provided technical comments, which were incorporated as appropriate.\nIn responding to a draft of this report, NASA concurred with three recommendations and partially concurred with three other recommendations and commented on actions in process or planned in response. In some cases, these actions meet the intent and are responsive to issues we raise; however, some of the responses do not fully address the issues we raised in the report.\nNASA partially concurred with our recommendation to improve the cost estimate documentation of the JWST project, and to continually update it to reflect earned value management actual costs and record any reasons for variances between planned and actual costs. In response to this recommendation, NASA officials stated that the project currently receives earned value data from some of its contractors and performs monthly analysis of that data to understand the contractors’ estimates at completion, and then compares these numbers to similar figures independently assessed by the JWST project. NASA also highlighted its efforts to improve the agency’s documentation of the earned value variances and to extend the earned value management analysis to areas where it is not yet implemented, such as ground systems development at the Space Telescope Science Institute. In addition, NASA responded that its annual budget process generates a requirements-driven budget plan consistent with the rebaseline. NASA stated that this information is updated in several different documents that are provided to management and it does not plan to revise its JCL documentation developed during the replan. Despite these steps, we could not independently confirm that they were leading to an updated cost estimate, which is the basis of our recommendation. If the estimate is not updated, it will be difficult to analyze changes in project costs and collecting cost and technical data to support future estimates will be hindered. Furthermore, if not properly updated on a regular basis, the cost estimate cannot provide decision makers with accurate information for assessing alternative decisions. Without a documented comparison between the current estimate (updated with actual costs) and the old estimate, the cost estimator cannot determine the level of variance between the two estimates and cannot see how the project is changing over time. Therefore, we continue to believe NASA will be well served by following best practices and updating its cost estimate with current information and documenting reasons for any variances. We encourage the project to improve the cost estimate documentation and record any reasons for variances between planned and actual costs and we intend to review the documentation as a part of our ongoing review of the project.\nNASA officials partially concurred with our recommendation that the project conduct a sensitivity analysis on the number of staff working on the project to determine how staff variations affect the cost estimate. In its response, the agency stated that it believes it met the intent of this recommendation when staffing levels were determined in the 2011 JWST rebaseline based on programmatic experience from the accomplishment of similar activities. To accommodate the possibility of increased costs based on increased staffing hours, NASA reports that funded schedule reserve was built into the JWST rebaseline, in addition to unallocated future expenses being held at various levels of the organization. NASA believes that these reserves will be sufficient to cover increases for the duration of specific activities that result in increased staffing cost, and that an additional workforce sensitivity analysis is not warranted. NASA added that the joint cost and schedule confidence level analysis performed provided a de facto workforce sensitivity analysis and does not plan any further action. A joint cost and schedule confidence level analysis, however, is not the same as a sensitivity analysis wherein the sources of the workforce variation should be well documented and traceable. While we appreciate the steps NASA took to account for workforce variation, the JWST cost model does not show how staff levels increasing or decreasing over time affects cost. Furthermore, best practices call for a risk analysis to be conducted in conjunction with a sensitivity analysis, not to be a substitute for it. As a best practice, a sensitivity analysis should be included in all cost estimates because it examines the effects of changing assumptions and ground rules. Since uncertainty cannot be avoided, it is necessary to identify the cost elements that represent the most risk and, if possible, cost estimators should quantify the risk. Without performing a sensitivity analysis that reveals how the cost estimate is affected by a change in a single assumption, such as workforce size, the cost estimator will not fully understand which variable most affects the cost estimate. Therefore, we continue to believe that NASA should conduct a sensitivity analysis for the JWST project, given the large number of staff working on the program, to determine how staff variations positively or negatively affect the cost estimate rather than relying on schedule reserve and unallocated future expenses to offset any shortfall.\nNASA concurred with our recommendation to perform an updated integrated cost and schedule risk analysis using a schedule that meets best practices and includes enough detail so that risks can be appropriately mapped to activities and costs. In response to this recommendation, NASA stated that the agency is already using tools and a method to conduct programmatic assessments of projects after the baseline was established using the JCL methodology. While these may be good tools, the key point is the need to address shortcomings of the schedule that supports the baseline itself. For example, the lack of detail in the summary schedule used for the joint cost and schedule risk analysis prevented us from sufficiently understanding how risks were incorporated; therefore, we question the results of that analysis. Since the JCL was a key input to the decision process of approving the project’s new cost and schedule baseline estimates, we maintain that the JWST project should perform an updated JCL analysis using a schedule with sufficient detail to map risks to activities and costs. Doing so could help increase the reliability of the cost estimate and the confidence level of the JCL. Furthermore, risk management is a continuous process that constantly monitors a project’s health. Given that JWST is many years from launch and the risks that the project faces are likely to change, a risk analysis should be conducted periodically throughout the life of the project.\nNASA concurred with our recommendation to conduct a separate independent review prior to the beginning of the OTIS and spacecraft integration and test efforts. In response to this recommendation, NASA stated that it will request members of the independent JWST Standing Review Board participate in OTIS Pre-Environmental Review scheduled prior to the beginning of OTIS environmental testing. A member of the Standing Review Board will co-chair this review and report its findings to the NASA Associate Administrator, which is the practice of all Standing Review Board reviews. In addition, NASA plans to direct Northrop Grumman, the spacecraft developer, to add members of the Standing Review Board, as well as members of the Goddard Independent Review Team, to the spacecraft element integration readiness review and report their findings to the NASA Associate Administrator. We believe these actions meet the intent of our recommendation and will afford an independent evaluation of the readiness of the project to move forward with its major integration and test efforts.\nNASA partially concurred with our recommendation to schedule the management review and approval to proceed to integration and test (KDP-D) prior to the start of the observatory integration and test effort. In response to this recommendation, NASA stated that it will reduce the 3- month gap between the scheduled system integration review and the KDP-D review, which it believes will provide NASA management and the NASA Associate Administrator with the full independent assessment earlier than currently planned. While we agree that this change will move the review earlier than previously planned, based on its response, NASA still plans to hold the review after the observatory integration and test is already underway. Holding this review after the observatory integration and test effort is already underway does not meet agency policy and will lessen the impact of the review as it may be inadequate to ensure key technical and management issues are identified early enough to be addressed. KDP-D is the point in which management approval is given to transition to the test and integration phase. We reiterate our recommendation that NASA should hold this important key decision point prior to the beginning of this last major integration and test effort, as required by agency policy.\nNASA concurred with our recommendation to devise an effective, long- term plan for project office oversight of its contractors that takes into consideration the anticipated travel budget reductions. In response to this recommendation, NASA stated that it will develop a plan based on fiscal year 2013 travel allocations and will take into consideration anticipated travel budget reductions. In addition, NASA stated that the plan will enable the project to maintain oversight of JWST contractors and their ability to meet performance and delivery deadlines and work closely with the international partners. We believe such a plan will be critical to ensuring adequate oversight, which is particularly important as the project enters into the complex integration and test efforts where issues will likely surface. In addition, we agree with the concerns of project officials that the current efforts to increase communication and oversight may not be sustained if reductions to future travel budgets occur as anticipated. We encourage the project to complete this plan in a timely manner and intend to review it as a part of our ongoing assessment of the project’s oversight efforts.\nWe will send copies of the report to NASA’s Administrator and interested congressional committees. We will also make copies available to others upon request. In addition, the report will be available at no charge on GAO’s web-site at http://www.gao.gov.\nShould you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "Our objectives were to assess (1) the extent to which NASA’s revised cost and schedule estimates are reliable based on GAO best practices, (2) the major risks and technological challenges the James Webb Space Telescope (JWST) project faces, and (3) the extent to which the National Aeronautics and Space Administration (NASA) has improved the oversight of the JWST project. In assessing the project’s cost and schedule estimates, we performed various checks to determine that the provided data were reliable enough for our purposes. Where we discovered discrepancies, we clarified the data accordingly. Where applicable, we confirmed the accuracy of NASA-generated data with multiple sources within NASA.\nNorthrop Grumman, the Space Telescope Science Institute, and the JWST program and project offices. After reviewing cost estimate documentation submitted by NASA and conducting numerous interviews with relevant sources within the project office, we calculated the assessment rating of each criteria within the four characteristics by assigning each individual assessment rating: Not Met = 1, Minimally Met = 2, Partially Met = 3, Substantially Met = 4, and Met = 5. We then took the average of the individual assessment ratings for the criteria to determine the overall rating for each of the four characteristics. The resulting average becomes the “Overall Assessment” as follows: Not Met = 1.0 to 1.4, Minimally Met = 1.5 to 2.4, Partially Met = 2.5 to 3.4, Substantially Met = 3.5 to 4.4, and Met = 4.5 to 5.0. We discussed the results of our assessments with officials within the program office at NASA headquarters and the project office at Goddard Space Flight Center.\nWe supplemented the assessment of the revised 2011 cost estimate with an assessment of the summary schedule used for the JCL, which was a part of the project’s cost estimation process, and followed criteria laid out in the GAO schedule guide. These practices address whether the schedule (1) captured all activities; (2) sequenced all activities—that is, listed in the order in which they are to be carried out; (3) assigned resources to all activities; (4) established the duration of all activities; (5) integrated schedule activities horizontally and vertically, which identifies whether products and outcomes associated with other sequenced activities are arranged in the right order, and that varying levels of activities and supporting subactivities are also aligned properly; (6) established for all activities, the critical path, which is the longest continuous sequence of activities that is necessary to examine the effects of activities slipping in the schedule; (7) identified between activities float, which is the amount of time by which a predecessor activity can slip before the delay affects the program’s estimated finish date; (8) identified a level of confidence using a schedule risk analysis; and (9) was updated using logic and durations to determine dates. We also reviewed the inputs to the JCL model, the document outlining the methodology of the analysis that accompanied the electronic files, and interviewed cognizant project officials to discuss their use of the summary schedule.\nBecause the project’s detailed integrated master schedule has not been finalized because of ongoing negotiations and contract modifications, we did not conduct a complete schedule analysis using the GAO schedule assessment guide. We plan to perform this assessment in a subsequent review of the JWST project.\nTo assess the major short- and long-term risks and technological challenges facing the project, we reviewed the project’s risk list, monthly status reviews, and other documentation provided by projects and contractor officials. This information covered the risks, mitigation plans, and timelines for addressing risk and technological challenges. We also interviewed project officials for each major observatory subsystems to clarify information and to obtain additional information on risks and technological challenges. Further, we interviewed officials from the Jet Propulsion Laboratory, Northrop Grumman Aerospace Systems, Lockheed Martin Advanced Technology Company, Teledyne Imaging Sensors, the University of Arizona, and the Space Telescope Science Institute concerning risks and challenges on the subsystems, instruments, or components they were developing. We reviewed GAO’s prior work on NASA Large Scale Acquisitions, NASA Office of Inspector General reports, and NASA’s Space Flight Program and Project Management Requirements and Systems Engineering Processes and Requirements We compared NASA’s controls as outlined in these policy documents.agency policies with the project plan to assess the extent to which the JWST’s plan followed the intent of the policies with regard to independent oversight and management approval processes.\nTo assess the extent to which NASA is performing enhanced oversight of the JWST project, we reviewed documentation from the Independent Comprehensive Review Panel and the project to determine actions taken by NASA in response to the panel’s recommendations. We interviewed project officials to understand the impact of these changes on the oversight processes for the project and communication between the project and its contractors. We also interviewed officials from the Jet Propulsion Laboratory, Northrop Grumman Aerospace Systems, Lockheed Martin Advanced Technology Company, Teledyne Imaging Sensors, the University of Arizona, and the Space Telescope Science Institute concerning project oversight of work they were performing and the effectiveness of oversight changes. In addition, we reviewed a presidential directive and Office of Management and Budget and project documentation and interviewed project officials concerning the reductions to travel budgets and their impact on project oversight activities. We interviewed the Director of NASA’s Office of Evaluation about a recent internal review of the JWST project and reviewed documentation from that review. We also reviewed documentation and interviewed project officials concerning the changes made to the project’s risk management system.\nOur work was performed primarily at NASA Headquarters in Washington, D.C., and Goddard Space Flight Center in Greenbelt, Maryland. We also visited Johnson Space Center in Houston, Texas, and the Jet Propulsion Laboratory in Pasadena, California. In addition, we met with representatives from Northrop Grumman Aerospace Systems, Lockheed Martin Advanced Technology Company, Teledyne Imaging Sensors, the University of Arizona, and the Space Telescope Science Institute.\nWe conducted this performance audit from February 2012 to December 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "In determining that the National Aeronautics and Space Administration’s (NASA) processes for developing the James Webb Space Telescope (JWST) cost estimate do not fully comply with best practices, we evaluated the project’s cost estimation methods against our 2009 Cost Estimating and Assessment Guide. (See table 4.) We applied the following scale across the four categories of best practices:\nNot met: NASA provided no evidence that satisfies any portion of the criterion.\nMinimally met: NASA provided evidence that satisfies less than one- half of the criterion.\nPartially met: NASA provided evidence that satisfies about one-half of the criterion.\nSubstantially met: NASA provided evidence that satisfies more than one-half of the criterion.\nMet: NASA provided complete evidence that satisfies the entire criterion.", "", "", "", "In addition to the contact named above, Shelby S. Oakley, Assistant Director; Karen Richey, Assistant Director; Richard A. Cederholm; Laura Greifner; Cheryl M. Harris; David Hulett; Jason Lee; Kenneth E. Patton; Sylvia Schatz; Stacey Steele; Roxanna T. Sun; Jay Tallon; and Jade A. Winfree made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "h3_full", "", "h0_full", "", "h1_full", "", "", "", "h2_full", "h2_full", "", "", "h3_full", "", "h2_full", "h3_full", "", "h0_full", "", "", "", "" ] }

{ "question": [ "What does the current cost estimate of JWST reflect?", "How specifically did the current cost estimate use best practices?", "What was the cost estimate lacking?", "How was the estimate's accuracy and confidence level lessened?", "Why was the credibility of the estimate lessened?", "What does GAO believe?", "What is the problem with the amount of reserve JWST has?", "How might JWST encounter problems?", "What ongoing challenges does JWST have?", "What does NASA's plan for project oversight call for?", "How has JWST improved communications of the oversight of the project and its contractors?", "What is the projected view of the enhancements to the oversight project?", "What could require the oversight approach to be changed?", "How will this problem be addressed?", "What is the purpose of JWST?", "How has the cost of JWST changed?", "Why did GAO report on JWST?", "What did GAO assess?", "How did GAO get information for the report?" ], "summary": [ "Its current cost estimate reflects some features of best practices for developing reliable and credible estimates.", "For example, the estimate substantially meets one of four cost characteristics--comprehensive--that GAO looks for in a reliable cost estimate, in part because all life cycle costs were included.", "The estimate, however, only partially met the other three characteristics--well documented, accurate, and credible--which detracts from its reliability.", "For example, the estimate's accuracy, and therefore the confidence level assigned to the estimate, was lessened by the summary schedule used for the joint cost and schedule risk analysis because it did not provide enough detail to determine how risks were applied to critical project activities.", "The estimate's credibility was also lessened because officials did not perform a sensitivity analysis that would have identified key drivers of costs, such as workforce size.", "GAO believes there is time to improve the estimate and enhance the prospects for delivering the project according to plan.", "Project officials report that the JWST schedule has 14 months of reserve, which meets Goddard guidance for schedule reserve; however, only 7 of the 14 months are likely to be available for the last three of JWST's five complex integration and test efforts. GAO's prior work shows that the integration and test phases are where problems are commonly found and schedules tend to slip.", "GAO's prior work shows that the integration and test phases are where problems are commonly found and schedules tend to slip. Given that JWST has a challenging integration and test schedule, this could particularly be likely.", "For example, instrument challenges have delayed the first integration and test effort. In addition, key long-term risks on subsystems with a significant amount of work remaining will not be retired until 2016.", "Currently, NASA's plan for project oversight calls for one independent mission-level system integration review about 13 months before launch.", "JWST has taken several steps to improve communications and oversight of the project and its contractors--such as taking over responsibility for mission systems engineering from the prime contractor; instituting meetings that include various levels of NASA, contractor, and subcontractor management; and implementing a new risk management system to allow for better tracking of risks.", "The enhancements to the oversight of the project are steps in the right direction, but it will take time to assess their effectiveness and ensure that the efforts are sustained by the project in the future.", "Reductions in travel budgets, however, could require the project to adjust the oversight approach that was adopted as a result of the replan.", "Additional reductions in travel budgets are anticipated in future years, but officials do not have a plan to address such reductions and their potential impact on continuing the current oversight approach.", "JWST is one of NASA's most expensive and technologically advanced science projects, intended to advance understanding of the origin of the universe.", "In 2011, JWST was rebaselined with a life cycle cost estimate of $8.8 billion and a launch readiness date in October 2018--almost nine times the cost and more than a decade later than originally projected in 1999.", "Concern about the magnitude of JWST's cost increase and schedule delay and their effects on NASA's progress on other high-priority missions led conferees for the Consolidated and Further Continuing Appropriations Act, 2012, to direct GAO to report on the project.", "Specifically, GAO assessed (1) the extent to which NASA's revised cost and schedule estimates are reliable based on best practices, (2) the major risks and technological challenges JWST faces, and (3) the extent to which NASA has improved oversight of JWST.", "To do this, GAO compared NASA's revised cost and schedule estimates with best practice criteria, reviewed relevant contractor and NASA documents, and interviewed project and contractor officials." ], "parent_pair_index": [ -1, 0, 0, -1, -1, -1, -1, 0, -1, -1, -1, 0, 0, 2, -1, 0, -1, 2, 2 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 0, 0, 0, 0, 0 ] }

{ "title": [ "", "Introduction", "New Source Performance Standards (NSPS)", "Regulating Existing Sources Under Section 111", "EPA's NSPS Proposals for EGU Greenhouse Gas Emissions", "Emission Limits9", "EPA's Cost-Benefit Analysis", "Questions Regarding the Re-proposed Rule", "Has CCS Been Adequately Demonstrated?", "Should Cost and/or Energy Considerations Have Led EPA to Propose a Less Stringent Standard?", "Should EPA Promulgate Separate Standards for Coal- and Gas-Fired Units?", "Is the Standard Barred by Statutory Language?", "Guidelines for Existing Power Plants", "Congressional Responses", "Conclusion" ], "paragraphs": [ "", "Since 2009, the Environmental Protection Agency (EPA) has begun to address emissions of greenhouse gases (GHGs) from both mobile and stationary sources, using broad regulatory authority provided by Congress decades ago in the Clean Air Act. Although Congress has never specifically directed EPA to regulate emissions of GHGs, the Clean Air Act as enacted in 1970 and as amended in 1977 and 1990 gave the agency authority to identify air pollutants and promulgate regulations to limit their emission.\nFrom the late 1990s until 2007, EPA and various interested parties debated whether that authority covered greenhouse gases. This debate was settled by the Supreme Court in April 2007, in Massachusetts v. EPA . In a 5-4 decision, the Court found that greenhouse gases are unambiguously air pollutants:\nThe Clean Air Act's sweeping definition of 'air pollutant' includes ' any air pollution agent or combination of such agents, including any physical, chemical ... substance or matter which is emitted into or otherwise enters the ambient air... (emphasis added). ... Carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons are without a doubt 'physical [and] chemical ... substances[s] which [are] emitted into ... the ambient air.' The statute is unambiguous.\nSince the Court's Massachusetts decision, EPA has addressed GHG emissions in a number of steps, among them:\nIn December 2009, the agency laid the groundwork for regulations by finding that emissions of greenhouse gases may reasonably be anticipated to endanger public health and welfare, and that GHGs from new motor vehicles cause or contribute to that endangerment. In May 2010, the agency promulgated GHG emission standards for model year 2012-2016 cars and light trucks. In January 2011, the agency began requiring permits and the imposition of Best Available Control Technology on new stationary sources (and major modifications of existing sources) that emit more than a threshold amount of GHGs. In September 2011, EPA promulgated GHG emission standards for model year 2014-2018 medium- and heavy-duty trucks. In October 2012, the agency promulgated a second phase of GHG emission standards for cars and light trucks, covering model years 2017-2025.\nAs extensive as these actions may seem, they have had relatively minor impacts on GHG emissions to date. The rules are prospective, and in most cases have not yet taken effect.\nThe auto and truck manufacturing industries have been the major focus of the GHG regulations; in both cases, they are eager to improve fuel economy (coincidentally reducing GHG emissions), because the high cost of fuel has affected consumer purchasing decisions over the last five years.\nThe stationary source permitting requirement has yet to affect most sources. As of early September 2013, EPA and the states have issued only 110 GHG permits to stationary sources since the requirement was implemented in January 2011. (For comparison, EPA estimates that there are more than 6 million stationary sources.) EPA set the emission threshold for requiring permits at a high level, exempting most new sources of GHGs; and few new facilities have been constructed in the recession's aftermath.\nUltimately, if EPA is to reduce the nation's GHG emissions, as the President has committed to do, it will have to issue emission standards for broad categories of existing stationary sources. EPA took the first step toward setting such standards on April 13, 2012, with the proposal of standards for new electric generating units (EGUs). In a June 25, 2013, memorandum to the EPA Administrator, the President directed the agency to re-propose those standards by September 20, 2013, finalize them \"in a timely fashion after considering all public comments,\" and propose guidelines for existing EGUs by June 1, 2014. The re-proposed standards for new sources were announced on September 20, 2013.\nAs shown in Table 1 , EGUs—principally, coal-fired power plants—are the most significant U.S. source of greenhouse gases, accounting for about one-third of the nation's total emissions. With the principal mobile source categories already subject to GHG regulations, EPA will have addressed the sources of more than half of all U.S. emissions once it promulgates regulations for existing EGUs.", "To control GHG emissions from stationary sources, EPA intends to use Section 111 of the Clean Air Act, which requires the agency to set New Source Performance Standards (NSPS) when, in the Administrator's judgment, a category of sources causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare. As noted, EPA proposed the first such NSPS/GHG standard, for electric generating units, on April 13, 2012, and following extensive public comment, at the President's direction, re-proposed the standard on September 20, 2013. The agency has also committed to the promulgation of NSPS for petroleum refineries, although it is unclear when those standards will be proposed.\nUnder Section 111, the EPA Administrator is required to set standards for categories of new (or substantially modified) major sources if, in her judgment, they cause or contribute significantly to air pollution which may reasonably be anticipated to endanger public health or welfare. Over the past four decades, EPA Administrators have used this authority to set emission standards for numerous sources of conventional pollutants, such as sulfur dioxide or nitrogen oxides. The standards are to reflect the degree of emission limitation achievable through application of the best \"adequately demonstrated\" system of emission reduction. The Administrator can take costs, health impacts, environmental impacts, and energy requirements into account in setting the standards; she can distinguish among classes, types, and sizes of sources; and she must review the standards at least every eight years.", "In addition to standards for new sources, Section 111 requires that EPA develop guidelines applicable to GHG emissions from existing units whenever it promulgates GHG standards for new sources in a category (Section 111(d)). Using the guidelines, states would be required to develop performance standards for existing sources. These standards could be less stringent than the NSPS, taking into account, among other factors, the remaining useful life of the existing source to which the standard applies. Nevertheless, these standards might have far greater impact than the NSPS, given that existing power plants are the largest U.S. source of GHG emissions.\nThe authority to control existing sources is particularly important in sectors like the electric utility industry, where old units can continue operating for decades. The average coal-fired power plant in the United States is more than 40 years old. Without the authority to control emissions from such existing facilities, it could be decades before emissions from most power plants would be controlled.\nHow quickly Section 111(d) standards will be applied to existing sources has been an open question, however. EPA must first propose and promulgate guidelines, following which the states will be given time to develop implementation plans. In the President's June 25 memorandum, he requested that EPA:\n(i) issue proposed guidelines for modified, reconstructed, and existing power plants by no later than June 1, 2014;\n(ii) issue final guidelines by no later than June 1, 2015; and\n(iii) include in the guidelines addressing existing power plants a requirement that states submit to EPA the implementation plans required under section 111(d) of the Clean Air Act by no later than June 30, 2016.\nFollowing approval of the plans, the act envisions case-by-case determinations of emission limits. Thus, it is likely to be several years before existing power plants or other stationary sources are subject to emission limits for GHGs.", "As noted, the President directed EPA in his June 25 memorandum to re-propose the NSPS standards for power plant carbon pollution. To understand what issues the agency has addressed in the re-proposed standards, this report discusses both the 2012 proposal and the September 2013 re-proposal.", "The re-proposed standard would set a limit of 1,100 pounds of carbon dioxide (CO 2 ) per megawatt-hour (MWh) of electricity generated for coal-fired EGUs, and a standard of 1,000 or 1,100 lbs/MWh (depending on the size of the unit) for new natural gas-fired plants. The standard is to be measured on a gross output basis; it requires reduction of emissions whether the electricity is used on site (e.g., for the operation of pollution control equipment) or is sold to customers.\nThe standards can be met by new natural gas combined cycle plants without add-on emission controls. Coal-fired plants, however, would find it impossible to meet the 1,100 lb. standard without controls to capture and store some of the CO 2 they produce. EPA estimates that a supercritical pulverized coal-fired power plant without such controls produces roughly 1,800 lbs. CO 2 /MWh of electricity, so a plant subject to the standard would need to reduce emissions by about 40%.\nCarbon capture and storage (CCS) technology that might be used to reduce CO 2 emissions has been the subject of much recent research and demonstration. It poses a number of challenges, not the least of which is the additional energy it consumes. The energy required to run equipment that can remove CO 2 from an emission stream (referred to as the \"parasitic load\") is currently in the range of 30% on most demonstration projects. In addition, a CCS-equipped unit might incur costs for underground storage of the captured CO 2 (unless it is used for enhanced oil recovery) and possibly significant costs for building and operating a pipeline to transport the CO 2 to the storage location.\nTo address the concerns of those who maintain that CCS technology is not yet available, or who expect the technology to improve (bringing down costs) as research and demonstration continue, the agency's 2012 proposal included an alternative under which coal-fired facilities would have been allowed to average their emissions over a 30-year period: during the first 10 years, such facilities could have emitted up to 1,800 lbs. CO 2 /MWh; the facility would then have needed to reduce emissions to 600 lbs/MWh for the following 20 years. This option is not included in the September 2013 re-proposal, but the proposal does include two optional compliance periods. Compliance can be measured using a rolling average of emissions for 12-month periods or it can be measured using the rolling average for 84-month periods. If the facility chooses the longer compliance measurement period, it would gain flexibility to exceed the proposed standard over longer periods of time, but it would need to meet a lower standard overall: EPA has proposed somewhere in a range of 1,000 to 1,050 lbs/MWwh for the 84-month standard. The agency requests comments on the appropriate number.\nNSPS are different from other Clean Air Act emission standards in that, once a standard is final, it applies to sources that commenced construction after the date of proposal in the Federal Register , rather than taking effect after the date of the final standard's promulgation. EPA has identified only three facilities with construction permits that might be affected by this retroactive application of a final standard: the Wolverine project in Rogers City, MI; a Washington County, GA, project; and a Holcomb, KS, project. The developers of the latter two maintain that they have commenced construction. Assuming this is the case, these sources would not be considered new sources and would not be subject to the NSPS. The status of the third facility, the Wolverine project, is less certain, but EPA is proposing to exempt it from the NSPS, stating:\nThe EPA has not formulated a view as to the project's status in the development process or as to whether the proposed 1,100 lb CO 2 /MWh standard or some other CO 2 standard of performance would be representative of BSER [Best System of Emission Reduction] for this project, and invites comment on these questions.", "EPA's Regulatory Impact Analysis (RIA) for the 2012 proposal concluded that \"even in the absence of this rule, existing and anticipated economic conditions in the marketplace will lead electricity generators to choose technologies that meet the proposed standards.\" EPA repeats this conclusion in nearly identical language in the RIA for the September 2013 proposal. The economic conditions referred to include the abundance and low projected cost of natural gas, the many state requirements that increasing amounts of electricity come from renewable sources, and the increasing cost of coal-fired electricity due to higher coal prices and new emission standards for emissions of conventional and toxic air pollutants. These factors combined make it likely that almost all new generation will come from natural gas combined cycle or renewable sources, according to EPA.\nIn preparing the 2012 NSPS proposal, EPA ran the Integrated Planning Model—a model developed by ICF Inc. that EPA and many industry sources have used to analyze the impacts of regulations since the 1980s—to analyze the sensitivity of the results to various assumptions. (The agency does not appear to have conducted new model runs for the 2013 re-proposal, but it reviewed its analysis using the Energy Information Administration's latest Annual Energy Outlook [AEO2013] and concluded that the 2012 results held.)\nThe IPM scenarios tested included a high electricity demand scenario, a low gas recovery scenario (which results in higher prices for natural gas), and a scenario combining both assumptions. None of these assumptions caused the model to project construction of new coal-fired capacity. The analyses found that \"the price of natural gas would have to increase to approximately $10/mmBtu [million Btu] for coal boilers without CCS to become competitive with combined cycle natural gas units, which is projected to be very unlikely.\" Similarly, the 2013 RIA states, \"It is only when natural gas prices exceed $10/MMBtu on a levelized basis (in 2011 dollars) that new coal-fired generation without CCS approaches parity with NGCC [Natural Gas Combined Cycle].... \" The RIA adds:\nFor context, a natural gas price level of $10/MMBtu (in 2011 dollars) is higher than any annual natural gas price to the electric power sector since at least 1996, when the EIA data series stops. In addition, the highest projected average annual natural gas price during the analysis period in any of the [EIA's] AEO2013 scenarios cited in this chapter is $6.64/MMBtu in the Low Oil and Gas Resource scenario.\nWith no new coal plants on the horizon (except for those already under construction or demonstration projects), EPA sees little quantifiable impact from its prospective NSPS promulgation. As the 2013 RIA states:\nEPA anticipates that the proposed EGU New Source GHG Standards will result in negligible CO 2 emission changes, energy impacts, benefits or costs for new units constructed by 2020. Likewise, the Agency does not anticipate any notable impacts on the price of electricity or energy supplies. Additionally, for the reasons described above, the proposed rule is not expected to raise any reliability concerns, since reserve margins will not be impacted and the rule does not impose any requirements on existing facilities.\nThe 2012 RIA argued the case for the rule as a backstop, in case its projections of market conditions were inaccurate:\nThis NSPS provides legal assurance that any new coal-fired plants must limit CO 2 emissions. Rather than relying solely on changeable energy market conditions to provide low emissions from new power plants in the future, this rule prevents the possible construction of uncontrolled, high-emitting new sources that might continue to emit at high levels for decades, contributing to accumulation of CO 2 in the atmosphere.… In addition, EPA intends this rule to send a clear signal about the future of CCS technology that, in conjunction with other policies such as Department of Energy (DOE) financial assistance, the agency estimates will support development and demonstration of CCS technology from coal-fired plants at commercial scale….\nThe proposed rule, in EPA's view, will assist in the deployment of CCS technology, by removing regulatory uncertainty that may have hindered its deployment:\nThe rule will reduce regulatory uncertainty by defining requirements for emission limits for GHG from new fossil fuel-fired EGU sources. In addition, the EPA intends this rule to send a clear signal about the current and future status of CCS technology. Identifying partial implementation of CCS technology as the best system of emission reductions (BSER) for coal-fired power plants promotes further development of CCS, which is important for long-term CO 2 emission reductions.\nAn example of how the absence of a regulatory requirement has hindered the development of CCS technology is provided in the re-proposed rule's preamble:\nIn 2011, AEP [American Electric Power] deferred construction of a large-scale CCS retrofit demonstration project on one of their coal-fired power plants because the state's utility regulators would not approve cost recovery for CCS investments without a regulatory requirement to reduce CO 2 emissions. AEP's chairman was explicit on this point, stating in a July 17, 2011 press release announcing the deferral:\n\"We are placing the project on hold until economic and policy conditions create a viable path forward … We are clearly in a classic 'which comes first?' situation. The commercialization of this technology is vital if owners of coal-fueled generation are to comply with potential future climate regulations without prematurely retiring efficient, cost-effective generating capacity. But as a regulated utility, it is impossible to gain regulatory approval to recover our share of the costs for validating and deploying the technology without federal requirements to reduce greenhouse gas emissions already in place. The uncertainty also makes it difficult to attract partners to help fund the industry's share.\"\nBesides addressing regulatory uncertainty, the promulgation of New Source Performance Standards, even if the standards have little or no effect on new sources, serves as the precondition for standards affecting existing units. The latter are described in Section 111(d) of the Clean Air Act as \"standards of performance for any existing source ... to which a standard of performance under this section would apply if such existing source were a new source.\" EPA would have no legislative authority to promulgate such standards if it did not first establish standards for new sources.", "Many in the electric power and coal industries view the proposed and re-proposed standards, if either were finalized, as effectively prohibiting the construction of new coal-fired power plants other than those granted exemptions. Whether carbon capture and storage (CCS) technology has been \"adequately demonstrated\" is the key question they raise. Other questions involve whether the cost of compliance, assuming CCS is available, and the increased energy required to capture and store carbon should lead the Administrator to propose a less stringent standard. Whether the proposed standard is barred by statutory language that prohibits the Administrator from requiring the installation and operation of any particular emission reduction system is another issue that has been raised.", "EPA maintains that the components of CCS technology have been demonstrated on numerous facilities. In the preamble to the 2012 proposal, the agency stated, \"… at present, CCS is technologically feasible for implementation at new coal-fired power plants and its core components (CO 2 capture, compression, transportation, and storage) have already been implemented at commercial scale.\" Specifically, the agency said:\nCapture of CO 2 from industrial gas streams has occurred since the 1930s using a variety of approaches to separate CO 2 from other gases. Carbon dioxide has been transported via pipelines in the U.S. for nearly 40 years. Approximately 50 million metric tons of CO 2 are transported each year through 3,600 miles of pipelines. Moreover, a review of the 500 largest CO 2 point sources in the United States shows that 95% are within 50 miles of a possible geologic sequestration site, which would lower transportation costs. With respect to carbon sequestration/storage, there are at least four commercial integrated CCS facilities sequestering CO 2 into deep geologic formations and applying a suite of technologies to monitor and verify that the CO 2 remains sequestered.\nSimilar statements are made in the re-proposal.\nCritics of the agency maintain that even if the components have been demonstrated, there is no plant that captures and stores CO 2 on the scale of a large coal-fired power plant. There are several large power plants currently under development that will demonstrate CCS at commercial scale when completed, but none of these is currently operational, and several planned projects have been abandoned for a variety of reasons.\nIn the supporting materials for the re-proposed rule, EPA identified five plants that are incorporating CCS on a commercial scale: Southern Company's Kemper County (Mississippi) Energy Facility; SaskPower's Boundary Dam CCS Project in Estevan, Saskatchewan, Canada; Summit Power's Texas Clean Energy Project, near Odessa, Texas; the Hydrogen Energy California Project in Kern County, California; and NRG Energy's post-combustion carbon capture project at the company's W.A. Parish generating station southwest of Houston, Texas. Three of these (the latter three) are still in the planning stages, and the other two (Kemper and Boundary Dam) are still under construction. Both of the latter have experienced large cost overruns.", "Although it maintains that CCS has been adequately demonstrated, EPA stated in 2012, based on DOE estimates, that \"using today's commercially available CCS technologies would add around 80 percent to the cost of electricity for a new pulverized coal (PC) plant, and around 35 percent for a new advanced gasification-based (IGCC) plant.\" The statement was not specific, but presumably referred to the cost of capturing and storing a plant's total CO 2 emissions. The Congressional Budget Office, in a June 2012 report, reached essentially the same conclusion. Since the proposed rule would require capture of only 40% of a coal-fired plant's carbon emissions, the added cost would be lower. The preamble to the proposed rule states that an 1,100 lb./MWh standard would add 20% to the cost of electricity from a supercritical pulverized coal plant, without accounting for revenues from the use of the CO 2 for enhanced oil recovery.\nMuch of the increased cost results from what is termed a \"parasitic\" energy load: capturing all of a coal-fired plant's CO 2 emissions, and compressing, transporting, and injecting them underground would use as much as 30% of the electricity that the plant produces. As CBO explained it, a CCS-equipped plant will cost more to build and operate for two main reasons:\nThe equipment a CCS plant requires to capture and compress CO 2 is large, complex, and expensive; and Capturing and compressing CO 2 consumes a substantial fraction of the plant's total output. Consequently, to produce the same amount of electricity for customers, a plant with CCS capabilities has to be bigger than a plant without them.\nBoth EPA and the Congressional Budget Office, among others, assume that the cost and energy penalty can be reduced through research, development, and demonstration, and both view EPA regulation as one of the policy tools that could lead to reduced cost by forcing the development of better technology. Experience suggests that such \"learning by doing\" will lower the cost, but the road to what might be a competitive technology can be a long one, and given the availability of other power sources (such as natural gas, renewables, and nuclear) with lower or no carbon emissions, it is not clear that the electric power industry will be motivated to pursue it.\nLegal challenges to EPA's judgment that such a costly technology can be considered \"adequately demonstrated\" and that the degree of emission reduction required is \"achievable\" as required by Section 111 would have to be filed in the D.C. Circuit Court of Appeals. D.C. Circuit decisions on NSPS have made clear that while EPA has some discretion in determining what is \"adequately demonstrated,\" that discretion is not unlimited. In 1973, in Essex Chemical Corp. v. Ruckelshaus , the court explained that to be adequately demonstrated, a system must be one \"which has been shown to be reasonably reliable, reasonably efficient, and ... [not] exorbitantly costly in an economic or environmental way.\" In turn, an \"achievable\" standard is one that is \"within the realm of the adequately demonstrated system's efficiency and which, while not at a level that is purely theoretical or experimental, need not necessarily be routinely achieved within the industry prior to its adoption.\" In Portland Cement Ass'n v. Ruckelshaus the same year, the circuit made clear that \"adequately demonstrated\" does not confine EPA to presently available technology: \"The Administrator may make a projection based on existing technology, though that projection is subject to the restraints of reasonableness and cannot be based on 'crystal ball' inquiry.\" Much later, in 1999, the D.C. Circuit in Lignite Energy Council v. EPA reiterated the point: \"Because it applies only to new sources, we have recognized that section 111 looks toward what may fairly be projected ... , rather than the state of the art at present.\" Where data are not currently available, the court continued, EPA \"may compensate ... through the use of other qualitative methods, including the reasonable extrapolation of a technology's performance to other industries.\"\nDespite the potentially high cost of currently available CCS technology, the agency stated in both its 2012 and 2013 Regulatory Impact Analyses that it does not anticipate that the rule will have any impacts on the price of electricity, employment or labor markets, or the US economy. Other than demonstration projects supported by DOE or other incentives, EPA sees no new coal-fired units incorporating CCS in the next 10 years: given the low cost and projected abundance of natural gas, all new fossil-fueled units are likely to be powered by gas.\nEPA's finding of no new, unplanned conventional coal-fired capacity (and therefore, no projected costs or quantified benefits) is robust beyond the analysis period (past 2030 in both EIA and EPA baseline modeling projections) and across a wide range of alternative potential market, technical, and regulatory scenarios that influence power sector investment decisions.", "Unlike the standard proposed in 2012, the September 2013 re-proposal would set separate standards for coal-fired and gas-fired EGUs. In this regard, the re-proposal is similar to most New Source Performance Standards promulgated previously for conventional pollutants (such as sulfur dioxide) emitted by electric generating units. As EPA noted in the preamble to the 2012 proposal, in setting standards for conventional pollutants or air toxics, it was not appropriate to combine coal-fired and gas-fired units in a single category, because \"although coal-fired EGUs have an array of control options for criteria and air toxic air pollutants to choose from, those controls generally do not reduce their … emissions to the level of conventional emissions from natural gas-fired EGUs.\"\nCritics of the 2012 GHG proposal took EPA's statement a step further, stating frequently that combining coal-fired and gas-fired units in a single category, as the 2012 proposal did, was \"unprecedented.\" This is not actually the case: in 1998, EPA promulgated NSPS for emissions of nitrogen oxides (NOx) that imposed a single emission standard on all fossil-fueled EGUs. In Lig nite Energy Council v. U. S. EPA , the D.C. Circuit Court of Appeals squarely addressed the argument that a single fuel-neutral standard was impermissible and rejected that argument, thus upholding EPA's authority to issue a single standard applicable to all fossil-fueled sources.\nNevertheless, EPA reversed course in the 2013 re-proposal, and now proposes to set separate standards for coal-fired and gas-fired units.", "Critics of the proposed 2012 standard maintained that in setting the standard at 1,000 lbs. CO 2 /MWh, EPA would effectively have required coal-fired power plants to add CCS to any new unit. The same argument is likely to be used against the re-proposed standard for coal-fired units. The critics maintain that such a requirement violates Section 111(b)(5) of the Clean Air Act, which states that unless she determines that it is not feasible to prescribe or enforce a standard of performance, the EPA Administrator is not authorized to require a new source \"to install and operate any particular technological system of continuous emission reduction to comply with any new source standard of performance.\"\nWhether a court would find that EPA is imposing a \"particular technological system\" might come down to an interpretation of the term. There are several different technologies for carbon capture under development. Does the fact that they all result in capturing CO 2 make them a \"particular technological system\"? Or would a court find that the option of switching fuels to lower emissions means that sources can comply with the standard without having to install and operate a particular technological system?", "The potential impacts of the NSPS rule extend beyond new sources, because the agency is obligated under Section 111(d) of the act to promulgate guidelines for existing sources within a category whenever it promulgates GHG standards for new sources. Using these guidelines, states will be required to develop performance standards for existing sources. These could be less stringent than the NSPS—taking into account, among other factors, the remaining useful life of the existing source to which the standard applies. But the standards could have far greater impact than the NSPS, given that existing plants account for one-third of total U.S. GHG emissions.\nThe average coal-fired power plant is about 40 years old; some are more than 60 years old. The older plants are generally less efficient than newer units, and most operate only a small percentage of the time. Thus, the agency might choose to set a guideline based on a less costly approach than application of CCS to the units' emissions. In presentation slides that the agency has used in stakeholder discussions, emphasis has been placed on improving efficiency as a preferred approach to reducing GHG emissions.\nIn recent months, considerable attention has been given to a proposal by the Natural Resources Defense Council (NRDC) as to how Section 111(d) guidelines might be structured. Under NRDC's plan, each state would be given an emission \"budget\" or cap based on the mix of fuels used by EGUs in the state to generate electricity in a base period (2008-2010 in the NRDC proposal). States with more coal-fired generation would receive higher budgets than those with more natural gas or renewable sources. The state budgets would be reduced in phases, with a target reduction of about 26% in GHG emissions overall by 2020, compared to 2005 emission levels—significantly less stringent than the re-proposed standard for new units.\nUnder this approach, EGUs could comply in a variety of ways: by shifting power dispatch to lower emitting plants (and thus running higher emitting plants less often), by switching fuels, by co-firing lower emitting fuels with coal, by retiring their least efficient plants, by efficiency improvements at existing plants, or by reducing demand. EGUs could average, bank, or trade emission credits; as a result, individual units would have an emissions target, but they could exceed the target if they had sufficient credits obtained from earlier reductions or from other units in the state's electric system. Since the goal would be to reduce emissions overall, rather than in specific states, states might also combine their markets for allowances, giving individual electric generating units and companies additional flexibility.\nWhatever their form, a key question regarding the 111(d) guidelines has been when EPA would propose them. In his Climate Action Plan, the President resolved this question, as noted earlier, directing the agency to propose the guidelines by June 1, 2014, finalize them by June 1, 2015, and require the states to submit implementation plans by June 30, 2016. In cases where a state fails to submit a satisfactory plan, Section 111(d) also gives EPA the authority to prescribe and enforce a federal plan.", "Many in Congress oppose EPA standards for GHG emissions. The House passed two bills in 2011 ( H.R. 1 and H.R. 910 ) that would have prohibited EPA from promulgating GHG emission standards for any source, and it repeated itself in September 2012 with H.R. 3409 , the Stop the War on Coal Act. The Senate did not follow suit.\nLegislation to limit or prevent EPA regulatory action is considered possible in the 113 th Congress, and may be given a boost by EPA's re-proposal of the Carbon Pollution Standard.\nEnacting such legislation faces hurdles similar to those encountered in the last Congress, however. Although the House could take action to block NSPS regulations, the Senate is less likely to do so. If the House and Senate did act to limit executive branch authority, a bill sent to President Obama would almost certainly be subject to a veto, given the President's recent statements regarding the importance of dealing with climate issues.", "The debate over EPA's proposed carbon pollution standard for new power plants is largely symbolic, and is characterized by exaggeration on both sides.\nIt is symbolic because this rule by itself will have little impact. Its real significance is that without the promulgation of a rule for new sources, EPA cannot, under the Clean Air Act, proceed to regulate existing sources. It is the standards for those existing plants that may actually reduce the nation's GHG emissions, and in the process, could have significant impacts on coal-fired electricity. It is exaggerated because both EPA and the affected industries describe the rule itself as having far more impact than it will.\nIf EPA (among many sources) is correct that no new coal-fired power plants (other than demonstration projects) will be built in the foreseeable future even in the absence of the proposed rule, then the rule will have little effect. It will have little impact on the coal industry or the electric power industry in the near term, and it will not cause emission reductions from these industries. Both are adjusting to a new set of economic conditions, in which coal finds it harder to compete with natural gas. Gas is projected by most experts to be cheap and abundant for the foreseeable future. Since the early 1990s, new coal-fired plants have accounted for less than 10% of new power-generating capacity (see Figure 1 ). In these conditions, the electric power industry is likely to continue what it has already been doing for two decades: building gas-fired plants (or relying on renewable sources) when it needs new capacity.\nThe coal industry is unhappy with this, and has tended to place the blame for its current difficulties on EPA; but, actually, the market is the key factor in coal's recent decline. This market is affected by a number of elements, including the development of new technologies that have revolutionized production of natural gas, by state-level requirements for the use of renewable power sources, by stagnant growth in demand for electricity, and by environmental regulations mandated by Congress in the 1990 Clean Air Act amendments that are only now being implemented.\nThe net result is that coal is simply not competitive with natural gas in most areas of the country when power producers consider new generation facilities in current and foreseeable conditions. EPA's analysis finds that natural gas would need to triple in price for coal to be competitive with it, even without the potential cost of this rule. Further, the agency concludes, in every year since 1996, the economics of gas have made it a more cost-effective choice when planning new power generation. This rule will tilt the playing field even further against new coal-fired generation, but the field was already tilted far in that direction. To say that the rule will effectively prohibit the construction of new coal-fired power plants, as many in the coal and electric power industries do, is to focus on only one among many factors.\nWhile EPA is essentially correct in saying that this rule will have little effect on industry, the agency seems to exaggerate the benefits of the rule. In her speech at the National Press Club on September 20, EPA Administrator McCarthy maintained that\nThe standards set the stage for continued public and private investment in technologies like Carbon Capture and Sequestration (CCS). With these investments, technologies will eventually mature and become as common for new power plants as scrubbers have become for well-controlled plants in generation today.\nIf the standards won't have any cost or impact, because no new coal-fired capacity subject to them will be built, then they will do little to stimulate the development of CCS technology.\nThe rule does not mean the end of coal mining, or the end of coal-fired power, however. Existing coal-fired plants, which have amortized much of their capital cost, still generate about 40% of the nation's electricity, even with the low price of natural gas and even with the costs of current environmental regulations. Since power plants can last for decades, coal could play an important role in the nation's energy future for decades to come. Furthermore, as many in the utility industry maintain, power producers have an interest in maintaining a diverse mix of fuel sources. Projections regarding the cost of generation a decade or more in the future are uncertain at best: few would have predicted the current glut of natural gas a decade ago. Energy markets are notoriously volatile and difficult to foresee. With that in mind, coal is likely to remain in the mix, in part as an insurance policy against uncertain future conditions, especially at plants that are already in operation and meeting existing standards for other pollutants.\nBut here the spotlight returns to EPA. The future of coal and coal-fired electricity could be greatly affected by the next carbon pollution standard, the guidelines for existing units. The fight over that rule, which is due to be proposed in June 2014, should place the current debate in its true perspective." ], "depth": [ 0, 1, 1, 2, 1, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h1_full", "h2_full h4_title", "h4_full", "h1_title h3_title", "h3_full h1_full", "h3_full", "h3_title", "h3_full", "h3_full", "", "", "h4_full", "", "" ] }

{ "question": [ "What were President Obama's initiatives on climate change focused on?", "How will these initiatives be achieved?", "What are EGUs?", "What did the reproposed standards set?", "Why were new standards proposed?", "Why does the EPA Administrator have a great deal of flexibility with standards?", "What can the Administrator take into account?", "What is required of the New Source Performance Standard?", "What has the EPA concluded about coal-fired EGUs?", "Why will new fossil-fueled units likely be powered by gas?", "How will the standard be met for these facilities?", "Why does the proposal extend beyond new EGUs?", "What did the President direct regarding this proposal?", "What will states be required to do regarding these guidelines?", "What impact will these guidelines have?" ], "summary": [ "As President Obama announced initiatives addressing climate change on June 25, 2013, a major focus of attention was the prospect of greenhouse gas (GHG) emission standards for fossil-fueled—mostly coal-fired—electric generating units (EGUs).", "If the country is going to reduce its GHG emissions by significant amounts, as the President has committed to do, emissions from these sources will almost certainly need to be controlled.", "EGUs (more commonly referred to as power plants) are the largest anthropogenic source of greenhouse gas emissions, accounting for about one-third of total U.S. GHGs.", "The re-proposed standards were released September 20. They would set an emissions limit of 1,100 pounds of carbon dioxide (CO2) per megawatt-hour (MWh) of electricity generated by new coal-fired EGUs, and a standard of either 1,000 or 1,100 lbs/MWh (depending on size) for new natural gas-fired plants.", "Coal-fired plants would find it impossible to meet the standard without controls to capture, compress, and store underground about 40% of the CO2 they produce—a technology referred to as carbon capture and storage (CCS).", "Under the Clean Air Act, the EPA Administrator has a great deal of flexibility in setting these standards.", "The Administrator can take costs, health impacts, environmental impacts, and energy requirements into account in determining what has been adequately demonstrated.", "The statute requires that New Source Performance Standards (NSPS) reflect the degree of emission limitation achievable through application of the best system of emission reduction that has been \"adequately demonstrated.\"", "Despite this, the agency concludes that no coal-fired EGUs (other than DOE-sponsored or other demonstration projects) will be built in the next 10 years regardless of whether the rule is finalized, and therefore no units will be required to use CCS before EPA must review the standard.", "Given the projected low cost and abundance of natural gas, all new fossil-fueled units are likely to be powered by gas, according to EPA.", "The standard proposed for these facilities (combined cycle natural gas units) can be met without add-on emission controls, according to the agency.", "Although the September 20 proposal would only affect new EGUs, the potential impacts of the rule's issuance extend beyond these sources, because the agency is obligated under Section 111(d) of the Clean Air Act to promulgate guidelines for existing sources within a category when it promulgates GHG standards for new sources.", "The President directed EPA to propose such guidelines by June 2014 and to finalize them a year later.", "Using these guidelines, states will be required to develop performance standards for existing sources.", "These could be less stringent than the NSPS—taking into account, among other factors, the remaining useful life of the existing source—but the standards could have far greater impact than the NSPS, given that they will affect all existing sources." ], "parent_pair_index": [ -1, 0, -1, -1, 0, -1, 0, -1, -1, -1, 1, -1, 0, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 3, 3, 4, 4, 4, 6, 6, 6, 7, 7, 7, 7 ] }

{ "title": [ "", "Introduction", "Budgetary Impact1", "Baseline", "Scores", "Title-by-Title Summary", "Commodities8", "Conservation11", "Working Lands Programs", "Land Retirement and Easement Programs", "Other Conservation Programs", "Trade13", "Nutrition15", "Credit16", "Rural Development17", "Research18", "Forestry19", "Energy29", "Horticulture30", "Crop Insurance33", "House-Passed Farm Bill", "Miscellaneous34", "Provisions of the House- and Senate-Passed Bills (H.R. 2) by Title, Compared with Current Law" ], "paragraphs": [ "", "Congress has been active in establishing federal policy for the agricultural sector on an ongoing basis since the 1930s. Over the year s, as economic conditions and technology have evolved, Congress has regularly revisited agricultural policy through periodic farm legislation. Across these decades, the breadth of policy areas addressed through such farm bills has expanded beyond providing support for a limited number of agricultural commodities to include establishing programs and policies that address a broad spectrum of related areas, such as agricultural conservation, credit, rural development, domestic nutrition assistance, trade and international food aid, organic agriculture, forestry, and support for beginning and veteran farmers and ranchers, among others.\nOn June 21, 2018, the House voted 213-211 to approve H.R. 2 , the Agriculture and Nutrition Act of 2018, an omnibus farm bill that would establish farm and food policy for the next five years, covering FY2019-FY2023. The vote to approve H.R. 2 followed a failed vote of 198-213 on the same bill on May 18, 2018. The final passage vote on June 21 followed a vote of 233-191 approving a motion to reconsider, which was made after the unsuccessful vote on final passage of May 18. The Senate passed its version of H.R. 2, the Agriculture Improvement Act of 2018, on June 28, 2018, on a vote of 86-11.\nBoth the House- and Senate-passed versions of H.R. 2 continue the tradition of multi-year farm bills that would establish policy for farm programs and nutrition assistance. To this end, H.R. 2 addresses agriculture and food policy across 11 titles in the House bill and 12 titles in the Senate bill. These titles cover commodity support programs, agricultural conservation, trade and international food aid, domestic nutrition assistance, credit, rural infrastructure and economic development, research and extension, forestry, horticulture, and a variety of other policies and initiatives. The disparity in the number of titles between the two bills reflects the provision of a separate title for energy programs in the Senate bill, whereas the House bill would eliminate what had been a separate energy title in the 2014 farm bill and place these agricultural energy programs within the title on rural infrastructure and economic development.\nThe Congressional Budget Office (CBO) issued its scores of H.R. 2 as passed by the House and the Senate on July 24, 2018. CBO projected that spending on mandatory programs in the Senate bill would total $867 billion over the 10-year period FY2019-FY2028 and $865 billion in the House bill. These totals compare with CBO's estimate of the cost of extending the current 2014 farm bill for 10 years of $867 billion. According to CBO, the estimated costs across titles and individual programs frequently differ between the House-passed bill and the Senate-passed bill as well, reflecting the program priorities and policy preferences of each chamber. The Budget Impact section of this report includes a breakdown of these differences in the two bills.\nBoth versions of H.R. 2 would supersede the current slate of farm programs and policies authorized by the 2014 farm bill, P.L. 113-79 , many of which are to expire in 2018 unless Congress acts to reauthorize or extend them. Certain programs, such as crop insurance, are permanently authorized and would continue to operate in the absence of new farm legislation or an extension of the current farm bill. The Supplemental Nutrition Assistance Program (SNAP) could continue to operate as long as funding is appropriated. But if the current farm law were to expire, many other programs—such as revenue support programs for producers of major agricultural commodities—including corn, wheat, milk, sugar, and others—would be governed by so-called permanent laws, which date from the late 1930s and 1940s and do not expire.\nThese permanent laws, including the Agricultural Adjustment Act of 1938 (P.L. 75-430) and Agricultural Act of 1949 (P.L. 81-439), rely on supply controls to buttress price support regimes that would raise market prices of these basic farm commodities above existing levels. A change in farm policy along these lines could restrict production and prove to be broadly disruptive for farmers, farm input suppliers, agricultural exporters, food manufacturers, and consumers. Many other programs, such as conservation programs and rural development programs, would cease to function. In the past, when Congress has faced the prospect of expiring farm legislation without enacting successor legislation, it has acted to extend the existing policies, as it did when the 2002 and 2008 acts expired.\nA change in the current policy environment from the situation that prevailed when the 2014 farm bill was being debated and enacted is the reduced profitability of the U.S. farm economy. The U.S. Department of Agriculture (USDA) forecasts that for 2017 and 2018, net cash farm income—a measure of the profitability of farming—will be about one-third below the high levels reached in 2012 and 2013, when Congress was considering the 2014 farm bill. The decline in net cash farm income over this period reflects declining prices for many commodities. More recently, trade disputes involving major U.S. agricultural export markets—including China, Canada, Mexico, and the EU—has led to imposition of tariffs by these trading partners on a range of U.S. farm product exports. Agricultural exports provide critical support to U.S. commodity prices and farm profitability. The tariffs have coincided with a further decline in prices for some U.S. agricultural products while fostering uncertainty about the near-term prospects for U.S. agricultural exports and, by extension, farm income.\nThis report provides a title-by-title summary of the policies and provisions in the House- and Senate-passed versions of H.R. 2 and compares them with current law. Following an analysis of the budgetary implications of both bills, summaries of some of the changes that the House and Senate bills would make in each of their 11 and 12 titles, respectively, are provided. These summaries are followed by title-specific side-by-side comparison tables that briefly describe the provisions in the House- and Senate-passed versions of H.R. 2 and compare them with the current law or relevant existing policy.", "A farm bill authorizes funding in two ways. It authorizes and pays for mandatory outlays with multiyear budget estimates when the law is enacted. It also sets the parameters for discretionary programs and authorizes them to receive future appropriations but does not provide funding. Mandatory programs often dominate farm bill policy and the debate over the farm bill budget.", "The budgetary impact of mandatory spending proposals is measured relative to an assumption that certain programs continue beyond the end of the farm bill. The benchmark is the CBO baseline —a projection at a particular point in time of future federal spending on mandatory programs under current law. The baseline provides funding for reauthorization, reallocation to other programs, or offsets for deficit reduction.\nIn April 2018, CBO released a baseline for farm bill programs with mandatory spending that will be used for the rest of the legislative year. It projects that, if current law were extended, farm bill programs would cost $867 billion over the next 10 years, FY2019-2028, 77% of which is in the nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining $203 billion baseline is for agricultural programs, mostly in crop insurance, farm commodity programs, and conservation. Other titles of the farm bill contribute about 1% of the baseline ( Table 2 , Figure 1 ), some of which are funded primarily with discretionary spending.", "When a new bill is proposed that would affect mandatory spending, the score (cost impact) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Budget enforcement uses these baselines and scores and may follow \"PayGo\" and other budget rules (that in part may require no increase to the federal deficit).\nRelative to the baseline, CBO released its scores of H.R. 2 as passed by the House and as passed by the Senate ( Table 2 ).\nThe 10-year score of House-passed H.R. 2 is a net reduction of $1.8 billion from the federal budget (-0.21% below the $867 billion baseline). This is the result of a decrease in projected outlays of $1.3 billion and $0.5 billion of new revenue from fees that would be paid by contractors in the SNAP program. On a shorter-time-period basis, the five-year score shows a net increase of $2.2 billion over the $426 billion baseline that is more than offset by net reductions in the second five years of the budget window. The 10-year score of the Senate-passed amendment to H.R. 2 is budget neutral ($0, +0%), with an overall increase in outlays of $68 million (+0.01%) that is offset by a $68 million increase in revenue from fees for an oilheat program. As in the House bill, the five-year score shows a net increase ($1.6 billion) that is offset by net reductions in the second five years of the budget window.\nThe overall relatively small scores (measured in percentage changes) of the bills are the net result of sometimes relatively larger increases and reductions across individual titles ( Table 2 , Figure 2 ).\nIn the House bill, the 10-year score of outlays shows increases for the commodities, trade, research, and miscellaneous titles. These increases are more than offset by net reductions in the nutrition, conservation, energy (rural infrastructure), and crop insurance titles, as well as a revenue provision in the nutrition title. In the Senate bill, the 10-year score shows increases for the trade, energy, horticulture, research, and miscellaneous titles. These increases are offset by net reductions in the rural development and commodities titles, along with a revenue provision in the miscellaneous title.\nSome of the overall scores within an individual title are the net result of increases in individual provisions, which are offset by reductions in other provisions within a title.\nIn the House bill, the nutrition and conservation titles have numerous provisions with relatively large cumulative increases that are offset by provisions with relatively large decreases in their scores ( Table 3 , Figure 3 ). In the Senate bill, while none of the titles' cumulative increases and decreases are as large in magnitude as the changes to nutrition and conservation programs in the House bill, the section-by-section scores of the Senate bill nonetheless show both increases and decreases from the baseline. Titles such as rural development, horticulture, and research have larger scores in the Senate bill than in the House bill ( Table 4 , Figure 4 ).\nFor several of a subset of programs in the 2014 farm bill that received mandatory funding but do not have a baseline beyond the end of FY2018, both the House and Senate bills would provide continuing funding and, in some cases, permanent baseline.\nIn the House bill, certain trade title programs would receive $470 million and permanent baseline. A food insecurity program in the nutrition title would receive $472 million in mandatory funding and permanent baseline. Other affected programs that receive mandatory funding, but not permanent baseline, include organic research and beginning farmer programs in the research title ($250 million), two organic programs in the horticulture title ($10 million), and outreach for socially disadvantaged farmers and the wool and cotton trust funds in the miscellaneous title ($150 million). In the conservation title, small watershed rehabilitation, wetlands mitigation, voluntary public access, and grassroots source water protection programs receive over $500 million of mandatory funding. In the Senate bill, organic research would receive $450 million in mandatory funds and permanent baseline. The beginning farmer program would be combined with other outreach programs to receive $466 million and permanent baseline. Trade title programs would receive $515 million and permanent baseline. Farmers market and value-added promotion programs are combined to receive $558 million and permanent baseline. A food insecurity program in the nutrition title would receive $401 million in mandatory funding and permanent baseline. Other affected programs that receive mandatory funding, but not permanent baseline, include an agricultural research foundation ($200 million); various bioenergy programs ($375 million); three other horticulture programs ($68 million); and Pima cotton, wool, and citrus programs in the miscellaneous title ($336 million).", "", "Title I commodity programs of both the House- and Senate-passed farm bills authorize support programs for dairy, sugar, and covered commodities—including major grain, oilseed, and pulse crops—as well as agricultural disaster assistance. Major field-crop programs include the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs and the Marketing Assistance Loan (MAL) program (see Table 5 ). The dairy program involves protecting a portion of the margin between milk and feed prices. The sugar program provides a combination of price support, border protection, and producer production allotments. Four disaster assistance programs that focus primarily on livestock and tree crops were permanently authorized in the 2014 farm bill. These disaster assistance programs provide federal assistance to help farmers recover financially from natural disasters, including drought and floods. Title I also includes several administrative provisions that suspend permanent farm law from 1938 and 1949; assign payment limits for individuals, joint ventures or partnerships, and corporations; specify the adjusted gross income (AGI) threshold for program payment eligibility; and identify other details regarding payment attribution and eligibility.\nBoth bills extend authority for most current commodity programs but with some modifications to programs for covered commodities and dairy as well as agricultural disaster assistance. The Senate bill eliminates the transition assistance for producers of upland cotton. Under both bills, the sugar program is extended but is otherwise unchanged.\nIn general, program changes affecting covered commodities under the House farm bill make PLC a more attractive option for producers than ARC. In particular, the House farm bill includes an escalator provision that would raise a covered commodity's effective reference price (used in the PLC payment formula) by as much as 115% of the statutory PLC reference price based on 85% of the five-year Olympic average of farm prices. In addition, producers participating in PLC that experienced at least 20 consecutive weeks of severe drought during 2008-2012 would be allowed to update their program yields (used in the PLC payment formula). Producers enrolled in the county-level ARC program (or the stacked income protection plan for cotton) would be ineligible for crop insurance coverage under an area yield and loss basis or the supplemental coverage option. Furthermore, the individual, farm-level ARC program is eliminated.\nIn contrast, the Senate farm bill leaves the PLC program unchanged but proposes changes to ARC that make it a more attractive option: ARC would use a trend-adjusted yield and would increase the yield floor (available to producers under certain conditions) to 75% of the transitional county yield (up from 70%) when calculating the benchmark county revenue guarantee. In addition, ARC would become the default option when a producer fails to choose between ARC and PLC at signup. The Senate farm bill also specifies that the county in which a farm is located be used for the benchmark and actual ARC revenue calculations, and it instructs USDA to use a single data source for county yield estimates to avoid the disparity in ARC payments that some neighboring counties experienced in recent years. The Senate farm bill would also require USDA to publish ARC and PLC payment rates within 30 days after the end of the crop marketing year and would obligate USDA to review and report on the establishment, calculation, reallocation, adjustment, and reduction of base acres.\nWith respect to payment limits and the AGI limit, the Senate farm bill would leave payment limits unchanged but tighten the AGI limit to $700,000 (down from $900,000 under current law). In contrast, the House farm bill proposes to expand the list of producer exemptions from payment and income limits under certain conditions. First, MAL program benefits would be exempted from inclusion under both payment limits and the AGI limit. Second, payment limits would be affected by the House farm bill's treatment of eligible payment entities. Under current law, partnerships and joint ventures are treated as collections of individuals, each with their own payment limits, whereas a corporation is treated as a single individual subject to a single payment limit. The House bill would alter the treatment of certain corporations by defining qualified pass - through entity (QTPE) as including partnerships, joint ventures, limited liability corporations, and S corporations. This would allow each separate owner of a QTPE (meeting all program eligibility criteria) to have an individual payment limit. Also, the House bill would redefine family farm to include first cousins, nieces, and nephews, thus increasing the potential pool of individuals eligible for individual payment limits on family farming operations.\nBoth the House and the Senate bills amend the permanent agricultural disaster assistance programs, but there is no overlap between the amendments. The House bill amends the limits on payments received under select disaster assistance programs and waives the AGI requirement if more than 75% of the producer's income comes from farming, ranching, or silviculture. The House bill also expands payments for livestock losses caused by disease, whereas the Senate bill expands payments for losses of unweaned livestock that occur before vaccination. The Senate bill also expands the definition of an eligible producer to include Indian tribes or tribal organizations and increases replanting and rehabilitation payment rates for beginning and veteran orchardists.\nBoth the House and the Senate bills would rename the current dairy Margin Protection Program (MPP)—Dairy Risk Management Program (DRMP) under the House bill and Dairy Risk Coverage (DRC) by the Senate. Like MPP, both the DRMP and DRC would pay participating dairy producers the difference (when positive) between a producer-selected margin and the national milk margin (calculated as the all-milk price minus an average feed cost ration). Both bills would lower the catastrophic margin protection level. Under current law, for a $100 administrative fee, participating dairy producers automatically receive payments on 90% of their first 5 million pounds or less of milk production when the milk margin falls below $5.00 per hundredweight (cwt.). Under both DRMP and DRC, the catastrophic margin is lowered to $4.00/cwt.\nBoth bills would also expand coverage choices for milk producers. Under current law, premiums paid by producers vary with coverage levels selected across two production tiers: Tier I is the first 5 million pounds of milk production; Tier II is milk production above 5 million pounds. Currently, dairy producers select a percent coverage ranging from 25% to 90% of the farm's historical milk production. Both DRMP and DRC propose extending the percent coverage range to 5% to 90% of a farm's milk production history.\nBoth DRMP and DRC would reinstate premiums for the $4.50/cwt. and $5.00/cwt. margins and add margin levels of $8.50/cwt. and $9.00/cwt. under Tier I. DRMP would substantially reduce premiums for the other Tier I margins ranging from $5.50/cwt. to $8.00/cwt., while premiums for Tier II would be left unchanged. In contrast, DRC would slightly raise premiums for the other Tier I margins ranging from $5.50/cwt. to $7.50/cwt., while the $8.00/cwt. margin would be lowered slightly. DRC would raise the premiums for all Tier II margins. DRC would partially offset higher premiums by providing premium discounts for small- and medium-sized participating dairy operations: Discounts of 50% are available on Tier I and Tier II premiums for milk production history of 2 million pounds or less, and premium discounts of 25% are available on milk production history over 2 million pounds but not greater than 10 million pounds. Finally, DRC requires USDA to repay any calendar-year positive net premiums (i.e., premiums paid minus both margin-payments received and MPP program costs) to dairy operations that participated in MPP during 2015-2017.\nUnder DRC, as under current law, dairy producers would make annual elections of a margin coverage level and a percentage of milk production to cover. Under DRMP, dairy producers would make a single one-time election, which would last the duration of the farm bill.\nBoth the House and the Senate bills would extend through FY2023 the Dairy Forward Pricing Program, the Dairy Indemnity Program, and the Dairy Promotion and Research Program. The House bill would eliminate the provision prohibiting dairy producers from participating in both the DRMP and the Livestock Gross Margin-Dairy insurance program, although dual coverage cannot be on the same milk production. The Senate bill would retain the current law prohibition on joint participation in both margin programs. Both bills would amend the formula for the Class I skim milk price used for calculating the Class I price under Federal Milk Marketing Orders.\nFinally, the House bill, but not the Senate bill, would require USDA to conduct studies on whether the feed cost ration is representative of actual feed costs used in the margin calculation and on the cost of corn silage versus the feed cost of corn. The bill also directs USDA to report alfalfa hay prices in the top five milk-producing states.", "USDA administers a number of agricultural conservation programs that assist private landowners with natural resource concerns. These can be broadly grouped into working lands programs, land retirement and easement programs, watershed programs, emergency programs, technical assistance, and other programs. Both the House and the Senate bills amend portions of programs in all of these categories (see Table 6 ). However, the general focus is on the larger working lands, land retirement, and easement programs. The House and the Senate bills reauthorize all current conservation programs with the exception of the largest—the Conservation Stewardship Program (CSP)—which the House bill would repeal. The House bill would increase funding for conservation by $656 million in the short term (in the first five years) but overall reduce funding by nearly $800 million in the long term (over 10-years). The Senate bill would increase funding for conservation programs by $185 million over the first five years of authorization but would be budget neutral over 10 years. Generally, the House bill would eventually shift funding out of the conservation title, while the Senate bill would reallocate funding within the title among the larger programs.", "In general, working lands programs provide technical and financial assistance to help farmers improve land management practices. The two largest working lands programs—Environmental Quality Incentives Program (EQIP) and CSP—account for more than half of all conservation program funding. Overall funding for both programs is reduced under the House and Senate bills, compared with current law, but in different ways and to different degrees.\nThe House bill repeals CSP, whereas the Senate bill reauthorizes CSP and reduces program enrollment. CSP provides financial and technical assistance to producers to maintain and improve existing conservation systems and to adopt additional conservation activities in a comprehensive manner on a producer's entire operation. Currently more than 70 million acres is enrolled in CSP. The House bill provides a more limited version of the CSP stewardship contract within EQIP with the proviso that no more than 50% of EQIP funding may be used for these contracts. Repealing CSP is the primary driver behind the projected decline in spending under the conservation title of the House bill, since CSP contracts would all expire by FY2023. The House bill provides an overall increase in annual funding for EQIP, providing for annual incremental increases through FY2023 to $3 billion from $1.75 billion in FY2018. This increase in funding for EQIP would be less than the savings that would result from repealing CSP. The Senate bill reduces EQIP funding from the current level of $1.75 billion in FY2018 to $1.5 billion in FY2019 while providing for annual incremental increases to $1.6 billion in FY2023. The Senate bill also reduces CSP enrollment to 8.8 million acres annually, down from the current 10 million acres annually. The Senate bill amends CSP in a number of ways that are aimed at achieving increased environmental benefits.\nThe House bill makes fewer changes to EQIP, when compared to the Senate bill, among which the House adds a stewardship contract, removes the allocation requirement that 60% of payments relate to livestock production, and expands options for irrigation and drainage entities. The Senate bill contains a number of amendments that focus on water quality and quantity-related practices and wildlife habitat improvement. The Senate bill also retains and reduces the allocation for livestock-related practices to 50% and increases the allocation for wildlife-related practices from 5% to 10%. Both bills amend Conservation Innovation Grants, a subprogram under EQIP. The House bill limits funding for program, while the Senate bill adds to the types of projects that may be carried out under the program.", "Land retirement and easement programs provide federal payments to private agricultural landowners for accepting permanent or long-term land-use restrictions. Both bills reauthorize and amend the Conservation Reserve Program (CRP), the largest land retirement program. CRP provides annual rental payments to producers to replace crops on highly erodible and environmentally sensitive land with long-term resource-conserving plantings. Both bills would increase CRP enrollment from the current limit of 24 million acres in FY2018, with the House bill providing for annual incremental increases to a maximum of 29 million acres in FY2023, whereas the Senate bill would allow enrollment to increase to 25 million through FY2023. In order to offset this increased enrollment level, both bills would reduce payments to participants. The House bill would limit annual rental payments to 80% of the rental rate (less for reenrollment), allow for a one-time early termination of select CRP contracts without penalty in FY2019, reduce incentives for continuous contracts, and limit cost-share assistance. The Senate bill would limit annual rental payments to 88.5% of the rental rate, delete the early termination provision, codify the existing continuous contract initiatives, create an easement program, and expand the transition option for new and limited resource producers. Both bills make a number of other changes that would further expand grazing and commercial uses on CRP acres but through different approaches.\nBoth bills also reauthorize and amend the Agricultural Conservation Easement Program (ACEP). ACEP provides financial and technical assistance through two types of easements: (1) agricultural land easements that limit nonagricultural uses on productive farm or grasslands and (2) wetland reserve easements that protect and restore wetlands. In both bills, most of the changes to ACEP focus on the agricultural land easements in which USDA enters into partnership agreements with eligible entities to purchase agricultural land easements from willing landowners. Both bills would provide additional flexibilities to ACEP-eligible entities, including amendments to the non-federal cost share requirements, consideration of geographical differences, terms and conditions of easements, and certification criteria of eligible entities. Differences between the two bills center on planning requirements, eligible land criteria, eligible activities, AGI requirements, and total funding for the program. The House bill would increase overall funding to $500 million annually through FY2023 from $250 million in FY2018, whereas the Senate bill would increase funding incrementally to $450 million by FY2023.", "The 2014 farm bill created the Regional Conservation Partnership Program (RCPP), which enrolls land through existing conservation programs in partnership with eligible partners. Under RCPP, partners define the scope and location of the project, provide 50% or more of the project cost, and work with eligible landowners to enroll in existing conservation programs. Both the House and Senate bills amend RCPP and increase annual funding—to $250 million and $200 million, respectively—from the current level of $100 million annually. Both bills also expand the set of conservation programs covered under the program and include the ability to renew partnership agreements. The Senate bill includes a number of other amendments that provide additional funding and flexibilities to partners.\nBoth bills include amendments to conservation programs and provisions with authorities both inside and outside of omnibus farm bill legislation, including various watershed and emergency conservation programs. Both bills also require reports related to natural resources but do not overlap in the specific reports required. Similarly, both bills create new conservation programs that do not overlap.", "The trade title—Title III under both House and Senate bills—addresses statutes concerning U.S. international food aid and agricultural export programs (see Table 7 ). Under the farm bill authority, U.S. international food assistance is distributed through three main programs: (1) Food for Peace (emergency and nonemergency food aid), (2) Food for Progress (agricultural development programs), and (3) the McGovern-Dole International Food for Education and Child Nutrition program (school lunch and feeding programs). The largest of these, the Food for Peace (FFP) program, receives about $1.5 billion in annual appropriations. Traditionally, these three programs have relied on donated U.S. agricultural commodities as the basis for their activities. However, recent farm bills have increasingly added flexibility to purchase food in local markets or to directly transfer cash or vouchers to needy recipients. FFP is administered by the U.S. Agency for International Development, while the other two programs are administered by the Foreign Agricultural Service of USDA.\nBoth the House and Senate farm bills would reauthorize all of the international food aid programs along with certain operational details such as prepositioning and micronutrient fortification. The House bill would specifically require that food vouchers, cash transfers, and local and regional procurement of non-U.S. foods avoid market disruption in the recipient country. Both bills would amend FFP to remove a minimum monetization requirement of 15% of FFP funds and to raise the minimum requirement used for nonemergency programs to $365 million (up from $350 million) or not more than 30% of FFP funding. Also, both House and Senate bills would extend authority for several other related international programs including the Farmer-to-Farmer program, Bill Emerson Humanitarian Trust, and Global Crop Diversity Trust, as well as two associated fellowship programs: Cochran Fellowships and Borlaug Fellowships.\nCurrent U.S. export promotion programs include the Market Access Program (MAP), the Foreign Market Development Program (FMDP), the Emerging Markets Program (EMP), and Technical Assistance for Specialty Crops (TASC). These programs are administered by the Foreign Agricultural Service.\nBoth the House and Senate farm bills would reauthorize these four programs. Under the House bill, all four export programs—MAP, FMDP, EMP, and TASC—are combined into a single program named the International Market Development Program (IMDP) while maintaining existing activities and eligibility requirements. IMDP would be authorized to receive $255 million in annual mandatory Commodity Credit Corporation (CCC) funds for FY2019-FY2023. The House bill further creates the Biotechnology and Agricultural Trade Program in Title III to assist with the removal of non-tariff and other trade barriers to U.S. agricultural products produced with biotechnology and other agricultural technologies.\nThe Senate bill would maintain the separate export promotion programs but adds to them the Priority Trade Fund, which gives the Secretary of Agriculture $6 million annually to further promote U.S. agricultural exports or to expand and maintain markets. The Senate bill would also allow for MAP and FMDP money to be spent on projects in Cuba (but subject to restrictions specified in a National Security Presidential Memorandum of June 16, 2017 ) and would require the Secretary to include tribal agricultural and food products on trade missions. The Senate bill would authorize $260 million in annual mandatory CCC funds for these trade programs for FY2019-FY2023.\nBoth the House and Senate farm bills would require that no less than $200 million be spent on promotional activities for both generic and branded U.S. agricultural products, no less than $35 million on promotional activities for generic commodities, no more than $9 million for technical assistance to specialty crop groups looking to export their crops, and no more than $10 million on promoting U.S. agricultural goods to emerging markets. These funding levels reflect current authorization levels across MAP, FMDP, TASC, and EMP. Finally, both the House and Senate farm bills would reauthorize direct credits or export credit guarantees for the promotion of agricultural exports to emerging markets of not less than $1 billion in each fiscal year through 2023.", "The Nutrition titles of House- and Senate-passed farm bills differ in their approach to eligibility and benefit calculation rules but include some similar policies in other topic areas (see Both bills would reauthorize SNAP and related programs for five years through the end of FY2023.\nWhen CBO's 10-year estimates of the policies are totaled, the Nutrition titles of the Senate- and House-passed bills are about $1 billion apart. This difference obscures larger differences in terms of the scale and scope of policies proposed.\nFor the House-passed bill, CBO estimates that the Nutrition title would reduce spending by approximately $1.4 billion over 10 years (FY2019-FY2028) but would also increase revenues by $465 million. This overall estimate includes (1) over $22.0 billion in savings (primarily from changes that would restrict eligibility and benefit amounts); (2) approximately $20.6 billion in increased spending (some from policies estimated to increase benefit amounts, most from funds for related grants and costs associated with administering SNAP); and (3) $465 million in revenues (from a policy that would collect fees from states). For the Senate-passed bill, CBO estimates that the Nutrition title would increase spending by $94 million over 10 years (FY2019-2028). The Senate bill's overall estimate includes (1) over $1 billion in savings (primarily from changes to integrity policies) and (2) over $1.1 billion in increased spending (from one eligibility change and increased funding for related grants and costs associated with administering SNAP).\nSNAP Eligibility and Benefit Calculation. The House-passed bill includes multiple policies that would affect who is eligible for SNAP and how their benefits are calculated. Some of the most prominent are limits to categorical eligibility, changes to work-related rules (subjecting a greater share of the caseload to a 20-hour work requirement and requiring states to offer employment and training opportunities), and limits to how utilities may be calculated in benefit calculation (these are described in greater detail below). The proposal would increase asset limits and change how vehicles and savings accounts are counted. It also amends the way certain income is counted or excluded and requires households' cooperation with child support enforcement. On the other hand, the Senate-passed bill would largely maintain current law in these areas, though it would increase certification periods for certain households and make some changes to existing work-related rules, including additional employment and training pilot programs.\nSNAP Fraud, Errors , and Related State Administration. Both bills propose policies intended to improve detection of errors and fraud. Often, the bills' policies are similar, but they are never identical. Both bills would establish or expand a data system to identify concurrent enrollment in multiple states, make changes to the Quality Control system, and increase USDA's oversight of state performance. The House bill repeals funding for performance bonuses, while the Senate bill reduces funding and limits them to application timeliness. The House bill alone would also allow states to contract out eligibility determination functions.\nElectronic Benefit Transfer (EBT) and Retailers. Both bills propose a number of policies for SNAP's EBT system and benefit redemption. Few of the policies are in both bills. They both place new limits on the fees the processors may charge. Both bills would increase USDA oversight authority for the system, but only the House bill would establish a \"national gateway\" for routing transactions. The House bill alone would make multivitamins and dietary supplements eligible for purchase with SNAP benefits.\nOther SNAP-Related Grants. In addition to making changes to SNAP Employment and Training, both bills make changes to, and in some cases increase, existing grant programs' funding, with the House bill providing greater increases. Both bills would expand SNAP bonus incentives for fruit and vegetable purchases and authorize the addition of milk for certain incentive pilot programs (one with mandatory funding in the House bill, one with discretionary funding in the Senate bill). Both bills reauthorize the Food Insecurity Nutrition Incentive (FINI) grant program, renaming it Gus Schumacher FINI and providing for evaluation, training, and technical assistance. The House bill increases FINI funding by $472 million over 10 years; the Senate bill increases funding by $401 million over two years. On nutrition education, the House bill moves SNAP's nutrition education component from SNAP state agencies to land-grant universities and increases program funding. The Senate bill makes some policy changes but does not change funding. The Senate bill also creates a new grant program that would receive $4 million in mandatory funding each year to fund produce prescription programs serving low-income individuals with diet-related diseases.\nFood Distribution Programs. Both bills would expand certification periods for the Commodity Supplemental Food Program in similar but not identical ways. Both bills increase mandatory funding for the Emergency Food Assistance Program (TEFAP) foods, the House (+$45 million per year) to a greater extent than the Senate bill does (+$8 million in FY2019, +$20 million each year FY2020-FY2023). Both bills authorize new aspects of TEFAP, taking similar but not identical approaches, seeking to include new donated foods and reduce food waste. Both bills would make changes to the Food Distribution Program on Indian Reservations. The House changes are minor compared to the Senate's changes, which would increase federal funding for administrative costs and create a demonstration project for tribes to purchase their own commodities.\nOther Nutrition Programs and Policies. Both bills reauthorize the Senior Farmers' Market Nutrition Program and its funding. The House bill alone would amend the Fresh Fruit and Vegetable Program to include all forms of these foods (e.g., canned, dried, frozen). The House bill alone would require USDA to review its regulations on National School Lunch Program and School Breakfast Program nutrition standards, both the updated standards for meals and the standards for foods served outside the meal programs.\nMore D etails on Selected House E ligibility and B enefit C alculation C hanges. The House bill proposes a number of changes to the determination of households' financial and nonfinancial eligibility for SNAP benefits. Three of these policies were debated throughout House consideration of the bill and are described below. CBO published its cost estimates for the House-passed changes but did not publish its participation estimates for the House-passed changes. The text below includes the CBO participation estimates based on the House- reported bill. This text is in italics.\n1. Broad-based categorical eligibility. The bill proposes to place additional limits on households that are eligible for SNAP based on their receipt of Temporary Assistance for Needy Families benefits. CBO estimates that the House-passed changes would reduce SNAP spending by approximately $4 billion over the 10-year window. Regarding participation, CBO estimated, for the House-reported bill, that in an average year, about 400,000 households would lose SNAP eligibility. As SNAP recipients are also eligible for free school meals, CBO estimated that in an average year, 265,000 children would lose access to free meals, though many would still be eligible for reduced-price meals. 2. Work-related requirements. The bill proposes to replace SNAP's general work requirements and time limit for able-bodied adults without dependents with a work requirement for all states. Beginning in FY2021, the proposal would require a minimum of 20 hours of work per week for nonexempt able-bodied adults. Unlike the current law time limit, which applies to 18- to 49-year-olds who do not have children, the proposed requirement would apply to 18- to 59-year-olds and would not exempt parents or caretakers of children age six or older. The proposal continues to give states authority to exempt a portion of the caseload and to request geographic waivers based on labor-market measures, with some amendments to current law. Unlike the current law time limit, the proposal requires states to offer employment or training opportunities to those individuals subject to the requirements. The bill increases SNAP Employment and Training funding for the states, increasing mandatory funding in a formula grant for states from $110 million in current law to $270 million in FY2020 and to $1 billion in FY2021 and each year thereafter. CBO estimates that the House-passed work-related changes would reduce spending on SNAP benefits by approximately $14.1 billion over 10 years and would increase spending on program administration by approximately $7.3 billion—a net reduction of $6.8 billion. CBO estimated for the House-reported bill that, in FY2028, in an average month, approximately 1.2 million recipients would no longer receive benefits, with each recipient losing an average annual SNAP benefit amount of $1,816. 3. Low Income Home Energy Assistance Program ( LIHEAP ) and benefit calculation. Under current law, an eligible household's receipt of a LIHEAP payment over $20 has the potential to increase monthly benefit amounts, because this payment allows the household to have their benefits calculated using a standard utility allowance. Under this bill, for households without elderly or disabled members, LIHEAP would no longer confer this advantage regardless of the amount provided. CBO estimated that the House-reported provision would reduce 560,000 households' SNAP benefits by an average of $84 per month.", "Both the House- and Senate-passed farm bills would reauthorize and make several changes to provisions in the Consolidated Farm and Rural Development Act that governs the USDA farm loan programs. They would also modify the Farm Credit Act that governs the Farm Credit System and reauthorize the State Agricultural Loan Mediation Program (see Table 9 ).\nFor the USDA farm loan programs, the House and Senate bills would add specific conditions that the Secretary may use to reduce the requirement for three years of farming experience in order for beginning farmers to qualify for loans (e.g., coursework, military service, mentoring). Both bills raise the maximum loan size for guaranteed farm ownership loans and guaranteed farm operating loans from a statutory base of $700,000 in FY1996 ($1.4 million in FY2018 after adjusting for inflation) to a higher base of $1.75 million per borrower, which inflation adjusts to an effective maximum guaranteed loan amount of about $3.5 million in FY2019. The House bill would make this change permanently going forward. The Senate bill would change it for FY2019-FY2023. For direct loans, the Senate bill would increase the farm ownership loan limit to $600,000 and the farm operating loan limit to $400,000, both from $300,000 currently. For beginning and socially disadvantaged farmers, the Senate bill would exempt them from guarantee fees and raise the guarantee percentage to 95%.\nFor the State Agricultural Loan Mediation Program, both the House and Senate bill reauthorize the program to FY2023 so that it may continue to provide matching grants for mediation of credit and certain other agricultural disputes. The Senate bill also expands the range of issues covered by the program.\nFor the government-chartered, cooperative Farm Credit System (FCS), both bills would eliminate a host of obsolete references to outdated names and transition periods from the 1980s and 1990s. Both bills add clarification that FCS entities may share privileged information with the Farm Credit Administration (FCA) for regulatory purposes without altering the privileged status elsewhere. Both bills expand FCA's jurisdiction to hold accountable \"institution-affiliated parties\" (including agents and independent contractors) and makes the scope retroactive for a six-year period. The Senate bill adds the category of socially disadvantaged farmers to the reporting requirement for young, beginning, and small farms. The House bill would delete the compensation limit for FCS bank boards of directors.\nFor the Federal Agricultural Mortgage Corporation (FarmerMac), the House bill increases the acreage exception from 1,000 acres to 2,000 acres for the dollar limit to remain a qualified loan, subject to a study by FCA. The House bill also directs FCA to study the risks and capitalization of loans in the FCS and FarmerMac portfolios.\nFor the Farm Credit System Insurance Corporation (FCSIC), which insures repayment of certain FCS debt obligations, the Senate bill would provide greater statutory guidance regarding the powers and duties of the FCSIC when acting as a conservator or receiver of a troubled FCS institution and the rights and duties of parties affected by an FCS institution being placed into a conservatorship or receivership. The new conservatorship/receivership authorities would be largely modeled after the existing conservatorship/receivership statutory regime that is applicable to depository institutions insured by the Federal Deposit Insurance Corporation.", "Programs and policies that address rural development are addressed in both the House and Senate bills (see Table 10 ). In the House bill, the Rural Infrastructure and Economic Development title amends the Rural Development Act of 1972 (P.L. 92-419) to propose a new Subtitle A, Improving Health Outcomes in Rural Communities. The four sections of the proposed subtitle would permit the Secretary of Agriculture, after consultation with public health figures, to announce a temporary reprioritization of certain rural development loans and grants to assist rural communities in responding to a specific rural health emergency. The announced emergency would expire either when the Secretary has determined that the emergency has ended or 360 days after the announcement, whichever date is earlier. While the emergency is in effect, 10% of the funds available for the Distance Learning and Telemedicine Program would be made available to identify and treat individuals affected by the emergency. Under the Community Facilities program, priority would be given to entities providing prevention, treatment, and recovery services to those affected by the emergency. The subtitle would also reauthorize the Farm and Ranch Stress Assistance Network and authorize a new loan and grant program to help establish group health plans offered by agricultural associations.\nSubtitle B of the House bill makes changes to the Enhancing Broadband Telecommunications Services in the Rural Areas Program. Provisions under this subtitle would establish minimum acceptable standards of broadband service of 25 megabits per second downstream transmission capacity and 3 megabits per second upstream transmission capacity and direct that projections of broadband service be developed five, 10, 15, 20, and 30 years into the future. Other provisions would require broadband infrastructure loan guarantees, provide incentives to reach more isolated rural areas by establishing a residential density measure for loan guarantee applicants, permit the Rural Utility Service to obligate but not disburse broadband funding support, and give priority to applicants who would provide broadband service to areas not predominantly for business. Other provisions would authorize loans for middle-mile broadband infrastructure, modify build-out requirements for loan applicants from three to five years, reduce reporting requirements for borrowers, and establish a task force in the Federal Communications Commission for reviewing the connectivity and technology needs of precision agriculture.\nSubtitle C of the bill concerns provisions for rural communities, business development, and rural infrastructure. Its provisions would prioritize project applications that support implementation of strategic plans on a multi-jurisdictional basis and reserve a portion of funds for such projects, raise the maximum loan amount for water and waste water projects, increase funding for water and waste water technical assistance, and reauthorize a range of rural development programs authorized under the Consolidated Farm and Rural Development Act.\nThree provisions in Subtitle C would change the population eligibility criteria in defining rural and rural area . Under current law, water and waste disposal loan and grants are limited to communities of 10,000 or fewer. A new provision would exclude loan guarantees from that 10,000-head threshold. A second provision would exclude incarcerated individuals in determining whether an area is rural. A third provision would similarly exclude the first 1,500 military personnel living in on-base housing in determining whether an area is rural.\nSubtitle D of the House bill reauthorizes programs under the Rural Electrification Act of 1936 (P.L. 74-605), including expanding 911 access in rural areas and extending the rural economic development loan and grant program. Subtitle E amends and reauthorizes all of the agricultural energy programs in the 2014 farm bill that were previously in a separate title, extending most through FY2023. The House bill also modifies the type of funding available for these programs. In prior farm bills, many of these programs were provided with mandatory funding, whereas the House bill authorizes only discretionary funding.\nSubtitle F reauthorizes the Value-Added Grants program and increases its discretionary funding authorization. The regional development commissions established in the 2008 farm bill are also reauthorized, and the current definition of rural area for the Rural Housing Service's programs is retained until the 2030 decennial census. Subtitle G repeals several unfunded programs, including the Rural Telephone Bank, the Rural Collaborative Investment Program, and the Delta Region Agricultural Development Grants Program. Subtitle H makes technical corrections to certain provisions of the Consolidated Farm and Rural Development Act (P.L. 92-419) and the Rural Electrification Act.\nSimilar to the House bill, the Rural Development title in the Senate bill makes significant changes to the Access to Broadband Telecommunications Services in Rural Areas. The bill establishes priorities for awarding loans and grants for broadband projects in rural communities. Unserved rural communities with no residential broadband and applications that offer the maximum level of broadband service to the greatest proportion of rural households in the proposed service area would get top priority. Within those priority categories, the highest priority would go to rural communities with a population of 10,000 or fewer, those experiencing outmigration that have adopted a strategic community investment plan, communities with high percentages of low-income residents, and those rural communities more isolated from population centers. Other broadband-related provisions would limit grant support to 50% of development costs and 75% of costs where the proposed project would occur in one of the priority communities. A new provision would also permit the Secretary to use up to 5% of appropriated broadband funds for technical training and assistance in developing broadband projects and preparing applications.\nThe Senate bill makes changes to the Rural Economic Development Loan and Grant Program by amending its source of funding, the \"cushion-of-credit\" account. The bill would terminate further deposits into the cushion-of-credit accounts in FY2019 and modify the interest rate structure that borrowers receive on their cushion-of-credit accounts. The provision also provides new mandatory and discretionary spending authorization of $5 million each in FY2022 and FY2023.\nThe Senate bill also amends the Consolidated Farm and Rural Development Act to establish a new grant program for the purpose of providing technical assistance and training to support funding applications for programs carried out under the Rural Business-Cooperative Service. The grants could be used to assist communities in identifying and planning for business and economic development needs, to prepare applications for financial assistance for small and emerging businesses, and to prepare reports and surveys necessary to request financial assistance for businesses in rural communities.\nIn reauthorizing the Distance Learning and Telemedicine Program and the Community Facilities Program, the Senate bill reserves 20% of the appropriation for each program to finance assistance for substance abuse disorder prevention and treatment services. In further addressing substance abuse disorder treatment and prevention, the Senate bill would amend rural health and safety education programs to add a new grant program on substance abuse and disorder education and prevention.", "USDA is authorized under four major laws to conduct agricultural research at the federal level and to provide support for cooperative research, extension, and postsecondary agricultural education programs in the states through formula funds and competitive grants to land-grant universities (see Table 11 ). The House bill reauthorizes funding for these activities through FY2023, subject to annual appropriations.\nWith respect to the land-grant entities, the House bill authorizes a new scholarship program for the 1890 land-grant institutions. A provision in the bill would also prohibit any further entities from being designated as eligible to receive formula funding under the Hatch Act (24 Stat. 440), Smith-Lever Act (P.L. 63-95), and McIntire-Stennis Act (P.L. 87-788). Permissible indirect cost recovery for federal funding of agricultural research and extension would increase to 30% from 22% of funding.\nUnder the House bill, several new research areas in the High Priority Research and Extension program are designated as high priorities: macadamia tree health, national turfgrass research, fertilizer management, cattle fever ticks, and laying hen and turkey research. The bill also reauthorizes the Organic Agriculture Research and Extension Initiative and increases mandatory funding levels to $30 million annually for FY2019-FY2023. The Specialty Crop Research Initiative (SCRI) would be reauthorized through FY2023 and continues to include carve-out funding for the Emergency Citrus Disease Research and Extension Program. SCRI also expands program eligibility to include \"size-controlling rootstock systems for perennial crops\" and \"emerging and invasive species,\" among other production practices and technologies.\nThe Senate bill would provide new programs for the 1890 land-grant institutions and 1994 tribal colleges of agriculture, authorize new support for urban and indoor agricultural production, authorize new funding for industrial hemp research and development, and authorize an initiative supporting advanced agricultural research. Other provisions reauthorize and extend national genetic resources programs, the Organic Agriculture and Extension Initiative, and SCRI. The research title also makes changes to the Foundation for Food and Agriculture Research and reauthorizes several programs relating to agricultural biosecurity.\nThe Senate bill would create a new scholarship program for students attending 1890 universities. Authorized grants are for young African American students who commit to pursuing a career in the food and agricultural sciences. Another provision of the bill would also establish at least three Centers of Excellence, each to be led by an 1890 institution. The centers would concentrate research and extension activities in one or more defined areas, including nutrition, wellness and health, farming systems and rural prosperity, global food security and defense, natural resources, energy and the environment, and emerging technologies. A similar program, New Beginnings for Tribal Students, would offer competitive grants to 1994 tribal agriculture colleges to support recruiting, tuition, experiential learning, student services, counseling, and academic advising to increase the retention and graduation rates of tribal students at 1994 land-grant colleges. Another provision would also make 1994 tribal colleges that offer an associate's degree or a baccalaureate eligible to participate in McIntire-Stennis forestry research support.\nSeveral provisions in the Senate bill authorize research and development funding for industrial hemp production. Under the Critical Agricultural Materials Act, hemp would be included as an industrial product eligible for support. Amending and expanding a provision in the 2014 farm bill (Section 7606, P.L. 113-79), the Senate bill would direct the Secretary to conduct a study of hemp production pilot programs to determine the economic viability of domestic production and sale of hemp. A new provision would also create a \"Hemp Production\" subtitle under the Agricultural Marketing Act of 1946, expanding the existing statutory definition of hemp and expanding eligibility to other producers and groups, including tribes and territories. States or Indian tribes wanting primary regulatory authority over hemp production would be required to implement a plan with specific requirements to further monitor and regulate their production of hemp.\nTwo provisions of the research title in the Senate bill would create new programs supporting advanced agricultural research and urban, indoor, and emerging agricultural production systems. The Agriculture Advanced Research and Development Authority (AGARDA) would be established as a component of the Office of the Chief Scientist to examine the applicability for advanced research and development in food and agriculture through a pilot program that targets long-term and high-risk research. Focal areas include acceleration of novel, early stage innovative agricultural research; prototype testing; and licensing and product approval under the Plant Protection Act and the Animal Health Protection Act, among other innovative research tools that might be used in the discovery, development, or manufacture of a food or agricultural product.\nThe Secretary would develop and make publicly available a strategic plan setting forth the agenda that AGARDA would follow and provide for consultation with other federal research agencies; the National Academies of Sciences, Engineering, and Medicine; and others. There are provisions to expedite contract and grant awards and the appointments of highly qualified scientists and research program managers without regard to certain statutes governing appointments in the competitive federal service.\nTo support the agenda of the AGARDA, the Senate bill would establish in the U.S. Treasury the Agriculture Advanced Research Development Fund, to be administered by the Chief Scientist. The fund would have an authorized appropriation of $10 million each year FY2019-FY2023. The program would terminate in FY2023.\nThe Senate bill would also authorize a new Urban, Indoor, and Emerging Agricultural Production, Research, Education, and Extension Initiative. The provision authorizes the Secretary to make competitive grants to facilitate development of urban and indoor agricultural production systems and emerging harvesting, packaging, and distribution systems and new markets. The grants could also support methods of remediating contaminated urban sites (e.g., brownfields); determining best practices in pest management; exploring new technologies to minimize energy, lighting systems, water, and other inputs for increased food production; and studying new crop varieties and agricultural products to connect to new markets. The provision provides mandatory and discretionary spending of $4 million and $10 million, respectively, for each year FY2019-FY2023. In addition, there is authorization of $14 million for a study of urban and indoor agriculture production under the 2017 Census of Agriculture, including data on community gardens, rooftop gardens, urban farms, and hydroponic and aquaponic farm facilities.", "The Agriculture Committees have jurisdiction over forestry issues generally as well as over some National Forest System (NFS) lands managed by the USDA Forest Service (FS). Previous farm bills have primarily addressed forestry research and programs to provide financial and technical assistance to nonfederal forest landowners, although more recent farm bills have also sometimes included provisions addressing management of federal forest land. The forestry title in both the House- and Senate-passed farm bills would establish, reauthorize, modify, and repeal several research and assistance programs (see Table 12 ). Both bills also contain several provisions that would address management of the NFS and the public lands managed by the Bureau of Land Management (BLM) in the Department of the Interior. While both bills include some similar provisions, there is also considerable variation between the House and Senate forestry titles.\nForestry assistance and research programs are primarily authorized under three main laws: the Cooperative Forestry Assistance Act, the Forest and Rangeland Renewable Resources Research Act, and the Healthy Forests Restoration Act. Many forestry programs are permanently authorized to receive such sums as necessary in annual discretionary appropriations and thus do not require reauthorization in the farm bill. Some programs, however, are not permanently authorized and are set to expire in FY2018. The House bill would reauthorize, through FY2023, four assistance and research programs with authorizations expiring at the end of FY2018: Healthy Forest Reserve Program (HFRP), Rural Revitalization Technology program, National Forest Foundation (NFF), and Statewide Forest Resource Assessments. The Senate bill would reauthorize two of the same programs (HFRP and NFF)—but does not address the other two—and would reauthorize an additional program not addressed in the House bill (Rapid Insect and Disease Assessments). The House bill would amend two other programs by replacing their permanent authority to receive annual appropriations with an authorization limit and a FY2023 expiration (Forest Legacy and Community Forest and Open Space Conservation). The Senate bill does not address either of those same programs but would amend a different permanently authorized program with a sunset date of FY2023, although the authorization limit would remain the same as current law (Semiarid Agroforestry Research Center). The Senate bill would also repeal two programs (Biomass Commercial Utilization Program and the Biomass Energy Demonstration Project). Both the House and Senate bills would establish some new assistance programs—generally by providing explicit statutory authorization and congressional direction for current programs that are operating under existing, but broad, authorizations. For example, both bills would establish a Landscape Scale Restoration program to provide financial assistance for large restoration projects that cross landownership boundaries, although the specifics of each proposal differ.\nThe forestry title would also address issues related to the accumulation of biomass in many forests and the associated increased risk for uncharacteristic wildfires on both federal and nonfederal land. For example, both bills would provide various types of assistance for large hazardous fuel reduction projects that cross landownership boundaries. The Senate bill would authorize up to $20 million in annual appropriations to provide financial assistance to fund such projects. The House bill would encourage the Secretary of Agriculture to allocate existing funding and use existing authorities to provide assistance to encourage cross-boundary projects. Both the House and Senate bills would also establish, reauthorize, modify, and repeal research and assistance programs to promote wood innovation for energy use and building construction and to facilitate the removal of forest biomass, although the specifics of each proposal also differs.\nThe House and Senate bills would also change how FS and BLM comply with the requirements under the National Environmental Policy Act (NEPA) and the consultation requirements under the Endangered Species Act for specified management activities. For example, the House bill would establish 10 categorical exclusions (CEs) that would not be subject to the requirements to prepare an environmental assessment or environmental impact statement under NEPA. Six of the 10 apply to both FS and BLM actions, while four apply to just FS actions. The Senate bill would establish one CE for projects involving sage grouse mule deer habitat that is applicable to both FS and BLM. The House bill includes other related provisions, such as limiting the analysis requirements for specific projects and providing for expedited ESA consultations.\nThe forestry title also contains several provisions specific to the management of NFS lands. Both bills would address the authority provided in the 2014 farm bill to designate insect and disease treatment areas on NFS lands and procedures intended to expedite the environmental analysis for specified priority projects within those areas. The House bill would expand the authorities in several ways, such as by adding hazardous fuels reduction as a priority project category and authorizing larger projects. The Senate bill would require FS to apply specific procedures when implementing the CE. In addition, both bills would also reauthorize the Collaborative Forest Landscape Restoration Program to receive appropriations through FY2023. The Senate bill would raise the authorized level, while the House bill would modify the terms of the program. In addition to other NFS management provisions, both bills would also authorize the conveyance of NFS land through lease, sale, or exchange. While both bills include conveyance provisions for specific parcels, the Senate bill would also reauthorize and establish other disposal authorities. The Senate bill would establish two watershed protection programs on NFS lands and would authorize the Secretary to accept cash or in-kind donations from specified nonfederal partners to implement projects associated with one of those programs. The Senate bill would also designate wilderness areas on NFS lands in Virginia and Tennessee.\nThe bills would address miscellaneous federal and tribal forest management issues. For example, both bills would expand the availability of Good Neighbor Agreements (GNA) to include federally recognized Indian tribes and county governments. The Senate bill would make any revenue generated from GNA projects exempt from any revenue-sharing laws. The House bill, in contrast, does not include that provision and would remove a similar exemption to revenue derived from Stewardship Contracts. The House bill would also direct the Secretary of Agriculture to exempt unprocessed dead and dying trees on NFS lands in California from the export prohibition for 10 years and would amend provisions of the Secure Rural Schools and Community Self-Determination Act of 2000, a program that authorizes payments to counties containing NFS lands and certain BLM lands, among other provisions.", "Both the House and Senate bills (included within Title VI in the House bill and designated as Title IX in the Senate bill) modify the energy title. Both bills extend most of the energy title programs through FY2023. One of the key differences between the bills is that the House bill provides no mandatory funding, while the Senate bill retains mandatory funding (see Table 13 ).\nThe House bill addresses energy programs in three key ways—it reauthorizes many of the programs, it changes the placement of the programs within the farm bill, and it modifies the type of funding available for the programs. The House bill extends most of these programs through FY2023. In prior farm bills, the energy programs were included in a separate title (e.g., Title IX of the 2014 farm bill). But the House-passed bill includes these programs within the title on Rural Development and Economic Development (i.e., Subtitile E of Title VI). In prior farm bills, many of these programs were provided with mandatory funding. For instance, the 2014 farm bill authorized a total of $694 million in mandatory funding and a total of $765 million in discretionary funding. In contrast, the House bill provides discretionary funding, but not mandatory funding, for the energy title programs.\nThe Senate bill maintains a separate energy title (Title IX), amends certain programs, and establishes a new biogas research initiative and a new carbon utilization education program. The bill modifies the definitions for biobased product, biorefinery, and renewable energy systems. It extends most of the programs through FY2023. Additionally, it provides mandatory funding for seven programs—the Biobased Markets Program, the Biorefinery Assistance Program, the Bioenergy Program for Advanced Biofuels, the Rural Energy for America Program, the Biomass Research and Development Initiative, the Biomass Crop Assistance Program, and the newly established carbon utilization education program—amounting to approximately $640 million over five years.\nThe two bills have similarities as well as differences. For instance, unlike the House bill, the Senate Agriculture Committee bill repeals the Repowering Assistance Program. Similar to the House bill, the Senate bill modifies the Biobased Markets Program to restrict federal agencies from placing certain limitations on the procurement of bio-based products. Additionally, unlike the House bill, the Senate bill expands the focus of the Biomass Research and Development Initiative to include carbon dioxide utilization and sequestration. The Senate bill would also establish a biogas research and adoption of biogas systems initiative and directs the Secretary of Agriculture to form an Interagency Biogas Opportunities Task Force and to partner with the National Renewable Laboratory to conduct a biogas study, among other things. The Senate bill also establishes a Carbon Utilization Education Program that provides competitive funding for eligible entities to provide education about the benefits of carbon utilization and sequestration.", "The House and Senate farm bills reauthorize many of the existing farm bill provisions supporting farming operations in the specialty crop, certified organic agriculture, and local foods sectors. These provisions (Title IX in the House bill and Title X in the Senate bill) cover several programs and provisions benefitting these sectors, including block grants to states, support for farmers markets, data and information collection, education on food safety and biotechnology, and organic certification, among other market development and promotion provisions (see Table 14 ). The Senate bill includes a number of provisions regarding industrial hemp within the bill's Horticulture title but also includes hemp-specific provision in the Research, Crop Insurance, and Miscellaneous titles of the bill. The House bill does not include comparable hemp provisions, but it would amend certain regulatory requirements under some federal statutes that are not contained in the Senate bill.\nThe House and Senate bills make changes both to farmers markets and local foods promotion programs but in fundamentally different ways. The House bill eliminates mandatory CCC funding for the Farmers Market Promotion Program (FMPP) and Local Food Promotion Program (LFPP) while reauthorizing discretionary appropriations for these programs of $30 million annually for FY2019-FY2023. The Senate bill combines and expands the existing FMPP and LFPP, along with the Value-Added Agricultural Product Market Development Grants program, to create a new \"Local Agriculture Market Program\" with expanded mission and mandatory funding of $60 million for FY2019 and each year thereafter, plus authorized appropriations. The Senate bill also includes several provisions from S. 3005 (Urban Agriculture Act of 2018) supporting urban agriculture development (including new programs and funding in the Miscellaneous, Research, Conservation, and Crop Insurance titles).\nThe two bills differ in addressing funding for USDA's National Organic Program (NOP) and related programs. Both bills address concerns about organic import integrity by including provisions that strengthen the tracking, data collection, and investigation of organic product imports, including certain provisions in H.R. 3871 (Organic Farmer and Consumer Protection Act of 2017). Both bills also amend the eligibility and consultation requirements of the National Organic Standards Board, among other changes. Both bills reauthorize NOP appropriations above current levels while reauthorizing current funding for the Organic Production and Market Data Initiatives and for technology upgrades to improve tracking and verification of organic imports. The Senate bill also reauthorizes current mandatory funding for the National Organic Certification Cost Share Program, which the House bill does not reauthorize (although the program remains authorized).\nThe Senate bill includes a number of provisions from the introduced versions of the Hemp Farming Act of 2018 ( S. 2667 ; H.R. 5485 ) that are intended to facilitate the possible commercial cultivation of hemp in the United States. Chief among these provisions is one that would amend the Controlled Substances Act (21 U.S.C. 802(16)) to exclude from the statutory definition of marijuana industrial hemp, as defined in the 2014 farm bill (P.L. 113-79, §7606), as containing no more than a 0.3% concentration of delta-9 tetrahydrocannabinol—marijuana's primary psychoactive chemical. The Senate farm bill also creates a new hemp program under the Agricultural Marketing Act of 1946 (7 U.S.C. §1621 et seq. ) expanding the existing statutory definition of hemp and also expanding eligibility to other producers and groups, including tribes and territories. States or Indian tribes that seek primary regulatory authority over hemp production would be required to implement a \"plan\" to further monitor and regulate hemp production. Other provisions in the bill's Crop Insurance title would make hemp producers eligible to participate in federal crop insurance programs, while provisions in the Research title of the bill would make hemp production eligible for certain USDA research and development programs.\nThe House bill includes several exemptions from certain regulatory requirements, amending existing provisions in the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA, 7 U.S.C. 136 et seq. ), the Clean Water Act (33 U.S.C. §1251 et seq. ), the Plant Protection Act (7 U.S.C. 7701 et seq. ), and the Occupational Safety and Health Act (OSHA, 29 U.S.C. 651 et seq. ). The House bill amends FIFRA to clarify federal and state roles in the regulation of pesticides to exempt certain pesticide discharges from point source discharge permitting requirements and to expressly state that the Environmental Protection Agency is not required to consult with other federal agencies regarding pesticide registrations and their potential impact on endangered species. It would also enact into law the House-passed H.R. 1029 , the Pesticide Registration Improvement Enhancement Act of 2017, which would amend FIFRA to extend the authority to collect pesticide fees, among other purposes. Finally, the House bill amends the Plant Protection Act regarding the use of methyl bromide in response to an emergency event and also amends the Occupational Health and Safety Administration to exempt agricultural retailers from process safety management requirements. These provisions are not included in the Senate bill.\nProvisions affecting the specialty crop and certified organic sectors are not limited to the Horticulture title but are contained within several other titles. Among these are programs in the Research, Nutrition, and Trade titles, among others. Related programs outside the Horticulture title include the Specialty Crop Research Initiative, the Organic Agriculture Research and Extension Initiative, the Fresh Fruit and Vegetable Program, and Section 32 purchases for fruits and vegetables under the Nutrition title, among other farm bill programs.", "Crop insurance is designed to cover economic losses from a variety of natural causes as well as certain adverse market developments. The federal crop insurance program makes available subsidized crop insurance to producers who purchase policies to protect against losses in yield, crop revenue, margin, whole farm revenue, and other losses.\nThe House- and Senate-passed versions of the Crop Insurance title of H.R. 2 (Title X in the House bill and Title XI in the Senate bill) largely modify different provisions of the Federal Crop Insurance Act, the underlying statute that permanently authorizes the federal crop insurance program (see Table 15 ). Section 508(d) of the act (7 U.S.C. §1508(d))—which authorizes the Federal Crop Insurance Corporation (FCIC) to provide performance-based premium discounts to producers with \"good insurance or production experience relative to other producers\" of the same crop in the same area—is modified by both the House- and Senate-passed versions but in different ways.\nThe House-passed farm bill repeals Section 508(d) in its entirety, effectively removing authority for performance-based discounts for producers. In contrast, the Senate-passed farm bill expands FCIC's authority to offer discounts for practices that can be demonstrated to reduce risk relative to other practices. For the 2020 reinsurance year, under the Senate-passed farm bill, FCIC would have to specifically consider providing discounts for precision irrigation or fertilization, crop rotations, and cover crops.", "The Crop Insurance title of the House-passed farm bill makes several modifications to the existing federal crop insurance program. According to CBO, it would decrease authorized spending for crop insurance relative to baseline levels by $70 million during the FY2019-FY2023 period by eliminating the crop insurance education and information program for targeted states carried out by the Risk Management Agency and the Agricultural Management Assistance program.\nAdditional savings would be achieved by increasing the administrative fee for catastrophic risk protection from $300 per crop per county to $500 and from provisions that would eliminate several past research and development (R&D) priorities, discontinue R&D partnerships, and reduce CCC funding for R&D contracting from $12.5 million to no more than $8 million annually.\nAmong other adjustments, the House farm bill expands coverage for forage and grazing by allowing separate crop insurance policies to be purchased for crops that can be both grazed and mechanically harvested on the same acres during the same growing season. Such separate policies can be independently indemnified for each intended use. Also, beginning farmer or rancher is redefined as an individual having actively operated and managed a farm or ranch for less than 10 years, thus making these individuals eligible for federal subsidy benefits available for the purposes of research, development, and implementation of whole-farm insurance plans.\nCrops for which the producer has elected ARC or that are enrolled in stacked income protection would be ineligible for coverage based on an area yield and loss basis or for the supplemental coverage option. The House farm bill also clarifies requirements for FCIC approval of reimbursement for the development of private submissions for modifying old plans of insurance or creating new ones.", "The Miscellaneous title of House-passed H.R. 2 contains seven subtitles: Livestock; Beginning, Socially Disadvantaged, and Veteran Producers; Textiles; United States Grain Standards Act; Noninsured Crop Disaster Assistance Program; Protect Interstate Commerce; and Other Matters. The Senate-passed H.R. 2, as amended, contains six subtitles: Livestock; Agriculture and Food Defense; Historically Underserved Producers; Department of Agriculture Reorganization Act of 1994, Amendments; Other Miscellaneous Provisions; and General Provisions. The provisions in the title—38 in the House bill and 82 in the Senate bill—cover a wide array of issues, with some overlapping provisions (see Table 16 ).\nBoth bills would establish an animal disease preparedness program and a vaccine bank that prioritizes the acquisition of foot-and-mouth disease vaccine. A key difference in the bills is funding. The House-passed bill would provide a combined $250 million in mandatory funding for the preparedness program and vaccine bank in FY2019, and $50 million for FY2020-2023. It also authorizes appropriations of $15 million for the National Animal Health Laboratory Network (NAHLN) each year FY2019-FY2023. The Senate-passed bill authorizes appropriations only for such sums as necessary for the preparedness and vaccine programs and authorizes appropriations of $30 million per year FY2019-FY2023 for the NAHLN.\nThe provisions in the House- and Senate-passed bills would expand USDA activities for beginning, socially disadvantaged, and veteran farmers and ranchers. Both the House and the Senate bills would prioritize youth agricultural employment and volunteer programs and promote the role of youth-serving organizations and school-based agricultural education programs. The House bill would create a Commission on Farm Transition to study issues affecting the transition of farm operations from established farmers and ranchers to the next generation. The Senate bill would establish a Tribal Advisory Committee to advise USDA on tribal and Indian affairs. The House-passed bill provides $43 million (FY2019-FY2023) for the Outreach and Assistance to Socially Disadvantaged Producers program, and the Senate-passed bill provides $216 million (FY2019-FY2023) for the Farming Opportunities and Outreach Training program.\nBoth the House-passed and Senate-passed bills amend parts of current law to account for USDA reorganizational changes that created the Under Secretary for Trade and Foreign Agricultural Affairs, the Under Secretary for Farm Production and Conservation, and the Assistant to the Secretary for Rural Development. However, the Senate bill requires USDA to re-establish the position of Under Secretary of Agriculture for Rural Development that USDA abolished and replaced with an Assistant to the Secretary for Rural Development in its May 2017 reorganization. The Senate bill would also prohibit USDA from closing Natural Resource Conservation Service field offices without notifying the House and Senate agricultural committees.\nBoth bills would amend parts of NAP. The House bill would amend NAP crop eligibility to include crops that may be covered by crop insurance but only under whole farm policies. It would raise the service fees and reauthorize buy-up coverage through crop year 2023. The Senate bill would add data collection and coordination requirements, raise the service fee, and delete the sunset provision for buy-up coverage.\nThe House-passed bill would repeal the trust funds for the Pima Agriculture Cotton and Agriculture Wool Apparel Manufacturers. It would also repeal the Wool Research and Promotion grant funding program. In place of these funds, the House-passed bill would establish the Textile Trust Fund to reduce injury for domestic users of imported pima cotton and wool fabric in the event that tariffs on those products exceed the tariffs on certain finished imported pima cotton and wool apparel. Instead of establishing a new Textile Trust Fund, the Senate-passed bill would reauthorize the existing Pima and Wool trust funds and reauthorize the Wool Research and Promotion grant funding.\nBoth bills include animal welfare provisions on importing dogs and on the slaughter of dogs and cats for human consumption. The House bill would extend provisions banning animal fighting to U.S. territories. Both bills would establish a Century Farms Program under the Secretary that recognizes farms in continuous operation for at least 100 years and add South Carolina to the Virginia/Carolina region of the Peanut Standards Board.\nThe Protect Interstate Commerce provisions in the House-passed bill would prohibit a state or local government from setting standards or conditions on agricultural commodities produced in another state if the commodities are produced or manufactured in accordance with federal or state laws and regulations. The bill provides that producers, consumers, trade associations, governments, and other agents may bring an action against the standard or condition in the appropriate court. The Senate-passed bill does not include these provisions.", "" ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 2, 3, 3, 3, 2, 2, 2, 2, 2, 2, 2, 2, 2, 3, 2, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full", "h0_title", "h0_full", "h0_full", "h4_title h2_title h1_title h3_title", "h1_full", "h3_title", "h3_full", "h3_full", "", "", "h4_full h2_full", "h3_full", "h4_full", "", "h2_full", "h4_full", "h4_full", "", "", "h3_full", "" ] }

{ "question": [ "What is the relationship between the CBO score and the programs in both bills with mandatory spending?", "How do these cost projections compare with CBO's baseline scenarios?", "What plans exist for extending these programs?", "What do these bills achieve?", "What is the relationship between the proposed bills and commodity support programs?", "What does the House bill propose to do?", "What does the Senate bill propose to do?", "What are the commonalities between the two bills?", "What do the two bills propose to do with regards to SNAP?", "What do the bills propose regarding eligibility and calculation of benefits?", "What do the bills propose regarding work requirements?", "What is the relationship between the two bills and the conservation title?", "How do the two bills approach the Conservation Stewardship Program?", "How do the two bills approach the Environmental Quality Incentives Program?", "What is the relationship between the two bills and the credit title?", "How do the two bills approach farm ownership loans?", "How do the two bills deal with disease?", "How do the two bills differ regarding hemp?", "How do the two bills address the needs of rural communities?", "How do the two bills approach bioenergy?", "How do the bills propose to fund these programs?" ], "summary": [ "In terms of cost, the Congressional Budget Office (CBO) score of July 24, 2018, of the programs in both bills with mandatory spending—such as nutrition programs, commodity support programs, major conservation programs, and crop insurance—over a 10-year budget window (FY2019-FY2028) amounts to $867 billion in the Senate-passed bill and $865 billion in the House-passed bill.", "These cost projections compare with CBO's baseline scenario of an extension of existing 2014 farm bill programs with no changes of $867 billion.", "In both the House and Senate versions of H.R. 2, most existing programs would be extended through FY2023.", "Overall, the bills provide a relatively large measure of continuity with the existing framework of farm and food programs even as they would modify numerous programs, alter the amount and type of program funding that certain programs receive, and exercise discretion not to reauthorize some others.", "Both bills would extend commodity support programs largely along existing lines while modifying them in different ways.", "For instance, the House bill could raise the effective reference price for crops enrolled in the Price Loss Coverage program (PLC) under certain market conditions. It would also amend payment limits and the adjusted gross income (AGI) limit for eligibility for farm program payments and increase the number of producer exemptions from payment and income limits.", "In contrast, the Senate bill would leave payment limits unchanged while lowering the AGI limit for payment eligibility. The Senate would also leave PLC unchanged while adopting changes to the Agricultural Risk Coverage program (ARC) that could enhance its appeal as a program option.", "Both bills would amend disaster assistance programs but under different approaches. Both bills would also rename the dairy program and expand coverage choices for milk producers, and both bills extend the sugar program with no changes.", "The House and Senate bills would reauthorize the Supplemental Nutrition Assistance Program (SNAP) for five years, and both bills include polices intended to improve error and fraud detection.", "Among their differences, the House bill includes multiple changes to who is eligible for SNAP and the calculation of benefits, which are not included in the Senate bill.", "The House bill includes major changes to work requirements, while the Senate bill would make changes that are minor by comparison.", "Within the conservation title, the two bills would raise the acreage limit on enrollment in the Conservation Reserve Program (CRP), with the House bill setting a higher limit than the Senate does.", "Among other differences, the House bill would repeal the Conservation Stewardship Program (CSP), whereas the Senate bill would extend CSP but lower the limit on acreage enrollment.", "The House bill also increases funding for the Environmental Quality Incentives Program (EQIP), while the Senate bill reduces funding for EQIP.", "Within the credit title, both bills increase the maximum loan amounts for the U.S. Department of Agriculture's guaranteed farm ownership loans and guaranteed farm operating loans.", "The Senate bill would also raise the limits for direct farm ownership loans and direct farm operating loans, whereas the House bill would not.", "The Senate bill would also raise the limits for direct farm ownership loans and direct farm operating loans, whereas the House bill would not.", "The Senate bill includes a number of provisions that are intended to facilitate the possible commercial cultivation of industrial hemp, while the House bill would amend certain regulatory requirements that apply to industrial hemp.", "For rural communities, the House bill would authorize the Secretary of Agriculture to reprioritize certain loan and grant programs and take other actions to respond to specific health emergencies, and it would require the Secretary to promulgate minimum acceptable standards for broadband service. The Senate bill would establish priorities for awarding loans and grains for rural broadband projects and add a new program on substance abuse education and prevention.", "Both bills extend most bioenergy programs, but the House bill places them within the title on rural development and infrastructure, while the Senate bill maintains a separate energy title.", "Moreover, while the House bill would provide discretionary funding for these programs but no mandatory funding, the Senate bill would provide both mandatory and discretionary funding." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 0, 0, -1, 0, 0, -1, 0, 0, 0, 0, 0, -1, -1, -1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 5, 5, 5, 5, 5, 5, 6, 6, 6, 6 ] }

{ "title": [ "Background", "Task Force Agencies Use the Action Plan and Agreements among Themselves and with Nonfederal Stakeholders to Implement the GLRI", "Task Force Agencies Use the Action Plan to Implement the GLRI", "Task Force Agencies Use Interagency Process to Identify and Fund GLRI Work", "EPA’s Methods to Assess GLRI Progress May Not Produce Comprehensive and Useful Assessments or Support Program Adjustments", "EPA Uses the Action Plan Measures to Assess GLRI Progress", "Action Plan Measures of Progress May Not Provide Sufficiently Comprehensive or Useful Information", "EPA and the Task Force Agencies Have Not Fully Established an Adaptive Management Plan for the GLRI", "Task Force Agencies and Nonfederal Stakeholders Report GLRI Progress, but Overall Great Lakes Restoration Progress Is Difficult to Quantify", "Task Force Agencies Report Progress", "Nonfederal Stakeholder and Task Force Agency Examples of GLRI Progress", "Overall Great Lakes Restoration Progress Is Difficult to Quantify", "Nonfederal Stakeholders Identified Key Factors That May Affect and May Limit GLRI Progress", "Factors Related to Implementing GLRI Projects Affected Progress", "Factors Outside the Scope of the Action Plan May Limit GLRI Progress", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Environment Protection Agency", "Appendix III: Comments from the Department of the Interior", "Appendix IV: Comments from the Department of Agriculture", "Appendix V: Survey Questions", "Appendix VI: Great Lakes Restoration Initiative Action Plan Long-term Goals, Objectives, and Measures of Progress for Each of the Five Focus Areas", "Focus Area One, Toxic Substances and Areas of Concern", "Long-term Goals", "Objectives", "Measures of Progress", "Focus Area Two, Invasive Species", "Long-term Goals", "Objectives", "Measures of Progress", "Focus Area Three, Nearshore Health and Nonpoint Source Pollution", "Long-term Goals", "Objectives", "Measures of Progress", "Focus Area Four, Habitat and Wildlife Protection and Restoration", "Long-term Goals", "Objectives", "Measures of Progress", "Focus Area Five, Accountability, Education, Monitoring, Evaluation, Communication and Partnerships", "Long-term Goals", "Objectives", "Measures of Progress", "Appendix VII: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The Great Lakes Basin spans more than 750 miles from east to west and, as shown in figure 1, encompasses nearly all of Michigan, and parts of Illinois, Indiana, Minnesota, New York, Ohio, Pennsylvania, Wisconsin, and Ontario, Canada. The U.S. shoreline along the five Great Lakes— Erie, Huron, Michigan, Ontario, and Superior—is approximately 4,530 miles long, which is more than 2,000 miles longer than the U.S. coastline on the Atlantic Ocean.\nNumerous stresses threaten the health of the lakes themselves and the adjacent land within the Great Lakes Basin. For example, Asian carp threaten commercial and recreational fisheries in the Great Lakes because they tend to outcompete native fish for resources and modify habitat. In addition, despite progress in reducing the amount of phosphorus in the lakes achieved through mitigation techniques implemented in the 1970s, harmful algal blooms are once again threatening the Great Lakes Basin.\nThe United States has taken several steps to restore the health of the Great Lakes ecosystem during the last four decades. Examples are as follows: In 1972, the United States and Canada signed the first binational Great Lakes Water Quality Agreement with the goal of restoring and maintaining the chemical, physical, and biological integrity of the Great Lakes Basin. The parties signed another Great Lakes Water Quality Agreement in 1978 that was amended in 1983, 1987, and in 2012. The 1987 amendment resulted in the formal identification of specific areas of concern, which were defined as geographic areas where a change in the chemical, physical, or biological integrity of the area is sufficient to cause restrictions on fish and wildlife or drinking water consumption, or the loss of fish and wildlife habitat, among other conditions, or impair the area’s ability to support aquatic life. The 2012 amendment contains provisions for addressing the nearshore environment, aquatic invasive species, habitat degradation, and the effects of climate change, among other things.\nIn 2002, the Great Lakes Legacy Act authorized EPA to, among other things, carry out sediment remediation projects and to conduct sediment contamination remediation research in areas of concern in the Great Lakes.\nIn 2004, the Task Force agencies collaborated with Great Lakes governors, mayors, tribes, and nongovernmental organizations in an effort referred to as the Great Lakes Regional Collaboration, which led to the development in 2005 of the Great Lakes Regional Collaboration Strategy to Restore and Protect the Great Lakes. More than 1,500 individuals participated in this effort. A 2007 Brookings Institution report estimated that the $26 billion dollar investment necessary to implement this strategy would have resulted in $30 to $50 billion in short-term benefits to the regional economy and at least $50 billion in the long term.\nH. R. Rep. No. 111-316, at 110-11 (2009). adaptive management framework for the GLRI and noted that EPA should consider potential impacts of climate change on restoration.\nIn March 2013, the Chair of the Council on Environmental Quality announced that the administration is committing to another 5-year GLRI Action Plan, for fiscal years 2015 to 2019. In May 2013, EPA and the Task Force agencies began conducting public meetings and webinars to obtain comments on how the Action Plan could be refined to increase the effectiveness of GLRI investments during the next phase of the Action Plan.", "The Task Force agencies use the Action Plan to guide implementation of the GLRI. They also use an interagency process to identify and transfer funds to GLRI work, and to enter into agreements among themselves and with nonfederal stakeholders to identify and implement GLRI projects, or they do the work themselves.", "The Task Force agencies use the Action Plan to guide implementation of the GLRI. The Action Plan is organized into five focus areas that, according to the Task Force agencies, encompass the most significant environmental problems in the Great Lakes: (1) toxic substances and areas of concern; (2) invasive species; (3) nearshore health and nonpoint source pollution; (4) habitat and wildlife protection and restoration; and (5) accountability, education, monitoring, evaluation, communication, and partnerships. Table 1 describes each focus area.\nEach focus area includes a description of its stresses and several long- term goals to address them. For example, one long-term goal in the invasive species focus area is to eliminate the introduction of new invasive species to the Great Lakes Basin. In addition, each focus area includes a number of objectives to be completed within the 5-year period covered by the Action Plan. For example, in the habitat and wildlife protection and restoration focus area, one objective is to assess 100 percent of U.S. coastal wetlands in the Great Lakes Basin by 2014.\nThe focus areas also include measures of progress—28 in total—each of which has annual targets for fiscal years 2010 to 2014 that are designed to ensure that efforts are on track to meet the long-term goals. Some of the measures address environmental conditions. For example, one measure for the habitat and wildlife protection and restoration focus area addresses the number of fish passage barriers that are to be removed or bypassed annually for the period of time covered by the Action Plan. The annual targets for the measure are the removal or bypassing of 100 barriers in 2010, 150 in 2011, 250 in 2012, 350 in 2013, and 450 barriers in 2014.\nThe last part of each focus area is the principal actions, broad statements of the most significant activities that EPA and its federal partners conclude need to be done in order to achieve the goals, objectives, and targets in the Action Plan. For example, a principal action for the invasive species focus area is to promote the development and use of new control technologies, including biological control methods, that will significantly reduce the cost or increase the effectiveness of invasive species control measures.\nSee appendix VI for a complete list of the Action Plan long-term goals, objectives, and measures of progress.", "The Task Force agencies identify the GLRI projects they plan to implement through an interagency process. EPA and the other Task Force agencies then enter into interagency agreements that describe the scope of the GLRI work that is to be undertaken and the amount of GLRI funds EPA will transfer to the Task Force agency doing that work.\nThe Task Force agencies and nonfederal stakeholders have started more than 1,450 GLRI projects since the program began. GLRI projects can range in size from 0.25 acres for a fish spawning project to 10 million acres for a project to update habitat and wetland maps to identify sensitive and restorable wetlands across the basin. These projects may take place in one location or across multiple states within the Great Lakes Basin. GLRI projects have also ranged in cost from $3,000 to protect nesting piping plovers to $60.5 million to address contaminated sediment in multiple areas of concern.complete and, as a result, many projects funded in fiscal years 2010 to 2012 are still under way. For example, approximately 64 percent of the fiscal year 2010 to 2012 projects reported in GLAS were at least half completed as of May 2013. Tables 2 and 3 show the number of projects Many GLRI projects take several years to funded by Task Force agency and by focus area as of May 2013, respectively.\nAlthough we did not break down GLRI funding per project in detail, some Task Force agency officials told us that they use a small percentage of that funding for administrative tasks. For example, officials from one Task Force agency told us that they used 5 percent of GLRI funds for one agency project for overhead and indirect costs. In this case, the agency performs laboratory and monitoring work that the nonfederal stakeholders that implement the project do not have the capacity to do. As shown in figures 2 and 3, most GLRI funding has been utilized by EPA, the Department of the Interior’s Fish and Wildlife Service, and the U.S. Army Corps of Engineers, and focus area one—toxic substances and areas of concern—has received more GLRI funding than the other focus areas in each of the past 4 years.\nEPA and the Task Force agencies have 2 years to obligate GLRI funds, which means that the amounts allocated in fiscal years 2010 and 2011 are not likely to change, but fiscal year 2012 and 2013 amounts may change as the period for obligating those funds comes to an end. In addition, while nearly all of the GLRI appropriations from fiscal years 2010 to 2012 have been obligated, not all of those obligations have been outlayed because many GLRI projects take several years to complete.Table 4 shows the extent to which GLRI appropriations for fiscal years 2010 to 2012 have been obligated and outlayed as of July 2013.\nAfter EPA and the Task Force agencies have agreed to the GLRI fund transfers to each agency and the work that will be done, each agency either does the work itself or implements it through mechanisms such as cooperative agreements, contracts, or grants with nonfederal stakeholders. In the case of GLRI grants, a Task Force agency announces the availability of the grants through a request for application process. For example, EPA announced on April 19, 2012, that the agency planned to award approximately $20 million for about 100 projects in four of the five focus areas, and that the applications were due on May 24, 2012. The request for application document included the amount of money and number of grants that would be awarded in each focus area and grant eligibility information, among other things. Similar announcements were made by other Task Force agencies for their GLRI grants, and EPA issued its first request for applications for fiscal year 2013 projects in July 2013.", "Although EPA uses information from GLAS and a variety of other sources to assess GLRI progress in meeting the annual targets associated with each of the 28 measures of progress in the Action Plan to assess GLRI progress, this information may not produce sufficiently comprehensive or useful assessments or support program adjustments. Specifically, (1) the Action Plan measures of progress currently in place may not provide sufficiently comprehensive or useful information and (2) EPA and the Task Force agencies have not fully established a plan to guide an adaptive management process for the GLRI that could allow them to assess the effectiveness of GLRI actions and, if needed, adjust their efforts.", "EPA assesses GLRI progress primarily by evaluating performance toward meeting the annual targets for the 28 measures of progress in the Action Plan, which EPA officials said are intended as indicators of success for each focus area. Of the 28 measures, 15 are also used in the agency’s performance plan and performance report, which are required by the Government Performance and Results Act of 1993 (GPRA) as amended.consultation with the Office of Management and Budget, a limited set of measures that could be used to evaluate GLRI progress on an annual According to EPA officials, the agency sought to develop, in basis. EPA officials said that, in developing the set of measures, they considered such factors as the availability of relevant data, the suitability of the data for measuring year-to-year changes, a focus on environmental outcomes, and the existing federal authorities available to address the measure. Officials from EPA and another Task Force agency also told us that many of the measures were based on existing baseline information and were practical because they used existing agency databases for information.\nTo gauge GLRI progress toward meeting the targets for the measures, EPA obtains the data needed using information from GLAS, EPA programs, other federal agencies, states, and universities. For example, for 7 of the 28 measures of progress, GLAS provides progress data specific to individual GLRI projects. In addition, states provide information on progress at areas of concern, the National Oceanic and Atmospheric Administration provides progress information from a database it manages on invasive species in the Great Lakes, and the Fish and Wildlife Service provides progress information related to habitat and wildlife protection and restoration. In March 2013, the Task Force agencies issued the first GLRI progress report to Congress, which identified fiscal year 2011 progress using the measures for each focus area and described the accomplishments of some projects. The Task Force agencies also issued a report on fiscal year 2010 progress in April 2013.", "Assessments of GLRI progress could help GLRI stakeholders, Congress, and the public discern the extent to which the health of the Great Lakes ecosystem has been restored, as well as what has been achieved by the approximately $1.3 billion appropriated to the program since fiscal year 2010. However, the Action Plan measures of progress may not provide sufficiently comprehensive or useful information on GLRI progress because (1) some goals and objectives do not link to any measures that will allow EPA to assess progress toward achieving them; (2) the measures do not capture the results of many of the GLRI projects; (3) data used to evaluate some measures of progress may not be complete; and (4) some Task Force and state agency officials, subject matter experts, and EPA’s Science Advisory Board raised concerns about the usefulness of some measures or their targets for indicating progress toward the GLRI goals and objectives.\nThe Action Plan does not identify the links between a focus area’s goals, objectives, and measures. Specifically, based on our analysis of the GLRI Action Plan, some of the goals and objectives in the Action Plan do not link to any measures of progress, which EPA uses to assess GLRI progress. For example, one of the goals of the habitat and wildlife protection and restoration focus area is that development activities are planned and implemented in ways that are sensitive to environmental considerations and compatible with fish and wildlife and their habitats. However, we found that none of the six objectives and nine measures of progress in this focus area link to this goal. Similarly, in its 2012 review of the GLRI Action Plan, EPA’s Science Advisory Board commented on the ambiguity in the links between the elements of the plan, such as between the long-term goals and the objectives. The Science Advisory Board also recommended that the Action Plan tie the measures more directly to the goals, noting that the more clear and transparent the connection between the measures and the goals, the easier it will be to document how well the actions are working to meet the goals.\nEPA officials told us that the Action Plan was not intended to contain direct linkages between every goal, objective, and measure but rather that the measures were to serve as key indicators of success for each focus area. They said that the rationale for that decision was to provide some flexibility, recognizing that not all important restoration work may fall within the measures of progress and that the Action Plan does not represent the entirety of actions necessary for Great Lakes protection and restoration. However, based on our review of documents on planning for restoration of natural resources, we believe that clear linkages between a plan’s goals, objectives, and measures are critical to achieving and assessing progress over time. For example, the National Research Council recommended such linkages in its checklist for planning and evaluating aquatic ecosystem restoration. Specifically, the National Research Council recommended constructing specific performance indicators that are directly and appropriately linked to each objective, noting that these performance indicators are specific, measureable quantities that reveal to what extent the objectives are being achieved. In addition, the Department of the Interior’s 2009 technical guidance on managing natural resources emphasizes that, to be useful for decision making and evaluation, objectives need to be unambiguous, with specific metrics and specific target conditions.\nWe recognize that it may not always be feasible or appropriate to identify measures for every aspect of each goal or objective. Nonetheless, although some objectives in the Action Plan describe quantifiable actions, the Action Plan contains no measures of progress for them. For example, two Action Plan objectives for the nearshore health and nonpoint source pollution focus area state that, by 2014, (1) 50 percent of high priority Great Lakes beaches will have been assessed using a standardized sanitary survey tool to identify sources of contamination and (2) rapid testing or predictive modeling methods (i.e., to improve the accuracy of decisions on beach postings to better protect public health) will be employed at 33 percent of high-priority beaches. However, because the Action Plan contains no measures of progress that link to these objectives, it is unclear how EPA will be able to assess annual progress toward these and other objectives that do not have linked measures. EPA officials told us that they recognize the need to report a more comprehensive assessment of objectives and are considering options for evaluating and reporting on them.\nMany of the projects funded by the GLRI do not have an Action Plan measure of progress assigned to them, which means that the results of those projects are not captured by the measures. Specifically, nearly 60 percent of the more than 1,450 GLRI projects reported in GLAS as of May 2013 did not have an associated Action Plan measure of progress. One reason for this is that, according to a Task Force agency, some projects contribute to the Action Plan measures but are not the type of on-the- ground restoration projects that are addressed by most of the measures of progress. Officials from the U.S. Geological Survey told us that this is the case for much of their agency’s GLRI work. For example, the agency’s work has included efforts to develop new methods of controlling phragmites, an invasive plant. This work contributes toward the Action Plan’s objective of developing or refining and pilot testing five technologies to contain or control invasive species by 2014. However, there is no linked measure of progress for this objective or assigned to the project. As a result, EPA’s progress assessments may inaccurately capture the extent of progress being made toward containing or controlling invasive species.\nAccording to EPA officials, projects without assigned measures address the Action Plan goals, objectives, or principal actions; the reason these projects do not have measures assigned to them is that they do not directly provide data for any of the Action Plan’s 28 measures. They told us that they monitor the results of individual projects through standard agency practices, but that they are not currently tracking cumulative results that are not addressed by an Action Plan measure of progress. According to agency officials, future GLRI progress assessments may capture more information. Specifically, they said that the cumulative results of some of the projects without assigned measures of progress may ultimately be captured by some of the existing measures. We recognize that this may be the case for some projects. For example, projects to restore native fish habitat that do not have assigned measures of progress could help lead to progress over time toward the measure that addresses the percentage of native aquatic species populations that are self-sustaining in the wild. However, a cumulative approach may not allow EPA to capture specific progress information from those projects without measures, and EPA uses the measures to assess GLRI progress and has been directed to report on that progress annually. As we reported in November 2002, one attribute of successful performance assessment is that there should be enough measures to ensure that an agency has the information it needs about project performance. Without methods to include the results of such projects, EPA cannot ensure that the agency is assessing the full extent of progress being made.\nData used to evaluate some measures of progress may not be complete because GLAS users are limited to reporting progress using a single measure, and GLRI projects may directly address multiple measures across different focus areas. We found that 7 of the 28 measures of progress are tracked primarily in GLAS and, as we noted previously, EPA uses information from GLAS, as well as other sources, to gauge GLRI progress toward meeting the targets for the measures. Officials from five Task Force agencies told us that this is a significant limitation that can result in underreporting of progress. For example, a National Park Service GLRI project has involved managing acres for invasive species, which is one measure, as well as outreach to the public on practices that prevent the introduction and spread of invasive species, which is another measure. However, GLAS requires the agency to choose only one of these measures for reporting progress. EPA officials told us that GLAS users are restricted to reporting on a single measure due primarily to a decision by EPA to simplify the reporting process during the initial stages of the GLRI. Agency officials said that this decision was made for several reasons, including concerns about double-counting and overreporting, a desire to minimize the reporting burden for GLAS users and EPA, and the need to ensure appropriate data quality review before making the progress information public. They said that the current design of GLAS reflects this decision and that system modifications would be necessary to allow reporting on multiple measures. However, by limiting users to reporting information on only a single measure for each project, GLAS prevents EPA from collecting complete progress information on GLRI projects—that is, information on each of the measures addressed by GLRI projects. As we noted previously, there should be enough measures to ensure that an agency has the information it needs to assess project performance. Without collecting information about the multiple measures affected by a project, the data EPA is using for certain measures of progress cannot be complete, and EPA is likely underreporting progress for these measures.\nEPA officials told us that they began to address this issue in fiscal year 2012 for two complementary measures in the habitat and wildlife protection and restoration focus area, the miles of rivers reopened for fish passage, and the number of fish passage barriers removed or bypassed. Specifically, EPA has begun asking GLRI funding recipients reporting on one of these measures to indicate progress, if any, on the complementary measure. This effort will help EPA obtain more complete information on these two measures, but it does not address the broader reporting limitation in GLAS, which EPA officials told us may result in underreporting of progress for certain measures. EPA officials told us that they will consider addressing this limitation in GLAS, but they did not indicate a time frame for doing so.\nIn addition, although EPA officials told us that they have concerns about the quality of GLRI progress information in GLAS, they have not fully assessed the quality of that information, such as its completeness, accuracy, and consistency. As a result, the agency has not made this information available to the public. While practices required under GPRA, as amended, are required at the federal department or agency level, we have previously reported that these requirements can serve as leading practices for planning at lower levels within federal agencies, such as individual programs or initiatives. Thus, EPA is not required to address requirements under GPRA, as amended, for GLAS, but by following them, the agency would be implementing leading practices. The GPRA Modernization Act of 2010 requires, among other things, that agency performance plans and reports describe how the agency ensures the reliability of the data used to measure progress toward its performance goals, including how it verifies and validates measured values of performance and compensates for any limitations to the data to reach the Verification includes the assessment of data required level of accuracy.completeness, accuracy, and consistency to ensure that the data will be of sufficient quality to document performance and support decision making. In light of this and EPA’s concerns about the quality of the GLRI progress data in GLAS, we also have concerns about the use of these data for measuring progress toward the Action Plan goals and objectives.\nGLRI funding recipients are responsible for entering information about the progress of their GLRI projects directly into GLAS, and EPA has methods in place to review this information on a project-by-project basis. For example, EPA has developed a plan for managing the grants, interagency agreements, and contracts the agency awards for GLRI projects. According to agency officials, this plan synthesizes existing agency standards and policies and itemizes the activities to be undertaken by project officers and others to ensure an effective grant oversight process. Among other things, this plan specifies that, for interagency agreements, EPA officials who are GLRI project officers will review progress reports submitted by GLRI funding recipients and that the project officers will compare the information in those reports to the information entered in GLAS. According to EPA officials, project officers for grants are also expected to compare information in progress reports with information in GLAS.\nGLRI funding recipients are required to submit semiannual progress reports to EPA. According to EPA officials, they do not use these project reports to assess GLRI progress. This is because the progress reports are for administrative management purposes and not for reporting progress made toward the Action Plan measures. identifying improvements. The officials noted that they are also considering whether GLAS is the right tool for the GLRI. EPA officials had not determined a time frame for this work as of June 2013.\nSome Task Force and state agency officials, subject matter experts, and EPA’s Science Advisory Board, raised concerns that certain measures of progress or their targets may not be useful for indicating GLRI progress toward the Action Plan’s goals and objectives.\nClimatic factors may affect the usefulness of some measures. Five of the six measures of progress for the nearshore health and nonpoint source pollution focus area may not be useful for indicating GLRI progress over the short term toward the Action Plan’s goals and objectives. Specifically, EPA officials and others have noted that these measures address environmental conditions that are influenced by climatic factors, such as precipitation and wind patterns. These factors make it difficult to identify whether the restoration efforts are having the desired effects. For example, one of the measures of progress in the Action Plan for this focus area tracks the square miles of harmful algal blooms in the Great Lakes. According to information from EPA officials, such algal blooms are influenced by climatic factors such as precipitation patterns, water temperature, and wind speed and direction. Officials from another Task Force agency also told us that because of factors such as weather that cannot be controlled, the extent of algal blooms in any given year is not directly related to the management actions being taken in the GLRI and, as a result, the measure is not useful for indicating GLRI progress toward the Action Plan’s goals and objectives. EPA officials told us that, given the short period of time the GLRI has been under way, factors such as temperature and the amount and timing of precipitation are currently the primary factors affecting the extent of algal bloom. Officials also told us that, over the long term, management actions will lead to lower phosphorous levels, which will have a minimizing affect on the extent of such algal blooms. However, over the short term, this measure may not be useful for indicating GLRI progress toward the focus area’s objective of significantly reducing the number and severity of incidences of harmful algal blooms by 2014. In addition, we have previously reported criteria for determining the extent to which an agency’s performance plan provides a clear picture of intended performance, including that measures must clearly represent or be related to the performance they are trying to assess.related to management actions being taken may not be useful for indicating GLRI progress toward the Action Plan’s goals and objectives. While we recognize that the Action Plan is not a performance plan, using criteria intended for performance plans is appropriate because EPA uses the Action Plan’s measures of progress to assess GLRI progress as an agency would use the measures in a performance plan.\nTherefore, measures that track conditions that are not directly Some measures track actions that may not be sufficient to lead to the desired GLRI goals. For example, one of the goals for the toxic substances and areas of concern focus area is that environmental levels of toxic chemicals are reduced to the point that all restrictions on the consumption of Great Lakes fish can be lifted. A measure of progress that links to this goal tracks the long-term reduction in average concentrations of PCBs in Great Lakes fish. However, officials from two Task Force agencies and two state agencies, as well as five subject matter experts, reported that the measure’s focus on PCBs is too narrow and that other contaminants, particularly mercury, need to be addressed as well. EPA’s Science Advisory Board also noted this narrow focus in its 2012 review of the Action Plan. Mercury is important because, according to a 2011 binational study of mercury in the Great Lakes region, it has widely contaminated the region and has been responsible for fish consumption advisories in the eight Great Lakes states and the Canadian province of The study concluded that mercury, largely due to atmospheric Ontario. emissions from coal-fired power plants, remains a pollutant of major concern with an impact on fish in the region that is much greater than previously recognized. Consequently, reducing average concentrations of PCBs in fish is not likely to lead to lifting all restrictions on the consumption of Great Lakes fish. Because this measure does not clearly represent all of the contaminants that need to be addressed, it may not be useful for indicating GLRI progress toward the Action Plan’s goals and objectives.\nD. C. Evers, J . G. Wiener, C. T. Driscoll, D. A. Gay, N. Basu, B. A. Monson, K. F. Lambert, H. A. Morrison, J. T. Morgan, K. A. Williams, and A. G. Soehl, Great Lakes Mercury Connections: The Extent and Effects of Mercury Pollution in the Great Lakes Region, Biodiversity Research Institute, Report BRI 2011-18 (Gorham, Maine: 2011).\nMonitoring practices may affect the usefulness of some measures. For example, one goal of the invasive species focus area is to eliminate the introduction of new invasive species, with a 2014 objective of reducing the yearly average rate of invasive species newly detected in the Great Lakes ecosystem by 40 percent, compared with the period from 2000 to 2009. The linked measure of progress addresses the rate at which nonnative species are newly detected in the Great Lakes ecosystem. The source of data used to evaluate this measure is a database maintained by the National Oceanic and Atmospheric Administration. According to information on this database, the identification of new species depends on the ability to find, recognize, verify, and document new species, which is, in turn, dependent on the ability to adequately sample the Great Lakes ecosystem. Officials from a state agency and four subject matter experts raised concerns about the usefulness of this measure for assessing progress toward the Action Plan objectives, noting that the number of new species detected will increase if surveillance for invasive species increases or improves. One of these experts noted that meeting the targets may not represent progress because monitoring efforts are low, and another of these experts told us that the measure needs to be combined with a known level of monitoring. Similarly, National Oceanic and Atmospheric Administration officials agreed that progress toward the targets for this measure will vary depending on the extent of monitoring and the ability of surveillance to detect new nonnative species, and they told us that, without a known level of monitoring, it may not be possible to reliably identify trends in the introduction or detection of new species using this measure. As we reported in November 2002, one attribute of successful performance measures is that they are likely to produce the same results if applied repeatedly to the same situation. If efforts to identify new species depend on the ability to adequately sample the Great Lakes ecosystem and surveillance or levels of monitoring are not consistent throughout the program, then this measure may not be useful for indicating GLRI progress toward the Action Plan’s goals and objectives.\nTargets for some measures may not represent significant ecological improvement. EPA’s Science Advisory Board reported in its 2012 review of the GLRI Action Plan that it is not clear whether the targets for the measures of progress reflect significant or measurable improvement, or whether achieving the targets will result in real ecological benefit. It also noted that it is not clear how the targets were developed and, that while the measures of progress include baselines for the targets, the universe is not always defined. For example, one measure in the nearshore health and nonpoint source pollution focus area addresses the amount of land with certain conservation practices implemented to reduce erosion, nutrients, and pesticides. The Action Plan reports a baseline of 165,000 acres with such practices already being implemented and identifies a 2014 target of 247,500 acres, a 50 percent increase. However, the Action Plan does not identify the universe (i.e., the total acreage of land upon which such practices could be implemented), which the Science Advisory Board reported is more than 38 million acres of agricultural land in the United States within the Great Lakes Basin. Consequently, using this universe, the 50 percent increase in acreage using such conservation measures represents a change from 0.4 percent to 0.6 percent of the total U.S. agricultural land in the Great Lakes Basin. According to the Science Advisory Board, it is not clear if this change is meaningful and how this percentage of improvement will potentially result in the restoration of the Great Lakes ecosystem. In November 2002, we reported that clarity is a key attribute of successful performance measure.clarification, this measure may not be useful for indicating GLRI progress toward the Action Plan’s goals and objectives.\nA subgroup of the Task Force agencies has been evaluating how well the measures of progress and targets are working and has identified some that will need revisions. For example, the subgroup found that some measures of progress have been difficult to implement or difficult to demonstrate scientifically, particularly in the nearshore health and nonpoint source pollution focus area. However, as this subgroup has acknowledged, there is no defined process for the Task Force agencies to revise the Action Plan, such as updating or replacing the measures of progress or for updating their targets.", "EPA and the Task Force agencies have not fully established a plan to guide an adaptive management process for the GLRI. Although there is no requirement that the Task Force establish an adaptive management plan for the GLRI, an adaptive management process could allow EPA and the Task Force agencies to evaluate whether GLRI projects are leading to the Action Plan’s objectives and goals and, if needed, use the results to adjust future actions. EPA and several Task Force agencies in 2000 adopted a unified federal policy on watershed management that defined adaptive management as a type of natural resource management in which decisions are made as part of an ongoing science-based process that involves (1) testing, monitoring, and evaluating applied strategies; (2) incorporating new knowledge into management approaches that are based on scientific findings and the needs of society; and (3) using results to modify management policy, strategies, and practices. This policy stated that the agencies would incorporate adaptive management principles into their programs and use adaptive management to improve watershed conditions. More recently, in the 2012 amendment to the Great Lakes Water Quality Agreement, the United States and Canada agreed to be guided by the principles and approaches of adaptive management, which is described in the agreement as a systematic process to assess the effectiveness of actions and adjust future actions to achieve the objectives of the agreement, as outcomes and ecosystem processes become better understood.\nThere is no universal definition for adaptive management or fixed set of steps that constitutes an adaptive management process, but key elements of this iterative process based on guidance documents from several Task Force agencies are summarized in figure 4. In addition, according to guidance from the Forest Service, adaptive management requires explicit designs that, among other things, specify documentation and monitoring protocols; roles, relationships, and responsibilities; and, assessment and evaluation processes. This guidance also notes that it is important for an adaptive management effort to have clear documentation describing details of the adaptive management process, and an absence of explicit plans can diminish the potential benefits of adaptive management.\nIn its 2012 review of the Action Plan, EPA’s Science Advisory Board found that the GLRI Action Plan did not establish an adaptive management framework and recommended that EPA develop a science- based plan that, when coupled with the Action Plan, would create an adaptive management framework for the GLRI. In response to this recommendation, in May 2013, the Task Force agencies released the draft GLRI Adaptive Science-Based Framework for Great Lakes Restoration, or draft framework, for public comment.\nThe draft framework recommends use of an “adaptive restoration” approach for the GLRI that includes most of the key elements of adaptive management. According to the draft framework, adaptive restoration involves exploring alternative ways to meet the goals and objectives in the Action Plan, predicting the outcomes of alternatives based on the current state of knowledge, implementing one or more of these alternatives, monitoring to learn about the impacts of restoration actions, and incorporating new knowledge into restoration strategies that are based on scientific findings and the needs of society. However, the draft framework does not provide details on how the elements of adaptive management will be implemented. For example, neither the draft framework, nor the Action Plan, addresses how the agencies will complete the adaptive management loop by incorporating the information gained in future decision making and adjusting the GLRI, if needed. The draft framework indicates that re-assessment of the Action Plan goals, objectives, and measures of progress should be considered every 5 years. However, neither the framework nor the Action Plan outlines a process for assessing or incorporating new information or altering the Action Plan, such as by refining the measures or their targets, as recommended by the adaptive management section of EPA’s 2003 guidance for states and communities on watershed analysis and For example, neither the draft framework nor the Action management.Plan identifies decision thresholds or criteria for making changes, which the Science Advisory Board’s 2012 report and EPA’s 2003 guidance have identified as important.\nIn addition, the draft framework does not include two of the key elements of adaptive management shown in figure 4: engaging stakeholders, and identifying and evaluating uncertainties.\nEngaging stakeholders. According to guidance from several Task Force agencies, active and sustained stakeholder involvement is essential for effective implementation of adaptive management. The draft framework does not explicitly include stakeholder engagement as an element of the adaptive restoration process. It acknowledges that engaging scientists, stakeholders, and the general public should be considered for updating the GLRI over time and states that interactive engagement in setting goals and objectives is a key element for producing results. Nevertheless, it does not address how the Task Force agencies will ensure ongoing stakeholder engagement in the GLRI. Without explicit plans in the draft framework for engaging stakeholders, it is not clear how the Task Force agencies will consider and account for potential changes in stakeholder perspectives and priorities. As the Department of the Interior’s guidance notes, conflicting priorities among stakeholders can be enough to prevent This guidance the successful implementation of adaptive management.also explains that differing stakeholder views about how natural processes work and how they respond to management are examples of uncertainties that can limit the effectiveness of management efforts.\nIdentifying and evaluating uncertainties. Neither the draft framework, nor the Action Plan, identifies, prioritizes, and evaluates critical scientific or policy uncertainties. In addition, the draft framework does not include such uncertainties in its list of elements of adaptive restoration planning. Such uncertainties could include critical assumptions, gaps in knowledge, or uncertainties about the relationships between ecological processes and stresses, such as the potential effects of climate change on the Great Lakes. Identifying and explicitly accounting for critical uncertainties in designing the GLRI could increase the likelihood that the GLRI will meet its goals and objectives. Several Task Force agencies have emphasized the use of models as an important way to evaluate and account for such uncertainties by, for example, representing how the ecosystem may respond to restoration actions or environmental changes. The draft framework notes that predictive modeling plays an important role in adaptive restoration, and it recommends evaluation of uncertainties in the context of reporting on progress. However, the framework does not identify and account for critical uncertainties.", "The Task Force agencies have issued two GLRI progress reports, but the reports include few specific examples of progress. To obtain further insights about GLRI progress, we surveyed nonfederal GLRI stakeholders and interviewed Task Force agency officials. However, quantifying overall Great Lakes restoration progress is difficult for several reasons, including the unique environmental conditions of each of the Great Lakes.", "As we noted previously, the Task Force agencies have issued two GLRI progress reports to Congress; one on fiscal year 2011 progress and one on progress in fiscal year 2010. EPA officials told us that the report on progress in fiscal year 2011 includes more information and was released earlier than the fiscal year 2010 report because GLRI funding was available late in fiscal year 2010 and not as much was achieved that year. Both reports identified whether the targets for the GLRI Action Plan’s 28 measures of progress had been met or exceeded in the related fiscal year, or that data were unavailable for a specific measure. For example, the fiscal year 2011 report states that 15 measures were met or exceeded, 9 measures were not met, and data were not available to determine the status of 4 measures. However, as we noted earlier, the measures may not provide sufficiently comprehensive or useful information for a number of reasons, including that the measures do not capture the results of many of the GLRI projects and that some measures or their targets may not be indicative of progress.\nIn the first years of the GLRI, no new aquatic invasive species populations have been detected in the Great Lakes. The GLRI is at the forefront of invasive species prevention, control, and rapid response. The GLRI is supporting investments in technologies that prevent the introduction of invasive species, including the Department of Transportation’s Maritime Administration’s verification of new ballast water treatment technologies, which is an important step before conducting ship-scale testing.\nHowever, except for the two projects highlighted in each focus area, the fiscal year 2011 report does not identify the GLRI projects that led to the progress achieved. In addition, neither of the two reports integrates accomplishment and progress information into conclusions about overall GLRI progress or contains specific information about the extent of progress toward GLRI goals, and neither includes an assessment of changes in the health of the Great Lakes ecosystem that could be attributed to the projects. As a result, the information in the GLRI progress reports was not sufficient for determining if GLRI projects had led to the described progress and how much progress has been made in restoring the health of the Great Lakes ecosystem.", "In light of the limited information included in the two GLRI progress reports, we sought to obtain further insights by surveying nonfederal stakeholders and interviewing officials from Task Force agencies. The information we gathered in the survey allows us to provide more information on how nonfederal stakeholders describe GLRI progress, and it is not intended to determine the extent of GLRI progress toward restoring the health of the Great Lakes ecosystem. When asked to provide examples of how one or more of their organization’s GLRI projects had benefitted the Great Lakes ecosystem, 87 percent (153) of the 176 respondents provided at least one example of how one or more of their GLRI projects had benefited, or was expected to benefit, the Great Lakes ecosystem in each of the five focus areas. Specifically:\n55 percent (96) of respondents provided at least one example of how one or more of their GLRI projects had directly benefited the Great Lakes ecosystem, such as by restoring habitat or by trapping invasive species.\n27 percent (47) of respondents provided at least one example of how one or more of their GLRI projects indirectly benefited the Great Lakes ecosystem, such as by improving the understanding of part of the ecosystem or identifying future restoration work.\n44 percent (77) of respondents reported that they expected at least one of their projects to result in a direct or indirect benefit to the ecosystem, but that it was too early to report a benefit at this time.\n13 percent (23) of respondents did not provide an example of how one of their projects had, or was expected to, benefit the Great Lakes ecosystem.\nToxic substances and areas of concern\nOne survey respondent reported that her organization received two GLRI grants to help clean up the Presque Isle Bay area of concern in Lake Erie, in Pennsylvania; the two grants totaled $664,789. The respondent told us that, prior to the GLRI, the organization was devoting all of its resources to addressing only one of the specific conditions—fish tumors—that were responsible for the bay being identified as an area of concern, and that GLRI funding made it possible for her organization to do additional work. Specifically, GLRI funding enabled the organization to undertake a number of monitoring and investigative projects; develop a target for being removed from the list of areas of concern; and, develop a long-term monitoring, restoration, and protection plan for the bay’s watershed. The respondent reported that GLRI funding was also used for specific investigations in the watershed that will provide her organization with an updated set of data to use in identifying priority areas for restoration and protection. According to the respondent, without that information, the organization would not have a blueprint to maintain and continue protecting the bay. In December 2012, 21 years after the bay had been identified as an area of concern, the survey respondent told us in an interview that her organization was in the process of sending a formal request to remove Presque Isle Bay’s designation as an area of concern. EPA announced in February 2013 that the bay had been delisted. It is the second U.S. area of concern to be removed from the list. The respondent estimated that GLRI funding had accelerated the process of removing Presque Isle Bay from the list of areas of concern by 10 years.\nOfficials we interviewed from the U.S. Geological Survey told us that the agency had used GLRI funds to complete three basin-wide sampling efforts of the water column, bottom sediments, and two other types of samples across the entire Great Lakes Basin as a part of its methylmercury sampling and analysis project. Methylmercury— an organic form of mercury—is a highly toxic substance that can build up in predatory fish, including fish that people eat. According to the officials, the sampling efforts took place in August 2010, April 2011, and August 2011, and data from these efforts have revealed a previously unknown source of methylmercury that likely is the dominant source leading to elevated concentrations in fish throughout the Great Lakes.\nOne survey respondent reported progress made by a project to improve control of sea lampreys, an invasive species in the Great Lakes, for which his organization had received $8,203,561 in GLRI funding. According to the U.S. Geological Survey, sea lampreys have devastated fish communities in the Great Lakes by feeding on the bodily fluids of host fish, such as the native lake trout. According to the respondent, the project worked to develop a new sea lamprey control technique that relies on the sea lamprey’s sense of smell. The respondent reported that field trials using this technique increased trapping efficiencies by up to 53 percent and that traps used with this technique can capture more than twice as many sea lampreys as traps that do not use the technique. According to the respondent, this new technique may make it possible not only to capture more sea lampreys but also to reduce the amount of pesticides introduced into the Great Lakes that are used to kill sea lampreys.\nOfficials we interviewed from the U.S. Coast Guard told us that the agency’s invasive species-related projects will increase its enforcement capability and address some technical problems relating to the installation and operation of freshwater ballast treatment systems for vessels operating on the Great Lakes. Ballast water is water that is taken into or discharged from a ship to accommodate changes in weight as a ship loads or unloads cargo. According to the U.S. Coast Guard, ballast treatment systems are intended to reduce the number of invasive species that can be transported into the Great Lakes in ballast water. The U.S. Coast Guard’s Research and Development Center worked with the Naval Research Laboratory to design, build, test, and verify a system for testing treated ballast water under both shoreside and shipboard conditions. According to U.S. Coast Guard officials, this project will facilitate rigorous testing of the performance of ballast water treatment systems under shipboard conditions, ensuring greater protection against the introduction of invasive species into the Great Lakes.\nNearshore health and nonpoint source pollution\nOne survey respondent reported that her organization received $85,000 in GLRI funding for a project to reduce the amount of bacteria in beach sand at a park on Lake Erie, in New York. According to the respondent, work completed in 2011 with GLRI funds determined that beach sand is acting as a reservoir for Escherichia coli, abbreviated as E. coli, which can negatively impact public health. The organization then compared three sand grooming techniques to no beach grooming. According to the respondent, the results indicated that sand grooming using a specific tractor attachment can reduce the amount of bacteria in the sand. In 2012, the organization compared water quality when sand was groomed using two different grooming techniques. The respondent reported that preliminary results indicate that grooming the beach daily with the specific tractor attachment significantly reduced the number of beach closures. The respondent reported that this fiscal year 2011 to 2012 GLRI project resulted in an improvement in water quality.\nThe Natural Resources Conservation Service received $75 million in GLRI funding from fiscal years 2010 to 2012 to target conservation efforts in selected priority areas. According to an agency official, this funding provides an opportunity to implement additional scientifically proven conservation practices in the priority watersheds, accelerating conservation practice implementation above what other programs would have provided. Landowners can take advantage of GLRI funds through a Natural Resources Conservation Service cost-share assistance program to install conservation practices. The agency helps landowners with conservation planning using various conservation practices, such as cover crops, conservation crop rotations, filter strips, prescribed grazing, and wetlands restoration. For example, the practice of cover crops establishes close-growing grasses, or other crops, to help improve soil and water quality by reducing soil erosion, among other things. A filter strip is a strip of herbaceous vegetation that is situated between crop or grazing land and a stream, river, or wetland, in order to reduce contaminated runoff. An agency official reported that GLRI funded efforts have led to the use of cover crops and filter strips on nearly 70,000 acres and 143 acres of priority watersheds respectively. For example, one landowner used the funds to develop a prescribed grazing system that encourages groundwater recharge, improves soil quality and prevents sediment and nutrient losses. The landowner is also installing a waste collection system to keep contaminated water out of nearby surface water and plans to plant 34 acres of cover crop.\nHabitat and wildlife protection and restoration\nA survey respondent reported that his organization had a project to help restore a marsh area that is among the roughly 15 costal marsh areas along Lake Michigan’s Lower Peninsula shoreline. The organization received $783,823 in GLRI funds for the project. One component of the project was to replace seven misaligned culverts. According to the respondent, the new culverts will allow unimpeded fish passage to more than 12 miles of stream habitat, which improves habitat for trout and other aquatic organisms. In addition, the respondent reported that the project restored a mile-long section of trout stream back to its original watercourse. This was necessary because the hydrology of an adjacent 75-acre wetland had been significantly degraded when the trout stream had been diverted into a straightened channel decades ago. The project also resulted in the eradication of types of invasive plants. The survey respondent reported that this project will improve fisheries habitat, help restore hydrology to a large wetland for waterfowl and many other species of wildlife and fish, and improve public recreational opportunities.\nOfficials from the Fish and Wildlife Service told us that the agency has received $11,590,857 in GLRI funds in fiscal years 2010 to 2012 for a project that focuses on restoring habitats for native lake sturgeon, brook trout, migratory birds, and threatened and endangered species populations within the Great Lakes Basin by removing barriers to fish passage, stabilizing stream banks and riparian areas (narrow vegetated areas adjoining rivers, streams, and lakes), improving in- stream habitat and restoring costal, wetland and upland areas. According to agency officials, the project has protected, restored, or enhanced more than 2,000 acres of wetlands and uplands, removed or bypassed more than 30 fish passage barriers, and reopened more than 210 stream miles to fish movement. Agency officials said that improving aquatic connectivity in the Great Lakes Basin is one of the more prominent achievements of the project, and that removing barriers to fish passage creates a healthier aquatic habitat and improves water quality and sediment management. In addition, according to agency officials, free-flowing rivers provide new recreational opportunities.\nAccountability, education, monitoring, evaluation, communication, and partnerships\nOne survey respondent reported that his organization received GLRI funding to map and describe all of the wastewater treatment plants in the Great Lakes Basin, both in the United States and Canada, and to develop a binational aquatic invasive species response plan. The respondent’s organization received $300,000 in GLRI funding for these projects. According to the respondent, the project to map and describe wastewater treatment plants resulted in the first ever binational map of these facilities and will inform management decisions about the level and consistency of water treatment and help protect human and environmental health. In addition, the respondent reported that the aquatic invasive species response plan developed by his organization provides a foundation for work on a basinwide plan that will be an important backup plan in the event that aquatic invasive species prevention efforts fail. According to the respondent, the plan his organization developed will directly assist the governments of the United States and Canada in meeting their obligations under the 2012 amendment to the Great Lakes Water Quality Agreement, which requires the two governments to develop and implement an early detection and rapid response initiative for aquatic invasive species, among other things.\nOfficials we interviewed from the National Oceanic and Atmospheric Administration told us that the agency’s dissemination of training materials for educators and climate curricula for elementary through high school students, which is customized for the Great Lakes region, is on target to reach more than 3,000 students and 50 teachers by the end of fiscal year 2013. As a result, officials said, the number of institutions incorporating this information into existing curricula far exceeds the GLRI Action Plan targets. Specifically, the Action Plan’s 2013 target for the measure that addresses the number of educational institutions incorporating Great Lakes protection and stewardship criteria into their environmental education curricula is 10 institutions. This measure corresponds to the Action Plan’s goal to increase outreach and education for the Great Lakes so that students understand the benefits and ecosystem functions of the Great Lakes and are able to make decisions to ensure that restoration investments are enhanced over time.\nIn addition to these examples of progress, respondents to our survey and other stakeholders we interviewed reported that the GLRI had allowed them to do restoration work that they previously identified as important but could not undertake because of limited funds or staff, among other reasons. For example, one survey respondent noted that due to GLRI funding, progress has been made on problems that had been languishing for years due to inadequate funding such as high-priority restoration projects, aquatic invasive species control, and actions to reduce beneficial use impairments. In addition, a state agency official we interviewed told us that without GLRI funding his state would not have had the capacity to help coordinate restoration efforts for areas of concern or conduct necessary monitoring of fish toxicity. Furthermore, in commenting on a draft of this report, National Park Service officials noted that GLRI funds have proven to be invaluable for helping the Service accomplish significant restoration of wetlands and areas affected by invasive species, among other things.", "We, and other organizations, have documented the difficulties associated with efforts to quantify overall progress toward Great Lakes restoration. For example, we reported in 2004 that it is difficult to describe restoration progress across the basin because of the unique environmental conditions of each of the Great Lakes. Specifically, the Great Lakes are not one contiguous water body but rather distinct lakes with unique environmental conditions—such as lake depth—that present challenges to setting goals and developing a monitoring system that can be used to describe restoration progress across the basin and also capture the uniqueness of each lake. In addition, according to a 2006 United Nations report, it is usually difficult, and sometimes impossible, to attribute changes in the state of a large ecosystem solely to the efforts of a specific ecosystem management program. agency officials, nonfederal stakeholders, and subject matter experts told us that it may take time for some Great Lakes restoration efforts to show measurable results.\nFurthermore, several Task Force EPA officials told us that it may not be possible to summarize Great Lakes restoration progress with one simple statement due to the size and complexity of the Great Lakes ecosystem. They said that when the Action Plan was created, the Task Force agencies incorporated a measure the agency had created as part of its GPRA reporting requirements, the Great Lakes 40-point scale (also called the Great Lakes Index), as a measure of progress intended to represent progress across the focus areas by measuring improvement in the overall health of the aquatic ecosystem. The index rates eight indicators on a scale from 1 to 5, where 1 is poor, and 5 is good, to produce an assessment of overall Great Lakes health that is represented by one number.\nHowever, some stakeholders and subject matter experts we interviewed raised concerns about the index and some of its indicators. For example, they said that the index is missing key ecosystem indicators, such as those related to invasive species and the health of native species. In addition, they said that the index is better suited for assessments of long- term, as opposed to annual, changes in the health of the ecosystem. EPA officials also questioned how meaningful it was to use just one number to convey information about the state of the multiple ecosystems and indicators within the Great Lake basin.\nEPA officials also explained that the GLRI is a relatively new undertaking and that getting visible, lake-wide and basin-wide ecosystem improvements from Great Lakes restoration efforts is a slow process. According to the officials, benefits, such as improvements in areas of concern, are being seen at the local level and by the end of the GLRI’s lifespan in 2014, EPA will be able to show progress at a local level as a step toward improving the health of the lakes overall.\nThe Task Force agencies’ draft framework includes direction to report on restoration progress and accomplishments, and transfer knowledge and lessons learned, among other things. The draft framework also notes that, while assembling project specific results can begin to offer a picture of cumulative progress and local success, reporting on GLRI at the program level can inform whether or not the GLRI is making restoration progress at other levels, such as the regional, lake, or ecosystem level.", "In response to our survey, respondents reported on what they believed to be the key factors that may affect and may limit GLRI progress. They cited practical issues related to implementing GLRI projects, such as the time it takes to complete quality assurance requirements and obtain permits. They also cited broader issues outside the scope of the Action Plan, for which realistic solutions may be expensive, pointing in particular to inadequate infrastructure for wastewater and stormwater and the effects of climate change.", "Survey respondents most often reported that their GLRI projects started later than planned because of quality assurance requirements and the length of time needed to obtain permits. It is important to emphasize that quality assurance requirements for environmental programs play a critical role in ensuring the success of those programs and that permits for environmental activities are required by a number of federal and state laws. Moreover, survey respondents did not suggest that either process should be eliminated when asked to comment on GLRI’s quality assurance requirements. Nonetheless, later start times can slow GLRI implementation and, as a result, may affect the pace of progress.\nQuality assurance requirements. Organizations that receive GLRI funds through federal grants may be required to meet specific quality assurance requirements for projects and tasks involving environmental data in order to receive the funds. Seventy-seven percent (135) of the 176 survey respondents reported that they needed to complete quality assurance requirements for at least one of their GLRI projects and, that on average, it took nearly 4 months to complete those requirements. Of those 135 respondents, 28 percent (38) reported that their projects started later than planned because of the time it took to complete quality assurance requirements, and 13 percent (17) reported that they could not start their project until the next spring because the ground or water was frozen. EPA officials told us that the GLRI quality assurance process was slow at the start of the program because the agency had not previously assessed quality assurance requirements for the kind of work being proposed in some of the projects. However, several survey respondents reported that the time it takes to complete GLRI quality assurance requirements has decreased since the program began in fiscal year 2010.\nTime needed to obtain permits. Organizations implementing GLRI projects might need to obtain federal or state permits for certain efforts, such as using herbicides to reduce invasive species, conducting controlled burning to enrich soil nutrients, or enhancing habitat for endangered species and communities. About half (87) of the 176 survey respondents reported that they needed a permit for at least one of their GLRI projects and that it took an average of 5 months to obtain the necessary permits. Of those 87 respondents, 31 reported that their projects started later than planned as a result of the time needed to obtain permits, and 13 reported that they could not start their project until the next spring because the ground or water was frozen. In addition, in the fiscal year 2011 GLRI progress report, the Task Force agencies identified permit processing as one of the factors for slowed project implementation for the habitat and wildlife protection and restoration measure of progress addressing the number of acres of coastal, upland, and island habitats protected, restored, and enhanced.\nSurvey respondents also reported that the timing of award notification resulted in later-than-planned start times for their GLRI projects (30 percent, or 52 out of 176, respondents), and that weather events limited the implementation of their GLRI projects (26 percent, or 45 out of 176, respondents). Specifically, 16 percent (29) reported that weather events caused their GLRI projects to be completed later than planned, 15 percent (27) reported weather events caused a suspension of GLRI activities, and 6 percent (11) reported that weather events resulted in later-than-planned start times for their GLRI projects.may cause GLRI projects to start later than planned because work cannot proceed on some projects—such as those that involve planting, doing construction, or monitoring stormwater—if there is a drought, too much Weather events rain, or the ground does not freeze in winter, among other things. For example, three survey respondents reported that work on their projects in wetlands was delayed because the wetlands involved with their organization’s projects did not sufficiently freeze one winter.", "Once started, the success of GLRI projects and of the GLRI as a whole can depend upon factors outside the scope of the Action Plan—that is, factors that are not addressed by the Action Plan’s long-term goals, objectives, or measures of progress—that affect the Great Lakes ecosystem. One such factor is atmospheric deposition, which is a process that transfers pollutants from the air to the earth’s surface and can significantly impair water quality in the nation’s rivers, lakes, bays, and estuaries, and harm human health and aquatic ecosystems. Airborne pollutants transferred by atmospheric deposition can fall to the ground in precipitation or as a gas or particle and be deposited either directly onto the surface of a water body or onto land and then transported into a water body through runoff. Atmospheric deposition contributed to the presence of toxaphene in the Great Lakes. Toxaphene is an insecticide that was once primarily used in southern states from 1947 to 1980, and it was banned in the United States for all uses in 1990. It is toxic for many aquatic organisms and accumulates in fish and shellfish causing health problems in humans who consume them.\nWe asked survey respondents to rank nine factors that are not addressed in the Action Plan on the basis of their potential to limit the restoration of the health of the Great Lakes ecosystem. As indicated in figure 5, survey respondents most frequently reported that inadequate infrastructure for wastewater or stormwater (72 percent, or 126 of 176, respondents) and the effects of climate change (65 percent, or 114 of 176, respondents) have the greatest potential to limit the restoration of the health of the Great Lakes’ ecosystem in comparison with other factors outside the scope of the Action Plan. Survey respondents also reported that factors such as the removal of water from the Great Lakes for use outside of the region and the effects of population growth in the Great Lakes region have the potential to limit the restoration of the health of the Great Lakes’ ecosystem to a great or very great extent by 57 percent (101 out of 176 respondents) and 49 percent (87 out of 176 respondents) respectively.\nIn addition, we asked 21 Great Lakes subject matter experts we interviewed to rank these factors, and 13 of the 21 experts identified the same top two factors the survey respondents did, noting that both inadequate infrastructure for wastewater or stormwater and the effects of climate change have the potential to limit the restoration of the health of the Great Lakes ecosystem to a great or very great extent.\nInadequate infrastructure for wastewater or stormwater refers to the deteriorating condition of the nation’s wastewater systems. These systems include sewer pipes that convey wastewater from homes and businesses to treatment facilities before discharging it into water bodies or land. In a 2004 report to Congress, EPA estimated that more than 1.2 million miles of pipes delivered wastewater into these systems. EPA has also reported that the vast majority of the pipes making up the nation’s wastewater systems were installed more than 50 years ago and are reaching the end of their useful lives. In addition to the age of these systems, their conveyance capacity (i.e., the rate at which they can transport water) is often exceeded during rainfall or snowmelt, which adds to the discharge of wastewater into U.S. surface waters. According to the American Society of Civil Engineers, the age and inadequate capacity of wastewater infrastructure systems lead to the discharge billion of gallons of untreated wastewater into U.S. surface waters each year.\nInadequate infrastructure can cause conditions that may slow, if not negate, restoration efforts, such as to improve water quality or reduce the number of days a beach is closed. This is because most wastewater systems are designed to discharge flows that exceed conveyance capacity directly to rivers, streams, and other surface waters. One Great Lakes interest group reported that five U.S. cities alone discharged 41 billion gallons of untreated sewage and stormwater into the Great Lakes from January 2009 to January 2010. needs survey report, EPA stated that $19.7 billion was needed to address publicly owned wastewater and stormwater infrastructure needs in the Great Lakes Basin.\nHealing Our Waters – Great Lakes Coalition, Turning the Tide: Investing in Wastewater Infrastructure to Create Jobs and Solve the Sewage Crisis in the Great Lakes (Ann Arbor, MI: August 2010). According to the report, data for this statement was provided by the five cities and EPA. but a strong scientific consensus has emerged in recent years from the U.S. Global Change Research Program and the National Research Council that the future likely entails greater risks of flooding, drought, and changes in the frequency and severity of storms. In addition, several organizations have predicted specific effects of climate change in the Great Lakes, which could negatively affect GLRI restoration efforts, such as to remove contaminated sediments from areas of concern or reduce the introduction of invasive species. For example, according to a 2000 report by the U.S. Global Change Research Program, drought could lead to certain situations in the Great Lakes that may require additional dredging of sediments at an annual cost of from $75 million to $125 million—about $101.6 million to $129.6 million in 2013 dollars—simply to maintain shipping lanes. In addition, the U.S. Global Change Research Program reported in 2009 that warming water temperatures can lead to increased numbers of aquatic invasive species, which tend to thrive under a wide range of environmental conditions, and a decline in native species, which are adapted to a narrower range of conditions. As we noted previously, invasive species such as the zebra mussel have caused extensive ecological and economic damage to the Great Lakes.\nOne way to reduce the potential effects of climate change is to invest in enhancing resilience. As defined by the National Academies, resilience is the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events. Enhanced resilience results from better planning to reduce losses, rather than waiting for an event to occur and paying for recovery afterward. Many jurisdictions in the Great Lakes region have recognized the threat of climate change and committed resources to prepare for its effects, according to a 2012 report focused on the region. Among these efforts, several Great Lakes states and the city of Chicago have each created climate change action plans that identify steps being taken to reduce the effects of climate change. For example, the city of Chicago identified the use of green roofs as one of many climate change mitigation and adaptation actions in its 2008 Chicago Climate Action Plan. In its subsequent progress report, Chicago reported that more than 4 million square feet of green roofs had been A green roof is a vegetative layer planned or completed since 2008.grown on a rooftop that provides shade and removes heat from the air, reducing temperatures of the roof surface and the surrounding air. As a result, green roofs act as insulators for buildings and reduce the energy needed to provide cooling and heating, which can decrease the production of associated air pollution and greenhouse gas emissions that contribute to climate change.\nIn addition, some Great Lakes jurisdictions have recognized that climate change can exacerbate other factors that may limit Great Lakes restoration. As we reported in April 2013, the Milwaukee Metropolitan Sewerage District officials employed what they called “green infrastructure” programs to make the district’s sewer system more resilient to climate change by capturing and holding or slowing the flow of stormwater. This was done as part of broader efforts to meet growing demand for sewer capacity, and officials plan to incorporate climate change adaptation into infrastructure planning and design where it makes sense as their facilities age and are replaced over time.\nThe Action Plan does not include goals, objectives, or measures of progress that show how the GLRI should address inadequate infrastructure, the effects of climate change, or other key factors that may limit the Action Plan’s success and overall progress concerning the health of the Great Lakes ecosystem, with two exceptions. In some cases, such as with inadequate infrastructure for wastewater or stormwater and atmospheric deposition of pollutants from sources outside the Great Lakes Basin, the Action Plan notes that some of these issues are addressed by other federal programs. For example, the Action Plan states that infrastructure needs will be addressed through increased funding for EPA’s Clean Water State Revolving Funds, a program that provides states and local communities with independent and sustainable sources of financial assistance, such as low- or no-interest loans, to fund water quality projects identified by the states and localities. EPA reported in 2010 that the program has provided more than $74 billion for these projects since 1988. As we testified in March 2013, however, wastewater infrastructure needs are made more daunting by the limited resources and budgets facing all levels of government.\nThe Action Plan acknowledges that the effects of climate change may have implications across all five of the Action Plan’s focus areas, and that the needs of communities to adapt to those effects will be assessed and addressed by GLRI projects and programs where appropriate. However, the Action Plan does not state how these effects will be addressed. To date, EPA has made some modest efforts to acknowledge the issue in the context of the Great Lakes. In its 2012 request for grant applications, for example, EPA included $200,000 for two to five grants for projects to increase climate change resiliency in Great Lakes communities. EPA also included an incentive in the request for applications for 2012 for the applicants to consider climate change impacts through vulnerability assessments or the integration of climate change adaptation measures into their project. Specifically, applicants could increase their eligibility for a grant by addressing climate change in their proposal.\nThe GLRI was created to accelerate the protection, maintenance, and restoration of the integrity of the Great Lakes. If the Action Plan does not state how the GLRI should address key factors—such as inadequate infrastructure and the effects of climate change—then the ability of restoration efforts guided by the Action Plan to achieve the GLRI’s goal is uncertain because these factors may negatively affect restoration efforts. EPA has acknowledged that the effects of climate change can be detrimental to the Great Lakes and stated in its fiscal year 2013 budget justification that it is imperative that consideration of climate change and climate adaptation be integrated into GLRI grants and projects to ensure the overall success of the GLRI. Nonetheless, to date, EPA has made few connections between this key issue and the potential effects of climate change. At a series of public meetings and webinars beginning in May 2013, EPA requested input regarding whether the connection between the Action Plan focus areas and the protection of the Great Lakes from the effects of climate change should be expressed more clearly in the next Action Plan. In commenting on a draft of this report, EPA officials told us that they have heard from many stakeholders about the need for the fiscal year 2015 to 2019 Action Plan to place additional emphasis on climate change, and that there is broad agreement on this point among the task force agencies.", "As directed by Congress, EPA and the other Task Force agencies began implementing the GLRI in fiscal year 2010 to address the stresses that threaten the health of the Great Lakes ecosystem and help restore the health of the Great Lakes and issued the GLRI Action Plan to guide implementation of the approximately $1.3 billion appropriated to the program. A collaborative and comprehensive approach, it is clear that both federal and nonfederal GLRI stakeholders believe that the program is making strides toward its goals. For example, GLRI efforts enabled EPA to remove the Presque Isle Bay area of concern from the list of areas of concern identified by the United States and Canada. Nonetheless, the threats to the Great Lakes persist, and EPA and the other Task Force agencies face significant challenges in ensuring the future success of the GLRI due to issues involving their abilities to assess and achieve progress. EPA and the Task Force agencies are currently obtaining input for the next version of the GLRI Action Plan for fiscal years 2015 to 2019.\nEPA has assessed GLRI progress primarily by using information from various sources to determine whether the GLRI is meeting the annual targets for the 28 measures in the Action Plan. Assessments of GLRI progress could help GLRI stakeholders, Congress, and the public discern the extent to which the health of the Great Lakes ecosystem has been restored, as well as what has been achieved by the approximately $1.3 billion appropriated to the program since fiscal year 2010. Moreover, such assessments can be used by EPA and the Task Force agencies to assess the effectiveness of GLRI actions and adjust their efforts if needed. However, we believe EPA is not well positioned to produce comprehensive and useful assessments for several reasons. Specifically:\nSome of the Action Plan’s long-term goals and objectives do not have measures of progress that link to them. We believe that clear linkages between a plan’s goals, objectives, and measures are critical to achieving and assessing progress over time. Without such linkages in the current Action Plan, it is unclear how EPA will be able to assess progress in meeting the Action Plan’s long-term goals and objectives.\nSimilarly, without identifying linkages between long-term goals, objectives, and measures in the Action Plan for 2015 to 2019 now under development, it is unclear how EPA will be able assess progress in meeting the long-term goals and objectives in that plan.\nThe measures of progress do not capture the results of many of the GLRI projects because more than half of the projects are not associated with an Action Plan measure of progress in GLAS, which is a mechanism EPA created for collecting information to monitor GLRI projects and progress. We recognize that some projects do not directly provide data for any of the Action Plan’s 28 measures, and that the cumulative results of some of the projects without assigned measures may ultimately be captured by some of the existing measures. With so many instances in which a project does not have an assigned measure, it is unclear if EPA will have the information it needs to capture the results of these projects and, therefore, if the agency can assess the full extent of progress being made.\nGLRI projects may directly address multiple measures of progress, but GLAS limits users to reporting the information for just one measure for each project even if more measures are being addressed. Without complete progress information on GLRI projects, the data EPA is using for certain measures of progress cannot be complete, and EPA may be underreporting GLRI progress. EPA officials told us that they will consider addressing this limitation in GLAS, but they did not specify a time frame for doing so.\nSome Action Plan measures or targets may not be useful because, among other things, they track activities that may not be sufficient to lead to the desired GLRI goals. Without useful measures, EPA may not be able to determine that GLRI efforts are producing the desired results.\nEPA and the Task Force agencies have not fully established an adaptive management plan. Although there is no requirement that the Task Force agencies establish an adaptive management plan for the GLRI, EPA and several of the Task Force agencies agreed in a 2000 to incorporate adaptive management principles into their programs. EPA and the Task Force agencies recently issued a plan that includes most but not all of the key elements of adaptive management, and it does not provide details on how the elements of adaptive management will be implemented. Without a fully established adaptive management plan, EPA and the other Task Force agencies may be limited in their ability to assess the effectiveness of GLRI efforts and adjust future actions to achieve the goals and objectives of the GLRI as results and ecosystem processes become better understood.\nWe recognize the potentially significant contributions that individual GLRI projects can make to resolving specific environmental and public health stresses that threaten the Great Lakes. However, we believe that these contributions need to be viewed in the context of larger factors affecting the Great Lakes, in order to more fully appreciate the long-term future of the Great Lakes and to develop optimal strategies to help ensure the best possible outcome. Some of these factors can lead to problems that will be very expensive to address. Most notably, inadequate infrastructure for wastewater and stormwater and the effects of climate change may lead to conditions that can negatively affect GLRI restoration efforts. One way to reduce the potential impacts of climate change is to invest in planning to reduce losses, rather than waiting for an event to occur and paying for recovery afterward. The Action Plan touches on these factors, but it does not directly address how these factors may affect GLRI efforts to restore the health of the Great Lakes ecosystem or provide strategies to address them. Without more clearly expressing that connection in the next Action Plan, EPA will not be able to help address the effects of these factors, including climate change, on GLRI restoration efforts.", "To address challenges the Task Force faces in producing comprehensive and useful assessments of progress and addressing factors that may limit GLRI progress, we recommend that the EPA Administrator, in coordination with the Task Force, as appropriate, take the following seven actions: ensure progress toward long-term goals or objectives that are identified in the Action Plan, but which do not have measures that link to them, is assessed; ensure that linkages between long-term goals, objectives, and measures are identified in the Action Plan for 2015 to 2019; ensure that the progress being made by projects that do not have an Action Plan measure assigned to them is captured in assessments of GLRI progress; capture complete information about progress for each of the measures that are addressed by a project; further evaluate the usefulness of the current measures and targets and the need, if any, for the creation of additional measures; establish an adaptive management plan that includes all of the key elements of adaptive management and provides details on how these elements will be implemented; and address how factors outside of the scope of the Action Plan that may limit progress, such as inadequate infrastructure for wastewater or stormwater and the effects of climate change, may affect GLRI efforts to restore the Great Lakes.", "We provided a draft of this report to EPA, the Departments of Agriculture, Commerce, Defense, Health and Human Services, Homeland Security, the Interior, State, and Transportation, and the Council on Environmental Quality for comment. In written comments from the EPA Region 5 Administrator, which are reproduced in appendix II, EPA generally agreed with the conclusions and recommendations in our report. EPA noted in particular that our report is well-timed because it comes at the beginning of a new 5-year GLRI planning cycle. The agency also noted that we rightly acknowledged the complexity of assessing and quantifying overall Great Lakes health, the difficulty of attributing specific environmental changes to specific projects or programs, and the slow pace of ecosystem change.\nIn addition, EPA noted that the agency is already taking actions consistent with our recommendations, including working to develop more appropriate measures of progress in the Action Plan for fiscal years 2015 to 2019 and finalizing the draft framework. The agency also noted it is working with the task force agencies to link all activities described in interagency agreements to goals, objectives, and measures of progress in the Action Plan to help to track projects where there is not currently an associated measure of progress for which data can be reported in GLAS. EPA also noted that the agency has heard from many stakeholders about the need for the next Action Plan to place additional emphasis on climate change, and that there is broad agreement on this point from Task Force agencies. Taken together, we believe comprehensive actions along the lines stated in the EPA letter would constitute important steps forward, and we will look forward to seeing the progress the agency has made in taking these actions in the 2015 to 2019 Action Plan.\nIn written comments from the Department of the Interior’s Assistant Secretary for Policy, Management, and Budget, which are reproduced in appendix III, Interior noted that information in our report is accurate and relevant, and the agency acknowledged the challenges in quantifying the progress toward restoration goals that we identified in our report. The Department of Agriculture provided technical comments but did not comment on our recommendations. Its letter is reproduced in appendix IV.\nIn addition to these written comments, the Council on Environmental Quality submitted an e-mail on September 13, 2013, that further emphasized our findings on the need for accountability. Specifically, this e-mail stated that GLAS limitations have led to an underreporting of progress for certain measures, so that they are not most accurately reflecting what benefits are accruing under the measures and projects implemented. EPA and the Departments of Agriculture, the Interior, and Transportation, provided technical comments that we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Administrator of the EPA, the appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VII.", "This appendix provides information on the scope of work and the methodology used to examine (1) how the Great Lakes Restoration Initiative (GLRI) is implemented by the Task Force agencies and other stakeholders; (2) the methods that the Environmental Protection Agency (EPA) has in place to assess GLRI progress; (3) the progress identified by the Task Force agencies and nonfederal stakeholders; and (4) the views of nonfederal stakeholders on factors, if any, that may affect or limit GLRI progress.\nTo examine how the GLRI is implemented by the Great Lakes Interagency Task Force (Task Force) agencies and other stakeholders we analyzed key documents and interviewed individuals involved with the GLRI. Specifically, we analyzed the Great Lakes Restoration Initiative Action Plan Fiscal Years 2010-2014 (Action Plan) to understand its structure and identify the long-term goals, objectives, measures of progress and related annual targets, and principal actions in each of the Action Plan’s five focus areas; EPA GLRI financial reports and the agency’s fiscal year 2014 budget justification to determine the amount of GLRI funds that have been allocated for fiscal years 2010 to 2013 to each Task Force agency and each focus area; and, information from the Great Lakes Accountability System (GLAS) to identify the number of GLRI projects in each focus area and to learn more about GLRI projects, such as location, size, and funding.\nWe also reviewed interagency agreements between EPA and the Task Force agencies that identify the amount of GLRI funds EPA will allocate to each agency and the GLRI projects the agencies will implement. In addition, we conducted interviews with federal stakeholders, officials from EPA headquarters, EPA’s office responsible for implementing the GLRI, the Great Lakes National Program Office, and the other Task Force agencies. We also interviewed representatives from nonfederal GLRI stakeholders—such as the Nature Conservancy and the Great Lakes Indian Fish and Wildlife Commission—and a prominent Great Lakes interest group, Healing Our Waters – Great Lakes Coalition, to gain an understanding of the GLRI and how it is implemented. Nonfederal stakeholders are state and local governments, tribes, nongovernmental organizations, and academic institutions that have received GLRI funds. We also attended the Eighth Annual Great Lakes Restoration Conference in Cleveland in September 2012 to learn more about the GLRI and Great Lakes restoration, and webinars to learn about the GLRI grant application process and how to use GLAS.\nTo examine the methods that EPA has in place to assess GLRI progress, we analyzed the Action Plan, documentation about GLAS, information from GLAS about GLRI project measures of progress, information provided by EPA on the sources of data for each of the plan’s measures of progress, the draft GLRI Adaptive Science-Based Framework for Great Lakes Restoration (draft Framework), and EPA’s Science Advisory Board’s 2012 review of the Action Plan.\nWe interviewed EPA officials to discuss their methods of assessing GLRI progress. We used the interviews with Task Force agency officials described above, and we conducted interviews with relevant officials from each of the Great Lakes states—Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania, and Wisconsin—to discuss the Action Plan. We also conducted interviews with subject matter experts, to obtain their views about the achievability and usefulness of the Action Plan’s measures of progress and related annual targets.\nAs part of our analysis of the Action Plan, we evaluated the extent to which the long-term goals and objectives in the plan have corresponding measures of progress. One analyst first compared the objectives for each focus area with the goals. The analyst considered whether it appeared that an objective would clearly contribute to attaining a goal. For example, in the invasive species focus area, the objective of developing and refining/piloting technologies that contain or control invasive species appears to clearly contribute to attaining the goal of preventing the spread of invasive species. The analyst also considered whether there was consistent or similar language in any of the goals and objectives that helped identify links between them. For example, the analysts examined if aspects of a goal in one focus area could be identified in an objective in the same focus area, such as in the toxic substances and areas of concern focus area, we identified similar language between the objective of reducing the concentrations of polychlorinated biphenyls (PCBs) in fish through 2014 and the goal of reducing environmental levels of toxic chemicals to the point that all restrictions on the consumption of Great Lakes fish can be lifted. Objectives could correspond to multiple goals. The analyst then compared the measures for each focus area to the objectives and looked for consistent or similar language in any of them that helped identify links between the objectives and measures. The analyst considered whether a measure was closely related to an objective and whether it appeared that progress toward at least part of the objective could clearly be assessed by a corresponding measure of progress. Measures could correspond to multiple objectives. We requested additional information from EPA officials on goals, objectives, and measures as needed to improve our understanding of them. A second analyst examined the conclusions of the first. In cases where there were initially disagreements between the two analysts regarding the identification of linkages between goals, objectives, and measures, all disagreements were resolved through analyst discussions. Ultimately, there was 100 percent agreement between the analysts. In addition, we evaluated the extent to which EPA and the Task Force agencies had established an adaptive management plan for the GLRI by first reviewing guidance from several Task Force agencies to identify key elements of adaptive management. We then examined the extent to which the GLRI Action Plan and draft Framework addressed those elements.\nFor our interviews with officials from each of the Great Lakes states, we developed a set list of open-ended questions for these interviews to obtain official’s views about the Action Plan, among other things. We identified the state agencies that we would contact by starting with the list of state agencies identified at EPA’s Great Lakes website as interested parties. We then contacted officials from each interested party to determine if their agency was the lead GLRI agency for the state or to learn if we should contact a different agency. As a result of this process, we identified the following as lead GLRI state agencies: the Illinois Department of Natural Resources; the Indiana Department of Environmental Management; the Michigan Department of Environmental Quality; the Minnesota Pollution Control Agency; the New York Department of Environmental Conservation; the Ohio Lake Erie Commission; the Pennsylvania Department of Environmental Protection; and, the Wisconsin Department of Natural Resources.\nFor the interviews with subject matter experts, we developed a set list of questions about the Action Plan’s long-term goals, objectives, and measures of progress. The experts we interviewed included state agency officials, members of academia, and representatives of nongovernmental organizations who had expertise in one or more of the Action Plan’s five focus areas. We identified these experts by asking for recommendations of at least three experts in each of the focus areas from 24 representatives of nonfederal Great Lakes stakeholders or Great Lakes interest groups organizations: 12 were nonfederal attendees of the Eighth Annual Great Lakes Restoration Conference that we selected randomly to conduct interviews about the Action Plan and the GLRI, and 12 were representatives of nonfederal organizations that we contacted as part of learning more about the GLRI and the Great Lakes. We received responses from 17 of the 24 individuals who recommended a total of 187 subject matter experts. We then created a list of the 33 experts who had been recommended two or more times and invited 31 of them to participate in interviews to obtain their views on the Action Plan goals, objectives, and measures of progress, among other things. Of those 31 experts, 21 agreed to be interviewed: five experts in focus area one; six experts in focus area two; three experts in focus area three; four experts in focus area four; and three experts in focus area five. Because we used a nonprobability sample, the information obtained from these interviews is not generalizable to other individuals with expertise in the Action Plan focus areas but provides illustrative information.\nTo examine the progress identified by the Task Force agencies and nonfederal stakeholders, we took several steps: we reviewed the fiscal year 2010 and 2011 GLRI progress reports that EPA and the other Task Force agencies issued to Congress in April and March 2013, respectively; we administered a web-based survey to each of the 205 nonfederal stakeholders that, as of October 2012, had received GLRI funds from a Task Force agency and had a project identified in GLAS; we used the interviews with officials from each Task Force agency identified above; and, we visited several GLRI projects in Illinois.\nWe conducted a web-based survey of all of the nonfederal GLRI stakeholders that have reported projects in GLAS, as of October 10, 2012, to identify examples of GLRI progress by obtaining their views on how their GLRI projects have benefited the ecosystem, among other things. The questionnaire used for this study is in appendix V. EPA provided us with contact information for each of those stakeholders, and we sent at least one e-mail to a point of contact from each stakeholder to identify the best point of contact for our survey. We surveyed the universe of the 205 nonfederal stakeholders that have projects in GLAS, as of October 10, 2012, and received responses from 176 nonfederal GLRI stakeholders for a response rate of 86 percent.\nWe designed draft questionnaires in close collaboration with a GAO social science survey specialist. We conducted pretests with three nonfederal GLRI stakeholders to help further refine our questions, develop new questions, and clarify any ambiguous portions of the survey. We conducted the pretests over the phone, and we selected one GLRI nonfederal stakeholder that had received GLRI funds for one grant and two GLRI nonfederal stakeholders that had each received GLRI funds for multiple grants for the pretest.\nWe developed and administered the web-based questionnaire accessible through a secure server, and we e-mailed unique identification numbers and passwords to points of contact at the 205 nonfederal GLRI stakeholders February 4, 2013. We sent follow-up e-mail messages beginning February 11, 2013. Then we contacted all remaining nonrespondents by telephone, starting February 26, 2013. The questionnaire was available online until March 28, 2013. For questions that should have been skipped but were not, we attempted to contact the respondents for clarification and edited their responses where warranted.\nBecause this was not a sample survey, it has no sampling errors. However, the practical difficulties of conducting any survey may introduce errors, known as nonsampling errors. For example, difficulties in interpreting a particular question, sources of information available to respondents, or when entering data into a questionnaire or analyzing the data can introduce unwanted variability into the survey results. We took steps in developing our questionnaire, collecting the data, and analyzing it to minimize these errors. In addition, as indicated above, social science survey specialists designed the questionnaire in collaboration with GAO staff that had subject matter expertise. We then conducted three pretests to check that (1) the questions were clear and unambiguous, (2) terminology was used correctly, (3) the questionnaire did not place an undue burden on respondents, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased. We made multiple contact attempts with nonrespondents during the survey by e- mail, and some nonrespondents were also contacted by telephone. When we analyzed the data, an independent analyst checked all computer programs. Since this was a web-based survey, respondents entered their answers directly into the electronic questionnaire, eliminating the need to key data into a database, minimizing error.\nWe conducted a computer-enabled content analysis to analyze responses to the question “Please provide examples of how one or more of your organization’s GLRI projects have benefitted the Great Lakes ecosystem.” Of the 176 respondents, 163 provided information in response to this question. We categorized the responses along two dimensions: direct and indirect benefits, and observed or expected benefits. We defined these categories based on whether respondents reported that their organization’s GLRI projects resulted in changes in the ecosystem, such as reduced beach closure days, or other types of changes, such as improved understanding of the ecosystem, and if respondents reported that they had observed the result or expected to observe them a later time. One reviewer developed content categories based on survey responses and, after obtaining agreement on the categories from the second reviewer, assessed and coded each survey response into those categories. The second reviewer examined the coding. In cases where disagreements among the two reviewers regarding the coding of responses into content categories were found, all disagreements were resolved through reviewer discussion. Ultimately, there was 100 percent agreement between the reviewers. In addition, we conducted follow-up interviews by phone and e-mail with those survey respondents whose examples we wanted to include in the report to collect clarifying information, if necessary.\nIn addition to the survey, we used the interviews with Task Force agency officials identified above to obtain information about GLRI progress. We also visited several GLRI projects in Illinois. We traveled to Illinois because EPA’s Great Lakes National Program Office is located in Chicago. We met with representatives from two nonfederal GLRI stakeholders who took us to the sites of their GLRI projects; the two nonfederal GLRI stakeholders—the Chicago Park District and Waukegan Harbor Citizens Advisory Group—were recommended to us by an official from the Illinois Department of Natural Resources.\nTo examine the views of nonfederal stakeholders on factors, if any, that may affect or limit GLRI progress, we used the web-based survey described above. Specifically, we used the survey to obtain nonfederal GLRI stakeholder views about factors that may have limited their ability to carry out GLRI projects and factors that have the potential to affect the restoration of Great Lakes health. As part of creating the survey, we developed lists of factors that might limit GLRI project implementation progress and factors that might limit the restoration of Great Lakes health in general through interviews we conducted with 19 randomly selected individuals at the Eight Annual Great Lakes Restoration Conference and interviews we conducted with representatives from five nonfederal GLRI stakeholders and one Great Lakes interest group. We narrowed the list of factors that might limit GLRI project implementation progress to four factors most often cited by interviewees as hindering their abilities to start a project or to successfully carry out a project, and asked survey respondents if they had experienced these factors and about the effects of each of these factors on their GLRI projects. We narrowed the list of factors that might limit the restoration of Great Lakes health in general to the nine factors most often cited by grouping similar factors together and eliminating those factors that are addressed by the Action Plan either through Action Plan long-term goals, objectives, or measures of progress. We eliminated those factors addressed by the Action Plan because this meant they had already been identified by the GLRI as factors that had the potential to limit restoration of Great Lakes health. We asked survey respondents to identify the extent to which each of these factors had the potential to limit the restoration of the health of the Great Lakes ecosystem.\nWe also used the interviews with subject matter experts mentioned above to obtain information about the factors that may limit progress by asking them to identify the extent to which each of the same nine factors we included in the survey had the potential to limit the restoration of the health of the Great Lakes ecosystem.\nWe conducted this performance audit from June 2012 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "We conducted a web-based survey of nonfederal GLRI stakeholders that have reported projects in the Great Lakes Accountability System, as of October 10, 2012, using all of the questions below as stated here. Non- federal stakeholders are state and local governments, tribes, nongovernmental organizations, and academic institutions that that have received GLRI funds.", "The GLRI Action Plan for fiscal years 2010 to 2014 is organized by five focus areas that, according to the federal agencies responsible for implementing the GLRI, encompass the most significant environmental problems in the Great Lakes: (1) toxic substances and areas of concern; (2) invasive species; (3) nearshore health and nonpoint source pollution; (4) habitat and wildlife protection and restoration; and (5) accountability, education, monitoring, evaluation, communication and partnerships. Each focus area includes several long-term goals to address these problems, as well as objectives to be completed within the 5 years of the plan and measures of progress to ensure that efforts are on track to meet the long- term goals.", "", "Goal 1: Areas of concern are cleaned up, restoring the areas and removing the beneficial use impairments.\nGoal 2: The release of toxic substances in toxic amounts is prevented and the release of any or all persistent toxic substances to the Great Lakes Basin ecosystem is virtually eliminated.\nGoal 3: Exposure to toxic substances from historically contaminated sources is significantly reduced through source reduction and other exposure reduction methods.\nGoal 4: Environmental levels of toxic chemicals are reduced to the point that all restrictions on the consumption of Great Lakes fish can be lifted.\nGoal 5: The health and integrity of wildlife populations and habitat are protected from adverse chemical and biological effects associated with the presence of toxic substances in the Great Lake Basin.", "By 2014, delist five areas of concern.\nBy 2014, 46 beneficial use impairments will be removed in areas of concern.\nBy 2011, 15 million pounds of electronic waste and 15 million pills of unwanted medicines will be collected or their release will have been prevented.\nBy 2014, 45 million pounds of e-waste, 45 million pills of unwanted medicines, and 4.5 million pounds of household hazardous waste in the Great Lakes Basin will have been collected or their release will have been prevented.\nBy 2014, 9.4 million cubic yards of contaminated sediments will be remediated.\nThrough 2014, an annual average of up to 5 percent annual decline will be maintained or improved for the trend (year 2000 and on) in average concentrations of PCBs in whole lake trout and walleye samples.", "Number of areas of concern in the Great Lakes where all management actions necessary for delisting have been implemented (cumulative).\nArea of concern beneficial use impairments removed (cumulative).\nBeneficial use impairment delisting project starts at areas of concern (cumulative).\nCubic yards (in millions) of contaminated sediment remediated in the Great Lakes (cumulative).\nPollution (in pounds) collected through prevention and waste minimization projects in the Great Lakes Basin (cumulative).\nThese projects represent on-the-ground actions that are being implemented in order to remove beneficial use impairments. For example, sediment removals, Superfund cleanups, habitat projects and others.\nThis is an existing measure [used in the agency’s performance plan and performance report, which are required by the Government Performance Results Act, as amended].\nCumulative percentage decline for the long term trend in average concentrations of PCBs in Great Lakes fish.", "", "Goal 1: The introduction of new invasive species to the Great Lakes Basin ecosystem is eliminated, reflecting a “zero tolerance policy” toward invasives.\nGoal 2: The risk of introduction of species, which are imported for various uses, in the Great Lakes is minimized.\nGoal 3: The spread of invasive species, by means of recreational activities, connecting waterways, and other vectors, beyond their current range is prevented.\nGoal 4: A comprehensive program for detection and tracking newly identified invasive species in the Great Lakes is developed and provides up-to-date critical information needed by decision makers for evaluating potential rapid response actions.\nGoal 5: An effective, efficient and environmentally sound program of integrated pest management for invasive species is developed and implemented, including program functions of containment, eradication, control, and mitigation.", "By 2011, eight state aquatic nuisance species management plans will be established or revised to include rapid response capabilities. By 2014, eight state-based, multiagency rapid response plans will be implemented and 22 mock exercises to practice responses carried out under those plans and/or actual response actions will be completed.\nSix technologies that prevent the introduction of invasive species and four technologies that either contain or control invasive species will be developed or refined and piloted by 2011. Ten technologies that prevent the introduction of invasive species and five technologies that either contain or control invasive species will be developed or refined and piloted by 2014.\nBy 2011, methodology and protocols will be piloted for the coordinated monitoring methodology and shared protocols for basinwide invasive species surveillance. By 2014, a basinwide surveillance program with shared sampling protocols and methodologies to provide early detection of nonnative species will be operational.\nBy 2014, a 40 percent reduction in the yearly average rate of invasive species newly detected in the Great Lakes ecosystem will be achieved, compared with the period 2000-2009.\nBy 2014, invasive species populations within the Great Lakes ecosystem will have been controlled and reduced, as measured in populations controlled to a target level in 6,500 acres of managed area and by removing 5,000 pounds of invasive species from the Great Lakes ecosystem.\nBy 2014, approximately 10 million recreation and resource users will be educated on best practices that prevent the introduction and spread of invasive species.", "Rate of nonnative species newly detected in the Great Lakes ecosystem.\nAcres managed for populations of invasive species controlled to a target level (cumulative).\nNumber multiagency plans established, mock exercises to practice rapid responses carried out under those plans, and/or actual rapid response actions (cumulative).\nNumber of recreation and resource users contacted on best practices that prevent the introduction and spread of invasive species (cumulative).", "", "Goal 1: Nearshore aquatic communities consist of healthy, self- sustaining plant and animal populations dominated by native and naturalized species.\nGoal 2: Land use, recreation, and economic activities are managed to ensure that nearshore aquatic, wetland, and upland habitats will sustain the health and function of natural communities.\nGoal 3: The presence of bacteria, viruses, pathogens, nuisance growths of plants or animals, objectionable taste or odors, or other risks to human health are reduced to levels in which water quality standards are met and beneficial uses attained to protect human use and enjoyment of the nearshore areas.\nGoal 4: High-quality bathing beach opportunities are maintained by eliminating impairments from bacterial, algal, and chemical contamination; effective monitoring for pathogens; effective modeling of environmental conditions, where appropriate; and timely communications to the public about beach health and daily swimming conditions.\nGoal 5: A significant reduction in soil erosion and the loading of sediments, nutrients, and pollutants into tributaries is achieved through greater implementation of practices that conserve soil and slow overland flow in agriculture, forestry and urban areas.\nGoal 6: High quality, timely and relevant information about the nearshore areas is readily available to assess progress and to inform enlightened decision making.", "By 2010, EPA will compile and map the highest priority watersheds for implementation of targeted nonpoint source pollution control measures.\nBy 2014, remediation, restoration and conservation actions in at least one targeted watershed in each Great Lake Basin will control erosion, reduce nutrient runoff from urban and agricultural sources, and improve habitat to protect nearshore aquatic resources.\nBy 2014, a baseline will be established for total suspended solids loadings from targeted tributaries.\nBy 2014, a measurable decrease will be achieved in soluble phosphorous loading from 2008 levels in targeted tributaries.\nBy 2014, the causes of nutrient-related nearshore biological impairments will be better understood and, following local or watershed remedial actions, the number and severity of incidences of harmful algal blooms, avian botulism, and/or excessive Cladophora growth will be significantly reduced from 2008 levels.\nBy 2014, a comprehensive nearshore monitoring program will have been established and implemented, including a publicly accessible reporting system, based on a suite of environmental indicators.\nBy 2014, 50 percent of high-priority Great Lakes beaches will have been assessed using a standardized sanitary survey tool to identify sources of contamination.\nBy 2014, 20 percent of high-priority Great Lakes beaches will have begun to implement measures to control, manage or remediate pollution sources identified through the use of sanitary surveys.\nBy 2014, rapid testing or predictive modeling methods (to improve the accuracy of decisions on beach postings to better protect public health) will be employed at 33 percent of high-priority beaches.\nBy 2014, the area of agricultural lands in conservation and/or utilizing conservation tillage practices will increase by 50 percent over 2008 levels.", "Five-year average annual loadings of soluble reactive phosphorous from tributaries draining targeted watersheds.\nPercentage of beaches meeting bacteria standards 95 percent or more of beach days.\nExtent (sq. miles) of Great Lakes harmful algal blooms.\nAnnual number of days U.S. Great Lakes beaches are closed or posted due to nuisance algae.\nAnnual volume of sediment deposition in defined harbor areas in targeted watersheds (cubic yards).\nAcres in Great Lakes watershed with U.S. Department of Agriculture conservation practices implemented to reduce erosion, nutrients and/or pesticide loading under Farm Bill programs.\nThis metric will be added to national surveys for beach managers for 2010. Nuisance algae can include Cladophora, harmful algal blooms or other species, all of which are believed to be aggravated by elevated levels of phosphorous in the water.\nU.S. Army Corps of Engineers dredges the federal shipping channel at Toledo Harbor each year. This area receives the highest rate of sedimentation in the Great Lakes, coming from the Maumee River watershed. Even small improvements in the rate of sedimentation here would reflect considerable efforts in the watershed to reduce erosion and farm runoff. Alternately, the Corps conducts bathymetric surveys of commercial harbors each year, from which the volume of new fluvial sediment can be calculated for targeted watersheds. Because the Corps does not dredge every location of every harbor each year, the estimated accumulation from a designated area over time will reflect the relative amount of sediments deposited from the tributary. This approach is currently in development.", "", "Goal 1: Protection and restoration of Great Lakes aquatic and terrestrial habitats, including physical, chemical, and biological processes and ecosystem functions, maintain or improve the conditions of native fish and wildlife.\nGoal 2: Critical management activities (such as stocking native fish and other aquatic species, restoring access of migratory fish species at fish passage barriers, and identifying and addressing diseases) protect and conserve important fish and wildlife populations.\nGoal 3: Sound decision making is facilitated by accessible, site specific and landscape-scale baseline status and trend information about fish and wildlife resources and their habitats.\nGoal 4: High-priority actions identified in strategic plans (such as state and federal species management, restoration and recovery plans, Lakewide Management Plans, Remedial Action Plans, and others) are implemented, lead to the achievement of plan goals, and reduce the loss of fish and wildlife and their habitats.\nGoal 5: Development activities are planned and implemented in ways that are sensitive to environmental considerations and compatible with fish and wildlife and their habitats.", "By 2014, 4,500 miles of Great Lakes rivers and tributaries will be reopened and 450 barriers to fish passage will be removed or bypassed.\nBy 2014, 82 percent of recovery actions for federally listed priority species will be implemented.\nBy 2014, 53 percent of populations of native aquatic non-threatened and endangered species are self-sustaining.\nBy 2014, 97,500 acres of wetlands, wetland-associated uplands, and high-priority coastal, upland, urban, and island habitats will be protected, restored or enhanced.\nBy 2014, 100 percent of U.S. coastal wetlands in the Great Lakes Basin will be assessed.\nBy 2014, 30 habitat-related beneficial use impairments will be delisted across the areas of concern.", "Miles of rivers reopened for fish passage.\nNumber of fish passage barriers removed or bypassed.\nNumber of species delisted due to recovery.\nPercentage of recovery actions implemented for priority listed species.\nPercentage of populations of native aquatic non-threatened and endangered species self-sustaining in the wild.\nNumber of acres of wetlands and wetland-associated uplands protected, restored and enhanced.\nNumber of acres of coastal, upland, and island habitats protected, restored and enhanced.\nPercent of U.S. coastal Great Lakes wetlands assessed.\nNumber of habitat-related beneficial use impairments removed from the 27 U.S. areas of concern so impaired.", "", "Goal 1: A cooperative monitoring and observing system provides a comprehensive assessment of the Great Lakes ecosystem.\nGoal 2: The necessary technology and programmatic infrastructure supports monitoring and reporting, including Great Lakes Restoration Initiative project deliverables by all agencies and participating stakeholders. Data and information are provided in reports that are public friendly, timely and available on the Internet. Reports present integrated and scaled data from watersheds to lakes to Great Lakes basinwide.\nGoal 3: Increase outreach and education for the Great Lakes, and provide ongoing K-12 education for students to understand the benefits and ecosystem functions of the Great Lakes so they are able to make decisions to ensure that restoration investments are enhanced over time.\nGoal 4: Expand the range of opportunities for Great Lakes stakeholders and citizens to provide input to the governments and participate in Great Lakes issues and concerns.\nGoal 5: Work under the goals and objectives of the Great Lakes Water Quality Agreement is coordinated between the United States and Canada through Lakewide Management Plans and other binational processes.", "By 2011, opportunities for collaboration, planning, data accessibility and accountability will be increased through the expanded use of Internet-based technology.\nBy 2011, an Accountability System will be developed and implemented for the Initiative. The system will integrate and make transparent strategic planning, budgeting, and results monitoring.\nBy 2011, a satellite remote sensing program will be implemented to assess Great Lakes productivity and biological (e.g., algal bloom) events.\nBy 2011, outreach and education efforts are increased, including identifying and revising existing curricula to incorporate sustainable education needs for the Great Lakes that meet state and other relevant learning standards.\nBy 2011, a refined suite of science-based indicators for development of a comprehensive assessment of Great Lakes ecosystem health will be identified, monitoring programs for those indicators will begin to be implemented, and restoration and protection actions tied to those assessments and programs assured.\nBy 2011, social media access opportunities for basinwide public involvement in the Initiative will be in place.\nBy 2012, education efforts under existing curricula that meet state and other relevant learning standards will be coordinated across states, and a system for tracking student and teacher outreach (quantitatively and qualitatively) for their use.\nBy 2012, improved coordination with Canada will take place for programs under the Great Lakes Water Quality Agreement, particularly under the Lakewide Management Plans, which will result in the achievement of 5-10 priority Lakewide Management Plans goals and actions.\nBy 2014, a statistically valid and comprehensive assessment, using a probability-based design, of Great Lakes water resources, will be established. The system will integrate shipboard monitoring, remote sensing, automated sampling, and other monitoring or observing efforts. By 2016, the system will be in place for all of the Great Lakes and it will be capable of providing a scientifically justifiable assessment of Great Lakes water resources.\nBy 2014, timely data and information will be provided to decision makers at multiple scales within a framework of established baselines, targets, indicators of progress, and monitoring.", "Improvement in the overall aquatic ecosystem health of the Great Lakes using the Great Lakes 40-point scale.\nNumber of priority Lakewide Management Plans projects that are completed.\nNumber of educational institutions incorporating new or existing Great Lakes protection and stewardship criteria into their broader environment education curricula.", "", "", "In addition to the individual named above, Steven Elstein, Assistant Director; Krista Breen Anderson; Cheryl Arvidson; Mark Braza; Lisa L. Fisher; Stuart M. Kaufman; Armetha Liles; Marya Link; Michelle K. Treistman; and Wayne Turowski made significant contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 1, 2, 2 ], "alignment": [ "", "h0_full", "h0_full", "", "h1_full", "", "h1_full", "", "h2_title", "h2_full", "h2_full", "h2_full", "h3_full", "", "h3_full", "h3_full h4_full h1_full", "", "", "h4_full h2_full", "", "", "", "", "h0_full h4_full h1_title", "h1_title", "h1_full", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What is the relationship between the Task Force agencies and the Great Lakes Restoration Initiative?", "What does the Action Plan include?", "What does each focus area include?", "For what does EPA use the Action Plan's measures?", "How successful is this assessment?", "What is the relationship between goals and measures in this plan?", "What is one example of this gap?", "What might be the ramifications of this?", "What do the Task Force's reports state?", "What did GAO's research focus on?", "How did respondents see their projects in relationship to the Great Lakes ecosystem?", "What is GAO's stance regarding the quantification of restoration progress?", "What factors limit GLRI progress?", "What is an example of one such factor?", "How has EPA addressed this problem?", "How does the Action Plan deal with these factors?", "Why must EPI address these factors?", "How is GLRI administered?", "What did the Task Force's Action Plan propose?", "What was GAO asked to review?", "What does this report examine?", "What is GAO's methodology?" ], "summary": [ "The Task Force agencies use the Action Plan to implement the Great Lakes Restoration Initiative (GLRI) and use an interagency process to enter into agreements among themselves to identify GLRI projects and with other stakeholders to implement GLRI projects.", "The Action Plan includes guidance for implementing the GLRI in five focus areas (such as invasive species and habitat and wildlife protection and restoration) that encompass the most significant environmental problems in the Great Lakes.", "Each focus area includes, among other things, long-term goals, objectives to be achieved by fiscal year 2014, and 28 measures of progress that have annual targets for fiscal years 2010 to 2014.", "EPA uses the Action Plan's measures to assess GLRI progress.", "However, its methods may not produce comprehensive and useful assessments of GLRI progress for several reasons.", "Among them, some of the goals and objectives do not link to any measures and, as a result, it is unclear how EPA will be able to assess progress toward them.", "For example, one measure tracks the reduction in concentrations of polychlorinated biphenyls (PCB) in fish as part of the goal to lift all restrictions on consumption of Great Lakes fish. However, stakeholders reported that the measure is too narrow and that mercury and other contaminants need to be addressed as well. Consequently, reducing PCB concentrations in fish is not likely to lead to the desired result of lifting all Great Lakes fish consumption restrictions.", "Without useful measures, EPA may not be able to determine that GLRI efforts are producing the desired results.", "In spring 2013, the Task Force agencies issued two reports about GLRI progress in fiscal years 2010 and 2011, which state whether the targets for the Action Plan's 28 measures were being met (e.g., 15 of 28 measures met or exceeded in fiscal year 2011), but the reports include few specific examples of progress.", "As a result, GAO sought further insights into such progress by surveying nonfederal GLRI stakeholders.", "Overall, 87 percent of respondents cited at least one example of how one or more of their projects had, or was expected to, benefit the Great Lakes ecosystem.", "GAO and others have reported that quantifying overall Great Lakes restoration progress is difficult, that the environmental conditions of each lake are unique, and, according to a 2006 U.N. report, it is often impossible to attribute specific environmental changes to specific projects or programs.", "In response to GAO's survey, among the factors respondents most often cited as potentially limiting GLRI progress are several outside the scope of the Action Plan, such as inadequate infrastructure for wastewater or stormwater and the effects of climate change. These factors could negatively affect GLRI restoration efforts.", "For example, as a result of climate change, warming water temperatures can lead to increased numbers of aquatic invasive species and a decline in native ones, a GLRI focus area.", "In 2012, EPA took steps to incorporate climate change considerations into a small number of GLRI projects but has yet to decide if the GLRI will consider climate change impacts on all GLRI projects.", "The Action Plan touches on these factors but does not state how they will be addressed.", "Without addressing these factors in the next Action Plan, EPA will not be able to more fully account for their impacts on GLRI restoration efforts.", "Approximately $1.3 billion has been appropriated to the GLRI, created in fiscal year 2010, which an interagency Task Force of 11 federal agencies, chaired by the EPA Administrator, oversees.", "In 2010, the Task Force issued an Action Plan for fiscal years 2010 to 2014 to develop a comprehensive approach to restoring the health of the Great Lakes ecosystem.", "GAO was asked to review the GLRI.", "This report examines (1) how the GLRI is implemented by the Task Force agencies and other stakeholders, (2) the methods that EPA has in place to assess GLRI progress, (3) the progress identified by the Task Force agencies and nonfederal stakeholders, and (4) the views of nonfederal stakeholders on factors, if any, that may affect or limit GLRI progress.", "GAO analyzed the Action Plan, surveyed 205 non-federal recipients of GLRI funding, and interviewed Task Force agency officials and nonfederal stakeholders." ], "parent_pair_index": [ -1, 0, 1, -1, 0, 1, 2, 1, -1, 0, 1, 0, -1, 0, 1, -1, 3, -1, -1, -1, 2, 2 ], "summary_paragraph_index": [ 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5, 5, 1, 1, 1, 1, 1 ] }

{ "title": [ "Background", "State and Local Governments Use ITS in Various Ways to Manage Congestion, and Some New Uses of ITS Are Promising", "State and Local Governments’ ITS Deployment", "State and Local Governments Face a Number of Challenges in Using ITS Technologies", "Strategic Planning Challenges", "Funding Challenges", "ITS Knowledge Challenges", "Coordination Challenges", "Further Use of Leading Practices Could Enhance DOT’s Promotion of ITS and Better Address Challenges", "DOT’s Efforts to Promote and Support ITS Technologies Help Address State and Local Challenges", "Increased Use of Leading Practices Could Improve DOT’s Promotion of ITS", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Examples of DOT Activities That Address State and Local Challenges", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Congestion is geographically concentrated in major metropolitan areas, as close to 80 percent of America’s growth and economic development is concentrated in metropolitan areas. Traffic congestion has grown worse in many ways in the past 30 years—trips take longer, congestion affects more of the day and affects more personal trips and freight shipments, and trip travel times are more unreliable. According to AASHTO, travel on the National Highway System has increased fivefold over the past 60 years, from 600 billion miles driven per year to almost 3 trillion in 2009. Annual travel is expected to climb to nearly 4.5 trillion miles by 2050, even with aggressive strategies to cut the rate of growth to only 1 percent per year.\nThe main types of strategies that state and local governments can use to address traffic congestion are improved traffic operations, public transportation, increased capacity, and demand management. ITS generally fits within traffic operations as a way to better manage existing capacity. According to FHWA, traffic congestion is caused by various factors (see fig. 1). Bottlenecks, which reflect inadequate capacity, cause about 40 percent of urban road traffic congestion. The remaining 60 percent of congestion results from other causes, which, according to FHWA, can be addressed by management and operations strategies.\nITS encompasses a broad range of wireless and wire line communications-based information and electronic technologies, including technologies for collecting, processing, disseminating, or acting on information in real time to improve the operation and safety of the transportation system. When integrated into the transportation system’s infrastructure and in vehicles themselves, these technologies can relieve congestion, improve safety, and enhance productivity.\nUsing ITS strategies may require officials to make capital improvements by installing equipment, such as traffic control systems and incident management systems. In highly congested metropolitan areas, ITS infrastructure tends to be complex because it typically consists of a set of systems deployed by multiple agencies. For example, the state government typically manages and operates freeway facilities, and city or county governments manage and operate smaller arterial roadways. In a given metropolitan area, the state transportation department, city traffic department, transit agency, and toll authority may each deploy different ITS technologies that address their transportation needs. Metropolitan planning organizations serve a key role in planning, as they have responsibility for the regional transportation planning processes in urbanized areas.\nCongress established the ITS program in 1991 in the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), and DOT created the ITS Joint Program Office in 1994. Since its creation, the ITS Joint Program Office has overseen allocation and expenditure of more than $3 billion for deploying ITS applications and researching new technologies. Under ISTEA and continuing under the Transportation Equity Act for the 21st Century (TEA-21), enacted in 1998, Congress authorized funds specifically for state and local governments to deploy ITS technologies. The Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), enacted in 2005, did not directly reauthorize the ITS deployment program. Although DOT no longer provides dedicated funding for ITS deployment, states can use their federal aid highway program funds for improving traffic operations, including deploying ITS. In addition, state and local governments may use their own funds to finance ITS projects. State funding mainly comes from highway user charges, while local funding primarily comes from general funding allocations, property taxes, sales taxes, and various other taxes and fees. Although DOT does not track state or local spending on ITS, a market research company has estimated that states spent a combined $1.4 billion on ITS in 2010.\nThe ITS Joint Program Office, within RITA, leads research of new ITS technologies and also carries out several activities to promote the use of existing technologies. In this capacity, the office works with the other modal administrations within DOT, including FHWA, the Federal Transit Administration, the Federal Motor Carrier Safety Administration, the Federal Railroad Administration, the National Highway Traffic Safety Administration, and the Maritime Administration. The Joint Program Office was previously housed in FHWA and moved to RITA in early 2006. FHWA’s Office of Operations carries out activities aimed at improving the operations of the surface transportation system, including traffic management, and, as part of these efforts, encourages the use of ITS by state and local governments.", "State and local governments currently use ITS technologies in a variety of ways to monitor traffic conditions, control traffic flow, and inform travelers. While numerous types of ITS technologies are available for these purposes, their deployment is uneven across the country. We identified several emerging uses of ITS that have significant potential to reduce traffic congestion. These include approaches that use integrated data to manage traffic and inform travelers and use ITS to proactively manage traffic.", "State and local governments use ITS technologies to monitor traffic conditions, control traffic flow, and inform travelers about traffic conditions so they can decide whether to use alternative, less congested routes (see fig. 2).\nTransportation agencies use ITS technologies, such as closed circuit cameras and sensors, to monitor traffic conditions in real time. The availability of real-time information means that agency staff can more rapidly identify and respond to events that impede traffic flow, and develop accurate traveler information. For example, cameras are an important component of incident management. Incident management is a planned and coordinated process to detect, respond to, and clear traffic incidents that can cause traffic jams. Operators can use information from cameras to verify traffic conditions detected through sensors, coordinate response to incidents, and monitor the recovery from the incident. According to DOT’s 2010 ITS deployment survey, the percentage of freeway miles covered by cameras increased from approximately 15 The 2010 deployment survey percent in 2000 to 45 percent in 2010.found that 83 percent of freeway management agencies reported a major benefit from cameras—higher than for any other technology. Meanwhile, the level of deployment of cameras on arterials has remained relatively flat. For example, in the 2000 deployment survey, 17 percent of agencies reported deploying cameras on arterials, compared with 21 percent of agencies in 2010. DOT speculated that this may be due to funding limitations at local agencies.\nLoop detectors use a fixed roadway sensor to measure the number and estimate the speed of passing vehicles. Radar detectors use microwave radar and are mounted on overhead bridges or poles and transmit signals that are reflected off vehicles back to the sensor. The reflected energy is analyzed to produce traffic flow data, such as volume and speed. Vehicle probes use roaming vehicles and portable devices, such as cell phones and Global Positioning System devices, to collect data on travel times. by real-time data collection technologies, as compared with 55 percent in 2010. The use of these technologies has also grown on arterial roadways, with the percentage of signalized intersections covered by electronic data collection technologies growing from approximately 20 percent in 2000 to 48 percent in 2010. In addition, private companies are expanding the use of vehicle probes that collect real-time data on travel time and speed, allowing for greater geographic coverage. Partnering with private companies to gain vehicle probe data expands the data that state DOTs use. According to the 2010 deployment survey, 11 state DOTs reported using vehicle probe data collected by a private sector company.\nMany technologies can be used to dynamically manage freeway capacity and traffic flow using real-time information. Approximately one-third of the largest U.S. cities deploy traffic control technologies on freeways. Specifically, 35 of the 108 largest metropolitan areas in the United States have deployed one or more of the following freeway technology capabilities:\nRamp meters control the flow of vehicles entering the freeway. According to DOT’s 2010 deployment survey, ramp meters are deployed in 27 of the 108 largest metropolitan areas in the country and manage access to 13 percent of freeway miles, about the same level as in 2006.\nCongestion (or road) pricing controls traffic flow by assessing tolls that vary with the level of congestion and the time of day. All U.S. congestion pricing projects in operation are High Occupancy Toll lanes, which charge solo drivers a toll to use carpool lanes, or peak- period pricing projects, which charge a lower toll on already tolled roads, bridges, and tunnels during off-peak periods. The deployment of congestion pricing relies on electronic tolling ITS technology. Other ITS technologies used to support congestion pricing include sensors that detect traffic conditions and dynamic message signs that announce toll rates. In 2012, GAO found that congestion pricing projects were open to traffic in 14 major metropolitan areas.\nReversible flow lanes and variable speed limits can also be used to control freeway traffic and address congestion. These strategies can incorporate various forms of ITS technologies, including retractable access gates and dynamic message signs. According to the 2010 deployment survey, 11 metropolitan areas use reversible flow lanes or variable speed limits on freeways.\nTransportation agencies can use ITS technologies to control arterial traffic through traffic signals. Types of advanced traffic signal systems include the following:\nOperating signals under computerized control: This capability allows operators to remotely adjust the signals from the traffic management center to respond to current traffic conditions and allows for enhanced control over signals in response to traffic events. According to the 2010 deployment survey, 50 percent of signalized intersections were under centralized computer control—essentially equal to the proportion in 2000.\nAdaptive signal control technology: These signals can be automated to adjust signal timings in real time based on current traffic conditions, demand, and system capacity. It allows faster responses to traffic conditions caused by special events or traffic incidents. For example, Los Angeles has developed one of the first fully operating adaptive signal control systems in North America. Despite benefits of adaptive signals, according to DOT, only 3 percent of traffic signals in the country’s largest metropolitan areas are controlled by adaptive signal control. According to DOT, agencies have not deployed adaptive signals because of the costs of deploying, operating, and maintaining them, as well as uncertainty about their benefits.\nTransportation agencies communicate information gathered from traffic monitoring to the traveling public in various ways, including via dynamic message signs, television, websites, e-mail, telephone, and devices used in vehicles such as cell phones. This information—including information about travel times and traffic incidents—allows users to make informed decisions regarding trip departures, routes, and modes of travel.\nDynamic message signs are popular for communicating traffic information to travelers. According to DOT’s 2010 deployment survey, almost 90 percent of freeway agencies, and approximately 20 percent of arterial agencies, reported using dynamic message signs to disseminate traveler information. The number of dynamic message signs deployed on freeways increased from fewer than 2,000 signs in the year 2000 to over 4,000 in 2010, greatly expanding agencies’ capabilities to communicate directly with freeway travelers. Arterial agencies also increasingly adopted dynamic message signs, nearly tripling from 10 percent of responding agencies in 2000 to 26 percent in 2010.\nThe 511 Traveler Information Services are another method of informing travelers. DOT initiated the development of these services and seeks to have states deploy them nationwide. These 511 services provide information via the telephone (using an interactive voice response automated system) and the Internet. State DOTs generally run these services and they operate independently of one another. Currently, 14 states lack 511 service coverage or provide service for only a portion of the state. Additionally, these services vary in the ways they provide information (phone or Internet), the types of information they provide (travel times, roadway weather conditions, construction), and areas they cover (statewide or citywide). To fulfill requirements in SAFETEA-LU, FHWA issued a Final Rule in November 2010 to establish the Real-Time System Management Information Program. The rule contains minimum requirements for states to make information on traffic and travel conditions available through real-time information programs and to share this information. In 2009, 17 of the 19 experts we interviewed about the need for a nationwide real-time traffic information system said such a nationwide system should be developed.that state and local transportation agencies generally develop and use Some of these experts noted these systems within their own jurisdictions, leading to gaps in coverage and inconsistencies in the quality and types of data collected. Because of these gaps, travelers using 511 systems have to contact different systems while they are traveling and may receive different types of information.\nIn general, the level of ITS deployment varies by state and locality. For example, the deployment of ITS technologies across the four metropolitan areas we visited greatly varies (see table 1). ITS is also used more on freeways than on arterial roads. For example, in response to DOT’s 2010 deployment survey, agencies in 21 metropolitan areas reported deploying real-time traffic data collection technologies such as loop detectors on arterial roadways, compared with agencies in 71 metropolitan areas that reported deploying the same types of technologies on freeways. Several experts we interviewed described the deployment of ITS nationwide as “spotty” or having uneven geographical coverage. DOT officials told us that the pace of ITS adoption by state and local governments has been slow and that upgrades to newer types of technologies have been difficult. In the next section we discuss some of the common challenges state and local governments face in deploying ITS, such as funding constraints.\nWe identified four emerging uses of ITS technologies that have the greatest potential to reduce traffic congestion, based on views of experts we interviewed (see table 2).two broad themes: (1) using integrated data to manage traffic and inform travelers, and (2) proactively managing traffic.", "State and local governments face various challenges in deploying and effectively using ITS technologies to manage traffic congestion. As mentioned previously, ITS in metropolitan areas tends to be complex and is deployed by multiple agencies, which involves planning and coordination across agencies. Effectively using ITS is dependent upon agencies having the staff and funding resources needed to maintain and operate the technologies. We identified four key challenges agencies face in using ITS: strategic planning, funding deployment and maintenance, having staff with the knowledge needed to use and maintain ITS, and coordinating ITS approaches.", "Planning for ITS is a key component of strategically using ITS to address transportation issues and reduce congestion. Transportation planning for metropolitan areas has traditionally focused on building and maintaining basic infrastructure to ensure adequate roadway capacity. ITS, in contrast, focuses on managing already-existing capacity to use it more effectively. Strategically using ITS requires agencies to shift focus from planning construction and maintenance of roadways to planning the operations of the surface transportation system, a shift that, according to DOT, some states and local transportation agencies have not yet fully made.\nA RITA official told us that planning is a major challenge that affects agencies’ ability to make effective use of ITS. The federal ITS program, as mentioned previously, initially included a DOT program that provided grants to transportation agencies specifically to deploy ITS. As a result, many agencies have deployed ITS based on the availability of funding rather than systematic planning, according to two stakeholders, a national transportation organization representative, a DOT official, and four transportation agencies we interviewed. According to FHWA officials, ITS deployment has not always been clearly connected to a transportation problem or need, or well integrated with other transportation strategies and programs. If state and local governments do not consider the range of available ITS options in developing their congestion management strategies, they may miss opportunities to better manage traffic and make the best use of scarce funds to address congestion.\nMost experts we spoke to believed that limitations of planning processes, as well as the availability of information to support sound decision making, were challenges faced by state and local governments in using ITS. Furthermore, six experts, two stakeholders, and officials from five transportation agencies we contacted noted that there is a need for more planning and analysis information such as cost-benefit information and performance measures. Some of these officials noted that it is currently difficult to calculate and measure the benefits of ITS. For example, in its 2010 deployment survey, DOT found that 25 percent of agencies responsible for managing arterial roadways reported that they had not deployed adaptive traffic signal control technology because of uncertainty about benefits. Lack of quantifiable information about benefits can put ITS projects at a disadvantage compared with other types of transportation projects such as road improvements or bridge replacements, which have more easily quantified benefits. While some studies show that various types of ITS technologies can be cost-effective, conducting such studies can be challenging.\nFHWA has emphasized the importance of incorporating transportation operations (including ITS) into transportation planning, along with related objectives and performance measures. Despite FHWA’s promotion of the use of such an approach, many metropolitan planning organizations do not fully consider operations in the planning process. A recent FHWA assessment found that metropolitan planning organizations increasingly address traffic operations (including ITS) in their plans, but only 36 percent include specific, measurable objectives related to operations that meet DOT’s recommended criteria. Despite challenges, DOT reports that some regions have effectively incorporated ITS into their planning efforts, including Hampton Roads, Virginia. The Hampton Roads Transportation Planning Organization, the metropolitan planning organization for the area, scores ITS projects for their capacity to support planning objectives and has been able to acquire federal funding for several ITS plans and projects through this process. These include a centralized traveler information system and signal system upgrades.", "Funding constraints pose a significant challenge to transportation agencies in their efforts to deploy ITS technologies because of competing priorities and an overall constrained funding situation. ITS projects must compete for funding with other surface transportation needs, including construction and maintenance of roads, which often take priority, according to officials from transportation and stakeholder agencies we interviewed. As we reported in 2005, transportation officials often view adding a new lane to a highway more favorably than ITS when deciding how to spend their limited transportation funds. DOT has noted that funding constraints might explain why the rate of adoption of arterial management technologies over the past decade has been flat. In addition, the 2010 deployment survey found that 55 percent of agencies responsible for managing freeways, compared with 36 percent of agencies responsible for managing arterial roadways, plan to invest in new ITS in 2010 to 2013. Transportation agencies face difficult decisions regarding the allocation of their transportation funding, and many have faced severe revenue declines in recent years, restricting the availability of funds for transportation improvements. For example, a county transportation official we interviewed reported that the funds for deploying and maintaining ITS have been reduced annually over the last 3 to 4 years because of reduced county revenues, which has led to the county suspending almost all deployment of ITS field devices.\nTransportation officials must identify priorities and make trade-offs between funding projects that preserve or add new infrastructure and those that improve operations, such as ITS projects. Preserving infrastructure is a high priority for state and regional decision makers. Traffic growth has outpaced highway construction, particularly in major metropolitan areas, which puts enormous pressure on roads. According to FHWA’s most recent projections (using 2006 data), less than half of the vehicle miles traveled in urban areas are on good-quality pavements and about one-third of urban bridges are in deficient condition.stakeholders and officials from four transportation agencies we spoke with noted, ITS projects have difficulty competing for funding with other needs, such as road and bridge maintenance projects. For example, one city transportation official told us the city must devote most of its resources to highway and bridge projects rather than new technology, and in some cases the city has resorted to demolishing unsafe bridges because of lack of funds rather than repairing or replacing them.\nThese funding issues exist within the context of an overall large funding gap for maintaining and improving the nation’s surface transportation infrastructure. The Highway Trust Fund has been undergoing a solvency crisis in recent years. Its expenditures have exceeded its revenues, which derive mainly from motor fuel taxes. According to 2006 National Surface Transportation Infrastructure Financing Commission estimates, combined revenues at all levels of government, under current policies, will meet only 58 percent of the capital investment requirements for U.S. highway maintenance and only 41 percent of the costs for highway improvement for the period 2008-2035.\nAgencies that are able to deploy ITS often face additional challenges in funding the operations and maintenance of these technologies. Eight experts we interviewed noted that funding operations and maintenance of ITS is more challenging than funding the initial deployment. Two experts we interviewed noted that ITS is often installed and then not fully utilized or maintained. Additionally, in response to FHWA’s 2009 proposed requirement for states to make travel information available as part of a Real-Time System Management Information Program, several states identified operation and maintenance costs as a barrier to the implementation of such a program.some systems may exceed those of deployment. For example, in 2003, investments for signal control hardware had initial costs of $21,000 to $30,000 and yearly maintenance costs of $9,000 to $10,500 over a 5- year time frame.\nOngoing costs of operations for FHWA officials told us that it is often difficult for state and local agencies to sustain the operations of ITS technologies because of funding constraints and the higher priority agencies place on basic infrastructure. For example, a county transportation agency official we interviewed reported that the agency’s operating budget has been reduced by about 30 percent over the past 2 years, which has led to reduced maintenance of ITS devices. Officials from one local agency told us that one of its big challenges is identifying operations and maintenance funding to support newer systems. Advanced traffic signal systems are one area in which operations and maintenance funding challenges can limit effectiveness and impede greater expansion. According to FHWA, over 50 deployments of these signal systems have occurred over the last two decades. However, over half of the deployments were deactivated because of insufficient resources or lack of maintenance or operations capabilities. Additionally, a 2010 study on adaptive traffic control systems found that funding—including the high cost of deployments and the lack of funding for operations—was the main factor in why these systems are not more widely deployed. Transportation officials in one metropolitan area we visited told us that it was common for smaller cities to fund the deployment of advanced traffic signals but be unable to fund, maintain, and repair them after deployment, causing signal failures that can impair coordination with neighboring cities and operation of the larger network.\nThe lack of funding availability for operations and maintenance is compounded by other challenges such as insufficient staffing resources, difficulty in planning maintenance costs, and the fast pace of technological change. RITA officials noted that some local governments will not install ITS because they do not have the staff to do the continual maintenance that the systems require. Three stakeholders and officials from six transportation agencies told us that funding the operations and maintenance of ITS is difficult to plan for, because of challenges accounting for maintenance costs and the fast pace of technology. The life cycle of ITS technologies is short, between 5 and 7 years, according to one ITS researcher, meaning that equipment or software will become obsolete or require retooling within that time frame.\nSome states and localities have developed alternative methods for financing congestion reduction efforts, including ITS projects. These supplement traditional funding sources and have included imposing additional tolls, local taxes, or fees; developing partnerships with private industry; and designating separate funding. For example,\nHalf of the budget of the Metropolitan Transportation Authority of Los Angeles County comes from a 1.5 percent sales tax dedicated to transportation. This allows the agency to fund and deploy ITS improvements countywide, on arterials, highways, and the transit system.\nThe Virginia DOT is constructing High Occupancy Toll lanes on I-495 through a public-private partnership. This agreement provided Virginia with needed construction funds, as the project would otherwise consume more than a year of the state’s construction funds.\nSome state and local governments have purchased traffic data from private companies because they can avoid the costs of data collection, including sensor deployment and operations and maintenance.", "ITS is a rapidly developing field that requires a specialized workforce familiar with emerging technologies. Staff responsible for managing ITS systems need knowledge in a variety of areas, including project management and systems engineering, according to two FHWA division office ITS engineers. Workforce demographic changes, the competitive labor market, new technologies, and new expectations in the transportation industry combine to make attracting and retaining a capable workforce difficult for state and local transportation agencies. In addition, a 2011 National Cooperative Highway Research Program study found that U.S. universities produce too few skilled applicants for state and local DOTs. These issues combine to affect the ability of state and local agencies, especially smaller agencies, to manage ITS.\nMany state and local transportation agencies struggle to maintain in- house staff with the skills and knowledge needed to manage ITS projects. Eight of the 15 experts we spoke with noted that agencies face challenges in maintaining staff with the expertise and skills needed for ITS. For example, 1 expert noted that ITS requires skills that civil engineers—with whom transportation agencies are generally well staffed—are not specifically trained in, such as understanding electrical systems, communication networks, and interagency relationship building. Another expert noted difficulty finding staff with other skills necessary to ITS management, such as contract management, systems integration, and information technology troubleshooting skills. In addition, the fast pace of technological change and resource limitations put more demands on transportation officials and limit training opportunities. RITA officials told us that transportation agencies need systems engineers to manage ITS deployment and operations but do not have them in sufficient numbers. For example, a local government official told us he has been unable to fill a vacant ITS-related engineering position because of a hiring freeze that has been in effect for over 3 years. According to this official, this makes it difficult to complete ITS projects even when funds for projects are available.\nOnce ITS professionals have needed skills, agencies find it difficult to retain them. Eight of the 15 experts we spoke with noted that retention of qualified staff is a challenge for agencies. Limitations in salary and career opportunities can limit the ability of state and local governments to retain staff. One expert noted that the ITS staff at his state DOT could double their salary by going elsewhere, and another mentioned a state DOT employee who had multiple job offers from the private sector and whom the state DOT could no longer afford. Additionally, officials from 10 transportation and stakeholder agencies we interviewed noted that retaining staff was a challenge. For example, officials from several transportation and stakeholder agencies noted that, because of budget restrictions, they have been unable to hire ITS staff to replace those who have retired.\nThis is a particular issue for small agencies, according to two FHWA division office ITS engineers. The agencies controlling arterial roadways and intersections, including traffic signals, are typically county and city governments and are smaller in terms of funding and personnel, on average, than agencies controlling freeways, which are typically state governments. For example, the National Transportation Operations Coalition’s 2007 National Traffic Signal Report Card Technical Report found that agencies operating very small signal systems scored markedly lower on signal operations than all other agencies, likely because of staff not having specialized knowledge of signal systems operations and maintenance. Additionally, the report found almost one-half of all 417 survey respondents did not have staff or resources committed to monitor or manage traffic signal operations on a regular basis. According to a paper by two FHWA division office ITS engineers in California, small to medium-size agencies in the state lack qualified staff and, as a result, find it difficult to implement complex ITS projects successfully. The engineers noted that these agencies are not able to maintain staff with project management and systems engineering expertise because of insufficient ITS activity to justify a full-time staff position, high turnover of staff, and difficulty in obtaining ITS training. In the paper, the FHWA engineers proposed several potential solutions for these agencies, such as sharing technical staff within the same agency, sharing ITS staff between agencies, hiring consultants, or hiring another agency to perform some of the needed functions.\nSeven experts, six stakeholders, and officials from nine transportation agencies we spoke with noted that agencies often address these issues by hiring consultants for ITS support. State and local agency officials reported hiring consultants to perform a range of ITS tasks, such as maintaining ITS equipment, developing the regional architecture needed to meet federal requirements, and conducting the systems engineering to develop project requirements.\nOf the 15 experts we spoke to, 12 rated institutional leadership and support as a challenge facing state and local governments in deploying, operating, and maintaining ITS. Five identified it as a major challenge, 3 as between a major and a minor challenge, 4 as a minor challenge, 2 as not a challenge, and 1 had no basis to judge. elected and appointed officials lack good understanding of potential ITS benefits, and require reeducation when there is a change in leadership, which can lead to variations in funding and other support. The majority of the experts we interviewed noted that the level of ITS leadership varies across the country and from agency to agency.", "As mentioned earlier, in highly congested metropolitan areas, ITS systems tend to be complex and involve multiple agencies. Transportation networks include freeways, arterial roadways, and transit systems that cross state and jurisdictional boundaries; and ITS may be implemented by numerous agencies, such as state DOTs, counties, cities, and transit agencies. For example, in the Pittsburgh metropolitan area, approximately 260 townships manage their own traffic signals, and in the Los Angeles metropolitan area, approximately 120 cities manage their own traffic signals, according to metropolitan planning organization officials. As noted previously, better integration of data across jurisdictions can improve traffic operations and traveler information. According to FHWA, better coordination has the potential to improve a region’s integration of ITS approaches, permitting agencies to leverage resources, avoid duplication, and enhance ITS effectiveness. However, we found coordination of various ITS elements and technologies is a challenge for agencies. Fourteen experts, seven stakeholders, and officials from five transportation agencies we interviewed noted that In addition, the DOT 2010 coordination across agencies is a challenge.deployment survey found that about 39 percent of freeway management agencies employ coordinated traffic incident management and only about 16 percent of freeway agencies and 28 percent of arterial agencies engage in cross-jurisdictional traffic signal coordination.\nAgencies face difficulty coordinating for many reasons, including differing priorities and perspectives. In 2007, we reported that common challenges transportation agencies face in coordinating include difficulties aligning perspectives when working on regional projects and addressing competing ideas of which jurisdictions should be responsible for the management and funding of ITS projects that cross boundaries. FHWA officials noted that some communities may have priorities that are contrary to the goal of creating free-flowing traffic, such as slowing down traffic through the town. Additionally, officials from six transportation agencies we interviewed discussed differing jurisdictional priorities as obstacles to regional goals. For example, in regard to traffic signals, officials in one metropolitan area we visited told us some cities work together to manage their signals with the purpose of expediting traffic through a corridor, while other cities want to independently manage their signals to slow traffic or discourage additional traffic. In another metropolitan area we visited, metropolitan planning organization officials reported challenges deciding who will bear the financial responsibility for bus priority signals that would allow buses to have priority through traffic signals. While the transit agency that operated the buses wanted a single equipment system to enable buses to move freely at signals in the region’s various jurisdictions, cities operating the traffic lights could not afford to modify their systems.\nIn some cases, agencies are able to work together to achieve common goals to reduce congestion. For example, three jurisdictions outside of Pittsburgh—Cranberry Township, Seven Fields Borough, and Adams Township—worked together in 2008 to implement a signal coordination project along Route 228, a congested arterial corridor. These jurisdictions were able to secure a mix of local and state funding to implement the project and established an agreement to govern the maintenance of the signals. According to an evaluation, the project could yield total benefits of up to approximately $2 million in reduced delay, reduced fuel consumption, and reduced emissions over a 5-year period. For a 5-year cost of $70,000, the public could realize a benefit-to-cost ratio of as much as 30 to 1.a consensus basis to promote better traffic management along the I-95 corridor by involving state and local transportation agencies, toll authorities, and related organizations since the early 1990s. Initially focused on incident management, the coalition now addresses other issues including data sharing to enhance decision making by states. Other areas in which the coalition is now working include integrating tolling systems and promoting availability of real-time truck-parking information along the corridor.", "DOT activities sponsored and funded by RITA and FHWA promote and support the use of ITS and address the challenges that state and local governments face in deploying and effectively using ITS technologies. We identified several leading practices for successfully encouraging the adoption of new technologies: developing a strategy to promote and support the use of technologies; choosing appropriate methods to promote the use of technology by the target audience, including making users aware of ITS resources; and monitoring technology adoption. Further use of these leading practices could improve DOT’s promotion of ITS while leveraging its resources.", "DOT agencies—specifically RITA and FHWA—sponsor and fund various activities that promote and support the use of ITS by state and local governments. These activities can be categorized as training and education, technical assistance, publications and guidance, ITS databases, planning and analysis tools, funding, demonstration and pilot projects, and ITS standards and architecture.\nRITA’s activities focus on conveying knowledge of the value and uses of ITS technologies, while FHWA’s activities promote strategies for improving traffic operations, many of which make use of ITS technologies. The activities sponsored by RITA and FHWA help state and local governments address the challenges they face in deploying, operating, and maintaining ITS technologies. For a summary of various DOT activities that address the state and local challenges we have previously identified, see appendix II.\nDOT has undertaken various activities that can assist state and local governments in addressing challenges they face in planning the strategic use of ITS technologies. FHWA sponsors a program called Planning for Operations aimed at incorporating traffic operations strategies, supported by ITS technologies, into mainstream transportation planning. For example, this approach advocates using operations-based objectives and performance measures, such as reducing delays as a result of incidents, as a basis for choosing congestion management strategies, such as traffic incident management strategies that make use of ITS technologies to identify and respond to incidents more quickly. As part of this effort, FHWA sponsors workshops for metropolitan planning organizations and has written guidance that provides examples of operations objectives, performance measures, and a sample transportation plan that includes different operational strategies. In addition, RITA hosts an ITS portal on its website that includes ITS-related information that can be useful for planning, such as databases with studies highlighting the benefits, costs, and lessons learned associated with ITS deployments.\nAlthough DOT no longer provides dedicated funding for ITS deployments, several funding mechanisms can be used for ITS-related deployments and operations. SAFETEA-LU authorizes states to use their federal aid highway funding for developing and implementing ITS systems. For example, funds from the Highway Trust Fund’s National Highway System, Surface Transportation, and Congestion Mitigation and Air Quality Improvement programs are eligible to be used for the deployment and operations of ITS technologies. Although funding of ITS technologies is not specifically tracked, FHWA officials estimate that approximately 3 to 5 percent, or between $800 million and $1.3 billion for fiscal year 2010, of federal aid highway program funds have been used for ITS technologies. For the most part, this funding is not for pure ITS projects but rather for ITS technologies that are incorporated into larger road and bridge improvement projects. According to FHWA officials, an internal analysis found that a similar percentage of funds, or between about $800 million and $1.3 billion, of FHWA’s American Recovery and Reinvestment Act funds were used for ITS deployments, with the majority of the total American Recovery and Reinvestment Act funds being obligated between early 2009 and March 2011. In fiscal year 2010, RITA obligated approximately $28.2 million for research on emerging uses of ITS technologies and obligated an additional $12.3 million to programs supporting the deployment of ITS, including the Professional Capacity Building program.\nDOT also provides funding for limited trial deployments of ITS. Since 2005, FHWA has provided about $26.6 million and managed about $150.9 million of RITA’s funds for demonstration projects that support the use of ITS technologies in managing traffic congestion, including four Urban Partnership Agreement projects, two Congestion Reduction program projects, and two Integrated Corridor Management projects. In addition, FHWA has sponsored several smaller-scale demonstration projects that examine and test ITS applications, such as a demonstration project to develop an enhanced 511 traveler information system.\nDOT sponsors multiple activities and programs aimed at ensuring that the state and local transportation workforce and leaders have adequate ITS knowledge. RITA operates a Professional Capacity Building program that aims to enhance the professional development of current and emerging ITS professionals. According to RITA statistics, between January 2010 and June 2011, the program reached over 3,400 transportation professionals through multiple activities, including 13 webinars, 8 web- based courses, 5 workshops, 6 presentations, and 12 peer-to-peer exchanges on topics such as ITS project management, systems engineering, adaptive signal control technology, and integrated corridor management. The program is in the process of refocusing its efforts in order to prepare transportation professionals for new connected vehicle technologies as well as to allow them to take advantage of proven ITS technologies.\nSimilarly, FHWA conducts a variety of activities aimed at building the expertise of the state, regional, and local workforce in traffic operations strategies and associated ITS technologies. In addition to offering some training courses through RITA’s Professional Capacity Building program, FHWA offers its own training courses, technical assistance, and a variety of publications and guidance aimed at improving the management of traffic operations and the use of ITS. For example, between January 2010 and June 2011 FHWA offered 52 workshops, 2 webinars, and 12 peer-to- peer exchanges related to topics such as adaptive signal control technology, traffic incident management, and ITS performance measures. Most of these activities are sponsored by FHWA’s Office of Operations under individual program areas, such as traffic incident management, traffic signal management, congestion pricing, and real-time traveler information. FHWA also has an additional initiative—including guidance, training, and technical assistance—aimed at improving traffic signal management.\nIn addition, RITA and FHWA have activities focused on enhancing the knowledge of state and local leaders about traffic operations and ITS technologies. Through its Professional Capacity Building program, RITA emphasizes leadership awareness through activities such as peer-to-peer exchanges. RITA officials told us they are also considering possible new ways to reach high-level decision makers. FHWA is sponsoring an initiative that provides guidance to leaders in 12 states on how to integrate transportation operations and ITS technologies into the state planning process, with the intent of turning these states into models for other states. Furthermore, FHWA has an effort under way to identify and contact newly appointed state DOT leaders to discuss the benefits of operational strategies that use ITS technologies, including hosting workshops with top-tier leaders.\nDOT promotes the coordination of ITS approaches among state and local government agencies, emphasizing the benefits of a regional approach. For example, FHWA promotes regional collaboration through its Planning for Operations program as well as the Regional Concept for Transportation Operations initiative. Specifically, this initiative provides state and local officials with various publications that encourage a coordinated regional approach in the planning for and deployment of ITS- based operational strategies, such as traffic incident management or traveler information services. RITA and FHWA also promote regional cooperation by sponsoring demonstration projects through the Integrated Corridor Management initiative. This initiative aims to integrate operational strategies and ITS technologies among transportation operators along a specific corridor, supporting interagency collaboration and the integration of systems. Additionally, RITA and FHWA promote ITS coordination through the development and support of ITS architecture and standards used to facilitate the exchange of information and ensure compatibility among ITS technologies at a regional level. One RITA official told us that the regional architecture is often the catalyst for interagency contact between state and local DOTs.\nFurthermore, FHWA encourages regional approaches by supporting alliances of transportation agencies in multiple states. For example, the I- 95 Corridor Coalition includes 40 member agencies, toll authorities, and other entities located along the corridor that work together with the aim of creating seamless operations across jurisdictions and modes. The coalition has been supported by RITA funds that are managed by FHWA and used for efforts that benefit all the coalition members, such as purchasing private sector data that are shared among the agencies. Similarly, the North/West Passage Corridor Coalition was created as part of a shared fund study, supported by FHWA, that combines funds among eight member states along the I-90 and I-94 corridors in order to develop effective methods for sharing, coordinating, and integrating traveler information and operational activities across state borders.", "The National Academies’ Transportation Research Board and we have identified a number of leading practices for successfully encouraging the adoption of new technologies. Of these, the ones we have identified as being most applicable for assessing DOT’s efforts to promote and support ITS use by state and local governments fall into three main areas (see table 3).\nRITA and FHWA each have strategies that guide their efforts to promote and support the use of ITS technologies at the state and local levels. RITA has developed a strategic plan for its Professional Capacity Building program that outlines goals, performance measures, and an action plan for implementation of professional development activities for ITS professionals and leaders. In addition, RITA is developing a strategy to help ensure that the results of its ITS research become commercially viable and are adopted by the transportation community and is planning to issue this strategy in the third quarter of fiscal year 2012. Likewise, FHWA’s Office of Operations has developed a plan that outlines, among other things, the activities associated with promoting better traffic operations among state and local agencies, including the use of ITS technologies. The plan defines goals, performance measures, and activities for each traffic operations program, such as sponsoring workshops on real-time traveler information, developing guidance on the state of the practice for traffic incident management, and creating training courses on road weather traffic management.\nRITA and FHWA coordinate on ITS research programs and in developing a strategic research plan for ITS, but they have not fully or clearly defined their roles and responsibilities for promoting and supporting ITS technologies. RITA and FHWA both participate in the ITS Strategic Planning Group, a departmental group that oversees DOT’s ITS research efforts. The Strategic Planning Group’s charter, a document that specifies the process for multimodal coordination, describes RITA’s leadership role in advocating for advanced ITS technologies that address congestion issues, among other things. However, the respective roles and responsibilities of RITA and FHWA in promoting and supporting ITS are not defined in the charter or in RITA’s strategic research plan. In addition, the ITS Professional Capacity Building strategic plan does not discuss the roles and responsibilities of the modal agencies, such as FHWA, in developing activities to support ITS professionals. Although RITA and FHWA officials said that they coordinate informally, we have found that, as part of agreeing to respective roles and responsibilities, collaborating agencies should clarify who will do what.\nWe have previously identified a number of surface transportation programs where potential duplication, overlap, or fragmentation could exist. See GAO, List of Selected Federal Programs That Have Similar or Overlapping Objectives, Provide Similar Services, or Are Fragmented across Government Missions, GAO-11-474R (Washington, D.C.: Mar. 18, 2011). We have used the term “fragmentation” to refer to those circumstances in which more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national need. The presence of fragmentation and overlap can suggest the need to look closer at the potential for unnecessary duplication. However, determining whether and to what extent programs are actually duplicative requires programmatic information that is often not readily available. technologies.effort is currently on meeting with select universities to identify the learning providers. One expert and a transportation agency said that the roles of RITA and FHWA should be better defined so that state and local government officials are aware of which agency is playing which role.\nHowever, according to a RITA official, the focus of this Furthermore, in comparing RITA and FHWA websites related to ITS, we found that each of the sites provided links to different studies and guidance for several of the same or similar ITS uses. For example, in a search for the benefits associated with arterial management applications, RITA’s and FHWA’s websites provided different documents with no clear coordinated approach to addressing the topic. for training opportunities on arterial management, we looked at two FHWA websites and a RITA website and found 16 different courses cited. FHWA officials noted that such inconsistencies exist because each agency has a different outlook on ITS technologies. In addition, the large array of information and pace of development make it difficult to completely align the websites.\nRITA’s and FHWA’s websites provide some links to each other’s ITS resources, such as between FHWA’s Arterial Management program and Adaptive Signal Control Technologies program and RITA’s ITS databases. given the current fiscal environment, may inhibit RITA and FWHA from fully leveraging their resources to promote ITS.\nRITA and FHWA have defined their target audiences for promoting and supporting ITS technologies. RITA’s Professional Capacity Building strategic plan defines the target audience as the ITS practitioner, including federal, state, and local level professionals from all surface modes, decision makers, researchers, and students. However, a RITA official told us that the agency intends to more narrowly define its target audience to better focus its efforts. According to FHWA officials, FHWA defines its main audience as state DOTs, in part because of its role in administering the federal aid highway program. FHWA is building stronger relationships with metropolitan planning organizations and transportation agencies in major metropolitan areas as part of its efforts to promote improved traffic operations, according to an FHWA official. However, the official noted that it is difficult to work with local transportation agencies, since there are so many of them. As previously mentioned, smaller transportation agencies tend to face additional challenges in deploying ITS technologies, such as having limited time or knowledge to plan for ITS and difficulty recruiting and retaining a qualified workforce to manage ITS.\nRITA and FHWA involve stakeholders in the process of developing activities and information on traffic operations and related ITS technologies. RITA has elicited input from stakeholders in developing its activities. For example, the agency conducted three user workshops in developing the Professional Capacity Building strategic plan, getting feedback from 148 multimodal public and private sector users in two interactive web meetings. RITA issued a request for information in July 2011, seeking input from interested public, private, and academic entities in identifying the needs for ITS learning among transportation professionals and innovative techniques for delivering ITS learning. FHWA also involves stakeholders at the program-planning level, specifically when major products are being developed. For example, an FHWA official told us that the Planning for Operations program used peer groups from metropolitan planning organizations to develop and review guidance materials.\nExperts, transportation agencies, and stakeholders we interviewed considered some of the activities sponsored by RITA and FHWA more useful than others. The 14 experts we interviewed considered training and education activities, including webinars, as well as technical assistance activities, such as the peer-to-peer exchanges, to be the most useful of the activities offered by RITA and FHWA. Many of the transportation agencies and stakeholders we interviewed found webinars particularly useful. Additionally, experts and transportation agencies we interviewed, as well as stakeholders with whom RITA consulted indicated that opportunities to share information among their peers, either via workshops or peer-to-peer exchanges, provide valuable ways to learn from others’ experiences.\nA RITA official told us that the peer-to-peer program may be phased out as RITA refocuses the agenda of the Professional Capacity Building program on connected vehicle technologies, leaving less of a focus on mainstream ITS. In RITA’s planning workshops, users indicated that they primarily would like real-world experience “from the source,” stating that opportunities to learn from peers, including peer-to-peer exchanges, are a desirable way to learn. In our interviews, two transportation agencies and three experts also said that it would be useful to have more opportunities to learn from peers. RITA’s refocused agenda could decrease the opportunities for state and local officials to participate in an effective method for relaying ITS information and technical assistance to DOT’s target audience.\nIn contrast, other resources, such as the information sources sponsored by RITA and FHWA may not be as useful to state and local officials. According to the experts we interviewed, RITA’s and FHWA’s publications and guidance related to ITS, as well as the ITS databases, were not considered as useful as other activities.agencies noted that FHWA’s website is helpful, four experts and one While several transportation state and local official said that RITA’s and FHWA’s websites have too much information and are not well organized. In addition, three experts and one transportation agency commented that it is difficult to identify needed information given the amount of information available. Specifically, one expert noted there was little effort to highlight or summarize the most important information on these websites.\nUsers that RITA surveyed, as well as some experts and transportation agencies we interviewed, indicated that they would like specific benefit information related to ITS deployment. At the same time, the majority of experts we interviewed said that the ITS databases housing this type of information were only somewhat useful. Likewise, one transportation stakeholder did not think the databases were useful and found them difficult to navigate, while another stakeholder did not think the studies in the databases were useful. In addition, we searched the ITS database for the benefits associated with arterial management projects and found 125 separate studies in six categories dated from 1994 to 2011. Of these studies, 21, or only 17 percent, were completed in the last 5 years.\nRITA officials told us that there are fewer evaluations being completed to include in the ITS databases, since DOT no longer provides dedicated funds for ITS deployments. In addition, as previously mentioned, DOT’s current ITS research agenda focuses on connected vehicle technologies. RITA officials also acknowledged that the information in the databases may be dated, but noted that the information is still useful. According to a RITA official, the information in the databases is updated on a rolling basis as DOT reports are completed and other external reports are submitted by state and local governments. A RITA official also stated that RITA tracks the monthly usage statistics for the ITS databases, although this doesn’t measure the usefulness of the databases. ITS-related information that is not easily accessible, timely, and relevant will not effectively meet the needs of state and local officials as they plan for and deploy ITS technologies, resulting in underused resources.\nTransportation agencies may not be aware of all of the ITS-related activities and information offered by RITA and FHWA. In an informal poll that a RITA official recently conducted of transportation professionals at two outreach events sponsored by transportation organizations, RITA officials found that 10 of 29 professionals polled, or 35 percent, were not aware of the activities and information available through RITA, and 21 percent were not aware of activities and information on transportation operations offered by FHWA. Likewise, four experts, a transportation agency, and a stakeholder we interviewed said that DOT could improve communications about ITS activities and information with state and local governments, for example, by becoming more engaged with state and local officials. For example, two experts said that transportation agencies were not aware of how to contact the ITS specialists in FHWA’s Resource Center that offer ITS technical assistance. According to two FHWA division office ITS engineers in California, although DOT sponsors Internet-based training, most local agencies have not taken advantage of these activities. An FHWA official also acknowledged that it is difficult to match users with their activities and get state and local officials to take advantage of the activities available.\nRITA and FHWA are taking some steps currently to improve access to and awareness of ITS-related information and assistance. For example, RITA is developing plans to target audiences through partnerships with professional associations that may have more direct access to ITS practitioners, such as the Institute of Transportation Engineers and ITS America. It also plans to more effectively use University Transportation Centers, which are established to “advance significantly the state-of-the- art in transportation research and expand the workforce of transportation RITA is also planning to use video more aggressively to professionals.”promote ITS activities and develop testimonials to promote the Professional Capacity Building program. FHWA is focusing on outreach and marketing as a critical element of an implementation plan for its traffic signals program, with the aim of increasing awareness and directly engaging stakeholders on the benefits and applicability of the strategy. SAFETEA-LU set a cap of $250,000 per fiscal year for DOT’s funding of outreach for ITS-related activities, but this cap may be lifted in the next reauthorization of surface transportation programs.\nAs noted earlier, RITA is developing a strategy, to be issued in the third quarter of fiscal year 2012, to help ensure that the results of its ITS research become commercially viable and are adopted by the transportation community. Such a strategy could provide an opportunity for RITA, as well as its partner FHWA, to further identify methods for improving access to and awareness on the part of state and local transportation agencies of ITS resources related to traffic management. Also, as noted previously, RITA is considering phasing out its peer-to- peer program, while experts and transportation agencies we interviewed as well as stakeholders RITA consulted indicated that methods for sharing information among peers provide valuable ways to learn from others’ experiences. Therefore, this strategy could also provide an opportunity to identify ways to facilitate the exchange of information among state and local officials. However, RITA has not yet determined to what extent its strategy will address these issues.\nSeveral options have been proposed for improving communication about ITS resources and facilitating learning exchanges. A 2011 report solicited by RITA to identify best practices for promoting ITS technologies included a recommendation that the agency create an ITS Partners program that would incorporate a number of its activities under a single brand, encourage and support the deployment of ITS by public agencies, and increase collaboration among federal agencies, state and local agencies, universities, and industry.program, implementing an interactive website where agencies can share experiences, and establishing networks of individuals interested in specific topics.\nActivities would include marketing the While RITA is planning to enhance partnerships with professional associations and University Transportation Centers to leverage its resources, RITA has not yet decided on the extent to which it will implement this recommendation. Officials cited restricted funding as a factor in their implementation decision. In addition, RITA’s Professional Capacity Building strategic plan includes a goal to establish an ITS learning portal for “one-stop shopping” of training courses, technical assistance, and peer-to-peer events. According to a RITA official, this effort is currently on hold, awaiting the results of a National Cooperative Highway Research Program study. This study, which is being conducted by the Transportation Research Board, is focusing on designing an Operations Center of Excellence that would facilitate implementation of best practices for traffic operations, including ITS, and promote collaboration among state and local government officials in developing best practices. The study will assess the needs of state and local transportation agencies, inventory the available resources, and analyze alternative methods to implement and fund such a center. The study is DOT has not yet defined its expected to be completed in early 2012.role in establishing, supporting, and implementing such a center. A RITA official said that the organization would need extra funds if it was tasked with operating such a center and will wait for the outcome of the study to determine the role it can play. FHWA officials told us that they envision that they would be heavily involved in setting up the Operations Center of Excellence, but would prefer that it not be funded by DOT. Participation in this effort, if and when it is implemented, could allow both RITA and FHWA to identify and potentially take advantage of opportunities to leverage their ITS promotion and support activities with those of external organizations. Such leveraging is particularly important given federal fiscal constraints. As RITA develops its strategy for ensuring that the results of its ITS research become commercially viable and are adopted by the transportation community, it could benefit from working with FHWA to consider this range of options for improving communication about ITS resources related to traffic management, thereby enhancing access to and awareness of these resources, and facilitating learning exchanges among state and local governments, while leveraging its resources.\nBoth RITA and FHWA collect information to monitor the adoption of ITS technologies and use this information to understand the level of deployment and make decisions on how to encourage the future deployment of ITS technologies, according to officials from both agencies.\nNearly every year since 1997, RITA has conducted a national survey of state and local government agencies on the deployment of various ITS technologies and reported the results on its website. The deployment survey also gauges the factors affecting decisions to purchase ITS, views on benefits associated with ITS, and plans for continued investment. According to a RITA official, the agency uses the information on the level of current ITS deployments to help make decisions about future research. In addition, the survey provides feedback to RITA officials on the level of stakeholder interest in deploying specific ITS technologies and operational strategies. For example, the survey results assist the Professional Capacity Building program in determining the locations where ITS technologies are deployed and any gaps in deployment that merit attention.\nFHWA also uses the deployment survey to understand ITS deployment trends. FHWA officials said they use the deployment statistics when developing operations-based initiatives, such as selecting the states to include in a program aimed at accelerating the integration of ITS and operational strategies into mainstream transportation planning. In addition, FHWA recently used the 2010 survey results when issuing a Final Rule for the Real-Time System Management Information Program, which requires states to establish programs to collect traffic and travel information. The survey was used to establish a baseline for the deployment of 511 traveler information services and determine the effect this rule would have on the expansion of 511 services, according to a RITA official. FHWA’s Office of Operations’ plan also incorporates deployment assessments for specific operations programs, such as the Road Weather Management program. This program tracks the rate of adoption of road weather technologies, such as a decision support system that helps winter maintenance managers make road treatment decisions.", "As traffic congestion is projected to grow and state and local governments face fiscal constraints, ITS technologies and operational strategies supported by ITS provide opportunities for state and local governments to manage traffic congestion on the nation’s existing roadways. Furthermore, emerging uses of ITS technologies have the potential to build upon existing investments in ITS by integrating real-time traffic information and instituting proactive management techniques. However, the challenges that state and local governments face in planning and funding ITS use, ensuring that staff and leaders have adequate knowledge of ITS, and coordinating ITS approaches impede their ability to make the most effective use of ITS technologies in addressing congestion.\nWhile DOT’s efforts to promote and support the use of ITS technologies help state and local agencies address these challenges, the department could improve the effectiveness of these efforts through greater use of leading practices for promoting technology use. The lack of clearly defined respective roles and responsibilities of RITA and FHWA in promoting and supporting ITS raises questions about whether DOT could better leverage its resources and provide a more specific, cohesive strategy for ITS as it evolves. In addition, DOT’s activities may not be achieving maximum results, as state and local officials may have difficulty identifying the most relevant information or may not be aware of all of the ITS-related activities sponsored by RITA and FHWA. Taking steps to more effectively target efforts and leverage resources by further exploring internal and external opportunities to promote and support ITS technologies could better ensure that DOT’s activities achieve their intended purposes. Some options currently under consideration hold promise for facilitating the exchange of ITS information among state and local governments as well as for enhancing communication to improve access to and awareness of ITS-related resources. It will be important for DOT to work with its external partners and determine its role in these efforts to ensure it is fully leveraging its resources in promoting the use of ITS and maximizing its reach. If DOT does not effectively target and leverage its efforts to promote and support the use of current and emerging ITS technologies by state and local transportation agencies, DOT may struggle in helping these agencies transition to the next generation of ITS.", "To effectively target efforts, leverage resources, better promote and support the use of ITS technologies by state and local governments, and improve access to and awareness of ITS resources, we recommend that the Secretary of Transportation take the following three actions: clearly define and document the respective roles and responsibilities of RITA and FHWA in promoting and supporting the use of ITS, revise ITS information on RITA and FHWA websites to improve its usefulness for state and local audiences based on their needs, and include in RITA’s strategy for promoting the adoption of ITS technologies plans for collaborating with external partners to (1) further enhance communication about the availability of ITS resources and (2) facilitate learning exchanges.", "We provided a draft of this report to the Department of Transportation for review and comment. DOT said it would consider our recommendations, and provided technical clarifications that we incorporated into the report as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to interested congressional committees and the Secretary of Transportation. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made significant contributions to this report are listed in appendix III.", "This report addresses (1) how state and local governments currently use Intelligent Transportation Systems (ITS) technologies to manage traffic and emerging uses of these technologies that have the greatest potential to reduce congestion, (2) what types of challenges state and local governments face in using ITS technologies to manage traffic congestion, and (3) the extent to which the Department of Transportation’s (DOT) promotion and support of state and local governments’ use of ITS technologies have met leading practices and responded to challenges they face.\nTo determine how and to what extent state and local governments currently use ITS technologies to manage traffic, we analyzed DOT’s policy and planning documents and data on ITS deployment from its 2010 ITS deployment survey. On the basis of interviews with DOT officials and analysis of the data, we determined that the data were sufficiently reliable for our purposes. We also analyzed pertinent legislation, documents, and studies of traffic management approaches and ITS deployment in the United States. We synthesized information from interviews with officials from DOT, including the Research and Innovative Technology Administration (RITA) and Federal Highway Administration (FHWA). We also interviewed officials from related associations such as the American Association of State Highway and Transportation Officials (AASHTO) and the Intelligent Transportation Society of America (ITS America).\nWe conducted site visits to Washington, D.C.; Pittsburgh, Pennsylvania; Austin, Texas; and Los Angeles, California. At each site, we obtained documentation and interviewed officials from one or more state departments of transportation; one or more local government transportation agencies; the metropolitan planning organization; one FHWA division office responsible for the area; and, if applicable, any academics, researchers, or coalitions focused on ITS in that metropolitan area. We selected these locations from those with high congestion levels as determined by the Texas Transportation Institute’s 2010 Urban Mobility Report and varied ITS deployment levels as determined by DOT’s 2007 deployment survey database. We made a final selection of sites that included cities of different sizes and geographical representation, and one metropolitan area that spans more than one state (Washington, D.C.). We are not able to generalize our findings in these site visits to the whole country but used the other sources mentioned above to gain a more general perspective.\nWe also conducted a literature search to identify background materials on emerging ITS technologies, published research by prospective ITS experts, and leading practices in promoting and supporting the adoption of new transportation technologies. The literature search focused on databases with transportation and engineering journal articles and conference proceedings (e.g., ProQuest and Transport Research International Documentation) as well as government reports (e.g., National Technical Information Service). The search terms used were related to using ITS for managing traffic congestion (e.g., incident response management).\nWe conducted semistructured interviews with 15 experts, whom we selected based on recommendations from officials at RITA, FHWA, AASHTO, and ITS America using several criteria. The primary requirement was that each individual have expertise in at least one of the following ITS fields that are important for traffic management: freeway management, arterial management, traffic incident management, roadway operations and maintenance, traveler information, and road weather management. In addition, we selected individuals with experience in the operations or deployment of ITS; planning, development, or evaluation of ITS projects; or experience with DOT’s efforts to promote and support the use of ITS technologies. In making our final selection, we considered publications and ITS experience and aimed to include a mix of individuals from state and local government, transportation associations, academia, and private industry. We selected experts based on how frequently they were recommended, a proxy for their standing within the ITS community, and to obtain a representative mix of officials from state and local government, academia, transportation associations, and private industry (such as consultants and ITS service or equipment providers). Through this representative mix, we believe that we have obtained a balanced set of perspectives.\nWe identified emerging uses of ITS technologies, which we defined as approaches that have begun to be used over the last 5-10 years, including approaches being researched or promoted by DOT, through interviews with DOT officials, experts, and a literature search. We excluded technologies with primary applications outside roadway traffic management, such as transit ITS, except when it had bearing on roadway traffic management. The scope of our work did not include connected vehicle technology or uses of ITS primarily aimed at other than managing and reducing traffic congestion, such as rural safety. To determine what emerging uses of ITS technologies have the greatest potential to reduce congestion, we presented the experts with a list of emerging uses of ITS technologies that we identified. This list consisted of (1) real-time data capture, sharing, and management; (2) real-time traveler information; (3) integrated corridor management; (4) active transportation and demand management; (5) enhanced incident response management; (6) weather responsive traffic management; and (7) work zone management. We asked the experts if there were other emerging uses of ITS technologies that they believe have significant potential to reduce traffic congestion, and asked them to rate these and the above ITS uses on their potential to reduce traffic congestion. On the basis of the expert ratings, we selected the four emerging uses that all experts ranked as having at least medium potential to reduce traffic congestion, and which the most experts (at least 9 of the 15) rated as having high potential to reduce traffic congestion.\nTo determine what types of challenges state and local governments face in using ITS technologies to manage traffic congestion, we conducted interviews with and obtained documents from RITA and FHWA officials, and AASHTO and ITS America representatives; conducted interviews with identified experts; reviewed published research on ITS challenges identified through a literature search; gathered information through interviews and documents collected during the site visits described above; and analyzed these various interviews and documents to identify the most frequently cited challenges. We did not otherwise assess the extent of these challenges in the locations visited, such as determining actual funding or staffing levels.\nTo determine the extent to which DOT’s promotion and support of state and local governments’ use of ITS technologies responded to challenges they face and met leading practices, we collected information on DOT’s ITS promotion and support through interviews with RITA and FHWA officials and reviews of RITA’s and FHWA’s program and strategic planning documents, including documents related to the professional capacity- building program and traffic operations improvement efforts. In addition, we reviewed RITA’s and FHWA’s efforts to promote and support ITS technologies, including various studies, guidance, websites, demonstration project and highway funding, and RITA’s ITS databases. We limited our work to DOT’s activities and information relevant to the promotion and support of state and local governments’ use of ITS, not including DOT’s efforts aimed at bringing new technologies to market. We determined how DOT is required to promote and support the use of ITS technologies through reviews of pertinent laws. To determine the extent to which DOT’s efforts are meeting the challenges and leading practices, we reviewed literature on promoting and supporting the use of new technologies, including prior GAO reports, Transportation Research Board publications, and other academic publications, particularly focusing on leading practices that encourage the adoption of transportation technologies by state and local governments. On the basis of the scope and nature of DOT’s efforts, we identified the following practices as most applicable: (1) developing a strategy to promote and support the use of technologies; (2) choosing appropriate methods to promote the use of technology by the target audience; and (3) monitoring technology adoption. We compared DOT’s efforts with these leading practices and evaluated any areas needing improvement. We also obtained the views of identified experts and state and local officials interviewed during site visits about the usefulness of DOT’s efforts and any needed improvements.\nWe conducted this performance audit from January 2011 through February 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Examples FHWA’s Planning for Operations program sponsors webinars, case studies, and workshops.\nFHWA’s Resource Center and division offices provide assistance related to planning for operations, including ITS expertise.\nFHWA provides planning-related guidance on its website, including case studies, a desk reference on benefit/cost analysis, guidebooks, and reports.\nRITA’s databases provide information on the benefits and costs associated with ITS technologies.\nFHWA’s ITS Deployment Analysis System assists in planning for ITS deployments.\nFHWA provides federal aid highway funds to states, some of which can be applied to ITS projects. FHWA has estimated that between 3 and 5 percent of the total funds, or $800 million to $1.3 billion in fiscal year 2010, has been used for funding ITS.\nDemonstration and pilot projects RITA and FHWA fund various projects aimed at applying ITS technologies, such as projects funded under the Urban Partnership Agreements, Congestion Reduction Program, and Integrated Corridor Management Program, totaling more than $177 million since 2005.\nRITA’s Professional Capacity Building program offers webinars, workshops, and presentations for ITS professionals. FHWA’s Office of Operations and Resource Center provide seminars, training courses, and workshops for traffic operations managers as part of their efforts to improve traffic operations, such as traffic signal management. FHWA also sponsors workshops to develop local ITS champions and educate newly appointed leaders at state DOTs.\nRITA and FHWA facilitate peer-to-peer exchanges to transfer ITS knowledge and experiences from model users to agencies with less experience. FHWA’s Resource Center and division offices provide assistance and guidance on ITS-related issues, such as systems engineering, regional architecture, and traffic operations.\nRITA’s website includes a searchable ITS library with a variety of studies and guidance. FHWA provides studies and guidance related to improving traffic operations in areas such as traffic incident management, traffic signal management, congestion pricing, and real-time traveler information, among others.\nFHWA’s Regional Concept for Transportation Operations initiative offers studies and guidance to promote a regional approach to transportation management and operations Demonstration and pilot projects DOT’s Integrated Corridor Management projects, jointly run by RITA and FHWA, promote interjurisdictional partnerships to transform the way a corridor operates.\nThese standards and architecture, supported by efforts of RITA and FHWA, define and support a common structure for regional ITS projects with interoperable technologies.", "", "David J. Wise, (202) 512-2834 or [email protected].", "In addition to the individual named above, Judy Guilliams-Tapia, Assistant Director; Leia Dickerson; Jennifer DuBord; Colin Fallon; David Hooper; Erik Kjeldgaard; Terence Lam; Emily Larson; Sara Ann Moessbauer; Madhav Panwar; and Joshua Ormond made key contributions to this report." ], "depth": [ 1, 1, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full h1_full", "h0_full", "h0_full", "h1_full", "", "h1_full", "h1_full", "h1_full", "h2_title", "h2_full", "h2_full", "", "", "", "h3_full", "h2_full", "", "", "" ] }

{ "question": [ "How do governments use ITS technologies?", "What is one example of this?", "What did GAO find in their interviewing of experts?", "What is one example of this?", "What is one factor that would complicate this?", "What challenges do governments face in using ITS technologies?", "How do agencies manage ITS in their planning?", "What funding issues tend to arise?", "What are some common staffing issues?", "In what ways can coordination help?", "How have RITA and FHWA helped address these challenges?", "What has FHWA estimated regarding ITS?", "What are some challenges in RITA and FHWA's roles?", "What other challenges have arisen?", "What are some options for improving ITS information?", "How has RITA addressed improvement of ITS?", "What is the current status of traffic congestion?", "What are Intelligent Transportation Systems?", "Who administers ITS?", "What is DOT's role in ITS?", "What was GAO asked to address?", "How did GAO address this work?" ], "summary": [ "State and local governments currently use ITS technologies in various ways to monitor and control traffic and inform travelers.", "For example, transportation agencies use cameras to monitor traffic conditions, signal technologies to control traffic flow, and dynamic message signs to inform travelers about travel conditions.", "By interviewing experts, GAO identified several emerging uses of ITS that have significant potential to reduce traffic congestion.", "For example, integrating traffic and emergency services data can allow for enhanced detection of and response to roadway incidents.", "However, some cities use ITS and the emerging uses to a much greater extent than others.", "State and local governments face multiple challenges in using ITS technologies to manage traffic congestion.", "For example, some agencies do not fully integrate ITS into their planning processes.", "Funding the deployment and maintenance of ITS technologies is also an issue, because of funding constraints and competition with other needed infrastructure projects.", "Further, agencies struggle to attract and retain staff with the skills necessary to manage and maintain ITS systems and may not have leaders who support ITS.", "Finally, coordination among agencies can enhance the effectiveness of ITS through such activities as synchronized traffic signals along a corridor, but such coordination can be difficult given agencies’ differing perspectives and priorities.", "RITA’s and FHWA’s activities to promote and support the use of ITS technologies help address these challenges. Both offer ITS-related training and technical assistance and provide guidance and information on their websites.", "FHWA estimates that states used about $800 million to $1.3 billion of their eligible 2010 federal aid highway funds and $798 million to $1.3 billion of American Recovery and Reinvestment Act funds on ITS. Further adoption of leading practices could improve these efforts.", "RITA’s and FHWA’s respective roles in these efforts are not clearly defined, potentially inhibiting their ability to effectively leverage resources.", "Some experts and transportation agencies noted that ITS-related information on RITA’s and FHWA’s websites is not always presented in a way that is useful and some agencies lack awareness of some ITS activities sponsored by DOT.", "Several options have been proposed to improve communication about ITS-related activities and facilitate the sharing of ITS information among state and local officials.", "While RITA intends to develop a new strategy in 2012 for promoting the use of ITS, it has not yet determined whether it will incorporate any of these proposals.", "Traffic congestion burdens the nation’s quality of life and will likely grow substantially if current trends continue.", "Intelligent Transportation Systems (ITS) are a range of technologies that can reduce congestion at less cost than some other approaches.", "The U.S. Department of Transportation’s (DOT) Research and Innovative Technology Administration (RITA) is responsible for promoting and supporting the use of ITS in coordination with other modal administrations, including the Federal Highway Administration (FHWA).", "Since 1994, DOT has overseen the allocation and expenditure of more than $3 billion for deploying and researching ITS.", "GAO was asked to address (1) the current and emerging uses of ITS technologies by state and local governments, (2) the challenges these governments face in using ITS, and (3) the extent to which DOT’s efforts to promote and support ITS address these challenges and follow leading practices.", "To conduct this work GAO visited four sites, and interviewed and analyzed documents and data from DOT and state and local transportation officials, ITS experts, and other stakeholders." ], "parent_pair_index": [ -1, 0, -1, 2, 2, -1, 0, 0, 0, 0, -1, 0, 0, 2, -1, 4, -1, -1, 1, 1, -1, 4 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 0, 0 ] }

{ "title": [ "Background", "Petroleum Refining Industry", "Key Regulations Affecting the Domestic Refining Industry", "Stationary Source GHG Requirements", "Market Changes and Key Environmental Regulations Likely Affected the Refining Industry", "Increased Crude Oil Production Has Lowered Crude Oil Costs for Some Refiners", "Domestic Consumption of Petroleum Products Has Declined", "Two Key Regulations Have Likely Contributed to Declining Fuel Consumption and Compliance with One Has Increased Some Refiners’ Costs", "CAFE and GHG Vehicle Emission Standards", "Industry Outlook Depends on a Number of Factors", "Uncertain Future Domestic Consumption", "Costs of Key Regulations", "Extent to Which Refiners Can Export and Compete in Foreign Markets", "Refiners Projected to Continue to Rely on Foreign Markets", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: List of Stakeholders", "Federal Agencies", "Refiners", "Other", "Appendix III: Further Information Regarding the Renewable Fuel Standard, Compliance Credits, and the Blend Wall", "Appendix IV: Comments from the Environmental Protection Agency", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "This section describes the petroleum refining industry and the five key regulations that we reviewed.", "According to data from EIA, there were 143 petroleum refineries in the United States as of January 2013, with a capacity to process 17.8 million barrels of crude oil per day. While there are refineries in most regions of the country, most refining capacity (almost 90 percent) is located in the Gulf Coast, West Coast, and Midwest regions (see fig. 1). These refineries employed over 70,000 people in 2013.\nRefineries process crude oil into products primarily through a distillation process that separates crude oil into different fractions based on their boiling points, which can then be further processed into final products. One barrel of crude oil can be processed into varying amounts of gasoline, diesel, jet fuel, and other petroleum products depending on the configuration—or complexity—of the refinery and the type of crude oil that is being refined. Through the addition of specialized equipment, refineries can be optimized—or “upgraded”—to produce greater proportions of specific types of products or to use different types of crude oil. For example, a coker unit upgrades the low-value residual oil from the distillation process into higher value products such as diesel, increasing a refinery’s ability to process heavier crude oils. As shown in Figure 2, from a barrel of crude oil, U.S. refineries primarily produce gasoline, diesel, and jet fuel that are used in the transportation sector, along with heating oil and liquefied petroleum gases such as propane used in home heating.\nThe U.S. petroleum refining industry consists of firms of varying sizes that, in addition to operating refineries, may also have operations in other related industry segments: (1) the upstream segment, which consists of the exploration for and production of crude oil; (2) the midstream segment, which consists of pipelines and other infrastructure used to transport crude oil and refined products; (3) the downstream segment, which consists of the refining and marketing of petroleum products such as gasoline and heating oil; and (4) the renewable fuels segment, where biorefineries produce renewable fuels that are blended with petroleum products at wholesale terminals before being distributed to consumers. To varying degrees, refiners may primarily operate refineries—these are called merchant refiners—or may be integrated, participating in various other related industry segments. HollyFrontier Corporation is an example of a merchant refiner that purchases crude oil from unaffiliated producers and sells refined products to other companies operating retail fuel outlets, while Chevron is an example of a fully integrated company, a refiner that also produces crude oil and operates pipelines and retail fueling outlets across the United States.\nCrude oil, petroleum products, and renewable fuels are transported between market participants through an extensive supply infrastructure including pipelines, tanker vessels, rail, trucks, wholesale terminals, and retail outlets. (See fig. 3.) In 2012, refineries received the majority of their crude oil by pipeline (over 50 percent) and by tanker vessel (37 percent), with trucks and rail generally playing a more limited role according to EIA data.\nAs we reported in 2007, according to industry officials and experts, the refining industry was a low-return industry for much of the prior two decades. Retail prices for regular gasoline averaged $3.63 per gallon in 2012, the highest annual average price when adjusted for inflation since 1976, the earliest comparable data available from EIA. Retail prices have declined in 2013—gasoline averaged $3.55 in the first half of 2013 and $3.18 in November 2013—but are still near historic highs. Market dynamics anywhere along the supply chain can influence consumer prices, beginning with upstream crude oil production, the production of renewable fuels, through downstream refining and retailing. According to EIA data, increases in crude oil costs have been the largest component of the recent increases in gasoline prices. The refining component of prices—including labor, materials, energy, and other costs of the refining process, as well as profits to refinery owners—has fluctuated over time but has not increased in a significant way since 2000, when EIA began reporting estimates of the components of retail prices (see fig.4).", "The five key environmental regulations affecting the domestic refining industry that we reviewed are concerned with various health, environmental, and other issues.\nUnder the RFS, since 2006, transportation fuels sold in the United States have been required to contain increasing amounts of renewable fuels such as ethanol and biodiesel. EPA is responsible for administering the RFS and annually issues regulations that establish the percentage of gasoline and diesel fuels that refiners, importers, and other obligated parties must ensure are renewable fuels. Congress established the RFS in light of concerns such as climate change and the nation’s dependence on imported crude oil. As shown in figure 5, the law generally required that transportation fuels contain 9 billion gallons of renewable fuels in 2008, and that volumes increase 4-fold through 2022 to 36 billion gallons. The Administrator of EPA is authorized to waive the RFS levels established in the act if the Administrator determines—in consultation with the Secretaries of Agriculture and Energy—that implementing the requirement would severely harm the economy or environment, that there is an inadequate domestic supply, or in certain other situations. The major source of renewable fuels has traditionally been ethanol produced from corn; however, as we reported in 2009, the increased cultivation of corn for ethanol, its conversion into renewable fuels, and the storage and use of these fuels could affect water supplies, water quality, air quality, soil quality, and biodiversity. Under the RFS’ statutory provisions, the increasing amounts of renewable fuels are to primarily come from renewable fuels other than corn ethanol—called advanced biofuels—that meet certain criteria, including reducing GHG emissions by at least 50 percent compared with the gasoline or diesel fuel they displace. According to EPA, achieving the RFS’ statutory blending levels in 2022 could result in total benefits—including those related to overall fuel costs, energy security, health, and GHG effects—of between $13 and $26 billion and could reduce GHG emissions by 138 million metric tons of carbon dioxide equivalent emissions, equal to taking about 27 million vehicles off the road.\nThe federal government has regulated vehicle fuel economy through CAFE standards since 1978 and, more recently, aligned these standards with new GHG vehicle emission standards in a joint national program aimed at reducing oil consumption and GHG emissions from the transportation sector. CAFE standards are administered by the National Highway Traffic Safety Administration (NHTSA) and require that vehicle manufacturers meet fleet-wide average fuel economy standards for vehicles. The Energy Independence and Security Act of 2007 instituted several changes to the CAFE standards and, in 2009, the administration announced a new program to increase vehicle fuel economy and reduce vehicle GHG emissions, which was implemented by a joint rulemaking with NHTSA raising CAFE standards and EPA establishing the first GHG emissions standards for vehicles. Although the CAFE and GHG vehicle emission standards are distinct, their targets were aligned for compliance purposes. NHTSA and EPA put the national program into place by issuing coordinated regulations covering vehicle model years 2012 to 2025. As shown in figure 6, fuel economy standards for cars largely remained unchanged from 1990 through 2010, but vehicle manufacturers are now expected to meet increasingly stringent standards reaching the projected combined average fuel economy of about 50 miles per gallon by 2025— about 80 percent more efficient than required under the 2011 standards. EPA estimated that the 2011-2025 standards may save consumers and businesses $1.7 trillion, reduce oil consumption by 12 billion barrels, and reduce GHG emissions by 6 billion metric tons over the lifetime of the vehicles sold during model years 2011-2025.\nUnder the Clean Air Act, EPA is authorized to establish certain standards for new motor vehicles and fuels to address air pollution that may reasonably be anticipated to endanger public health or welfare. On May 21, 2013, EPA proposed the Tier 3 standards, and on March 3, 2014, EPA announced the final Tier 3 standards which establish more stringent vehicle emission standards and reduce the sulfur content of gasoline. (Because EPA finalized this rulemaking after the draft report was completed and provided to agencies, the views of stakeholders and other information on Tier 3 that we reviewed and summarize in the rest of this report relate primarily to the proposed standards. EPA stated that the final rulemaking is very similar to the proposal, and that EPA made some changes—including to the sulfur provisions—based on public input.) According to EPA, more than 149 million Americans experience unhealthy levels of air pollution that has been linked to respiratory and cardiovascular problems and other adverse health effects. Cars and light trucks are significant contributors to air pollution, and EPA estimated that the Tier 3 standards will reduce pollution from such sources. The standards set more stringent tailpipe emission standards for new vehicles and generally require refiners to lower the sulfur content of gasoline from 30 parts per million (ppm) to 10 ppm on an annual average basis by 2017, among other things. According to EPA, reducing the sulfur content of gasoline allows emissions control systems to work more effectively for existing and new vehicles and would therefore enable more stringent vehicle emissions standards. EPA estimated that the Tier 3 standards would reduce on-highway vehicle emissions of nitrogen oxides, a pollutant that has been liked to respiratory illnesses, by 10 percent in 2018, and 25 percent in 2030. According to EPA estimates, by 2030, annual emission reductions from the Tier 3 standards would generate annual benefits of between $6.7 and $19 billion and prevent up to 2,000 premature deaths annually. EPA estimated that the vehicle and fuel standards would cost approximately $1.5 billion in 2030, including costs for refiners to install and operate equipment to remove sulfur from gasoline, as well as costs for vehicle manufacturers to improve the emissions performance of vehicles.", "Under the Clean Air Act, EPA is authorized to take certain steps to address emissions from stationary sources, including refineries. EPA has regulated certain emissions of air pollutants from stationary sources for several decades, and EPA recently issued rules concerning how GHGs are to be included in certain existing permitting processes. Specifically, permitting authorities are to include GHG emission control requirements in Prevention of Significant Deterioration (PSD) permits and certain other permits issued to refineries and other stationary sources that trigger GHG emissions thresholds. Since 2011, construction of any new refineries and certain refineries that are modified have generally been subject to the use of the “best available control technology” for GHG emissions. The best available control technology is determined for each facility based on an analysis of available technologies considering cost and other factors. According to EPA, in most cases, the best available control technology selected for GHGs are energy efficiency improvements. For example, for refineries, this could involve the installation of heat recovery units, which capture and use otherwise wasted heat in the refinery process. Such energy efficiency improvements can lower GHG emissions and other pollutants while reducing fuel consumption and saving money. Current regulations do not require existing facilities to take any steps to control GHG emissions unless they undertake a major modification. Examples of major modifications at a refinery include a significant expansion of crude oil processing units, or installing new secondary processing units that would increase GHG emissions above specified thresholds.\nCalifornia’s LCFS aims to lower GHG emissions by reducing the level of carbon in transportation fuels. Established by the California Air Resources Board (CARB) following state legislation and an executive order, the LCFS has been fully in effect since January 2011. The LCFS would change the mix of fuels and vehicles in California to reduce emissions throughout the fuel “life cycle”—which includes emissions associated with producing, transporting, distributing, and using the fuel. To reduce emissions, carbon intensity (CI) scores are used, which are to reflect each fuel’s life cycle GHG emissions. Refiners generally are required to ensure that the overall CI score for their fuels—which can include gasoline, diesel, and their blendstocks and substitutes—meets the annual carbon intensity target for a given year. Unlike the RFS, which requires certain types of renewable fuels be used, under LCFS refiners can meet the CI reduction targets using a variety of low carbon fuel technologies. Low carbon fuel technologies include renewable fuels from waste and cellulosic materials, natural gas, electricity used in plug-in vehicles, and hydrogen used in fuel cell vehicles. The original LCFS statewide reduction targets for gasoline, diesel, and their substitutes started at 0.25 percent of 2010 values in 2011 and increased to 10 percent by 2020. However, in 2013 a state Court of Appeal found that CARB must correct certain aspects of the procedures by which the LCFS was originally adopted. CARB officials subsequently announced a regulatory package would be proposed in 2014, and that the 2013 standards—a 1 percent decrease in carbon intensity from 2010 values—will remain in effect through 2014.\nTo comply with LCFS, refiners can produce their own low carbon fuels, buy such fuels from other producers to blend into their products and sell on the market, or purchase credits generated by others. Refiners can also generate credits—which can be banked and traded—if their use of low carbon fuels results in greater-than-required carbon intensity reductions. CARB estimated that the 2020 targets would reduce GHG emissions associated with the transportation sector in California by 10 percent in 2020, or 23 million metric tons of carbon dioxide equivalent.", "Stakeholders we interviewed identified three major changes that have likely recently affected the domestic petroleum refining industry. First, crude oil production in the United States and Canada has increased, which has lowered the cost of purchasing crude oil for some refiners but poses some challenges related to crude oil transportation infrastructure constraints and the types of crude oils produced. Second, after many years of generally increasing domestic consumption of petroleum products, consumption has fallen since 2005, resulting in a smaller domestic market for refiners. Third, two key environmental regulations— CAFE and GHG vehicle emission standards and the RFS—have likely recently contributed to declining consumption of petroleum fuels, and compliance with the RFS has increased costs for some refiners.", "U.S. and Canadian crude oil production has increased in recent years, leading to lower crude oil costs for some refiners, according to several stakeholders we contacted. According to EIA data, U.S. production of crude oil reached its highest level in 1970 and generally declined through 2008, reaching a level of almost one-half of its peak. During this time, the United States increasingly relied on imported crude oil to meet growing domestic energy needs. However, recent improvements in technologies have allowed companies that develop petroleum resources to extract oil from shale formations that were previously considered to be inaccessible because traditional techniques did not yield sufficient amounts for economically viable production. In particular, the application of horizontal drilling techniques and hydraulic fracturing—a process that injects a combination of water, sand, and chemical additives under high pressure to create and maintain fractures in underground rock formations that allow oil and natural gas to flow—have increased U.S. crude oil and natural gas production. As shown in figure 7, monthly domestic crude oil production has increased by over 55 percent through September 2013 compared with average production in 2008. According to EIA, increases in production in 2012 and 2013 were the largest annual increases since the beginning of U.S. commercial crude oil production in 1859. Much of the increase in crude oil production has been from shale and other formations, such as the Bakken in North Dakota and the Eagle Ford in Texas, according to EIA data. Similarly, crude oil production in Canada— the largest foreign supplier of crude oil to the United States—has also increased significantly in recent years. From 2005 through 2012, total Canadian crude oil production increased by 32 percent and U.S. imports from Canada increased almost 50 percent.\nThe rapid growth in U.S. and Canadian crude oil production has lowered the cost of crude oil for some domestic refiners that have the access and ability to process these crude oils. For example, West Texas Intermediate crude oil—a domestic crude oil used as a benchmark for pricing—was $17.60 per barrel less expensive in 2012 than Brent, an international benchmark crude oil from the European North Sea that was historically about the same price as West Texas Intermediate. Those refineries able to take advantage of these lower priced crude oils have benefited because crude oil costs are the largest cost for refiners. However, all refineries may not have been able to take advantage of these crude oils to the same extent for two key reasons:\nTransportation infrastructure challenges. The development of domestic and Canadian crude oil production has created some challenges for U.S. crude oil transportation infrastructure because some of the growth in production has been in areas with limited transportation linkages to refining centers. Most of the system of crude oil pipelines in the United States was constructed in the 1950s, 1960s, and 1970s to accommodate the needs of the refining sector and demand centers at that time. According to DOE officials, this infrastructure was designed primarily to move crude oil from the South to the North, but emerging crude oil production centers in Western Canada, Texas, and North Dakota have strained the existing pipeline infrastructure. Though pipeline capacity has increased—investments increased pipeline capacity to deliver crude oil to a key Cushing, Oklahoma hub by about 815,000 barrels per day from 2010 through 2013—EIA reported that it has been inadequate. Because of these challenges, some refineries may not have been able to take full advantage of crude oil production increases or had to rely on other more expensive crude oil transportation options such as truck, rail, or barge. For example, two of the refineries we visited recently installed facilities to enable them to receive crude oil from North Dakota or Canada by rail. According to EIA data, while refinery receipts of crude oil by these methods of transportation is a small percentage of total receipts, they have increased 57 percent from 2011 to 2012. Infrastructure constraints have, according to EIA, contributed to discounted prices for some domestic crude oils.\nConfiguration constraints at refineries. Increasingly, the crude oil being produced in the United States and Canada has different characteristics from the crude oils that some domestic refineries are configured to use. Production of new domestic crude oil has tended to be light and sweet, whereas a portion of new Canadian production has been heavy and sour crude oils. To a certain extent, some refineries can use these crude oils, but some have invested in new equipment in order to do so. For example, representatives of one refiner told us they had invested over $2.2 billion in a project including a new coking unit at a refinery to refine heavier and more sour crude oil from Canada.", "After decades of generally increasing domestic consumption of petroleum products, consumption has declined since 2005, resulting in a smaller domestic market for refiners, according to several stakeholders we contacted. Overall, consumption of gasoline, diesel, and other petroleum products in the United States increased from 1983 through 2005. In 2007, EIA projected that U.S. consumption would increase by nearly 30 percent between 2005 and 2030. As we reported in late 2007, trends in domestic refining capacity had not kept pace with consumption growth, though it was unclear whether and for how long that market tightness would continue. However, as shown in figure 8, domestic consumption of petroleum products overall peaked in 2005 at 20.8 million barrels per day, and it declined by 11 percent through 2012. Consumption of gasoline, diesel, and jet fuel peaked in 2007 and declined by over 8 percent through 2012. More recent data indicate that these trends may now be starting to shift, as EIA estimated that petroleum product consumption increased in the first 11 months of 2013 compared with the first 11 months of 2012.\nAccording to several stakeholders we contacted and information we reviewed, a number of factors can affect consumption of petroleum products, including economic activity and crude oil and petroleum prices. For example, the recession of 2007 to 2009 reduced economic activity and demand for gasoline, and historically high gasoline prices have discouraged the use of gasoline. Stakeholders and information we reviewed also cited the effect of more stringent fuel economy standards and the RFS, which are discussed in the next section.\nSeveral stakeholders told us that this broad shift from growing to falling consumption of petroleum products has affected the domestic refining industry because it has resulted in a smaller domestic market. The U.S. market is important for domestic refineries because U.S. refiners have historically primarily sold their products domestically. On average, the United States exported almost 1 million barrels per day of domestic petroleum products from 2000 through 2005—less than 6 percent of U.S. refinery production. As discussed below, the refining industry has shifted sales to export markets amid a declining domestic market.", "According to stakeholders and the information we reviewed, two recently strengthened key environmental regulations—the coordinated CAFE and GHG vehicle emission standards, and the RFS—have likely affected the refining industry by reducing the consumption of petroleum fuels, and compliance with the RFS has recently increased costs for some refiners, as well as other challenges. The other three key environmental regulations we reviewed have had minimal effects to date because they have either not yet been implemented or have generally not affected the industry in a major way, according to several stakeholders and information we reviewed.", "According to information we reviewed and two stakeholders we contacted, CAFE and GHG vehicle emission standards have contributed to reductions in the consumption of petroleum fuels, but the extent is unclear. These standards aim to reduce oil consumption, and although they do not require changes at the refinery level, they can affect refineries indirectly by contributing to improvements in the overall efficiency of the vehicle fleet and, therefore, reducing fuels consumption. However, the National Academy of Sciences reported that it is difficult to isolate the effect of CAFE and GHG vehicle emissions standards from other factors that also affect consumption, such as higher fuel prices and changing driving habits.\nStakeholders had different views on the extent to which CAFE and GHG vehicle emission standards have affected consumption of petroleum products. We reported, in 2007, that CAFE standards—along with higher fuel prices and other factors—contributed to a reduction in transportation fuel consumption of 2.8 million barrels per day in 2002. CAFE standards for cars largely did not change from 1990 through 2010, but they were strengthened beginning with model year 2011. According to EPA and DOE officials, since the standards did not change until recently, CAFE and GHG vehicle emissions standards did not cause the shift from growing consumption to declining consumption discussed previously. Regarding the strengthened standards, EPA estimated in 2010 that vehicles were expected to save 1.3 billion gallons of gasoline in 2013 compared with model year 2011 standards. This is equivalent to about 1 percent of EIA’s projection of gasoline consumption in 2013. A stakeholder told us that the CAFE and GHG vehicle emissions standards have likely had a relatively large impact on petroleum demand declines in the past few years, but it is unclear how much declining demand overall can be attributed to these standards versus other factors such as the recent economic recession and higher fuel prices. On the other hand, EPA and DOE officials, and a refinery representative told us that the most recent changes to CAFE and GHG vehicle emissions standards have had a marginal effect on petroleum demand so far. DOE officials also told us that the impact of the standards has been limited because they affect new car sales, and there are a relatively small number of new vehicles in the overall fleet.\nSeveral stakeholders we contacted and information we reviewed cited three main effects that the RFS has had on the domestic petroleum refining industry or individual refiners—compliance has increased costs, declining domestic consumption, and investment uncertainty. In addition, EPA has been late in issuing annual RFS standards, and several factors contribute to the delays.\nRFS Has Had Three Main Effects Stakeholders we contacted and information we reviewed identified three main ways the RFS has affected U.S. petroleum refiners: (1) compliance has recently increased costs for some refiners, (2) required blending of renewable fuels has contributed to declining domestic consumption of petroleum-based transportation fuels, and (3) EPA’s delays in issuing annual RFS standards may have contributed to investment uncertainty for some refiners. First, compliance with the RFS has recently increased costs for some refiners, according to information we reviewed and several stakeholders we contacted. Under the RFS regulations, refiners and other obligated parties are required to ensure U.S. transportation fuels include certain amounts of renewable fuels. To comply, refiners generally have two options—they can purchase and blend renewable fuels themselves, or they can pay others to blend or use renewable fuels by purchasing credits. These credits can be freely traded, and prices for credits are established based on the market and generally reflect the stringency of requirements and the costs of incorporating additional renewable fuels into the transportation fuel system to comply with the RFS—if costs increase, credits prices would tend to increase as well. According to EIA, corn-based ethanol credit prices were low—between $0.01 and $0.05 per gallon between 2006 and much of 2012—because it was generally economical to blend up to or above the level required by the RFS. However, in 2013, prices for these credits increased to over $1.40 per gallon in July before declining to about $0.20 per gallon as of mid- November 2013.\nSeveral stakeholders told us this increase in credit prices was primarily due to RFS requirements exceeding the capability of the transportation fuel infrastructure to distribute and the fleet of vehicles to use renewable fuels, referred to as the “blend wall.” A refiner we spoke with also attributed the decline in credit prices in the second half of 2013 to EPA’s statements expressing its desire to address the blend wall. We have previously reported on the blend wall and other challenges to the increasing use of renewable fuels.\nWhile the RFS applies to all refiners in the same way, the effect of the rise in credit prices may depend on each refiner’s situation. However, in comments to this report EPA stated that refiners experience the same compliance costs. As a result of higher costs, several stakeholders told us refiners could reduce production, produce more jet fuel, which is not subject to RFS requirements, or increase exports to nations where the RFS does not apply. (See app. III for more information about the blend wall, RFS credits, and views on how they have affected U.S. refiners.)\nSecond, the RFS has contributed to the declining domestic consumption of petroleum-based transportation fuels. Under the RFS regulation, refiners and other obligated parties are required to ensure U.S. transportation fuels include certain amounts of renewable fuels. As a result, refiners and other industry participants have blended increasing amounts of renewable fuels. For example, consumption of ethanol has increased almost 8-fold since 2000, from 1.7 billion gallons in 2000 to 12.9 billion gallons in 2012. According to EIA, increased ethanol use since 2007 displaced over 4 billion gallons of petroleum-based gasoline, or about 3 percent of gasoline consumption in 2012. As discussed previously, decreases in consumption affect refiners by decreasing the size of the domestic market. Since the RFS was established in light of concerns about the nation’s dependence on imported crude oil, decreased consumption of petroleum products may further some of the objectives of the RFS.\nThird, the RFS has contributed to investment uncertainty for refiners according to several stakeholders because EPA has not issued annual RFS standards on time since 2009. Beginning in calendar year 2009 and through calendar year 2022, EPA is required to set annual blending percentages for total renewable fuels, advanced biofuels, cellulosic biofuels, and biomass-based diesel fuels by November 30 of the preceding calendar year. However, as shown in figure 9, EPA has missed the statutory deadline to set annual percentages since 2009. Most recently, EPA issued 2013 standards in August 2013—over 8 months late—and has not issued the 2014 standards. EPA proposed the 2014 standards on November 29, 2013, and EPA officials told us that they plan to finalize the standards in Spring 2014. The RFS compliance period—the time during which refiners and other parties incur obligations under RFS and can take steps to incorporate additional renewable fuels to create credits for compliance—is set by statute to be a full calendar year, and delays do not change this compliance period. As a result, when the RFS standards are issued late, the industry has less time to plan and budget effectively. Several representatives of refiners told us that delays in issuing annual RFS standards increase uncertainty for refiners and renewable fuel producers, making it more difficult to make long-term planning decisions. One refining company representative told us that the company has reduced capital investments due to uncertainty related to the RFS. In contrast, EPA officials told us that there is no indication that delays have caused significant problems for refiners. They also noted that delays could actually make annual standards more robust since EPA then has more data upon which to base decisions.\nRegulatory Development Processes Contribute to EPA Delays in Issuing RFS Standards EPA officials told us that delays in issuing RFS standards have largely been due to the length of the regulatory development process, which includes interagency and public reviews. Under the interagency review process, EPA is to follow certain procedures before publishing proposed or final regulations that establish annual RFS standards, including submitting draft proposed and final regulations to the Office of Management and Budget (OMB), which coordinates review of the draft regulations by other agencies, as well as conducting its own review. The interagency review process is to ensure that regulations are consistent with the President’s priorities, among other things, and that decisions made by one agency do not conflict with the policies or actions taken or planned by another. Under the public review process, EPA must publish a proposed standard in the Federal Register, provide the public with the opportunity to review and comment on the proposal, and address comments received before finalizing the regulation. According to EPA officials, the interagency and public review processes can be time consuming because the RFS standards involve complex and controversial issues and balance competing agricultural, energy, and environmental policy interests.\nIn 2009, we recommended that EPA and other agencies track their performance for developing significant regulations against targeted milestones to identify opportunities for improvement. We found that monitoring actual versus estimated performance could help agency managers identify steps in the process that account for substantial time and provide information necessary to evaluate whether time was well spent. In this regard, EPA stated in comments to our 2009 report that it uses an agency-wide Action Development Process that tracks 14 milestones as it develops proposed rules and additional milestones in developing final regulations. For example, EPA tracks when its senior management approves of a document describing the scope of the regulation and the analytical work necessary to develop it, known as the detailed analytic blueprint. In comments to our 2009 report, EPA stated that it used an internal tracking system along with additional information to develop regulatory management reports to EPA managers and executives. EPA stated at the time that this process helps management identify regulations that are off-track so that corrective steps can be taken to expedite their completion. EPA officials told us that they develop RFS regulations using the same procedures used for developing all EPA regulations. However, even with these systems, EPA has not met its statutory deadlines under the RFS in the five annual standards since 2009. EPA has not conducted a systematic review of its experience issuing RFS regulations to identify the underlying causes of repeated delays and has not identified changes in its approach that may help to avoid these delays in the future. Without such analyses and a plan to address the underlying causes of the delays, EPA risks repeating them.\nThe other key regulations that we reviewed—Tier 3 standards, stationary source GHG requirements, and LCFS—have had minimal effects to date because these regulations either have not yet been implemented (Tier 3 standards) or, with respect to the other two, have not affected industry operations or costs in a major way, according to stakeholders and information we reviewed. Specifically:\nTier 3 standards. Tier 3 standards were proposed on May 21, 2013, and EPA announced final standards on March 3, 2014; therefore, they have had not had a direct effect on industry to date.\nStationary source GHG requirements. Representatives of two refiners told us that stationary source GHG requirements have been burdensome to refiners; however, several other stakeholders told us they have not had a major effect, and EPA officials told us they were aware of only three refineries that have received major source GHG permits since the GHG permitting program was implemented in 2011. A refining company representative expressed concerns to us about the lengthy permitting process to authorize GHG emission increases. However, stationary source GHG requirements do not apply unless an existing refining facility proposes a major modification or a new refinery is proposed for construction. An EPA official said that, in most cases, best available control technologies selected to comply with GHG requirements for refining facilities involve energy efficiency improvement measures that could help refiners reduce fuel consumption and save money. Further, EPA officials also explained that, in some cases, delays can occur when the refinery applicant has not provided EPA with the proper information to proceed with processing the permit. The Clean Air Act requires that EPA approve or deny such permits within 12 months of receiving a complete application.\nLCFS. CARB, the entity responsible for implementing LCFS, said the regulation has had a modest effect to date—increasing fuel prices by about $0.01 per gallon. LCFS is the subject of several ongoing lawsuits, which resulted in a 4-month delay in some regulatory activities and uncertainty about the status of the regulation. According to a study conducted by a consultant on behalf of industry, the ongoing legal challenge to LCFS is creating uncertainty that discourages new investments by industry. A refining industry trade association representative told us many refiners that previously invested in new components for their California facilities to process heavy crude oils may not be able to make an adequate return on investment since the LCFS disincentivizes the use of carbon intensive heavy crude oils. However, a CARB official noted that LCFS does not specifically prohibit any crude oil from being processed in California refineries, but rather it ensures that the LCFS’ goal to reduce carbon intensity in transportation fuels is not affected by increased use of higher carbon intensity crude oils. Nevertheless, California refiners have thus far been able to comply with LCFS requirements by blending lower carbon intensive renewable fuels—such as Brazilian sugar-cane ethanol—or purchasing carbon credits as an alternative method of compliance.", "Stakeholders we contacted and information we reviewed generally suggest that the outlook of the U.S. refining industry depends on a number of factors, in particular: (1) future domestic consumption of petroleum products; (2) the extent to which key environmental regulations raise costs for domestic refiners; and (3) the extent to which domestic refiners will be able to export and compete in international markets.", "The outlook of the U.S. refining industry depends on future domestic consumption of petroleum products, which is uncertain, according to stakeholders we contacted and information we reviewed. As discussed above, domestic petroleum product consumption declined by 11 percent from 2005 through 2012, and forecasts we reviewed project consumption of three major petroleum products—gasoline, diesel, and jet fuel—will be stable to slightly increasing through 2020, but not returning to high levels of the past. Most of the scenarios in forecasts we reviewed from IHS and EIA project total consumption of gasoline, diesel, and jet fuel to increase slightly by 2020, with projections ranging from a decline of 2 percent to an increase of 7 percent compared with 2012 consumption. Expectations differ somewhat by fuel, with all EIA scenarios projecting gasoline consumption to decline or remain stable and diesel and jet fuel consumption to increase from 2012 to 2020 (see fig. 10). IHS projects an increase in the consumption of both gasoline and diesel, with more robust growth projected for diesel. Scenarios in the forecasts we reviewed generally project consumption to decline after 2020.\nForecasts indicate that the level of future domestic consumption—the size of the domestic market for petroleum products—may affect future U.S. refinery production. In higher consumption scenarios, EIA’s projections suggest higher refinery production than in scenarios with lower domestic consumption. Specifically, EIA projects that inputs to refineries—which track trends in refinery production—in 2020 would be about 1 million barrels per day higher in scenarios with higher domestic consumption—a difference of about 7 percent of 2012 inputs. This difference is equivalent to about eight average-size U.S. refineries.\nSeveral stakeholders we contacted and information we reviewed highlighted various factors that can affect future domestic consumption levels and thereby the size of the largest market for the production of U.S. refineries, including the following:\nEconomic growth. Faster economic growth tends to increase consumption, and EIA’s forecast scenario with higher economic growth assumptions projects greater future consumption of petroleum products than a scenario with low economic growth.\nCrude oil and petroleum product prices. Higher prices for crude oil and petroleum products tend to decrease consumption. For example, of the forecast scenarios we reviewed, the scenario that assumes high future oil prices projects lower domestic consumption of petroleum products.\nShifts in consumer behavior and demographic trends. Changes in consumer behavior, such as reduced driving, along with demographic trends, such as an aging population and fewer young people with driving licenses, may reduce future consumption, according to EIA.\nKey regulations. Three of the key regulations we reviewed—CAFE and GHG vehicle emission standards, RFS, and LCFS—are expected to reduce domestic consumption of petroleum products in the future according to information we reviewed, though it is uncertain by how much. CAFE and GHG vehicle emission standards will require more efficient vehicles in the future, which may reduce future consumption of fuels. EPA estimated that the model year 2012-2025 standards are projected to reduce U.S. consumption of crude oil by 2.2 million barrels per day by 2025, equivalent to almost 15 percent of crude oil used by refineries in 2012. Similarly, under the RFS statute, unless waived by EPA, renewable fuels blending is required to double by 2022, which EPA estimated would reduce gasoline and diesel demand by 13.6 billion gallons, equivalent to about 10 percent of consumption in 2012. Furthermore, CARB projected that the LCFS would help decrease future gasoline consumption in California. However, the extent to which these regulations will reduce future consumption depends on actions by regulators and market and other developments. For example, as discussed above, EPA has proposed to reduce renewable fuel requirements for 2014 due to an inadequate supply in light of the blend wall and other issues. EPA stated that the framework it applied to determine the proposed percentage standards could be appropriate for later years. Therefore, the potential for RFS to reduce petroleum-based fuel consumption will depend on the percentages finalized by EPA, which, in turn will depend on the development of advanced renewable fuel sources and market infrastructure and could be affected by legal challenges, as well as any legislative action to modify the RFS.", "Stakeholders we contacted and information we reviewed generally suggest that the outlook of the U.S. refining industry will also depend on the extent to which some key regulations—RFS, Tier 3, stationary source GHG requirements, and LCFS—increase costs for refiners. In general, increasing costs for refiners may be absorbed by refiners themselves (i.e., by reducing their profits), be passed on to consumers through higher product prices, or both. The requirements on domestic refiners from the key regulations we reviewed generally are expected to collectively have a greater effect in the future, for example, by affecting more refiners (such as the stationary source GHG requirements to the extent that more refineries make modifications over time), or becoming more stringent in the future (such as the RFS), potentially increasing costs for refiners. In addition, several stakeholders told us that the uncertainty surrounding these regulations—and what costs they will impose—can affect the market climate within which refiners and other market participants make investment decisions such as whether to expand a refinery’s ability to process different crude oils, or to build new advanced biofuel processing facilities. Such uncertainty can discourage investments in the industry overall.\nRFS. RFS may increase costs for some refiners depending on the percentages of renewable fuels required by EPA and on other factors. As discussed previously, costs for some refiners to comply with RFS rose in 2013, which some of the stakeholders we contacted attributed to concerns about the blend wall. The blend wall may remain a concern into the future because statutory renewable fuel blending requirements continue to increase—they more than double from 2012 to 2022—while the consumption of petroleum products is expected to increase only slightly. Several stakeholders told us that the effect of the RFS depends in particular on how EPA addresses the blend wall in the annual standards it issues in the future. Furthermore, EPA’s timeliness in issuing the standards could also affect costs to the extent that delays affect the supply of renewable fuels, RIN prices, and refiners’ ability to plan and budget effectively for compliance. Several representatives of refiners told us that future delays would contribute to investment uncertainty and higher costs for refiners. EPA officials said that they did not believe delays have affected market participants, and that the market for RFS credits has provided flexibility to refiners and other obligated parties. The extent to which the RFS increases costs in the future could also be affected by the outcome of any relevant litigation and of legislative proposals to change the RFS or how EPA implements it.\nTier 3. According to EPA, to meet the Tier 3 fuel sulfur standards, refiners would need to install or upgrade hydrotreating capacity or take other steps to reduce the sulfur content in fuels, which will likely increase industry-wide costs. EPA projected that 67 out of 108 refineries would modify or purchase some equipment, and the capital costs of installing this equipment and operating costs to run it would average about $0.0065 per gallon, and total $804 million in 2017. An industry study of the Tier 3 proposal estimated that the regulation would increase costs by up to $0.09 per gallon for the highest-cost refinery, and several refinery representatives told us that Tier 3 would increase their costs. The extent to which the refining industry will be affected by Tier 3 standards would have been greater had EPA decreased the per-gallon maximum allowable sulfur levels in gasoline—known as caps. In the final standards, EPA maintained the current 80 ppm cap, but had sought comment on whether it should decrease the cap to as low as 20 ppm. A stakeholder told us that Tier 3 would be manageable if EPA maintained the current caps, but far more difficult if the caps were lowered. One study we reviewed estimated that industry could incur additional capital expenses to achieve lower sulfur caps, ranging from $2 billion to over $6 billion dollars depending on the sulfur cap level in the final standards.\nStationary source GHG requirements. Several of the refining industry representatives we contacted expressed concerns that stationary source GHG requirements could become more stringent in the future. The current permitting framework is a case-by-case determination that takes into account costs, among other factors, and places no requirement on existing refineries unless they undertake a major modification. However, EPA entered a settlement in which the agency agreed to develop national performance standards—called New Source Performance Standards—for GHG emissions from new and modified refineries, and GHG emissions guidelines for certain facilities at existing refineries. Although EPA has no current schedule to issue these standards, EPA committed in its settlement to issue them, and several stakeholders expressed concern that future standards could impose more strict controls involving higher costs at refineries. A stakeholder told us that until EPA clarifies its approach for NSPS, many refiners will be reluctant to make certain investments in their refineries out of concerns that their investments may be unprofitable given future requirements. In addition, some companies may preemptively factor in the cost of emissions control technologies in their investment analyses.\nLCFS. Two stakeholders and a refining industry trade association told us that California refiners could face higher costs or compliance challenges unless CARB adjusts future low carbon fuel requirements. CARB has estimated that the cost of LCFS on gasoline and gasoline- substitute fuels is likely to range between an increase of $0.09 per gallon, and a decrease of $0.13 per gallon by 2020. However, an industry study estimated that the LCFS could cost the refining industry an average of $0.70 per gallon by 2020. The study also projected that 5 to 7 of 14 California refineries could cease production by 2020, and the LCFS could raise other compliance challenges because of insufficient supplies or consumer uptake of cellulosic, Brazilian sugar- cane ethanol, and other low carbon intensity fuels or vehicle technologies. CARB officials told us that if it proves more difficult than expected to meet LCFS requirements, CARB could introduce cost containment provisions to increase the availability of credits, such as through a “safety valve” to release additional credits at a set price, or by providing extra credits to certain compliance approaches. Stakeholder told us that the decisions CARB makes with respect to the LCFS may affect California refiners’ ability to stay in business and compete with refiners in other states and countries.", "While the domestic refining industry has increasingly relied on export markets, stakeholders and forecasts we reviewed indicate that the industry’s future competitiveness is uncertain and that foreign markets present both challenges and opportunities for U.S. refiners.", "Forecasts and data we reviewed from EIA and IEA suggest that future domestic refinery production levels may depend on exports of petroleum products. Petroleum products are increasingly global commodities, and EIA data indicate that as domestic consumption has declined, refiners have looked to foreign markets to sell products. Since 1949, the United States had been a net importer of petroleum products, but this long-term trend reversed in 2011 when the United States became a net exporter of total petroleum products. According to EIA data, the United States recently exported more petroleum products than other leading exporters, including Russia, India, and Singapore, and petroleum product exports have represented an increasing share of U.S. refinery production. Exports of petroleum products represented 7 percent of refinery production in 2007 but increased to 17 percent in 2012. Major markets for U.S. exports include Central and South America, Mexico, and Europe, to which U.S. refiners sent nearly all diesel exports in 2012. The United States exports more diesel than gasoline, though U.S. refiners have been increasing exports of gasoline to Central and South America and Africa.\nForecasts that we reviewed generally project that exports will remain strong. According to most of the EIA and IHS forecasts we reviewed, exports of petroleum products are expected to increase until 2015, but the extent of the increase is unclear. As shown in figure 11, EIA scenarios project export levels from 2.6 to 3.4 million barrels per day by 2020, a relatively wide range. Even the lowest projection for petroleum product exports in 2020 is above 2010 levels, indicating a general expectation that exports will remain strong.\nThe extent to which domestic refiners are able to export their products will depend on the competitiveness of domestic refiners compared with foreign refiners, and stakeholders we contacted and information we reviewed highlighted both challenges that may inhibit competitiveness and opportunities that may increase it in the future. To sell products abroad, refiners need to be competitive—that is, they must be able to supply fuels that foreign purchasers want to buy at prices that are attractive. Stakeholders and information we reviewed suggest that various factors may affect the U.S. refining industry’s future competitiveness, including: (1) the balance between global refining capacity and global demand for petroleum products, (2) costs associated with environmental regulations, (3) exports to nations with stringent fuel standards, and (4) increasing domestic and Canadian crude oil production. More specifically:\nBalance between global refining capacity and demand. IEA data indicate that competition from foreign refiners may increase as global refining capacity is projected to exceed global consumption, creating an imbalance between global supply and demand that may affect U.S. refiners. According to IEA, global consumption of petroleum products was about 78.9 million barrels per day in 2012 and is projected to grow an additional 6 million barrels per day by 2020—with growth concentrated in Asia and the Middle East and consumption declining in Europe. But IEA projects refining capacity may grow even faster, resulting in excess capacity (refining capacity beyond that needed to meet consumption) of nearly 15.5 million barrels per day by 2020, in contrast to an estimated 4.8 million barrels per day of excess capacity in 2012. Excess refining capacity is likely to result in greater competition in foreign markets overall, and some regions may present particular challenges. A large share of the new capacity is expected in China, India, and the Middle East, and representatives of two refiners indicated concern that capacity additions in some of those regions may present competition for U.S. refiners. Several other stakeholders were optimistic about domestic refiners’ ability to compete in the future. According to IEA, capacity additions in China and India are intended to keep pace with growing consumption in those regions, but new Middle Eastern refineries are intended to be export facilities and may present increased competition to U.S. refiners.\nCosts associated with environmental regulations. As discussed above, the key environmental regulations we reviewed could collectively impose additional costs on the domestic refining industry. These costs could affect the industry’s ability to compete internationally to the extent that foreign refiners do not face similar costs. In addition, regulatory uncertainty can affect refiners’ competitiveness if it inhibits the industry from making investments that would otherwise lower costs. Not all of the key regulations we reviewed would be expected to affect the industry’s competitiveness. In particular, CAFE and GHG vehicle standards do not impose requirements on refiners. In addition, although RFS and Tier 3 standards could impose requirements with potential associated costs on some refiners, they would not apply to exported fuels—they apply only to fuels sold in the United States regardless of where they are produced.\nPotential for increased exports to nations with stringent fuel standards. In general, U.S. refineries are among the most sophisticated in the world and have generally been optimized to produce large proportions of cleaner-burning gasoline. IEA has pointed out that refiners in many parts of the world face challenges producing fuels that meet high product quality and environmental performance standards. Therefore, some U.S. refiners may benefit from any trend toward higher quality and more stringent environmental performance standards. In this regard, actions refiners may take to reduce gasoline sulfur to comply with proposed Tier 3 standards could enable them to export to markets—such as Japan and much of Europe—that already require low sulfur gasoline. On the other hand, representatives of a refiner pointed out that refiners could undertake such investments on their own—without Tier 3—if such exports were sufficiently economically attractive.\nIncreasing domestic and Canadian crude oil production. As discussed above, increasing U.S. and Canadian crude oil production has led to lower cost crude oil for some refiners, providing a competitive advantage. All of the forecast scenarios we reviewed from EIA, IEA, and IHS anticipate increases in U.S. crude oil production, but the projections are uncertain and vary widely—from 6.8 to 9.8 million barrels per day in 2020 as shown in figure 12. Projections are revised each year, and expectations for U.S. crude oil production in 2020 have increased in more recent forecasts. For example, the reference scenario in EIA’s most recent forecast projects domestic crude oil production to approach a historical high of 9.6 million barrels per day in 2020, higher than the reference scenario from the prior year. Canadian crude oil production—which accounted for about 16 percent of the crude oil used by U.S. refineries in 2012—is expected to increase as well: the reference scenario in EIA’s international forecast projects that Canadian petroleum liquids production will increase more than 30 percent from 2012 levels, reaching approximately 5 million barrels per day in 2020. The extent of the increase in future crude oil production can have implications for future petroleum product exports. For example, EIA’s scenario that assumes more domestic crude oil and natural gas resources projects higher export levels than a scenario that assumes low crude oil and natural gas resources. Several stakeholders told us that various issues could mitigate U.S. refiners’ ability to take advantage of growing crude oil supplies. In particular, it is unclear whether planned expansions in pipelines and rail transportation will keep pace with growing production, and these infrastructure expansions could be affected by regulatory actions to address pipeline and rail safety. Similarly, several stakeholders told us that potential future increases in crude oil exports, which are currently minimal, could put pressure on regional crude oil prices, reducing the price advantage of U.S. refiners.", "The domestic petroleum refining industry has been and is expected to continue to be affected by several profound changes. Some of these changes, such as the growth in crude oil production in the United States and Canada, are reshaping the industry and creating new business opportunities. To take advantage of some of these opportunities, refiners and other market participants will need to invest—to upgrade refineries to be able to process different crude oils or to build pipelines or rail connections to move more crude oil from production to refining centers. Uncertainty can affect the market climate within which these investment decisions will be made. In this context, EPA’s timeliness in issuing annual percentage standards under the RFS is important to help inform the investment decisions of the refining industry. In issuing annual percentage standards, EPA may waive the statutory volumes in whole or in part according to statutory criteria, which EPA has identified as potentially factoring in the blend wall, market developments, and other issues. However, EPA has missed the annual deadline for issuing annual standards under the RFS in most years. EPA has some systems in place to monitor and evaluate progress in developing regulations, which could provide useful information for understanding delays in RFS. But EPA has not identified the underlying causes of delays, and it has not developed a plan to address delays and, therefore, risks repeating delays. EPA delays in issuing RFS standards are important because delays do not change refiners’ compliance periods accordingly and they therefore create uncertainty in the marketplace, potentially harming investment. Uncertainty among refiners, renewable fuel producers, and other market participants about how EPA will address the blend wall, which can be exacerbated by the prospect of litigation, can affect investment decisions and ultimately the availability and prices of the fuels they produce.", "To improve EPA’s ability to meet the annual statutory deadline for issuing annual RFS standards, we recommend that the Administrator of the EPA take the following two actions:\nAssess past experience to identify the underlying causes of delays in issuing annual RFS standards.\nDevelop and implement a plan to address the causes of delays and help ensure RFS annual standards are issued on time.", "We provided drafts of this report to DOE, DOT, and EPA for review and comment. The three agencies provided technical comments on early or final drafts, which we incorporated as appropriate.\nEPA also provided a letter in which it generally agreed with our findings and recommendations and clarified three topics discussed in the report.\nFirst, regarding the effects of compliance with RFS, EPA asserted that refiners experience the same compliance costs regardless of whether they are fully integrated, with blending capabilities, or merchant refiners that purchase credits for compliance. Based on our work, we found the views of several stakeholders differed from EPA's. For example, in a 2011 study, DOE identified the degree to which a small refiner can actively blend production with renewable fuels is a large component that could contribute to economic hardship from compliance with the RFS. In theory, market-based compliance systems—such as the RFS credit system—provide incentives for market participants to make decisions that would tend to equalize additional compliance costs over time. However, there can be physical infrastructure or contractual constraints, among various other factors, that could result in different outcomes in the short run. We added additional language to explain EPA's views in the report and in Appendix III.\nSecond, regarding the time-frame for RFS compliance, EPA stated that the RFS compliance deadline—the date by which refiners and other obligated parties must demonstrate compliance to EPA—is established through implementing regulations, not statute. EPA stated that it adjusted the 2013 deadline to provide additional time to demonstrate compliance. We acknowledge that EPA can extend the compliance deadline. However, the compliance period refers to the time during which refiners and other parties incur obligations under RFS and can take steps to incorporate additional renewable fuels to generate credits for compliance. This period is set by statute to be a full calendar year. We clarified language in the report to acknowledge EPA's ability to adjust the compliance deadline, essentially providing additional time for obligated parties to purchase credits, and its inability to adjust the compliance period.\nThird, regarding Tier 3 standards, EPA announced the final standards while our draft was with the agency for comment. EPA stated that the final Tier 3 program is very similar to what it proposed, though EPA made some changes based on public input and updated its analyses. EPA provided technical comments to incorporate information from the final rule which we incorporated into the report, as appropriate. However, we were not able to obtain stakeholder and other views on the final Tier 3 rule for this report. See appendix IV for EPA’s letter.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time we will send copies to the appropriate congressional committees and to the Secretaries of Energy and Transportation and the Administrator of the EPA. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "This report provides information on the domestic petroleum refining industry and its market and regulatory environment. Specifically, it addresses what is known about (1) major changes—including key environmental regulations—that have recently affected the domestic petroleum refining industry and (2) major factors that may affect the future of the domestic petroleum refining industry—including its production, profitability, and competitiveness in foreign markets.\nTo provide information on major changes that have affected the domestic petroleum refining industry and the future of the industry, we reviewed information including the following: studies by federal agencies and consultants, company financial regulatory filings, and proposed and final regulations and regulatory impact analyses.\nTo identify studies and other literature, we conducted searches of various databases, such as ProQuest and PolicyFile, for studies since published 2009. We also asked agency officials and other stakeholders we contacted to recommend studies.\nBased on our research and information from stakeholders, we identified five key regulations that were recently strengthened or proposed: (1) the Environmental Protection Agency’s (EPA) Renewable Fuels Standard regulations, (2) the Department of Transportation’s Corporate Average Fuel Economy and EPA’s greenhouse gas vehicle emission standards; (3) EPA’s Tier 3 Motor Vehicle Emission and Fuel Standards; (4) EPA’s stationary source greenhouse gas requirements; and (5) the state of California’s Low Carbon Fuel Standard. We reviewed agency regulatory impact assessments and industry and other studies on the effect of these regulations on industry. Other regulations may also affect the industry.\nWe also summarized the results of semistructured interviews with a nonprobability sample of 32 stakeholders. (See app. II for a list of these stakeholders.) Stakeholders included representatives from refining companies, environmental organizations, consultants, and officials from federal and state agencies. We also visited several refineries of selected refining companies. We selected these stakeholders to represent broad and differing perspectives on these issues based on recommendations from agencies and industry associations, along with other information. For example, to select refiners, we considered, among other factors, the size and location of their refineries, and whether they were vertically integrated or merchant refiners. When possible, we used a standard set of questions in interviewing stakeholders, including questions about the effect of the key regulations we reviewed. However, as needed, we also sought perspectives on additional questions tailored to these stakeholders’ expertise and sought opinions from stakeholders on key issues, such as their views on the potential effects of exports on industry. Because we used a nonprobability sample, the views of these stakeholders are not generalizable to all potential stakeholders, but they provide illustrative examples of the range of views. Similarly, the conditions at the refineries we visited are not generalizable to all refineries. The stakeholder views we summarize were not necessarily supported by all types of stakeholders, though we identify differing views where appropriate. Stakeholders and information we reviewed identified a number of changes that have affected the industry and a number of factors that may affect its future, and we report on those that were most often cited.\nTo illustrate major changes over time and to describe the domestic petroleum refining industry, we summarized historical data from the Energy Information Administration (EIA) regarding such issues as capacity and location of refineries, crude oil production, and consumption of petroleum products. To assess the reliability of EIA data, we took several steps including reviewing documentation, interviewing EIA staff, and consulting with stakeholders. We determined the EIA data to be sufficiently reliable for the purposes of this report.\nTo provide information about the future of the domestic petroleum refining industry and major factors that could affect it, we also reviewed forecasts from EIA, the International Energy Agency (IEA), and IHS, and summarized projections through 2020 under different scenarios. We selected these forecasts because they made projections through 2020, contained information broadly relevant to our report, covered multiple scenarios or offered a counterpoint scenario, and contained well- documented discussions of methodologies used and assumptions made.\nWhile forecasts are subject to inherent uncertainties, we found these forecasts to be reasonable for describing a range of views about potential conditions of the domestic refining industry and major factors that will help determine these conditions. We reviewed and compiled data from relevant scenarios and compared them where appropriate. Specifically, we reviewed all 27 scenarios in EIA’s 2013 forecast, the reference scenario in EIA’s 2014 initial forecast, and IHS’s forecast, and, in particular, highlight the scenarios representing the highest and lowest projection of gasoline, diesel, and jet fuel consumption; petroleum product exports; and crude oil production. We identified some differences in the metrics reported in the four forecasts and did not make direct comparisons in these instances.\nWe conducted this performance audit from November 2012 to March 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "To demonstrate compliance with the Environmental Protection Agency’s (EPA) annual blending requirements under the Renewable Fuel Standard (RFS), refiners use renewable identification numbers (RIN), which we refer to in this report as credits. A RIN is a unique 38-character code that renewable fuel producers and importers assign to each gallon of renewable fuel produced or imported. To demonstrate compliance with the RFS, refiners and importers must provide sufficient RINs for the volume of gasoline and diesel they produce for use in the contiguous United States and Hawaii. For example, to comply with the 2013 total renewable fuels standard requiring that renewable fuels compose at least 9.74 percent of gasoline and diesel, a refiner selling 100 million gallons of gasoline would have to provide 9.74 million total RINs to EPA. Refiners can obtain RINs by purchasing and blending renewable fuels themselves, or they can purchase RINs from renewable fuel producers, importers, blenders, other refiners, or other RIN-holding entities. RINs are valid for the calendar year in which they were generated, and up to 20 percent of a year’s standard can be met with RINs from the previous year. Refiners and other obligated parties with more RINs than needed to meet the year’s blending standard can hold them for use in the following year or sell them to another party that needs additional RINs to comply with the blending standard.\nPrices for RINs reflect the cost of renewable fuels compared with the petroleum fuels they displace, the stringency of annual blending percentage standards, and other factors, and have varied over time. According to the Energy Information Administration (EIA), between 2006 and much of 2012, corn-based ethanol RIN prices were low—between $0.01 and $0.05 per gallon—because it was generally economical to blend up to or above the level required by the RFS. However, RIN prices for corn-based ethanol increased to over $1.40 per gallon in July 2013. Several stakeholders told us this increase in RIN prices was primarily due to RFS requirements exceeding the capability of the transportation fuel infrastructure to distribute and the fleet of vehicles to use renewable fuels, referred to as the “blend wall.” EPA officials told us that high corn prices, which made ethanol more expensive relative to gasoline, also contributed to higher RIN prices during this period. These RIN prices have since come down to about $0.20 per gallon as of mid-November 2013. A refiner attributed this decline to EPA’s statements expressing its desire to address the blend wall.\nThe blend wall exists because blending more than 10 percent ethanol with gasoline (called E10) is affected by constraints such as the limited availability of vehicles that can use higher ethanol blends. In addition, higher ethanol blends are less widely available than E10 and must be priced at a discount to encourage greater consumption, according to EIA. EPA officials recently said the blend wall would be reached in 2014 when about 13.2 billion gallons of E10 could be consumed. Blending additional renewable fuels can be difficult and costly once the blend wall is reached because significant volumes of non-ethanol renewable fuels must be available, consumers must be encouraged to purchase additional higher blends of ethanol, and other market participants must develop the infrastructure to deliver those fuels.\nCompliance with the RFS has recently increased costs for some refiners, according to information we reviewed and several stakeholders we contacted. While the RFS applies to all refiners in the same way, effects of rising or falling RIN prices may vary depending on each refiner’s situation. For example, those refiners that have incorporated renewable fuel blending into their operations may have benefited from the rising prices relative to those refiners that are less well positioned. According to several stakeholders, RFS compliance has been most difficult for refiners with less of a retail presence, known as merchant refiners, because they do not blend their own fuel and must purchase RINs from others, increasing their cost of compliance. On the other hand, some industry participants may be relatively advantaged when the price of RINs rises. For example, an ExxonMobil official said that RIN costs did not have a significant impact on the company’s financial performance during the second quarter of 2013 because ExxonMobil meets the majority of its obligation by blending its renewable fuels itself.\nEPA officials told us, however, that the RFS program affects all refiners equally because obligations are the same regardless of whether refiners blend renewable fuels themselves or purchase RINs. In particular, EPA stated that refiners experience the same costs. If a company generates its own RINs, there is a cost associated with doing so, namely the cost for the renewable fuel compared to the petroleum fuel it displaces.", "", "", "", "In addition to the individual named above, Christine Kehr (Assistant Director), Elizabeth Beardsley, Catherine Bombico, Keya Chateauneuf, Nirmal Chaudhary, Quindi Franco, Cindy Gilbert, Katharine Kairys, Michael Kendix, Armetha Liles, and Alison O’Neill made key contributions to this report.", "Oil and Gas: Information on Shale Resources, Development, and Environmental and Public Health Risks. GAO-12-732. Washington, D.C.: September 5, 2012.\nBiofuels: Challenges to the Transportation, Sale, and Use of Intermediate Ethanol Blends. GAO-11-513. Washington, D.C.: June 3, 2011.\nVehicle Fuel Economy: NHTSA and EPA’s Partnership for Setting Fuel Economy and Greenhouse Gas Emissions Standards Improved Analysis and Should Be Maintained. GAO-10-336. Washington, D.C.: February 25, 2010.\nEnergy-Water Nexus: Many Uncertainties Remain about National and Regional Effects of Increased Biofuel Production on Water Resources. GAO-10-116. Washington, D.C.: November 30, 2009.\nEnergy Markets: Estimates of the Effects of Mergers and Market Concentration on Wholesale Gasoline Prices. GAO-09-659. Washington, D.C.: June 12, 2009.\nBiofuels: Potential Effects and Challenges of Required Increases in Production and Use. GAO-09-446. Washington, D.C.: August 25, 2009.\nFederal Rulemaking: Improvements Needed to Monitoring and Evaluation of Rules Development as Well as to the Transparency of OMB Regulatory Reviews. GAO-09-205. Washington, D.C.: April 20, 2009.\nEnergy Markets: Refinery Outages Can Impact Petroleum Product Prices, but No Federal Requirements to Report Outages Exist. GAO-09-87. Washington, D.C.: October 7, 2008.\nEnergy Markets: Increasing Globalization of Petroleum Products Markets, Tightening Refining Demand and Supply Balance, and Other Trends Have Implications for U.S. Energy Supply, Prices, and Price Volatility. GAO-08-14. Washington, D.C.: December 20, 2007.\nVehicle Fuel Economy: Reforming Fuel Economy Standards Could Help Reduce Oil Consumption by Cars and Light Trucks, and Other Options Could Complement These Standards. GAO-07-921. Washington, D.C.: August 2, 2007.\nMotor Fuels: Understanding the Factors That Influence the Retail Price of Gasoline. GAO-05-525SP. Washington, D.C.: May 2, 2005." ], "depth": [ 1, 2, 2, 3, 1, 2, 2, 2, 3, 1, 2, 2, 2, 3, 1, 1, 1, 1, 1, 2, 2, 2, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "", "h0_title h1_title", "", "", "h0_title h1_title", "h0_full h1_full", "h0_title h2_title h1_title", "h0_full", "h0_full h1_full", "h2_full h1_title", "h2_full h1_full", "h0_full", "", "", "h3_full", "", "", "", "", "h0_full", "", "", "", "", "" ] }

{ "question": [ "What regulations have contributed to declining petroleum-based fuel consumption?", "How have these standards affected refiners?", "What caused these increased costs?", "What is the current status of EPA's standards?", "What are the consequences of a late RFS?", "What is the relationship between key regulations and cost increases?", "How does RFS affect the costs of compliance?", "How are increasing costs absorbed?", "What is the relationship between the U.S. refining industry and foreign markets?", "How have exports grown recently?", "What does the export rate depend on?", "What affects competitiveness?", "What information was GAO asked to provide?", "What does this report examine?", "How did GAO conduct this research?" ], "summary": [ "Key regulations. Two key regulations—the Environmental Protection Agency's (EPA) and Department of Transportation's (DOT) coordinated fuel economy and greenhouse gas (GHG) vehicle emission standards, as well as EPA's Renewable Fuel Standard (RFS)—have contributed to declining petroleum-based fuel consumption.", "For some refiners, compliance with the RFS increased costs in the first half of 2013, though costs have since declined to some degree from their peak.", "According to some stakeholders GAO contacted, this was primarily due to RFS requirements exceeding the capability of the transportation fuel infrastructure to distribute and the fleet of vehicles to use renewable fuels.", "Moreover, EPA has missed the statutory deadline to issue regulations establishing annual RFS blending standards since 2009. EPA has not systematically identified the underlying causes of these delays or changed its approach in order to avoid them.", "A late RFS contributes to industry uncertainty, which can increase costs because industry cannot plan and budget effectively, according to some stakeholders.", "Costs of key regulations . The extent to which requirements in the key regulations increase costs for refiners will affect the industry's outlook.", "For example, future costs to comply with RFS may depend on the annual renewable fuel volumes EPA sets and whether EPA issues annual RFS standards on time.", "In general, increasing costs may be absorbed by refiners (i.e., by reducing their profits), be passed on to consumers through higher prices, or both.", "Foreign markets. The U.S. refining industry has increasingly relied on foreign markets.", "Exports grew from 7 percent of production in 2007 to 17 percent in 2012.", "The extent to which domestic refiners export their products will depend on the competitiveness of U.S. refiners.", "Factors that may affect competitiveness include domestic environmental regulations, levels of U.S. and Canadian crude oil production, and the balance between global refining capacity and demand for petroleum products.", "GAO was asked to provide information on the domestic petroleum refining industry.", "This report examines: (1) major changes that have recently affected the industry and (2) the future of the industry.", "GAO reviewed information including studies by agencies and consultants and company financial filings; interviewed stakeholders, including agency officials and representatives of refiners and environmental organizations; and reviewed forecasts by the Energy Information Administration and others." ], "parent_pair_index": [ -1, 0, 1, 0, 0, -1, 0, 0, -1, 0, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 6, 6, 6, 6, 6, 9, 9, 9, 10, 10, 10, 10, 2, 2, 2 ] }

{ "title": [ "Background", "FDA Lacks the Measurable Goals and Funding Information Necessary to Conduct Strategic Planning for Regulatory Science Priorities", "FDA Lacks Measurable Goals to Assess Progress Meeting Its Regulatory Science Priorities", "FDA Lacks Information Necessary to Track Funding and Strategically Plan for Its Regulatory Science Priorities across the Agency", "FDA Annual Obligations for Regulatory Science Projects Generally Increased from 2010 through 2014 and Varied across Centers and Offices and Priority Areas", "FDA Annual Obligations for Regulatory Science Projects Generally Increased over Time", "FDA Obligations for Regulatory Science Varied Widely across Centers and Offices and Priority Areas", "FDA Reported That the Selected Regulatory Science Projects Led to Changes in Agency and External Stakeholder Practices", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Description of Projects Included in Our Review of Achievements Resulting from FDA’s Regulatory Science Projects", "Appendix II: Comments from the Department of Health and Human Services", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "According to FDA, the goal of its regulatory science initiative is to develop and apply the best available scientific data, knowledge, methods, and tools to reduce uncertainty and make regulatory decisions more efficient and consistent. In doing so, the agency seeks to ensure public access to products that are manufactured or processed in a high quality manner and monitored to ensure safety and quality during real-world use. FDA’s 2011 strategic plan identified eight priority areas for regulatory science, of which seven related to medical products where the agency determined that new or enhanced engagement is essential to the continued success of the agency’s public health and regulatory mission. The agency then added an additional priority area related to global product safety in 2013. (See table 1.)\nFDA conducts work to advance regulatory science through intramural research and extramural collaborations, such as collaboration with other government agencies, academia, industry, patient organizations, professional associations, and other stakeholders. Targeted funding for regulatory science at FDA comes from a number of centers and offices, including the Center for Biologics Evaluation and Research (CBER), the Center for Drug Evaluation and Research (CDER), and the Center for Devices and Radiologic Health (CDRH), all within FDA’s Office of Medical Products and Tobacco. These centers are responsible for approving medical products (biologics, drugs, and devices, respectively) and monitoring their ongoing safety once approved. In addition, other offices support the regulatory mission of FDA, such as the Office of International Programs (OIP) in the Office of Global Regulatory Operations and Policy, and those under the Office of the Chief Scientist—whose mission is to provide strategic leadership, coordination and expertise—including the National Center for Toxicological Research (NCTR), the Office of Counterterrorism and Emerging Threats (OCET), the Office of Minority Health (OMH), the Office of Regulatory Science and Innovation (ORSI), and the Office of Women’s Health (OWH). (See fig. 1.) Additional broad regulatory science efforts may occur within these centers and offices as well as others at FDA.", "FDA does not have measurable goals, such as targets and time frames, to assess its progress in advancing regulatory science. Further, FDA does not consistently track information on center and office funding decisions for each FDA priority area, leaving it without important information needed to conduct strategic planning on the agency’s regulatory science priorities.", "FDA’s 2011 and 2013 strategic planning documents do not identify measurable goals, such as targets and time frames, for assessing progress in regulatory science. For example, the 2013 strategic planning document states that FDA will measure progress by enumerating and describing product-specific advisory committees and staff training opportunities related to the priority areas. However, the document neither sets any targets or time frames, nor establishes further outcome-based measures for what FDA hopes to achieve for either a given priority area or regulatory science in general. Likewise, FDA’s 2011 strategic planning document presents strategies for addressing the priority areas, but the document does not include measurable goals within these strategies. For example, it indicates that addressing the toxicology priority area would involve developing human and animal models to predict adverse responses, but it does not provide the number of models FDA intends to develop or the adverse responses for which the models are intended. FDA’s lack of specific measurable goals is reflected in the progress report that it completed for FDASIA. In that report, FDA includes examples of achievements but it does not specify overall results, such as the number of tests and technologies developed for the efficacy and safety of medical products, which the 2013 planning document indicated would help the manufacturing and quality priority area. In addition, FDA generally did not link the categories that it used to measure the adoption of regulatory science to a specific priority area. Specifically, in the progress report, only four of the eleven categories are linked to the FDA priority areas that they address. For example, while FDA reported one or more related FDA priority area for each guidance document included in the progress report, it did not provide the same information for the reported training examples or the projects included in the Drug Development Tool Qualification programs.\nAccording to our work on leading practices for strategic planning, an agency’s strategic goals should explain what results are expected from the agency and when to expect those results. It is also critical that the strategic planning documents describing these goals include specific actions and implementation schedules for how the agency is to achieve these goals. Without measurable goals, clear targets, and implementation time frames, FDA cannot provide a complete assessment of progress made in the regulatory science areas it has designated as priorities.\nAccording to FDA officials, it is difficult to measure the progress made in the priority areas because the priority areas are very broad and the underlying science is continually changing. Furthermore, the adoption of discoveries from regulatory science research can take years. Because the priority areas are managed across multiple organizational units, they are not being overseen by a specific center or office. However, we have previously recognized that while measuring the performance of science- related projects can be difficult, science-related agencies like FDA should still have clearly established goals.\nOne of the centers that targets funding at regulatory science has a plan to track the progress of its regulatory science activities, but this plan does not include measurable goals that could be used to assess progress. Specifically, CDRH officials told us the center has drafted a logic model to identify and track the short- and long-term outcomes of funds it spends on regulatory science research. The center expects the model to be finalized in 2017. However, the current draft does not include measurable goals to assess progress. In addition, officials from most of the other centers and offices that obligated funds targeted at regulatory science activities in fiscal years 2010 through 2014 told us they are not developing such a model. One office also stated that the CDRH model may not be applicable to their work and that they may not have the resources needed to customize and implement such a model. In another effort, FDA officials indicated that the agency recently initiated internal discussions primarily to share information, and if feasible and desired, harmonize best practices within the agency. FDA officials also said that this group would discuss evaluation strategies and processes and perhaps eventually arrive at a common FDA approach to thinking about research outcomes and impact. This group first met in October 2015 to discuss current efforts, and FDA officials reported in April 2016 that it is still in the early stages of sharing information.", "FDA does not have the information necessary to track funding and conduct strategic planning agency-wide for its regulatory science priorities because most of the centers and offices did not collect information on the FDA priority areas that were addressed by the projects they funded. As a result, information on funding for each priority area is generally not readily available and therefore the majority of these centers and offices had to retrospectively assign FDA priority areas to each project at the time of our review.\nSix centers and offices—CDRH, NCTR, OCET, OIP, OMH, and OWH—fund regulatory science projects that address multiple FDA priority areas, but generally did not collect information about how funds are distributed across those priority areas. All six had to retrospectively identify associated FDA priority areas for our review. For example, while CDRH and NCTR collect some information about research priorities for the projects they fund, the information they collect does not fully align with the FDA priority areas. Specifically, CDRH collects information on its own set of priorities and NCTR collects information on FDA goals. While this information is partially aligned with the FDA priority areas, there is not a one-to-one correspondence, thus information on FDA priority areas is not readily available. According to NCTR officials, they began capturing information on the FDA priority areas in 2016. Further, OMH asks researchers to identify the unmet regulatory science need that their proposed research addresses, but the researchers are not asked to identify specific FDA priority areas. In addition, OCET and OIP officials told us that all of their funded projects are related to one FDA priority area, and therefore they do not collect information about other priority areas. However, there is no guarantee they will not fund projects related to other priority areas in the future. Further, while OIP told us they focus on just the FDA priority area global product safety, the data they provided for our review also identified an additional priority area, information sciences, as an FDA priority area being addressed by some of their projects.\nThree offices, CBER, CDER, and ORSI, collect some information on the FDA priority areas addressed by their targeted projects. CBER and CDER have not collected this information at the time of funding. Rather, CBER asks researchers to provide it as part of required annual reports and CDER officials indicated that CDER has made a similar request of researchers since 2012. Officials from both CBER and CDER said that in the near future their centers plan to track the FDA priority areas at the time projects are proposed for funding. ORSI asks researchers to identify FDA priority areas for its broad agency announcements, which are competitive funding announcements for extramural research programs and accounted for 21 percent of ORSI’s funding for the projects that we reviewed. ORSI does not ask this of researchers applying for its other regulatory science funding programs, although the announcements for the intramural grants state that the proposals should align with one or more of the eight original priority areas. For these other funding programs, ORSI confirms that a project proposal is related to regulatory science, but does not document any specific FDA priority area for that project.\nWhile each center or office may be funding projects that are generally consistent with the priority areas that FDA established, without consistent information from each center or office detailing those connections, the agency is not able to examine obligations across specific priority areas. Standards for internal control in the federal government state that complete and accurate data are needed to make operating decisions and to allocate resources. In addition, to ensure program goals are met, our work encourages agencies to manage efforts that cut across the agency. Without complete information on the allocation of funding across priority areas by centers and offices, FDA cannot ensure that funding is being distributed in line with its strategic plan.", "In response to our request, FDA identified projects targeted at regulatory science funded from fiscal years 2010 through 2014 totaling more than $507 million. Annual obligations for these projects generally increased during that time. This funding varied across centers and offices, ranging from approximately $450,000 to about $200 million. In addition, while FDA does not systematically track regulatory science obligations by priority area, the agency’s retrospective review showed wide funding variation across priority areas, ranging from about $3 million to approximately $203 million.", "FDA obligations targeted at regulatory science projects increased from about $73 million in fiscal year 2010 to a peak of about $123 million in fiscal year 2013, then a decline to about $110 million in fiscal year 2014. These funds represent those obligations targeted at specific regulatory science projects and do not include FDA obligations for other activities benefitting regulatory science for which the agency was not able to quantify spending at a project level. (See fig. 2.) Over the 5 years we examined, FDA obligated nearly $507 million for 1,279 regulatory science projects, an average of approximately $400,000 per project. Total obligations for individual projects ranged from $430 to $9.1 million during this time. While FDA obligated funds for some projects for a single year, FDA typically obligated funds for projects in multiple years.\nFDA obligated 80 percent of these regulatory science funds to intramural projects—those led by FDA researchers. For example, the Office of the Chief Scientist’s grant program includes five intramural grant programs; for these programs, FDA scientists first submit concept papers that are ranked and then submit full proposals that are peer-reviewed. The remaining 20 percent of projects were either extramural or a combination of intramural and extramural. For example:\nBroad Agency Announcements are extramural, competitive funding announcements supporting regulatory science research programs.\nCenters of Excellence in Regulatory Science and Innovation are extramural partnerships between FDA and universities to promote cross-disciplinary regulatory science training and research.\nThe Critical Path Initiative started in 2004 to improve medical product development, evaluation, and manufacturing and is used to support intramural research and external collaborations. Most Critical Path Initiative projects were intramural, except for ten projects that were both intramural and extramural.\nOf the total funding targeted at regulatory science projects, 48 percent was obligated for projects awarded through a non-competitive award process, 39 percent through a competitive award process, and 13 percent through a combination of competitive and non-competitive processes.\nOfficials reported that FDA has traditionally funded regulatory science projects with FDA general appropriations, but projects funded within CDER have also been supplemented by funds collected under user fee acts—specifically the Prescription Drug User Fee Act (PDUFA) and Generic Drug User Fee Amendments of 2012 (GDUFA)—that authorize the collection of funds from industry (including the pharmaceutical and biotechnology industries). PDUFA funds accounted for 2 percent of CDER’s total regulatory science obligations for fiscal years 2010 through 2014, ranging from 1 to 4 percent annually, with approximately $300,000 of PDUFA funds obligated each year for regulatory science. Starting in fiscal year 2013, CDER committed to using a portion of its GDUFA funds for regulatory science. GDUFA funds accounted for 65 percent of CDER’s regulatory science obligations in fiscal years 2013 and 2014 combined, about $17 million (70 percent) and $19 million (62 percent), respectively. (See fig. 3.) In 2013, the addition of funds from GDUFA more than doubled CDER’s annual obligations for regulatory science projects for fiscal years 2010-2013. GDUFA and PDUFA are the only two user fee programs that support targeted regulatory science obligations.\nIn addition, FDA indicated that it funded other efforts benefitting regulatory science, but was unable to quantify spending at the project level. For example, CDER officials told us that funds targeted at regulatory science identified for our review represent only a portion of CDER’s investment in regulatory science. They added that lab programs, like those in the Office of Pharmaceutical Quality and the Division of Applied Regulatory Science within the Office of Translational Sciences, fund the bulk of their projects through the normal CDER budgeting process and therefore are not included among the targeted funds. One such CDER project focused on developing an analytical method that sponsors could use to support that proposed generic and brand name forms of estrogen are chemically equivalent. The work resulted in new recommendations for some estrogen analyses, which were incorporated into a guidance document for the development of generic estrogen products.", "Of the nine centers and offices that obligated funds targeted at regulatory science from fiscal year 2010 through fiscal year 2014, total obligations ranged from approximately $450,000 by OMH to about $200 million by NCTR. The center and offices within the Office of the Chief Scientist— NCTR, OCET, OMH, ORSI, and OWH—accounted for 65 percent of FDA’s total obligations for projects targeted at regulatory science, with NCTR accounting for 60 percent of the total Office of the Chief Scientist’s obligations. Centers with regulatory responsibilities for medical products (CDER, CBER, and CDRH) accounted for 34 percent of the obligations, and OIP accounted for the remaining 1 percent. The average obligation per project by centers and offices ranged from just over $110,000 for OWH to about $1.1 million for OIP. However, the centers and offices that had the highest total obligations were not necessarily the ones that had the highest average obligation at the project level. For instance, OIP had the highest average obligations per project, more than $1 million, yet it had the second lowest total obligations, at about $5.4 million. (See fig. 4.)\nSimilarly, total obligations associated with each FDA regulatory science priority area varied widely, ranging from about $3 million for projects that focused on global product safety to approximately $203 million for projects that focused on the toxicology priority area. (See fig. 5.) Projects that focused on the clinical evaluations and personalized medicine and medical countermeasures priority areas were among those with the greatest obligations. Average obligations per project ranged from about $250,000 for the projects that focused on the manufacturing and quality priority area to approximately $1.1 million for the projects that focused on the global product safety priority area. However, the FDA priority areas that had the lowest total obligations were not necessarily the ones that had the lowest average obligation at the project level. For example, projects that included a focus on global product safety had the lowest total obligations but they had the highest average obligation per project. Similarly, projects that included a focus on social and behavioral science had the second lowest total obligations but they had the second highest average obligation per project.\nFDA’s centers and offices make decisions about funding that determine which projects to fund, and they generally obligated project funds across several regulatory science priority areas. Specifically, two-thirds of the centers and offices provided obligations to five or more priority areas. For example, CBER provided obligations to projects that collectively focused on every priority area except global product safety. Nevertheless, there were four centers and offices that directed at least half of their regulatory science obligations to a single priority area.\n100 percent of OCET obligations were for medical countermeasures.\n62 percent of OIP obligations were for global product safety.\n56 percent of NCTR obligations were for toxicology.\n50 percent of OWH obligations were for clinical evaluations and personalized medicine.\nWhile funding for each of the FDA priority areas generally came from a number of different centers and offices, for all but two priority areas, there was one center or office that accounted for the majority of obligations.\nGlobal product safety: 100 percent of the obligations from OIP.\nToxicology: 82 percent of the obligations from NCTR.\nSocial and behavioral science: 76 percent of the obligations from CDER.\nMedical countermeasures: 64 percent of the obligations from OCET.\nManufacturing and quality: 56 percent of the obligations from CBER.\nEmerging technologies: 55 percent of the obligations from CBER.\nInformation sciences: 49 percent of the obligations from NCTR.\nClinical evaluations and personalized medicine: 43 percent of the obligations from NCTR.", "FDA reported that the 17 regulatory science projects that we selected for review helped to advance regulatory science. (See appendix I for additional information about each of these 17 projects.) For each of these 17 projects, FDA identified achievements that we classified as dissemination of project findings, internal changes at FDA, and changes by industry and groups outside of FDA. (See fig. 6.)\nDissemination of project findings. For 16 of the 17 selected projects, FDA reported that it disseminated the project results in scientific publications, conferences, FDA workshops, or some combination of all three. Such dissemination provides FDA an opportunity to share new information and understanding internally and with the larger scientific community and may contribute to future regulatory science activities.\nInternal impacts. FDA described internal impacts resulting from each of the 17 selected projects, many of which related to advancing FDA’s scientific understanding in a particular area.\nFor 12 selected projects, FDA reported that the projects resulted in new information about the topic that FDA was using or considering using for future work. For example, one goal of OCET’s project looking at the feasibility of using electronic health records in public health emergencies was advancing FDA’s understanding of the possibilities and limitations of using electronic health data. The findings from this project indicated that structured data in electronic health records could help the agency assess the risk of adverse events, particularly those that are severe. However, the results also indicated that this near real-time data still had some built-in delays and that the data search process cannot be fully automated. This provided FDA with information it can use as it considers using electronic health records in emergency situations.\nFor 9 selected projects, FDA reported that the results led the agency to plan or conduct additional studies or activities that represent the logical next step in the particular area being studied. For example, initial results from an ORSI study of the use of social media to provide early signals of drug safety concerns showed a relationship between data obtained from social media and from FDA’s adverse event reporting system. Using that information, FDA then conducted a retrospective study for 10 safety concerns to see if there was evidence of those adverse events in social media before FDA became aware of them. FDA has since reported that the analysis identified specific limitations of the tool FDA uses in monitoring safety concerns.\nOther internal impacts were related to changes in agency practices.\nFor 8 selected projects, FDA reported that the results led to the development of standards, methods, tools, or training for FDA internal use. For example, an OIP project was designed to create a tool to help secure global supply chains against the infiltration of counterfeit or substandard products. The project resulted in the production of a “roadmap” that FDA could use to develop such a system.\nFor 5 selected projects, FDA reported that the results led to either a change in guidance or regulation or the decision to not make a previously proposed change. For example, CDER funded a study of surrogate endpoints that could speed the development of new therapies for breast cancer. FDA used results from this study to inform its development of guidance to industry that described study designs in which a surrogate endpoint may be accepted by FDA as reasonably likely to predict the clinical benefit of a drug. In response to a statutory requirement, CDER also examined whether quantitative information could be added to drug advertising to maximize consumer and health care professional understanding of the benefits and risks of the drug. Based on the results of the study, the Secretary of HHS concluded that quantitative information cannot be readily applied to many drugs and therefore it is not appropriate to issue regulations that would require such information to be added to promotional labeling or advertising.\nFor 5 selected projects, FDA reported that the results led the agency to change aspects of its review process. For example, a CBER study designed to improve influenza vaccine efficacy provided information to FDA that has helped in the review of preclinical animal studies that are included in some drug applications. The study also resulted in FDA offering training for its lab members in an approach to vaccine testing that FDA says is a common part of a product review. In addition, an NCTR project developed a knowledge base about liver toxicity and has used that to advise CDER reviewers about drug- induced liver injury risk for products they were reviewing.\nExternal impacts. FDA described external impacts for 8 of the 17 selected projects. These projects resulted in the development of tools or proposed standards for use by industry or the implementation or use of new tools or standards by industry or outside organizations. According to FDA, it can take several years for funded research to result in these types of tools.\nFor 7 selected projects, FDA reported that the results led to the development of tools or proposed standards for use by industry. For example, a CDRH study of radio interference with automated external defibrillators led FDA to recommend to an international commission that standards for these types of defibrillators be modified to account for radio interference. Similarly, FDA officials reported that results from a study funded by OWH looking at degradation of absorbable polymers used in some cardiac stents have provided guidance for industry on the design, manufacturing, and regulation of these absorbable stents.\nFor 6 selected projects, FDA reported that industry or outside organizations have made changes based on the results of these FDA- funded projects. For example, FDA told us NCTR’s studies of Bisphenol A, a chemical found in certain plastics, helped FDA and the European Food Safety Authority, resolve public safety concerns. Similarly, CDRH’s study of total disc replacement devices for the spine led to the development of a test guide published through the American Society of Testing and Materials International that is used by multiple manufacturers. FDA told us that the results from these tests were then part of the manufacturers’ submissions for approval of these devices.", "For several years, FDA has been aware of the need to improve its scientific base and has established multiple regulatory science initiatives, as well as prioritized areas to address that need. FDA projects targeted at advancing regulatory science have led to internal and external impacts in understanding new science associated with medical products. However, the agency has not identified measurable goals in their strategic plans or reports on strategic priorities, such as specific targets and time frames, for regulatory science. Such goals are a best practice for strategic planning and could enable FDA to assess and report its progress in addressing its identified priority areas and strategically plan and allocate resources for its broader regulatory science initiative. The agency faces another obstacle to its strategic plan without consistent information about centers and offices’ distribution of targeted regulatory science funding among those identified priority areas. The individual centers and offices that decide which projects to fund are either tracking the priority areas in different ways or not all. Our prior work encourages the proactive collection of consistent information and standards for internal control recommend federal agencies have complete and accurate data for making funding decisions. Systematic tracking by each center or office is needed for the agency to examine obligations across, or progress within, specific priority areas and would help the agency to strategically plan for its regulatory science initiative as a whole.", "In order to improve FDA’s strategic planning for regulatory science efforts, we recommend the Secretary of Health and Human Services direct the Commissioner of FDA to take the following two actions: 1. Develop and document measurable goals, such as targets and time frames, for its regulatory science efforts so it can consistently assess and report on the agency’s progress in regulatory science efforts. 2. Systematically track funding of regulatory science projects across each of its priority areas.", "We provided a draft of this report to HHS. HHS concurred with our recommendations and provided written comments, which are reprinted in appendix II. In its written comments, HHS agreed with the importance of strategic planning for regulatory science. HHS concurred with our recommendation that FDA should develop and document measurable goals; HHS suggested that agency documents with a targeted focus, such as user fee commitment letters and specific planning documents, are a more appropriate place for such goals than an agency-level strategic plan. In our recommendation to HHS, we do not specify where such goals should be documented. We recognize, as HHS noted in its comments, that advancing regulatory science is an uncertain and non- linear path that can make it challenging to set targets for specific accomplishments. Nevertheless, FDA should develop measureable goals that are related to the impacts that are discussed in HHS’s comments, including the effectiveness and efficiency of FDA’s regulatory review, new pathways for medical product development, enhancements in the agency’s ability to provide useful guidance to sponsors, and new technologies to monitor manufacturing and real world use of approved medical products. As all but one of the agency-wide priority areas are being addressed by projects funded by multiple centers and offices, it is important that FDA develop and document measurable goals that encompass the efforts of multiple centers and offices. HHS also concurred with our recommendation to systematically track funding across FDA’s regulatory science priority areas, and the department identified recent and planned activities of specific centers to improve such tracking We support these efforts and reiterate the importance of FDA systematically track funds agency-wide for each of the priority areas it developed. Systematic tracking of both progress on measurable goals and funding is essential for FDA to strategically plan its regulatory science initiative across the agency. In addition to these general comments, HHS provided technical comments, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "We examined the achievements related to regulatory science for 17 projects funded by the Food and Drug Administration (FDA). Below is a brief description of each project, including examples of achievements resulting from that project, according to information provided by FDA.\nTitle: Created new approaches to identify and understand critical product quality attributes of complex products, such as stem cell- derived products (both animal and human) and complex systems of medical devices.\nCenter or office funding project: Center for Biologics Evaluation and Research (CBER)\nPriority area(s) covered: Emerging technologies and medical countermeasures Funding obligations and time period of funding: $4.513 million (fiscal years 2010 through 2014)\nDescription of project: Certain stem cells are being used in clinical trials for multiple medical conditions. However, multiple factors, including donor variation and culture conditions may affect the clinical performance of the stem cells either in terms of safety, efficacy, or both. This project was designed to identify product attributes that correlate with specific outcomes and to increase understanding of factors that might affect stem cell-derived safety and efficacy. This project also included the development of methods to quantify various attributes of these cells.\nSelect achievements reported by FDA: The project’s findings affected FDA reviewers’ understanding of stem-cell products. Further, the findings have helped producers of stem cell products with their studies, specifically noting that some sponsors have adopted quantitative methods for assessing the stem cells. The findings were important in the scientific reasoning in two guidance documents. Additional projects have been planned to further advance understanding in this area.\nTitle: Developing new approaches for measuring the quality of next- generation smallpox vaccines.\nCenter or office funding project: CBER Priority area(s) covered: Medical countermeasures Funding obligations and time period of funding: $0.537 million (fiscal years 2010 through 2014)\nDescription of project: The goal of the project was to evaluate factors that affect the safety and efficacy of smallpox vaccines and to develop new methods to evaluate smallpox vaccine quality— specifically, potency. The studies were aimed at helping the development of new smallpox vaccines.\nSelect achievements reported by FDA: Results from the project informed FDA’s understanding of various characteristics of the vaccine, as well as factors that influenced immune responses to the vaccine. FDA also reported that one of the two alternative approaches for evaluating the potency of smallpox vaccines used in clinical trials was considerably faster than traditional methods and could be adapted for future use. In addition, further studies are ongoing in other tests related to smallpox vaccines.\nTitle: Correlates of protective immunity against influenza.\nCenter or office funding project: CBER Priority area(s) covered: Manufacturing and quality, emerging technologies, and medical countermeasures Funding obligations and time period of funding: $1.209 million (fiscal years 2010 and 2011)\nDescription of project: This project was designed to support the development of seasonal and pandemic influenza vaccines by identifying mechanisms that contribute to immunity and developing measures of those responses.\nSelect achievements reported by FDA: This project resulted in the development of a new method that was useful for testing influenza vaccines, the discovery of certain characteristics that are important for producing protective immunity, and the determination of the amount of a vaccine ingredient that is needed to produce immunity. FDA reported that the project provided a foundation for training lab members in development and validation of an approach to vaccine testing, while also providing the basis for an international study led by CBER to assess reproducibility in one of the methods developed in this project.\nTitle: Evaluating a surrogate endpoint that could speed development of new therapies for breast cancer.\nCenter or office funding project: Center for Drug Evaluation and Research (CDER)\nPriority area(s) covered: Clinical evaluations and personalized medicine Funding obligations and time period of funding: FDA could not determine funding as the research was conducted as part of FDA employees’ regular responsibilities.\nDescription of project: FDA conducted research to assess and evaluate the validity and potential applications of a surrogate endpoint—a measure that can predict, but is not itself a measure of, benefit—in trials of treatments for women with breast cancer. By collaborating with an international working group, FDA researchers were able to use data from more than 12,000 patients.\nSelect achievements reported by FDA: FDA reported that researchers found a potential relationship between the surrogate endpoint and survival. This then provided important information to drug developers for the design of future drug trials. It also informed the development of guidance to industry.\nTitle: Completed three studies and a literature review assessing whether quantitative information could be successfully added to television and print advertisements to maximize audience understanding of benefit information in the piece, including the type of benefit information, different combinations of statistical format, and different graphic representations.\nCenter or office funding project: CDER Priority area(s) covered: Social and behavioral science Funding obligations and time period of funding: $0.270 million (fiscal year 2010)\nDescription of project: This project was composed of four studies designed to investigate whether quantitative information in direct-to- consumer advertisements is helpful for consumers. FDA was asked by Congress to investigate this topic to determine whether such information about the benefits and risks of prescriptions drugs in a standardized format would improve health care decision-making by clinicians, patients, and consumers.\nSelect achievements reported by FDA: FDA reported that, based on these studies and other efforts, the inclusion of certain types of quantitative information can be helpful in some limited circumstances, but a standardized format cannot be readily applied to many drugs. It was therefore not appropriate to issue new regulations that would require such information on promotional labeling or print advertising. The findings have been used internally by an FDA working group that explores direct-to-consumer advertising. FDA reported that the findings have also been used by the external research community.\nTitle: Experimental study of patient information prototypes.\nCenter or office funding project: CDER Priority area(s) covered: Social and behavioral science Funding obligations and time period of funding: $1.613 million (fiscal year 2010)\nDescription of project: This project examined different methods of presenting prescription drug information to patients who obtained a prescription. The study was designed to compare the format in which information is presented, the inclusion of additional context or not, and the order of information about warnings versus information about the efficacy of the drug.\nSelect achievements reported by FDA: The study provided information about patient preferences for and increased comprehension of single page prototypes over the currently available format. These findings have informed FDA’s development of the Patient Medication Information Initiative, which will consider a new regulation to require all prescription drugs to have a single document standardized in content and format that provides prescription information to patients in an accurate, easily understood, and balanced form.\nTitle: Development and validation of a standard test method to assess for impingement of artificial total disc replacement devices in order to provide scientific basis for regulatory guidance and better predict which devices will be clinically successful.\nCenter or office funding project: Center for Devices and Radiological Health (CDRH)\nPriority area(s) covered: Clinical evaluations and personalized medicine and emerging technologies Funding obligations and time period of funding: $0.753 million (fiscal years 2010 through 2012)\nDescription of project: The primary goal of the project was to develop a new scientific tool to characterize impingement— unintended contact between surfaces of the device—of total disc replacement devices. Impingement can be linked to premature mechanical device failure and was not accounted for in preclinical test methods. As a result, bench testing was not accurately mimicking wear and damage that was being observed clinically.\nSelect achievements reported by FDA: The project resulted in the development of an impingement test guide published through a professional association. As a result, multiple device manufacturers used the guide to perform impingement testing and FDA incorporated those results into their decision making on premarket approval applications and investigational device exemption submissions.\nTitle: Developed standards to reduce the risk of misconnection between different types of small-bore connectors used for intravenous, feeding, neural, blood pressure cuff, and breathing system tubes to prevent serious adverse events.\nCenter or office funding project: CDRH Priority area(s) covered: Manufacturing and quality Funding obligations and time period of funding: FDA could not determine funding as the research was conducted as part of FDA employees’ regular responsibilities.\nDescription of project: Because devices using small bore connectors have been accidentally connected with devices that have different functions and have led to serious adverse events for patients, including deaths, FDA participated in international efforts to standardize connector designs for specific medical applications such that they cannot be interconnected with a device for another medical application.\nSelect achievements reported by FDA: FDA has issued guidance on premarket recommendations for devices that use small-bore connectors intended for use in the gastrointestinal tract. International standards are also being finalized based on this work. Device manufacturers are modifying their devices accordingly. In addition, FDA has developed a website for highlighting relevant information for stakeholders.\nTitle: Created a general testing protocol and test methods for electromagnetic compatibility of automated external defibrillators.\nCenter or office funding project: CDRH Priority area(s) covered: Emerging technologies Funding obligations and time period of funding: FDA could not determine funding as the research was conducted as part of FDA employees’ regular responsibilities.\nDescription of project: A growing number of adverse events and voluntary recalls by manufacturers of automated external defibrillators led FDA to study the effect of electromagnetic interference that had been related to potentially life-threatening failures of this device.\nSelect achievements reported by FDA: As a result of this project, FDA developed test methods to evaluate the susceptibility of automated external defibrillators to radiofrequency interference. FDA recommended an international commission’s standards be modified to account for interference testing at certain frequencies.\nTitle: Physiologically based pharmacokinetic models for Bisphenol A.\nCenter or office funding project: National Center for Toxicological Research (NCTR)\nPriority area(s) covered: Toxicology Funding obligations and time period of funding: $1.049 million (fiscal years 2010 through 2014)\nDescription of project: Due to concerns about the safety of Bisphenol A, which is used in many consumer plastic products, NCTR developed computational modeling to simulate infant exposure to Bispehnol A to provide FDA with information necessary to complete a safety assessment.\nSelect achievements reported by FDA: The results of the project allowed FDA to predict how much chemical remained after being metabolized and would get into the circulatory system of adults and infants. These models were incorporated into FDA’s updated assessment on Bisphenol A and allowed FDA’s Center for Food Safety and Nutrition, as well as other regulatory bodies, to determine that current uses of Bisphenol A are safe for infants and adults and, further, led the agency to conclude that the traditional safety assessment methods used were overly conservative.\nTitle: Development of liver toxicity knowledge base to empower the FDA review process.\nCenter or office funding project: NCTR Priority area(s) covered: Toxicology and information sciences Funding obligations and time period of funding: $3.426 million (fiscal years 2010 through 2013)\nDescription of project: Drug-induced liver injury is a serious safety concern that is a frequent cause of denied approvals and “black box” warnings on drugs. As a result, FDA was interested in developing a database to improve its understanding and prediction of such liver injury.\nSelect achievements reported by FDA: The project has produced a centralized resource of data and predictive models that are useful for both research and regulation. NCTR has trained CDER reviewers to effectively use the software from this database. NCTR also has received requests from CDER for five consultations to assess the risk of products that it has reviewed and to incorporate the software into training for new reviewers. An extension of the project is also currently under review.\nTitle: Assessing the feasibility of using electronic health record systems to conduct near real-time monitoring of health outcomes, including serious or unexpected adverse events associated with medical countermeasures used during public health emergencies.\nCenter or office funding project: Office of Counterterrorism and Emerging Threats (OCET)\nPriority area(s) covered: Medical countermeasures Funding obligations and time period of funding: $1.419 million (fiscal year 2013)\nDescription of project: The project was designed as a proof-of- concept feasibility study to learn whether it is possible to extract adverse event data from electronic health records and, if so, whether those data would provide useful information about the safety and effectiveness of medical countermeasures during a public health emergency.\nSelect achievements reported by FDA: FDA learned that electronic health records data could help inform a risk assessment of medical countermeasures based on adverse events; however, there are limits to what can be done. For example, they found it was feasible to detect severe adverse events, but that less severe adverse events were likely to be underreported.\nTitle: Sentinel initiative for surveillance of drugs, vaccines, and blood products used to prevent and treat pandemic influenza.\nCenter or office funding project: OCET Priority area(s) covered: Medical countermeasures Funding obligations and time period of funding: $9.1 million (fiscal year 2011)\nDescription of project: Sentinel is FDA’s system for conducting near real-time active safety surveillance of FDA-regulated medical products through routinely collected electronic healthcare data. This project was designed to expand those capabilities to include preparedness for safety surveillance in response to the use of medical countermeasures, including for pandemic influenza.\nSelect achievements reported by FDA: This project created the capability for FDA to monitor the safety of medical countermeasures— for example, influenza vaccines used during an emergency, such as a pandemic. It also increased the efficiency of linkages between registries of immunization and the Sentinel database, which FDA says is vital during pandemics.\nTitle: Collecting spectral information of foods, pharmaceutical ingredients, and formulated product (as well as its packaging materials) to establish a comprehensive spectral library accessible through the internet.\nCenter or office funding project: Office of International Programs (OIP)\nPriority area(s) covered: Information sciences Funding obligations and time period of funding: $0.314 million (fiscal year 2013)\nDescription of project: The primary goal of this project was to develop a roadmap for the development of a global library that could potentially be used to protect consumers against fraudulent and adulterated products.\nSelect achievements reported by FDA: A roadmap was produced from this project and FDA intends to use it in discussions with domestic and foreign stakeholders, including other regulatory agencies and manufacturers.\nTitle: Explored the potential for mining social media and other web sources to detect adverse event and safety signals.\nCenter or office funding project: Office of Regulatory Science and Innovation (ORSI)\nPriority area(s) covered: Information sciences Funding obligations and time period of funding: $0.801 million (fiscal years 2012 through 2014)\nDescription of project: This study evaluated the validity and trustworthiness of using a social media data mining tool to detect drug safety events. It was also designed to evaluate the potential of social media data to provide early signals for drug safety events in postmarketing surveillance and to better understand how these data can be used.\nSelect achievements reported by FDA: FDA initially reported that the data mining tool suggested that user-generated data sources may identify signals not found in the traditional voluntary reporting systems and that there was agreement between data obtained from this tool and that obtained from the FDA Adverse Events Reporting System. FDA conducted an additional study to evaluate if there was evidence in social media for 10 recent MedWatch Safety Alerts prior to FDA becoming aware of them. FDA has since reported that monitoring social media did not provide early safety concerns for the medical products that were monitored in the study. The analysis identified specific limitations of FDA’s tool that was used in monitoring safety concerns. These limitations related to the natural variability of data sources and the difficulties in conducting accurate evaluation of the data. FDA noted that as monitoring social media for safety concerns is a new approach, the agency still needs to establish best practices in order to use it effectively.\nTitle: Consortium for tuberculosis biomarkers.\nCenter or office funding project: ORSI Priority area(s) covered: Clinical evaluations and personalized medicine Funding obligations and time period of funding: $1.425 million (fiscal years 2010 through 2012)\nDescription of project: This project had three main objectives: 1) create protocols, processes, and standards by which a consortium for tuberculosis biomarkers—composed of three organizations central to tuberculosis clinical drug development—would operate; 2) create a repository for receiving, storing, and shipping samples to designated investigators; and 3) establish a peer review panel to review proposals related to the discovery and qualification of tuberculosis biomarkers, especially some surrogate markers.\nSelect achievements reported by FDA: The consortium established protocols for key data elements to be gathered; a consensus set of operating procedures for sample collection, processing, and storage; and quality assurance and monitoring for these activities. The consortium also adopted a peer review process to review applications for access to samples.\nTitle: Sex-based differences in the molecular mechanisms of polymer degradation in drug eluting stents.\nCenter or office funding project: Office of Women’s Health (OWH)\nPriority area(s) covered: Clinical evaluations and personalized medicine and manufacturing and quality Funding obligations and time period of funding: $0.2 million (fiscal years 2011 through2012)\nDescription of project: This study explored the different breakdown of materials used in biodegradable stents and examined the potential effect of sex on the degradation of these materials.\nSelect achievements reported by FDA: FDA reported that the study found that stent material breakdown varied in different tissues. The findings provide information that can guide FDA and the larger community in the design, manufacture, and evaluation of absorbable stents. FDA reported that this research will support the development of guidance for implants containing certain absorbable components.", "", "", "Marcia Crosse, (202) 512-7114 or [email protected].", "In addition to the contact name above, William Hadley, Assistant Director; Carolyn Garvey; Sandra George; Cathleen Hamann; Carolyn Feis Korman; and Deborah Linares made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "h0_full h2_title", "h0_full h2_full", "h0_full", "h2_full", "", "", "h0_full h1_full", "", "h2_full", "", "", "", "", "", "" ] }

{ "question": [ "How does the FDA assess its progress in advancing regulatory science?", "What has characterized its most recent planning documents?", "Why is it important to include measurable goals?", "What funding information does FDA collect?", "What is the effect of this lack of information?", "What did FDA identify in their regulatory science projects?", "What did FDA find?", "What standards did the projects develop?", "What other groups benefited from the development of standards?", "What was GAO asked to assess?", "What does GAO evaluate in this report?", "What methodology did GAO use?" ], "summary": [ "The Food and Drug Administration (FDA) lacks measurable goals to assess its progress in advancing regulatory science—the science supporting its effort to assess the products it regulates. While FDA cited examples of its achievements in regulatory science in a 2015 report, FDA cannot assess how those achievements constitute progress towards its goals.", "The agency issued strategic planning documents in 2011 and 2013 to guide its regulatory science efforts and identify priority areas for conducting work, but these documents do not specify the targets and time frames necessary for the agency to measure progress overall or within each of the eight priority areas related to medical products.", "According to leading practices for strategic planning, identifying and using consistent measurable goals in planning and progress documents is important to assessing effectiveness. Standards for internal control in the federal government state that complete and accurate data are needed to make operating decisions and allocate resources. Furthermore, multiple centers or offices fund projects toward a given priority area and leading practices for strategic planning encourage agencies to manage efforts that cut across the agency.", "In addition, FDA lacks information about how funding targeted at regulatory science is distributed across the priority areas. Decisions to award these funds are made by individual FDA centers and offices, which generally did not collect information on the associated priority areas of funded projects. Rather, FDA retrospectively identified these areas for the purpose of GAO's review.", "The lack of consistent information limits FDA's ability to examine obligations across, or progress within, specific priority areas.", "For the 17 regulatory science projects GAO reviewed, FDA identified achievements ranging from the dissemination of project findings to changes in both agency and external stakeholder practices.", "For example, FDA reported that all projects resulted in some type of change within FDA.", "About half of the projects resulted in the agency developing standards, methods, tools, or training that it could use internally, and about one-third of the projects affected guidance or regulations.", "FDA also reported that about half of the projects resulted in the development of new tools or standards for use by industry or other stakeholders, in areas such as setting new standards for defibrillators to account for radio interference.", "GAO was asked to examine FDA's progress on its regulatory science efforts related to medical products.", "In this report, GAO (1) evaluates FDA's strategic planning efforts to address its regulatory science priorities, (2) describes FDA's funding targeted at regulatory science projects, and (3) describes the achievements of selected FDA regulatory science projects.", "GAO compared related FDA strategic planning documents to federal internal control standards and leading practices for strategic planning. GAO reviewed FDA data on obligations targeted at regulatory science projects for fiscal years 2010 through 2014 and reviewed the achievements FDA reported from a sample of 17 projects, chosen to ensure nine FDA centers and offices and priority areas are represented." ], "parent_pair_index": [ -1, 0, 1, 0, 0, -1, 0, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 1, 1, 1 ] }

{ "title": [ "", "Introduction", "Part I: United States Trade Obligations Under International Law", "The Uruguay Round, Marrakesh Agreement, and World Trade Organization", "The General Agreement on Tariffs and Trade (GATT) 1994", "The Nondiscrimination Provisions of the GATT", "Article XX: General Exceptions to the GATT and \"the Chapeau\"", "Other WTO Agreements Reached During the Uruguay Round", "Antidumping Agreement", "Agreement on Subsidies and Countervailing Measures", "Agreement on Safeguards", "Agreement on Rules of Origin", "Agreement on Agriculture", "Prohibited Export Subsidies Under the AA", "Domestic Support Programs", "Agreement on Technical Barriers to Trade", "Agreement on Sanitary and Phytosanitary Measures", "General Agreement on Trade in Services", "Agreement on Trade-Related Intellectual Property Rights", "Dispute Settlement Understanding", "The WTO Plurilateral Agreements", "Agreement on Government Procurement", "Agreement on Trade in Civil Aircraft", "The Doha Development Round", "Free and Reciprocal Trade Agreements", "North American Free Trade Agreement", "Investment Provisions", "Intellectual Property", "Labor", "Dominican Republic-Central America-United States Free Trade Agreement", "Investment", "Intellectual Property Provisions", "Labor Provisions", "Trade Negotiations for the Trans-Pacific Partnership Agreement", "Part II: The U.S. Constitution and Separation of Powers", "Article I of the Constitution and Legislative Branch Authority", "Article II of the Constitution and Executive Branch Authority", "Separation of Powers in Practice: Fast Track and Trade Remedies", "Fast Track Authority: Trade Act of 1934, Trade Act of 1974, and Bipartisan Trade Promotion Act of 2002", "Import Competition: Tariff Act of 1930 and Trade Act of 1974", "Part III: Selected U.S. Agencies and Federal Entities with Responsibility for Aspects of International Trade", "United States Trade Representative", "United States International Trade Administration", "United States International Trade Commission", "United States Customs and Border Protection", "United States Court of International Trade", "Part IV: Selected Federal Statutes Regulating International Trade", "Trade Remedy Laws", "Section 301 of the Trade Act of 1974: Remedies for Violations of Trade Agreements and Other Inconsistent or Unjustifiable Foreign Trade Practices", "Countervailing Duties: Remedies for Imports of Subsidized Goods", "Antidumping Duties: Remedies for Imports Sold at Less Than Fair Value", "Safeguards", "Section 201", "Country-Specific Safeguards", "Domestic Tariff and Customs Law", "Harmonized Tariff Schedule", "Generalized System of Preferences", "Eligible Countries", "Eligible Products", "Other Duty Free Entry Programs", "Statutory Authorities for the Imposition of Trade Sanctions", "Trading with the Enemy Act", "International Emergency Economic Powers Act" ], "paragraphs": [ "", "The post-World War II era has been characterized by a global movement toward liberalizing trade and creating frameworks under which trade disputes can be avoided and resolved. In particular, the trade agreements of the last half-century can be seen as adopting the view that government bodies need a global legal framework to ensure that they effectively conform their countries' policies and laws with their citizens' interests. Legal theorists posit that trade policy failure, in both the global and domestic arenas, as well as inequitable power dynamics among countries engaged in trade negotiations, are the products of a legal architecture that does not sufficiently discipline how governments represent their citizens' interests. In this vein, the international trade law regime has attempted to strengthen its enforcement mechanism over time to ensure that national governments comply with trade law despite shifting domestic pressures.\nAs international trade law has developed, there has been interplay between domestic and global trade law. Initially, international trade agreements focused on tariffs, but, over time, they have broadened to encompass aspects of domestic policymaking and establish fairly stringent dispute settlement mechanisms. This interplay, however, has led to criticism that trade agreements infringe national sovereignty and autonomy by (1) limiting the kinds of policy decisions a country can make and (2) giving international trade dispute settlement bodies too much power to shape and constrain domestic law.\nThis report provides an overview of the legal framework that governs trade-related measures. This framework is composed of both international agreements and domestic laws. The particular agreements and statutes selected for this report are those that are most commonly implicated by U.S. trade interests and policy. This report is not intended to be a comprehensive review of trade law.", "Often, a single trade issue, such as dumping (the sale of goods in foreign markets at lower prices than in the domestic market), is governed by both international agreements and federal laws. Accordingly, this report first discusses international trade agreements and then turns to domestic law.\nThe United States has international trade obligations under (1) the World Trade Organization (WTO) agreements, which include the General Agreement on Trade and Tariffs (GATT) and other \"covered agreements\"; (2) its own free trade agreements; and (3) other international agreements with narrower policy goals, such as the conservation of natural resources. The scope of this report, however, is limited to obligations incurred under agreements that seek to liberalize international trade. In the WTO context, trade agreements are categorized as either multilateral (accepted by all WTO Members as a condition of membership) or plurilateral (accepted by only some WTO Members). Other free trade agreements may be classified as bilateral agreements (which bind only two countries) and regional agreements (which bind countries within a discrete region of the world). No matter their classification, most trade agreements have a corresponding body of domestic law.", "After World War II, developed nations sought to establish an open trade network to facilitate the recovery of the global economy. These negotiations yielded a proposal for an International Trade Organization (ITO), and, as a temporary fix until the ITO Charter could be negotiated, the General Agreement on Trade and Tariffs 1947 (GATT 1947). The expectation was that the GATT 1947 would expire once a more comprehensive trade agreement, the ITO Charter, was developed and ratified. Then the ITO would interpret and administer the ITO Charter.\nHowever, the ITO never materialized, and, therefore, despite its provisional nature, the GATT 1947 became a permanent fixture in international trade. Nevertheless, to dispel any concern that an international organization had been established, the GATT 1947 signatories continued to be called \"Contracting Parties\" rather than \"Members.\" Moreover, the GATT 1947 was not considered a comprehensive trade agreement because it consisted mainly of the commercial policy provisions of the ITO charter.\nPartly as a response to concerns about the GATT 1947's strength and breadth, Contracting Parties engaged in a series of \"rounds\" of multilateral trade negotiations over the ensuing decades: the Dillon Round (1960-1962), the Kennedy Round (1964-1967), the Tokyo Round (1973-1979), the Uruguay Round (1986-1994), and the ongoing Doha Development Round. Each round of talks sought to liberalize new markets, lower tariffs, and identify solutions to different kinds of trade barriers. It was not until the Uruguay Round that the Contracting Parties finally reached an agreement on a charter for an international trade organization: the WTO.\nThe agreements completed in the Uruguay Round are detailed in the Marrakesh Agreement. Part of this Agreement is the Agreement Establishing the World Trade Organization (the WTO Agreement). The other texts negotiated during the Uruguay Round are annexed to the WTO Agreement. Annex 1 contains 13 multilateral agreements on trade in goods as well as the General Agreement on Trade in Services and the Agreement on Trade-Related Aspects of Intellectual Property Rights. Annex 2 contains the Dispute Settlement Understanding, which sets out the process by which WTO Members may resolve disputes over the meaning or application of a WTO agreement. Annex 3 contains a Trade Policy Review mechanism, providing for periodic review of a WTO Member's trade laws and policies. Annexes 1 through 3, and the agreements therein, must be accepted by a country as a condition of its membership in the WTO. Accordingly, all of these agreements, along with the other provisions of the Marrakesh Agreement, were approved and implemented in U.S. law through the Uruguay Round Agreements Act (URAA, P.L. 103-465 , 19 U.S.C. §3501 et seq. ), which then-President Bill Clinton signed into law on December 8, 1994.", "The GATT 1994, which is found in Annex I of the WTO Agreement, consists of (a) the GATT 1947, (b) certain protocols, waivers, and tariff concessions made pursuant to the GATT 1947, and (c) interpretations of particular language and provisions of the GATT 1947. At its most general, the GATT sets the maximum tariffs for particular goods and countries and disciplines certain trade-restricting measures adopted by WTO Members. This report surveys many of the articles of the GATT that are considered fundamental as well as those that are frequently raised in WTO consultations or disputes over a WTO Member's domestic trade measures.", "The GATT seeks to prohibit WTO Members from discriminating between \"like products\" on the basis of their origins. More specifically, the GATT bars WTO Members from discriminating between like products because they originated in different WTO Members or because they originated in a WTO Member's territory rather than domestically. The GATT articles that lay out this prohibition, Article I and Article III, are therefore known as the nondiscrimination provisions. Although \"like product\" is used in both provisions, the GATT does not offer a single precise and absolute definition of the term. Consequently, to determine whether two products are \"like,\" WTO panels and the Appellate Body engage in a case-by-case analysis to discern whether the two products are in a competitive relationship given the products' properties and end uses, consumer preferences, and tariff classification.\nArticle I: Most Favored Nation Treatment\nArticle I of the GATT requires WTO Members to grant immediate and unconditional most-favored-nation (MFN) treatment to the products of other Members. This means that any \"advantage\" that a WTO Member grants in the context of customs duties or rules regarding importation or exportation to any product imported from one country, whether a WTO Member or not, must also be granted to any \"like\" product imported from all WTO Members.\nThe term \"advantage\" in Article I:1 has been given a very broad definition to encompass any more favorable competitive opportunity or commercial status relative to those of like products destined to different WTO Members. It can include, for example, variations in both the procedural and administrative requirements for imports. As a result, variations in the licensing requirements for imports can constitute an advantage under Article I:1. In EC – Bananas III , for example, a WTO panel ruled that the European Union had accorded an origin-discriminatory advantage to the products of some WTO Members by imposing additional licensing requirements on imports from other WTO Members. Notably, a measure may be deemed to accord an advantage even if it is written in origin neutral terms.\nSimilarly, two products may be deemed \"like\" under Article I:1 even if they are subject to different tariff classifications or, for other reasons, are not exact duplicates. WTO panels and the Appellate Body assess the \"likeness\" of two products by examining their characteristics, their end-uses, their tariff classification, and consumers' tastes and habits. Where a complaining Member demonstrates that the difference in treatment between imported products is based exclusively on the products' different origins, a WTO panel will presume that there can or will be discrimination between imported products that are \"like.\" Although it is often difficult in other cases to predict whether a given measure would affect \"like\" products from WTO Members, a measure that affects a broad range of products may be likely to result in discrimination between at least some \"like\" imports.\nOnce a measure is found to have conferred a trade advantage that affects \"like\" products, that measure will be deemed inconsistent with Article I:1 if it fails to accord the advantage \"unconditionally.\" WTO panels have adopted different interpretations of the term \"unconditionally, \" but their decisions suggest that conditions may be attached to an advantage only if they do not discriminate, either on their face or as applied, between \"like\" products on the basis of their countries of origin or destination. For example, an advantage is not accorded \"unconditionally\" if some countries have to do or pay something to receive it. Similarly, an advantage is not accorded \"unconditionally\" if some countries have to take a particular action, such as adopt a specified policy, in order for exports to their territories to be eligible to receive it.\nNotably, a measure framed in origin neutral terms so as to appear facially consistent with Article I:1 violates the MFN principle if it has a discriminatory impact on imports of like products from some WTO Members relative to others. In Canada – Autos , for example, a WTO panel examined a Canadian measure that exempted car imports from a customs duty if their manufacturers satisfied certain requirements, including establishment in Canada and the use of Canadian materials in production. The panel found that the duty exemption was an \"advantage\" and that, although the exemption was origin neutral on its face, the structure and characteristics of the global automotive industry meant that the criteria for the exemption created origin-based discrimination among auto imports from WTO Members. The panel buttressed this finding with the measure's legislative history, which suggested that the exemption was part of a scheme intended to rationalize production in the North American automotive market and encourage U.S.-owned car manufacturers to expand their production operations to Canada. In other words, the panel ruled that Canada's import duty exemption was a de facto violation of Article I:1 because it was designed to benefit auto imports from particular sources, namely those in the United States and North America, and had the discriminatory effect it intended.\nSimilarly, in Indonesia – Autos , a WTO panel found that an Indonesian measure exempting certain cars from import duties and sales taxes was also inconsistent with Article I:1. In that case, an import's eligibility for the exemptions depended on facially origin-neutral factors, such as the domestic car company's relationship with the foreign importer, the use of local content, and the use of the imported car parts in the assembly in Indonesia of a domestic car. While these criteria, like those in Canada – Autos , were framed in origin neutral terms, the panel found that in practice only car imports from Korea could satisfy them. Therefore, the panel ruled that the tax advantages, as applied, were accorded in a fashion that discriminated against products from WTO Members on the basis of their origin.\nArticle III: National Treatment\nArticle III articulates the basic principle of \"national treatment\": Members must treat products from other Members no less favorably than they treat their own \"like\" domestic products. Accordingly, Article III reflects concern that WTO Members could use internal taxation schemes, regulations, and other domestic measures to protect their domestic industries. As written, Article III forbids Members from using internal taxes, charges, and regulations that affect the \"internal sale, offering for sale, purchase, transportation, distribution or use of products,\" as well as internal quantitative regulations, so as to \"afford protection to domestic production.\"\nHowever, Article III prescribes different standards for national treatment depending on whether the particular measure is a tax or regulation. When a measure is an internal tax or charge, Article III:2 forbids its application if it either (1) is in excess of those taxes or charges applied to like domestic products or (2) dissimilarly taxes imports and domestic products so as to afford protection to a domestic product that is directly competitive with, or substitutable for, the imported product. However, when the measure in question is a \"law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution, or use,\" Article III:4 proscribes its application if it treats foreign products less favorably than like domestic products.\nA wide variety of measures fit the definition of a \"law, regulation, or requirement\" affecting \"internal\" transactions, and, as a result, are subject to Article III:4. Examples include local content requirements, advertising bans, and labeling requirements. WTO and GATT panels have also found that, while measures that tax particular products, such as sales taxes, are governed by Article III:2, measures that tax taxpayers for engaging in particular behavior, such as tax credits for specified taxpayer purchases, are assessed under Article III:4. Even border measures—measures that affect importation or exportation—governed by Article XI:1 can be subject to Article III:4. Ultimately, whether a \"law, regulation or requirement\" is covered by Article III:4 typically depends on whether it might modify the conditions of competition between domestic and imported products in the internal market. Significantly, WTO panels have found that these conditions can be modified not only by measures that regulate the products but also by measures that regulate their manufacturers or producers.\nIn Thailand – Cigarettes , a WTO panel considered the Article III:4 consistency of Thai measures that imposed more reporting, registration, and recordkeeping requirements on resellers of imported cigarettes than were imposed on resellers of domestic cigarettes. Thailand argued, inter alia , that the reason for the difference was to ensure that the sale of domestic products and the sale of imports were both subject to the same regulatory regime and legal liabilities. Thailand alleged that because cigarette importers are not legally responsible for paying the taxes on their cigarettes, resellers of imported cigarettes presented a risk of tax evasion in the absence of measures subjecting the sale of imported cigarettes to reporting, collection, and enforcement mechanisms that mirrored those in place for the sale of domestic cigarettes. Therefore, Thailand contended that the measures merely imposed requirements on resellers of imported cigarettes for which there were already \"equivalent\" requirements imposed on resellers of domestic cigarettes. However, the WTO panel found that the Thai measures were inconsistent with Article III:4 because they could prejudice cigarette suppliers against importing and selling foreign-made cigarettes by raising the operating costs associated with selling imported cigarettes in the Thai market. The panel cited evidence that administrative burdens can and do affect business decisions and that the Thai measures at issue were enforced through penalties and other sanctions, including the denial of tax credits. Accordingly, the WTO panel and Appellate Body agreed that the Thai measures subjected imported cigarettes to less favorable treatment in violation of Article III:4.\nArticle II: Tariffs\nThe original goal of the GATT was to move countries toward imposing tariffs, rather than non-tariff trade barriers, that could then be reduced over time. Article II of the GATT embodies this goal by requiring each WTO Member to abide by the tariff schedule that it has submitted to the WTO. The goods that are subject to the negotiated tariff rates are called \"bound\" items.\nArticle II forbids Members from imposing tariffs on goods from other Members that are less favorable than the tariff rates listed in the applicable schedule. Furthermore, Members may not impose any other duty or charge on a product's importation that exceeds the duties that existed at the date the Members entered the WTO. There are, however, exceptions to Article II. Under Article II:2, tariff concessions do not prevent Members from levying internal taxes consistent with Article III:2 (these are often called \"border tax adjustments\"), antidumping or countervailing duties consistent with the GATT and other relevant agreements, and fees or other charges commensurate with the cost of services rendered.\nDespite Article II's importance to the GATT, its enforcement can be difficult because WTO Members frequently disagree about which duty applies to a particular good. A country's tariff schedules address categories and sub-categories of products but do not expressly identify and provide a tariff rate for every potential product variation and nuance. Despite these problems, a country's customs agency must rely on the tariff schedules as written to identify the kind of product under consideration and apply a tariff rate. This leads to problems like the one encountered in EC – Chicken Classification , in which Brazil complained that the European Union incorrectly classified fresh chicken packed in salt as fresh chicken cuts rather than salted chicken cuts. At issue was an EU regulation that provided the customs agency with guidance on the distinction between salted and fresh chicken cuts, stating that chicken must be \"deeply and homogenously impregnated with salt in all parts\" to be subject to the ad valorem duty that was more favorable to foreign imports than the duty that was applied to fresh chicken.\nArticle VIII: Fees and Formalities\nArticle VIII:1 of the GATT requires that all fees and charges imposed in connection with importation or exportation be (1) limited in amount to the approximate cost of services rendered, and (2) not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes. The first prong (limiting the amount to the cost of services rendered) is actually a dual requirement as it requires (a) that a service was rendered, and (b) that the level of the charge does not exceed the approximate cost of that service. Moreover, the term \"services rendered\" means services rendered to the individual importer in question.\nOne of the early disputes involving Article VIII was US – Customs User Fee , which was heard by a GATT panel in 1987. In that case, the European Union and Canada challenged the GATT-consistency of an ad valorem processing fee charged by the U.S. Customs Service on all commercial merchandise entering the United States. The amount of the fee charged varied depended only on the appraised value of the merchandise, not on the costs incurred by the Customs Service of processing the merchandise. The United States argued that the fee was commensurate with the services rendered because it was commensurate with the sum costs of the Customs Service's commercial operations. The panel disagreed, finding that if the \"cost of services rendered\" referred to the total cost of the relevant government activities, rather than to the actual cost of the services rendered to the individual importers charged, Article VIII:1 would not provide an objective standard by which the equitable apportionment of these fees could be ascertained. Accordingly, it ruled that it the U.S. processing fee was inconsistent with Article VIII:1 to the extent that it caused fees to be levied in excess of the approximate cost of the services provided to each individual importer.\nSimilarly, in Argentina – Textiles , the panel found that Article VIII:1 forbade Argentina from imposing an ad valorem duty with no fixed fee on textile and footwear imports. In that case, Argentina was calculating an average import price for each tariff line of textiles, apparels, and footwear to determine what the specific minimum duty was for products in that category. Upon the importation of an article within that tariff line, Argentina then applied either the specific minimum duty or an ad valorem duty with no fixed fee depending which duty was higher. While Argentina claimed that it applied the higher ad valorem duty only to recoup the costs of the \"statistical services\" involved in calculating the average import price for tariff line, the panel ruled that because the ad valorem duty had no fixed maximum fee, it was inherently not limited to the approximate cost of the services rendered and therefore inconsistent with Article VIII:1.\nIn addition, in U.S. – Certain EC Products , a WTO panel ruled that Article VIII barred the United States from increasing bonding requirements on imports from the European Communities in order to secure the collection of future additional import duties that it was going to impose, once authorized by the DSB, for the European Communities' non-compliance with a WTO decision. The United States argued that the increased bonding requirements were a fee for the \"early release of merchandise,\" but the panel found that the United States failed to provide any evidence that the bonding requirements represented any approximate costs of such services.\nArticle IX: Marks of Origin\nArticle IX of the GATT disciplines marks of origin laws, that is, laws setting requirements for the labeling of certain products with their country or region of origin. Under Article IX:1, WTO Members may not accord to the products of other Members \"treatment with regard to marking requirements\" that is \"less favorable than the treatment accorded to like products of any third country.\" Article IX thus requires most favored nation treatment in marks of origin laws just as Article I requires most-favored nation treatment in the broader context of tariffs, other charges, and all rules and formalities connected to importation and exportation. In addition, while Article IX:2 recognizes that origin marking is important for protecting consumers against fraudulent or misleading labels, it calls on WTO Members to reduce the trade barriers that may result from domestic origin marking requirements.\nArticle IX is not so broad, however, as to govern measures requiring the labeling of process and production methods, even when the measure requires this labeling based on the location where the good was produced or harvested. In US – Tuna/Dolphin I , an unadopted report, a GATT panel rejected Mexico's allegations that provisions of the U.S. Dolphin Protection Consumer Information Act (DPCIA) were inconsistent with Article IX. The challenged provisions created civil penalties for selling tuna products with labels or other indications that the tuna was harvested in a manner not harmful to dolphins if the tuna was caught in particular locations by certain methods. The GATT panel agreed with the United States that these labeling provisions were subject to the nondiscrimination rules set by Article I and Article III:4, not the marks of origin rules set by Article IX. The panel reasoned that because Article IX does not entail a national treatment requirement, but only a most favored nation requirement, it was intended to regulate the marking of origin of imported products, but not the marking of products or their process and production methods generally.\nArticle XI: General Elimination of Quantitative Restrictions\nArticle XI:1 of the GATT bars the institution or maintenance of quantitative restrictions on exports to, and imports from, any WTO Member's territory. Quantitative restrictions limit the amount of a product that may be imported or exported. Unlike internal regulations enforced at the border, quantitative restrictions hinder the opportunity for a product to enter into, rather than simply compete in, the enforcing country's market. Common examples of quantitative restrictions include embargoes, quotas, minimum import or export prices, and certain import or export licensing requirements. Only duties, taxes, and other charges are Article XI:1 consistent methods of restricting imports or exports.\nBy barring WTO Members from placing quantitative prohibitions or restrictions on the importation or exportation of products, Article XI illustrates the strong preference of GATT and Uruguay Round negotiators for tariffs as opposed to non-tariff border restrictions. These negotiators intentionally made tariffs the border protection of choice because they are more transparent and easily satisfied without bringing trade to a halt unlike quantitative restrictions, and, perhaps most importantly, they are capable of definitive reduction over time.\nAlthough Article XI:1 is a cornerstone GATT obligation, import and export restrictions are the frequent subject of WTO dispute settlement proceedings. In U.S. – Shrimp , for example, several WTO Members requested that a panel examine a U.S. ban on shrimp imports from nations whose trawling procedures the United States had not certified as sufficiently protecting sea turtles. The panel wrote that the express prohibition on imported shrimp from non-certified countries was inconsistent with Article XI:1, raising doubts about the WTO consistency of similar measures that ban imports or exports that do not meet certain criteria.\nWhile an import ban can be readily identified as a quantitative restriction, WTO panels have also characterized \"discretionary\" or \"non-automatic\" licensing requirements as prohibited quantitative restrictions. As a result, a system under which the licensing authority has universally granted licenses to applicants who satisfy the prerequisites may still violate Article XI:1 if those prerequisites give the licensing authority unfettered discretion to deny a license. In addition, an early GATT case, Japan – Semi-Conductors , held that a lengthy license approval process also has a limiting effect on exportation in violation of Article XI:1. In that case, the GATT panel held that three-month delays in an agency's export licensing process restrained exports even though the delays did not result from any \"mandatory\" law, regulation, or requirement. Japan had required exporters to obtain licenses before exporting certain quantities of semi-conductors, and, after several years, lowered the threshold level of semi-conductors that could be shipped without a license. As a result of this change in policy, the number of license applications almost doubled. The licensing agency found itself unprepared for the sudden increase of applications, and, due to the back-up, applications often could not be processed for several months. The panel held that the practices resulting in the three-month delays in licensing had a limiting effect on exportation and were, therefore, de facto quantitative restrictions prohibited by Article XI:1.\nDespite the strong policy choice behind it, Article XI does provide exceptions to its rule, including (1) export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages facing the exporting Party; (2) quantitative restrictions that are \"necessary\" for the application of standards or regulations for the classification, grading, or marketing of commodities in international trade; and (3) import restrictions designed to remove a temporary surplus of the like domestic product.\nOther GATT articles may be implicated by the imposition of quantitative restrictions. Under Article XIII, for example, quantitative restrictions must be applied in accordance with most favored nation treatment.", "Article XX identifies 10 policy-related exceptions to the provisions of the GATT that may justify a GATT-inconsistent measure. To qualify for an exception, the violative measure must: (1) fall within the scope of one of the 10 exceptions; and (2) be applied in a manner that does not constitute arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade. This second condition is referred to as \"the chapeau\" of Article XX because it is contained in the introductory clause, or the \"hat,\" of Article XX.\nThe Article XX Exceptions\nAmong the 10 measures excepted from the GATT's provisions are those measures (1) necessary to protect public morals; (2) necessary to protect human, animal, or plant life and health; (3) relating to products of prison labor; (4) imposed for the protection of national treasures of artistic, historic, or archaeological value; or (5) relating to the conservation of exhaustible natural resources which operate in conjunction with restrictions on domestic production or consumption.\nArticle XX operates as an affirmative defense in a WTO dispute settlement proceeding. Consequently, Article XX is raised after a Member's measures are deemed inconsistent with the GATT and is invoked by the defending Member who bears the burden of proving that Article XX exempts the measures concerned from the provisions of the GATT. The defending Member must first show that the measure fits within one of the exceptions covered by Article XX. For Article XX exceptions that require the defending Member to prove that the measure is \"necessary\" to achieve an identified goal (e.g., to protect human, animal, or plant health), this means that the defending Member must make a prima facie case that (1) the common interests or values protected by the measure are important, (2) the measure materially contributes to the realization of the ends it pursues, and (3) the restrictive impact of the measure on international commerce is outweighed by its contribution to the stated values or interests. The complaining Member may then rebut the defending Member's arguments by showing that there are less restrictive alternatives available. Then the defending Member must show that these alternatives would not be effective or feasible.\nThe Article XX Chapeau\nIf the defending Member is successful in showing that the measure fits into one of the stated Article XX exceptions, it must next show that the measure satisfies the \"chapeau.\" Specifically, the defending Member must establish that, as applied, the measure neither (1) creates arbitrary or unjustifiable discrimination between countries where the same conditions prevail nor (2) constitutes a disguised restriction on international trade. The chapeau is intended to strictly discipline the use of the Article XX exceptions so as to distinguish measures intended to protect legitimate interests from measures intended to circumvent a Member's WTO obligations. Accordingly, the chapeau imposes requirements that are more difficult to satisfy than the requirements of any one of the 10 policy exceptions.\nRelatively few panel or Appellate Body reports have articulated the standards for determining that a measure is a disguised restriction on international trade. Ostensibly, this analysis involves a heightened analysis of the intent behind the measure's application to discern whether the defending Member's true motive was protectionism. Because the intent behind a measure \"may not be easily ascertained,\" panels may scrutinize the \"design, architecture, and revealing structure\" for signs of knowing or willful \"protective application.\" A WTO panel may also consider the extent to which the measure's application has a discriminatory effect, such as benefiting a domestic industry to the detriment of a foreign one. Given the rudimentary nature of WTO jurisprudence in this area, it can be difficult to predict whether a given measure would be indefensible under Article XX because its application constituted a disguised restriction on trade.\nIn contrast to the jurisprudence on \"disguised restrictions,\" a host of WTO panels and Appellate Body reports have declared measures inconsistent with the Article XX chapeau because their application constituted arbitrary or unjustifiable discrimination. These decisions express a strong preference for measures applied after international negotiations or pursuant to an international agreement. The seeming corollary of this preference, moreover, is the distaste that panels and the Appellate Body have shown for measures with a unilateral or coercive character. As discussed below, these preferences are expressed both in the Appellate Body's interpretation of the term \"discrimination\" and its interpretation of the phrase \"arbitrary or unjustifiable.\"\nAccording to the Appellate Body, \"discrimination,\" for the purposes of the Article XX chapeau, occurs when a measure is applied without regard for the similarity of—or differences between—the conditions in either the importing and exporting countries or two importing countries. In other words, both the differential treatment of countries in which the same conditions prevail as well as the uniform treatment of countries where different conditions prevail constitute discrimination. Once a measure's application is deemed discriminatory, a WTO panel will assess the nature of the discrimination to determine whether it is \"arbitrary or unjustifiable.\" This analysis depends on whether the discrimination has a \"a legitimate cause or rationale in light of the [Article XX] objectives,\" and often requires an assessment of the actions, if any, that the defending Member took to prevent foreseeable discrimination.\nFor example, in U.S. – Shrimp , the Appellate Body examined the GATT consistency of a U.S. measure prohibiting the importation of shrimp from countries not certified by the United States as maintaining a regulatory program or fishing environment that satisfied the U.S. standards for sea turtle protection. After determining that the shrimp import ban created discrimination because it was \"coercive,\" the Appellate Body assessed whether this discrimination was \"arbitrary or unjustifiable.\" It described its approach to this question as \"heavily\" influenced by the U.S. failure to engage all shrimp exporting Members in negotiations before enforcing the ban. Indeed, the Appellate Body ultimately found that the discrimination was unjustifiable because (1) the import ban reflected U.S. negotiations with some, but not all, WTO Members that export shrimp; and (2) the United States had not even attempted to use existing international mechanisms to achieve international cooperation. As a result, the Appellate Body wrote, the ban had a \"unilateral character\" that heightened both its discriminatory nature and its \"unjustifiability.\"\nIn a subsequent decision, U.S. – Shrimp (Article 21.5) , the Appellate Body clarified what it meant by international cooperation. In that case, Malaysia challenged the adequacy of the measures the United States imposed to implement the Appellate Body's decision in U.S. – Shrimp . Specifically, the Department of State had revised its guidelines so that countries could be certified for shrimp imports once they demonstrated either that their shrimp fishing environments did not pose a threat of incidental sea turtle capture or that they had implemented, and were enforcing, a \"comparably effective\" regulatory program. In determining whether a country's regulatory program was \"comparably effective\" to U.S. standards, the guidelines stated that the Department of State would \"take fully into account any demonstrated differences between the shrimp fishing conditions in the United States and those in other nations.\" In addition, the United States commenced international negotiations with Malaysia, the complaining Member, as well as other countries. Although these negotiations did not yield an agreement between the United States and Malaysia, the discrimination caused by the U.S. embargo and shrimp import certification procedures was not \"arbitrary or unjustifiable\" because the United States had undertaken \"serious, good faith efforts\" to avoid it.\nArticle XXI: National S ecurity Exceptions to the GATT\nArticle XXI lists three very specific occasions when international or domestic security interests trump a Member's obligations under the GATT. In any one of these three situations, a Member's noncompliance with the GATT will not be considered a violation of its provisions. These occasions occur when:\n(1) the Member's noncompliance is the refusal to disclose information and the Member considers the disclosure contrary to its essential security interests;\n(2) the Member considers noncompliance necessary to protect its essential security interests relating to fissionable materials, the traffic in arms or other materials for the purpose of supplying a military establishment, or a time of a war or emergency in international relations, or\n(3) the Member's noncompliance occurs in its pursuit of its obligations under the UN Charter for the maintenance of international peace and security.\nIn general, Article XXI is understood as intending to remove legitimate national security matters from the scope of GATT obligations and to discourage use of the exception for measures with commercially inspired goals. Moreover, some countries, including the United States, have taken the position that the Article is \"self-judging,\" that is, that each WTO Member may determine whether a particular matter is contrary to or necessary for the protection of its essential security interests and that determination cannot be reviewed by WTO panels or the Appellate Body. While this position raises questions about the proper role of dispute settlement proceedings in this area, to date there is no WTO case law on the application of Article XXI.\nDespite the absence of case law, Article XXI has played a role in the diplomatic discourse that precedes, and in some cases eliminates the need for, a request for consultations. For example, when WTO Members have threatened to request consultations over the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (\"Helms-Burton Act,\" P.L. 104-114 , 22 U.S.C. 6021 et seq. ), the United States responded with claims that the measure was justified under Article XXI. The goal behind the LIBERTAD Act was to dissuade other countries from investing in Cuba and to generally undercut the Fidel Castro regime. To achieve this goal, the law codified and strengthened the long-standing embargo against Cuba, making parties liable under U.S. law for trafficking in property expropriated by Cuba from U.S. citizens without compensation and requiring the U.S. State Department to deny visas to officials of companies that had trafficked in such property. The European Union asked for WTO consultations, stating that the LIBERTAD Act would violate both the GATT and the GATS by, inter alia, restraining E.U. companies who export goods to Cuba or trade in goods from Cuba and excluding E.U. citizens from entering the United States. During the ensuing meetings and negotiations between the United States and the European Union, the United States contended that, if the LIBERTAD Act was indeed inconsistent with the WTO agreements, it was justified under Article XXI. Moreover, because, in its view, it is up to the country invoking Article XXI to determine when a particular trade measure is justified by national security concerns, the United States argued that any WTO panel would lack competence to assess the use of Article XXI and, consequently, there could be no WTO proceedings on any dispute resulting out of the consultations on this issue. This dispute never actually came before a panel because the two governments reached a diplomatic solution in the form of a Memorandum of Understanding, and the European Union requested that the panel suspend its work.\nArticle XXIII: The Basis for WTO Dispute Settlement\nArticle XXIII provides the basis for dispute settlement under both the GATT and under the other WTO agreements. Article XXIII entitles any WTO Member who considers that a benefit granted by the GATT is being \"nullified or impaired or that the attainment of any objective of the Agreement is being impeded\" to have recourse to WTO dispute settlement procedures. Most often, the nullification or impairment of a benefit (or the impeding of the realization of an objective) results from a violation of an obligation prescribed by a WTO agreement, but Article XXIII states that it could also result from a Member's application of a measure that does not conflict with the provisions of a WTO agreement or from \"any other situation.\" However, disputes alleging nullification and impairment of trade benefits from non-violative actions occur much less frequently than disputes alleging violations of WTO agreements.\nIn general, proving nullification or impairment requires showing that the affected imports are subject to and benefiting from a WTO agreement market access concession (e.g., a tariff) and their competitive position is being upset by the challenged measure. However, when the complaining Member demonstrates that the challenged measure violates an obligation prescribed by a WTO agreement, the measure is considered prima facie to constitute a case of nullification or impairment. In other words, there is a presumption that a breach of the rules adversely affects other Members, and, consequently, it shifts the burden to the defending Member to disprove the presumed nullification or impairment. To date, very few Members have tried to rebut this presumption, and it appears that none have succeeded, which has led some to suggest that the presumption may be rebuttable only in theory.\nArticle XXIV: Customs Unions and Free Trade Areas\nWTO Members' participation in free trade agreements and customs unions is facially inconsistent with the MFN obligation because parties to these arrangements may grant lower tariff rates and more favorable treatment to each other's goods without granting those benefits to the goods of other WTO Members. However, these arrangements are permitted under Article XXIV as vehicles of trade liberalization.\nLike Articles XX and XXI, Article XXIV operates as a defense to justify an otherwise GATT-inconsistent measure, namely a measure related to the formation of customs unions or free trade areas. Article XXIV justifies these measures only if the formation of the customs union or free trade area in question would be made impossible if the measure concerned was not allowed. It is unclear at this time, however, how a WTO panel or the Appellate Body would determine whether a measure satisfies this standard.\nUnder Article XXIV:8(a), the members of both customs unions and free trade areas are required to eliminate \"duties and other restrictive regulations of commerce\" with respect to \"substantially all\" trade between them. The \"substantially all\" standard offers customs unions and free trade areas some flexibility in the degree to which they liberalize the trade between them. Furthermore, in Argentina – Footwear , the Appellate Body found that Article XXIV:8(a)'s requirement to eliminate all tariffs and commerce-restricting regulations on trade among customs union members did not prohibit Argentina's imposition of safeguard measures on countries who were part of a customs union (MERCOSUR) with Argentina.", "All multilateral trade agreements negotiated during the Uruguay Round are binding on WTO Members. These are agreements that a country must accept in order to become a WTO Member. As mentioned, these agreements were implemented in U.S. law through the Uruguay Round Agreements Act (\"URAA,\" P.L. 103-465 , 19 U.S.C. §3501), which then-President Bill Clinton signed into law on December 8, 1994.\nThe WTO agreements selected for discussion below are those that are still in effect, impose substantive, rather than purely procedural, requirements on WTO Members, and have been commonly cited in WTO consultations and disputes. As with the overview of the selected provisions of the GATT above, the following section is not a comprehensive list or discussion of all of the agreements that are annexed to the Marrakesh Agreement. Instead, it is intended only as an introduction to the WTO agreements that are frequently mentioned as governing common types of trade measures.", "Article VI of the GATT condemns dumping, the practice of exporting a product at a price lower than the price charged for that product in the exporter's home market, when it causes or threatens material injury to an established industry in the territory of another Member or materially retards the establishment of a domestic industry. The Agreement on Implementation of Article VI of the GATT 1994 (the Antidumping, or AD, Agreement) provides substantive and procedural requirements for WTO Members to follow in conducting antidumping investigations and imposing antidumping duties, which supplement existing tariffs. No action against the dumping of exports from another Member can be taken except in accordance with the provisions of the GATT, as interpreted by the Antidumping Agreement.\nUnder the Antidumping Agreement, a domestic investigation of dumping by a WTO Member must be triggered by a written application by or on behalf of a domestic industry. An application meets this standard if domestic producers expressing support for the application produce both a greater percentage of \"like products\" than the domestic industry opposed to the application and no less than 25% of total production of \"like products.\" All WTO Members must inform the Committee on Antidumping Practices when they initiate anti-dumping actions and provide reports on all ongoing investigations.\nThe AD Agreement defines dumping as introducing a product into a foreign country's market at an export price lower than the product's \"normal value\"—that is, its \"comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.\" Accordingly, the first step in assessing a dumping margin is calculating the normal value and the export price of the product. Although the normal value is ordinarily the market price in the country of export, Article 2.2 of the AD Agreement permits WTO Members to use a different methodology for calculating the normal value in certain circumstances. In addition, by incorporating an interpretative note to Article VI of the GATT, Article 2.7 of the AD Agreement permits WTO Members to use surrogate country data to make price comparisons about the normal value of products allegedly dumped by a government-controlled, i.e., nonmarket, economy (NME). Once the normal value is determined, the investigating authorities must calculate the dumping margin by comparing the product's export price with its normal value. Article 2.4 of the Antidumping Agreement requires this comparison be fair, made at the same level of trade (i.e., ex-factory, wholesale, or retail), and made with sales that occurred, as nearly as possible, at the same time. If the dumping margin is de minimis , the investigating Member may not impose anti-dumping duties. Many WTO disputes center around the methodology that a WTO Member uses to calculate the dumping margin. In particular, the practice of using \"zeroing\" to assess a country's dumping margin has been a frequent subject of WTO dispute settlement proceedings and is discussed later in this report.\nTo form the basis for anti-dumping duties, dumping must cause or threaten injury to the domestic industry or materially retard its establishment. The presence of injury is determined by examining the import volume of the dumped product, its effect on the prices in the domestic market for a like product, and the resulting impact on domestic producers of the like product. Several additional factors are relevant when the WTO Member is investigating allegations that the dumping causes a threat of injury, rather than actual injury. For the purposes of these injury and threat determinations, the term \"domestic industry\" generally refers to the domestic producers as a whole of a like product or the domestic producers of a major proportion of the total domestic production of a like product. Only in exceptional circumstances may a WTO Member use a narrower regional definition.\nFinally, the AD Agreement requires a WTO Member to determine that the dumping causes the injury to the domestic industry. Article 3.5 of the Agreement contains a non-attribution requirement: investigating authorities must separate and distinguish the injurious effect of other factors from the injuries effects of the dumped imports to ensure that the imposition of an antidumping duty on the imports at issue would, in fact, be justified.\nUltimately, WTO Members must limit the amount of any antidumping duty imposed to the amount \"adequate to remove the injury to the domestic industry,\" and the duty must be lifted as soon as it is no longer necessary to counteract the dumping causing the injury. The AD Agreement requires WTO Members to review the need for the continued imposition of any antidumping duty when requested by an interested party. Members must also \"terminate\" an antidumping duty five years after its imposition unless, after review, the authorities determine that lifting the duty would lead to the continuation or recurrence of dumping and injury.", "Like the Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures (SCM Agreement) is an agreement meant to expand, clarify, and implement some of the original provisions of the GATT. One of these provisions, Article VI addresses measures taken to offset any subsidy granted to an imported product. The second, Article XVI, requires Members to notify subsidies and be prepared to discuss limiting those subsidies if they cause serious damage to other Members. However, neither Article VI nor Article XVI defines the term \"subsidy\" or provides clear and comprehensive rules for governments who are either offering, or responding to, subsidies. Consequently, these provisions were deemed vague and inconsistently applied, and support developed for a new, clearer, and more comprehensive agreement on subsidies. Accordingly, the SCM Agreement was developed to discipline Members' use of subsidies and their responses to countering the effects of certain subsidies.\nAmong the advantages that the SCM Agreement provides over the subsidy provisions of Articles VI and XVI of the GATT is a more precise definition of subsidy. The SCM Agreement defines \"subsidy\" as a financial contribution by a government or public body within a WTO Member's territory that confers a benefit. A financial contribution may take the form of (1) a direct transfer of funds, such as a grant, loan, or loan guarantee; (2) government revenue (i.e., a tax) \"otherwise due\" but foregone or not collected; (3) governmental provision of goods or services other than general infrastructure; (4) governmental payments to a funding mechanism or the government's entrusting a private body to carry out at least one of the functions described above. In addition, WTO panels and the Appellate Body have interpreted the word \"benefit\" broadly to include receipt of a financial contribution on terms that are more favorable than those available to the recipient in the marketplace.\nThe SCM Agreement entitles a WTO Member to respond to subsidized imports in two ways. One authorized response is to use the WTO dispute settlement process to seek withdrawal of the subsidy or the removal of its adverse effects. The second authorized response is to launch a domestic investigation and ultimately charge an extra duty, known as a countervailing duty, on subsidized imports that are injuring domestic producers. For a subsidy to be remedied under either procedure, it must be specific in law or fact to an enterprise, industry, or group thereof. Prohibited subsidies, as described below, are considered specific per se .\nThe SCM Agreement divides subsidies into two categories: prohibited and actionable. Prohibited subsidies are contingent upon either export performance or the use of domestic over imported products. If a subsidy is deemed prohibited, the WTO dispute settlement body will recommend that the subsidizing Member withdraw the subsidy without delay and specify a time-period in which the measure should be withdrawn.\nAll other subsidies are actionable, meaning they may be subject to dispute settlement or domestic remedies if they are used in a way that causes adverse effects to the interests of the complaining Member. There are three types of adverse effects: (1) material injury to the domestic industry of the complaining member; (2) nullification or impairment of the Member's WTO benefits (such as tariff concessions on a particular product); and, (3) serious prejudice to the Member's interests.\nRegardless of whether the subsidies are prohibited or actionable, if the defending Member does not remove a subsidy or its adverse effects within a set compliance period, the WTO dispute settlement body may, upon request, authorize the complaining Member to impose new or additional tariffs, known as countervailing duties, against the subsidizing Member's exports. The goal of these countervailing duties is to effectively restore the benefits that are supposed to accrue to the complaining Member under the WTO agreements. As discussed in the later section on domestic investigations of foreign subsidies, Members may also impose countervailing duties against subsidized imports without first requesting consultations and bringing the dispute before a WTO panel. However, when a Member imposes countervailing duties without first litigating the dispute, it may do so only if it initiates and conducts its investigation of the foreign subsidies in accordance with the provisions of the SCM Agreement.\nThe interpretation of the SCM Agreement was at issue in the \"Boeing-Airbus cases\" between the United States and the European Union. The United States first requested dispute settlement proceedings in 2004, alleging that several European Union countries provided a variety of actionable and prohibited subsidies to Airbus, including, inter alia , \"launch aid,\" grants and loans for research and development, and the governmental provision of infrastructure goods and services to develop and upgrade Airbus manufacturing sites. The European Union filed a countersuit, alleging that the U.S. provided actionable and prohibited subsidies to Boeing, including, inter alia , state and federal tax incentives, access to NASA and Department of Defense (DOD) facilities and equipment for corporate research and development, and payments by both agencies to Boeing pursuant to contracts for research and development.", "A safeguard measure is a temporary restriction imposed on imports to allow a domestic industry time to adjust to import surges. These measures can be applied even in the absence of the unfair trade actions required for antidumping or countervailing duties. Possible safeguards include quotas, tariffs, and tariff rate quotas. Under Article 2.2 of the Agreement on Safeguards, however, a safeguard measure must be product, not country, specific. Because safeguard measures disturb the balance of rights and obligations, the Members affected by a safeguard are entitled to appropriate trade compensation.\nThe foundation for both domestic and international safeguard law is Article XIX of the GATT, which permits Members to apply safeguards where two conditions are met: (1) imports are increasing as a result of both unforeseen developments and the effect of obligations incurred by Members under GATT, and (2) imports are increasing in such quantities as to cause or threaten serious injury to domestic producers of like or directly competitive products. Both the U.S. law on safeguard measures, discussed later in this report, and the WTO Agreement on Safeguards are based on Article XIX.\nThe Agreement on Safeguards lays out (1) substantive requirements that must be met in order to apply a safeguard, (2) procedural requirements for the application of a safeguard measure, and (3) characteristics of, and conditions relating to, a safeguard measure. Today, all safeguard measures must comply with both Article XIX of the GATT and the Agreement on Safeguards.\nUnder the Agreement on Safeguards, a Member may apply a safeguard measure only when it determines that the product is being imported in such increased quantities as to cause or threaten serious injury to the domestic industry that produces like or directly competitive products. The Appellate Body has clarified the \"increased imports\" requirement to mean an increase that is \"recent, sudden, sharp, and significant.\" This means that the legality of a safeguard hinges in part on the rate and amount of the increase in the recent past. Import trends that precede the recent past (e.g., import trends over the previous five years rather than the previous two) are not grounds for imposing a safeguard measure, and, if older data and more recent data show conflicting trends, the most recent data on imports takes precedence in a determination of a safeguard measure's legality. Moreover, WTO panels have narrowly interpreted the causation element: the domestic industry's injury must be caused solely by the import surge and not by any other factor.", "Rules of origin are national rules that determine the source of imported goods, and, accordingly what restrictions and duties should apply to their importation. Determining a product's country of origin can be difficult given the increasing globalization of manufacturers' supply chains. Preferential rules of origin determine whether a particular good is entitled to enter the importing country on better terms than products from other countries . For example, preferential rules of origin determine whether a product originated in a country that participates in a reciprocal trade agreement with, or benefits from a tariff preference program administered by, the importing country. Nonpreferential rules of origin determine a product's country of origin for all other purposes, including application of most favored nation treatment, quantitative restrictions, imposition of antidumping and countervailing duties, and government procurement requirements.\nThere is no international consensus on how countries should formulate their rules of origin. The United States and many WTO Members apply the \"substantial transformation\" standard under which the source of a given import is the country in which the last \"substantial transformation\" occurred. However, other countries may identify a product's country of origin as the country in which (1) a certain percentage of value was added to the good; (2) the activity resulting in a particular change in the product's tariff classification occurred; or (3) a specified production process occurred.\nBy agreeing to the WTO Agreement on Rules of Origin (RO Agreement), WTO Members agreed to a negotiate a uniform set of nonpreferential rules of origin. Once the negotiations (also known as the Harmonization Work Program) are completed, all WTO Members will apply only one set of non-preferential rules of origin for all purposes. However, the negotiations are currently running more than 10 years behind schedule. Until WTO Members reach an agreement that harmonizes their nonpreferential rules of origin, Article 2 of the Agreement, which governs the application of rules of origin during the \"transition period,\" is the major source of guidance on these rules. Among Article 2's lengthy list of directives is both a national treatment and an MFN requirement, a prohibition on the use of rules of origin as a primary means of protecting domestic industries or favoring a particular Member's imports, and a requirement that rules of origin not themselves create restrictive, distorting, or disruptive effects on trade. However, Article 2 has been interpreted rather narrowly, with the WTO panel in U.S. – Textiles Rules of Origin emphasizing that, until harmonization is completed, WTO Members retain considerable discretion in designing and applying their respective nonpreferential rules of origin. Nevertheless, in the name of transparency, Members are required to notify the WTO Committee on Rules of Origin of their respective rules of origin.", "Members' agricultural support policies can be governed by both the Agreement on Agriculture (AA) and other non-agriculture specific WTO Agreements such as the GATT and the SCM Agreement. The objective of the AA is to ensure that Members undertake \"progressive reductions in agricultural support and protection over an agreed period of time.\"\nAn agricultural support or protection program is governed by the AA if it (1) satisfies the SCM Agreement's definition of a \"subsidy\"; and (2) supports a product listed in Annex 1 of the AA. Because WTO Members make commitments under the AA, a covered agricultural support program is inconsistent with the AA if it does not conform with the Member's schedule or domestic support reduction commitments. However, as discussed below, the AA prescribes different rules for export subsidies than domestic agricultural support measures.", "Like the SCM Agreement, the AA defines \"export subsidies\" as subsidies that are contingent on export performance. Unlike the SCM Agreement, the AA does not prohibit all export subsidies. Instead, Article 3.3 prohibits Members from providing the six types of export subsidies identified in Article 9.1 to:\nunscheduled agricultural products, and scheduled products in excess of the specified reduction commitment levels.\nAmong the export subsidies listed in Article 9.1 are direct subsidies, payments on the export of an agricultural good, subsidies to reduce the costs of marketing agricultural exports, and subsidies contingent on the product's incorporation in exported products. The AA also prohibits export subsidies and non-commercial transactions that are not identified in Article 9.1 when they circumvent, or threaten circumvention of, the Member's export subsidy commitments.\nIn U.S. – Upland Cotton , Brazil challenged several U.S. policies designed to support a variety of U.S. agricultural industries. Among these policies were the so-called \"Step 2 payments\" to domestic purchasers and exporters of U.S. cotton. The Commodity Credit Corporation of the U.S. Department of Agriculture provided these commodity certificates and cash payments to exporters of U.S. cotton as compensation for marketing or otherwise enhancing the international competitiveness of U.S. cotton when it was more expensive than foreign-grown cotton. Determining that the phrase \"contingent on exports\" has the same meaning it is given under the SCM Agreement, the Panel found that the Step 2 payments were export subsidies under the AA because, to receive them, exporters had to prove that they had exported U.S. cotton. Furthermore, because the United States had not scheduled export subsidy commitments for upland cotton, the Step 2 payments were inconsistent with U.S. commitments under the AA.\nHaving found that the Step 2 payments were inconsistent with the U.S. schedule, the Panel in U.S. – Upland Cotton did not need to consider whether the payments circumvented U.S. commitments. In contrast, the WTO Appellate Body in U.S. – FSC determined that U.S. tax benefits for Foreign Sales Corporations (FSCs) circumvented, but did not violate, U.S. export subsidy commitments. In that case, the tax benefits at issue excluded from a U.S. taxpayer's gross income all income that was earned with respect to goods in transactions involving property that: (1) was manufactured, grown, or extracted within the United States; (2) was held primarily for sale, lease, or rental outside the United States; and (3) had a fair market value, no more than 50% of which was attributable to articles manufactured or extracted outside of the United States or direct costs of labor performed outside of the United States. The Appellate Body found that the tax measure was inconsistent with the Agriculture Agreement because it allowed for the provision of an unlimited amount of the subsidy to scheduled agricultural products that already received the maximum level of subsidies specified by the U.S. Schedule. In other words, by implementing the FSC measure, the United States threatened to circumvent, if not actually circumvented, Article 3.3 of the AA.", "In addition to their export subsidy commitments, WTO Members are required by the AA to make and abide by reduction commitments for their domestic subsidy programs. Accordingly, two types of domestic subsidy programs are consistent with the AA: those that are exempt from the subsidizing Member's domestic support reduction commitments and those that are provided in conformity with (i.e., not in excess of) those commitments. A given subsidy program is exempt from a WTO Member's reduction commitments if it is either:\na so-called \"green box\" program; or provided at levels that do not exceed the relevant de minimis level.\nTo be considered a \"green box\" program, a domestic agricultural support program must satisfy the applicable criteria in Annex 2. In addition to requiring that domestic agricultural support programs have \"no, or at most minimal, trade-distorting effects or effects on production,\" Annex 2 prescribes different requirements for different kinds of domestic agricultural support programs. These programs include, inter alia , domestic food aid programs, payments for relief from natural disasters, and payments under environmental programs.\nMeasures that are not exempt from the subsidizing Member's domestic support reduction commitments must be included in the Member's calculation of its \"Current Total\" Aggregate Measurement of Support, or AMS. This is a monetary measurement of the Member's domestic agricultural support programs and it is reported annually to the WTO. The total can then be compared with Member's commitments to ensure that Members are complying with their reduction commitments. For example, the United States is committed to providing no more than $19.1 billion per year in AMS. Therefore, if the United States provides domestic subsidies covered by the AA in excess of its $19.1 billion AMS commitment, the United States may be in violation of the AA.", "Members frequently adopt measures that regulate a product's characteristics or its production methods to protect the environment or human health, to ensure the quality of products, to prevent deceptive practices, or to achieve some other legitimate objective. However, these measures can create obstacles to international trade. To that end, the WTO Agreement on Technical Barriers to Trade (TBT Agreement) is intended to balance the need to protect Members' regulatory autonomy with the need to prevent unnecessary obstacles to international trade.\nThe TBT Agreement applies to measures that are not governed by the WTO Agreement on Sanitary and Phytosanitary Measures (which focuses primarily on food safety) but that regulate a product's characteristics or process and production method (PPM). A measure meets this definition if it regulates on the basis of either a product's intrinsic qualities, qualities that that are related to the product, or qualities that the product lacks . Characteristics that are related to the product include their identification, presentation, and appearance. In EC – Sardines , for example, Peru challenged an EU regulation prescribing common marketing standards for preserved sardines. The EU regulation required that all fish labeled and marketed as \"preserved sardines\" belong to one species of fish, Sardina pilchardus , effectively prohibiting all other fish species from being sold as \"preserved sardines\" in the EU market. Because the regulation conditioned the \"naming\" of preserved sardines on product characteristics, the WTO Appellate Body held that it prescribed product related characteristics.\nThe measure in EC – Sardines was a positive TBT measure: it specified a characteristic that a product must have in order to carry a particular label. In EC – Asbestos , however, the Appellate Body found that measures framed in the negative can also be TBT measures. In that case, Canada challenged a French decree that criminalized, inter alia , the sale, import, and placing on the domestic market of asbestos fibers and materials, products, or devices containing those fibers. Although the French measure mandated that all products not contain asbestos, it had the same effect, in the Appellate Body's view, as requiring all products to have a shared characteristic because it effectively required all products to be asbestos-free.\nThe TBT Agreement classifies measures that regulate on the basis of a product's characteristics or PPM as technical regulations, standards, and conformity assessment procedures. Technical regulations are documents that prescribe product characteristics or their related processes and production methods with which compliance is mandatory . Technical regulations can include import bans and prohibitions that are related to product characteristics or PPMs. Standards are documents that have been approved by a recognized body and prescribe product characteristics or their related processes and production methods with which compliance is voluntary . Conformity assessment procedures (CAPs) are procedures, such as those related to testing, verification, inspection, or certification, that are used to ensure that the requirements prescribed by a given standard and/or technical regulation are satisfied.\nThe TBT Agreement lays out different commitments for technical regulations, standards, and conformity assessment procedures. However, to date, most of the WTO panel and Appellate Body decisions interpreting the TBT Agreement have focused on the provisions on technical regulations. These provisions are contained in Article 2 of the Agreement. Members must, inter alia :\nensure that their technical regulations provide Most Favored Nation (MFN) status to other Members' products; ensure that their technical regulations do not violate the national treatment principle (i.e. Members' technical regulations must not accord imported products less favorable treatment than that accorded to like products of national origin); base their technical regulations on international standards unless international standards would, because of unique country conditions, result in ineffective or inappropriate regulations; give positive consideration to accepting as equivalent technical regulations of other Members that fulfill the objectives of their own domestic regulations; and specify technical regulations based on product requirements in terms of performance rather than design or descriptive characteristics wherever appropriate.\nThe TBT Agreement also bars Members from preparing, adopting, or applying technical regulations that are \"more trade-restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment [of that objective] would create.\" The Agreement provides an illustrative non-exhaustive list of \"legitimate objectives,\" which includes: the protection of national security; the prevention of deceptive practices; and the protection of human health or safety, animal or plant life or health, or the environment. WTO panels have suggested that the analysis of whether a technical regulation is, in fact, \"more trade-restrictive than necessary\" is an inquiry into whether the measure's trade-restrictiveness is required to achieve the Member's chosen level of protection. Accordingly, WTO panels have compared the extent to which a given technical regulation contributes to the achievement of the Member's policy goal with \"a potential less trade restrictive alternative measure\" to determine whether the latter would similarly fulfill the Member's objective at the chosen level of protection. Notably, a measure that is trade-restrictive and does not contribute to the fulfillment of the Member's objective necessarily violates Article 2.2.\nSignificantly, unlike the GATT and GATS, the TBT Agreement does not provide Members with an affirmative defense for technical regulations that are inconsistent with the Agreement but necessary for national security or the protection of the environment or human and/or plant life or health. The lack of a general or national security exception to the TBT Agreement has contributed to the view that it is a \"stricter\" agreement than the GATT or GATS.\nIn addition to restraining the preparation and adoption of TBT measures that interfere with international trade, the TBT Agreement encourages WTO Members to participate in the work of international standardizing bodies with the aim of achieving broader consensus on the creation and content of international standards. The Agreement also established processes and mechanisms that enhance the transparency of countries' TBT measures and a forum for Members to resolve concerns relating to TBT measures without resorting to formal dispute settlement procedures. Article 2.9.1, for example, requires Members to publish notice of—and allow time for other Members to comment on—proposed technical regulations that were created in the absence of, or deviate from, an international standard or may significantly affect trade. Additionally, representatives from each WTO Member sit on the Committee on Technical Barriers to Trade (TBT Committee), which affords Members the opportunity to consult and resolve concerns relating to the TBT Agreement or the accomplishment of its objectives.", "Sanitary and phytosanitary measures (SPS measures) are measures intended to protect human, animal, or plant life or health within a WTO Member's territory from food-safety risks and other risks relating to pests or diseases. Possible examples include bans on imported beef to prevent the spread of mad cow disease or a food-safety regulation requiring all imported chicken meat to be heated to a certain temperature for a specified length of time. While SPS measures can be thought of as a subset of technical barriers to trade, as noted above, a measure can not be covered by both the SPS and the TBT Agreements. Therefore, SPS and TBT measures are mutually exclusive for the purposes of applying WTO obligations.\nSPS measures covered by the SPS Agreement are those that \"may, directly or indirectly, affect international trade.\" The Agreement defines an SPS measure to include four types of protective or preventative measures: (1) measures to protect animal or plant life or health arising from the entry, establishment, or spread of pests or diseases; (2) measures to protect human or animal life or health from risks arising from additives, contaminants, toxins, or disease-causing organisms in foods, beverages, or feedstuffs; (3) measures to protect human life or health from risks arising from diseases carried by animals, plants, or products, or from the entry, establishment, or spread of pests; and (4) measures to prevent or limit other damage from the entry, establishment, or spread of pests.\nArticles 2 and 5 of the SPS Agreement set out Members' basic rights and obligations. Article 2.2 requires WTO Members to ensure that any covered SPS measure is (1) applied only to the extent necessary to protect human, animal or plant life or health; (2) based on scientific principles; and (3) not maintained without sufficient scientific evidence, unless it is provisionally adopted and maintained in conformity with Article 5.7. Article 2.3 requires WTO Members to further ensure that their SPS measures neither \"arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members\" nor are applied \"in a manner which would constitute a disguised restriction on international trade.\" This language prohibiting arbitrary or unjustifiable discrimination and disguised restrictions on trade is also in Article XX of the GATT.\nArticle 5.3 obligates WTO Members \"to avoid arbitrary or unjustifiable distinctions\" in the levels of sanitary or phytosanitary protection \"if such distinctions result in discrimination or a disguised restriction on international trade.\" Article 5.6 obligates WTO Members to ensure that their sanitary or phytosanitary measures \"are not more trade-restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection.\" Notably, a measure will not be deemed to be more trade restrictive than required unless there is a feasible alternative that would achieve the \"appropriate level of sanitary or phytosanitary protection\" and be \"significantly less restrictive to trade.\"\nLike the TBT Agreement, the SPS Agreement requires Members to base their SPS measures on international standards, guidelines, or recommendations where they exist. The three sources of international standards for SPS measures are: the Codex Alimentarius Commission (CODEX), the World Organization for Animal Health (OIE), and the International Plant Protection Convention (FAO). SPS measures that conform to these organizations' international standards or guidelines are deemed necessary and presumed consistent with both the SPS Agreement and the GATT. If there is not a relevant international standard, Members may still apply SPS measures to imports so long as the measures are based on \"sufficient scientific evidence.\" If the scientific evidence is insufficient, Members may provisionally adopt SPS measures on the basis of the available information but must seek additional information for a more objective assessment of the risk and review the SPS measure within a reasonable period of time.\nAnother core provision of the SPS Agreement requires Members to \"base\" their SPS measures on \"an assessment, as appropriate to the circumstances, of the risks to human, animal, or plant life or health, taking into account risk assessment techniques developed by relevant international organizations.\" In EC – Biotech Products , the WTO panel wrote that a Member satisfies this obligation when (1) an evaluation that meets the SPS Agreement's definition of a \"risk assessment\" is conducted, and (2) the measure at issue is \"based\" on that assessment. Notably, the Member imposing the measure at issue need not perform the risk assessment itself so long as a risk assessment that meets the criteria in Annex A of the SPS Agreement was performed.\nThe type of risk assessment required depends on the purpose of the SPS measure at stake. In the case of measures concerned with pests or disease, the term \"risk assessment\" means an \"evaluation of the likelihood entry, establishment, or spread of a pest or disease... according to the sanitary or phytosanitary measures which might be applied, and of the associated potential biological and ecological consequences.\" In the case of measures concerned with food additives, a risk assessment is defined as an \"evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins, or disease-causing organisms in food, beverages or feedstuffs.\"\nAssuming that a WTO panel finds that an SPS measure was imposed after the requisite risk assessment, it will then determine whether the measure was, in fact, \"based\" on that assessment. According to the WTO Appellate Body's decision in EC – Hormones , a measure is based on a risk assessment if the results of the risk assessment \"reasonably support\" the measure at stake. A measure meets this test if (1) it has a scientific basis, even if it reflects \"divergent or minority views\"; (2) the defending Member's interpretation and application of that evidence is \"objective and coherent\"; and (3) there is a scientific basis for determining that the results of the risk assessment warrant the imposition of the SPS measure at issue. Although a WTO panel will determine whether a Member conformed with these requirements, the panel may not substitute its own judgment for that of the risk assessor.\nNotably, however, some measures that meet the SPS Agreement's general definition of an SPS measure may be imposed without a risk assessment. For example, in EC – Biotech Products , a WTO panel found that although the European Union's regulatory regime for the approval and marketing of biotech products was designed to protect the lives and health of humans and plants, the SPS Agreement permitted the EU to temporarily place a moratorium on the approval of applications to market new genetically modified organisms without first conducting the risk assessment described in Article 5.1. The panel stated that SPS measures have both the objective of protecting animal, plant, or human life or health and the \"nature\" of \"requirements and procedures,\" and the moratorium was a decision to delay final substantive approval decisions—not a requirement or a procedure subject to Article 5. Nevertheless, the panel found that, while the moratorium was exempt from the risk assessment requirement, it was subject to and in violation of other provisions of the SPS Agreement.\nFinally, in addition to restraining the preparation and adoption of SPS measures that interfere with international trade, the SPS Agreement established processes and mechanisms that enhance the transparency of countries' SPS measures and a forum for Members to resolve concerns relating to SPS measures without resorting to formal dispute settlement. To those ends, the Agreement requires each Member to notify other Members of new or changed SPS regulations when the regulation will significantly affect trade and either no relevant international standard exists or the new regulation differs from the relevant international standard. It also establishes the Committee on Sanitary and Phytosanitary Measures to, inter alia , facilitate ad hoc consultations and negotiations among Members on specific sanitary and phytosanitary issues.", "The General Agreement on Trade in Services (GATS) is designed to liberalize trade in services. Unlike international trade in goods, which is largely governed by measures imposed at countries' borders, trade in services tends to be governed mostly by internal regulations. Internal regulations might, for example, restrict the number of drugstores allowed within a geographical area, define technical safety requirements for airline companies, or prohibit banks from selling certain financial products. As this list suggests, the GATS disciplines a wide range of domestic measures, but some of its provisions, including those on market access and national treatment, are limited by the scope of each country's commitments, which are defined in the national schedules and subject to progressive reduction. The GATS also contains a number of annexes addressing specific individual service sectors.\nThe GATS does not define the term \"service\" except to exclude \"services supplied in the exercise of governmental authority\" from its definition. Instead, the GATS purports to regulate measures affecting the supply of a service in four \"modes\": (1) from a service supplier in one Member to a consumer in another Member without travel (e.g., an architecture firm mails blueprints to a consumer overseas), (2) in the territory of one Member to a consumer of any other Member (e.g., in the U.S. to a foreign tourist), (3) by a service supplier of one Member with a commercial presence in the territory of any other member (e.g., by a commercial bank with branches in a foreign country), and (4) by a service supplier of one Member travelling temporarily to provide services in another Member (e.g., by a consultant on an overseas business trip).\nNotably, a service supplier under the GATS includes entities engaged in \"the production, distribution, marketing, sale and delivery of a service.\" Measures \"affecting trade in services\" include any measure \"in respect of,\" inter alia , \"the purchase, payment or use of a service\" or \"the presence, including commercial presence, of persons of a Member for the supply of a service in the territory of another Member.\" Because the GATS defines both \"service suppliers\" and \"measures affecting trade in services\" broadly, the GATS applies not only to measures directly regulating the supply of a service, but also a wide range of other measures that affect the service sector.\nBecause the GATS permits Members to specify how they will reduce market access barriers to trade in services, whether a particular measure is GATS-inconsistent generally hinges on the scope of the national schedules of commitments of the Member imposing the measure. Unlike the GATT, under which the nondiscrimination provisions apply to goods from all Members, the GATS permits Members to schedule (1) exemptions from the Most Favored Nation (MFN) treatment obligation, and (2) specific service sector commitments to the national treatment obligation. As a result, each Member limits the scope of its obligations not to discriminate between services provided by firms from different Members and between services provided by foreign, rather than domestic, firms. Article XXI of the GATS allows a WTO Member to modify or withdraw any of its scheduled commitments once three years have elapsed from the date the commitment entered into force, subject to certain conditions, including possible compensation to Members affected by the change.\nThe GATS does not compel a government to privatize services industries or outlaw government or private monopolies. However, the GATS is, like the TBT and SPS Agreements discussed above, concerned with increasing transparency. Article III of the GATS requires governments to publish all relevant laws and regulations and to set enquiry points that can provide foreign companies and governments with information about entering and competing in a service sector. This is particularly important because service sectors may be regulated by multiple government entities at both the national and local levels. Consequently, service providers seeking to do business internationally may be stymied by a lack of transparency in how a country licenses its service providers or regulates service delivery. U.S. service providers continue to cite the lack of transparency in the development and implementation of foreign countries' regulations as a primary obstacle to increasing foreign trade in services. If the policy goals behind the GATS are achieved, Members' will presumably have an improved understanding of all other Members' services regulations.", "The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets minimum standards for the intellectual property rights that WTO Members must offer their nationals and the enforcement of those rights. Developing countries, however, have delayed compliance periods.\nThe basic tenet of TRIPS is the extension of most-favored-nation status and national treatment to intellectual property rights (IPR). Consequently, any advantage in IPR protection granted to nationals of one WTO Member must be granted to nationals of all other WTO Members, and Members must treat nationals of other WTO Members no less favorably in terms of IPR protection than they treat their own nationals. The term \"nationals\" in the TRIPS Agreement refers to natural or legal persons that are either domiciled in a particular country or have a real and effective industrial or commercial establishment there.\nPrior to the TRIPS Agreement, intellectual property rights were primarily regulated at the international level by treaties administered by the World Intellectual Property Organization (WIPO). Most of the obligations of the WIPO treaties are now incorporated by reference into Articles 2.1 and 9.1 of the TRIPS Agreement so that compliance with the WIPO treaties remains the baseline for compliance with the TRIPS Agreement. However, the TRIPS Agreement also builds on WIPO treaties by establishing additional minimum obligations, most notably in the areas of copyright, trademarks, geographical indications, patents, and undisclosed information (i.e., trade secrets). The TRIPS Agreement also has \"exception clauses,\" which permit WTO Members to pass measures that authorize particular forms of IPR \"infringement\" without running afoul of TRIPS Agreement obligations.\nIn an early dispute over an exception clause, the European Communities alleged that Section 110(5) of the U.S. Copyright Act of 1976 ( P.L. 94-443 , 17 U.S.C.§101 et seq. ) as amended by the Fairness in Music Licensing Act of 1998 ( P.L. 105-298 ) was inconsistent with the TRIPS Agreement because it permitted the playing of radio and television music in certain retail, drinking, and food service establishments without the payment of a royalty fee. The U.S. argued that these exceptions were permissible under the TRIPS Agreement because they were covered by Article 13, which permits WTO Members to create limited exceptions to the exclusive rights of copyright holders. The panel found that Article 13 permits a WTO Member to provide exceptions to the exclusive rights of copyright holders only if (1) those exceptions are clearly defined, (2) when utilized, those exceptions do not create economic competition with the ways that right holders normally extract economic value from copyrights and thereby deprive them of significant or tangible commercial gains, and (3) when utilized, those exceptions do not cause or have the potential to cause an unreasonable loss of income to the copyright owner.\nApplying this standard, the panel found that one, but not both, of the exceptions contained in Section 110(5) were covered by Article 13. Specifically, the panel stated that the \"homestyle\" exception, which allows small restaurants and retail outlets to amplify music broadcasts with equipment commonly used in private homes without authorization or payment of a royalty to the copyright holder, met the requirements of Article 13. In reaching this conclusion, it noted that only a small percentage of all eating, drinking, and retail establishments in the U.S. was eligible to use the exception and this small group was further narrowed by the additional requirement that they use \"homestyle\" equipment (i.e., commonly available stereo systems). In contrast, the \"business\" exception, which allowed food service, drinking, and small retail establishments to amplify copyrighted music without authorization or payment of a fee, did not meet the requirements of Article 13 because a substantial majority of U.S. eating and drinking establishments and close to half of all U.S. retail establishments could make use of the exception.", "The WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU) significantly strengthened the earlier GATT dispute settlement mechanism. The DSU creates a Dispute Settlement Body (DSB) with representatives of all the WTO Members, which administers the WTO dispute settlement system.\nIf a Member wants to challenge another Member's trade practices, it submits a written request for consultation to the DSB identifying the measures at issue and the legal basis for the complaint. A consultation is an opportunity to settle the dispute without a panel being established. It is confidential and will not work prejudice on either Member in any further proceedings.\nIf consultations fail to resolve the dispute within 60 days, or one party refuses to enter them, the complaining party may request a panel. If the DSB establishes a panel, that panel is authorized to receive pleadings and rebuttals, hear oral arguments, and engage in other forms of fact development. The panel then issues an interim report on which the two parties can comment. A final report addressing, if not adopting, the parties' comments follows. A party to the dispute can appeal the legal interpretations or findings in a final report to the Appellate Body. Subject to the \"negative consensus rule,\" the DSB will ultimately adopt the findings of the panel, or, if the panel's decision was appealed, those of the Appellate Body. The negative consensus rule states that these findings should be adopted unless they are rejected by a consensus of Members on the DSB.\nAfter adoption, the Member deemed in violation of a WTO obligation will generally be given a reasonable period of time to bring its measures into compliance (usually between eight and 15 months). If the measures are not brought into compliance or the adequacy of compliance is disputed, the parties may negotiate a settlement providing for compensation (i.e., additional trade concessions) to the injured party. If these negotiations fail, the complaining Member may then seek authority from the DSB to retaliate, namely to suspend some of its WTO obligations that benefit the defending Member.", "The preceding sections of this report discussed the multilateral agreements contained in the Marrakesh Agreement. All countries must accept those agreements as a condition of WTO membership. The WTO \"plurilateral agreements,\" on the other hand, are not prerequisites to WTO membership, and, therefore, only some Members, including the United States, have agreed to them. The two plurilateral agreements discussed below are contained in Annex 4 of the Marrakesh Agreement. Initially there were four plurilateral agreements in Annex 4, but both the International Dairy Agreement and the International Bovine Meat Agreement terminated in 1997. Another plurilateral agreement, the Information Technology Agreement (ITA), was concluded after the Uruguay Round.", "To date, 41 countries have signed the Agreement on Government Procurement (AGP) and several more (including China) are negotiating accession to it. The AGP seeks to grant foreign suppliers of goods and services increased access to government procurement opportunities. To achieve this goal, the AGP is designed to both reduce laws and regulations that discriminate against foreign products or services and increase the transparency of government procurement procedures.\nThe general obligations of the AGP only apply to government contracts that meet four criteria. First, the AGP does not apply to government contracts below the monetary threshold for the procuring entity. These thresholds are identified in the five annexes contained in Appendix I so that Annex 1 contains the threshold for central government entities, Annex 2 contains the threshold for sub-central government entities, etc. Secondly, the AGP does not apply to procurements by, or necessary for fulfilling a contract with, the government. To determine whether a procurement meets this test, WTO panels may consider whether the government is paying for the good at issue; whether the government will use or benefit from its use; whether the government will possess it; whether the government controls its acquisition process; and whether the procuring entity had a commercial interest in the transaction. In addition, AGP parties have negotiated exceptions for some of their government entities so that their procurements are exempt from the AGP. Third, the AGP only applies to procurements between two parties to the AGP. Consequently, if the U.S. government is procuring a good from a non-party, the United States is not obligated to comply with the provisions of the AGP. Fourth, the object of the procurement must be a covered good or, alternatively, a party not exempted by the party's schedule. While procurements of most goods are covered by the AGP, procurements of most services are not. Nevertheless, the United States provides fairly comprehensive coverage of the service sectors.\nFor covered government procurement contracts, Article III of the AGP provides that each party must provide to the products, services, and suppliers of other parties treatment no less favorable than that which is accorded to (1) domestic products, services, and suppliers, and (2) products, services, and suppliers of any other party that provides the procuring party with reciprocal access to its own procurements of that good or service. Furthermore, each party must ensure that its entities do not treat locally established suppliers less favorably on the basis of foreign affiliation or ownership, and parties may not discriminate against locally established suppliers on the basis of the country of production of the good or service in question. For the purposes of applying these obligations, Article IV mandates that the rules of origin applied in the normal course of trade also apply to transactions covered by the AGP.\nHowever, as under the GATT, there are affirmative defenses to violations of the AGP. Article XXII of the AGP authorizes each party to take action, or not disclose information, regarding procurement that \"it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement for indispensable for national security or for national defense purposes.\" The United States identifies several government agencies and types of procurements that it considers are exempt from the AGP by virtue of this national security exception. The second AGP exception authorizes parties to impose or enforce measures affecting procurement that are \"necessary to protect public morals, order or safety, human, animal or plant life or health or intellectual property; or relating to the products or services of handicapped persons, of philanthropic institutions or of prison labor,\" so long as the measures \"are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade.\"\nAs for transparency, Article IX requires the Parties' entities to publish an invitation to participate in all cases of intended procurement. Each notice of proposed procurement must state (1) the contact point with the entity from which further information may be obtained; (2) the subject matter of the contract; (3) the time-limits set for the submission of tenders or an application to be invited to tender; and (4) the addresses from which documents relating to the contracts may be requested. Additionally, when it is possible to provide other information (e.g., any economic or technical requirements or any options for further procurement), Article IX requires its inclusion in the notice as well.\nArticle XX and XXI govern the procedures for challenging a breach of the AGP. Article XX requires Parties to provide timely, transparent, and effective procedures that enable suppliers to challenge alleged breaches of the AGP in the context of procurements in which they have, or have had, an interest. Parties must provide suppliers with the opportunity for their challenges to a procurement process or decision to be heard by a court or impartial and independent review body. If a Party, rather than a supplier, wishes to challenge the failure of another Party to carry out its AGP obligations, it can rely on the Dispute Settlement Understanding to initiate consultations.\nWTO panels have rendered very few decisions in the government procurement area. Nevertheless, one of the most famous dispute settlement proceedings involving the AGP arose out of a Massachusetts law (An Act Regulating State Contracts with Companies Doing Business with or in Burma, 1996 Mass. Acts 239, ch. 130) that barred state entities from procuring goods or services from any person or business organization doing business with Burma. The European Union commenced dispute settlement proceedings against the U.S. on the grounds that the Massachusetts law would prevent certain European companies from bidding on government contracts in Massachusetts, in violation of the AGP. However, the European Union suspended those proceedings when the U.S. Supreme Court held that the law was pre-empted by a federal statute, the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997, that imposed sanctions on Burma.", "The Agreement on Trade in Civil Aircraft (\"Aircraft Agreement\"), which entered into force on January 1, 1980, predates the formation of the WTO. It remains, however, as one of the two WTO plurilateral agreements that are in force for WTO Members who have accepted it. Thirty countries, including all major aircraft manufacturing and exporting countries, are signatories to this agreement,\nThe Aircraft Agreement seeks to establish an international framework to encourage continued technological development of aeronautics, provide fair and equal competitive opportunities for civil aircraft producers of the signatory nations, and eliminate some of the adverse trade effects resulting from governmental support of civil aircraft development, production, and marketing. Specifically, the Aircraft Agreement requires signatories to eliminate tariffs on civil aircraft, engines, flight simulators, and related parts, and to provide these benefits on a nondiscriminatory basis to other signatories.\nArticle 4 of the Aircraft Agreement forbids signatories from requiring or unduly pressuring airlines and aircraft manufacturers to procure civil aircraft from a particular source that would create discrimination against suppliers from any other signatory. Article 5 forbids quantitative restrictions and other licensing requirements that would restrict imports and exports of civil aircrafts in a manner that is inconsistent with the GATT. Article 6 requires signatories to apply the provisions of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) to their civil aircraft industries, which explains why the Boeing-Airbus disputes dealt largely with the SCM Agreement rather than the Aircraft Agreement.", "While the Marrakesh Agreement marked the completion of the Uruguay Round, it also committed Members to reopen negotiations on agriculture and services at the beginning of the 21 st century. Accordingly, new negotiations began in early 2000 and were formally expanded into a new WTO Round the following year.\nThe Doha Ministerial Declaration is effectively the charter for the Doha Round of talks. It urges Members to focus on the unique concerns of developing and least-developed countries in the negotiations. Hence, the Doha Round is formally known as the Doha Development Round. The Declaration states that negotiations should be conducted transparently and open to all Members as well as to states and customs territories that are currently in the process of accession.\nAll of the agreements under negotiation must be adopted as one final agreement. Consequently, until the Doha Round of negotiations is concluded, the few agreements that Members have reached cannot be permanently implemented. Concluding negotiations in the Doha Round, however, has proven difficult because of the number of countries involved and the differences between them.", "A free or reciprocal trade agreement is an agreement involving two or more trading partners under which trade barriers are reduced or eliminated. The United States first entered reciprocal trade agreements with Israel and Canada respectively. Today, the United States has entered into reciprocal trade agreements with 19 countries, including nations in Asia, the Middle East, South and Central America, and Africa.\nAny free trade agreement is non–self-executing, meaning that these agreements have no legal effect domestically until legislation implementing the agreement is enacted. Because congressional action is necessary to approve a free trade agreement, these agreements and their implementing legislation are called congressional-executive agreements.\nThe following discusses the only two regional free trade agreements to which the United States is a party: the North American Free Trade Agreement (NAFTA) and the Dominican-Republic Central America-United States Free Trade Agreement (DR-CAFTA). It then addresses pending free trade agreements and the negotiations for a third regional free trade agreement: the Trans-Pacific Partnership Agreement. The United States is a party to 15 bilateral free trade agreements, which are listed on the United States Trade Representative's website.\nThis report discusses only a few selected provisions of the following trade agreements. The United States negotiates free trade agreements that, more or less, comport with the U.S. \"model FTA.\" Used as a framework for U.S. trade agreements by the Office of the U.S. Trade Representative (USTR), the model FTA is roughly based on NAFTA and the WTO Agreements but has evolved with congressional involvement and shifting U.S. priorities. Under the current model, the United States pursues trade liberalization in trade in goods through provisions on nondiscrimination, tariff reduction, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, trade remedies, and other obligations that resemble those found in the GATT and WTO agreements on trade in goods. In addition, the model FTA covers trade in services, with specialized provisions on telecommunications and financial services, investment, government procurement, competition policy, intellectual property rights, and dispute settlement. Although provisions on labor rights and environmental protection were not a part of earlier U.S. trade agreements, they are now standard and increasingly enforceable. Most recently, the model FTA has evolved to include electronic commerce obligations. While the texts of the free trade agreements generally establish each country's obligations, the contracting countries reserve exceptions to these obligations in the annexes. Consequently, a full understanding of each country's obligations under a free trade agreement comes from reading both the body and the annexes to each agreement.\nCongress has played a significant role in the evolution of the model FTA. First and foremost, the Trade Promotion Authority statutes, which authorize the Executive to negotiate and enter into trade agreements with foreign countries, set the U.S. negotiating objectives. In addition, in 2007 Congress and the George W. Bush Administration negotiated the \"Bipartisan Trade Deal\" or \"May 10\" understanding. This trade deal required the incorporation of certain provisions into the Peru, South Korea, Panama, and Colombia trade agreements in the areas of labor, environment, intellectual property, foreign investors' rights, and port security. Essentially, the Bipartisan Trade Deal modified the model FTA, and, consequently, countries that had already passed domestic legislation regarding pending free trade agreements with the United States incorporated the changes. Among the most frequently discussed provisions of the Bipartisan Trade Deal are those on labor and the environment. The labor provisions require U.S. free trade agreement partners to adopt, maintain, and enforce five labor standards stated in the 1998 International Labor Organization Declaration: freedom of association, the effective recognition of the right to collective bargaining, the elimination of all forms of forced or compulsory labor, the effective abolition of child labor, and the elimination of discrimination in respect of employment and occupation. Moreover, both the labor and environment provisions subject allegations of the labor and environmental chapters to the same general dispute settlement system used for trade violations.\nThe free trade agreement chapters selected for discussion below, namely investment, intellectual property, and labor, illustrate notable processes and trends in the evolution of the model FTA. Investment has always been a crucial chapter for U.S. free trade agreements, but the language of the model provisions has changed over time to reflect concern that initial NAFTA arbitral tribunals' interpretations of these provisions overly limited government regulatory power. The core investment provisions of NAFTA have, in turn, been renegotiated and redrafted to incorporate the NAFTA parties' understanding of the concepts. In the case of intellectual property rights, the model FTA has increasingly expanded the rights of intellectual property holders beyond those required by the Trade-Related Intellectual Property Rights Agreement and NAFTA. Finally, the model FTA's approach to labor issues has evolved from addressing labor issues outside of the agreement's text to incorporating them into the final agreement and, with the May 10 understanding, subjecting allegations of the labor and environmental chapters to the same general dispute settlement system used for trade violations.", "The North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico entered into force on January 1, 1994. NAFTA contains, inter alia , tariff reduction schedules, provisions intended reduce nontariff barriers to trade, and dispute settlement provisions that are distinct from the WTO's Dispute Settlement Understanding. NAFTA also has side agreements on labor and the environment.", "In general, investment law is considered distinct from international trade law. Unlike international trade, which entails a series of exchanges of goods for money, foreign investment refers to a long-term relationship between a private investor and a foreign country. The decision to include investment provisions in NAFTA and subsequent U.S. trade agreements reflected concern that, as these relationships progressed, companies operating abroad were susceptible to expropriation and other means of intervention by their host governments.\nChapter 11 of NAFTA articulates numerous substantive protections for investors. Key protections include parties' obligations to accord foreign investors national and most-favored-nation treatment; conform with a \"Minimum Standard of Treatment\"; compensate investors adequately for expropriation of their property; and refrain from imposing certain performance requirements, such as requirements that an investment achieve a given level of domestic content or export a given level of goods or services. Articles 1110 and 1105 of NAFTA are reportedly among the most frequently cited NAFTA investment provisions in legal disputes and public controversies. Paragraph 1 of Article 1110 prohibits NAFTA parties from \"directly or indirectly\" nationalizing or expropriating an investment of an investor of another party in its territory or taking a measure \"tantamount to nationalization or expropriation of such an investment\" except: (1) for a public purpose; (2) on a non-discriminatory basis; (3) in accordance with due process of law and Article 1105; and (4) on payment of compensation.\" Paragraph 1 of Article 1105 articulates the \"Minimum Standard of Treatment,\" requiring each party to accord to investments of investors of another party \"treatment in accordance with international law, including fair and equitable treatment and full protection and security.\"\nHowever, whether a given investor is entitled to benefit from these provisions depends, in large part, on whether the investment at issue is covered by Article 1139 of NAFTA. Article 1139 defines \"investment\" as limited to: an enterprise or interest, equity security, or debt security in such an enterprise; a loan to an enterprise; real estate or other property acquired in the expectation or used for economic benefit or other business purposes; and interests arising from the commitment of capital or other resources to economic activity in the territory of the host party. Intellectual property rights, which are expressly included in the definition of \"investment\" in subsequent U.S. trade agreements, are excluded from the definition in Article 1139 of NAFTA.\nIf a given investment is covered by Chapter 11's substantive protections, investors of NAFTA parties can enforce those provisions against other NAFTA parties through investor-state arbitration. When an investor from a NAFTA country believes that another Party has breached an obligation and the investor has suffered a loss as a result, the investor has the right to file a claim for arbitration against the allegedly offending nation. The investor does not need to obtain the permission or participation of its own government before filing a claim. However, the investor must wait to file a claim until a six-month \"negotiation\" period has passed from the date of the events giving rise to the claim and provide the host state with 90 days' written notice of the intent to file a claim. The investor must also discontinue and/or waive its right to initiate legal actions against the challenged measures before other courts or tribunals. Under the Chapter 11 dispute settlement mechanism, the investor decides whether the arbitration will be governed by the Convention on the Settlement of Investment Disputes (ICSID Convention), the ICSID Additional Facility Rules, or the UNCITRAL (United Nations Commission on International Trade Law) rules.", "Chapter 17 of NAFTA, which addresses intellectual property, was modeled in part on the WTO's Agreement on Trade-Related Aspects of Intellectual Property (TRIPS Agreement), which was negotiated concurrently with NAFTA. NAFTA's provisions on intellectual property can be divided into three categories: provisions articulating the scope and substance of required intellectual property laws; provisions governing domestic enforcement of intellectual property law; and provisions prescribing the mechanisms for party-to-party dispute resolution.\nArticle 1701, which belongs in the first category, requires each party to provide \"adequate and effective protection and enforcement of intellectual property rights\" to the nationals of another party. At a minimum, this obligation requires that each party give effect to the substantive provisions of four separate international agreements on intellectual property: the Geneva Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms, the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, and either the 1978 or the 1991 International Convention for the Protection of New Varieties of Plants. Each party must also ensure its laws provide specified levels of protection for copyrights, sound recordings, encrypted program-carrying satellite signals, trademarks, patents, layout designs of semiconductor integrated circuits, industrial designs, rights in geographical indications, and trade secrets. Finally, each party must accord national treatment with regard to the protection and enforcement of the intellectual property rights of another party's nationals.\nArticles 1715, 1717, and 1718 of NAFTA fall into the second category. They require that NAFTA parties make civil judicial procedures available to intellectual property right holders; provide criminal procedures and penalties in cases of willful trademark counterfeiting or copyright piracy on a commercial scale; and adopt procedures under which an intellectual property right holders can petition to have infringing goods barred from importation.\nAs under the TRIPS Agreement, disputes arising under Chapter 17 of NAFTA can be settled under the general dispute settlement mechanism. Accordingly, if a NAFTA panel finds that a defending party has acted inconsistently with its NAFTA obligations for the protection or enforcement of intellectual property rights, the complaining party may seek authorization of trade sanctions for noncompliance with the panel's report.", "Unlike most other trade agreements to which the U.S. is a party, NAFTA does not contain labor provisions but, rather, incorporates a side agreement on labor: the North American Agreement on Labor Cooperation (\"NAALC\"). Although NAALC articulates several substantive requirements, few of these requirements are enforceable under the formal mechanism for dispute resolution. Furthermore, NAALC does not permit labor unions or other concerned parties to use the NAALC dispute settlement mechanism to resolve a labor-related dispute with a NAFTA party.\nUnder NAALC, each party retains the right to set and apply its own \"high\" labor standards but is required to enforce labor rights through specified procedures, including citizen access to authorities. Each party must further ensure that enforcement proceedings are \"fair, equitable, and transparent\" and \"comply with due process of law.\" However, a NAALC arbitral panel may only be established to hear a claim by a NAFTA party that another party has engaged in a \"persistent pattern of failure ... to effectively enforce its occupational safety and health, child labor or minimum wage technical labor standards\" where that the pattern is \"trade-related\" and \"covered by mutually recognized labor laws.\" If an arbitral decision is rendered and the offending party fails to comply, the panel may impose a monetary enforcement assessment to be paid into a fund improve or enhance labor law enforcement in the defending party. If the defending party does not pay the assessment, the complaining party may suspend trade benefits equal to the amount of that assessment.\nNAALC requires each NAFTA party to establish its own National Administrative Office (NAO) to monitor NAFTA-related labor rights issues. In the United States, the NAO is the Office of Trade and Labor Affairs (OTLA) in the U.S. Department of Labor. As the U.S. NAO, OTLA is responsible for, inter alia , investigating citizen complaints about another NAFTA party's labor practices, seeking consultations with another party's NAO on specified matters relating to the agreement, and submitting information to the NAALC Secretariat.\nFinally, NAALC establishes the Commission for Labor Cooperation to oversee the implementation of the Agreement, develop recommendations for its further elaboration, create technical assistance programs, and facilitate party-to-party consultations. The Commission also manages the fund into which monetary enforcement assessments levied by NAALC arbitral tribunals are paid.", "In August 2004, the United States signed the CAFTA-DR with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic; a year later, the President signed the requisite implementing legislation ( P.L. 109-53 , 119 Stat. 462, 19 U.S.C. §4001 et seq. ). It is the first free trade agreement between the United States and a group of smaller developing economies. Like NAFTA, CAFTA-DR contains, inter alia , tariff reduction schedules, provisions intended reduce nontariff barriers to trade, and dispute settlement provisions that are distinct from the WTO's Dispute Settlement Understanding. Unlike NAFTA, CAFTA-DR has chapters, rather than side agreements, dedicated to labor and environmental protection.", "Like Chapter 11 of NAFTA, Chapter 10 of CAFTA-DR establishes substantive and enforceable protections for investors in CAFTA-DR parties. Again, key protections include parties' obligations to accord foreign investors national and most-favored-nation treatment; conform with a \"Minimum Standard of Treatment\"; compensate investors adequately for expropriation of their property; and refrain from imposing certain performance requirements, such as requirements that an investment achieve a given level of domestic content or export a given level of goods or services.\nHowever, CAFTA-DR clarifies and expands upon the two protections that are the most litigated under NAFTA: the \"Minimum Standard of Treatment\" and compensable expropriation. As to the former, CAFTA-DR clarifies that the concept of \"fair and equitable treatment\" does not require treatment in addition to or beyond that which is required by customary international law and includes the obligation to accord \"due process\" in adjudicatory proceedings. This language reflects U.S. experience with NAFTA's \"fair and equitable treatment\" provision, which was originally interpreted by a tribunal as requiring fair and equitable treatment in addition to the treatment required under international law. In terms of the expropriation provisions, CAFTA-DR establishes the presumption that a group of regulatory actions designed to protect \"legitimate public welfare objectives, such as public health, safety, and the environment\" cannot be treated as compensable indirect expropriation. There is no such exception from NAFTA's expropriation provisions, and its inclusion in CAFTA-DR seems to reflect heightened concern for parties' regulatory sovereignty in the environmental and public health spheres.\nAs under NAFTA, investors from, and in the territories of, CAFTA-DR parties may enforce the protections accorded them by Chapter 10 through investor-state arbitration. However, as under NAFTA, whether an investor can pursue investor-state arbitration often depends on whether the dispute concerns a covered investment. Notably, CAFTA-DR provides a broader definition of an \"investment\" than NAFTA. Unlike NAFTA, which provides a positive list of property and interests that qualify as investment, Article 10.28 of CAFTA-DR states that \"investment means every asset than an investor owns or controls, directly or indirectly, that has the characteristics of an investment\" and provides an illustrative and non-exhaustive list of possible investments that meet this definition. Intellectual property rights is expressly identified as one type of investment covered by Chapter 10 of CAFTA-DR.\nGenerally, however, the dispute settlement provisions in CAFTA-DR mirror those in NAFTA. CAFTA-DR requires investors to abide by the same six-month \"negotiation\" period as NAFTA and provide the host state with 90 days' written notice before submitting a claim to arbitration. The disputing investor must discontinue and/or waive its right to initiate legal actions against the challenged measures before other courts or tribunals. As under NAFTA's investment dispute settlement mechanism, the investor in a dispute under Chapter 10 of CAFTA-DR decides whether the arbitration will be governed by the Convention on the Settlement of Investment Disputes (ICSID Convention), the ICSID Additional Facility Rules, or the UNCITRAL (United Nations Commission on International Trade Law) rules.\nCAFTA-DR does contain two significant departures from dispute settlement under NAFTA's Chapter 11. First, under CAFTA-DR, investors may bring claims not only for breach of one of the substantive investor protections but also for a breach of an \"investment authorization\" or \"investment agreement.\" In effect, this provision significantly widened the scope of investment disputes that could be settled under CAFTA-DR's Chapter 10 beyond those that could be settled under NAFTA's Chapter 11.\nSecond, unlike the NAFTA parties, CAFTA-DR parties' committed themselves to the creation of an appellate body tasked with reviewing the arbitral tribunals' awards. Specifically, Annex 10-F provides for the establishment of a negotiating group to develop an appellate body or similar mechanism \"to provide coherence to the interpretation\" of CAFTA-DR's investment provisions.", "Chapter 15 of CAFTA-DR expands upon the obligations contained in NAFTA's chapter on intellectual property rights. First, it requires each party to join and give effect to more international agreements on intellectual property. Whereas NAFTA requires its parties to ratify or accede to four international agreements on intellectual property, CAFTA-DR requires its parties to ratify or accede to seven international agreements and make \"all reasonable efforts\" to ratify or accede to another three.\nAdditionally, like NAFTA, CAFTA-DR specifies the level of protection that its parties must accord for different types of intellectual property. However, the list of categories of intellectual property subject to these provisions is slightly different than the list in NAFTA. The list includes: copyrights, encrypted program-carrying satellite signals, trademarks, patents, rights in geographical indications, and Internet domain names.\nFurther, as under NAFTA, each CAFTA-DR party must accord national treatment with regard to the protection and enforcement of the intellectual property rights of another party's nationals. A footnote in the Agreement clarifies that the term \"protection\" in the context of national treatment for intellectual property rights includes \"the availability, acquisition, scope, maintenance, and enforcement of intellectual property rights\" as well as matters affecting \"the prohibition on circumvention of effective technological measures\" that copyright owners use to restrict unauthorized use and \"the rights and obligations\" concerning information that identifies the copyright owner of a given work and any terms or conditions on its use.\nCAFTA-DR also, like NAFTA, requires its parties to make judicial or administrative procedures available to adjudicate claims brought by intellectual property right holders for unauthorized use; provide criminal procedures and penalties in cases of willful trademark counterfeiting or copyright piracy on a commercial scale; and adopt procedures under which an intellectual property right holders can petition to have infringing goods barred from importation. However, CAFTA-DR also requires its parties to establish criminal penalties for the willful importation or exportation of counterfeit or pirated goods. It also places limits on the liability of Internet service providers for copyright infringements that take place through systems or networks under their control so long as they do not control, initiate, or direct the infringements.\nFinally, as under the TRIPS Agreement and NAFTA, disputes arising under Chapter 15 of CAFTA-DR can be settled under the general dispute settlement mechanism. Accordingly, if a CAFTA-DR panel finds that a defending party has acted inconsistently with its CAFTA-DR obligations for the protection or enforcement of intellectual property rights, the complaining party may seek authorization of trade sanctions for noncompliance with the panel's report.", "Unlike NAFTA, labor provisions were written into CAFTA-DR, rather than incorporated through a side agreement. Like the North American Agreement on Labor Cooperation (NAALC) that accompanied NAFTA, Chapter 16 of CAFTA-DR entitles each party to retain its right to set and apply its own labor standards, but also requires each party to enforce labor rights through specified procedures, including citizen access to authorities. Each party must further ensure that enforcement proceedings are \"fair, equitable, and transparent\" and \"comply with due process of law.\"\nAnother important similarity between NAALC and Chapter 16 of CAFTA-DR is that although both articulate several substantive requirements, only one of these requirements is enforceable under the agreements' formal mechanisms for dispute resolution. Article 16.6.7 of CAFTA-DR expressly provides that no party may have recourse to dispute settlement for any matter arising under its labor chapter except for alleged violations of Article 16.2.1(a), which prohibits parties from failing to \"effectively enforce its labor laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the parties.\" There is one significant difference, however, between the dispute settlement process for labor issues under CAFTA-DR and NAALC. Whereas NAFTA parties have the option of suspending trade benefits for a defending party's failure to pay any monetary enforcement assessment levied by an arbitral tribunal in a labor dispute, CAFTA-DR parties do not. CAFTA-DR parties may only request that a dispute settlement panel impose an annual monetary assessment on a defending party for noncompliance with a CAFTA-DR panel's decision in a labor dispute. As under NAALC, assessments are not paid to the complaining party; they are paid into a fund managed by the Agreement's \"Free Trade Commission\" for labor and environmental initiatives, including efforts to improve or enhance labor or environmental law enforcement. The Free Trade Commission, which supervises the implementation of CAFTA-DR generally, is comprised of cabinet-level representatives of the parties.\nThe first formal complaint under Chapter 16 was lodged by the United States against Guatemala in July 2010. The complaint, following a petition filed by the AFL-CIO with the Department of Labor's Office of Trade and Labor Affairs (OTLA), charges that Guatemala's Ministry of Labor failed to both investigate and take appropriate enforcement action against alleged labor law violations and that Guatemala's courts failed to enforce court orders in cases involving labor law violations. Specifically, the U.S. Trade Representative stated in its request that Guatemala's inaction violated its obligations to enforce laws addressing collective bargaining, freedom of association, and working conditions.", "In December 2009, the USTR notified Congress of the President's intent to enter into negotiations for a regional, Asia-Pacific trade agreement, known as the Trans Pacific Partnership (TPP) Agreement. At that time, the other countries involved in the TPP negotiations were Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, and Vietnam. Since then, Malaysia formally joined the negotiations. Canada, Japan, and Mexico have also expressed interest in joining.\nThe USTR intends to proceed with the TPP negotiations as though they were covered by the terms of the Bipartisan Trade Promotion Authority Act of 2002 (Trade Act of 2002). The act entitled trade agreements that satisfied certain requirements, including being \"entered into\" by July 1, 2007, to receive fast track consideration in Congress. Accordingly, although the TPP cannot be entered into before the date required by the Trade Act of 2002, the Administration provided written notice to Congress of its intent to enter the TPP negotiations 90 days before doing so and has consulted with Congress about the negotiations.\nIn November 2011, the TPP countries announced the broad outlines of a possible TPP agreement, and the Obama Administration has stated that completing a TPP text by the end of 2012 is one of its trade priorities. The TPP will include chapters on investment, intellectual property, and labor. It will permit arbitration of investor-state disputes subject to \"appropriate safeguards.\" Australia, one of the countries involved in negotiations, is opposed to the inclusion of investor-state dispute settlement clauses in international agreements, and the U.S. trade agreement with Australia does not authorize investor-state dispute settlement.\nAlthough the details of the intellectual property chapter remain unclear, Obama Administration officials have stated that, relative to earlier U.S. trade agreements, the TPP will have uniquely high standards for intellectual property and digital economy. The Administration would like to see the TPP's chapter on intellectual property address restrictions in the free flow of information and electronic commerce that affect international trade. However, U.S. proposals for expanded terms of copyright, authority for right holders to prohibit temporary copies of their work, and a notice-and-takedown system under which Internet service providers would be obligated to remove allegedly infringing content from their sites are reportedly facing resistance from other TPP countries.\nIn terms of labor, the text tabled by the United States reportedly has slightly higher standards than those established by the Bipartisan Trade Deal. As described in the media, the U.S. proposal would detail countries' obligations to uphold and enforce the International Labor Organization commitments identified in the Bipartisan Trade Deal and specify how TPP countries should deal with public-sector complaints about labor violations. For example, the proposal reportedly states that TPP countries should take measures to reduce trade in products made through forced or child labor.", "In the United States, international trade law is developed and implemented through a joint effort between Congress and the Executive. Consistent with its constitutional authority, the Congress enacts trade laws, which the Executive implements and enforces. However, in the context of international trade agreements, the roles can seem reversed, with the Executive negotiating the agreement and the Congress \"implementing\" it through legislation.", "Article 1, section 8 of the United States Constitution gives Congress the authority to (1) \"lay and collect taxes, duties, imposts, and excises,\" (2) \"regulate commerce with foreign nations,\" and (3) \"make all laws which shall be necessary and proper\" to carry out these specific powers. Whereas Congress was initially only concerned with the conditions under which an import could enter the U.S., it has, over time, used its authority over international trade to regulate virtually all areas of trade policy, including how the Executive negotiates a trade agreement, how a negotiated trade agreement can be implemented, how domestic industries can obtain \"remedies\" for injury resulting from import competition, and how trade sanctions can be imposed.", "Article II of the U.S. Constitution gives the President authority, subject to the advice and consent of the Senate, to make treaties and appoint ambassadors. In addition, several clauses in Article II (namely, the clauses relating to the grant of executive power, the appointment of ambassadors, the submission of treaties, and the authority of the Commander in Chief) have been construed as operating together to vest the President with the vast share of the responsibility for conducting foreign relations. Consequently, the President is widely understood as having the authority to both negotiate trade agreements and execute laws affecting foreign commerce (e.g., through customs enforcement, collection of duties, implementation of trading remedy laws, and the administration of export and import polices).", "The following historical overview of two commonly discussed legal issues in international trade (fast track authority and import competition) illustrates how Congress and the executive branch have exercised their constitutional authorities over aspects of trade policy in response to changing concerns.", "In the name of job creation, the Tariff Act of 1930 (\"Smoot-Hawley Tariff Act,\" 46 Stat. 590, 19 U.S.C. §1202 et seq. ) established the highest tariffs in U.S. history. However, other countries quickly responded by closing off their markets, offsetting any new jobs resulting from the Tariff Act. In part because of this international response to the Tariff Act, Congress was persuaded that the U.S. needed international agreements that reduced tariffs. Accordingly, Congress passed the Trade Agreements Act of 1934 (\"1934 Trade Act,\" Pub. L. 316, 48 Stat. 943, 19 U.S.C. §1351 et seq. ) as an amendment to the Tariff Act, authorizing the President to adjust tariffs by negotiating reciprocal agreements with foreign countries.\nSince Congress first granted the President negotiating authority in international trade with the 1934 Trade Act, Congress has periodically renewed, and occasionally expanded, that authority. When Congress has expanded the President's negotiating authority, it has often done so by substantially reducing the possibility that Congress will delay a trade agreement's implementation or demand amendments. This kind of legislation is commonly known as trade promotion, or \"fast track,\" authority (TPA). At its most basic, TPA resembles a guarantee that a trade agreement negotiated by the President will receive expedited congressional consideration. Consequently, the Executive generally favors TPA because it gives U.S. negotiators both flexibility and credibility to negotiate a trade agreement with another country.\nThe modern form of TPA was first codified by the Trade Act of 1974, which developed out of a proposal by President Nixon for authority to negotiate tariff concessions during the Tokyo Round of the GATT. While the precise form of TPA can vary by the law establishing it, TPA statutes typically: (1) authorize the President to enter certain reciprocal international agreements reducing tariff and nontariff barriers; and (2) entitle those agreements to consideration under fast track procedures in Congress if the President has satisfied additional substantive and procedural conditions. In turn, the fast track procedures promote timely committee and floor action of the legislation at issue by entitling the legislation to receive, for example, an up-or-down vote in Congress without amendment and with limited debate.\nTPA was last granted by the Bipartisan Trade Promotion Act of 2002, which expired at the end of June 2007. Congress has occasionally withheld TPA, and it has also approved and implemented at least one trade agreement that was not considered pursuant to the fast track procedures. Nevertheless, some worry that, in the absence of a statute authorizing TPA, foreign governments will hesitate to engage in substantive trade negotiations with the United States because Congress might demand amendments to a negotiated agreement or delay the agreement's implementation indefinitely.", "While the Tariff Act of 1930 is most often cited for raising tariffs, it, along with the Trade Act of 1974, is the primary source of modern U.S. trade remedy law. The objective of trade remedy laws is to mitigate the adverse impact of import competition, particularly as a result of certain unfair trade practices, on domestic industries and workers. The three most frequently applied U.S. trade remedy laws are countervailing duty law, antidumping law, and safeguard law. The first two are contained in the Tariff Act of 1930 while safeguard law is contained in the Trade Act of 1974.\nThe first U.S. trade remedy law was a countervailing duty law created largely in response to Germany subsidizing its sugar exports. When Germany increased the subsidy to offset the new U.S. duty, Congress made the countervailing duty more flexible by setting the amount of the duty at the amount of the subsidy granted. Over time, this countervailing duty law was amended and incorporated into Title VII of the Tariff Act of 1930.\nU.S. antidumping law followed a similar path of development. In the early 20 th century, Congress became concerned with foreign companies selling their products in the U.S. at a price less than that which they charged in their home market. Consequently, Congress enacted the Antidumping Act of 1916 (Pub. L. 64-271, 39 Stat. 798, repealed by Miscellaneous Trade and Technical Corrections Act of 2004, P.L. 108-429 , 118 Stat. 2434). Title II of the 1921 Emergency Tariff Act (\"Antidumping Act of 1921,\" Pub. L. 67-10, 42 Stat. 9) transformed the original antidumping system into the current model, which imposes an offsetting duty on articles exported to the U.S. at a price less than that charged in the home market. This system was then incorporated into Title VII of the Tariff Act of 1930.\nThe third kind of trade remedy law (safeguards) developed in the mid-20 th century in response to the tariff reductions achieved by international agreements. President Truman, as a concession to Congress, agreed to set up a procedural mechanism to allow U.S. industries to apply for relief from U.S. tariff cuts negotiated as part of the GATT. Congress codified this \"escape clause\" in Section 7 of the Trade Agreements Extension Act of 1951. With the Trade Expansion Act of 1962 (Pub. L. 87-794, 76 Stat. 872), the Kennedy Administration succeeded in tightening the \"escape clause\" standards because of foreign complaints that its use was undercutting U.S. tariff concessions. However, these standards were loosened again with the Trade Act of 1974.", "", "The Office of the United States Trade Representative (USTR) is part of the Executive Office of the President. The USTR is the principal vehicle through which the U.S. conducts trade negotiations and implements U.S. trade policy. It is also responsible for keeping Congress informed of any WTO dispute settlement proceeding involving the United States. Persons or entities desiring an investigation of potential noncompliance with a trade agreement contact the USTR, which handles Section 301 complaints against foreign unfair trade practices. The USTR also oversees the administration of other aspects of U.S. trade law, including the Generalized System of Tariff Preferences (commonly called the GSP), which permits duty-free entry for imports from developing countries, and telecommunications reviews under Section 1377. The USTR is also involved in reviewing recommendations from the International Trade Commission under Sections 201 on safeguards and 337 on intellectual property right infringement.", "The International Trade Administration (ITA), which is located in the U.S. Department of Commerce, is responsible for making determinations in both countervailing duty and anti-dumping cases. Specifically, the ITA must determine whether there are subsidies in a countervailing duty case and whether the sales are made at less than fair value in anti-dumping cases.", "The United States International Trade Commission (ITC) is an independent federal agency with broad investigative responsibilities. One of the ITC's primary duties is its investigative role in the administration of U.S. trade remedy laws, which entails investigating the effects of dumped and subsidized imports on domestic industries and conducting safeguard investigations including investigations under the China-specific safeguard contained in Section 3421 of the Trade Act of 1974. The ITC also adjudicates cases involving imports that allegedly infringe intellectual property rights under Section 337 of the Tariff Act of 1930. In addition, the ITC maintains the Harmonized Tariff Schedule, which Customs Services uses to assess the correct tariff on imported goods.", "U.S. Customs and Border Protection (CBP) is a part of the Department of Homeland Security. Its primary trade functions include (1) enforcing intellectual property rights at the border, thereby preventing the importation of counterfeit, pirated, or patent-infringing goods, (2) assuring that appropriate duties and fees are paid, and (3) securing trade to and from the U.S. from acts of terrorism. In addition, along with the Food and Drug Administration, CBP seeks to protect American people, resources, and economic well-being from foods or plants that are contaminated, diseased, infested, or adulterated.", "The United States Court of International Trade (CIT) is part of the Judicial Branch. It was created by the Customs Courts Act of 1980 ( P.L. 96-417 , 94 Stat. 1727), which transformed the United States Customs Court into the Court of International Trade and expanded the CIT's jurisdiction. The President, with the advice and consent of the Senate, appoints the nine judges with lifetime tenure to the CIT.\nThe CIT, which is located in New York City, has jurisdiction over cases arising anywhere in the nation, but it may also hold hearings in foreign countries. The court may decide any civil action against or by the United States, its officers, or its agencies arising out of any law pertaining to international trade. All litigation involving the Generalized System of Preferences (GSP) is commenced in the Court of International Trade. Appeals may be taken to the United States Court of Appeals for the Federal Circuit, and, ultimately, to the Supreme Court of the United States.\nWhen asked to review the decision of an administrative agency, federal courts apply the \" Chevron \" standard of review, which is often associated with a high level of deference to the agency's decision. The Court of International Trade is no exception. Consequently, when it is reviewing a decision by the U.S. Department of Commerce or ITC to impose antidumping duties or use zeroing to determine a \"dumping margin,\" the CIT frequently respects the agency's decision.", "", "", "Sections 301 through 310 of the Trade Act of 1974 (commonly referred to as \"Section 301\") require the USTR to impose trade sanctions on foreign countries that either (1) violate trade agreements, (2) have acts, policies, or practices that are inconsistent with a trade agreement, or (3) have acts, policies, or practices that are unjustifiable and burden U.S. commerce. Section 301 also gives the USTR the option of imposing trade sanctions on foreign countries that maintain acts, policies, or practices that are unreasonable or discriminatory and burden or restrict U.S. commerce. The USTR is the only body authorized to challenge foreign trade practice on behalf of the United States (or United States industries) under this law.\nBefore imposing mandatory sanctions under Section 301, the USTR engages in a two-step process. First, the USTR must determine under Section 304(a)(1) whether a foreign country's acts or policies (1) violate U.S. rights under any trade agreement; (2) are inconsistent with a trade agreement; or (3) are unjustifiable and burden or restrict U.S. commerce. If the USTR determines that the country's acts or policies fall into one of those categories, then the USTR may, subject to any specific direction of the President, (1) suspend or withdraw benefits of U.S. concessions under the trade agreement; (2) impose duties or other restrictions on the foreign country's goods or services; or (3) enter a binding agreement with the foreign country that commits it to eliminating or phasing out the burden or practice in question or to provide the U.S. with compensatory trade benefits. For example, in the fall of 2010 the United Steelworkers filed a petition with the USTR alleging that China employed a wide range of WTO-inconsistent policies that unfairly protected and supported their domestic producers in the green energy sector. The USTR responded by initiating an investigation and subsequently requested consultations with China, alleging that that China provided prohibited subsidies to wind turbine manufacturers. In June 2011, the United States and China reached an agreement, and China terminated the subsidy program at issue.\nThe USTR is not required to act, however, if a WTO panel or dispute settlement ruling finds that U.S. rights have not been violated. The USTR is also not required to act if it finds (1) that the foreign country is taking satisfactory measures to grant U.S. trade agreement rights; (2) that the foreign country is taking satisfactory measures to either eliminate the practice, provide an imminent solution to it, or provide satisfactory compensatory benefits; or (3) that taking the action would cause serious harm to the U.S. national security.\nAny interested person may file a petition with the USTR requesting that action be taken under Section 301. The USTR must review the petitioner's allegations and publish, in the Federal Register, notice of the determination and a summary of the reasons behind it. The USTR can also initiate investigations to determine whether a matter is actionable.", "Title VII of the Tariff Act of 1930 governs the process by which the United States decides to impose countervailing duties (CVDs) in response to subsidies by foreign countries that either cause or threaten material injury to U.S. industry. CVDs are additional import duties imposed on the subsidized imports. Title VII creates two different sets of rules: one set governs the imposition of CVDs on goods from countries that are part of the Agreement on Subsidies and Countervailing Duties (SCM Agreement) and the other set governs the imposition of CVDs on countries that are not part of the SCM Agreement.\nThe U.S. International Trade Commission and the U.S. Department of Commerce (through the International Trade Administration) jointly investigate allegations of countervailable subsidies. Their investigations commence when an interested party files a countervailing duty petition with both ITA and the ITC alleging that an industry in the United States is materially injured or threatened by reason of the sale of subsidized imports in the United States at less than their fair value. The petition must be filed \"by or on behalf of the industry,\" meaning that the domestic producers or workers who support the petition must account for at least 25% of the total production of the domestic like product and for more than 50% of the production of the domestic like product produced by that portion of the industry expressing support for the petition. Interested parties may file both antidumping and countervailing duty petitions involving the same imported merchandise. Both the ITA and the ITC are willing to review a petition before it is filed to enable the petitioner to learn about any deficiencies in the petition that might delay or prevent the initiation of an investigation.\nOnce a petition is received, the ITA and the ITC enter the first of two rounds of the investigation. In this first round, the agencies must make preliminary determinations on the existence of both a material injury to domestic industry and of a countervailable subsidy by the foreign country.\nThe ITC's preliminary determination evaluates whether there is a \"reasonable indication\" of a material injury, that is, whether the domestic industry is materially injured or threatened with material injury or whether its establishment is materially retarded. However, the ITC will not engage in this preliminary analysis if the allegedly subsidizing country is not a member of the WTO and therefore entitled, under the SCM Agreement, to an injury determination. If, on the other hand, the ITC finds that there is no reasonable indication of material injury, the investigation is terminated and the ITA does not continue its own preliminary investigation.\nThe ITA's preliminary determination evaluates whether there is a reasonable basis to believe or suspect that a countervailable subsidy is being provided with respect to the subject merchandise. If the ITA and the ITC reach affirmative determinations, namely that there is a reasonable basis to believe the country being investigated is providing countervailable subsidy that is causing a material injury to the domestic industry, the importers of the targeted merchandise must post bond or provide some other security for the estimated subsidy for all entries of the subject merchandise. In addition, at that point, the investigation enters the second round in which both agencies must make final determinations.\nThe ITA makes its determination first. The ITA must determine whether or not a countervailable subsidy is being provided with respect to the merchandise. Following the ITA's final determination, the ITC determines whether the domestic industry is materially injured or threatened with material injury or whether its establishment in the United States is materially retarded by reason of imports, sales, or likely sales of merchandise that the ITA has deemed subsidized. However, as with the preliminary injury determination, the ITC will not engage in this final analysis if the allegedly subsidizing country is not a member of the WTO.\nIf the two agencies' final determinations conclude that a countervailable subsidy was provided with the effect of causing or threatening material injury to a domestic industry or its establishment, then, upon publishing its finding, the Department of Commerce issues a countervailing duty order. The duty levied in that order must be equal to the estimated amount of the government or other public subsidization. The U.S. Customs and Border Protection is then required to collect cash deposits of CVD duties on the merchandise in question when it enters the United States. The cash deposits represent an estimate of the actual duties owed. The final amount of the duties collected will be either the cash deposit, or, if an administrative review is requested, the duty established by that review. Generally, the final duty is determined by an administrative review.", "The process by which the United States investigates allegations of dumping—that is, allegations that a foreign manufacturer charges a price for its product that is \"less than its fair value\" —is similar to the process discussed above for investigating allegations of countervailable subsidies. The procedures for assessing and collecting antidumping (AD) duties are prescribed in Title VII of the Tariff Act of 1930. Any interested party may petition the Department of Commerce to investigate allegations of dumping, and these investigations may also be self-initiated by Commerce. The petitions must be filed \"by or on behalf of the industry.\" Like CVD investigations, AD investigations are jointly administered over the course of two rounds by the Department of Commerce and the ITC.\nLike countervailable subsidy investigations, the first round of an antidumping investigation requires preliminary determinations by the ITA and the ITC. If the ITC determines that there is a reasonable indication of material injury, the ITA assesses whether there is a reasonable basis to believe or suspect that the merchandise is being sold, or is likely to be sold, at less than its fair value. Predictably, the second round is the round in which the ITA and ITC make their final determinations on these same questions.\nAs under CVD law, if both the ITA and ITC make affirmative determinations on these questions, then the ITA issues an order instructing the U.S. Customs and Border Protection to collect cash deposits of the AD duties on the merchandise in question when it enters the United States. Antidumping duties are based on the \"weighted average dumping margin\" as determined by the ITA under 19 U.S.C. Section 1677f-1. In determining the size of a dumping margin for a particular product, the Department of Commerce has historically used a practice known as \"zeroing\" in its administrative reviews. Zeroing entails aggregating the dumping margins for all of the sub-products but assigning the value of zero to a sub-product's dumping margin when its export price exceeds its normal (home market) value.\nThe Department of Commerce's practice of using zeroing to calculate dumping margins generated complaints from other WTO Members. While the Court of International Trade found that Commerce's decision to use \"zeroing\" to calculate the dumping margin is a reasonable and permissible interpretation of the law, the WTO consistently ruled against the U.S. practice—declaring it a violation of U.S. obligations under the WTO Antidumping Agreement. In February 2012, the United States announced that it had reached agreements with the European Union and Japan to end \"zeroing.\" Pursuant to those agreements, the U.S. Department of Commerce published a final rule in the Federal Register pursuant to which the Department will abandon zeroing in administrative review, new shipper review, and expedited antidumping reviews of AD orders except, perhaps, where it determines that zeroing would be appropriate. Under this new rule, the Department will calculate weighted-average margins of dumping and antidumping duty assessments in a manner that provides offsets for non-dumped comparisons. The Department also adopted a timetable for modifying its practice in five-year \"sunset\" reviews of AD orders so that it will no longer rely on weighted-average dumping margins that were calculated using methodology deemed WTO-inconsistent.", "", "Sections 201 through 204 of the Trade Act of 1974 provide the authority and procedures for the President to take action, including import relief, to facilitate a domestic industry's adjustment to import competition. Successful adjustment to import competition is defined as the domestic industry's ability to successfully compete or its orderly transfer of resources to other productive pursuits.\nUnder Section 201, if the International Trade Commission determines that an article is being imported in such increased quantities as to be a substantial cause, or threat, of serious injury to the domestic industry producing the like or directly competitive article, the President shall take all appropriate action to facilitate the domestic industry's adjustment. Any entity that is representative of an industry may petition the ITC to make this determination. The law lists several factors, including a relative increase in imports and decline in the proportion of the domestic market supplied by domestic producers, that the ITC must consider in making its determination. However, the statute does not cabin the ITC's investigation to those factors.\nIf the ITC makes an affirmative determination, it must recommend the action that would address the serious injury, or threat thereof, to the domestic industry. Specifically, it is authorized to recommend, among other actions: an increase or imposition of a duty, a tariff-rate quota, and a modification or imposition of a quantitative restriction. Upon receiving a report of the ITC's determination and recommendations, the President must determine and take \"all appropriate and feasible action\" to make a positive adjustment to import competition. The President is required to consider certain factors before determining what action to take. If the President concludes that there is no appropriate and feasible action to take, the President must transmit to Congress a document setting forth the reasons for the decision.", "In addition to Section 201, Title IV of the Trade Act of 1974 also provides country-specific safeguards under which the President can provide domestic industries with relief from domestic market disruption. In advance of China's accession to the WTO, for example, the United States and China negotiated two temporary China-specific safeguards, which are scheduled to expire in 2013.\nThe first \"China safeguard,\" which is contained in Section 421 of the Trade Act of 1974, entitles the President to temporarily increase duties or other import restrictions to remedy an import surge that threatens—or causes—market disruption of a domestic producer of a similar product. In 2009, the Obama Administration exercised this authority after determining that imports of new pneumatic car tires from China were being imported into the United States in a fashion that caused or threatened to cause market disruption to domestic car tire products. Accordingly, the President proclaimed an additional duty on certain Chinese tires. Although China requested WTO consultations with the United States, both the WTO panel and Appellate Body reports supported the U.S. measures.\nThe second China-specific safeguard, Section 422 of the Trade Act of 1974, is an import monitoring provision. It provides that if any WTO Member other than the United States requests consultations with China under the product-specific safeguard provision, the United States Customs Service must monitor imports of those same products into the United States. To date, the President has not taken action pursuant to Section 422.", "", "The Harmonized Tariff Schedule (HTS) was enacted by the Omnibus Trade and Competitiveness Act of 1988. It identifies the \"rates of duty\" for particular classes and articles of imported and exported goods. The HTS is divided into three columns laying out (1) the rates of duty for products receiving most favored nation treatment, (2) the rates of duty for products that do not receive that treatment, and (3) the rates of duty for special duty-free and other preferential rates that are accorded under free trade agreements and trade preference programs. In addition, there are three different bases for assessing duties: (1) ad valorem rates, which assess duties by the value of the article; (2) specific rates, which assess duties by the weight or quantity of the article; and (3) compound rates, which assess duties by a combination of ad valorem and specific rates. However, Chapters 98 and 99 of the HTS also include special provisions and modifications that permit, in certain circumstances, duty-free or partial duty-free entry of goods that would otherwise be subject to duty. Among the exceptions to the HTS are suspensions or reductions of duties resulting from free trade agreements and other international obligations, from a U.S. tourist's purchases while overseas, and from the application of the Generalized System of Preferences, discussed below.", "Title V of the Trade Act of 1974, P.L. 93-618 , as amended, governs the U.S. Generalized System of Preferences (GSP). The GSP provides non-reciprocal, duty-free tariff treatment to certain products imported from over one hundred designated developing countries. The GSP originated in dialogues between the developed and the developing world in which the latter successfully pushed for special access to industrial markets. Under the GSP, any United States producer of an article that competes with GSP imports can petition to have a country or particular group of products removed from the program. Similarly, any foreign exporter can petition for product or beneficiary country status in the program.\nAs discussed below, the President has broad authority to withdraw, suspend, or limit the application of duty free entry under the GSP system. For example, in 2012, the United States suspended Argentina's eligibility as a beneficiary of the GSP because of the country's failure to pay investor-state arbitration awards to two U.S. firms.", "A list of GSP qualified nations and territories is contained in HTS General Note 4. Certain countries and categories of countries are statutorily barred from benefitting from the GSP program. For example, Congress has identified eight countries plus the European Union member states that are ineligible for the GSP. Other countries prohibited from benefiting from the GSP include, inter alia , communist states that meet certain criteria; nations that collude with other countries to withhold supplies or resources from international trade or otherwise raise the price of goods in a way that could seriously disrupt the world economy; countries that have not taken or are not taking steps to afford internationally recognized worker rights to workers; and countries that have aided or abetted an individual or group that has committed an act of international terrorism.\nOutside of these bars on eligibility, the President has substantial discretion over which countries and products receive beneficiary status. In determining whether a country is eligible, the Administration must evaluate, inter alia , if that country is upholding workers' rights, protecting intellectual property rights, extending equitable and reasonable access to its markets, reducing trade distorting investment practices (such as export performance requirements), and reducing barriers to trade in services. Although the Administration must consider these and other factors in assessing a country's eligibility, the President may determine that a country qualifies for beneficiary status despite having a less desirable record on any one or set of them if the Administration finds GSP duty free entry would be in the national economic interest of the United States.\nThe Administration's review of a country's eligibility under the GSP program is ongoing, which allows for disqualification, reinstatement, and graduation of GSP beneficiary nations. Moreover, the President must graduate a beneficiary country from the GSP program if the Administration determines that the nation has become a \"high income\" country. Any country designated as a beneficiary nation under the GSP program that is subsequently disqualified or graduated must receive notice and an explanation of the decision. In addition, before the President designates a country as a GSP beneficiary, graduates a country, or terminates a country's GSP beneficiary status, the President must notify Congress.", "The President issues a list of products from each country that qualify for duty free entry. \"Import sensitive\" products, however, are statutorily ineligible for the GSP program. These products include most textiles and apparel goods, watches, footwear and other accessories, and certain categories of electronics, steel, and glass products.\nIn addition to the statutory bars on an import's eligibility for duty-free treatment under the GSP program, there are two \"competitive need\" limitations. The first competitive need limitation bars duty-free entry for a product from a beneficiary country if, during the preceding year, that country exported to the U.S. more than a designated dollar volume of that product. The second bars duty-free entry for a product if, during the preceding year, the beneficiary country exported 50% or more of the total U.S. imports of that particular product. However, the President has authority to waive these limitations in certain circumstances.", "In addition to the U.S. GSP program, the United States has similar non-reciprocal duty-free entry programs for particular regions. One program is the Caribbean Basin Initiative of 1983 (CBERA), which offers substantial duty free entry to nearly all of the islands in, and many countries bordering, the Caribbean Sea. A second is the Andean Trade Preference Act of 1991, under which the President is authorized to grant duty free treatment to imports of eligible articles from Colombia, Peru, Bolivia, and Ecuador. A third trade preferences program is contained in the African Growth and Opportunity Act (AGOA), which authorizes the President to designate Sub-Saharan African countries as beneficiary countries eligible to receive duty-free treatment for certain articles.", "Although the United States has imposed trade embargoes since the earliest days of the republic, economic sanctions have become an increasingly prevalent feature of U.S. foreign policy in recent decades. In general, the President imposes these sanctions by issuing an Executive Order under existing statutory authorities. However, Congress also has a history of enacting legislation that purports to impose sanctions directly or instructs the President as to what actions may or must be taken with respect to imposing sanctions on a particular country or entity. Once imposed, sanctions are implemented primarily by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce.\nThis section briefly discusses two of the most commonly cited sources of the President's statutory authority for country-specific economic sanctions: the Trading with the Enemy Act and the International Emergency Economic Powers Act. However, sanctions, like other trade measures, must be crafted to comply with not only domestic laws but also principles of customary international law and WTO obligations. When the United States imposes unilateral sanctions, it can provoke friction not only with the target country but also with countries that trade with the target country. In turn, these countries may challenge the sanctions through WTO dispute settlement proceedings or other avenues.", "The Trading with the Enemy Act (TWEA) was intended to authorize country-specific sanctions during times of war. Congress briefly expanded TWEA to authorize sanctions during periods of declared national emergency, but, in 1977, Congress relocated the statutory authority for issuing sanctions in national emergencies from TWEA to the International Emergency Economic Powers Act (IEEPA).\nDespite these changes, the powers granted by Section 5 of TWEA have remained relatively stable, and TWEA remains, at least in part, the statutory basis for some U.S. sanctions programs. TWEA authorizes the President to take a wide variety of actions with respect to virtually any transaction that is conducted by a person subject to U.S. jurisdiction or that involves property subject to U.S. jurisdiction and in which the foreign country—or a national thereof—has an interest. Specifically, TWEA states that the President may\n[I]vestigate, regulate, direct and compel, nullify, void, prevent, or prohibit any acquisition, holding, withholding, use, transfer, withdraw, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.\nTWEA's prohibitory language is often tracked in the regulations implementing various economic sanctions programs. However, the President has also exercised his affirmative authorities under TWEA by, for example, directing and compelling certain foreign assets to be held in interest-bearing accounts.", "IEEPA replaced TWEA in 1977 as the source of authority for the President to issue economic sanctions during periods of declared national emergency—as opposed to wartime. Before the President may exercise his IEEPA authorities, he must declare a national emergency with respect to the threat involved. In addition, the President must consult with Congress, whenever possible, before declaring a national emergency and regularly while the national emergency remains in force. The question of whether a threat rises to the level of a national emergency sufficient to trigger IEEPA-based sanctions appears to be nonjusticiable. However, Congress may enact—and is required at a certain point to consider—a joint resolution terminating a Declaration of National Emergency.\nAlthough the statutory trigger is different, the powers of IEEPA are very similar to those granted by TWEA. Under IEEPA, the President may \"investigate, regulate, prevent, or prohibit\" virtually any foreign economic transaction, from import or export of goods and currency to transfer of exchange or credit. The USA Patriot Act further augmented the President's IEEPA authority by vesting him with the additional power to (1) block property during the pendency of an investigation and (2) confiscate and vest property of any foreign country or foreign national that has planned, authorized, aided, or engaged in armed hostilities with or attacks against the United States. IEEPA exempts very few international transactions from the President's control, and it grants the President broad authority to prescribe definitions. For example, the President may define who is a \"U.S. person\" subject to the prohibitions and restrictions of sanctions issued under IEEPA.\nOver the past few decades, IEEPA has become the primary source of authority for country-specific sanctions regimes. It was first used by President Carter in response to the Iranian hostage crisis. Similarly, after 9/11, President George W. Bush relied on IEEPA to block property and property interests of foreign persons who committed acts of terrorism against U.S. nationals or the U.S. economy. Among the sanctions programs currently based, at least in part, on the President's IEEPA authority are the U.S. sanctions against Myanmar (Burma), Cote d'Ivoire, Iran, North Korea, Sudan, and Syria." ], "depth": [ 0, 1, 1, 2, 3, 4, 4, 3, 4, 4, 4, 4, 4, 4, 4, 4, 4, 4, 4, 3, 3, 4, 4, 3, 2, 3, 4, 4, 4, 3, 4, 4, 4, 3, 1, 2, 2, 2, 3, 3, 1, 2, 2, 2, 2, 2, 1, 2, 3, 3, 3, 3, 4, 4, 2, 3, 3, 4, 4, 3, 2, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h1_full", "h0_full h1_full", "h1_title", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "", "", "h2_full", "", "", "h2_full", "", "", "h2_title", "", "", "", "", "h2_full", "h2_title h1_title", "h2_title h1_title", "h2_full", "", "", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "" ] }

{ "question": [ "What guides the United States' trade obligations?", "How do domestic trade laws influence these obligations?", "What does this report address?", "What is the relationship between trade agreements and trade barriers?", "What is the difference between tariff and non-tariff barriers?", "How have U.S. trade agreements evolved?", "How else have trade agreements evolved?", "What do contemporary trade agreements do?", "What are domestic trade laws?", "What does this report discuss?", "What is the report's discussion of federal agencies?", "What are the agencies discussed within?" ], "summary": [ "The United States has trade obligations under multilateral trade agreements, including the General Agreement on Tariffs and Trade (GATT) and the other World Trade Organization (WTO) agreements, as well as bilateral and regional trade agreements.", "A variety of domestic laws implement these agreements, prescribe U.S. trade policy goals, or regulate international trade to achieve specific foreign policy objectives.", "This report provides an overview of both international and domestic trade law, focusing on a select group of international agreements and statutes that are most commonly implicated by U.S. trade interests and policy.", "Historically, parties to international trade agreements were obligated to reduce two kinds of trade barriers: tariffs and non-tariff trade barriers.", "Whereas the former may hinder an imported product's ability to compete in a foreign market by imposing an additional cost on the product's entry into the market, the latter has the potential to bar an import from entering that market altogether by, for example, restricting the number of such imports that can enter the market or imposing prohibitively strict packaging and labeling requirements. Consequently, at their most basic, international trade agreements obligate their parties to convert at least some of their non-tariff trade barriers into tariffs, set a ceiling on the tariff rates for particular products, and then progressively reduce those rates over time.", "However, over time, U.S. trade agreements have become increasingly complex. The U.S. model free trade agreement now targets not only tariffs and non-tariff barriers, but also domestic policies in areas such as labor, environmental law, and electronic commerce that U.S. policymakers consider unfair trade practices.", "Trade agreements have also evolved to include elaborate trade dispute settlement mechanisms.", "As illustrated in this report, the typical international trade agreement today disciplines its parties' use of tariffs and trade barriers, authorizes its parties to use discriminatory trade measures to remedy certain unfair trade practices, and establishes a dispute settlement body.", "Domestic trade laws, meanwhile, can broadly be classified as laws (1) authorizing trade remedies, including remedies for violations of trade agreements, countervailing duties for subsidized imports, and antidumping duties for imports sold at less than their normal value, (2) setting domestic tariff rates and providing special duty-free or preferential tariff treatment for certain products, and (3) authorizing the imposition of trade sanctions to protect U.S. security or achieve foreign policy goals.", "In addition to describing these domestic laws, this report summarizes the constitutional authorities of Congress and the executive branch over international trade.", "Finally, the report identifies many of the federal agencies and entities charged with overseeing the development of new trade agreements and the administration and enforcement of federal trade laws.", "Among the federal agencies and entities discussed are the United States Trade Representative (USTR), the International Trade Administration (ITA), the International Trade Commission (ITC), the United States Customs and Border Protection (CBP), and the United States Court of International Trade (CIT)." ], "parent_pair_index": [ -1, 0, 0, -1, 0, -1, 2, 2, -1, -1, 1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2 ] }

{ "title": [ "", "Introduction", "Expiration of Certain NFIP Authorities", "Legislation in the 115th Congress", "NFIP Premiums and Surcharges", "Pre-FIRM Subsidy", "Newly Mapped Subsidy", "Grandfathering", "Proposed Changes to Premiums and Surcharges in H.R. 2874", "Affordability", "Provisions Related to Affordability in H.R. 2874", "Increasing Participation in the NFIP", "Provisions Related to Increasing Participation in H.R. 2874", "The Role of Private Insurance in the NFIP", "Barriers to Private Sector Involvement", "Reinsurance", "Provisions Related to Private Insurance in H.R. 2874", "Properties with Multiple Losses", "Provisions Related to Multiple Loss Properties in H.R. 2874", "Noninsurance Functions of the NFIP", "Flood Mitigation", "Selected Provisions Related to Flood Mitigation in H.R. 2874", "Floodplain Mapping", "Selected Provisions Related to Floodplain Mapping in H.R. 2874" ], "paragraphs": [ "", "The National Flood Insurance Program (NFIP) is authorized by the National Flood Insurance Act of 1968, and was reauthorized until September 30, 2017, by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). Congress amended elements of BW-12, but did not extend the NFIP's authorization further in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The NFIP received a short-term reauthorization through December 8, 2017, a second short-reauthorization through December 22, 2017, and a third short-term reauthorization through January 19, 2018. The NFIP lapsed between January 20 and January 22, 2018, and received another short-term reauthorization until February 8, 2017. The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent Federal Insurance and Mitigation Administration (FIMA). The NFIP has two main policy goals: (1) to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk of property owners to the federal government; and (2) to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. As of October 2017, the NFIP had 5 million flood insurance policies providing nearly $1.27 trillion in coverage, with over 22,000 communities in 50 states and 6 other jurisdictions participating in the NFIP.\nAs a public insurance program, the goals of the NFIP were originally designed differently from the goals of private-sector companies. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it, and to reduce government's cost after floods. From the inception of the NFIP, the program has been expected to achieve multiple objectives, some of which may conflict with one another:\nTo ensure reasonable insurance premiums for all. To have risk-based premiums that would make people aware of and bear the cost of their floodplain location choices. To secure widespread community participation in the NFIP and substantial numbers of insurance policy purchases by property owners. To earn premium and fee income that, over time, covers claims paid and program expenses.\nCongress has authorized FEMA to borrow no more than $30.425 billion from the U.S. Treasury in order to operate the NFIP. At the beginning of the 2017 hurricane season, the NFIP owed $24.6 billion to the Treasury. On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, Hurricane Irma, and Hurricane Maria, reaching the NFIP's authorized borrowing limit of $30.425 billion. On October 26, 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. This represents the first time that NFIP debt has been cancelled, although Congress appropriated funds between 1980 and 1985 to repay NFIP debt. FEMA borrowed another $6.1 billion on November 9, 2017, to fund estimated 2017 losses, including those incurred by Hurricanes Harvey, Irma, and Maria and anticipated programmatic activities, bringing the debt up to $20.525 billion. The NFIP currently has $9.9 billion of remaining borrowing authority.", "The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur after February 8, 2018:\nThe authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion.\nOther activities of the program would technically remain authorized following February 8, 2018, such as the issuance of Flood Mitigation Assistance (FMA) grants. However, the expiration of the key authorities described above would have varied and generally serious effects on these remaining NFIP activities.", "The House Financial Services Committee completed markup on June 21, 2017, of seven bills to reform and reauthorize the NFIP. The 21 st Century Flood Reform Act ( H.R. 2874 ) came to the House floor under H.Res. 616 , and included provisions from the six other bills. H.R. 2874 passed the House on a vote of 237-189 on November 14, 2017.\nThree bills have been introduced in the Senate to reauthorize the NFIP: S. 1313 (Flood Insurance Affordability and Sustainability Act of 2017), S. 1368 (Sustainable, Affordable, Fair and Efficient [SAFE] National Flood Insurance Program Reauthorization Act of 2017), and S. 1571 (National Flood Insurance Program Reauthorization Act of 2017). None of these bills have yet been considered by the Senate Committee on Banking, Housing, and Urban Affairs, the committee assigned all three Senate bills.\nThe remainder of this report will summarize relevant background information and proposed changes to selected areas of the NFIP in H.R. 2874 , which would reauthorize the NFIP until September 30, 2022, among other things. The report does not examine every provision in detail, but focuses on selected provisions which would introduce significant changes to the NFIP or where the effect of the provision may not be clear.", "As of October 2017, the written premium on approximately 5 million policies in force was $3.6 billion. Included within NFIP premiums are several fees and surcharges mandated by law on flood insurance policies. First, the Federal Policy Fee was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the Federal Policy Fee is set by FEMA and can increase or decrease year to year. As of October 2017, the fee is $50 for Standard Flood Insurance Policies (SFIPs), $25 for Preferred Risk Policies (PRPs), and $25 for contents-only policies.\nSecond, a reserve fund assessment was authorized by Congress in BW-12 to establish and maintain a Reserve Fund to cover future claim and debt expenses, especially those from catastrophic disasters. By law, FEMA is required to maintain a reserve ratio of 1% of the total loss exposure through the reserve fund assessment. However, FEMA is allowed to phase in the reserve fund assessment to obtain the ratio over time, with an intended target of not less than 7.5% of the 1% reserve fund ratio in each fiscal year. From April 2016, using its discretion, FEMA began charging every NFIP policy a reserve fund assessment equal to 15% of the premium charged for both SFIPs and PRPs. The reserve fund assessment has increased from its original status, in October 2013, of 5% on all SFIPs, and 0% on PRPs.\nIn addition to the reserve fund assessment, all NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. Revenues from the surcharge are deposited into the Reserve Fund.\nExcept for certain subsidies, flood insurance rates in the NFIP are directed to be \"based on consideration of the risk involved and accepted actuarial principles,\" meaning that the rate is reflective of the true flood risk to the property. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer discounts to other classes of properties in order to achieve the program's objective that owners of existing properties in flood zones could afford flood insurance. There are three main categories of properties which pay less than full risk-based rates: pre-FIRM properties, newly mapped properties, and grandfathered properties.", "Structures built or substantially improved before December 31, 1974, or before FEMA published the first FIRM for their community, whichever was later, are referred to as pre-FIRM structures. Policies on such structures are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to prefunding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, the flood insurance could distribute some the financial burden among those protected by flood insurance and the public. As of March 2017, approximately 16.1% of all NFIP policies received a pre-FIRM subsidy. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies by comparison to the total policy base has decreased. The pricing subsidy for pre-FIRM policies is progressively being phased out of the NFIP at a rate between 5% and 18% for primary residences and 25% for all other categories, as was initially required under Section 100205 of BW-12, and revised by Sections 3 and 5 of HFIAA.", "Congress introduced a new form of subsidy in HFIAA for owners of properties newly mapped into a Special Flood Hazard Area (SFHA). The newly mapped procedure applies to properties previously in zones of moderate or minimal flood hazards which are newly mapped into a SFHA on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. The newly mapped procedure does not apply to properties mapped into a SFHA by the initial FIRM for a community entering the NFIP, and certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the PRP rate, but with a higher Federal Policy Fee (FPF), for the first 12 months following the map revision. After the first year, the newly mapped rate is to begin its transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. As of March 2017, about 3.9% of NFIP policies receive a newly mapped subsidy.", "Using the authority to set rate classes for the NFIP and to offer lower than actuarial premiums, FEMA allows owners of properties that were built in compliance with the FIRM in effect at the time of construction to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as \"grandfathering,\" \"administrative grandfathering,\" or the \"grandfather rule\" and is separate and distinct from the pre-FIRM subsidy. FEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow policyholders to pay premiums that are less than their known actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder.\nCongress eliminated the practice of offering grandfathering to policyholders after new maps were issued in BW-12, but then subsequently reinstated the practice in HFIAA. FEMA does not have a definitive estimate on the number of properties that have a grandfathered rate in the NFIP, though data are being collected to fulfill a separate mandate of HFIAA. Unofficial estimates suggest that at least 10%-20% of properties are grandfathered, and these figures may increase with time as newer maps are introduced in high-population areas.", "Section 102 would phase out the pre-FIRM subsidy for primary residences at a rate of 6.5%-15% (compared to the current rate of 5-18%), except that in the first year after enactment, the minimum rate would be 5%; in the second year after enactment, the rate would be 5.5%; and in the third year of enactment, the rate would be 6%. The phaseout of the pre-FIRM subsidy for other categories of properties (nonprimary residences, nonresidential properties, severe repetitive loss properties, properties with substantial cumulative damage, and properties with substantial damage or improvement after July 6, 2012) would remain at 25%. This section would make it possible for FEMA to raise premiums more rapidly than under current legislation by increasing the minimum rate at which the pre-FIRM subsidy could be removed for primary residences. Section 105 would require FEMA, not later than two years after enactment, to calculate premium rates based on a consideration of the differences in flood risk resulting from coastal flood hazards and riverine, or inland flood hazards. Six months prior to the effective date of risk premium rates, the FEMA Administrator would be required to publish in the Federal Register an explanation of the bases for, and methodology used to determine, the chargeable premium rates to be effective for flood insurance coverage under this title. Certain aspects of coastal flood risk are already incorporated into NFIP rates, notably risk from wave action (known as the \"V\" zone); how this may change with this possible new requirement is not yet known. Section 109 would require that no new flood insurance coverage may be provided after September 30, 2022, unless an appropriate body (e.g., the local or state government) has imposed, by statute or regulation, a duty on any seller or lessor of improved real estate to provide a property flood hazard disclosure which discloses any actual knowledge of the seller of prior physical damage caused by flood to any building on the property, prior insurance claims for flood losses (NFIP or private flood insurance), any previous notification regarding the designation of the property as a multiple loss property, and any federal legal obligation to obtain and maintain flood insurance running with the property. This disclosure may affect properties that have flood history during real estate transactions by reducing the likelihood of them selling and/or reducing the value of the sale. Section 111 would require FEMA to conduct a study to evaluate insurance industry best practice and develop a feasible implementation plan and projected time line for including replacement cost value in setting NFIP premium rates. The Administrator would be required to begin gradually phasing in the use of replacement cost value in setting NFIP premium rates 12 months after enactment, with replacement cost value to be used in setting all NFIP premium rates by December 31, 2020. If this provision were enacted, it is anticipated that those properties with higher replacement costs than current local or national averages would begin paying more for their NFIP coverage than those properties that are below the average, which would pay less. How much more, or how much less, is uncertain. Section 112 would cap the premiums for 1-4 unit residential properties with elevation data meeting standards of the Administrator at $10,000 per year, adjusted for inflation every five years. There is currently no statutory cap on premiums. This cap could affect 800 properties, or 0.02% of NIFP policies, though that figure is subject to considerable change (likely increasing) as premium rates change going forward. Section 301 would require the Administrator, not later than three years from enactment, to calculate premium rates based on both the risk identified by the applicable FIRMs and by other risk assessment data and tools, including risk assessment models and scores from appropriate sources. This provision would expand on the existing method of determining rates (the FIRM) and allow alternatives, such as a risk score methodology (for example, a scale of 1 to 10 or 1 to 100, where the premiums would increase with the numerical score). Section 502 would increase the HFIAA surcharge from $25 to $40 for primary residences and from $250 to $275 for nonresidential properties and most nonprimary residences. However, the HFIAA surcharge for nonprimary residences which are eligible for a Preferred Risk Policy would drop from $250 to $125. This provision would increase the amount that most policyholders pay for flood insurance; however, FEMA does not include the HFIAA surcharge in their calculation of premium rate increases, so this increase would not affect the cap set out in Section 102. Section 503 would require the Administrator, beginning in fiscal year 2018, to place in the reserve fund an amount equal to not less than 7.5% of the required reserve ratio. If in any given year the Administrator does not do so, for the following fiscal year the Administrator would be required to increase the reserve fund assessment by at least one percentage point over the rate of the annual assessment, and to continue such increases until the fiscal year in which the statutory reserve ratio is achieved. This provision would likely increase premiums for all NFIP policyholders.", "Some in Congress have expressed concern related to the perceived affordability of flood insurance premiums and the balance between actuarial soundness and other goals of the NFIP. Particularly following the increase in premiums associated with BW-12 and HFIAA, concerns were raised that risk-based premiums could be unaffordable for some households. Section 100236 of BW-12 called for an affordability study by FEMA and also a study by the National Academy of Sciences (NAS) regarding participation in the NFIP and the affordability of premiums. The NAS completed the Affordability Study report in two parts. In HFIAA Section 9, Congress also required FEMA to develop a Draft Affordability Framework \"that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold under the National Flood Insurance Program, including issues identified in the affordability study….\" The framework was due 18 months following the submission of the Affordability Study which, based on FEMA's stated date of submittal of the Affordability Study, was September 10, 2017. According to FEMA, this report is still in the review stage.", "Section 103 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for owner-occupants of 1-4 unit residences in communities participating in the NFIP, and for which a Base Flood Elevation (BFE) is identified on a FIRM that is in effect and for which such other information is available as the Administrator considers necessary to determine the flood risk associated with such property. Eligibility would be determined by the state, but the affordability program would not be available to a household with income that exceeds the greater of (i) the amount equal to 150% of the poverty level for each state, or (ii) the amount equal to 60% of the median income of households residing in the state. Assistance could be in the form of either establishing a limit on the amount of chargeable risk premium paid or limiting the rate of increase in the amount of chargeable premiums. The state affordability program would be funded through a state affordability surcharge on each policy within that state for a property that is (A) not a residential property having four or fewer residences, or (B) such a residential property but is owned by a household that is not an eligible household for purposes of such fiscal year. Because this approach to affordability would not be funded by either federal or state taxes, but rather by other NFIP policyholders, it would create a new cross-subsidy within the NFIP for any states that develop an affordability program.", "A long-standing objective of the NFIP has been to increase purchases of flood insurance policies, and this objective of widespread NFIP purchase was one motivation for keeping NFIP premiums reasonable and for later introducing the requirement to purchase flood insurance as a condition of receiving a federally backed mortgage for properties in a SFHA, commonly referred to as the mandatory purchase requirement. Early in the program, the federal government found that making insurance available, even at subsidized rates, did not provide sufficient incentive for communities to join the NFIP or for individuals to purchase flood insurance. In response, Congress passed the Flood Disaster Protection Act of 1973, which required the purchase of flood insurance and placed the responsibility for ensuring compliance on lending institutions. This mandatory purchase requirement was later strengthened by the National Flood Insurance Reform Act of 1994.\nIn a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. By law and regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSE) must require these property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. However, there are no official statistics available from the federal mortgage regulators responsible for implementation of the mandate, and no up-to-date data on national compliance rates with the mandatory purchase requirement. A 2006 study commissioned by FEMA found that compliance with this mandatory purchase requirement may be as low as 43% in some areas of the country (the Midwest), and as high as 88% in others (the West). A more recent study of flood insurance in New York City found that compliance with the mandatory purchase requirement by properties in the SFHA with mortgages increased from 61% in 2012 to 73% in 2016. The escrowing of insurance premiums, which began in January 2016, may increase compliance with the mandatory purchase requirement more widely.\nNFIP policies are not distributed evenly around the country; about 37% of the policies are in Florida, with 11% in Texas and 9% in Louisiana, followed by California with 5% and New Jersey with 4%. These five states account for 66% of all of the policies in the NFIP. NFIP participation rates are higher in coastal locations than in inland locations, and are highest in the most risky areas due to mandatory purchase requirements. The NFIP could potentially be financially improved with a more geographically diverse policy base and, in particular, through finding ways to increase coverage in areas perceived to be at lower risk of flooding than those in the SFHA.\nThe flooding caused by the 2017 hurricanes highlighted the issue of low penetration rates of flood insurance. In the counties in Texas with a FEMA Individual Assistance declaration for Hurricane Harvey, the average penetration rate for all 41 counties was only 10%, with a 21% penetration rate for structures within the SFHA in those counties. The counties with the highest penetration rate were on the coast: Aransas County (72% penetration in SFHA, 43% penetration county-wide), Nueces County (70% in SFHA, 21% county-wide), and Galveston County (64% in SHFA, 47% county-wide). In the counties in Florida with a FEMA Individual Assistance declaration for Hurricane Irma, the average penetration rate for all 48 counties was only 12%, with a 31% penetration rate for structures within the SFHA in those counties. The counties with the highest penetration rate were St. Johns (73% in SFHA, 35% county-wide), Flagler (72% in SFHA, 18% county-wide), Nassau County (62% in SFHA, 25% county-wide), and Palm Beach County (62% in SFHA, 22% county-wide). NFIP Penetration rates were extremely low in Puerto Rico, with only 4436 residential policies at the time Hurricane Maria hit, for an average penetration rate of 0.23%, and in the Virgin Islands, with only 1412 policies, for an average penetration rate of 2.5%.", "Section 508 would increase the civil monetary penalties from $2000 to $5000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement. In addition, the federal entities for lending regulations, in consultation with FEMA, would be required jointly to update and reissue the guidelines on compliance with mandatory purchase. Section 514 would require a report by the Government Accountability Office (GAO) within 18 months of enactment on the implementation and efficacy of the mandatory purchase requirement.", "One of the reasons that the NFIP was originally created was because private flood insurance was widely unavailable in the United States. Generally, private companies could not profitably provide flood coverage at a price that consumers could afford, primarily because of the catastrophic nature of flooding and the difficulty of determining accurate rates. Until recently the role of the private market in primary, residential flood insurance has been relatively limited. The main role of private insurance companies at the moment is in the operational aspect of the NFIP. FEMA provides the overarching management and oversight of the NFIP, and retains the actual financial risk of paying claims for the policy (i.e., underwrites the policy). However, the bulk of the day-to-day operation of the NFIP, including the marketing, sale, writing, and claims management of policies, is handled by private companies. The arrangement between the NFIP and private industry is authorized by statute and guided by regulation.\nThere are two different arrangements that FEMA has established with private industry. The first is the Direct Servicing Agent (DSA), which operates as a private contractor on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The DSA handles the policies of severe repetitive loss properties. The second arrangement is called the Write-Your-Own (WYO) Program, where private insurance companies are paid to directly write and service the policies themselves. Roughly 86% of NFIP policies are sold by the 68 companies participating in the WYO Program. Companies participating in the WYO program are compensated through a variety of methods. Some have argued that the levels of WYO compensation are too generous, while others have argued that reimbursement levels are insufficient to cover all expenses associated with servicing flood policies under the procedures set by FEMA. A GAO study found that FEMA does not systematically consider actual flood expenses and profits when establishing WYO compensation, and has yet to compare WYO companies' actual expenses and compensation. Therefore, FEMA lacks the data to determine how much profit WYO companies make and whether its compensation payments are appropriate.\nIn addition to the WYO program, there is a small private flood insurance market which most commonly provides commercial coverage, coverage above the NFIP maximums, or coverage in the lender-placed market. In general, the private flood market tends to focus on high-value properties, which command higher premiums and therefore the extra expense of flood underwriting can be more readily justified. At the moment very few private insurers compete with the NFIP in the primary voluntary flood insurance market, partly because the noncompete clause—the contractual restriction placed on WYO carriers against offering standalone private flood products that compete with the NFIP—curtails the potential involvement of the WYO companies.", "Private insurer interest in providing flood coverage has increased in recent years. Advances in the analytics and data used to quantify flood risk mean that a number of private insurance companies and insurance industry organizations have expressed interest in private insurers offering primary flood insurance in competition with the NFIP. Private insurance is seen by many as a way of transferring flood risk from the federal government to the private sector.\nA reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market; FEMA's subsidized rates are often seen as the primary barrier to private sector involvement in flood insurance. Even without the subsidies mandated by law, the NFIP's definition of full-risk rates differs from that of private insurers. Whereas the NFIP's full-risk rates must simply incorporate expected losses and operating costs, a private insurer's full-risk rates must also incorporate a return on capital. As a result, even those NFIP policies which are considered to be actuarially sound from the perspective of the NFIP may still be underpriced from the perspective of private insurers.\nThe rules on the acceptance of private insurance for the mandatory purchase requirement have had a significant impact on the market potential for private insurers. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill the mandatory purchase mortgage requirement as long as the private flood insurance \"provides flood insurance coverage which is at least as broad as the coverage\" of the NFIP, among other conditions. The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue may be seen as answering the question of who would judge whether specific policies met the \"at least as broad as\" standard and what criteria would be used in making this judgment. The uncertainty about whether or not private policies would meet this standard has been viewed as a barrier to private sector participation in the flood insurance market, along with FEMA's policy on continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage.\nMany insurers also view the lack of access to NFIP data on flood losses and claims as a barrier to more private companies offering flood insurance. It is argued that increasing access to past NFIP claims data would allow private insurance companies to better estimate future losses and price flood insurance premiums, and ultimately to determine which properties they might be willing to insure. However, FEMA's view is that the agency would need to address privacy concerns in order to provide property level information to insurers, because the Privacy Act of 1974 prohibits FEMA from releasing policy and claims data which contains personally identifiable information.", "In HFIAA, Congress revised the authority of FEMA to secure reinsurance for the NFIP from the private reinsurance and capital markets. In January 2017, FEMA purchased $1.042 billion of insurance, to cover the period from January 1, 2017, to January 1, 2018, for a reinsurance premium of $150 million. Under this agreement, the reinsurers will cover 26% of losses between $4 billion and $8 billion arising from a single flooding event. Although it is too early to estimate the total costs associated with Hurricane Harvey or Hurricane Irma, FEMA has already paid over $7.3 billion in claims for Hurricane Harvey, triggering the 2017 reinsurance. In mid-November 2017, FEMA began the procurement process for the January 2018 reinsurance renewal.", "Section 201 would revise the definition of private flood insurance previously defined in BW-12. For example, in revising the definition, the bill would strike existing statutory language describing how private flood insurance must provide coverage \"as broad as the coverage\" provided by the NFIP. Instead, the definition would rely on whether the insurance policy and insurance company were in compliance in the individual state (as defined to include certain territories and the District of Columbia). Further, \"private flood insurance\" would be specifically defined as including surplus lines insurance. Though the majority of regulation of private flood insurance would then rest with individual states, federal regulators would be required to develop and implement requirements relating to the financial strength of private insurance companies from which such entities and agencies will accept private insurance, provided that such requirements shall not affect or conflict with any state law, regulation, or procedure concerning the regulation of the business of insurance. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance. The bill would also specify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered to have maintained continuous coverage. This provision would allow private insurers to offer policies that offer coverage that might differ significantly from NFIP coverage, either by offering greater coverage or potentially offering reduced coverage that could leave policyholders exposed after a flood. Section 202 would apply the mandatory purchase requirement only to residential improved real estate, thereby eliminating the requirement for other types of properties (e.g., all commercial properties) from January 1, 2019. This is likely to affect the policy base of the NFIP by reducing the number of commercial properties covered. However, it is uncertain how many will elect to forgo insurance coverage (public or private) entirely. To the extent that commercial properties no longer choose to carry insurance (or are allowed to do so by the conditions of their mortgages), there may be increased uninsured damages to these properties from floods. Section 203 would eliminate the noncompete requirement in the WYO arrangement with FEMA that currently restricts WYO companies from selling both NFIP and private flood insurance policies. This would allow these WYO companies to offer their own insurance policies while also receiving reimbursement for their participation in the WYO Program to administer the NFIP policies. It is unknown what criteria WYO companies will use to establish their own policies, and how they will choose to offer those policies rather than NFIP policies to potential customers. Section 204 would require the FEMA Administrator to make publicly available all data, models, assessments, analytical tools, and other information that is used to assess flood risk or identify and establish flood elevations and premiums. This section would also require FEMA to develop an open-source data system by which all information required to be made publicly available may be accessed by the public on an immediate basis by electronic means. Within 12 months after enactment, FEMA would be required to establish and maintain a publicly searchable database that provides information about each community participating in the NFIP. Personally identifiable information shall not be made available; the information provided shall be based on data that identify properties at the zip code or census block level. Ultimately, these data could be used to better inform the participation of private insurers in offering private flood insurance, as well as informing future flood mitigation efforts. However, the availability of NFIP data could make it easier for private insurers to identify the \"profitable, lower-risk policies\" of the NFIP policies that are \"overpriced\" due to explicit cross-subsidization or imprecise flood insurance rate structures, and adversely select these properties, while the government would likely retain those policies that benefit from those subsidies and imprecisions, potentially increasing the deficit of the NFIP. Section 507 would establish that the allowance paid to WYO companies shall not be greater than 27.9% of the chargeable premium for such coverage. Section 512 would require annual transfer of a portion of the risk of the NFIP to the private reinsurance or capital markets to cover a FEMA-determined probable maximum loss target that is expected to occur in the fiscal year, no later than 18 months after enactment.", "An area of controversy involves NFIP coverage of properties that have suffered multiple flood losses, which are at greater risk than the average property insured by the NFIP. One concern is the cost to the program; another is whether the NFIP should continue to insure properties that are likely to have further losses. The NFIP currently uses more than one definition of repetitive loss. The statutory definition of a repetitive loss structure is used for applications for FMA grants. A slightly different definition is used for Increased Cost of Compliance Coverage, and a third definition is used for internal tracking of insurance data and also for the Community Rating System. The statutory definition of a severe repetitive loss property is a property which has incurred four or more claim payments exceeding $5,000 each, with a cumulative amount of such payments over $20,000; or at least two claims with a cumulative total exceeding the value of the property. The definition of severe repetitive loss property is consistent across program elements in the NFIP.\nAccording to FEMA, repetitive loss (RL) and severe repetitive loss properties (SRL) account for approximately $17 billion in claims, or approximately 30% of total claims over the history of the program. As of January 31, 2017, there were 90,000 currently insured repetitive loss properties and 11,000 currently insured severe repetitive loss properties. The currently insured repetitive loss and severe repetitive loss properties (which represent about 2% of the overall policies in the NFIP) have accounted for approximately $9 billion in claims, or approximately 16% of total claims over the history of the program. A study of all of the residential NFIP claims filed between January 1978 and December 2012 showed that the magnitude of claims for repetitive loss structures as a percentage of building value was higher than nonrepetitive loss properties by 5%-20%.", "Section 402 would require certain NFIP communities with a history of flood loss to identify where repeatedly flooded properties are located and assess the continuing risks to such areas and develop a community-specific plan for mitigating flood risks in these areas or face possible sanctions from FEMA. Covered communities include those which participate in the NFIP within which such properties are located: (i) 50 or more repetitive loss structures for each of which, during any 10-year period, two or more claims for payment under flood insurance coverage have been made with a cumulative amount exceeding $1000; (ii) five or more severe repetitive loss structures for which mitigation activities have not been conducted; or (iii) a public facility or a private nonprofit facility that has received assistance for repair, restoration, reconstruction, or replacement under Section 406 of the Stafford Act ( P.L. 93-288 ) in connection with more than one flooding event in the most recent 10-year period. To assist communities in the preparation of plans, FEMA would be required to provide covered communities with appropriate data regarding property addresses and dates of claims associated with insured properties within the community. Before sanctioning a community for not fulfilling the requirements of this section, FEMA would be required to issue notice of noncompliance before sanctions and recommendations for actions to bring the community into compliance. FEMA would also be required to consider the resources available to the community affected, including federal funding, the portion of the community that lies within the SFHA, and other factors that make it difficult for the community to conduct mitigation activities for existing flood-prone structures. FEMA would be required to develop sanctions in future regulations. In making determinations regarding financial assistance for mitigation, the Administrator may consider the extent to which a community has complied with this subsection. Although a community may incorporate plans required under this section into flood mitigation plans or hazard mitigation plans which they may already be required to complete, covered communities may feel that this section imposes significant additional requirements. Section 504 would define a new \"multiple-loss property\" category, which would include three types of properties: (1) a revised definition of repetitive loss property; (2) a severe repetitive loss property, with the same definition as the existing statutory definition; and (3) a new category of extreme repetitive loss property. The new definition of a repetitive loss property would be a structure that has incurred flood damage for which two or more separate claims of any amount have been made. The new definition of an extreme repetitive loss property would be a structure which has incurred flood damage for which at least two separate claims have been made with the cumulative amount of such claims payments exceeding 150% of the maximum coverage available for the structure. This section also defines the term \"qualified loss payment\" as a claims payment of any amount made in connection with a flood event that occurred after the date of enactment, but not including any claim that occurred before a structure was made compliant with state and local floodplain management requirements. Any multiple loss properties which are not paying full risk-based rates, and for which two qualified claims payment have been made, would have rates increased at 10% per year until the full risk-based rate is reached. Any multiple loss properties which are not paying full risk-based rates, and for which three qualified claims payment have been made, would have rates increased at 15% per year until the full risk-based rate is reached. Severe repetitive loss properties and extreme repetitive loss properties would be subject to a minimum annual deductible of $5000. Flood insurance would not be available to an extreme repetitive-loss property for which a claim payment for flood loss was made after the date of enactment if the property owner refused an offer of mitigation. The newly mapped subsidy would not be available to multiple loss properties. This section would eliminate grandfathering for multiple loss properties after two future claims. Section 505 would eliminate any new or renewed NFIP coverage for multiple-loss properties with excessive lifetime claims. The section defines such properties as those where aggregate amounts in claims payments that have been made after18 months from enactment exceed three times the amount of the replacement value of the structure. This provision would represent the first time that the NFIP would refuse to cover a property in an SFHA.", "In the debate about the future of the NFIP, the fact that flood insurance is only one of the functions of the NFIP's key responsibilities is sometimes overlooked. The NFIP is more than just an insurance program. The NFIP also engages in many \"noninsurance\" activities that may be in the public interest: it disseminates flood-risk information through the creation of flood maps, requires communities to adopt land use and building code standards in order to participate in the program, potentially reduces the need for other post-flood disaster aid, may contribute to community resilience by providing a mechanism to fund rebuilding after a flood, and may help protect lending institutions against mortgage defaults due to uninsured losses. The benefits of such tasks are not directly measured in the NFIP's financial results from underwriting flood insurance. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations.", "Flood insurance can sometimes be seen as if it is the solution to flooding, but, of course, insurance does not prevent flooding, it merely makes it possible to recover financially more rapidly after a flood. Flood mitigation creates safer communities and can save money for individuals and taxpayers. The importance of FEMA's mitigation programs (which include, but are not limited to, FMA programs) is illustrated by research findings that for every dollar invested by FEMA in flood mitigation between 1993 and 2003, society as a whole saved $5 due to reduced future flood losses. The NFIP encourages communities to adopt and enforce floodplain management regulations such as zoning codes, subdivision ordinances, building codes, and rebuilding restrictions. Internal FEMA studies have found that structures built to FEMA standards experience 73% less damage than structures not built to those standards.\nMitigation activities, however, form only part of the NFIP activities and are funded entirely by premiums and fees paid by NFIP policyholders. The NFIP manages three programs that help communities reduce flood risk: the Community Rating System, the FMA grant program, and Increased Cost of Compliance coverage (ICC). The NFIP requires most policyholders to purchase ICC coverage, which is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. This ICC is authorized in law, with rates for the coverage as well as how much can be paid out for claims, set by FEMA. Congress has capped the amount that can be paid for ICC coverage at $75. The ICC policy has a separate rate premium structure: currently ICC premiums vary between $4 and $70. ICC coverage provides an amount up to $30,000 in payments for certain eligible expenses. For example, ICC claims payments may be used toward the costs of elevating, demolishing, relocating, or flood-proofing nonresidential buildings, or any combination of these actions. ICC coverage is in addition to the building coverage provided by the standard flood policy. However, the payment on the building claim plus the ICC claim cannot exceed the statutory maximum payment of $250,000 for residential structures or $500,000 for nonresidential structures.\nAccording to ICC data, elevation is the most common form of mitigation. Approximately 61% of all ICC claims closed with payment are single-family residential claims involving compensation for elevation of a structure to or above the BFE. Although the cost of elevating a structure depends on the type of building and elevation requirement, the average cost of elevating an existing property has been estimated at $33,239 to $91,732, and suggestions have been made for years that the amount of ICC coverage should be raised.", "Section 113 requires the Administrator to offer policyholders a reduction of the risk premium rate for the use of approved actions that mitigate the flood risk of their property, including innovative mitigation techniques that could be deployed on a block or neighborhood scale in dense urban environments and the elevation of mechanical systems such as heating, ventilation, and air conditioning. This would expand on existing authority provided in the law, by specifically requiring the Administrator to provide the premium reduction for approved mitigation methods. Section 403 would authorize the Administrator to supplement the existing ICC coverage with the option of allowing policyholders to purchase additional ICC coverage up to $60,000, for a surcharge priced accordingly by FEMA. This section would also expand the availability of ICC coverage to include properties that FEMA or a community identifies as being at high risk for future flood damages, and properties located in a covered community (as defined in Section 402). This would allow policyholders to claim ICC coverage in certain circumstances to mitigate their property before a flood, rather than waiting until after they had been flooded. Section 504 would give priority under the FMA program to property owners for direct grants for carrying out mitigation activities that reduce flood damage to extreme repetitive-loss properties, with up to 100% cost share subject to availability of funds. This section would also authorize $225 million for each fiscal year for the FMA program, subject to offsetting appropriations. This is a higher amount than currently authorized. Funding for the FMA program could also be provided by penalties collected for violations of the mandatory purchase requirement and grant funds recouped by FEMA from recipients who did not carry out funded mitigation activities.", "FEMA develops, in coordination with participating communities, flood maps called FIRMs that depict the community's floodplain and flood risk zones. FIRMs provide the basis for setting insurance rates and identifying properties whose owners are required to purchase flood insurance. The FIRMs also provide the basis for establishing floodplain management standards that communities must adopt and enforce as part of their participation in the NFIP. Flood maps adopted across the country vary considerably in age and in quality, and there is no consistent, definitive timetable for when a particular community will have its maps revised and updated. By law, once every five years, FEMA is required to assess the need to revise and update all floodplain areas and flood-risk zones defined, delineated, or established by the mapping program, based on an analysis of all natural hazards affecting flood risks. This requirement does not dictate, however, that the FIRMs actually be updated once every five years.\nGenerally, flood maps may require updating when there have been significant new building developments in or near the flood zone, changes to flood protection systems (e.g., levees and sand dunes), and environmental changes in the community. FEMA maps have been criticized for being out of date, using poor quality data or methods, or not taking account of changed conditions. In addition, the procedure to update maps is time consuming, in large part due to the lengthy statutory consultation and appeals process.\nIn BW-12, Congress reestablished and reauthorized a body called the Technical Mapping Advisory Council (TMAC). The TMAC is a federal advisory committee established to review and make recommendations to FEMA on matters related to the national flood mapping program. The TMAC is broadly authorized to review and recommend improvements to how FEMA produces and disseminates flood hazard, flood risk, and flood map information.", "Section 302 would create a new appeal process if FEMA denies a request to update a flood map based on new information regarding BFE or other flood mitigation factors. The initial appeal would be through a FEMA administrative process, with the possibility of a further appeal to the Scientific Resolution Panel. Section 306 would require the TMAC within 12 months after enactment to develop a procedure to use in mapping flood hazards located in communities and states that choose to develop alternative maps to the FIRMs developed by FEMA. The recommended standards and requirements shall include procedures for providing notification and appeal rights to individuals within the communities of the proposed flood elevation determinations. FEMA would be required to approve or disapprove such proposed maps for use in the NFIP within six months of receiving the proposed alternative maps. This provision would therefore allow states and local governments to finance and develop their own FIRMs independent of the existing process and in accordance with the TMAC procedures, subject to final approval by FEMA." ], "depth": [ 0, 1, 1, 1, 2, 3, 3, 3, 3, 2, 3, 2, 3, 2, 3, 3, 3, 2, 3, 2, 3, 3, 3, 3 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full", "h0_full", "h2_title h4_title h3_title h1_full", "h2_title", "", "", "", "h2_full", "h2_title", "h2_full", "h2_title", "h2_full", "h1_title h3_title", "", "", "h3_full h1_full", "h4_title", "h4_full", "h2_title", "", "", "h2_full", "" ] }

{ "question": [ "Why is February 8, 2018 important?", "How was the National Flood Insurance Program established?", "What will happen unless the bill is reauthorized or amended by Congress?", "What act did the House pass in November, 2017?", "What would H.R. 2874 do?", "What aspects of the bill does the report go over?", "How would H.R. 2874 affect the subsidy provided for primary residences?", "What would happen to the HFIAA surcharge?", "How would the bill make if easier for low-income people to own 1-4 unit residential properties?", "Why would federally regulated lenders be incentivized to comply with the purchase requirements?", "How would existing statutory language be affected by H.R. 2874?", "What would federal regulators be required to do under H.R. 2874?", "What clauses and requirements would be eliminated by H.R. 2874?", "How would H.R. 2874 define the new \"multiple-loss property\" category?", "What would happen to the rates for a multiple-loss property experiencing two claims after enactment?", "How would the rates be affected by at least three claims?" ], "summary": [ "The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was reauthorized until February 8, 2018 (H.R. 195). Unless reauthorized or amended by Congress, the following will occur after February 8, 2018: (1) the authority to provide new flood insurance contracts will expire; and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion.", "The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was reauthorized until February 8, 2018 (H.R. 195).", "Unless reauthorized or amended by Congress, the following will occur after February 8, 2018: (1) the authority to provide new flood insurance contracts will expire; and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion.", "The House passed H.R. 2874, the 21st Century Flood Reform Act, on November 14, 2017, with a vote of 237-189.", "H.R. 2874 would authorize the NFIP until September 30, 2022.", "This report summarizes selected provisions of the bill, concentrating on changes related to premiums and surcharges, affordability, increasing participation, the role of private insurance, treatment of multiple loss properties, and some provisions related to floodplain mapping and mitigation.", "H.R. 2874 would phase out the subsidy provided for primary residences built before the first Flood Insurance Rate Map (FIRM) was published in their community, at a rate of 6.5%-15% compared to the present rate of 5%-18%. The minimum would be phased in over a four-year period. The phaseout of the pre-FIRM subsidy for other categories of properties would remain at 25%.", "The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) surcharge would be increased from $25 to $40 for primary residences and from $250 to $275 for nonresidential properties and most nonprimary residences.", "The bill would cap the premiums for 1-4 unit residential properties at $10,000 per year. The Federal Emergency Management Agency (FEMA) would be required over time to include additional considerations in the setting of premium rates, including the use of replacement cost value of a property, the difference in flood risk between coastal and inland locations, and the use of risk assessment tools other than FIRMs. H.R. 2874 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for low-income owner-occupants of 1-4 unit residences, to be funded by a surcharge on other NFIP policyholders in the state(s).", "The bill would increase the civil penalties from $2,000 to $5,000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement.", "H.R. 2874 would strike existing statutory language describing how private flood insurance must provide coverage \"as broad as the coverage\" provided by the NFIP, and would instead require that policies comply with the laws and regulations of the state where the property is located.", "Federal regulators would be required to develop and implement regulations relating to the financial strength of private insurers, and lenders would have to accept a private insurance policy from a company with adequate financial strength.", "The mandatory purchase requirement would be eliminated for commercial property from January 1, 2019. The noncompete clause that currently restricts private companies from selling both NFIP and private flood insurance policies would be eliminated.", "H.R. 2874 would define a new \"multiple-loss property\" category, which would include a revised definition of repetitive loss properties, severe repetitive loss properties, and a new category of extreme repetitive loss properties.", "Any multiple-loss property with at least two claims after enactment would have rates increased by 10% per year until the rates reflect current risks.", "Those with at least three future claims would have their rates increased by 15% per year." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 1, -1, -1, -1, 2, -1, 0, 0, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4 ] }

{ "title": [ "Background", "Bankruptcy Proceedings", "Financial Companies and the Bankruptcy Code", "Current Role of Financial Regulators in Bankruptcy Proceedings", "Current Safe-Harbor Treatment for Financial Contracts under the Code", "Experts Agreed That Changing Regulatory Involvement May Have Varying Impacts and Needs Further Consideration", "Proposals to Further Involve Financial Regulators in Financial Company Bankruptcies", "Experts Noted Limited Effects on Regulator Roles from Most Proposals and Trade-offs Relating to Orderliness and Effectiveness", "Experts Generally Agreed That Proposals Need Further Consideration", "Experts Considered Funding Mechanisms Essential for Bankruptcies of Large Financial Companies", "Experts Considered Fully Secured Federal or Industry Funding Mechanisms Essential for Orderly and Efficient Bankruptcies", "Roundtable Experts Were Concerned about Using Federal Funding for Preferences to Some Creditors", "Experts Had Varying Views on Advantages and Disadvantages of QFC Proposals", "Experts Generally Agreed That Limiting Safe-Harbor Treatment of QFCs Would Affect Markets and Funding Availability", "Experts Held Varying Views on Proposal Impacts Relative to Orderliness and Effectiveness", "Experts Noted That Lessons Learned from Lehman Bankruptcy Are Still Unclear", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Experts, Background, and Agendas for Expert Roundtables", "Expert Participants", "Appendix III: Safe-Harbor Treatment of Certain Financial Contracts under the Bankruptcy Code", "Overview of Financial Derivatives", "Contracts Qualified for Special Treatment under the Code", "Treatment of QFCs under the Code", "Appendix IV: Comments from the Department of the Treasury", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Bankruptcy is a federal court procedure conducted under the Code. The goals of bankruptcy are to give individuals and businesses a “fresh start” by eliminating or restructuring debts they cannot fully repay and help creditors receive some payment in an equitable manner. The filing of a voluntary bankruptcy petition operates as an “automatic stay” that generally stops lawsuits, foreclosures, and most other collection activities against the debtor, allowing the debtor time to eliminate or restructure its debts. In bankruptcy, equitable treatment of creditors means that all creditors with substantially similar claims shall be classified similarly and receive the same treatment. For example, a class of secured creditors — those with liens or other secured claims against the debtor’s property— will receive similar treatment. Secured creditors are more likely to get some debt repaid than general unsecured creditors, and creditors generally receive payment of their debts before shareholders receive any return of their equity in the failed company.", "Business debtors that are eligible for protection under the Code may qualify for liquidation, governed primarily by Chapter 7 of the Code, or reorganization, governed by Chapter 11. Proceedings under both Chapters 7 and 11 can be voluntary (initiated by the debtor) or involuntary (generally initiated by at least three creditors). However, in an involuntary proceeding, the debtor can defend against the proceeding, including presenting objections within 21 days of being served the summons of the proceeding. The judge subsequently decides whether to grant the creditors’ request and permit the bankruptcy to proceed, dismiss the request, or enter any other appropriate order.\nA reorganization proceeding under Chapter 11 allows debtors, such as commercial enterprises, to continue some or all of their operations as a way to satisfy creditor claims. The debtor typically remains in control of its assets, and is called a debtor-in-possession (DIP). The court also, under certain circumstances, can direct the U.S. Trustee to appoint a Chapter 11 trustee to take over the affairs of the debtor. As shown in figure 1, a firm going through a Chapter 11 bankruptcy generally will pass through several stages.\nEach stage of the Chapter 11 process has key attributes: First-day motions. The most common first-day motions relate to the continued operation of the debtor’s business and involve matters such as requests to use cash collateral—liquid assets on which secured creditors have a lien or claim—and obtaining financing, if any. They may include a motion to pay the prebankruptcy claims of critical vendors—those deemed vital to the debtor’s continued business operations.\nDisclosure. The disclosure statement filed after the bankruptcy petition filing must include information on the debtor’s assets, liabilities, and business affairs sufficient to enable creditors to make informed judgments about how to vote on the debtor’s plan of reorganization and must be approved by the bankruptcy court.\nPlan of Reorganization. A debtor has an exclusive right to file a plan of reorganization within the first 120 days of bankruptcy. The court may not confirm the plan unless a sufficient proportion of allowed creditors has accepted the plan or would not be impaired by the plan. The court’s approval also depends on whether there are dissenting classes of creditors. If a plan has not been filed by the debtor within 120 days or accepted by a sufficient number of creditors after 180 days, any interested party—including creditors—may file a plan. The plan divides creditors into classes, prioritizing payments to creditors.\nReorganization. Possible Chapter 11 outcomes, which can be used in combination, include (1) sale of the company (in whole or in part), which is sometimes called a section 363 sale because that section of the Code applies to sales that are free and clear of creditor claims and interests; (2) liquidation of the company’s assets with the approval of the court through means other than a 363 sale; and (3) actual reorganization of the company in which it emerges from bankruptcy with new contractual rights and obligations that replace or supersede those it had before filing for bankruptcy.\nThe debtor, creditors, trustee, or other interested parties, may initiate adversary proceedings—in effect, a lawsuit within the bankruptcy case to preserve or recover money or property to subordinate a claim of another creditor to their own claims, or for similar reasons. Furthermore, the Chapter 11 trustee or others may bring a preference action (a type of avoidance action) challenging certain payments made by a debtor to a creditor generally within 90 days prior to the bankruptcy filing. In addition, fraudulent avoidance actions generally can be taken on transfers made within 2 years prior to a bankruptcy if payments are determined to be fraudulent. As such, an avoidance action can question the payment as a preferential or fraudulent transfer of assets and require payments to be returned to the debtor.", "Large, complex financial companies that are eligible to file for bankruptcy generally file under Chapter 11 of the Code. Such companies operating in the United States engage in a broad range of financial services including commercial banking, investment banking, securities and commodities trading, derivatives transactions, and insurance. Many of them are organized under both U.S. and foreign laws. The U.S. legal structure is frequently premised upon the ownership by a parent holding company of various regulated subsidiaries (such as depository institutions, insurance companies, broker-dealers, and commodity brokers) and other nonregulated subsidiaries that engage in a variety of financial activities. Many of these businesses have centralized business lines and operations that may be housed in a holding company or in one or more subsidiaries. Smaller banking institutions also are organized as holding companies, but many of these hold few, if any, assets outside a depository institution and generally engage in a narrower range of activities.\nCertain financial institutions may not file as debtors under the Code and other entities face special restrictions in using the Code: Insured depository institutions. Under the Federal Deposit Insurance Act, FDIC serves as the conservator or receiver for insured depository institutions placed into conservatorship or receivership under applicable law.\nInsurance companies. Insurers generally are subject to oversight by state insurance commissioners, who have the authority to place them into conservatorship, rehabilitation, or receivership.\nBroker-dealers. Broker-dealers can be liquidated under the Securities Investor Protection Act (SIPA) or under a special subchapter of Chapter 7 of the Code. However, broker-dealers may not file for reorganization under Chapter 11.\nCommodity brokers. Commodity brokers, also known as futures commission merchants, are restricted to using only a special subchapter of Chapter 7 for bankruptcy relief.", "Regulators often play a role in financial company bankruptcies. With the exception of CFTC and SEC, the Code does not explicitly name federal financial regulators as a party of interest with a right to be heard before the court. In practice, regulators frequently appear before the court in financial company bankruptcies. For example, as receiver of failed insured depository institutions, FDIC’s role in bankruptcies of bank holding companies is typically limited to that of creditor. CFTC has the express right to be heard and raise any issues in a case under Chapter 7. SEC has the same rights in a case under Chapter 11. SEC may become involved in a bankruptcy particularly if there are issues related to disclosure or the issuance of new securities. SEC and CFTC also are involved in Chapter 7 bankruptcies of broker-dealers and commodity brokers. In the event of a broker-dealer liquidation, pursuant to the SIPA, the bankruptcy court retains jurisdiction over the case and a trustee, selected by the Securities Investor Protection Corporation (SIPC), typically administers the case. SEC may join any SIPA proceeding as a party.\nThe Code does not restrict the federal government from providing DIP financing to a firm in bankruptcy, and in certain cases it has provided such funding, as it did in the bankruptcies of General Motors and Chrysler with financing under the Troubled Asset Relief Program (TARP). The authority to make new financial commitments under TARP terminated on October 3, 2010. In July 2010, the Dodd-Frank Act amended section 13(3) of the Federal Reserve Act to prohibit the establishment of an emergency lending program or facility for the purpose of assisting a single and specific company to avoid bankruptcy. Nevertheless, the Federal Reserve may design emergency lending programs or facilities for the purpose of providing liquidity to the financial system.\nThe federal government also has provided financial support to companies who later declared bankruptcy. For example, CIT Group, Inc. received funding from TARP in 2008. CIT subsequently declared bankruptcy under Chapter 11 in 2009 and was reorganized.", "Although the automatic stay generally preserves assets and prevents creditors from taking company assets in payment of debts before a case is resolved and assets are distributed in a systematic way, it is subject to exceptions, one of which can be particularly important in a financial institution bankruptcy. Commonly referred to as a safe harbor, this exception pertains to certain financial and derivative contracts, often referred to as qualified financial contracts (QFC). The types of contracts eligible for the safe harbors are defined in the Code. They include derivative financial products, such as forward contracts and swap agreements that financial companies (and certain individuals and nonfinancial companies) use to hedge against losses from other transactions or speculate on the likelihood of future economic developments. Repurchase agreements, collateralized instruments that provide short-term financing for financial companies and others, also generally receive safe-harbor treatment.\nSafe-harbor treatment was first added to the Code in 1982 for forward contracts, commodity contracts, and securities contracts. In a recent change, the Code’s definition of repurchase agreements was expanded (in 2005) to include, among other things, agreements for the transfer of mortgage related securities, mortgage loans, interests in mortgage- related securities or mortgage loans, and government securities issued by countries that are members of the Organisation of Economic and Co- operation and Development, thereby expanding the scope of contracts subject to the safe-harbor treatment. According to the legislative history, the purpose of these safe harbors is to maintain market liquidity and reduce systemic risk, which we define as the risk that the failure of one large institution would cause other companies to fail or that a market event could broadly affect the financial system rather than just one or a few companies.\nUnder the safe-harbor provisions, most counterparties that entered into a qualifying transaction with the debtor may exercise certain contractual rights even if doing so would otherwise violate the automatic stay. In the event of insolvency or the commencement of bankruptcy proceedings, the nondefaulting party in a contract may liquidate, terminate, or accelerate the contract, and may offset (net) any termination value, payment amount, or other transfer obligation arising under the contract when the debtor files for bankruptcy. That is, generally nondefaulting counterparties subtract what they owe the bankrupt counterparty from what that counterparty owes them (netting), often across multiple contracts. If the result is positive, the nondefaulting counterparties can sell any collateral they are holding to offset what the bankrupt entity owes them. If that does not fully settle what they are owed, they are treated as unsecured creditors in any final liquidation or reorganization.\nSafe-harbor provisions also generally exempt certain payments made under financial contracts from a preference action seeking to recover any payment made by a debtor to a creditor generally within 90 days of filing for bankruptcy. In addition, they exempt fraudulent transfers made to financial contract counterparties generally within 2 years prior to a bankruptcy unless the payments are determined to have been intentionally fraudulent. Trustees cannot question the payment made in connection with these contracts as a preferential or fraudulent transfer of assets and cannot require the payments to be returned to the debtor. See appendix III for more information on the current safe-harbor treatment for derivative and repurchase agreement contracts.", "Experts at our roundtables evaluated proposals to change the roles of regulators in financial company bankruptcies. Specifically, they discussed proposals to require firms to notify and consult with regulators prior to a bankruptcy; allow regulators to commence an involuntary bankruptcy; provide regulators with standing or a right to be heard in bankruptcy court; and have regulators determine how subsidiaries might be consolidated in a bankruptcy. The experts noted that the proposals could have varying impacts on the bankruptcy process. For example, they viewed most of the proposals as having limited impact because regulators already have similar roles in bankruptcies, whereas efforts to consolidate subsidiaries in a bankruptcy would undermine key legal and regulatory constructs. Although experts broadly supported regulatory involvement in financial company bankruptcies, they said the proposed changes raise several implementation issues, such as determining the number of days prior to a bankruptcy that a company would be required to notify regulators and which regulator(s) to notify. As a result, the proposals require further consideration. FSOC, which is charged with identifying and responding to risks to financial stability that could arise from the failure of large financial companies, has been identified in some proposals as a regulator that should be notified. However, FSOC has not yet considered implications of changes to the role of regulators in the bankruptcies of financial companies.", "Several proposals have been made by financial and legal experts, as well as government officials, to further involve regulators in financial company bankruptcies. The experts at our first roundtable discussed four such proposals we identified in our 2011 study.\nRequire debtors to notify and consult with regulators (primary, functional, Financial Stability Oversight Council, foreign, or other) in advance of filing for bankruptcy. Bankruptcy-related proposals introduced in the 111th Congress included a notification period. In prior work, we found that the notice period was intended to provide the regulator with some time to facilitate actions to minimize the systemic impact of the bankruptcy. During that time, the regulator might be able to find ways to maintain critical functions, facilitate an asset sale, identify potential creditors that would provide financing for the debtor, or determine if a proceeding under OLA would be more appropriate. This extra time for preparation could help to maintain the value of the institution and reduce systemic disruptions to the wider economy.\nAllow regulators to commence an involuntary bankruptcy if the firm is insolvent or in imminent danger of becoming insolvent. This proposal was included in the proposal made by the Hoover Institution resolution project group to have a separate bankruptcy chapter in the Code—Chapter 14—for large financial companies. The authors of that proposed chapter noted that under the existing Code, an involuntary bankruptcy proceeding can commence when a firm generally is not paying its debts as they become due unless the debts are subject to a legitimate dispute. For large financial companies, allowing involuntary bankruptcies in response to balance sheet insolvency may allow regulators to initiate a bankruptcy at a time when they could still limit the spread of damage to other financial companies. The Chapter 14 proposal specifically provides primary regulators power to commence an involuntary case against a financial company in the event that the firm’s assets are less than its liabilities, at fair valuation, or the firm has unreasonably small capital.\nAllow regulators of the debtor or its subsidiaries to have standing or a right to be heard in the courts to raise issues relative to regulation. Proposals introduced in the 111th Congress contained a provision to allow certain financial regulators the right to be heard during a bankruptcy case. The proposals granted the functional regulator, Financial Stability Oversight Council, Federal Reserve, Treasury, and any agency charged with administering a nonbankruptcy insolvency regime for any component of the debtor the right to be heard on any issue in a bankruptcy case. Experts have contended that regulated institutions have more complicated legal structures and products than others; thus, having regulatory expertise would provide more timely information to the judge and could lead to resolutions that better preserve asset value.\nConsider the role of regulators in determining what subsidiaries should be included in a bankruptcy proceeding and the extent to which complex firms might be consolidated in bankruptcy. This proposal would give regulators a role in determining whether the court should consider the filing of a financial company as a whole under processes similar to the doctrine of substantive consolidation—a rarely used procedure. In substantive consolidation, the intercompany liabilities of related companies are eliminated, the assets of these companies are pooled, and the companies’ liabilities to third parties are paid from the single pool of assets. The proposal also would give regulators a role in determining whether existing bankruptcy exclusions for insurance companies, broker-dealers, or commodity brokers should be maintained. The Hoover Institution resolution project group noted that these exclusions can complicate the resolution of a major financial institution, because the bankruptcy court can deal only with pieces of the firm.", "The experts at the first roundtable generally supported three of the four proposed changes to the role of regulators in bankruptcy proceedings, but noted that these proposals might have limited effects. None of the experts who responded to written questions indicated that requiring notice and consultation with regulators or granting regulators a right to be heard in bankruptcy court would greatly change the existing bankruptcy process. The experts noted that regulators already play these roles in financial company bankruptcies.\nIn response to the proposal to require notice to regulators, the experts generally agreed that regulators and financial companies usually have a great deal of communication and involvement, particularly when an institution is experiencing financial difficulties. One expert worried that requiring notice to the regulator before filing for bankruptcy might allow regulators to prevent the debtor from filing and adversely affect recoveries for creditors.\nIn relation to regulatory authority to compel involuntary filings, the experts who specifically addressed this proposal said that regulators already have ways of forcing a financial company to file for bankruptcy through their existing regulatory powers. A few experts said that regulators can use the threat of placing the firm into FDIC receivership under OLA if the firm does not file voluntarily for bankruptcy. One expert expressed the view that once living wills are in place, regulators may compel a financial company to execute its resolution plan by filing for voluntary bankruptcy. Regulators also can take other actions. For example, under the statute, the Federal Reserve and FDIC may jointly take corrective action, including ultimately requiring the divestiture of certain assets, if they jointly determine that a firm has not been able to submit a plan that meets the statutory criteria. Under SEC and CFTC rules, an undercapitalized securities broker-dealer or commodity broker cannot operate and must therefore be liquidated. One expert with whom we spoke said that even if regulators were given an explicit right to place a firm in involuntary bankruptcy, they would be unlikely to use that authority.\nIn response to the proposal to give regulators an explicit right to be heard, experts who addressed the issue said regulators are routinely heard by the court in bankruptcy proceedings. And as noted previously, SEC and CFTC already have legal standing in some cases. Court officials said they were not aware of an instance in which a regulator was denied the right to be heard by the court. However, experts also said making this an express right might have benefits, which we discuss later in this report.\nAlthough experts favored most of the regulatory proposals, they were opposed to having regulators decide whether a firm should be resolved on a consolidated basis and noted that these changes would undermine key legal and regulatory constructs. One expert noted that the idea undermined the concept of having corporate separateness for subsidiaries. Corporate separateness is generally the principle that a parent corporation is not liable for actions taken by its subsidiaries. Another expert noted that encouraging substantive consolidation as determined by the regulator could have a negative impact on the predictability and transparency of the bankruptcy process, detracting from the orderliness and effectiveness of that process. A third expert noted that treating the legal entities of a financial company in bankruptcy on a consolidated basis would conflict with the U.S. regulatory structure, which is designed around separate legal entities, such as depository institutions, broker-dealers, and insurance companies. However, companies continue to manage themselves along business lines that cut across legal entities. A regulatory expert said that removing the exemption for securities broker-dealers and commodity brokers from bankruptcy could undermine the purpose of the regulatory construct applied to those entities and the ability of regulators to protect customers’ assets. An expert noted that overriding state insurance regulators could lead to intensive litigation. Additionally, NAIC and state insurance officials said that the priority structure for bankruptcy is inappropriate for insurers because the primary goal in the resolution of an insurance company is to protect the policyholders. Because of this, policyholders generally receive priority over creditors in an insurance receivership beyond any claims supported by collateral.\nExperts at our roundtables also broadly discussed the proposals in relation to criteria for orderly and effective bankruptcies (including minimizing systemic risk and promoting due process). Most fundamentally, these experts had differing views on whether bankruptcy, as currently construed, was an appropriate vehicle for minimizing systemic risk. Some participants at the roundtable raised issues about whether the court could act quickly enough to stem systemic spillovers from the debtor company to other companies and markets. They noted other potential trade-offs. For example, to act quickly in cases involving large and complex financial companies, courts might need to shorten notice periods and limit parties’ right to be heard, which could compromise due process and creditor rights. Similarly, one participant said that if the goal was to turn the Code into an effective resolution tool, the fundamental balance of power among debtor, creditor, and regulator might need to be altered. Another was concerned that if regulators become more involved in bankruptcy cases, courts might defer to them over other parties, undermining the ability of creditors to argue their cases. However, a legal expert at the roundtable doubted that the courts would be overly solicitous to regulators. Another legal expert noted that regulators could enhance due process by educating the court and providing a method for verifying information provided by the financial institution. One of these participants noted that standards for an involuntary bankruptcy initiated by the regulator might require a new definition for insolvency that would consider both regulatory and systemic interests.\nNevertheless, many of the experts indicated that regulatory involvement in bankruptcies was consistent with minimizing systemic risk. These experts said that regulators do and should have influence in times of crisis and that commencing a bankruptcy without regulatory involvement could be problematic. Additionally, some of the experts at the roundtable noted that regulators ought to have the power to compel a financial firm to file for bankruptcy because, as one regulatory expert said, allowing a financial firm to continue to do business when it is in vulnerable financial condition would likely add to concerns for systemic risk.", "Although experts generally supported proposals to change the roles of regulators, they said implementing the proposals relating to notice and involuntary proceedings could be difficult. Experts at our roundtable said that determining the correct number of days for notification to the regulator would be difficult. For example, requiring a financial institution to provide notice to and consult with regulators 10 days in advance of filing for bankruptcy—the number of days specified in proposals introduced in the 111th Congress—might not work in practice. One expert said that 10 days can be a long time in a financial crisis. Another noted that the firm’s need to file for bankruptcy might arise very quickly and that a firm might only be able to notify its regulator a day or two in advance of its filing. As an example, an expert noted the rapid collapse of the investment firm Bear Stearns and Co. In 2008, senior management of Bear Stearns gave the Federal Reserve Bank of New York a 1-day notification, saying that the company would file for bankruptcy protection the following day unless it received an emergency loan. In the failure of Lehman Brothers, the abruptness of the company’s bankruptcy did not allow much time for attorneys to prepare for filing. Another expert said that a requirement to “notify and consult” with the regulator before entering bankruptcy should not interfere with the ability of a company to file for bankruptcy.\nDetermining which regulators to notify also may be difficult. Complex financial companies and their subsidiaries may have many regulators domestically and internationally. As a result, determining which regulator a bank holding company or nonbank financial company would notify if a domestic or foreign subsidiary were nearing insolvency is not clear. One expert noted that because large financial companies have many regulators, before a firm could file for bankruptcy it would be important to identify in advance which regulators to notify. Proposals introduced in the 111th Congress would have required that a nonbank financial company consult with its functional regulator, FSOC, and any agency charged with administering a nonbankruptcy insolvency regime for any component of the debtor firm, which could be a large number of regulators. The proposals define functional regulator as the federal regulatory agency with the primary regulatory authority, such as an agency listed in section 509 of the Graham-Leach-Bliley Act. Some roundtable experts said that prebankruptcy consultation should be with the firm’s primary regulator, although none of them defined this term.\nFSOC—which under the Dodd-Frank Act is charged with identifying and responding to risks to U. S. financial stability—was included as a regulator in the notification and consultation proposal. Treasury officials, including those who support FSOC, interpret the Dodd-Frank Act as having a preference for resolving financial companies through bankruptcy and said that FSOC has focused its activities on implementing its responsibilities under the act. Furthermore, in its annual reports FSOC has described the role that resolution plans are supposed to play in fostering orderly resolutions under the Code. Specifically, under the Dodd-Frank Act, bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by FSOC for enhanced supervision by the Federal Reserve are required to submit resolution plans to the Federal Reserve, FDIC, and FSOC. FSOC’s 2013 Annual Report included a recommendation that the Federal Reserve and FDIC implement their resolution plan authorities in a manner that better prepares firms and authorities for a rapid and orderly resolution under the Code.\nHowever, in our discussion with Treasury officials, including those who support FSOC, they noted that FSOC does not routinely evaluate proposals that could alter the role of regulators in the bankruptcy process or other changes to the Code that might reduce systemic risk, such as narrowing the safe harbor treatment of QFCs. While current law does not specify a role for FSOC related to the potential filing of a bankruptcy by a systemically important financial company, when MF Global declared bankruptcy, FSOC met in emergency session to monitor the event and subsequently reported that the MF Global bankruptcy had not roiled markets. Treasury officials and staff that support FSOC said that FSOC is focused on implementing provisions in the Dodd-Frank Act. Since helping to develop rules to implement OLA is explicit in the Dodd-Frank Act, FSOC has described activities related to these provisions and made recommendations—but has not considered the implications of changing the role of regulators under the Code. Although the Dodd-Frank Act does not amend the Code or explicitly call for FSOC to consider such changes, changing the role of regulators could potentially impact FSOC’s ability to identify and respond to systemic risks in a timely fashion.\nThe roundtable experts noted that allowing financial regulators to initiate an involuntary bankruptcy for financial companies raised a number of implementation questions including appropriate time frames and standards. These experts generally agreed that lengthy time frames included in the rules for an involuntary bankruptcy filed by a creditor could reduce the value of a systemically important financial institution and endanger market stability. However, one expert expressed concern over the possibility of regulators acting too quickly to place an institution in bankruptcy, especially during a financial crisis in which asset valuations might be in dispute. A legal expert noted that considering what the appropriate standard for placing a financial institution in bankruptcy would be was important. The expert noted the difficulty of distinguishing between an insolvent company and one experiencing temporary liquidity needs. Another expert proposed that a bankruptcy initiated by the regulator should require a standard similar to the standard in place for placing a firm in FDIC receivership under OLA. The regulators at the roundtable thought that a regulatory framework that required firms to meet certain standards or be placed in bankruptcy—as currently exists for commodities brokers and securities broker-dealers—might alleviate some of the disadvantages posed by the creditor rules and would not necessarily require a change in the Code.", "One criterion for an effective bankruptcy or resolution process is to limit taxpayer liability. Legislators have made proposals to limit the ability of the Treasury or the Federal Reserve to help finance bankruptcies of financial companies. For example, proposals introduced in the 111th Congress specifically would have forbidden the U.S. Treasury and Federal Reserve from participating in bankruptcy financing. However, some proposals recognize the difficulty of financing bankruptcies of large financial companies, especially during a crisis. The Chapter 14 proposal made by the Hoover Institution resolution project group would allow the government to provide subordinated DIP financing to companies with assets greater than $100 billion (subsidiaries included) with a hearing and the court’s approval and oversight. Experts at our roundtable discussed the appropriate role of the government in providing financing for firms in bankruptcy.", "Experts at our roundtables emphasized that many of the proposals to make the bankruptcy process more orderly and effective depend on having an adequate funding mechanism. As a result, experts at the first roundtable generally agreed that changing the Code to prevent any federal funding of these bankruptcies would not be consistent with orderly and effective resolutions. In their written responses to a question asking what the most important changes would be to achieve most of the elements of an orderly and effective bankruptcy, experts most consistently responded that proposals to provide adequate funding, rather than to restrict it, were the most important changes that could be made. All but one of the eight experts responding put providing a funding source as the most important change to avoid fire sales. Experts said that support for federal funding rested on two propositions. First, voluntary private funding likely would be unavailable to finance the bankruptcy of a systemically important financial company. Second, the government should distinguish between funding for a bailout and funding that provided short-term liquidity.\nExperts did not think that voluntary private funding would be available to finance a systemically important financial company because these companies are large and some of them grew substantially over the course of the financial crisis (see table 1). Solutions that were possible during the crisis, such as JPMorgan Chase providing funding for Bear Stearns, or Barclays’ purchase of parts of Lehman, would be unlikely in the future because some firms have gotten much larger. Experts also noted that obtaining funding would be especially difficult during a period of general financial distress when firms large enough to provide funding might be experiencing difficulties themselves.\nSeveral experts noted that any government funding would need to distinguish between bailing out an insolvent company, which they opposed, and providing short-term liquidity for a solvent company providing collateral, which they generally supported. One of the legal experts defined a bailout as the government putting in equity capital to support existing creditors. Legal and academic experts at our roundtables compared the provision of fully secured, liquidity funding with providing lender-of-last resort funding. They referred specifically to the Federal Reserve providing short-term liquidity through its discount window to solvent depository institutions with eligible collateral to secure the loan. The Federal Reserve accepts a very broad range of collateral to secure such loans. Our roundtable experts generally agreed that funding for liquidity needs was essential and noted that in a period of financial distress the federal government might be the only entity with enough resources to provide such funding.\nAlthough experts at the roundtables did not think voluntary private funding likely would be available for financing or other liquidity support during the bankruptcy of a large financial company, they did consider whether the industry as a whole might provide such support. They noted several options for such funding.\nThe industry could create a fund or mechanism for providing liquidity to firms that needed it.\nThe government could assess companies prior to a bankruptcy as it does for the deposit insurance fund.\nThe government could raise funds through postbankruptcy assessments, while meeting immediate needs through temporary federal funding as with the Orderly Liquidation Fund under Title II of the Dodd-Frank Act. Under OLA, the Treasury may make funds available through an Orderly Liquidation Fund to FDIC as the receiver of a covered financial company.\nA few of the experts noted that some government guarantees might facilitate private-sector financing.\nAs with many of the proposals, our roundtable experts noted that implementing a proposal to allow fully secured federal funding for liquidity needs raised some difficulties. First, they noted the difficulty of distinguishing between an insolvent company and one experiencing temporary liquidity needs. This distinction is particularly difficult in a period of financial stress when valuation of assets may be difficult. For example, the value of some of Lehman Brothers Holding, Inc.’s (LBHI) real estate assets has increased since the time of its bankruptcy in 2008.\nSecond, experts at the first roundtable noted that the Dodd-Frank Act amendments to section 13(3) of the Federal Reserve Act might apply to some Federal Reserve funding related to a bankruptcy. This provision restricts the Federal Reserve from providing funding to a single distressed company but would allow it to provide funding to the financial system. Similar funding provided under the Primary Dealer Credit Facility in September 2008 (prior to the Dodd-Frank Act amendments), allowed Lehman Brothers, Inc. (LBI)—the broker-dealer and commodity broker subsidiary of LBHI—to remain a going concern after LBHI declared bankruptcy, thus facilitating the transfer of some assets to Barclays later that week. The remaining parts of LBI were liquidated in a SIPA proceeding. Under the terms of the loans provided through the Primary Dealer Credit Facility, the Federal Reserve Bank of New York became a secured creditor of the firm, giving it higher priority in the event of a bankruptcy. We found in 2011 that LBI and Barclays had repaid their overnight loans with interest, according to Federal Reserve officials. One legal and financial expert suggested that the Federal Reserve would be in compliance with the amendments to section 13(3) if it set up a fund for firms being resolved under the Code for large financial companies.\nThird, experts noted that determining what types of assets firms could use to collateralize government or industry funding might be difficult. Although the Federal Reserve had accepted assets with significant tail risk (the probability of a rare event occurring that would result in great losses) as collateral during the crisis, experts noted that such risky assets might not be acceptable in the future.", "We asked the experts at our first roundtable to discuss the advantages and disadvantages of the proposal made by the Hoover Institution resolution project group that calls for using subordinated government debt to provide payments to certain short-term creditors early in a bankruptcy proceeding. Such subordinated loans would be repaid with a lower priority than that of other creditors. The proposal further proposes a “claw-back” procedure if the preferred creditors have received more than they were entitled to when the reorganization or liquidation is finalized. The proposal was made to stem systemic concerns—the failure at one financial company spreading to others because short-term creditors would not have access to funds. Reliance on short-term funding exacerbated the financial crisis of 2007-2009. And as has been noted by some Federal Reserve officials, regulatory reform has not yet addressed the risks to financial stability posed by short-term wholesale funding.\nLegal experts at the roundtable agreed that such payments could be made by treating certain short-term creditors as critical vendors during first-day motions. However, experts who discussed this issue at the first roundtable said that making decisions about providing funding to certain short-term creditors during a bankruptcy was not the best way to address systemic concerns associated with short-term liquidity. They noted that such a proposal would increase uncertainty for creditors during a bankruptcy proceeding. Two experts noted that they would not want to use subordinated federal funding. Another explained that the point of subordinating the funding is to help ensure that the government uses such funding to address concerns about liquidity rather than to defray certain creditors’ losses. However, such funding would expose taxpayers to potential liability.\nInstead, those experts who discussed this proposal at the first roundtable said that changing the Code to give an explicit priority to short- over long- term creditors would be preferable. They noted that an explicit priority would be a better option in that it would help to address systemic risk and lead to a more predictable bankruptcy process. In addition, such a priority might provide an incentive for firms to continue to provide short-term funding when a financial company experiences distress. One legal expert noted that the special bankruptcy laws for railroads had a provision that any creditor providing funding in the 6 months leading up to a bankruptcy had priority over other creditors in that bankruptcy proceeding. This type of provision might have created an incentive to provide funding to a railroad experiencing short-term financing issues and thus, might have prevented a bankruptcy. However, a legal expert at our second roundtable said that this would create unfair treatment for creditors providing long-term financing, because long- and short-term creditors were members of the same creditor class.\nWhile a priority for short- over long-term creditors might reduce the incentive to withdraw funding leading up to a bankruptcy and reduce the likelihood of systemic issues associated with liquidity shortages during a bankruptcy, it could have additional consequences. For example, such a priority would provide more of an incentive for creditors to provide short- rather than long-term funding. If there were less likelihood that these short-term creditors would lose their funds in the case of a default because they had priority over other creditors, they might be less likely to monitor the credit-worthiness of borrowers. As a result, the market might be less likely to discipline companies that take on excessive risk. Although promoting market discipline is not among the criteria we identified for orderly and effective bankruptcies, it is a goal of the Dodd- Frank Act.", "Experts at our roundtables evaluated proposals to change the treatment of certain QFCs relative to criteria for orderly and effective financial company bankruptcies. Specifically, they discussed the effects of proposals for removing all safe harbors for QFCs; partially rolling back safe harbors on specific contracts; implementing a temporary stay for all or certain contracts; and allowing trustees to “avoid” contracts entered into within specified periods prior to the bankruptcy filing if they are determined to be preferential or fraudulent. The experts generally agreed that limiting safe-harbor treatment would affect derivative and repurchase agreement markets and could limit short-term funding options for financial companies especially in periods of distress. However, the experts had differing views on the advantages and disadvantages of the proposals, and those views are still evolving as lessons learned from the treatment of these contracts during the Lehman Brothers bankruptcy remain unclear.", "The roundtable experts generally agreed that limiting the safe-harbor treatment—removing it all together or providing it to a more limited set of contracts—would reduce the use of derivatives and repurchase agreements. Some experts have noted that these markets grew substantially after additional types of contracts were granted safe-harbor treatment in 2005 (see fig. 2). However, one expert we spoke with noted that in his opinion the industry has tended to overstate the impact that limiting the safe harbors would have on the size of the markets, which the expert thought would likely be minimal.\nSeveral of the roundtable experts thought that if downsizing these markets was a goal, it should be done directly through regulations rather than through changes in the Code. For example, the experts noted that derivatives markets have been undergoing vast change as a result of requirements in the Dodd-Frank Act (such as requiring certain contracts to be tracked more effectively and traded on exchanges). However, another expert noted that it would be good if the Code were consistent with regulatory goals. Limiting the safe harbors would reduce the availability of short-term funding for financial companies. Short-term funding for financial companies creates flexibility, but, at the same time, it sets the stage for potential runs on firms.", "As figure 3 shows, there was little consensus in written responses provided by our roundtable experts on how, if at all, changes in QFC treatment under the Code would affect the orderliness and effectiveness of financial company bankruptcies (see app. II for more detailed information on the proposals). However, most of our roundtable experts responded that removing all of the safe harbors would detract from orderliness and effectiveness and none of them responded that this would greatly enhance orderliness and effectiveness. For the other proposals, the experts were split fairly evenly in their written responses between those who thought the proposal would enhance the orderliness and effectiveness and those who thought it would detract from orderliness and effectiveness. Many of the experts who thought allowing trustees to “avoid” contracts would detract from orderly and effective bankruptcies chose “greatly detract.” Generally, those experts representing industry interests noted that the proposals would detract from orderliness and effectiveness, and those in favor of adopting certain proposals thought that industry opposition would be difficult to overcome.\nExperts at the roundtable noted that even if there was high-level agreement on what changes to the Code were needed, legal experts might disagree on the precise details. For example, with regard to the safe-harbor exemptions from avoidance actions—trustees’ ability to “avoid” transfers entered into in the 90 days prior to a bankruptcy if they are determined to be preferential or up to 2 years prior to a bankruptcy if they are determined to be fraudulent—some legal experts at the second roundtable said that the courts were giving preferential treatment to contracts that in principle should not be receiving it. Specifically, they said that the courts were interpreting section 546(e) of the Code in a way that allows contracts that otherwise might be considered preferential or fraudulent to remain in force. As a result, they noted that changes to the Code might be made to tighten that section. For example, a roundtable expert said that section 546(e) of the Code should be changed so that fictional transactions, such as Ponzi scheme payments, would not receive such treatment. Another legal expert cited a number of cases in which contracts entered into within 90 days prior to the bankruptcy filing, which would be considered preferential without the safe-harbor exemption, were being given safe-harbor treatment. For example, in the bankruptcy case of communications company Quebecor, insurance companies that held private placement notes that qualified for safe-harbor treatment had received 105 cents on the dollar while other unsecured creditors received a fraction of a dollar. The expert and others said that it might be useful to allow a judge to make decisions relative to some contracts. However, one expert at the roundtable noted that this could be a very long, complex process. In addition, allowing the judge to decide which contracts would get safe-harbor treatment when counterparties defaulted would increase the uncertainty attached to those contracts.\nOur roundtable experts also varied in their evaluations of the proposals relative to some of the specific criteria we had identified for orderliness and effectiveness such as limiting systemic risk, avoiding fire sales, maximizing value, and preserving due process.\nWhen explicitly asked, some experts responded that limiting the safe harbors would increase systemic risk, while others responded that limiting them would reduce it. Such a dichotomy could result from differences in the way the experts viewed markets. Having the safe harbors likely increases dependence on short-term funding and thus increases the chance for a run if questions arise about a company’s financial soundness. In addition, needing to sell off assets because of a lack of funding could lead to a spiral of falling asset prices. However, safe harbors are also thought to limit systemic effects before and during a bankruptcy. According to an expert at the second roundtable, if counterparties are certain about the safe-harbor treatment of their contracts, such treatment may limit runs prior to bankruptcy because counterparties know they will be able to terminate or liquidate their positions in case of default. In addition, the safe harbors primarily exist to limit market turmoil during a bankruptcy—that is, they are to prevent the insolvency of one firm from spreading to other firms and possibly threatening the collapse of an affected market. Although FSOC has reported on threats to financial stability from derivative and repurchase agreement markets, as with proposals to change regulators’ roles under the Code, they have not considered the implications of potential changes to the safe-harbor treatment of these contracts during bankruptcy.\nThe roundtable experts made a number of specific points relative to the impact of QFC treatment on systemic risk and fire sales of assets. One expert at the second roundtable noted that during the early days of the Lehman Bankruptcy, he thought that the QFC terminations would lead to a systemic event in derivatives markets, but that did not happen. The expert questioned whether the lack of a systemic event reflected Lehman’s small share of the market—5 percent—or the safe-harbor protection. In contrast, the commercial paper market did experience a systemic event—becoming illiquid after the Lehman bankruptcy. However, another participant noted that it was not the claims process in a bankruptcy that caused systemic risk; it was the uncertainty, the effect on counterparties, and market reactions. Roundtable participants also discussed the likelihood that safe-harbor treatment or bankruptcy in general could create asset fire sales. One expert noted that fire sales were more likely to occur in the period leading up to bankruptcy rather than after the bankruptcy was filed. Another industry expert noted that some unpublished research suggests that fire sales of Lehman’s assets that might have resulted from the treatment of QFCs did not take place following the bankruptcy filing. Instead, counterparties terminated only those contracts that had maintained their value.\nRoundtable experts noted that conflicts might arise depending on whether the goal of a bankruptcy proceeding was to maximize value for the economy, for the debtors, or for the creditors. One legal expert noted that in a time of financial crisis, balancing market expectations and needs against the needs of an individual company was difficult. Debtors usually are expected to fare best when companies can be reorganized under Chapter 11. Under Chapter 11, the purpose of the automatic stay is to preserve the value of companies while debtors consider their options. However, one roundtable expert noted that with the rapid dissolution of value for a financial company as a result of the safe harbors, liquidation is a more likely outcome than reorganization. Another expert noted that even if QFCs were stayed, value could dissipate quickly in financial company bankruptcies because that value rests on the confidence of the debtors’ counterparties. In addition, one expert raised concern about the impact of the safe harbors on the remaining value for creditors after QFC positions were terminated. In a bankruptcy, creditors compete with counterparties to derivative contracts and repurchase agreements for a firm’s assets. Allowing the QFCs to be terminated while other debts are stayed means there are fewer assets available for those creditors. However, since creditors know that they are less well protected in bankruptcy, they should command a higher price for the risk they are taking when they provide credit. So, determining whether creditors are being disadvantaged overall is difficult.\nRoundtable participants also discussed whether a temporary stay for QFCs would enhance the value of a financial company; however, as noted earlier, they were split on whether this would contribute or detract from the overall orderliness and effectiveness of financial company bankruptcies. For example, while several experts said that a temporary stay might facilitate a sale of a company’s derivatives to a third party, the sale would increase concentration in the market and ultimately contribute to greater overall systemic risk. Other experts agreed that a temporary stay would be useful only to the extent that an exit strategy, such as selling to a third-party buyer, was available or a bridge company—which is a temporary company used to maintain the failed company’s operations—could be constructed. These experts cited the case of General Motors as an example of what they were suggesting. However, the newly formed company in the case of General Motors was not temporary. In contrast, one expert presented a hypothetical example that did not involve a sale of the whole entity to a third party or the construction of a bridge company. In this example the judge would have from a 10 to 12 day stay, which might allow the judge to dispose of pieces of the company, leaving a small enough entity that its assets could be liquidated through normal bankruptcy proceedings. However, other experts noted that it might be difficult to determine what the appropriate number of days for a temporary stay might be.\nSeveral of the experts at our roundtables questioned whether bankruptcy reforms designed to deal with systemically important financial companies would adequately protect due process given the need to move quickly in such a bankruptcy. They suggested that due process might be compromised or would depend on the ability of counterparties and creditors to take action after regulators or courts make decisions (as is the case with OLA). For example, if preferences were given to some counterparties or creditors during a temporary stay, other counterparties or creditors would have the right to take action to recover value or “claw back” value later in the process, as opposed to having a judge consider the views of all of the parties prior to making any decisions.\nRoundtable experts noted that some changes to the Code relative to the treatment of QFCs could create uncertainty in the process. Specifically, counterparties need certainty about bankruptcy treatment when they enter a contract. To provide that certainty, several experts agreed that changes should be detailed in the terms of the contract rather than determined at the time of the bankruptcy. However, one of the experts noted that even with provisions specified in the Code, counterparties might still be uncertain for some time about how certain contracts would be treated. Although the Code had been amended in 2005 to extend safe- harbor treatments to more types of repurchase agreements, that expert said that uncertainty as to how the courts would treat repurchase agreements contributed to the Lehman Brothers bankruptcy. Leading up to the bankruptcy, counterparties were unwilling to extend new short-term funding because of the uncertainty—essentially precipitating a run on the firm.\nOur roundtable experts noted other issues that would arise relative to making any changes in the Code, such as whether contracts that already existed would be processed under the Code at that time or under the new Code. One expert said that contracts should be grandfathered, while another pointed out that the grandfathered contracts might be around for another 30 years, creating other difficulties. While it is difficult to assess how many contracts would be long term, key contracts are thought to be used for overnight funding. When the 2005 changes were made to expand the contracts receiving safe-harbor treatment, the new treatment applied to all contracts, including those that had been entered into prior to that time. Some roundtable experts further suggested that not knowing which judge will have a case and how that judge will make decisions can introduce additional uncertainty into the treatment of certain contracts.\nNot knowing whether a qualified financial contract would be subject to the Code or OLA creates further uncertainty about how a contract will be treated. Under the latter, FDIC becomes the receiver of the company and QFCs are stayed for 1 business day. During that day, FDIC has an opportunity to transfer a company’s derivatives to a third-party or bridge company. Under OLA, FDIC can choose to transfer contracts with one company to the bridge company while choosing not to transfer those with another company. However, if FDIC chooses to transfer a contract with a specific company, it would have to transfer all of the contracts with that company. There was some presumption among roundtable participants that very large systemically important institutions would be resolved under OLA rather than through bankruptcy. However, FDIC officials testified before the Subcommittee on Oversight and Investigations of the House Committee on Financial Services in April 2013 that under the Dodd-Frank Act, bankruptcy is the preferred resolution framework in the event of a failure of a systemically important financial company.", "Experts at our roundtable said that the lessons learned from the Lehman bankruptcy that might be applied in considering changes to the safe harbors are still unclear. Early reports and statements about the LBHI bankruptcy said that in the first 5 weeks after LBHI filed for bankruptcy, approximately 80 percent of its derivatives counterparties terminated contracts that were not subject to the automatic stay. However, some of the initial counterparty claims have been found to have been overstated. Two experts at our second roundtable specifically noted that the large initial loss in value was, in part, the result of LBHI counterparties’ initially overstating their claims against LBHI, and subsequently some of these claims have been overturned in adversary proceedings. For example, Swedbank AB, a Swedish bank, that was a creditor of LBHI, sought to offset Lehman’s payment obligations under prepetition swaps with deposits Lehman had made at Swedbank after filing for bankruptcy. The Bankruptcy Court of the Southern District of New York ruled against Swedbank, holding that the post petition deposits could not be used to offset prepetition swaps. In another proceeding involving the Lehman bankruptcy, a lender, Bank of America, seized the debtor’s account funds, which were unrelated to any safe-harbor transaction, to set off certain contracts that could receive safe-harbor treatment. The court ruled that the bank’s use of the funds to set off the transactions violated the automatic stay. Further, some experts no longer supported proposals they had originally made in response to Lehman’s early perceived losses.\nAs a result, experts continue to weigh whether changes to the treatment of derivatives and repurchase agreements under the Code are needed. The Hoover Institution resolution project group continues to discuss their proposals and plans to issue additional publications on their Chapter 14 proposals. The American Bankruptcy Institute has a Commission to Study the Reform of Chapter 11 and has appointed advisory committees to consider various aspects, including the treatment of QFCs. Its work is expected to continue for some time. Throughout the roundtable discussion, the participants noted that changes to the Code should not be made without considering ongoing changes in the broader legal and regulatory environment for derivatives. Specifically, they noted that the Dodd-Frank Act calls for a number of significant changes in the regulation of derivatives that are still being implemented, and the industry is looking at potential changes to derivatives contracts. Finally, experts noted the need to make changes consistently across international borders, especially in the United States and United Kingdom. During the Lehman Brothers bankruptcy, differences in the treatment of various contracts caused courts in the United States and United Kingdom to rule in opposing ways on the same contracts.", "The financial crisis and the failures of some large financial companies raised questions about the adequacy of the Code for effectively reorganizing or liquidating these companies without causing further harm to the financial system. Although the Dodd-Frank Act created OLA, an alternative resolution process, filing for bankruptcy under the Code remains the preferred resolution mechanism even for systemically important financial companies. Some proposals to modify the Code recognize that currently the Code may not adequately address threats to financial stability. Some proposals—changing the role of regulators in the bankruptcy process, creating funding mechanisms, and limiting the safe- harbor treatment of qualified financial contracts—may address this potential shortcoming. However, experts are not ready to recommend specific changes to the Code and the proposals require further consideration. FSOC—which was established under the Dodd-Frank Act to identify and respond to threats to financial stability—has not specifically considered changes to the role of regulators in bankruptcy or the treatment of QFCs. Although the Dodd-Frank Act does not explicitly require FSOC to assess changes to the Code, it is well positioned to take a broad view of potential changes within the context of other regulatory and market changes prescribed by the act. It is also well positioned to decide the appropriate level of attention such changes merit. Such attention to the systemic implications of financial company bankruptcies could improve FSOC’s ability to take timely and effective action to identify and respond to threats to U.S. financial stability.", "To fulfill FSOC’s role under the Dodd-Frank Act to identify and respond to threats to financial stability, we recommend that the Secretary of the Treasury, as Chairperson of FSOC, in consultation with other FSOC members, consider the implications for U.S. financial stability of changing the role of regulators and narrowing the safe harbor treatment of qualified financial contracts in financial company bankruptcies.", "We provided a draft of this report to AOUSC, CFTC, FDIC, the Federal Reserve, NAIC, the Departments of the Treasury and Justice, and SEC, for review and comment. CFTC, FDIC, NAIC, and SEC provided technical comments, which we have incorporated as appropriate. AOUSC, the Federal Reserve, and Department of Justice did not provide comments. Treasury’s Under Secretary for Domestic Finance, on behalf of the Chairperson of FSOC, provided written comments, which are reprinted in appendix IV.\nIn commenting on our draft report, FSOC said that it shares our concern that a disorderly financial company bankruptcy could pose risks to financial stability. However, FSOC stated that it would be premature for FSOC to prioritize the consideration of proposals to amend the Code until the Dodd-Frank Act is fully implemented or there is evidence of risks that cannot be adequately addressed within existing law. FSOC added that the Federal Reserve Board and FDIC are currently implementing provisions of the Dodd-Frank Act requiring designated financial companies to submit resolution plans (\"living wills\") to facilitate their orderly resolution under the Code. FSOC also noted that it is facilitating communication and coordination on the implementation of OLA and living will requirements. FSOC noted further that the council is engaged in a variety of other actions to address risks to financial stability posed by the failure of one or more financial companies such as the designation of nonbank financial companies.\nWe acknowledge FSOC’s efforts to implement the Dodd-Frank Act and the actions they have taken to address risks to financial stability, including some actions related to implementing OLA. However, rather than considering changes to the Code after the Dodd-Frank Act is fully implemented, our recommendation is intended to encourage FSOC to actively address such changes in conjunction with these efforts— particularly as some suggested changes would affect regulators’ and ultimately FSOC’s ability to respond to the failure of a large complex institution. First, changing the role of regulators in a financial company bankruptcy could be critical for effective resolution. For example, the point at which regulators become aware of an impending or actual financial company bankruptcy could be critical to determining whether its living will could be used to improve the orderliness and effectiveness of the bankruptcy. Similarly, timing could be critical in determining whether to use OLA, which is to be used if a bankruptcy under the Code were determined to have serious adverse effects on U.S. financial stability. Second, narrowing the treatment of QFCs could also have implications for limiting systemic risk. As some members of the council have stated publicly, bankruptcy remains the preferred method for resolving failing financial companies. Given that preference and FSOC’s charge to identify and respond to risks to U.S. financial stability, our recommendation—that FSOC consider the implications for U.S. financial stability of changing the role of regulators and narrowing safe harbor treatment of QFCs in financial company bankruptcies—is consistent with its statutory role and responsibilities.\nWe are sending copies of this report to the appropriate congressional committees, the Director of the Administrative Office of the U.S. Courts, Chairman of the Commodity Futures Trading Commission, Attorney General, Secretary of the Treasury, Chairman of the Federal Deposit Insurance Corporation, Director of the Federal Judicial Center, Chairman of the Board of Governors of the Federal Reserve System, Chief Executive Officer of the National Association of Insurance Commissioners, Chairman of the Securities and Exchange Commission, and other interested parties. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact Alicia Puente Cackley at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix V.", "Section 202(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandated that we report on the orderliness and efficiency of financial company bankruptcies every year for 3 years after passage of the act, in the fifth year, and every 5 years thereafter. This report, the third in the series, examines the advantages and disadvantages of certain proposals to modify the Bankruptcy Code (Code) for financial company bankruptcies. Specifically this report examines the advantages and disadvantages of proposals (1) to change the role of financial regulators in the bankruptcy process; (2) affecting the funding of financial company bankruptcies; and (3) to change the safe- harbor treatment of qualified financial contracts (QFC), including derivatives and repurchase agreements.\nTo address all of our objectives, we reviewed relevant laws, including the Code and the Dodd-Frank Act as well as GAO reports that addressed bankruptcy issues and financial institution failures. We specifically reviewed the reports we issued during the first 2 years of the mandate as well as reports written under the same or similar mandates by the Administrative Office of the United States Courts (AOUSC) and the Board of Governors of the Federal Reserve System (Federal Reserve). We also updated our review of published economic and legal research on the effectiveness of bankruptcies that we had originally completed during the first year of the mandate. For the original search we relied on Internet search databases (including EconLit and Proquest) to identify studies published or issued after 2000 up through 2010. We reviewed these articles to further determine the extent to which they were relevant to our engagement, that is, whether they discussed criteria for effectiveness of the bankruptcy process, key features of the bankruptcy process, or proposals for improving the bankruptcy process. We augmented this Internet search with articles provided by those we interviewed or obtained from conferences. In addition, we reviewed a number of prior GAO reports on financial institutions and the financial crisis. For this report, we replicated the literature search for 2011 and 2012. Further we met with officials at the following federal government agencies: AOUSC; the Commodity Futures Trading Commission; Federal Deposit Insurance Corporation; Department of Justice; Department of the Treasury, including officials who support the Financial Stability Oversight Council (FSOC); Federal Reserve; and Securities and Exchange Commission. In addition we met with officials of the National Association of Insurance Commissioners and members of insurance departments in Illinois, Iowa, and Texas.\nWe relied on our earlier work and the updated literature review to establish criteria for orderliness and effectiveness and to develop a list of proposals related to the role of regulators in the bankruptcy process or the role of government in financing bankruptcies, as well as proposals to change the safe-harbor treatment of certain financial contracts. In our earlier work, we analyzed the results of the literature review and expert interviews to determine criteria for orderliness and effectiveness of financial company bankruptcies. These criteria are minimizing systemic risk, avoiding fire sales, maximizing value; preserving due process, and minimizing taxpayer liability. In that work, we also used the literature review to determine the range of proposals that had been made to reform the bankruptcy process for financial institutions. We categorized some of the proposals into groups, such as those that included a role for the regulators or modified the treatment of qualified financial contracts, and then asked the experts looking at these categories and specific proposals to tell us which they considered had merit and should be included for further consideration and why. We also updated the literature review to determine whether earlier proposals had evolved, proposals had been subject to critical review, or additional proposals had been made. As we had for our earlier work, we surveyed relevant government agencies for information on newer studies they had or were conducting or were aware of related to our objectives.\nTo obtain expert views on existing proposals and how these proposals might be improved, we convened two roundtables to discuss the advantages and disadvantages of specific proposals. The roundtables were held at the National Academy of Sciences (NAS) and staff at NAS assisted with determining who would sit on the roundtables. Generally, roundtable members were chosen for their expertise on bankruptcy and financial institutions and markets. We also discussed potential experts for our roundtables with the relevant government agencies listed previously. Specifically, we relied on a list of experts compiled for the first report under this mandate. These experts represented a wide range of interests including academics, industry representatives, judges, and practicing attorneys. The experts had made proposals, written extensively on bankruptcies or financial institutions, or were recommended by relevant government agencies. In addition, relevant government agencies and NAS suggested additional potential participants for our roundtables, whom we considered using our original criteria and the balance of the experts at the roundtables. Final participants for the roundtables were chosen for their expertise and to ensure that a number of interested parties were included. These included academics, industry representatives, judges, practicing attorneys, and regulators. To ensure that participants represented a broad range of views and interests and that we fully understood those interests, we required that participants complete a conflict of interest form. See appendix II for a list of participants in each roundtable, as well as background materials and agendas.\nParticipants at the first roundtable held on April 1, 2013, discussed the role of regulators in the bankruptcy process for financial companies and how those bankruptcies might be financed. The proposals discussed were: 1. Require the debtor to notify and consult with regulators (primary, functional, Financial Stability Oversight Council, foreign, or other) in advance of filing for bankruptcy. 2. Allow regulators (primary, functional, Financial Stability Oversight Council, foreign, or other) to commence an involuntary bankruptcy in the event that the firm is insolvent or in imminent danger of becoming insolvent. 3. Allow regulators (primary, functional, Financial Stability Oversight Council, foreign, or other) of the debtor or its subsidiaries to have standing or a right to be heard in the courts to raise issues relative to regulation. 4. Consider the role of regulators (primary, functional, Financial Stability Oversight Council, foreign, or other) in determining what subsidiaries should be included in a bankruptcy proceeding, the extent to which complex firms might be consolidated in bankruptcy, including the possibility of revoking the exclusion from bankruptcy for insurance companies and the exclusion from Chapter 11 for stock and commodities brokers. 5. Restrict U.S. Treasury and Federal Reserve from participating in bankruptcy financing. 6. Allow the government to provide subordinated debtor-in-possession financing to companies with assets greater than $100 million (subsidiaries included) with a hearing and the court’s approval and oversight.\nSimilarly, participants in the second roundtable, held on April 10, 2013, discussed proposals to change the safe-harbor treatment of certain financial contracts such as derivatives and repurchase agreements. The proposals discussed during this roundtable were: 1. Removing all safe harbors for qualified financial contracts. 2. Partially rolling back safe harbors on specific contracts; such as a. allowing only contracts traded on an exchange to have safe- b. limiting collateral sales of repos by counterparties to cash-like or highly marketable securities; or c. allowing roll backs with approval of the Financial Stability Oversight Council or the courts. 3. Implementing a temporary stay for all or certain contracts. 4. Exercising certain “reach back” avoiding powers for qualified financial contracts.\nIn both cases participants discussed the advantages and disadvantages of the proposals relative to our criteria for orderly and effective bankruptcies. In addition they discussed impediments to implementing proposals and how these impediments could be addressed. The agendas for the roundtables are included in appendix II. To meet our objectives, we also interviewed some experts that were not able or did not choose to participate in the roundtables on their views about the proposals.\nWe used regulatory data to provide context for some expert statements. For expert statements on the growth of large financial institutions since the 2007-2009 financial crisis, we used data from the Federal Reserve and SEC to provide measures of the growth of global systemically important banks from 2007 to 2012. For expert statements about the growth of markets for repurchase agreements and derivatives related to changes in the Code in 2005, we used data from FSOC’s 2013 Annual Report, which is signed by the principals of 9 federal agencies and the independent member with insurance expertise, and the Bank for International Settlements to provide measures of the growth of repurchase agreements and derivatives from 2000 to 2012.\nWe conducted this performance audit from October 2012 to July 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "This appendix includes a list of the experts who participated in our roundtables, background information that was provided to the experts prior to the roundtables, and the agendas for the roundtables discussions.", "", "", "Financial derivatives derive their value from an underlying reference item or items, such as equities, debt, exchange rates, and interest rates. Parties involved in financial derivative transactions do not need to own or invest in the underlying reference items, and often do not. These products are agreements that shift risks from one party to another—each commonly referred to as a counterparty. Such shifting of risks may allow companies to offset other risks—hedging—or to take advantage of expectations of obtaining an economic gain due to changes in the value of the underlying reference items—speculation. Although some transactions are bilateral in that they involve only two counterparties, derivatives can be used to structure more complicated arrangements involving multiple transactions and parties.\nFinancial derivatives are sold and traded on regulated exchanges or in private, over-the-counter markets that allow highly customized transactions specific to the needs of the counterparties. A master netting agreement sets out the terms governing contractual actions between counterparties with multiple derivative contracts. This agreement provides for the net settlement of all contracts, as well as cash collateral, through a single payment, in a single currency, in the event of default on or termination of any one contract. Generally counterparties net payments to each other under the contract, and, if a counterparty defaults, the nondefaulting counterparty can immediately close-out open contracts by netting one against the other. It can also receive payment under what is called set off, which is the discharge of reciprocal or mutual obligations to the extent of the smaller obligation. For example, a nondefaulting bank can take funds from a defaulting party’s bank deposit held by the bank as payment for what the bank is owed on a contract it has with the defaulting party as long as the deposit existed prior to the default.", "Financial derivatives receive special treatment under the Code and thus are sometimes called qualified financial contracts (QFC). The Code includes five categories commonly considered QFCs, which include various types of derivatives. Contracts may fall into more than one category. The Code includes specific definitions of the agreements and transactions covered. In addition, to have protection under the Code, the counterparty with the debtor also must meet specified definitions. The types of derivatives qualifying for special treatment are generally described as follows: Securities contract. Securities contact is a broad term defining a financial agreement between counterparties and may include contracts for the purchase and sale of various financial products such as a group or index of securities, mortgage loans, certificates of deposit, and extensions of credit for settlement purposes. Margin loans are one type of extension of credit through a financial intermediary for the purchase, sale, carrying, or trading of securities. Margin loans do not include other loans secured with securities collateral. Securities contracts also include options to purchase and sell securities, or other financial products. Options give their holders the right, but not the obligation, to buy (call option) or sell (put option) a specified amount of the underlying reference item at a predetermined price (strike price) at or before the end of the contract.\nCommodities contract. In a commodities contract the commodities buyer agrees to purchase from the commodities seller a fixed quantity of a commodity at a fixed price on a fixed date in the future. Commodities can consist of agricultural goods, metals, and goods used for the production of energy such as crude oil. For example, to hedge against the risk of rising oil prices, oil refineries can enter a commodities contract to fix a price today for a future supply shipment.\nForward contract. A “forward contract” is a contract for the purchase, sale, or transfer of a commodity with a maturity date more than 2 days after the contract is entered into. Under the Code, a forward contract can include, but is not limited to, a lease, swap, hedge transaction, deposit, or loan. As an example, a firm may want to limit risk to fluctuations in service costs, such as electricity prices. The firm may enter into a forward contract with an electricity provider to obtain future service at a fixed rate.\nSwap Agreement. A swap involves an ongoing exchange of one or more assets, liabilities, or payments for a specified period. Swaps include interest rate swaps, commodity-based swaps, and broad-based credit default swaps. Security-based swaps include single-name and narrow-based credit default swaps and equity- based swaps. As an example, interest rate swaps allow one party to exchange a stream of variable-rate interest payments for a stream of fixed-rate interest payments. These products help market participants hedge their risks or stabilize their cash flows. Alternatively, market participants may use these products to benefit from an expected change in interest rates. A credit default swap is generally a contract between two parties where the first party promises to pay the second party if a third party experiences a credit event such as failing to pay a debt. Credit default swaps are contracts that act as a type of insurance, or a way to hedge risks, against default or another type of credit event associated with a security such as a corporate bond.\nRepurchase agreements are also qualified to receive special treatment under the Code and are thus considered to be a QFC. In a repurchase agreement one party sells a security, or a portfolio of securities, to another party and agrees to repurchase the security or portfolio on a specified future date—often the next day—at a prearranged price. The security, or portfolio of securities, serves as collateral for the transaction. In a reverse repurchase agreement, a security is purchased with the agreement to resell on a specified future date. Repurchase agreements have been used to provide financial institutions with funding for operations.\nA bilateral repurchase agreement—a repurchase agreement solely between two counterparties—can be viewed as two subtransactions referred to as initiation and completion. A repurchase agreement is similar to a loan secured by collateral. A firm will lend cash to a counterparty at an interest rate in exchange for assets provided by the counterparty as collateral. In a repurchase agreement, a cash provider willing to invest cash will agree to purchase securities from a collateral provider, or repurchase agreement dealer. Repurchase agreement dealers are typically distinguished as the counterparty selling securities, or providing collateral, at initiation. The market value of the securities purchased will typically exceed the value of cash loaned to the dealer. When a repurchase agreement matures, securities are sold back to the collateral provider and cash plus interest are returned to the cash provider. Collateral providers or dealers are generally large financial institutions, such as subsidiaries within bank holding companies. Cash providers are firms such as, but not limited to, other large financial institutions, hedge funds, and money market funds. Under the Code, U.S. Treasury debt securities, agency debt issues, mortgage-backed securities, and other assets can be used as collateral in repurchase agreement transactions.", "For most of the debtor’s assets, the Code provides an automatic stay, or freeze, when the bankruptcy petition is filed. That is, the filing generally stops lawsuits, foreclosures, and most other collection activities against the debtor allowing the debtor or a trustee time to eliminate or restructure debts. For example, set-off of any debt owed to the debtor that arose before the filing against any claim against the debtor is prohibited. Additionally, in certain situations debtors may not terminate or modify an executory contract at any time after the bankruptcy is filed solely because of a provision in the contract that is conditioned on the insolvency or financial condition of the debtor or the filing of bankruptcy or the appointing of a trustee. However, the QFC’s described previously receive safe-harbor treatment that generally exempts them from the automatic stay. Instead, the contractual rights—to liquidate, accelerate, or terminate—of nondefaulting counterparties conditioned on the insolvency or financial condition of one of the counterparties or the filing of bankruptcy or the appointing of a trustee, such as netting and setoff, are activated. Counterparties with claims against the debtor’s property are typically referred to as creditors.\nSome contracts that are generally considered QFCs may not be eligible for safe-harbor treatment or may be otherwise limited. For example:\nRepurchase agreements, where the debtor is a stockbroker or securities clearing agency, and securities contracts that are resolved under the Securities Investor Protection Act of 1970 (SIPA) or any statute administered by Securities and Exchange Commission (SEC).\nCertain commodity contracts involved in a commodity broker’s liquidation under Chapter 7. For example, a commodity broker creditor may not net or offset an obligation to a commodity broker debtor.\nRepurchase agreements are treated differently from some other contracts in that any excess of the market prices received on liquidation over the amount of the stated repurchase agreement price and all expenses in connection with the liquidation of the repurchase agreement must be deemed property of the debtor’s estate, subject to the available rights of setoff.\nFor master netting agreements, the right to terminate, liquidate, or accelerate is only applicable to the extent it is permissible for each type of QFC.\nAfter entities exercise their rights of netting for individual QFCs and under master netting agreements, some debtors still may be indebted to the creditor. Generally, the creditors’ remaining claims will receive the same treatment accorded other unsecured creditors.\nThe figures below illustrate the safe-harbor exemption from the automatic stay in simplified, yet practical scenarios: Figure 4 illustrates a bilateral contract, in which two counterparties are able to net opposing obligations of a contract, or, stated otherwise, net payments under a single master netting agreement. In this example, under current market conditions of an existing QFC, Firm A owes $100 to Firm B while Firm B owes $120 to Firm A. If Firm B files under the Code, the QFC is not stayed due to the safe harbor and Firm A receives the net proceeds of $20 ahead of Firm B’s other creditors. However, Firm A has no guarantee of recouping the total value from the QFC due to other factors, such as a change in market conditions. Without the safe harbors, Firm A would not have been able to terminate the transaction and could have been exposed to further market risk.\nFigure 5 depicts the typical completion of a repurchase agreement transaction along with the possibility that the creditor liquidates collateral in certain situations. In the case of a repurchase agreement, if a dealer files under the Code after the initiation but prior to completion, the cash provider at initiation will be left with the collateral provided by the dealer. Under the safe harbor, the cash provider has the option to terminate the transaction with the insolvent dealer. As illustrated in figure 4, the cash provider may terminate the transaction and sell the collateral in the open market to a third party. Without the safe harbor, concerns have been raised that a stay on the overnight repurchase agreement market could result in adverse market impacts due to simultaneous sales of collateral.\nQFCs are generally also exempt from avoidance or claw back provisions under the Code. These provisions generally require that the trustee may avoid, or take back, any payments made during the 90 days before the filing of a bankruptcy petition if those payments are preferential or 2 years before the filing of the petition if those payments are fraudulent. But, for QFCs, a trustee may not recover certain transfers made by or to a swap participant, repurchase agreement participant, commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency in connection with securities contracts, commodity contracts, forward contracts, repurchase agreements, or swaps that were done before the bankruptcy filing. Also, a trustee may not recover transfers made by or to a master netting agreement participant or any individual contract covered by a master netting agreement that was made before the bankruptcy filing. Since many QFCs are short term, and likely to be agreed to well within the 90 day window, these exemptions provide protection to many QFCs including those under master netting agreements.", "", "", "", "In addition to the contact named above, Debra Johnson (Assistant Director), Nancy S. Barry, Rudy Chatlos, Risto Laboski, Marc Molino, Barbara Roesmann, Jessica Sandler, and Jason Wildhagen made significant contributions to this report. Other assistance was provided by Janet Eackloff and Walter Vance." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 2, 1, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h2_title", "", "", "", "h2_full", "h0_full h3_title", "h3_full", "h0_full", "h0_full", "h1_title h3_title", "h3_full h1_full", "", "h2_full", "h2_full", "h2_full", "h2_full", "", "", "h0_full h4_full", "h3_full", "", "", "h2_title", "", "", "h2_full", "", "", "", "" ] }

{ "question": [ "Why have experts proposed giving financial regulators a greater role in financial company bankruptcies?", "What opinions do experts have on such proposals?", "What did experts note about difficulties surrounding a proposal to require notification before bankruptcies?", "What other alternatives are there to address issues of systematic risk?", "How has the FSOC reacted to these proposed changes to the Code?", "What is the general consensus of experts regarding funding?", "How did experts suggest implementing funding for providing short-run liquidity?", "What difficulties did experts identify with these proposals?", "What does the Code exempt QFCs from?", "Which issues might changing QFC treatment address?", "What have experts said about changes to QFC treatments in the past?", "What does the Dodd-Frank Act mandate?", "What proposals does the report examine?", "Why did GAO use expert roundtables to evaluate the proposals?", "How did GAO choose the criteria to evaluate the proposals on?", "What implications should FSOC consider?", "What was FSOC's response to proposals to change the Code?", "How did GAO react to FSOC's response?" ], "summary": [ "Because the Bankruptcy Code (Code) does not specifically address issues of systemic risk, experts have proposed giving financial regulators a greater role in financial company bankruptcies.", "However, according to experts at a GAO roundtable, such proposals may have limited impact and raise certain implementation issues. For example, a proposal to require notification before bankruptcy depends on when (number of days) notification would be required and with whom (which regulators).", "Experts noted financial companies may not know that they will declare bankruptcy even a few days before the event and could have many regulators to notify. Experts also noted ways regulators already can compel financial companies to declare bankruptcy, and that changing the Code to allow regulators to place firms in bankruptcy involuntarily could temporarily place a firm in an uncertain legal status, eroding firms' values and endangering market stability.", "Other options, such as having regulatory standards forcing the firm into bankruptcy, could improve the likelihood of an orderly resolution, according to these experts.", "Although the proposals reflect the need to minimize systemic effects of financial company bankruptcies, the Financial Stability Oversight Council (FSOC)--charged with responding to threats to financial stability--has not considered changes to the Code. Consideration could improve FSOC's ability to address such threats in a timely and effective manner.", "Experts emphasized that funding is needed to facilitate orderly and effective financial company bankruptcies. They generally agreed that prohibiting all federal funding or guarantees of private funding likely would lead to fire sales of assets. They agreed that fully secured funding should be used only to provide short-run liquidity and not for bailouts of insolvent firms' creditors.", "Experts suggested a private-sector fund could be created for this purpose. Such funds could be collected voluntarily, through routine assessments (before a bankruptcy), or through a facility similar to the one created for the Orderly Liquidation Authority, which allows federal funding at the time of a bankruptcy and later recovery of funds through an industry assessment.", "Experts noted some difficulties associated with these proposals, including determining whether a firm was insolvent or needed liquidity, and identifying permissible types of collateral.", "The Code exempts QFCs, such as derivatives, from the automatic stay that generally prevents creditors from taking company assets in payment of debts before a case is resolved. It also exempts QFCs from provisions that allow bankruptcy judges to \"avoid\" contracts entered into within specified times before a filing.", "Proposals to change QFC treatment--subjecting all or some contracts to the automatic stay on a permanent or temporary basis and removing the avoidance exemptions--might address issues raised by extensive contract terminations in the early days of financial company bankruptcies.", "Experts said it was unclear what lessons should be learned from those experiences. Many noted that narrowing the exemptions would reduce the size of derivative markets, but views varied about whether such narrowing would increase or decrease systemic risk. Some experts said that the current safe harbors decrease systemic risk, while others said they increase it by making firms more dependent on less-reliable short-term financing.", "The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandates that GAO report on an ongoing basis on ways to make the Code more effective in resolving certain failed financial companies.", "This report examines advantages and disadvantages of certain proposals, based on those identified in GAO's first report, to revise the Code for financial company bankruptcies--specifically, proposals (1) to change the role of financial regulators in the bankruptcy process; (2) affecting funding of financial company bankruptcies; and (3) to change the safe-harbor treatment of QFCs.", "For this report, GAO held two expert roundtables in which participants evaluated the proposals using criteria for orderly and effective bankruptcies that GAO developed in earlier reports. The criteria are minimizing systemic risk, avoiding asset fire sales, ensuring due process, maximizing value, and limiting taxpayer liability.", "GAO identified these criteria by reviewing literature and interviewing government officials, industry representatives, and legal and academic experts.", "FSOC should consider the implications for U.S. financial stability of changing the role of regulators and the treatment of QFCs in financial company bankruptcies.", "FSOC agreed that a disorderly financial company bankruptcy could pose risks to financial stability, but stated that it would be premature for FSOC to consider proposals to change the Code.", "GAO reiterated that its recommendation was consistent with FSOC’s statutory role and responsibilities." ], "parent_pair_index": [ -1, 0, 1, -1, -1, -1, 0, 1, -1, -1, 1, -1, -1, -1, 2, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 3, 3, 3, 0, 0, 0, 0, 4, 4, 4 ] }

{ "title": [ "", "Introduction", "Foreign Relations", "Politics", "The Economy", "Terrorism and Foreign Fighters", "Western Sahara", "U.S. Relations", "U.S. Foreign Aid", "Foreign Aid Legislation Regarding Western Sahara" ], "paragraphs": [ "", "Successive U.S. Administrations have viewed Morocco as an important regional partner on security, trade, and development. Historically warm ties expanded after the terrorist attacks of September 11, 2001, when President George W. Bush sought the cooperation of moderate Arab governments in countering terrorism. His Administration designated Morocco a Major Non-NATO Ally in 2004 and concluded a bilateral Free Trade Agreement the same year (authorized by Congress under P.L. 108-302 ). The United States has continued to build strong relations with the kingdom under Presidents Obama and Trump, notwithstanding occasional friction over U.S. human rights criticism and the issue of Western Sahara, a disputed territory that Morocco claims and largely administers. High-level visits regularly occur, and the two countries recently agreed to restart a U.S.-Morocco Bilateral Strategic Dialogue (see \" U.S. Relations \").\nMorocco's stability has taken on greater prominence amid conflicts in Libya and the Sahel region of West Africa. It is the only country in North Africa not to have experienced a terrorist attack since 2012; authorities regularly report the disruption of internal and transnational threats. King Mohammed VI weathered large urban protests during the 2011 regional wave of unrest known as the \"Arab Spring,\" to which he responded with a new constitution devolving some executive powers to elected officials. The moderate Islamist Party for Justice and Development (PJD) has led the government since then, although the palace has increasingly moved to check its influence over policymaking in recent years. Amazigh (Berber) cultural rights, women's rights, administrative decentralization, and judicial independence have expanded under the 2011 constitution, even as these stated objectives remain works in progress.\nSome observers question whether Morocco can remain stable absent deeper changes. Since 2016, protests have surged in the historically marginalized north and east, apparently reflecting grievances over the economy, governance, and police brutality. Anger at perceived high-level cronyism and corruption has also fueled a boycott movement in 2018 targeting, in part, firms led by individuals seen as close to the palace and influential in both business and politics. Economic growth has been strong in recent years but has not always outpaced population growth. Unemployment and regional economic disparities remain salient challenges and drive high rates of emigration. Morocco's role in enforcing European efforts to curtail illicit migration across the Mediterranean has also sparked some domestic controversy.\nThe king has undertaken several human rights initiatives that have drawn international praise in recent years, for example ending military trials for civilian suspects and affording legal registration to a handful of critical civil society organizations in Western Sahara. At the same time, activists and journalists probing sensitive issues such as transparency, human rights abuses, and protests in the restive northern Rif region have faced harassment and criminal prosecution. The ongoing crackdown on protests in the north and east has reportedly featured serious abuses, including excessive use of force and torture of detainees.\nThe ongoing push and pull in Morocco over political power, economic opportunity, and freedom of expression is playing out amid a shifting regional and international context. Western efforts to encourage political reforms in the region have arguably waned since the 2013 leadership change in Egypt and the rise of the Islamic State in 2014. As elsewhere in the region, Moroccan citizens have continued to seek new ways to influence official decision-making, while state actors have toggled between a responsiveness to public demands and more hardline approaches.", "Morocco's foreign relations are focused on its Western partners (including the United States along with France, Spain, and the European Union); the Arab Gulf states; and friendly countries in sub-Saharan Africa. Since the \"Arab Spring,\" Morocco has drawn closer to the Gulf Cooperation Council (GCC) countries, which have provided aid and investment. In 2015, Morocco temporarily redeployed its F-16 jets from counter-Islamic State operations to participate in the Saudi-led coalition in Yemen, where one F-16 crashed. The UAE, Saudi Arabia, and Qatar were respectively the second-, third-, and fourth-largest sources of foreign investment in Morocco as of 2016 (France was the top source), which may help explain why Morocco has strived to remain neutral in the rift between Qatar and other GCC countries. In mid-2018, Morocco cut ties with Iran for the second time in a decade, after accusing it of providing weaponry to the Polisario via Hezbollah, a U.S.-designated terrorist network.\nMorocco supports a two-state solution to the Israeli-Palestinian conflict, and King Mohammed VI chairs the Al Quds (Jerusalem) Committee of the Organization of the Islamic Conference, which seeks to bolster Muslim claims to the city. Morocco closed Israel's liaison bureau in Morocco and Morocco's office in Tel Aviv during the Palestinian intifada (uprising) in 2001. Links between the two countries nevertheless remain, as some 600,000 Israelis are of Moroccan origin and many travel there regularly. The king criticized the Trump Administration's December 2017 decision to recognize Jerusalem as the capital of Israel, stating that it would \"negatively impact the prospects for a just and comprehensive solution to the Palestinian-Israeli conflict.\" Thousands of Moroccans joined street protests against the U.S. Embassy's move to Jerusalem in May 2018.\nTensions between Morocco and Algeria—a regional rival and the Polisario's primary backer—have long stymied security and economic cooperation in North Africa. Partly in response, the king has launched various economic, trade, and exchange initiatives in sub-Saharan Africa, and Moroccan private sector investment in that region has accordingly increased since the 2000s. In 2016, in a sign of its increased outreach to Africa, Morocco joined the African Union (AU), having previously chosen to remain outside the organization due to the AU's recognition of the SADR as a member state. The shift suggested that Morocco would seek to counter the SADR's influence within AU institutions, but no longer viewed the SADR's expulsion as a prerequisite for its own participation. Morocco has also requested to join the Economic Community of West African States (ECOWAS), although it is not geographically contiguous with the bloc.", "The 2011 constitution requires the king to appoint a prime minister/head of government from the largest party in the directly-elected Chamber of Representatives. The king remains the arbiter of national political decision-making, the head of the military, and (as \"Commander of the Faithful\") the country's highest religious authority. In practice, King Mohammed VI continues to exercise significant policy influence and has regularly dismissed or reshuffled cabinet ministers. In early 2018, the king spent several months abroad after undergoing surgery in France, raising concerns among some observers about his health and ability to shape policymaking at home.\nMorocco's main Islamist political party, the Party for Justice and Democracy (PJD, also known as Al Misbah or \"the lamp\"), holds a plurality of seats in the Chamber of Representatives and has led a series of coalition governments since 2011. The PJD spent its first two decades of existence as an opposition party before its first electoral victory in the immediate aftermath of the 2011 protests and constitutional revision. The party again won a plurality of seats in the last legislative elections, held in 2016. In recent years, however, the palace and its political allies have taken steps to curtail the PJD's influence over policymaking.\nThen-Prime Minister and PJD leader Abdelilah Benkirane was unable to form a majority coalition in 2016 after the RNI party (National Rally of Independents, after its French acronym), widely seen as close to the palace, refused to join unless Benkirane agreed to exclude the PJD's coalition partner of choice (the Istiqlal or \"independence\" party) while including smaller parties at odds with the PJD's policy agenda. After months of stalled negotiations, the king dismissed Benkirane in early 2017 in favor of the PJD's then-deputy leader, former Foreign Minister Saad Eddine al Othmani—who quickly announced a coalition with the very parties to which Benkirane had objected. These included the Socialist Union of Popular Forces (USFP after its French acronym), a secularist opposition party that shares few policy priorities with the PJD and whose electoral strength has declined in recent cycles. A trend toward diminished PJD political influence was also visible in the aftermath of regional and municipal elections in 2015. The PJD won a plurality of seats and votes, but the pro-palace Party for Authenticity and Modernity (PAM)—founded by top royal advisor Fouad Ali el Himma—secured control of more regional councils.\nThe PJD has generally refrained from pressing for deep political changes, preferring to reassure the palace of its ability to function within the established order. The party has nonetheless long espoused an anti-corruption message that can be understood as a critique of the status quo. This message appears to be popular, but the PJD's influence has been constrained by Morocco's political system and electoral rules. As the large protests of 2011 fade into the past, the palace and its allies may also feel more emboldened to intervene directly in politics and check the PJD. A perceived shift in Western donor attention away from democratic reforms and toward counterterrorism may also be a factor. The PJD itself may be responding to these trends. In its 2017 party convention, PJD members voted against a bid by Benkirane to remain party leader for a third term, replacing him with Al Othmani, who has arguably pursued a less populist tack and greater accommodation with the palace.\nThe palace and government leaders have struggled to respond to unrest since 2016 in the northern mountainous Rif region, where ethnic Amazigh (Berbers) predominate. Protests have also surged in parts of the east, reflecting similar grievances over economic marginalization as well as a \"deep distrust…in the formal political process.\" Human rights groups have decried lengthy prison sentences against Rif protest leaders as well as evidence of security force abuses and forced confessions. In October 2017, the king dismissed four cabinet ministers, two each from the leftist Party for Progress and Socialism (PPS) and the centrist Popular Movement (MP), after a judicial auditing report identified severe problems with the implementation of a Rif development project that the king had launched. The reshuffle appeared to be part of a wider effort to frame unresolved tensions as failures of the political class, despite a long history of conflict between Rif populations and the monarchy. Prosecutors have also secured lengthy prison sentences for Rif protest leaders.", "Morocco is a lower middle-income country; poverty and illiteracy remain widespread, despite sophisticated urban centers in Casablanca and Rabat. The economy is diverse: key sectors include agriculture, tourism, mining, and textiles and apparel. Remittances from Moroccans living in Europe are a source of foreign exchange and a social safety net. Through domestic and Western Sahara mines, Morocco controls nearly 75% of global reserves of phosphates, used in fertilizers.\nAnnual economic growth has ranged from 1% to 5% over the past decade, according to the International Monetary Fund (IMF)—in line with regional averages, but not consistently outpacing population growth. The unemployment rate is officially 10% but unemployment is reportedly twice as high among youth. Socioeconomic hardships drive emigration and periodic unrest. Some view the palace's extensive role in the economy and political system as enabling corruption and conflicts of interest. Such sentiments, along with anger at high prices, have spurred the aforementioned boycott protest movement in 2018.\nHeavily reliant on fossil fuel imports to meet its domestic electricity needs, Morocco has sought investment in renewable energy, including large-scale solar and wind power infrastructure. Because the domestic cost of fuel and electricity are politically sensitive, Morocco historically subsidized these and other key commodities, a policy that the World Bank criticized in 2014 as \"costly, inefficient, and… putting the medium-term sustainability of public finances at risk.\" Leveraging declines in global oil prices at the time, Morocco ended most fuel subsidies in 2015, with the notable exception of butane gas, used for cooking. Although the move did not set off major unrest, it has prompted public scrutiny over whether politically-connected gas distribution companies have benefitted disproportionately. Subsequent fuel price increases may also have contributed to frustrations over the high cost of living.\nThe American Chamber of Commerce in Morocco lists 300 members, including large American firms such as 3M, Chevron, Citibank, Colgate Palmolive, Johnson & Johnson, and Microsoft. The State Department's 2018 Investment Climate Statement reports that Morocco \"is actively encouraging and facilitating foreign investment, particularly in export sectors, through macro-economic policies, trade liberalization, investment incentives, and structural reforms.\" The report identifies a \"lack of skilled labor, weak intellectual property rights protection, inefficient government bureaucracy, and the slow pace of regulatory reform\" as key challenges.", "Morocco is the only country in North Africa not to have suffered a major terrorist attack since 2012, although it experienced large Al Qaeda-linked bombings in Casablanca in 2003 and an isolated attack on a tourist-friendly café in Marrakesh in 2011. Numerous small domestic Islamist extremist cells have long posed a security threat. In recent years, authorities also have repeatedly claimed to disrupt multiple terrorist cells and plots tied to Al Qaeda or the Islamic State. In 2017 alone, Moroccan authorities announced that they had arrested 186 terrorism suspects and broken up nine cells planning to attack a range of targets, including public buildings and tourist sites. The State Department has praised Morocco's \"comprehensive counterterrorism strategy,\" noting that it includes \"vigilant security measures, regional and international cooperation, and counter-radicalization policies.\"\nAl Qaeda in the Islamic Maghreb (AQIM), a regional network and U.S.-designated Foreign Terrorist Organization, has carried out attacks in other North African countries—as have several of its splinter factions and affiliated groups—but not in Morocco to date. In 2014, a State Department official stated in congressional testimony that Morocco's \"holistic counterterrorism strategy\" had made it \"difficult for AQIM to effectively establish a foothold.\"\nAt the height of the Islamic State's territorial control in Syria and Iraq (2014-2015), an estimated 1,500 Moroccans traveled to those countries as \"foreign fighters,\" placing Morocco among the top global sources of Islamist foreign combatants there. Hundreds reportedly joined the Islamic State organization, while others—including three former Guantánamo detainees who had been repatriated to Morocco under the George W. Bush Administration—joined or formed Al Qaeda-linked groups. The above figures do not include various individuals of Moroccan descent who have been implicated in terrorist plots in Europe and the United States. The head of Morocco's Central Bureau of Judicial Investigations stated to the press in mid-2018 that the country had prosecuted and convicted more than 200 returning fighters. He also cited Moroccan legislation allowing police to arrest returnees upon arrival before processing charges against them.", "The four-decade dispute between Morocco and the independence-seeking Polisario Front over the former Spanish colony known as the Western Sahara remains unresolved. A sand \"berm\" constructed by Morocco marks the effective line of control as of a 1991 ceasefire ( Figure 1 ). Morocco administers the western part of the territory, roughly 80%, which it considers its southern provinces or the \"Moroccan Sahara.\" The remainder to the east of the berm, which the Polisario refers to as \"liberated areas,\" comprises largely uninhabited desert with some small settlements. Algeria hosts and backs the Polisario, but contends that it is not a party to the conflict. A small U.N. peacekeeping operation known as MINURSO, originally conceived to oversee a referendum on the final status of the region, monitors the ceasefire.\nMorocco asserts that it will accept only a solution that guarantees its sovereignty over the territory and will negotiate only on that basis—while the Polisario says it will accept only an outcome involving a referendum with independence as an option. In 2007, King Mohammed VI submitted to the U.N. a proposal to grant Western Sahara \"autonomy\" under Moroccan sovereignty, and he has pursued policies of political decentralization that he says are intended to empower residents of his \"Saharan provinces.\" Since 2007, the U.N. Security Council has called for Morocco and the Polisario to engage in \"negotiations without preconditions\" to pursue a \"mutually acceptable political solution\" to the situation. The two sides have not held talks since early 2012, however. Neither side has shown an interest in compromise.\nU.N. Secretary-General António Guterres has named former German President Horst Köhler as his Personal Envoy charged with facilitating talks, replacing U.S. diplomat Christopher Ross, who held the post since 2009. (Moroccan officials criticized Ross as biased, particularly after a U.N. report in 2012 suggested that Morocco may have spied on MINURSO. ) U.N. Security Council Resolution 2351 (2017), which renewed MINURSO's mandate until April 2018, called on the parties (i.e., Morocco and the Polisario) to \"resume negotiations... without preconditions and in good faith.\" In April 2018, U.S. diplomats proposed and secured a six-month renewal of MINURSO's mandate (instead of the usual yearlong extension), which some observers interpreted as an effort to pressure the parties to come to the table. Köhler has invited the Polisario and Morocco, along with Algeria and Mauritania, to meet in Geneva in December.\nTensions within the territory and between Morocco and U.N. officials have often heightened during U.N. deliberations over MINURSO's mandate. In the lead-up to the mandate renewal in April 2018, Morocco accused the Polisario of violating the ceasefire with Algerian backing. Soon after, Morocco cut ties with Iran after accusing it of arming the Polisario via Hezbollah, although it did not publicly release evidence for this accusation. (Iran and Hezbollah denied the allegations. ) In 2016, Morocco expelled MINURSO civilian staff in response to remarks by then-U.N. Secretary General Ban Ki-moon referring to Morocco's \"occupation\" of the territory. Some MINURSO civilian staff began to return to headquarters in the city of Laayoune in 2017, but some positions were consolidated or relocated to other locations. Military tensions also escalated in the territory in 2016 and 2017 as Moroccan and Polisario forces reportedly entered the demilitarized \"buffer zone\" in an area near the Mauritanian border known as Guerguerate.\nWith few sources of international leverage, the Polisario has sought to challenge Morocco's ability to conclude trade and natural resource extraction agreements pertaining to goods sourced in Western Sahara. The Court of Justice of the European Union has ruled in favor of the Polisario's stance, finding that goods produced in the Western Sahara should not benefit from an EU-Morocco tariff agreement, and that an EU-Morocco fisheries agreement does not apply to the Western Sahara coastline.", "The United States and Morocco have long-running, warm relations; Morocco was one of the first foreign powers to recognize the United States, by opening its ports to American ships by decree of Sultan Mohammed III in 1777. Longstanding U.S. goals in Morocco include promoting regional stability, countering terrorism, strengthening trade and investment ties, and supporting Morocco's development and reform efforts. The Trump Administration has characterized the U.S.-Morocco relationship as \"a strategic partnership as we work together to advance our shared vision of a secure, stable, and prosperous North Africa and Middle East.\"\nHigh-level bilateral meetings occur regularly. In September 2018, Secretary of State Michael Pompeo and Moroccan Foreign Minister Nasser Bourita met in Washington DC and announced their intent to reconvene a Bilateral Strategic Dialogue in 2019, to be the first such session since 2015. (President Obama and King Mohammed VI initiated the Dialogue in 2012, and King Mohammed VI undertook an official state visit to Washington DC in 2013.) Bourita subsequently met with President Trump on the sidelines of the U.N. General Assembly in New York. These meetings followed a visit to Morocco by Deputy Secretary of State John Sullivan in June 2018, during which discussions were held on \"a wide range of political, economic, and security issues, including advancing regional stability, expanding bilateral trade opportunities, and promoting ongoing initiatives on religious tolerance.\"\nMorocco and the United States have built strong military-to-military ties through regular training engagements, a large annual exercise known as African Lion (hosted by Morocco), and Moroccan acquisitions of significant U.S.-origin materiel, including F-16 jets and M1A1 tanks. Morocco's Major Non-NATO Ally status grants it priority in the delivery of U.S. excess defense articles (EDA; 22 U.S. Code §2321j)—among other potential implications for bilateral security ties—and it is a major global EDA recipient. A growing U.S. interest in countering Islamist extremist ideology (often referred to as Countering Violent Extremism or CVE) has coincided with Morocco's efforts to train domestic and regional imams in its traditions of religious moderation. In November 2017, the United States and Morocco launched a \"global initiative to address homegrown terrorism\" under the multilateral Global Counterterrorism Forum.\nThe U.S.-Morocco partnership extends into regional initiatives. Morocco is a member of the U.S.-led Global Coalition to Defeat the Islamic State. A senior State Department official testified before the Senate in late 2017 that, \"Morocco continues to distinguish itself as a capable security partner and regional leader, particularly with respect to countering violent extremism and radicalization on the African continent.\" In recent years, African Lion has expanded to include participants from other militaries in North and West Africa along with Europe. In 2017, Morocco arrested a U.S.-designated Hezbollah financier who was apparently en route from Guinea to Lebanon, later transferring him to U.S. custody to face trial. Morocco also hosted Libyan political talks that culminated in the 2015 agreement calling for a Libyan Government of National Accord (GNA), which the United States supports.\nWith regard to Western Sahara, the Trump Administration has continued a policy of supporting U.N.-led diplomatic initiatives to achieve a negotiated solution. It has also used the same language as the Obama Administration to characterize Morocco's autonomy proposal, calling it \"serious, realistic, and credible\" and a \"potential approach that could satisfy the aspirations of the people in the Western Sahara to run their own affairs in peace and dignity.\" In 2013 and 2016, brief diplomatic crises erupted over perceived Obama Administration pressure on Morocco in the United Nations over Western Sahara.", "U.S. bilateral aid, totaling $38.6 million in FY2017, aims to help Morocco improve its education system, local governance, and livelihood opportunities. In doing so, U.S. aid programs seek to \"address the drivers of instability, such as social and economic marginalization, especially of youth, and the unmet expectations of government reforms.\" Morocco additionally began implementing a $450 million, five-year U.S. Millennium Challenge Corporation (MCC) compact in 2017, the country's second such program. The current compact seeks to address \"two Moroccan Government priorities that have posed binding constraints to economic growth and investment: youth employability and land productivity.\"\nIn line with its proposals to cut U.S. foreign aid globally, the Trump Administration proposed to decrease bilateral State Department- and USAID-administered aid to Morocco in both FY2018 and FY2019, although this would not directly affect MCC or Department of Defense activities. In enacting the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ), Congress did not follow the Administration's FY2018 proposals for aid to Morocco, maintaining bilateral aid at FY2017 levels (see Table 2 below).", "It has been the policy of successive Administrations that funds appropriated for bilateral aid to Morocco may not be implemented in Western Sahara, as such use could be interpreted as a tacit endorsement of Moroccan sovereignty and therefore as a shift in U.S. diplomatic recognition policy. The House Appropriations Committee-reported FY2019 foreign aid appropriations bill ( H.R. 6385 ) would provide that funds \"made available for assistance for Morocco shall also be made available for assistance for any region or territory administered by Morocco, including the Western Sahara.\" The bill reported in the Senate ( S. 3108 ) does not contain such a provision. In recent years, such measures have passed the House, but final enacted bills have contained modified language, providing that funds appropriated for global bilateral economic assistance \"shall be made available for assistance for the Western Sahara.\" This is the case for the FY2018 Consolidated Appropriations Act (§7041[g] of Division K, P.L. 115-141 ).\nIn response to similar provisions in previous appropriations measures, the Obama Administration initiated a program to strengthen civil society organizations based in the territory, drawing on Economic Support Fund (ESF) funding under the regional Middle East Partnership Initiative (MEPI). The House Appropriations Committee report on the FY2018 appropriations act ( H.Rept. 115-253 ) stated that \"The Committee expects funds to support democratic reforms and economic development\" in Western Sahara." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h1_full", "h4_full", "h0_full", "", "", "h2_full", "h3_full h2_full h1_full", "h1_full", "h3_full h2_full" ] }

{ "question": [ "What system of government does Morocco use?", "What liberalizing steps has King Mohammed VI taken?", "How has the monarchy retained its popular legitimacy and stability?", "What recent events have challenged the stability of the monarchy?", "Why is Morocco an important partner to U.S. Administrations?", "How has Morocco taken advantage of U.S. relations?", "What was the initiative that the United States and Morocco launched in 2017?", "What has the United States recognized regarding the disputed territory of Western Sahara?", "Why was MINURSO created?", "What has the U.N. Security Council called for Morocco and the Polisario to do?", "How did Morocco respect the U.N. led diplomatic process?", "How has Congressional interest in the Western Sahara issue been reflected in recent legislature?", "What are some of the relevant bills and resolutions?", "What does Moroccan foreign policy focus on?", "Why did Morocco cut ties with Iran in 2018?", "Why has security and economic cooperation within North Africa been difficult?", "How has Morocco addressed the lack of cooperation with North African countries?" ], "summary": [ "Morocco is a constitutional monarchy with an elected parliament and local government entities.", "King Mohammed VI, who inherited the throne in 1999, maintains overarching political authority but has taken some liberalizing steps. In 2011, amid domestic and regional protests, the king introduced a new constitution providing more power to elected officials and expanding individual rights.", "The monarch nonetheless remains the arbiter of national political decision-making, the head of the military, and—as \"Commander of the Faithful\"—the country's highest religious authority. The king's seizure of the initiative in 2011 and quick response to protests arguably helped the monarchy retain its popular legitimacy and stability.", "In recent years, officials have struggled to respond to resurgent protests and other forms of activism that apparently reflect ongoing grievances over economic challenges, corruption, and police brutality.", "Successive U.S. Administrations have viewed Morocco as an important regional security, trade, and development partner. Morocco is a designated Major Non-NATO Ally, and bilateral trade and investment have expanded since a U.S.-Morocco Free Trade Agreement was signed in 2004.", "The United States allocated $38.6 million in bilateral aid in FY2017; Morocco is also implementing a five-year $450 million U.S. Millennium Challenge Corporation (MCC) compact, its second such program. Security cooperation has also expanded amid instability in Libya and the Sahel region of West Africa. Morocco is a purchaser of U.S. defense materiel (including F-16 jets), hosts an annual military exercise in which some 1,000 U.S. personnel participate, and is a member of the U.S.-led Global Coalition to Defeat the Islamic State.", "In 2017, the United States and Morocco launched an \"Initiative to Address Homegrown Violent Extremists\" under the auspices of the multilateral Global Counterterrorism Forum (GCTF).", "With regard to the disputed territory of Western Sahara, the United States has recognized neither Morocco's claim of sovereignty, nor the self-declared Sahrawi Arab Democratic Republic (SADR), led by the independence-seeking Polisario Front from exile in Algeria.", "The United States has provided funding and diplomatic backing for a U.N. peacekeeping operation, known as MINURSO, which was conceived to organize a referendum on the territory's final status but currently observes a 1991 ceasefire between Morocco and the Polisario.", "The U.N. Security Council—including the United States, a veto-capable permanent member—has called for Morocco and the Polisario to negotiate a \"mutually acceptable political solution.\"", "U.S. officials have praised Morocco's proposal to grant the territory autonomy under Moroccan sovereignty, while maintaining support for the U.N.-led diplomatic process.", "Congressional interest in the Western Sahara issue and the scope of U.S. aid has been reflected in recent appropriations legislation—most recently, §7041(g) of Division K, P.L. 115-141 and the accompanying Explanatory Statement—among other channels.", "Relevant bills and resolutions pending in the 115th Congress include the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019 (H.R. 6385 and S. 3108, respectively), as well as H.Res. 1101 (Affirming the historical relationship between the United States and the Kingdom of Morocco […]).", "Morocco's foreign policy focuses on its Western partners (including the United States along with France, Spain, and the European Union); the Arab Gulf states; and sub-Saharan Africa. Since the 2011 \"Arab Spring,\" Morocco has drawn closer to the Gulf Cooperation Council (GCC) countries, which have provided aid and investment; it has remained officially neutral in the current rift between Qatar and other GCC countries.", "In mid-2018, Morocco cut ties with Iran for the second time in the past decade, accusing it of providing military support to the Polisario via Hezbollah, a U.S.-designated terrorist network.", "Tensions between Morocco and neighboring Algeria—a regional rival and the Polisario's primary backer—have long stymied security and economic cooperation within North Africa.", "The king has instead launched various economic, trade, and exchange initiatives in sub-Saharan African countries, and in 2016, Morocco joined the African Union (AU), having previously refused to do so due to the organization's recognition of the SADR as a member state." ], "parent_pair_index": [ -1, -1, -1, 2, -1, 0, -1, -1, -1, -1, 2, -1, 0, -1, -1, -1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 4, 4, 4, 4 ] }

{ "title": [ "Background", "History of the Lifeline Program", "USF Contributions and Lifeline Disbursements", "Lifeline Program Operations", "FCC Has Not Evaluated Lifeline’s Performance in Meeting Program Goals but Has Taken Recent Steps toward Evaluation", "FCC Has Not Evaluated Lifeline’s Performance in Meeting Program Goals", "FCC Has Recently Taken Steps towards Evaluating Lifeline", "Financial Controls Exist, with Others Planned, for the Lifeline Program, but Weaknesses Remain", "FCC and USAC Have Established Financial Controls for Lifeline", "USAC’s Banking Practices for USF Result in Oversight and Accountability Risks, Which FCC Has Plans to Mitigate", "USAC Currently Uses a “Pay-and-Chase” Model of Oversight, but It Has Plans to Create a National Verifier to Determine Eligibility Prior to Enrollment", "USAC Performed a Limited Number of USF Contribution Audits of Telecommunications Providers, but Plans to Increase Audit Coverage in Future Years", "Most Audited Carriers Collected and Contributed Incorrect Amounts of USF Fees; FCC Has Initiated a Process for Following up on Overcharges", "FCC Adopted a Budget Mechanism for Lifeline, but Its Effectiveness in Controlling Expenditures Is Potentially Limited", "USAC Audit Reviews of FCC Truth-in-Billing Rules Are Limited", "FCC Has Not Yet Provided USAC Guidance about USF Contribution Requirements, Which Can Result in Inconsistent USF Contributions", "FCC and USAC Have Implemented Some Controls to Improve Subscriber Eligibility Verification, but Weaknesses Remain", "FCC and USAC Have Implemented Some Controls to Improve Subscriber Eligibility Verification", "Our Analysis of 2014 Eligibility Data Suggests Significant Weaknesses in Subscriber Eligibility Verification", "Undercover Attempts to Obtain Lifeline Service Illustrate Beneficiary Verification Weaknesses", "USAC Has Taken Steps to Enhance the Accuracy of NLAD Beneficiary Eligibility Data Entered by Providers", "Lifeline Providers’ Verification of Subscriber Eligibility Hindered by Lack of Access to, or Awareness of, State Eligibility Databases", "FCC Has Taken Steps to Create a National Verifier to Determine Eligibility", "FCC and USAC Have Taken Some Steps to Improve Oversight of Lifeline Providers, but Remaining Gaps Could Allow Noncompliance with Program Rules", "FCC and USAC Have Implemented Some Mechanisms to Enhance Oversight of Lifeline Providers", "Oversight Weaknesses of Lifeline Adversely Affect Overall Program Integrity", "FCC Has Not Developed Evaluation Criteria for Providers’ Compliance Plans or Applications for Entering Lifeline and Faces a Substantial Backlog of Both", "FCC and USAC Have Limited Oversight of Provider Operations and Internal Control Structure, Risking Noncompliance with Program Rules", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Nationwide Percentage of Likely Lifeline Eligibility Confirmed and Unconfirmed for those Claiming Eligibility, Based on Supplemental Security Income", "Total population 7,573", "Appendix III: Additional Information about Beneficiary and Contributor Audits", "Appendix IV: Comments from the Federal Communications Commission", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The idea that communication services should be available “so far as possible, to all the people of the United States” has been a goal of telecommunications regulation since Congress enacted the Communications Act of 1934. In particular, although Lifeline was created in the mid-1980s to promote wireline telephone subscribership among low-income households, Congress codified the nation’s commitment to universal service and made significant changes to universal service policy through the Telecommunications Act of 1996 (1996 Act). The 1996 Act provided explicit statutory support for federal universal service policy and directed FCC to establish a Federal-State Joint Board on Universal Service to make recommendations to FCC on implementing universal service provisions of the 1996 Act. The 1996 Act also described universal service as an evolving level of telecommunications services the FCC should periodically review, taking into account advances in telecommunications and information technologies and services.\nTo participate in Lifeline, households must either have an income that is at or below 135 percent of the Federal Poverty Guidelines or participate in one of several qualifying assistance programs. The qualifying programs include Medicaid; SNAP; Supplemental Security Income (SSI); Federal Public Housing Assistance (Section 8); Veterans Pension and Survivors Benefit; or tribal programs for those living on federally recognized tribal lands. Residents of tribal lands may be eligible through additional tribal programs.\nSince the passage of the 1996 Act, FCC has taken actions aimed at increasing participation in Lifeline. For example, initially to be a Lifeline provider, a telecommunications carrier had to use its own facilities or a combination of its own facilities and resale of another carrier’s service. However, in 2005, FCC granted one carrier forbearance from that requirement. Then, in 2008, FCC approved that carrier, a non-facilities- based, wireless provider, for the limited purpose of providing Lifeline service, which paved the way for other non-facilities-based wireless carriers to offer wireless service. After this approval, participation in Lifeline began to increase significantly. From mid-2008 to mid-2012, Lifeline enrollment increased from 6.8 million households to 18.1 million households, a 166 percent increase. In addition, annual disbursements increased from $820 million in 2008 to $2.2 billion in 2012, a 167 percent increase.\nIn November 1998, FCC changed the universal service structure in response to legal concerns raised by GAO about FCC’s authority to create two independent corporations and Congress’s directive that a single entity administer universal service support. FCC appointed an existing body, USAC, as the permanent administrator of the program and directed the Schools and Library Corporation and the Rural Health Care Corporation to merge with USAC by January 1, 1999. Prior to appointing USAC as the administrator of all universal service programs, FCC prepared and submitted a report to Congress in response to congressional conference committee directions, proposing that USAC would serve in this capacity.\nWhile Lifeline participation and disbursements increased rapidly from fiscal year 2008 through mid-2012, both disbursements and participation declined after FCC began implementing the 2012 Reform Order in mid- 2012. As mentioned earlier, FCC adopted the 2012 Reform Order to strengthen internal controls, improve accountability, and explore the inclusion of broadband in the program through a pilot program. To reduce the number of ineligible subscribers in the program, the 2012 Reform Order adopted measures to check subscribers’ initial and ongoing eligibility for Lifeline. The 2012 Reform Order required the creation of NLAD and required Lifeline providers to query this enrollment database to prevent duplicative enrollment.\nFrom a 2012 peak of approximately 18.1 million Lifeline participants and $2.2 billion in disbursements, FCC reported that disbursements fell by nearly $40 million in 1 month after the eligibility verification requirements went into effect in June 2012. In the 4th quarter of calendar year 2016, Lifeline participation declined to approximately 12.3 million households, while disbursements declined to approximately $1.5 billion for the year. Figure 1 below shows Lifeline disbursements and participation from 2008 to 2016.", "The 1996 Act requires every telecommunications carrier providing interstate and international telecommunications services to contribute to federal universal service, unless exempted by FCC. According to the act, these contributions, or fees, are to be equitable and nondiscriminatory and are to be deposited into the USF. For calendar year 2014, approximately 3,100 of 6,820 telecommunications providers that filed their revenues paid USF fees.\nThe amount of contributions required from telecommunications carriers are determined each quarter, when FCC calculates the contribution factor based on the projected demands of the universal service programs and the projected contribution base. USAC then bills contributors based on this factor. As shown in figure 2, the USF contribution factor has increased 217 percent (approximately 12 percentage points) since 2000. In the 1st quarter of calendar year 2016, the USF contribution factor was 18.2 percent, but as of the 4th quarter had dropped slightly to 17.4 percent.\nAccording to FCC’s 2012 Further Notice of Proposed Rulemaking regarding the assessment and recovery of USF contributions, an impetus for the increased USF contribution factor is the decrease in assessable revenues. For example, competition in the interstate long-distance market, growth of wireless service, and bundling of service packages has led to decreases in assessable revenues. As the pool of contributors and assessable revenues has declined over the years, the USF contribution requirements for those remaining contributors has increased to cover the costs of administering the universal service programs.\nCarriers file projected revenue information on a quarterly basis, which is used to calculate the contribution factor for the forthcoming quarter, and carriers are then billed for contributions by USAC based on the quarterly contribution factor. Carriers generally pass their USF fee obligation on to their customers, typically in the form of a line item on their monthly telephone bill. Carriers, thus are able to recover the cost of their contributions to USAC on a monthly or quarterly basis using the money collected from customers. USAC uses USF contributions to pay for the universal service programs, including Lifeline.\nLifeline providers currently receive a subsidy of $9.25 for every nontribal Lifeline customer that the Lifeline provider claims is enrolled in Lifeline based on the monthly or quarterly forms they submit to USAC. While the federal nontribal Lifeline subsidy amount per beneficiary is consistent across all Lifeline providers, the services provided to the Lifeline subscriber may vary depending on the state where the beneficiary lives and service offerings of the Lifeline provider, as some states supplement the federal Lifeline subsidy with state funds. According to FCC officials, approximately 23 states currently offer additional funding for subscribers. For example, Lifeline providers in California receive $13.75 per month in addition to the $9.25 federal subsidy. As a result, some California Lifeline providers are able to provide subscribers with unlimited voice minutes and unlimited text messages, while subscribers receiving service from the same Lifeline provider in another state are eligible for up to 350 free minutes and unlimited text messages. In its 2016 Modernization Order, the commission addressed this variation to some extent by adopting minimum service standards for both voice and broadband services, to be implemented in a phased-in approach, which became effective in December 2016. See figure 3 for how USF money typically flows to support universal service programs, including Lifeline.\nPursuant to advice provided by the Office of Management and Budget (OMB) in April 2000, FCC maintains USF funds outside of the U.S. Treasury. The private bank that holds the USF provides banking services for USAC, which includes annual investment management services with fees of approximately $1.5 million per year as of December 2015. Funds collected in excess of USAC’s immediate requirements for cash on hand for all universal service programs are invested in U.S. Treasury securities. According to the most-recent financial reports, as of September 2016, the USF account had approximately $9 billion in assets, and, as of December 2015, Lifeline had approximately $80 million in assets. As we described in previous work, the USF is a permanent indefinite appropriation. While the Antideficiency Act applies to appropriated funds, since 2004, Congress has exempted the USF from the Antideficiency Act. The current exemption extends until December 31, 2017.", "FCC, USAC, and states, as well as Lifeline providers and their agents, all have roles and responsibilities in Lifeline. At the federal level, FCC is responsible for setting policy, making and interpreting rules, providing oversight, and, in certain states, designating carriers as Eligible Telecommunications Carriers (ETC)—which are companies eligible to receive universal support funding, including Lifeline, and generally referred to in this report as Lifeline providers. USAC manages the daily operations of Lifeline, including collecting USF fees, disbursing payments, auditing USF recipients and contributors, and reporting to FCC. At the state level, public-utility commissions can increase the scope of Lifeline in their states by contributing additional financial support to Lifeline recipients. States can also play a role in Lifeline enrollment either by accepting applicants directly or giving Lifeline providers access to information on enrollment in programs that households use to qualify for Lifeline for the purposes of verifying eligibility, since this information is generally housed at the state level.\nTo receive Lifeline disbursements, carriers must be designated as ETCs by state public-utility commissions or FCC. State public-utility commissions have the primary responsibility for designating carriers as ETCs; however, in a situation where the telecommunications carrier is not subject to jurisdiction of a state commission, FCC may designate the carrier as an ETC. ETCs participating as Lifeline providers are generally responsible for verifying applicants’ eligibility for Lifeline, advertising the availability of the program, submitting forms for reimbursement, and making annual eligibility recertifications. As of the fourth quarter of 2016, there were 2,079 ETCs. Figure 4 is a graphical representation of the organizational structure and corresponding responsibilities of the different parties involved in Lifeline program.", "", "FCC has called for program evaluations in the past to review the administration of universal service generally, including Lifeline, but has not completed such evaluations. For example, FCC specified that it would review USAC 1 year after USAC was appointed as the permanent administrator to determine whether the universal service programs were being administered effectively. This review was never done. In 2005, FCC awarded a contract to the National Academy of Public Administration to study the administration of the USF programs generally, examine the tradeoffs of continuing with the current structure, and identify ways to improve the oversight and operation of universal service programs. However, FCC officials told us that FCC subsequently terminated the contract and the study was not conducted.\nIn March 2015, we found that FCC had not evaluated Lifeline’s effectiveness in achieving its performance goals of ensuring the availability of voice service for low-income Americans, while minimizing the burden on those who contribute to the USF. Specifically, we reported that, according to FCC officials, FCC had not evaluated the extent to which Lifeline has contributed to the narrowing of the gap in penetration rates (the percentage of households with telephone service) between low- income and non-low-income households, and at what cost. We, therefore, recommended, and FCC agreed, to conduct a program evaluation to determine the extent to which Lifeline is efficiently and effectively reaching its performance goals.\nOur 2015 report also described the results of two studies that FCC provided to us and that had evaluated the impact of Lifeline. These studies suggested the program may be an inefficient and costly mechanism to increase telephone subscribership. The conclusions of both studies suggested that many low-income households would likely subscribe to telephone service in the absence of the Lifeline subsidy. As we reported in 2015, FCC officials stated that the structure of the program made it difficult for the commission to determine causal connections between the program and the number of individuals with telephone access. In particular, FCC officials noted that because Lifeline has existed since the 1980s, it is difficult to compare results from the program to results in the absence of the program. We also noted in our 2015 report that several factors may alter how many people sign up for Lifeline benefits. For example, changes to income levels and prices have increased the affordability of telephone service, and technological improvements, such as mobility of service, have increased the value of telephone service to households.\nOur current work raises additional questions about Lifeline’s effectiveness in meeting its program goals. Specifically:\nLifeline participation rates are low compared to the percentage of low- income households that pay for phone service. According to FCC, the participation rate shows that millions of Lifeline-eligible households are obtaining voice service without Lifeline. FCC’s most-recent monitoring report estimated that in 2015 approximately 96 percent of low-income households that would be eligible for Lifeline based on income had phone service. However, it appears that the majority of those low-income households are receiving phone service outside of Lifeline. Specifically, USAC reports that there were at least 38.9 million households in the states and District of Columbia that were eligible for Lifeline as of October 2015, and only 12.5 million, or 32 percent, were enrolled in the program. Additionally, FCC does not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service (for which they pay out of pocket) along with their Lifeline benefit. Without knowing whether participants are using Lifeline as a primary or secondary phone service, it is difficult for FCC to determine whether it is achieving the goal of increasing telephone subscribership among low- income consumers while minimizing the USF contribution burden.\nFCC revamped Lifeline in March 2016 to focus on broadband adoption and generally phase out phone service, in part because FCC recognized that most eligible consumers have phones without Lifeline and to also close the “digital divide” of broadband adoption between low-income households and the rest of the country. However, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. The 2016 Modernization Order cites a June 2015 report from the Pew Research Center to show that there is a “digital divide” as low-income consumers adopt broadband at rates well below the rest of the country. However, that report also notes that the class-related gaps have shrunk dramatically in 15 years, as the most pronounced growth has come among those in lower-income households and those with lower levels of educational attainment. More-recent analysis from the Pew Research Center shows that after accounting for mobile data services, the number of individuals without Internet service has dropped from an estimated 48 percent in 2000 to 13 percent as of May 2016. Telecommunications providers began to address the “digital divide” in some capacity prior to the 2016 Modernization Order’s effective date by offering their own low-cost Internet service to low-income households. We found that at least two companies operating in a total of at least 21 states have begun offering in-home non-Lifeline broadband wireline support for less than $10 per month to individuals that participate in public-assistance programs, such as SNAP, TANF, or public housing. The offered rate of these providers’ own low-income broadband service of $10 per month, is less expensive than FCC’s broadband reasonable-comparability cost benchmark of approximately $55 per month, which Lifeline subscribers would be paying for a similar level of service.", "FCC has recently taken some steps toward evaluating Lifeline. In June 2015, FCC solicited comments from the general public, citing our 2015 recommendation for a program evaluation. Specifically, FCC asked whether it should change or modify the program goals and whether it was necessary to perform a program evaluation, and, if so, how to best conduct such an evaluation for Lifeline. In the 2016 Lifeline Modernization Order, which, among other things, revamped Lifeline to include broadband service in addition to voice service, FCC revised program goals to explicitly include affordability for both services. Also as part of the 2016 order, FCC instructed USAC to hire an outside, independent, third-party evaluator to complete a program evaluation of the Lifeline’s design, function, and administration. The order stipulated the outside evaluator must complete the evaluation and USAC must submit the findings to FCC by December 2020.\nAccording to GAO’s Cost Estimating and Assessment Guide, to use public funds effectively, the government must meet the demands of today’s changing world by employing effective management practices and processes, including the measurement of government program performance. Similarly, according to OMB guidance, it is incumbent upon agencies to use resources on programs that have been rigorously evaluated and determined to be effective, and to fix or eliminate those programs that have not demonstrated results. As FCC expects Lifeline enrollment to increase as the program is expanded to include broadband service, this expansion could carry with it increased risks for fraud, waste, and abuse. Although the potential for this risk is acknowledged by FCC in its discussion of a previous expansion of Lifeline, when FCC previously expanded Lifeline it did so without sufficiently adjusting program rules to keep pace with the new technologies, the financial incentives, or the subsequent growth in the program. Similarly, our 2015 report found that when FCC expanded Lifeline to include wireless service without quantifying or estimating the potential cost increases, it contributed to significant increases in disbursements from 2008 to 2012. Therefore, completing the program evaluation as planned, and as we recommended, would help FCC determine whether Lifeline is meeting its stated goals of increasing telephone and broadband subscribership among low-income consumers, while minimizing the burden on those who contribute to the USF.", "FCC and USAC have established financial controls for Lifeline, including obtaining and reviewing information about billing, collecting, and disbursing funds. They have also developed plans to establish other controls, such as for moving USF funds currently held in a private bank account to the U.S. Treasury and establishing a national eligibility verifier (National Verifier) that Lifeline providers could use to determine the eligibility of applicants seeking Lifeline service. Weaknesses remain, however, including the lack of requirements to effectively control program expenditures, above approved levels, concerns about the transparency of fees on customers’ telephone bills, and a lack of FCC guidance that could result in Lifeline and other providers paying inconsistent USF contributions.", "USAC has established financial and management controls to obtain and review information to carry out its responsibilities with regard to billing, collection, and disbursement of funds for universal service programs, including Lifeline. To that end, FCC and USAC developed a Service Provider and Billed Identification Number and General Contact Information Form (FCC Form 498) to collect required information, such as service-provider name, study area code (SAC), tax identification number, and contact information from all ETCs, including Lifeline providers. This information serves as a key internal control for billing, collection, and disbursement operations. For example, all carriers participating in Lifeline are required to have a SAC, which is a unique company-specific six-digit number that identifies a carrier in a specific geographic area (e.g., state or territory), and to have a unique FCC Form 98 ID. USAC takes steps to assign a SAC to ensure only valid Lifeline providers, new Lifeline providers, or existing Lifeline providers that are beginning operations in a new geographical area receive disbursements. According to USAC policy, before a SAC is issued, USAC officials review the ETC designation order and confirm with the state public service commission that the order is final and valid. USAC policy states this review is generally accomplished by locating the ETC designation order on the state public service commission websites, but USAC may also contact the public service commission directly with any questions about the order.\nAs part of our undercover work, we tested this authorized payment internal control by submitting fictitious documentation to USAC posing as a Lifeline provider seeking a SAC designation to begin enrolling customers and collecting USF subsidies. The results of this test are illustrative rather than generalizable. USAC appropriately rejected our application and explained it was unable to confirm our ETC designation with the state we claimed to have approved us on our fabricated application. Moreover, USAC also noted that there was no record that FCC approved our fictitious company to provide Lifeline service.\nOnce the SAC and FCC Form 98 ID are established and validated by USAC, Lifeline providers can begin providing services to qualified subscribers and seek reimbursement from USAC. Typically, Lifeline providers file their claims to USAC on a monthly or quarterly basis, but have as long as 1 year from the respective filing period to file a revised claim. Currently, USAC calculates the amount owed to the Lifeline provider based on the providers’ monthly or quarterly claims.\nUSAC enhanced some of its internal controls to help prevent improper or potentially fraudulent payments as a result of potential risks we identified during the course of our work. Specifically, on the basis of our observations of how USAC enters and approves a Lifeline service provider and processes payments, we identified internal control weaknesses whereby a USAC employee could improperly use the system to create fraudulent payments. On the basis of our descriptions, USAC officials agreed that risks existed and indicated they would take steps to mitigate these risks, as described below.\nEmployee creates a fraudulent SAC and generates a disbursement: A policy exists to separate the roles of data entry and review among USAC employees charged with administering Lifeline. However, during our review we found a lack of controls that would separate these two functions and provide oversight of data-entry actions. For example, an employee could create a new SAC and then enter contact information and banking information for the SAC. This action would not create an automatic notification to a reviewer or supervisor. As a result, a lone employee could create a SAC and request a disbursement for the SAC. To enhance controls, USAC officials said that, beginning in August 2015, reimbursement approvers began pulling an independent report from their system for the new SACs receiving disbursements for the first time and comparing it to the supporting ETC-designation documentation obtained from an individual who does not have access to enter new SACs into the system.\nEmployee uses an existing SAC that is not currently receiving disbursements to generate a disbursement: During our review we found that a lone USAC employee could change the banking and contact information associated with a SAC and then act as a reviewer to approve the changes without a separate reviewer being automatically notified. The employee could then request a disbursement for the FCC Form 498 ID and have it deposited into a different bank account. To enhance controls, USAC officials said that, beginning in August 2015, the reimbursement approvers began generating an independent report from the system for SACs that are being paid with a prior FCC Form 497 entry of zero dollars, which occurs when a company has not filed for 6 months and confirms it has no subscribers, and reviewing the FCC Form 497 record to determine whether there was any suspicious activity requiring further validation.\nIn addition, USAC officials told us they would update the user workflows and permissions for employees as part of a development effort that includes revisions to ETC filing procedures. According to USAC officials, the updated workflow requires that new FCC Form 498 ID numbers generated internally will be reviewed and approved by a member of the Finance Management Team. According to USAC officials, these internal user workflow changes were implemented in May 2016.", "FCC maintains USF funds—whose current net assets exceed $9 billion according to the most recent financial reports (as of September 2016)— outside of the U.S. Treasury pursuant to OMB advice provided in April 2000. OMB had concluded that the USF does not constitute public money subject to the Miscellaneous Receipts Statute, 31 U.S.C. § 3302, a statute that requires that money received for the use of the United States be deposited in the Treasury unless otherwise authorized by law. As such, USF balances are held in a private bank account. However, subsequent to this OMB advice, in February 2005 we reported that the FCC should reconsider this determination in light of the status of universal service monies as federal funds.\nAccording to an internal memo from FCC’s Managing Director in December 2014, OMB presented the FCC with a Fiscal Year 2016 Budget Passback, a memo outlining various goals and objectives relating to USF reform, modernization, and oversight. The memo states that OMB observed that USF funds are federal resources and should enjoy the same rigorous management practices and regulatory safeguards as other federal programs. According to correspondence received from the FCC Chairman’s Senior Legal Counsel, as of March 2017, FCC has decided to move the funds to the Treasury to address this situation. In addition to addressing any risks associated with having the funds outside the Treasury, FCC identified potential benefits of moving the funds. For example, FCC explained that having the funds in the Treasury could allow USF payments to be used to offset other federal debts, and would provide USAC with better tools for fiscal management of the funds, including access to real-time data and more accurate and transparent data.\nTo accomplish this move, the correspondence notes FCC has been coordinating with the Treasury and OMB to obtain a better understanding of obstacles involved with moving the money to the Treasury. FCC’s Office of the Managing Director prepared a preliminary project plan for moving the USF to the Treasury with the goal of completing the transfer in approximately 1 year. If the USF were held in the Treasury, the Secretary of the Treasury would have more cash on hand, which could reduce the Treasury’s need to borrow cash and its associated borrowing costs.\nUSAC Banking Arrangements The Universal Service Administrative Company (USAC) contract with the bank that holds the Universal Service Fund (USF) includes terms for the compensation owed for services provided by the bank, bank-data retention requirements, and confidentiality agreements. For 2015, USAC paid the bank annual investment fees of approximately $1.5 million. A different bank provides banking services for USAC’s administrative disbursements, such as payroll services, but there is no contractual arrangement between that bank and USAC. Federal Communications Commission (FCC) officials were unaware that USAC did not have a contract in place until we raised the matter with them in April 2015. Since 1999, this bank has managed USAC’s administrative disbursements—totaling approximately $141 million in 2015—for an annual cost of approximately $22,000. According to FCC, fees paid to this bank are funded by credits from the USF, which are 0.2 percent of average collected balances, and there is not a minimum balance requirement, therefore, there are no separate annual fees paid to the bank. Regardless, there is no contract in place stipulating the service agreement, terms and conditions, or associated costs. FCC officials told us they were aware of the banking service, but that not having a contract in place was an oversight on the part of USAC and needs to be remedied. After we raised this issue, USAC solicited competitive proposals in October 2016 for these banking services and plans to put in place a contract to stipulate the agreement.\nAccording to FCC, until the USF is moved into the Treasury, there are some oversight risks associated with holding the fund in a private account. Although USF funds are held by a bank in the name “Universal Service Administrative Company as Agent of the FCC for Administration of the FCC’s Universal Service Fund,” the contract governing the account does not provide the FCC with authority to direct bank activities with respect to the funds in the event USAC ceases to be the administrator of the USF. FCC officials told us that although FCC is not party to the bank contract for USF, they reviewed the statement of work for the contract and were involved in USAC’s procurement process. After we raised this matter with FCC officials, beginning in November 2016, FCC sought to amend the contract between USAC and the bank to enable the bank to act on FCC instructions independent of USAC in the event USAC ceases to be the administrator. However, as of May 2017, the amended contract has not been signed.\nWhile there is a preliminary plan to move the USF funds to the Treasury, as well as plans to amend the existing contract with the bank as an interim measure, several years have passed since this issue was brought to FCC’s attention without corrective actions being implemented and under FCC’s preliminary plan it would not be until next year, at the earliest, that the funds would be moved to the Treasury. Further, in May 2017, while reviewing a draft of this report, a senior FCC official informed us that FCC experienced some challenges associated with moving the funds to the Treasury, such as coordinating across the various entities involved, which raised some questions as to when and perhaps whether the funds would be moved. Until FCC finalizes and implements its plan and actually moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized.", "Currently, there are no uniform front-end eligibility checks available to USAC to ensure Lifeline providers have accurately tallied the number of subscribers for whom they seek reimbursement. As a result, USAC primarily relies on a “pay-and-chase” model of oversight. “Pay-and-chase” refers to making disbursements on the front end and relying on audits or reviews after the funds have been disbursed to check for any noncompliance or improper payments. According to USAC officials, claims submitted by Lifeline providers are reviewed to help ensure accuracy, and the risks of overpayments are minimized prior to disbursement. However, these reviews are fairly limited. For example, USAC officials told us they compare provider disbursements, perform a trend analysis of disbursement amounts to search for suspicious claims, and initiate additional reviews when a claim appears irregular or exceeds a set rate of increase determined by USAC officials as potentially risky. Additionally, USAC primarily relies on Payment Quality Assurance Program (PQA) and Beneficiary and Contributor Audit Program (BCAP) assessments—discussed later in this report—that occur after disbursements have been made to detect fraud. While USAC’s payment- review processes may help minimize improper payments to some extent, USAC does not confirm subscriber eligibility and therefore is limited in its ability to know up front whether the Lifeline providers’ forms submitted for payment are accurate and based on qualifying households receiving Lifeline service. GAO’s Framework for Managing Fraud Risks in Federal Programs states that, to the extent possible, agencies should conduct data matching to verify key information, including self-reported data and information necessary to determine eligibility, prior to enrollment to avoid the “pay-and-chase” approach to risk management, which is typically a less cost-effective use of resources.\nTo help determine eligibility prior to enrollment, FCC has plans to create a third-party national eligibility verifier (National Verifier) to be launched nationwide by the end of 2019. The National Verifier is expected to interface with both state and federal eligibility databases to confirm eligibility. Currently, USAC and FCC are working to sign data-sharing agreements with state entities and federal agencies with relevant eligibility-data sources. If effectively implemented, the National Verifier— discussed in more detail later in this report—could help ensure eligibility verification and reduce the reliance on a pay-and-chase model of oversight. However, on the basis of past experience, the feasibility of creating data-sharing agreements that would enable an automated means to confirm eligibility prior to disbursements is uncertain. Specifically, the 2012 Reform Order set a goal for developing an automated means for verifying Lifeline eligibility by the end of 2013, for, at a minimum, SNAP, Medicaid, and SSI because these are the three most common programs through which subscribers qualify for Lifeline. FCC has not yet been able to create such an automated means. According to FCC officials, there are challenges in creating a national eligibility database as some states have privacy laws that prohibit sharing eligibility data with the federal government. Moreover, data quality may vary from state to state, or may not be maintained by the state for each Lifeline qualifying program. Until progress is made with the National Verifier and data-sharing agreements are put in place with state eligibility databases, USAC will continue to primarily rely on a pay-and-chase approach to detect fraud.", "USAC performs USF contribution audits of telecommunications providers as a financial management control. The number of audits issued from January 2010 through December 2015 was limited; however, USAC plans to increase its audit coverage in future years. USAC performs contribution audits to ensure that telecommunications providers pay USF fees as required to support the universal service programs. As previously discussed, all telecommunications providers, with limited exceptions, must pay a percentage of their interstate and international end-user telecommunications revenues to support the USF. Among other things, USAC contribution audits review documentation to verify that the revenue reported by the telecommunications providers match actual revenues. The contribution audits are also meant to confirm, among other things, that telecommunications providers that opt to pass the cost of USF fees to customers do not charge in excess of the relevant contribution factor times the assessable portion of that customer’s bill.\nFrom January 2010 through December 2015, USAC had issued contribution audits on 74 telecommunications providers, with audit periods from calendar year 2007 through 2013. During this 6-year period, the total number of telecommunications providers that filed revenues with USAC each year ranged from about 6,000 to almost 6,700. (See table 1.)\nThe limited audit coverage of the reported USF contribution-based revenue during this time frame is primarily the result of USAC not auditing the larger USF contributors. For example, during the period we reviewed, USAC audited 1 of the top 10 USF contributors and 2 of the top 30 USF contributors for calendar year 2014. Of the 74 audits performed, 8 of them were performed on telecommunications providers that reported $0 in assessable revenues. According to USAC officials, the reason the very large companies are not routinely audited is due to the complexity of the audits and limited audit resources.\nAccording to USAC’s most recent 2016–2017 fiscal year audit plan, USF contributions audits beginning in March 2016 used a targeted risk-based approach, which includes the amount of assessable revenues and whether the carrier has ever been audited, as opposed to randomly selecting carriers, as had been done previously. Also, the officials said that the percentage of audit coverage is expected to increase with the current audit plan as external cosourced staff from external audit firms were retained in March 2016 to help perform audits of higher-risk and larger contributors. The current audit plan also estimates that approximately 9 percent of the reported gross revenues from telecommunications carriers will be covered in future audit years. If effectively implemented, these changes should result in a significant increase of risk-based audit coverage, and should help USAC better assess compliance with USF contribution requirements for universal service funding.", "The findings for the 74 USF contributions audits we reviewed indicate that most carriers were not reporting their assessable telecommunications revenue appropriately. These audit findings raise questions not only about the USF fees collected, but also the rate that was set by USAC. Because the assessable telecommunications revenues reported by audited carriers have been incorrect, the audits raise the possibility that the USF rate-setting process was potentially based on inaccurate information. In other words, the accuracy of the USF contribution factor is limited as this calculation is partly based on reported telecommunications revenues, which the limited number of audits demonstrate may be reported incorrectly. Of the 74 contribution audits, USAC found that in 10 the carrier reported revenues correctly; in 48, USAC found the carrier underreported assessable telecommunications revenue; and in 16, USAC found that the carrier overreported assessable telecommunications revenues—and thus may have overcollected USF fees from customers.\nAs part of the contribution audit, USAC also reviews a small sample of customer phone bills to ensure that USF fees charged to customers are not in excess of the relevant contribution factor times the assessable portion of that customer’s bill as required by regulation. For 15 of the 16 USAC contribution audits that found the carrier overreported assessable telecommunications revenue to USAC, the audit noted the carrier was unable to be reimbursed because the 12-month time limit imposed by FCC rule to refile had expired. If the carrier passed through USF fees, as most do, it is likely that the customers were also not reimbursed. In some instances, when USAC audits find that the company overreports assessable revenue, but the limited sample testing of individual customer bills do not indicate an overcharge has occurred, the audits do not recommend or require that the company refund customers any USF fees that were overcollected as a result of the incorrect revenue assessment. The limited audit coverage combined with audit findings demonstrating some carriers have paid into the USF incorrectly may suggest that USF fees collected are not in the correct amount.\nIn our review of the 74 contribution audits, we also found that 60 of them included tests to determine whether the carrier was in compliance with the rules as they relate to USF recovery charges on end-user customer invoices. We found that 27 of the 60 tests identified that the carrier overcollected USF fees from some customers and 1 other could not determine whether the carrier overcharged USF fees as the carrier did not maintain documentation. The total amount of overcollection among these audits was unknown because the findings were based on a small sample of invoices reviewed and not the total population of potentially overcharged customers.\nAccording to USAC officials, typically when a telecommunications provider overcharges USF fees, it is not limited to a few customers but affects the entire customer base. For example, if a telecommunications provider charges all of its customers the incorrect USF quarterly- contribution factor, it would likely affect all customers. When USAC finds that USF fees were misapplied to a customer’s phone bill during the contribution audit, USAC instructs the telecommunications provider to comprehensively review all their phone bills to identify the universe of improper USF fee charges and to reimburse those customers. However, USAC told us that it is not responsible for determining how those reimbursements should take place, as that is an FCC policy issue. As a result, USAC does not follow up with telecommunications providers to ensure they comprehensively review their phones bills or reimburse overcharged customers, but instead refers the audits that find USF overcharges to the FCC Enforcement Bureau.\nUntil recently, USAC and the FCC’s Enforcement Bureau had differing views about what constituted a formal referral for enforcement action with respect to USF overcharges. According to USAC, since January 2013 it has submitted lists to FCC identifying telecommunications carriers with potential USF fee overcharges based on completed contribution audits, which included 16 identified carriers. FCC’s Enforcement Bureau officials told us that the lists alone were not considered by them as referrals or recommendations for enforcement action, but rather as general information that may support investigations. According to the Enforcement Bureau officials, the primary referral process used for USF enforcement actions is through letters submitted by USAC, which specifically identify matters to be considered for enforcement action. In contrast, USAC officials told us it was their understanding that the listings of contributor audits that found customers were overcharged USF fees would be considered referrals for follow-up and potential enforcement actions. According to the Enforcement Bureau, 1 of the 16 contributors that was listed is under investigation and 2 others were considered for enforcement action, but, on the basis of available enforcement resources, the age of the alleged overcharges, and the potential severity of the violations, the Enforcement Bureau determined no further action was warranted for these 2 cases.\nIn our review of the 74 contribution audits, we identified an additional 11 companies that overcharged USF fees to customers that were not included in the list of 16 audits that USAC provided to FCC’s Enforcement Bureau, totaling 27 audits that found USF overcharges to customers. USAC officials told us 8 of the 11 instances of overcharging USF fees were not forwarded to FCC because they occurred prior to 2013, which is when FCC and USAC established a policy to forward such audit findings to the FCC. Two of the audits were not on the list because they were approved by the USAC Board of Directors after our request for the list of audits that found USF overcharges. USAC officials confirmed those two audits were later provided to FCC. One audit was not provided, but USAC officials told us they will include that audit in their next report to FCC’s Enforcement Bureau. Thus, there was no audit follow-up or enforcement actions taken for 24 of the 27 audits in which USAC found the carrier was overcharging USF fees to customers during the 2007–2013 audit period time frame, and it is not known whether the carrier comprehensively reviewed phone bills across its customer base to identify all overcharges, or whether overcharged customers were ever reimbursed and whether overcharges stopped.\nThe lack of agreement as to what constitutes a referral to follow up on USF overcharges created some risk that FCC’s Enforcement Bureau would not take action to review and ensure customers are reimbursed and any overcharges stop. However, as a result of our inquiries regarding the status of these referrals, FCC officials told us they initiated a new referral process. According to FCC officials, since December 2015, all FCC referrals are routed to a central point of contact, as opposed to individuals, within FCC’s Enforcement Bureau using a standardized e- mail address. According to FCC officials, this revised process will better ensure that all referrals are reviewed by a central point of contact and routed to the appropriate point of contact for follow-up if necessary.", "With the March 2016 Modernization Order, FCC established a budget mechanism for Lifeline for the first time, setting the budget at $2.25 billion. According to FCC, it was mindful of concerns that establishing a budget on Lifeline could lead to eligible consumers being denied service. Yet, partly because it decided to expand Lifeline to include broadband, FCC stated that it had concluded that its budget mechanism would ensure the financial stability of the program and help guarantee access to all eligible consumers. It also stated that establishing the budget mechanism would balance the need to ensure that Lifeline continued to reduce the contribution burden on the nations’ ratepayers and continue to support service to eligible consumers. According to the March 2016 order, FCC set the budget at $2.25 billion by considering current participation rates, possible growth of the program as a result of the expansion to broadband, and the safeguards already in place to reduce waste, fraud, and abuse. According to GAO’s Cost Estimating and Assessment Guide, a reasonable and supportable budget is essential to a program’s efficient and timely execution.\nHowever, the 2016 Modernization Order does not require the FCC Commissioners to take any immediate action to control expenditures if the budget is exceeded. Instead, the order requires a bureau within FCC to issue a report to FCC Commissioners by July of the following year if total Lifeline disbursements exceeded 90 percent of the budget in the previous calendar year. The order states that the Commissioners are expected to take action in response to the report within a 6-month time frame. No requirements are outlined stipulating that the budget must be reapproved by the Commissioners if additional funds are needed to meet program demands.\nThus, if costs were to overrun 90 percent of the budget, it could be a year or longer before the commission could take any actions according to the time frame outlined in the order, raising questions about the timing, efficacy, and ability of the budget to control expenditures. Without requiring the Commissioners to review and approve additional spending in a timely manner, substantial increases in demand like those that the program has experienced in the past could lead to expenditures beyond those that FCC budgeted. In such a case, the budget would have limited effect in controlling program costs.", "When telecommunication carriers opt to bill customers with a USF line- item charge, a customer may not be able to identify what line item accounts for the USF charge. FCC’s Truth-in-Billing rules apply when providers pass through USF line-item charges to customers. These rules are intended to improve consumers’ understanding of their telephone bills and to help consumers detect and prevent unauthorized charges. While FCC has not adopted any particular language to specify how USF charges are to be labeled on a bill, the rules require that a telephone company’s bill must provide a brief, clear, nonmisleading, plain-language description of the service or services rendered to accompany each charge, and contain full and nonmisleading descriptions of charges, among other things. According to USAC officials, a customer may not be able to identify what line items account for the USF charge. For example, several USAC officials we spoke with were unable to determine what line items accounted for USF pass-through charges when reviewing their own phone bills. Similarly, FCC’s own phone bill did not clearly specify the line item reflecting the USF pass-through charge, but instead referred to “regulatory pass-through charges.” FCC officials were not able to determine whether this line item represented USF charges during our meeting, but they told us they confirmed with their telecommunications provider after the meeting that this line item represented USF charges.\nAccording to USAC officials, their contribution audits do not determine whether companies comply with the Truth-in-Billing rules with regard to the labeling of USF fees as this is considered outside the scope of their audits. Instead, according to USAC’s review officials, audits of customers’ bills as part of contribution audits are focused on ensuring carriers do not overcharge USF fees to customers beyond the assessable contribution rate, and this is made possible through detailed meetings with the telecommunications provider that take place during the audit. However, even though FCC has not adopted any particular language to specify how USF charges are to be labeled, USAC could assess whether there is a brief, clear, nonmisleading, plain-language description of the service or services rendered to accompany each charge. Without including in their audit reports instances where they cannot identify the USF charge—for those carriers that opt to pass through USF charges in a separate line item—carriers may lack the impetus to enhance the transparency of their bills, and their customers will remain unable to detect and prevent potentially unauthorized charges.", "USAC has requested guidance from FCC pertaining to USF contribution requirements, but the guidance is still pending. Specifically, in August, 2009 USAC sought guidance on whether various revenues derived from new technologies require USF fees, including whether Virtual Private Network (VPN) and dedicated Internet Protocol revenue should be classified as a telecommunication service, and thus subject to USF fees. Similarly, in April 2011 USAC submitted a request to FCC for guidance to determine whether text messaging revenue is subject to USF fees. Both of these items remain pending. In April 2012, FCC adopted a Further Notice of Proposed Rulemaking regarding reform of the contributions system. The notice sought public comment on various measures to reform and modernize the USF contribution system, including who should contribute, how contributions should be assessed, improvements to the administration of the contributions system, and recovery of universal service contributions from consumers. This rulemaking remains pending. Additionally, in August 2014 FCC sought a recommendation from the Federal-State Joint Board on Universal Service regarding modifications of the universal service contribution methodology and referred the rulemaking record from the April 2012 notice to the joint board for its consideration. The joint board’s decision also remains pending, but per FCC officials, may address some of the issues on which USAC has requested guidance.\nFCC is required to ensure that telecommunications carriers that provide interstate telecommunications services pay USF fees, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by FCC to preserve and advance universal service. In addition, according to Standards for Internal Control in the Federal Government, management should internally communicate the necessary quality information to achieve the entity’s objectives. Per FCC regulations, its Wireline Competition Bureau is required to take action in response to requests for reviews of decisions of the USF Administrator within 90 days, with the option to extend the response time an additional 90 days, but there is no requirement regarding the timing of action on requests for guidance from the USF Administrator. FCC officials told us the reasons for the significant delays are varied. For example, FCC officials told us that some guidance requests such as these from USAC are very complicated and require the full commission’s input, which can take a long time as the FCC has other competing priorities.\nWithout guidance on contribution requirements, some carriers collect more from customers and pay more into the fund than other carriers for the same service. For example, our review of the 74 contribution audits found 14 instances whereby a carrier classified texting or VPN revenues, or both, as assessable USF revenues. One audit, issued in March 2011 found the carrier reported $117 million dollars in VPN revenues as telecommunications revenues assessable to USF contributions. According to USAC, because of the carrier’s decision to classify VPN revenue as a telecommunication service, the carrier may have passed through approximately $3.9 million in USF fees to customers. In comparison, another audit found a company that classified $86 million in text revenue as nontelecommunications revenue and therefore not assessable for USF contributions. According to USAC, the carrier reported approximately 88 percent of its mobile services as nonassessable, therefore approximately $1.4 million in USF fees were forgone and not collected from customers to fund universal service programs. By responding to USAC requests for guidance, FCC could help ensure that the contribution factor is based on complete information and that USF pass-through charges are equitable.", "Although FCC and USAC have implemented controls to improve subscriber eligibility verification, such as implementing the NLAD database in 2014, our analysis of data from 2014, including undercover attempts to obtain Lifeline service, revealed significant weaknesses in subscriber eligibility verification. Subsequently, USAC took steps to enhance the accuracy of the NLAD database. Lifeline providers are generally responsible for verifying the eligibility of potential subscribers, but their ability to do so is hindered by a lack of access to, or awareness of, state eligibility databases. These challenges might be overcome if USAC provided additional information to providers about those databases and if FCC establishes a National Verifier, as it plans to do by 2020, to remove responsibility for verifying eligibility from the providers.", "USAC has implemented some controls to screen for subscribers attempting to receive duplicate Lifeline benefits, and for applicants attempting to enroll in the program using fictitious identities and addresses, and to verify whether subscribers are still eligible for Lifeline. These controls have reduced the number of subscribers and households receiving duplicate benefits both within the same Lifeline provider and subscribers receiving duplicate benefits across Lifeline providers. Specifically, in 2012, FCC directed USAC to develop NLAD to keep track of all subscribers within Lifeline and to verify that subscribers are not already receiving Lifeline service from a different Lifeline provider. Also in 2012, FCC began requiring the annual recertification of all subscribers’ eligibility. Lifeline providers or, if applicable, state Lifeline administrators are required to recertify that their subscribers are still eligible for Lifeline beginning the calendar year after each subscriber is enrolled.\nThe NLAD database was completely implemented by March 2014 and contains a real-time list of Lifeline beneficiaries to assist carriers in identifying and preventing duplicate subscribers.\nPrior to NLAD, because Lifeline providers were unable to view each other’s subscriber lists, they could not detect subscribers receiving duplicate benefits across providers. Currently, when Lifeline providers enroll individuals in the program, the NLAD database automatically checks for potentially duplicative benefits within and among Lifeline providers.\nIn addition, since NLAD went online the database has utilized a Third Party Identity Verification (TPIV) process and an address validation control to verify applicants’ identities and addresses when their information is entered into NLAD. The TPIV process verifies the identity of an applicant by matching the applicant’s first name, last name, date of birth, and the last four digits of his or her Social Security number (SSN) against official records. The address validation control process checks applicants’ addresses against U.S. Postal Service data. Applicants who fail TPIV or address validation controls are subject to a dispute resolution process whereby subscribers can provide additional documentation to confirm their identity or documentation confirming their address is deliverable. If NLAD identifies the applicant as a potential duplicate subscriber, or the identity and address cannot be confirmed, the provider will not be able to register the applicant in NLAD.", "To identify Lifeline subscribers who were potentially ineligible to participate in the program, we tested the eligibility of subscribers who claimed participation in Medicaid, SNAP, and SSI using NLAD data as of November 2014. We focused our analysis on these three programs because FCC reported in 2012 that these are the three qualifying programs through which most subscribers qualify for Lifeline. Because SNAP and Medicaid data are maintained at the state level, we selected five states to test Lifeline beneficiaries’ participation in SNAP and six states to test their participation in Medicaid. We tested SSI eligibility across the 46 states and the District of Columbia whose Lifeline providers utilize NLAD. We compared the approximately 3.4 million subscribers that, according to information entered in NLAD, were eligible for Lifeline due to enrollment in one of these three programs to eligibility data for these programs.\nPrior to our analysis of NLAD data, we conducted reliability testing including examining the data for anomalies such as last four SSN digits that were all zeroes and out-of-scope or dates of birth based on a comparison to the Lifeline enrollment date. We also tested NLAD for complete duplicate records containing the same subscriber name, last four SSN digits, and date of birth. On the basis of our discussions, documentation review, and our own testing of the data, we concluded that the data fields used for this report were sufficiently reliable for the purpose of our review, but that the potential for significant data-entry errors in NLAD remains. Further, it is not possible to determine from data matching alone whether these matches definitively identify recipients who were not eligible for Lifeline benefits without reviewing the facts and circumstances of each case. For example, we could not identify based on the data alone whether there were data-entry errors at the time of enrollment incorrectly stating the qualifying Lifeline program presented by the subscriber at the time of Lifeline enrollment.\nOn the basis of our analysis of NLAD and public-assistance data, we could not confirm that a substantial portion of selected Lifeline beneficiaries were enrolled in the Medicaid, SNAP, and SSI programs, even though, according to the data, they qualified for Lifeline by stating on their applications that they participated in one of these programs. According to NLAD, the number of subscribers participating in these programs in the states selected for our analysis was 3,474,672, or 33 percent, of the 10,589,244 unique subscribers we identified. In total, we were unable to confirm whether 1,234,929 individuals out of the 3,474,672 that we reviewed, or 36 percent, participated in the qualifying benefit programs they stated on their Lifeline enrollment applications or were recorded as such by Lifeline providers.\nIf providers claimed and received reimbursement for each of these subscribers, then the subsidy amount associated with these individuals equals $11.4 million per month, or $137 million annually, at the current subsidy rate of $9.25 per subscriber. Because Lifeline disbursements are based on providers’ reimbursement claims, not the number of subscribers a provider has in NLAD, our analysis of NLAD data could not confirm actual disbursements associated with these individuals. Given that our review was limited to those enrolled in SNAP or Medicaid in selected case-study states, and SSI in states that participated in NLAD at the time of our analysis, our data results are likely understated compared to the entire population of Lifeline subscribers. These results indicate that potential improper payments have occurred and have gone undetected. We plan to refer potentially ineligible subscribers identified through our analysis to FCC and USAC for appropriate action as warranted.\nFigure 5 below shows the percentage of Lifeline subscribers (that claimed either Medicaid or SNAP as eligibility to qualify for Lifeline) we were unable to confirm as eligible using state Medicaid and state SNAP eligibility data for selected case-study states. The results of our analysis for Georgia also include the percentage of Lifeline beneficiaries we were unable to confirm as eligible who were validated by the state eligibility database, as Georgia’s state database only confirmed eligibility for Medicaid and SNAP at the time of our analysis.\nFigure 6 is an interactive graphic that shows the percentage of Lifeline beneficiaries (that claimed eligibility via SSI to qualify for Lifeline) that we were able to confirm as likely eligible and that we were unable to confirm as likely eligible using nationwide SSI eligibility data for states that participate in NLAD. See appendix II for more information.\nWe also conducted analysis of NLAD to identify instances of subscribers receiving duplicate Lifeline benefits and deceased individuals appearing as active beneficiaries. The results of our analysis are as follows:\nWe found a total of 5,510 potential internal duplicates whereby the last name, first name, date of birth, and last four digits of the SSN of one record matched another record exactly. The subsidy amount associated with these duplicates equaled approximately $51,000 per month, or $612,000 annually.\nWe matched NLAD enrollment data with SSA’s Death Master File and identified 6,378 individuals reported as deceased who are receiving Lifeline benefits. These individuals either were enrolled, recertified, or both after they had been reported dead. The date of death for each of these individuals preceded the Lifeline enrollment or recertification date by at least 1 year. The subsidy amount associated with these individuals equaled $58,997 monthly and $707,958 annually. According to USAC, the NLAD recertification date field is not completely populated; therefore, these numbers likely understate the number of people reported dead who were reenrolled in Lifeline.\nThe results of our analysis show that a potential annual subsidy amount of $1.2 million could have resulted from potentially ineligible or fictitious individuals receiving Lifeline benefits if these individuals were not deenrolled by USAC or Lifeline providers and the providers claimed reimbursement for these subscribers.\nAt the time USAC provided the NLAD data to us in November 2014, USAC officials stated that they were performing a number of procedures on the initial data loaded into NLAD by providers. According to USAC officials, from September through December 2014 Lifeline providers were required to collect Independent Economic Household worksheets from all subscribers who were found to share the same address with another Lifeline subscriber. USAC officials informed us that if no such completed worksheet was obtained, or if the subscriber did not certify he or she was part of a different household from another subscriber sharing the same address, the subscriber was deenrolled. USAC reported that this process deenrolled approximately 1.3 million subscribers, some of whom could still have been in the data we reviewed. We did not remove these subscribers when we conducted our data analysis, because duplicate addresses are allowed if individuals are part of a separate economic household. USAC performed additional work to collect Independent Economic Household worksheets before determining whether subscribers should be deenrolled.\nUSAC officials also informed us that additional rigor was added to NLAD’s duplicate-checking algorithm in March 2015. Specifically, USAC officials explained that a process to scrub NLAD records to identify additional duplicates was completed in May 2015, and resulted in the deenrollment of approximately 374,000 subscribers. We estimate that USAC’s work to identify and scrub duplicates was performed on over 10 million subscribers, while our analysis was limited to our case-study states for Medicaid and SNAP and the national population of SSI recipients. As USAC had not completed its process of identifying and deenrolling duplicate subscribers when we obtained NLAD data, there may be some overlap between the subscribers deenrolled by USAC and the 3.4 million subscribers included in our analysis. However, we removed internal duplicates in NLAD whereby the last name, first name, date of birth, and last four digits of the SSN of one record matched another record exactly before performing any data matching, so the likelihood of any overlap in duplicate subscribers has been reduced. Our analysis also involved matching NLAD data to qualifying Lifeline program data, which FCC or USAC have not done.", "Our undercover testing found that Lifeline may be vulnerable to ineligible subscribers obtaining service and found examples of Lifeline providers being nonresponsive, or providing inaccurate information. To conduct our 21 tests, we contacted 19 separate providers to apply for Lifeline service. We applied using documentation fictitiously stating that we were enrolled in an eligible public-assistance program or met the Lifeline income requirements. We were approved to receive Lifeline services by 12 of the 19 Lifeline providers using fictitious eligibility documentation.\nThe seven Lifeline providers that we did not receive service from did not provide it for different reasons. For example:\nTwo of the seven Lifeline providers informed us that we were denied because they could not verify the identity of the fictitious applicants used for our tests.\nOne Lifeline provider told us that the application was appearing as a duplicate and was not being accepted by NLAD, even though the fictitious identity was not enrolled.\nOne other provider told us that our identity could not be verified and that the address provided on our application, a UPS Store mailbox, was in use by another Lifeline customer. We were told only a certain individual within the company could offer resolution; however, we made multiple calls and left six messages on this individual’s voice mail over a 5 week period and did not receive a call back.\nThe remaining three providers told us that they do not ship to post office boxes. While FCC regulations do not preclude a Lifeline provider from accepting a post office box address for a billing address if different from the subscriber’s residential address, there is no requirement for them to do so.\nWe completed two separate tests using different identities for 2 of the 19 providers due to the outcome of the first test for each provider. Specifically:\nOne of these providers initially deemed us ineligible for Lifeline, but it did so because the representative for that provider erroneously calculated our pay stub income, which if calculated correctly, would have met eligibility requirements. We reapplied using a different identity claiming enrollment in a public-assistance program as support and providing fictitious documentation and were approved for Lifeline.\nThe other provider approved us for the program, but never provided us with service. We were given a customer identification number and phone number, but the provider did not ship us a free phone as advertised as part of their Lifeline service. We called the Lifeline provider 11 times over a period of 2-½- months to inquire about the status of our service. A company representative told us on multiple occasions that our phone had been or would be shipped, only to later say that our phone could not be shipped because the company had run out of phones. We were told on multiple occasions that the phone would ship within 4 days, but we did not receive it from the time we applied in July 2015 through December 2015 and therefore we were unable to begin our Lifeline service. This provider did not provide an alternative to participating in Lifeline, such as using our own mobile device to receive service. We reapplied using a different identity to determine whether this was a recurring issue with this Lifeline provider. When reapplying using a different identity, we were told on separate occasions that our identity could not be validated and to not apply using low income as the eligibility qualifier. We were also told that the applicant’s participation in the public assistance program stated on the application could not be verified. However, an official from the state where we applied stated that the public-assistance program in question was not included in a database of public- assistance programs and beneficiaries made available to Lifeline providers.\nFurther, we experienced instances during our undercover tests where our calls to providers were disconnected, and where Lifeline provider representatives transmitted erroneous information, or were unable to provide assistance on questions about the status of our application. For example, one Lifeline provider told us that our application was not accepted by the company because our signature had eraser marks; however our application had been submitted via an electronic form on the provider’s website and was not physically signed. While our tests are illustrative and not representative of all Lifeline providers or applications submitted, these results suggest that Lifeline providers do not always properly verify eligibility and that applicants may potentially encounter similar difficulties when applying for Lifeline benefits.", "USAC officials told us that they had improved both NLAD and the TPIV process since they were established. USAC officials told us that they had identified that either Lifeline subscribers or Lifeline providers had exploited a TPIV override process in NLAD, so they established a control to remedy the problem. Specifically, USAC officials stated that in 2015 they had modified the duplicate-checking algorithm to add additional rigor and eliminated the identity override process. Furthermore, as discussed above, USAC officials stated that they scrubbed all NLAD records to identify any additional duplicates that may have occurred prior to these enhancements. This process was completed in May 2015, and resulted in deenrollment of approximately 374,000 subscribers.\nAdditionally, for the data that we examined from when NLAD was launched in March 2014 through November 2014, NLAD subscriber data contained addresses that were associated with multiple subscribers. For example, through our analysis we found a single address was associated with 10,000 separate subscribers, all receiving Lifeline benefits through the same Lifeline provider. This address could not be verified by the U.S. Postal Service address verification system we consulted. One Lifeline provider listed multiple addresses in NLAD with over 500 Lifeline subscribers, which may be reasonable given that some of the addresses appear to be associated with homeless shelters. In total, we identified 48 unique addresses that were each associated with more than 500 subscribers. In December 2016, the provider we found with over 10,000 subscribers associated with the same address was fined $30 million and relinquished FCC and state authorizations to participate in Lifeline; a fraud investigation by FCC and the United States Attorney’s Office found employees fraudulently enrolling duplicate and ineligible subscribers into Lifeline.\nOfficials from USAC also stated that they are examining ways to utilize data analytics to check the quality of data in NLAD. For example, according to USAC officials, they became aware that certain prefixes and area codes are not used for residential phone numbers and they have reviewed NLAD for such information to mitigate fraud. Another example of analytics includes looking for SSN last four digits of “0000,” which is a last-four-digit code never assigned in actual SSNs, and examining subscribers who are over the age of 100. Measures such as these, along with the transition to a National Verifier, as discussed below, should help data quality concerns in the future and mitigate potential fraud.", "Lifeline has relied primarily on Lifeline providers to verify subscriber eligibility for the majority of subscribers. Providers are to verify subscriber eligibility by reviewing supporting documentation or by checking state eligibility databases that contain information on beneficiaries of Lifeline-qualifying assistance programs, such as SNAP and Medicaid. If the data entered into the eligibility databases are accurate, and Lifeline providers use them as intended, eligibility databases available to Lifeline providers can be an important tool for limiting fraud, waste, and abuse in Lifeline by verifying eligibility.\nHowever, not all states have databases that Lifeline providers can use to confirm eligibility. According to FCC, as of June 2016, databases that could be utilized for initial eligibility determinations existed in 29 states. We also found that state databases do not always contain beneficiary information for every Lifeline qualifying program. Table 2 below shows what qualifying programs were available for eligibility checks for our case study states as of June 2016.\nSome providers with whom we spoke were unaware of databases that were potentially available to them. Officials from two Lifeline providers we spoke with were not aware of all the eligibility databases available for use in areas where they provide Lifeline service. For example, one Lifeline provider we spoke to provided us with information stating that 18 states maintained an eligibility database, while another Lifeline provider that operated in 41 states at the time told us it knew of only 8 states with databases. The provider operating in 41 states was unaware of 10 state eligibility databases in states it operated in that were identified by the other provider. Officials from one of these companies told us they were not aware of a comprehensive list of state eligibility databases. USAC officials confirmed that they do not provide Lifeline providers with a list of state databases that are available to confirm program eligibility. As a result, these Lifeline providers and potentially others are not utilizing required applicant verification tools that are available to them.\nFurther, USAC does not independently verify that subscribers have been vetted through the eligibility databases or otherwise verify subscribers’ eligibility. Lifeline providers are required by program rules to access state eligibility databases, where available, to determine an applicant’s program-based eligibility. In the absence of such a database, a Lifeline provider must review proof of enrollment in a qualifying program or proof of income eligibility. USAC audits of Lifeline providers do check to determine whether an administrator or eligibility database was relied upon. USAC does not, however, confirm that beneficiaries that Lifeline providers report in NLAD as having been vetted through a state database actually were vetted. Theoretically, a Lifeline provider could enter into NLAD that a state database or state administrator was used when it was not. This possibility could partially explain why we could not confirm eligibility for approximately 70 percent of those individuals we reviewed in Georgia that, according to NLAD, were deemed eligible by a state administrator. Officials from Georgia’s SNAP office told us that although the database is available to ETCs, it is possible they are not using the database, and Georgia does not have any way to check to see that the database is being used. As part of their annual recertification requirements, service providers are required to certify that they have procedures in place to review income and program-based eligibility documentation, and confirm eligibility by relying upon access to a state database or eligibility notice from a state Lifeline administrator, prior to enrolling a customer in Lifeline. The recertification form states that “ersons willfully making false statements on this form can be punished by fine or imprisonment under Title 18 of the United States Code, 18 U.S.C. § 1001.”\nLifeline providers are required to review supporting documentation, such as a driver’s license or Social Security card, when an applicant’s identity cannot be verified. However, Lifeline providers are not required to provide supporting documentation to USAC as part of the TPIV process; instead, Lifeline providers submit required information stating what documentation was reviewed, and USAC confirms that the type of documentation appropriately verifies the subscriber’s identity, but does not review the documentation itself. As of February 2016, providers are required to retain all documents used to verify a subscriber’ identity. The planned National Verifier will retain documentation collected as a result of the eligibility-determination process, and Lifeline providers will not be required to retain eligibility documentation for subscribers determined to be eligible by the National Verifier once it is implemented.\nAlthough state eligibility databases do not exist for all states, and not all eligible programs are included within those state eligibility databases that do exist, knowing which states have program-based eligibility databases is an important first step to allow Lifeline providers to better determine applicant eligibility prior to enrollment. According to Standards for Internal Control in the Federal Government, management should use high-quality information to achieve the entity’s objectives, such as using relevant data from reliable sources. Maintaining and disseminating an up-to-date list of available state eligibility databases that includes the qualifying programs those databases access would help enhance Lifeline providers’ awareness, and potentially use of, these tools. Such a list could also help USAC, working with the states, whenever possible, to determine which Lifeline providers had obtained access to state eligibility databases, and gain greater assurance that providers are fulfilling their responsibility of ensuring only eligible subscribers are enrolled.", "In March 2016, FCC adopted an order to create a National Verifier that would determine eligibility rather than having the Lifeline providers do so. According to FCC, to take steps to foster a long-term technological solution to Lifeline eligibility and to leverage the program integrity and enrollment procedures provided by assistance programs that capture 80 percent of the Lifeline eligible population, the number of benefit programs applicants may utilize for Lifeline eligibility would be reduced. According to the order, the five qualifying assistance programs that remain permit easy technological solutions to lay the groundwork for a successful National Verifier because they have existing and accessible databases that the National Verifier will be able to use. FCC officials told us that they intend the National Verifier to interface with both state and federal eligibility databases. According to FCC, with the exception of SNAP (which is administered at the state level), all of the eligibility programs have national databases (i.e., SSI, Veterans Pension, and Medicaid). FCC officials told us that they are working with USAC to create the National Verifier. The FCC has set expectations for it to be deployed in phases with at least five states being launched at the end of 2017, an additional 20 states launched in 2018, and the remaining states or territories by the end of 2019. FCC officials told us that USAC was required to submit a comprehensive draft plan for the National Verifier to FCC for review and approval by the end of November 2016. USAC submitted its National Verifier Draft Plan to FCC on November 30, 2016, outlining its proposed approach to designing and building the National Verifier. USAC submitted its first updated version of the plan on January 2017. According to FCC officials, USAC will provide a status update to FCC twice per year throughout the development and implementation of the National Verifier. FCC officials informed us that in January 2017, USAC executed a contract with the vendor for the design of the National Verifier.\nFCC and USAC identified challenges to establishing the National Verifier. As of January 2017, USAC had identified six initial challenges that could affect the successful launch, build, and operation of the National Verifier, including: (1) unavailability of data sources that can be used for automated eligibility; (2) inadequate operational capacity to effectively manage new processes and high volumes of eligibility verifications; (3) data-breach preparedness; (4) establishment of connections with state or federal data source; (5) emergency preparedness; and (6) designing a system that meets standards. FCC officials further explained that creating a national eligibility database requires coordination with each state, which can be time-consuming and challenging. For example, some states have privacy laws that prohibit sharing eligibility data with the federal government and data quality may vary from state to state. Additional potential concerns include challenges supporting subscribers in tribal areas. USAC has developed mitigation strategies to address several of these concerns, including working with states, vendors, and other stakeholders. According to USAC, progress updates to FCC and the public will continue to be provided every 6 months in updated National Verifier plans.", "", "FCC and USAC have established mechanisms to enhance their oversight of Lifeline providers. For example:\nAs implemented in the 2012 Reform Order, Lifeline-only ETCs that do not utilize their own facilities must file a compliance plan with FCC detailing measures they will take to comply with Lifeline regulations as well as additional safeguards against fraud, waste, and abuse. The compliance plans should include information about the carrier and the Lifeline plans it intends to offer, including the names and identifiers used by the carrier, its holding-company, operating company, and all affiliates, and how it will comply with FCC’s rules and requirements.\nThe 2012 Reform Order also required biennial audits of ETCs providing Lifeline service and receiving $5 million or more annually, determined on a holding company basis, from the low-income program. FCC regulations require that licensed certified public accounting firms independent of the carrier conduct these audits in a manner consistent with Generally Accepted Government Auditing Standards. In April 2014, FCC released uniform audit procedures that the accounting firms must use. As outlined in FCC’s audit procedures, these reviews would be conducted as agreed-upon procedures attestations. The first reports included reviews of calendar year 2013 and were submitted in 2015. Due to the nature of these agreed-upon procedures engagements, each biennial audit report must state that an examination of the subject matter was not performed. Therefore, an opinion on the Lifeline provider’s compliance with Lifeline rules cannot be expressed through these procedures.\nIn July 2014, FCC took additional measures to combat fraud, waste, and abuse by creating a strike force to investigate violations of USF program rules and laws. According to FCC, the creation of the strike force is part of the agency’s commitment to stopping fraud, waste, and abuse and policing the integrity of USF programs and funds.\nIn June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules.\nStarting in fiscal year 2016, USAC implemented a risk-based selection method when conducting Beneficiary and Contributor Audit Program (BCAP) audits to identify the entities with the greatest risk. BCAP audits are conducted on each USAC program in accordance with Generally Accepted Government Auditing Standards, with their primary purpose to ensure compliance with FCC rules and program requirements, and to assist in program compliance. USAC officials told us that, before fiscal year 2016, many of the audited entities were randomly selected, and the selection process was designed to provide a wide variety of entities with regard to size and geographic location. See appendix III for more information.", "Our analysis of FCC and USAC oversight of Lifeline providers found weaknesses in how they oversee providers entering and implementing the program, and enforcing penalties for violations of program rules. FCC has plans or has taken some steps to address some of these weaknesses.", "In its 2012 Reform Order, FCC described how its review of compliance plans was critical to helping evaluate Lifeline providers’ stated plans to adhere to program rules before providers receive any Lifeline funds. The compliance plan review process requires telecommunications providers to provide specific information regarding their service offerings and the measures they will take to implement the Lifeline provider obligations as well as further safeguards against fraud, waste, and abuse that FCC may deem necessary. However, FCC officials told us that no agency document exists that instructs reviewers how to evaluate compliance plans. Without written instructions with criteria for how to review compliance plans, there is some risk that the compliance plan review process is not applied consistently or effectively, or is not conducted in such a way as to help facilitate Lifeline program goals. As a result, the compliance plan review process is limited in providing some level of oversight prior to disbursing funds.\nFurthermore, FCC has a backlog of pending compliance plans. In 2012, FCC approved its first 20 compliance plans, and did not approve any additional plans until August 2016. In August 2016, FCC approved two plans from Lifeline providers specifically dedicated to wireline service. According to FCC, the approval of these two compliance plans was necessary to prevent disruption of Lifeline service for affected wireline customers. As of March 2017, 22 compliance plans had been approved, 22 had been denied, and 34 were pending. FCC officials told us that the delay in approving compliance plans was caused by other agency priorities, but were unable to detail what those priorities were. They also added that the number of staff assigned to reviewing compliance plans was limited to four; the staff have also had other assignments and responsibilities; and these factors were among those that led to the number of plans pending without an FCC decision. According to FCC officials, absent statutory time frames specific to the review of compliance plans and ETC petitions, FCC has not established any time frames for approving or denying these documents. The resulting situation limits the expansion of Lifeline service for companies providing and seeking to provide Lifeline service.\nAs with the compliance plans, FCC had a backlog of 35 pending ETC petitions and had approved 7 providers and denied 15 providers as of March 2017. According to federal statute, telecommunication providers must submit a petition and be designated as ETCs before they can receive reimbursement for providing Lifeline service. ETC designations are made by state regulatory commissions or by FCC if state law does not grant a state the authority to do so. By not making determinations on pending compliance plans and ETC petitions, FCC has not implemented a key aspect of the program’s 2012 reforms. This has created a group of carriers that can begin or expand their Lifeline service offerings and a group of carriers that are prevented from entering the marketplace altogether or from expanding to new geographical markets.\nFCC also faces a backlog for petitions to provide broadband services. As previously discussed, providers seeking to provide Lifeline broadband service must obtain the newly created Lifeline Broadband Provider (LBP) designation from FCC. The 2016 Lifeline Broadband Order states that FCC will take action on LBP designation petitions within 6 months of the submission of a completed filing. By January 2017, FCC had conditionally designated nine ETCs as LBPs, but revoked their LBP designations in February 2017, and returned their LBP petitions to pending status. According to FCC, revoking the designation provides the agency with additional time to consider measures that might be necessary to prevent further fraud, waste, and abuse in Lifeline. In March 2017, the FCC Chairman stated interest in initiating a proceeding to eliminate the new federal LBP designation process.", "FCC and USAC have limited oversight of Lifeline provider operations and the internal controls used to manage those operations. The current structure of the program relied throughout 2015 and 2016 on over 2,000 ETCs to provide Lifeline service to eligible beneficiaries. These companies are relied on to not only provide telephone service, but also to create Lifeline applications, train employees and subcontractors, and make eligibility determinations for millions of applicants. Federal internal control standards state that management retains responsibility for the performance and processes assigned to service organizations performing operational functions. Consistent with internal control standards, FCC and USAC would need to understand the extent to which a sample of these internal controls are designed and implemented effectively to ensure these controls are sufficient to address program risks and achieve the program’s objectives. However, we identified key Lifeline functions for which FCC and USAC had limited visibility.\nWhile FCC approves providers’ participation in Lifeline and USAC conducts audits to ensure providers comply with program rules, we found that they do not have full insight into providers’ operations. For example, we found instances of Lifeline providers utilizing domestic or foreign- operated call centers for Lifeline enrollment. We spoke with officials from two Lifeline carriers and inquired about their operations. One Lifeline provider explained to us that it contracts with a company that then contracts with a back office and a call center in a different country to handle Lifeline operations. Lifeline provider officials told us that individuals at this overseas back office are responsible for reviewing government assistance program documentation and making eligibility determinations for Lifeline applicants. Officials from the other carrier we spoke with told us that they use a third-party contractor located in the United States to verify eligibility. Through our undercover tests, we also found that this company uses an overseas call center to enroll subscribers. When we asked FCC officials about Lifeline providers that outsource program functions to call centers, including those overseas, they told us that such information is not tracked by FCC or USAC. With no visibility over these call centers, FCC and USAC do not have a way to verify whether other such call centers comply with Lifeline rules.\nAdditionally, FCC and USAC have limited knowledge about potentially adverse incentives that providers might offer employees to enroll subscribers. For example, some Lifeline providers pay commissions to third-party agents to enroll subscribers, creating a financial incentive to enroll as many subscribers as possible. Companies responsible for distributing Lifeline phones and service that use incentives for employees to enroll subscribers for monetary benefit increase the possibility of fictitious or ineligible individuals being enrolled into Lifeline. Highlighting the extent of the potential risk for companies, in April 2016 FCC announced approximately $51 million in proposed fines against one Lifeline provider, due to, among other things, its sales agents purposely enrolling tens of thousands of ineligible and duplicate subscribers in Lifeline using shared or improper eligibility documentation.\nTo test internal controls over employees associated with the Lifeline program, we sought employment with a company that enrolls individuals to Lifeline. We were hired by a company and were allowed to enroll individuals in Lifeline without ever meeting any company representatives, conducting an employment interview, or completing a background check. After we were hired, we completed two fictitious Lifeline applications as employees of the company, successfully enrolled both of these fictitious subscribers into Lifeline using fabricated eligibility documentation and received compensation for these enrollments. The results of these tests are illustrative and cannot be generalized to any other Lifeline provider. We plan to refer this company to FCC and USAC for appropriate action as warranted.\nFCC and USAC also have limited insight into when Lifeline providers do not abide by program rules. As a result, there may be increased risks that Lifeline providers are not adhering to rules. On the basis of our audit and undercover work, we identified instances in which Lifeline providers were applying different policies regarding Lifeline eligibility and enrollment, contrary to program rules. Examples we encountered of Lifeline providers applying the rules incorrectly are noted below.\nOfficials from one provider told us they do not enroll subscribers who reside in a zip code that includes tribal lands, because it is too difficult to confirm the subscribers’ addresses as nontribal. According to Lifeline rules, low-income residents living on tribal lands may be eligible for Lifeline benefits based on either income or participation in federal or tribal assistance programs.\nOfficials for one provider told us that when a subscriber fails the NLAD identity-validation process, they do not use the dispute-resolution system designed by USAC and FCC to verify the subscriber’s identity as required by program rules, because it is too costly. The company opts to not enroll the customer or attempt to verify the customer’s identity using the dispute-resolution system.\nCustomer-service representatives for one provider checked the authenticity of the SSI documentation we provided as evidence of qualifying for Lifeline against a state eligibility database that does not contain SSI information and denied our application. In this case, the representative was seemingly unaware of the contents of the state eligibility database and could potentially disqualify legitimate qualified applicants that use SSI documentation to apply for Lifeline.\nVariations in Lifeline provider policies and practices could also affect the ability of FCC and USAC to provide oversight of how providers maintain subscriber documentation, which may contain personally identifiable information, in a secure fashion. The risk to consumer information security in Lifeline was highlighted by a security breach and associated FCC enforcement action. In 2013, an investigative reporter alerted two Lifeline providers that documents submitted by Lifeline applicants were being stored on an unprotected Internet site. The providers notified FCC, prompting an investigation. The investigation found that, from September 2012 through April 2013, two Lifeline providers stored sensitive information collected from subscribers to determine Lifeline eligibility in a format readily accessible via the Internet, exposing up to 300,000 subscribers’ information to public view and to identity theft and fraud. This information included full SSNs, names, addresses, and other sensitive information. In October 2014, FCC proposed a penalty of $10 million.\nFCC’s planned National Verifier may address many of the issues we identified with FCC’s and USAC’s oversight of Lifeline provider operations if it is fully implemented by the current planned date of 2019. FCC officials told us that, as the National Verifier is rolled out, responsibility for eligibility determinations, storage of supporting documentation, and creation of all application forms will transfer to USAC.\nAdditionally, USAC has a process that allows Lifeline subscribers to submit complaints about their service, which could provide USAC with insights into provider operations, but we identified weaknesses in this process. USAC has information on its website informing subscribers to contact their provider if they are experiencing service issues, broken handsets, or billing disputes. If the provider does not resolve the issue, then subscribers are informed to contact their state regulatory commission. After stating an option to contact USAC about the issue, the final option provided is for subscribers to call FCC for assistance. On the basis of our review of complaints recorded in 2014 by USAC, some were closed after USAC referred them back to Lifeline providers without evidence stating that a subscriber’s issue had been addressed. Some subscribers stated that they were having difficulty using Lifeline service, though the individuals’ carriers were potentially billing and receiving funds for these individuals. Other complaints USAC received included service not working and phones that were never received. As previously discussed, we experienced a similar issue with a Lifeline provider approving us for the program, but not providing us with a phone or other method to utilize Lifeline while conducting our undercover testing. USAC told us that it plans to review and revise these processes to improve how it handles customer complaints.\nUSAC further conducts a separate review of Lifeline that provides incomplete visibility over the providers. Specifically, USAC performs Program Quality Assurance (PQA) assessments to determine the improper-payment rate for Lifeline pursuant to federal statute and OMB guidance. The Improper Payments Information Act of 2002, as amended, (IPIA) requires federal agencies to review programs and activities they administer and identify those that may be susceptible to significant improper payments. For programs and activities identified as susceptible, agencies must annually estimate the amount of improper payments, implement actions to reduce improper payments, and report those estimates and actions. IPIA focuses on payments made by a federal agency, contractor, or an organization administering a federal program or activity. We have previously reported that improper payments have consistently been a government-wide issue despite efforts to identify their root causes and reduce them.\nFCC has determined that IPIA applies to the USF programs and that Lifeline is susceptible to significant improper payments. When conducting PQA reviews for Lifeline, USAC reviews enrollment and recertification forms; FCC Form 497s for accuracy; subscriber listings for completeness; and duplicate subscribers with matching primary address, date of birth, and SSN. Using results of these assessments, USAC calculates estimates of improper-payment rates and provides this information to FCC. According to FCC’s Fiscal Year 2015 Agency Financial Report, the estimated 2015 improper-payment rate reported for Lifeline is 0.45 percent, or $7.3 million.\nUSAC’s reliance on Lifeline providers to determine eligibility and subsequently submit accurate and factual invoices is a significant risk for allowing potentially improper payments to occur, and under current reporting guidelines these occurrences would likely go undetected and unreported. For example, the improper-payment rate resulting from the PQA assessments accounts for duplicate subscribers, missing or incomplete subscriber data, and other factors that identify various types of improper-payments, but does not account for payments made to Lifeline providers that claimed beneficiaries who were not actually enrolled in the qualifying programs or were ineligible.\nFCC officials told us, however, that FCC and USAC will be better able to include eligibility testing in future year PQA testing given the new Lifeline rules pertaining to the retention of eligibility documentation. FCC officials told us that they have discussed these changes in Lifeline rules with OMB and both parties agree that adding testing procedures in a methodical manner is reasonable and appropriate.\nFCC Has Inconsistently Penalized Providers with Duplicate Lifeline Subscribers and Has Not Developed an Enforcement Strategy FCC directed USAC in May 2011 to perform in-depth validations (IDV) to uncover duplicative claims for Lifeline support. USAC was to do this by identifying and resolving instances of subscribers who receive simultaneous Lifeline benefits from multiple Lifeline providers and had duplicate subscribers within their own subscriber lists. After identifying providers with duplicate subscribers, FCC was not consistent in the actions it took, as it penalized some but not all of those providers. IDVs were conducted at the state level from 2011 to 2013 on 57 Lifeline providers prior to the implementation of the NLAD database. During this process, USAC contacted subscribers it identified as having duplicate service and advised them that they had to choose a single Lifeline provider. According to information provided by USAC, the IDVs resulted in the identification of approximately 87,000 intracompany duplicate subscribers.\nFollowing the IDVs, FCC issued Notices of Apparent Liability that proposed penalties of approximately $94 million to 12 Lifeline providers believed to have willfully and repeatedly violated Lifeline rules by enrolling duplicate subscribers. As of October 2016, FCC had not yet determined the final penalties for these 12 Lifeline providers.\nWe found, however, that FCC proposed penalties inconsistently against Lifeline providers that had duplicate subscribers. For example, USAC’s IDVs determined that 41 Lifeline providers had intracompany duplicates; of these, FCC proposed penalties against 12. In some cases, Lifeline providers that FCC penalized had fewer duplicates than others that were not penalized. For example:\nOne Lifeline provider had received $8,300 in overpayments due to intracompany duplicate subscribers from February through April 2013, and FCC proposed a fine of $3.7 million. Another Lifeline provider received approximately $81,000 in overpayments from intracompany duplicates during the same period and approximately $250,000 in intracompany duplicate overpayments found during the course of the IDV review and FCC did not propose a fine for having duplicate subscribers.\nFCC proposed a fine to another Lifeline provider of $1.2 million for approximately $8,000 in overpayment of duplicate subscribers and did not propose a fine for another Lifeline provider that had approximately $16,000 in duplicate subscriber overpayments through the IDV process.\nAs a result of FCC’s actions, Lifeline providers that were issued a Notice of Apparent Liability for duplicate subscribers may have been prevented from expanding Lifeline service, while others with duplicates were unaffected. Officials from one Lifeline provider told us that California did not approve their petition to offer Lifeline service in their state because of the penalties levied against them.\nAccording to FCC officials, FCC had been unable to issue a Notice of Apparent Liability against some providers because of the statute of limitations and delays in receiving IDV results from USAC. FCC is constrained by a statutory 1-year limitation, which begins when the violation occurs, on assessing forfeitures against carriers for Lifeline rule violations. FCC officials explained that the 1-year limitation has prevented FCC from attempting to assess fines against Lifeline providers when duplicate subscribers or other Lifeline rule violations were discovered near the end of this time frame. FCC told us that when the IDVs were initiated, there was not a formalized process or strategy for how FCC would address Lifeline providers with duplicate subscribers. The FCC proceeded with issuing Notices of Apparent Liability after reviewing the IDV results provided by USAC, though FCC officials were unable to provide us with information on when the results of the IDVs were provided to them by USAC.\nAccording to Standards for Internal Control in the Federal Government, management should implement and document control activities through policies. FCC officials told us that the penalties that FCC proposed to levy against Lifeline providers with identified duplicate subscribers were part of a particular enforcement strategy during that time, but they did not provide further details on that strategy. Further, according to FCC officials, in June 2015, the agency did not have a documented enforcement strategy for proposing penalties against Lifeline providers who retain duplicate subscribers. As of March 2017, FCC still does not have a documented enforcement strategy. FCC officials told us that because its Enforcement Bureau lacks resources to take action in all instances, targets for enforcement action are generally prioritized where a problem appears to be pervasive, represents a trend, affects many consumers, or reflects particularly egregious abuse.\nGrounding that approach in an articulated strategy with a rationale and method for resource prioritization could benefit FCC and the Lifeline providers against which it may choose to take action in the future. For example, an enforcement strategy could help FCC and USAC to allocate resources more effectively so that future IDVs are coordinated and any potential problems identified can be used for enforcement within the 1- year statutory time frame for enforcement actions. In addition, a strategy could help enhance the transparency of reasoning behind any enforcement actions that FCC might take and maximize the effectiveness of enforcement activities.", "Lifeline’s large and diffuse administrative structure creates a complex internal control environment susceptible to significant risk of fraud, waste, and abuse. FCC’s and USAC’s limited oversight of important aspects of program operations further complicates the control environment— heightening program risk. For example, FCC and USAC have limited knowledge about whether individuals receiving Lifeline benefits are truly eligible and are receiving services from providers prior to paying Lifeline providers, or whether Lifeline providers use the state eligibility databases available to them.\nNevertheless, while some academic studies have raised questions whether Lifeline is a costly and inefficient means of achieving universal service, FCC has not evaluated the program to determine whether it is efficiently and effectively meeting its goals, as we recommended in our March 2015 report. In March 2016, FCC expanded the program’s performance goals by including subsidies for broadband service.\nHowever, FCC lacks information about the potential impact of the expansion and about the extent to which it is meeting its goals of telephone subscribership, as FCC reported 96 percent of low-income qualifying households already have phone service. The expansion to broadband may face many of the challenges that arose in 2008 when Lifeline expanded to include non-facilities-based wireless service. In light of our findings, we believe that our March 2015 recommendation remains valid and relevant.\nWhile FCC established a budget mechanism for the first time in 2016, FCC did not establish requirements for approving any additional Lifeline spending beyond budget levels in a timely manner. If the budget is exceeded in the future, absent a requirement for the Commissioners to review and approve additional spending in a timely manner, up to a year or more could pass before the Commission takes any actions, all of which limits the budget’s ability to control costs.\nFCC and USAC have taken steps to address issues we have raised about the eligibility of subscribers by improving controls to prevent and detect duplicate enrollment through NLAD. In addition, FCC’s 2016 order establishing a National Verifier, if implemented as planned, could further help to address weaknesses in the eligibility-determination process. In the interim, as evidenced by our data analysis and undercover testing results, relying on thousands of private companies to verify eligibility creates significant risks. Further, providers may not have access or may be unaware of tools available to them to help facilitate such verification. Maintaining and disseminating an updated list of state eligibility databases would better position providers to have and use such information.\nNew challenges may also occur given that the 2016 reform order now allows broadband providers to bypass the state ETC designation process, and instead receive designation from FCC, potentially limiting the states’ ability to guard against waste and abuse. This change is concerning, as our review of FCC’s current ETC designation and compliance plan review process found that FCC has a significant backlog, in part because it has not established time frames for completing such reviews. FCC also does not have documented instructions with criteria for how to evaluate Lifeline compliance plans.\nAlthough classified as federal funds, the USF, with net assets of $9 billion, is maintained outside the Treasury in an account with a private bank. As a result, OMB observed that USF funds do not enjoy the same rigorous management practices and regulatory safeguards as funds for other federal programs. In an effort to improve management and oversight of the funds, FCC has developed a preliminary plan to move the funds to the Treasury. While acknowledging that, we note that several years have passed since this issue was brought to FCC’s attention. Further, the preliminary plan would not result in the funds actually being moved to the Treasury until next year, at the earliest, which means the risks that FCC identified will persist and the benefits of having the funds in the Treasury will continue to not be realized in the near term.\nMoreover, USAC’s ability to provide oversight for the collection and disbursement of billions of dollars of USF funds is complicated by many factors, including the challenge of ensuring that over 6,000 telecommunications carriers pay USF contributions correctly, and do not overcharge USF fees to millions of customers when those fees are passed through to end-users. USAC’s contribution audits were conducted on less than 1 percent of carriers for the period we reviewed, and typically found that carriers collected and contributed incorrect amounts of USF fees. When overpayment of USF fees was identified, FCC did not consistently follow up on audit findings to ensure customers are reimbursed and the overcharges stop. FCC recently initiated a new referral process to help address this issue.\nWhen FCC takes action to address program violations, it does so inconsistently, likely because it has not established an enforcement strategy. FCC has also not yet responded to USAC requests for guidance on whether technologies, such as text services, require USF fees. As a result, some carriers collect more from customers and pay more into the fund than others for the same service, though USF fees are required by law to be paid on an equitable and nondiscriminatory basis. Further, when carriers pass through USF charges via line items on customer bills, USAC’s contribution audits do not determine whether the labeling meets FCC Truth-in-Billing rules, which are intended to help ensure customer bills are transparent and appropriately labeled and described to help consumers detect and prevent unauthorized charges. Taking action to address these weaknesses would help FCC address risks we identified.", "To address control weaknesses and related program-integrity risks we identified in Lifeline, we recommend that the Chairman of FCC require Commissioners to review and approve, as appropriate, spending above the budget in a timely manner; maintain and disseminate an updated list of state eligibility databases available to Lifeline providers that includes the qualifying programs those databases access to confirm eligibility; this step would help ensure Lifeline providers are aware of state eligibility databases and could also help ensure USAC audits of Lifeline providers can verify that available state databases are being utilized to verify subscriber eligibility; establish time frames to evaluate compliance plans and develop instructions with criteria for FCC reviewers how to evaluate these plans to meet Lifeline’s program goals; and develop an enforcement strategy that details what violations lead to penalties and apply this as consistently as possible to all Lifeline providers to ensure consistent enforcement of program violations; the strategy should include a rationale and method for resource prioritization to help maximize the effectiveness of enforcement activities.\nTo address our findings regarding the USF, we recommend that the Chairman of FCC take action to ensure that the preliminary plans to transfer the USF funds from the private bank to the U.S. Treasury are finalized and implemented as expeditiously as possible; require a review of customer bills as part of the contribution audit to include an assessment of whether the charges, including USF fees, meet FCC Truth-in-Billing rules with regard to labeling, so customer bills are transparent, and appropriately labeled and described, to help consumers detect and prevent unauthorized charges; and respond to USAC requests for guidance and address pending requests concerning USF contribution requirements to ensure the contribution factor is based on complete information and that USF pass-through charges are equitable.", "We provided a draft of this report to FCC and USAC for review and comment. In written comments, reproduced in appendix IV, FCC generally agreed with our recommendations. FCC and USAC both provided technical comments, which we incorporated as appropriate. USAC did not provide written comments on the draft report.\nIn commenting on our recommendations, FCC stated that it agreed with the recommendations or outlined actions it was already taking to address the recommendation. Regarding our recommendation that the commission respond to USAC requests for guidance and address pending requests concerning USF contribution requirements, FCC noted that it has resolved a number of long-standing requests from contributors and expects to address additional questions in the future, which is consistent with what we recommend. However, FCC went on to comment that the commission referred the question of USF contribution reform to the Federal-State Joint Board on Universal Service; thus, these requests for guidance, as well as many of the remaining pending requests from contributors, may be resolved in that proceeding. Moreover, FCC commented that it recognizes the need for administrative efficiency, but must respect the processes of the institutions in place, which are designed to ensure the long-term sufficiency and predictability of the USF. In our report, we noted the steps taken by FCC in attempts to reform and modernize the USF contribution system, including FCC’s 2012 Further Notice of Proposed Rulemaking, and FCC’s 2014 recommendation on contribution reform sought from the Federal-State Joint Board on Universal Service. However, these items have been pending for years, and the USAC guidance requests pertaining to carrier USF fee requirements have been pending as far back as 2009. Therefore, we urge FCC to come to a resolution and respond to USAC requests for guidance in a timely manner and address pending requests concerning USF contribution requirements to ensure the contribution factor is based on complete information and that USF pass-through charges are equitable.\nFinally, FCC commented on our findings regarding its banking practices surrounding the USF. Specifically, in its letter FCC noted that USF funds currently are maintained in an account with a private bank but that it plans to move them to the Treasury. However, in May 2017, while reviewing a draft of this report, a senior FCC official informed us that FCC had experienced some challenges, such as coordinating across the various entities involved, that raised questions as to when and perhaps whether the funds would be moved as planned. Accordingly, we have revised the report and added a recommendation that FCC ensure that the preliminary plans to transfer the USF funds from the private bank to the Treasury are finalized and implemented as expeditiously as possible. We believe such a recommendation is warranted given the amount of time that has passed since FCC became aware of this issue and given the USF’s $9 billion in net assets, as well as the potential risks and benefits cited by FCC when it initially made the decision to move the funds to the Treasury. We provided FCC and USAC with the revised portions of the report, including the new recommendation, for review and comment. FCC agreed with the additional recommendation and USAC provided no comment.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Chairman of the FCC, the Chief Executive Officer of USAC, and interested congressional committees. This report will also be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-6722 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "This appendix discusses in detail our methodology for addressing four research questions: (1) the extent to which the Lifeline program (Lifeline) demonstrates effective performance towards program goals; (2) steps the Federal Communications Commission (FCC) and Universal Service Administrative Company (USAC) have taken to improve financial controls in place for Lifeline and the Universal Service Fund (USF), and any remaining weaknesses that might exist; (3) steps FCC and USAC have taken to improve subscriber-eligibility verification, and any remaining weaknesses that might exist; and (4) steps FCC and USAC have taken to improve oversight of Lifeline providers, and any remaining weaknesses that might exist.\nTo explore the extent to which Lifeline demonstrates effective performance towards program goals, we reviewed numerous documents including FCC’s 2012 Reform Order, FCC’s 2016 Modernization Order, and Pew Research Studies cited by FCC in support of expanding Lifeline to include broadband. We followed up on our 2015 work by reviewing two academic studies that evaluated the effect of Lifeline referred to us by FCC. Our prior work determined these academic studies met our criteria for methodological quality. We also gained the perspective of a range of stakeholders through interviews with program agency officials (FCC’s Enforcement Bureau, Wireline and Competition Bureau, Office of Managing Director, and Office of General Counsel); officials from Lifeline’s program administrator (USAC); state officials (National Association of Regulatory Commissioners); and representatives from an advocacy group with members representing more than 200 national organizations (Leadership Conference on Civil and Human Rights); two of the largest Lifeline providers according to annual disbursements received from Lifeline; and two telecommunications law firms representing numerous Lifeline providers.\nTo determine the steps taken by FCC and USAC to improve financial controls in place for Lifeline and USF, and any remaining weaknesses that might exist, we examined USAC financial data, including USF bank- account statements, payment data, and financial reports. We performed a walk-through of USAC’s processes to enter and approve Lifeline providers and administer USF disbursements. We analyzed 74 USF contribution audits conducted with audit periods in calendar years 2007 through 2013 (approximately the past 5 years of contribution audits issued as of the time we requested them in December 2015). We reviewed USAC guidance requests; FCC Office of Inspector General reports; FCC orders, policies, and other key guidance; and Treasury guidance on fiscal policy. We interviewed officials from USAC’s Internal Audit Division, a USF account manager and attorney with the private bank that holds USF, as well as officials from the U.S. Treasury, Bureau of the Fiscal Service, and FCC’s Office of Inspector General. We also attended USAC board meetings.\nTo evaluate the steps FCC and USAC have taken to improve subscriber- eligibility verification, and any remaining weaknesses that might exist, we performed data analysis to identify potential improper payments using Lifeline’s National Lifeline Accountability Database (NLAD) and other beneficiary databases, conducted covert testing of Lifeline providers while posing as Lifeline applicants, reviewed documentation discussing subscriber-validation and eligibility controls, and interviewed officials from FCC and USAC.\nTo identify potential improper payments, our Lifeline subscriber data analysis determined whether Lifeline subscribers who reported qualifying for the program due to participation in another federal program were enrolled in the specific programs recorded in NLAD. We obtained NLAD data in November 2014. The data contained a snapshot of enrolled Lifeline subscribers as of that date. We selected the three largest qualifying programs identified by FCC to test the eligibility of subscribers in NLAD; the U.S. Department of Agriculture’s Supplemental Nutrition Assistance Program (SNAP), the Department of Health and Human Services’ Medicaid program, and the Social Security Administration’s (SSA) Supplemental Security Income (SSI) program. We obtained nationwide SSI eligibility data from SSA and obtained SNAP and Medicaid data from selected states as these two programs’ data are maintained at the state level. Specifically, we obtained SNAP eligibility data from five states and Medicaid eligibility data from six states. As a result, we obtained data from a nongeneralizable selection of states. Our state selections were selected based on the highest dollar amount of 2013 nontribal Lifeline disbursements and were selected to include states that do and do not have a third-party administrator that can make eligibility determinations and states that do and do not have an eligibility database that can be used by Lifeline providers to validate eligibility in a qualifying Lifeline program.\nWe obtained SNAP data from Florida, Georgia, Michigan, New York, and Ohio. Lifeline providers in these states received the largest Lifeline disbursements of NLAD participating states. We identified Florida as a state with a third-party administrator that verifies eligibility. We identified Georgia, Michigan, and New York as states with an eligibility database that can be used to validate enrollment in a Lifeline qualifying program. Ohio did not have an eligibility database or third-party administrator at the time of our state selection. We utilized Center for Medicare & Medicaid Services (CMS) Medicaid Statistical Information System (MSIS) data to obtain Medicaid eligibility information from Florida, Georgia, Michigan, Nebraska, New York, and Ohio. Nebraska was another state identified as using a third-party administrator to verify eligibility, and was selected as an alternative to Florida because the Florida Medicaid data at the time of our state selection were only validated through 2011. However, during the course of our audit, Florida validated Medicaid data that met our review time frame. Consequently, both states were included in our analysis of Medicaid eligibility data.\nTo assess the reliability of the different datasets, we interviewed officials from agencies responsible for their respective databases to discuss data- related considerations and performed electronic testing to determine the validity of specific data elements in the federal and selected state databases that we used to perform our work. We also reviewed related documentation, including data layouts and information on database controls. On the basis of our discussions, documentation review, and our own electronic testing of the data, we concluded that the data fields used for this report were sufficiently reliable for the purpose of this engagement. However, we did identify issues in the NLAD data that suggested the potential for data-entry errors (such as a February 30 birthdate). We excluded cases that were clearly in error from our analysis.\nWe utilized the most up-to-date SNAP and MSIS data available at the time of our analysis. The six states selected for our Medicaid analysis had eligibility dates from the third quarter of 2012 through the most recent eligibility fiscal quarter available for each state—at the time of our data request—which ranged from the third quarter of 2012 to the fourth quarter of 2014. Specifically, Medicaid eligibility data for Florida and Michigan were available through September 2013; for Nebraska and Ohio, through December 2013; and for Georgia and New York, through September 2014. For our analysis of NLAD and Medicaid data, we only matched against Lifeline subscribers that enrolled prior to the latest Medicaid eligibility data available for each state. States can take up to 3 years to adjust their Medicaid data, and as a result beneficiaries can be included or excluded retroactively. Because Medicaid data are collected and maintained by the states, the consistency, quality and completeness of the data can vary from state to state.\nOur nationwide SSI eligibility data ranged from October 2012 to December 2014, and each of the five selected states’ SNAP data ranged from October 2013 to December 2014. Therefore, it was not necessary to exclude any Lifeline subscribers prior to matching. In the event that any of the Lifeline subscribers were only shown as eligible for the month of December 2014, they were nevertheless counted as a match and deemed likely eligible for Lifeline, even though NLAD data were only as of November 2014.\nTo ensure that our tabulations of unconfirmed eligibility are not overstated, we excluded any Lifeline subscribers that were enrolled in NLAD after the date range available for our review for each qualifying program. For example, if NLAD showed a subscriber enrolled in Lifeline in July 2014 and the corresponding date range for the qualifying program we reviewed had enrollment data only through December 2013, then this subscriber was excluded from our matching results. To further prevent the possibility of overstating unconfirmed eligibility, we counted subscribers as likely eligible for Lifeline if the Lifeline subscriber was enrolled in the qualifying programs at any time within the range of dates provided to us for each qualifying program we reviewed. For example, if NLAD shows a subscriber enrolled in April 2014, but was not enrolled in the qualifying program until June 2014, it was nevertheless counted as a match and that the subscriber was likely eligible for Lifeline. As a result, we are likely understating the unconfirmed match rate as some individuals may have enrolled in the qualifying program after the Lifeline enrollment date. However, given the potential for data-entry errors in NLAD, there is also potential for overstatement of unconfirmed eligibility.\nWe conducted work to determine that each subscriber was enrolled in a Lifeline qualifying program. To do this, we matched NLAD data to the SNAP, Medicaid, and SSI data to identify potential improper payments. We compared the enrolled Lifeline subscriber identity information recorded in NLAD as of November 2014 to the SNAP, Medicaid, and SSI eligibility data. For the purpose of our analysis, we considered a subscriber in NLAD to be a likely match and enrolled in SNAP if at least four of the following fields matched between NLAD and SNAP data from each state: subscriber first name; subscriber last name; subscriber date of birth; last four digits of the subscriber’s Social Security Number (SSN); and an exact address, zip-code, and state match. We considered a subscriber listed in NLAD to be a likely match and enrolled in SSI if the subscriber first name, last name, date of birth, and last four digits of the SSN matched exactly with the SSI program data.\nTo ensure that our tabulations of unconfirmed eligibility do not overstate potential problems with the data, for SNAP and SSI we counted first and last name matches with inexact, but similar, spelling to be a likely match and enrolled in the qualifying programs. Whereas, for Medicaid, we considered a subscriber listed in NLAD as a likely match enrolled in the qualifying program if the date of birth, last four digits of the SSN, and zip code matched exactly with Medicaid data for each state because the Medicaid data we utilized did not contain beneficiary first or last name information. As a result of not using first or last name, our Medicaid matching may understate unconfirmed eligibility for Medicaid. We also matched NLAD data against the SSA’s Death Master File (DMF) to identify subscribers that were listed as deceased at least 1 year prior to their initial Lifeline enrollment or required annual Lifeline recertification. To ensure that our tabulations of those Lifeline subscribers showing deceased in the DMF were not overstated, we required an exact match between NLAD and the DMF for the following four fields: first name, last name, date of birth, and last four digits of the SSN.\nThe results of our data matching are not generalizable to any other state or qualifying Lifeline program. It is not possible to determine from data matching alone whether these matches definitively identify recipients who were not eligible for Lifeline benefits without reviewing the facts and circumstances of each case. For example, we could not identify based on the data alone whether there were data-entry errors at the time of enrollment incorrectly stating the qualifying Lifeline program presented by the subscriber at the time of enrollment. Alternatively, our matches may also understate the number of deceased individuals receiving assistance because matching would not detect Lifeline subscribers whose identifying information in the Lifeline qualifying program data differed slightly from their identifying information in NLAD.\nTo test subscriber controls and the vulnerability of improper payments, we also conducted undercover testing of 19 Lifeline providers to determine whether we could obtain Lifeline service using fictitious eligibility documentation. We selected these providers based on the providers with the largest 2014 Lifeline disbursements that allowed us to apply electronically, through telephone, fax, or mail. We submitted 21 Lifeline benefit applications or otherwise attempted to obtain service using false information and fabricated supporting documents. These undercover tests were for illustrative purposes and are not generalizable. We also reviewed FCC’s Lifeline Reform and Modernization Orders, FCC and USAC documentation discussing subscriber controls, FCC guidance, and Lifeline enforcement actions and proposed penalties for violations of Lifeline rules.\nTo determine the steps FCC and USAC have taken to improve oversight of Lifeline providers, and any remaining weaknesses that might exist, we met with officials from FCC, FCC’s Office of Inspector General, USAC, and two Lifeline providers. We reviewed FCC documentation, including Lifeline Reform Orders, Lifeline provider enforcement actions, and required Eligible Telecommunications Carrier (ETC) petitions and Lifeline compliance plans. We reviewed USAC documentation, including audits conducted by USAC and certified public-accounting firms, Lifeline subscriber complaints, and work performed to identify duplicate subscribers. We reviewed information on 93 USAC Lifeline Beneficiary and Contributor Audit Program (BCAP) audits. We also analyzed reports released by the FCC Office of Inspector General.\nWe conducted this performance audit from June 2014 to May 2017 in accordance with Generally Accepted Government Auditing Standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work in accordance with investigative standards prescribed by the Council of the Inspectors General on Integrity and Efficiency.", "", "", "Beneficiary and Contributor Audit Program (BCAP) audits are conducted on each Universal Service Administrative Company (USAC) program in accordance with Generally Accepted Government Auditing Standards, with their primary purpose to ensure compliance with Federal Communications Commission (FCC) rules and program requirements, and to assist in program compliance. As part of these audits, USAC determines whether the number of Lifeline subscribers that providers claim for reimbursement can be supported by the providers’ internal records. The scope of these audits does not include work to determine whether Lifeline service was working for subscribers, or to determine the extent of any service issues and how many potential subscribers could be affected. USAC officials told us that, before fiscal year 2016, many of the audited entities were randomly selected, and the selection process was designed to provide a wide variety of entities with regard to size and geographic location. Starting in fiscal year 2016, USAC implemented a risk-based selection method to audit the entities with the greatest risk.\nA small percentage of Lifeline providers and Lifeline disbursements undergo BCAP audits. Of the 93 BCAP Lifeline audits with audit periods covering Lifeline disbursements from 2010 to 2014, 13 were of providers that received less than $1,000 in support during the period reviewed by USAC. In its 2012 Reform Order, FCC directed USAC to audit new carriers within the first year they begin receiving federal low-income Universal Service Fund (USF) support. FCC concluded that an initial audit will aid efficient administration of the program by confirming early on that the new Eligible Telecommunications Carriers (ETC) are providing Lifeline service in accordance with program requirements. According to USAC, many of these required audits were of carriers with nominal subscribers, and thus, in receipt of nominal disbursements. Table 4 below illustrates the audit coverage from BCAP audits from 2010 to 2014 and displays the percentage of carriers that were audited and the percentage of the total USAC Lifeline provider disbursement during these periods.\nThe audit findings for the audits we reviewed found that some carriers were not complying with Lifeline rules in some capacity, such as inaccurate Lifeline subscriber claim reporting, inaccurate recertification reporting, and lack of required subscriber certification documentation.\nAs part of the BCAP audit, USAC officials stated they generally review a Lifeline provider’s operations in one or two states during a 1-month period of time regardless of how many states the provider operates in. USAC officials told us that when it notes a material issue that could impact the program from a holding company level, the audit work is expanded. For example, during an audit of one provider, USAC found the company was failing to deenroll subscribers, which led to a $10.9 million forfeiture assessed by FCC.", "", "", "", "In addition to the contact named above, Dave Bruno (Assistant Director), Scott Clayton (Analyst-in-Charge), and Daniel Silva made key contributions to this report. Other contributors include Maurice Belding, Gary Bianchi, Clayton Clark, Julia DiPonio, Michelle Duren, Colin Fallon, Robert Graves, Scott Hiromoto, Mary Catherine Hult, Mitch Karpman, Lauren Kirkpatrick, Barbara Lewis, George Ogilvie, Joshua Parr, Ramon Rodriguez, and Julie Spetz." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 1, 1, 1, 1, 1, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h2_title h4_title h3_title", "h3_full h4_full", "h3_full h2_full", "", "h0_title h3_title", "h0_full h3_full", "h0_full", "h2_title h1_title", "h1_full", "h2_full", "h2_full", "", "", "", "", "", "h2_title h1_title h4_title", "h1_full", "h2_full", "h4_full", "", "h2_full", "", "h1_title", "h1_full", "", "", "", "h0_full h2_full", "", "h2_full", "h4_full", "", "", "", "", "", "", "" ] }

{ "question": [ "How has the FCC evaluated the Lifeline program's performance?", "How effective has Lifeline been in increasing subscribership among low-income households?", "Why is an evaluation necessary?", "What steps to enhance controls over finances and subscriber enrollment have FCC and USAC taken?", "How did FCC enhance the program's ability to detect and prevent ineligible subscribers from enrolling?", "What additional steps did FCC take to improve the detection and prevention of ineligible subscribers?", "What weaknesses did GAO find?", "What did GAO confirm based on matching of subscriber to benefit data?", "What does FCC's 2016 Order call for?", "What did GAO recommend regarding this arrangement?", "What will continue to happen until FCC implements a plan?", "What does FCC's Lifeline do?", "How is Lifeline able to provide discounts?", "How widespread were Lifeline's disbursements in 2016?", "What did GAO find in 2010?", "How did FCC enhance Lifeline's internal controls?", "What was GAO asked to do?", "What does this report discuss?" ], "summary": [ "The Federal Communications Commission (FCC) has not evaluated the Lifeline program's (Lifeline) performance in meeting its goals of increasing telephone and broadband subscribership among low-income households, but has recently taken steps to do so.", "Lifeline participation rates are low compared to the percentage of low-income households that pay for telephone service, and broadband adoption rates have increased for the low-income population even without a Lifeline subsidy.", "Without an evaluation, which GAO recommended in March 2015, FCC is limited in its ability to demonstrate whether Lifeline is efficiently and effectively meeting its program goals. In a July 2016 Order, FCC announced plans for an independent third party to evaluate Lifeline design, function, and administration by December 2020.", "FCC and the Universal Service Administrative Company (USAC)—the not-for-profit organization that administers Lifeline—have taken some steps to enhance controls over finances and subscriber enrollment. For example, FCC and USAC established some financial and management controls regarding billing, collection, and disbursement of funds for Lifeline and related programs.", "To enhance the program's ability to detect and prevent ineligible subscribers from enrolling, FCC oversaw completion in 2014 of a database with a real-time list of subscribers to assist carriers in identifying and preventing duplicate subscribers.", "Additionally, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules.", "Nevertheless, GAO found weaknesses in several areas. For example, Lifeline's structure relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility. This complex internal control environment is susceptible to risk of fraud, waste, and abuse as companies may have financial incentives to enroll as many customers as possible.", "Based on its matching of subscriber to benefit data, GAO was unable to confirm whether about 1.2 million individuals of the 3.5 million it reviewed, or 36 percent, participated in a qualifying benefit program, such as Medicaid, as stated on their Lifeline enrollment application.", "FCC's 2016 Order calls for the creation of a third-party national eligibility verifier by 2019 to determine subscriber eligibility. Further, FCC maintains the Universal Service Fund (USF)—with net assets exceeding $9 billion, as of September 2016—outside the Department of the Treasury in a private bank account.", "In 2005, GAO reported that FCC should reconsider this arrangement given the USF consists of federal funds. In addition to addressing any risks associated with having the funds outside the Treasury, where they do not enjoy the same rigorous management practices and regulatory safeguards as other federal programs, FCC identified potential benefits of moving the funds. For example, by having the funds in the Treasury, USF payments could be used to offset other federal debts, and would provide USAC with better tools for fiscal management of the funds.", "In March 2017, FCC developed a preliminary plan to move the USF to the Treasury. Until FCC finalizes and implements its plan and actually moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized.", "Created in the mid-1980s, FCC's Lifeline provides discounts to eligible low-income households for home or wireless telephone and, as of December 2016, broadband service.", "Lifeline reimburses telephone companies that offer discounts through the USF, which in turn is generally supported by consumers by means of a fee charged on their telephone bills.", "In 2016, Lifeline disbursed about $1.5 billion in subsidies to 12.3 million households.", "In 2010, GAO found Lifeline had limited abilities to detect and prevent ineligible subscribers from enrolling.", "FCC adopted a reform order in 2012 to enhance Lifeline's internal controls.", "GAO was asked to examine FCC's reforms.", "This report discusses, among other objectives, (1) the extent to which Lifeline demonstrates effective performance towards program goals, and (2) steps FCC and USAC have taken to enhance controls over finances, subscribers, and providers, and any weaknesses that might remain." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 1, -1, -1, -1, 2, 2, -1, 0, -1, -1, -1, -1, 2 ], "summary_paragraph_index": [ 3, 3, 3, 4, 4, 4, 5, 5, 5, 5, 5, 0, 0, 0, 1, 1, 1, 1 ] }

{ "title": [ "Background", "OMB’s Roles and Responsibilities for Overseeing IT Investments", "GAO Has Previously Recommended Improvements in the Management of Geospatial Information and OMB Guidance", "Implementing Established Policies Is Not a Federal Priority, Resulting in Duplicative Investments", "FGDC Has Developed Geospatial Standards, but Has Not Fully Implemented Key Activities for Coordinating Geospatial Data", "Departments and Theme- lead Agencies Have Not Fully Implemented Important Activities for Coordinating and Managing Geospatial Data", "OMB Does Not Have Complete and Reliable Information to Identify Duplicative Geospatial Investments", "Federal Agencies Have Coordinated Specific Investments, but Duplicative Geospatial Data Exists", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objective, Scope, and Methodology", "Appendix II: Comparison between Proposed Themes and Existing Themes", "Appendix III: Comments from the Department of the Interior", "Appendix IV: Comments from the Department of Commerce", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Geospatial information describes entities or phenomena that can be referenced to specific locations relative to the Earth’s surface. For example, entities, such as buildings, rivers, road intersections, power plants, and national parks can all be identified by their locations. In addition, phenomena, such as wildfires, the spread of the West Nile virus, and the thinning of trees due to acid rain can also be identified by their geographic locations.\nUsers can analyze that data in geographic information systems (GIS)— systems of computer software, hardware, and data used to capture, store, manipulate, analyze, and graphically present a potentially wide array of geospatial information. The primary function of a GIS is to link multiple sets of geospatial data and display the combined information as maps with different layers of information. Assuming that all of the information is at the same scale and has been formatted according to the same geospatial standards, users can potentially overlay geospatial information about any number of specific topics to examine how the data in the various layers interrelate. Each layer of a GIS map typically represents a single theme comprised of one or more sets of data, each of which could be derived from a source completely different from the others. Figure 1 portrays the concept of visual representation of geospatial data themes in a GIS.\nExamples of geospatial data applications are provided in figures 2 and 3. Figure 2 demonstrates the usefulness of GIS in showing the scope, severity, and duration of the effects of the recent drought in the United States, which could be used to make drought relief and agricultural support activities more effective.\nAnother use for GIS is tracking and responding to natural disasters, such as wildfires and hurricanes. Figure 3 demonstrates the usefulness of GIS in tracking the direction and estimated strength of an impending hurricane. The timely delivery of these data can be used to provide for orderly evacuation of people from affected areas, and lessen the impact of the storm on facilities, such as sewage treatment plants, hospitals, and nursing homes.\nFor many years, the federal government has taken steps to coordinate geospatial activities both within and outside the federal government. In 1953, the Bureau of the Budget first issued Circular A-16, encouraging expeditious surveying and mapping activities across all levels of government and avoidance of duplicative efforts. In 1990, OMB revised Circular A-16 to, among other things, establish the FGDC within Interior to promote the coordinated use, sharing, and dissemination of geospatial data nationwide. Building on that guidance, in 1994 the President issued Executive Order 12906 for the purpose of addressing wasteful duplication and incompatibility of geospatial information, and assigned the FGDC the responsibility to coordinate the development of the NSDI. In 2002, OMB again revised Circular A-16 to further describe the components of the NSDI; clearly define agency responsibilities for acquiring, maintaining, distributing, using, and preserving geospatial data; and to reaffirm the FGDC’s role as the interagency coordinating body for NSDI-related activities. The circular established the following five components of the NSDI and described how these components were to be implemented.\nData themes. Data themes are topics of national significance, such as transportation, which includes all modes of travel (e.g., road and rail data). OMB Circular A-16 currently identifies 34 data themes and identifies the “lead” agency or agencies for each theme. Each data theme is to be comprised of one or more electronic data records, known as datasets. Of the 34 themes, 9 are identified as “framework” themes—that is, themes identified in Circular A-16 as critical for many geospatial applications.\nStandards. Geospatial standards provide common and repeatable rules or guidelines for the development, documentation, and exchange of geospatial datasets.\nMetadata. Metadata are information about datasets, such as content, source, accuracy, method of collection, and point-of-contact. Metadata are used to facilitate the search of and access to datasets within a data library or clearinghouse, and enable potential users to determine the data’s applicability for their use.\nNational Spatial Data Clearinghouse. The clearinghouse is intended to be a centralized geospatial metadata repository that contains geospatial metadata records from federal agencies, state and local governments, and academic and private sector organizations that can be searched to determine whether needed geospatial data exist and can be shared. Federal agencies are required to identify their existing and planned geospatial investments in the clearinghouse, and search the clearinghouse for cost-saving opportunities before acquiring geospatial data. In 2003, the FGDC created the Geospatial One-Stop to provide “one-stop” access to geospatial metadata from a centralized database and search function. In October 2011, the Geospatial One-Stop was retired, and the FGDC initiated a pilot project, known as the Geospatial Platform, which is envisioned to provide shared and trusted geospatial data, services, and applications for use by government agencies, their partners, and the public. According to Interior officials, Interior is the managing partner of the Geospatial Platform. As of August 2012, there were approximately 835,000 geospatial metadata records in the central repository, of which about 373,000 were from federal sources. Users can search the metadata repository through two primary portals: geo.data.gov and the Geospatial Platform. The General Services Administration is responsible for managing the clearinghouse database and the associated web portal geo.data.gov.\nPartnerships. Partnerships are efforts aimed at involving all stakeholders (e.g., federal, tribal, state, local government, and academic institutions) in the development of the NSDI.\nIn November 2010, OMB issued supplemental guidance specifically regarding how agencies are to manage data themes.guidance expands upon and clarifies some of the language and responsibilities contained in OMB Circular A-16 in order to facilitate the adoption and implementation of a geospatial asset management capability.\nTo fulfill its responsibilities, the FGDC is governed by a steering committee—an interagency decision making body that provides leadership and policy direction in support of the development of the NSDI. The Secretary of the Interior chairs the committee; the Vice-Chair is the Deputy Director for Management of OMB. All departments or agencies responsible for geospatial data themes or that have activities in geographic information or geospatial data collection or use are required to be members of the FGDC. Thirty-two agencies are currently members of the Steering Committee and are to be represented by their senior agency officials for geospatial information. These senior agency officials are responsible for overseeing, coordinating, and facilitating their respective agency’s implementation of geospatial requirements, policies, and activities. The FGDC is supported by an Office of the Secretariat that consists of about 10 people located in USGS who do the day-to-day work of supporting, managing, and coordinating the activities of the FGDC.\nIn addition, in December 2007, the Secretary of the Interior created the National Geospatial Advisory Committee to provide the department and the FGDC with advice and recommendations related to the management of federal and national geospatial programs, development of the NSDI, and the implementation of related federal guidance. Members of the committee include approximately 30 officials from federal, state, local, and tribal governments, the private sector, and academia.", "OMB has specific oversight responsibilities for federal information technology (IT) systems and acquisition activities—including GIS—to help ensure their efficient and effective use. Two key laws that outline these responsibilities are the Clinger-Cohen Act of 1996 and the E- Government Act of 2002.\nThe Clinger-Cohen Act of 1996—The act requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by federal agencies and report to Congress on the net program performance benefits achieved as a result of these investments.\nThe E-Government Act of 2002—The act establishes an e- government initiative, which encourages the use of web-based Internet applications to enhance the access to and delivery of government information and service to citizens, to business partners, to employees, and among all levels of government. The act also requires OMB to report annually to Congress on the status of e- government initiatives. In these reports, OMB is to describe the administration’s use of e-government principles to improve government performance and the delivery of information and services to the public.\nOMB subsequently began initiatives to fulfill the requirements established by these laws: In February 2002, OMB established the Federal Enterprise Architecture, which is intended to facilitate governmentwide improvement through cross-agency analysis and identification of duplicative investments, gaps, and opportunities for collaboration, interoperability, and integration within and across agency programs. The Federal Enterprise Architecture is composed of five “reference models” describing the federal government’s (1) business (or mission) processes and functions, independent of the agencies that perform them; (2) performance goals and outcome measures; (3) means of service delivery; (4) information and data definitions; and (5) technology standards.\nIn March 2004, OMB established multiple “lines of business” to consolidate redundant IT investments and business processes across the federal government. Later, in March 2006, OMB established the Geospatial Line of Business. Each line of business is led by an individual agency and supported by other relevant agencies. Interior is the managing partner for the Geospatial Line of Business and the FGDC Secretariat provides project management support. OMB reports to Congress each year on the costs and benefits of these initiatives.\nIn carrying out its responsibilities, OMB uses several data collection mechanisms to oversee federal IT spending during the annual budget formulation process. Specifically, OMB requires federal departments and agencies to provide information related to their IT investments (called exhibit 53s) and capital asset plans and business cases (called exhibit 300s).\nExhibit 53. The purpose of the exhibit 53 is to identify all IT investments—both major and nonmajor—and their associated costs within a federal organization. Information included in agency exhibit 53s is designed, in part, to help OMB better understand agencies’ spending on IT investments. OMB guidance for the fiscal years 2013 and 2014 budget formulation instructs agencies to identify their geospatial investments in the exhibit 53 using Federal Enterprise Architecture codes for specific functions (e.g., geospatial services, financial management, and acquisition management).\nExhibit 300. The purpose of the exhibit 300 is to provide a business case for each major IT investment and to allow OMB to monitor IT investments once they are funded. Agencies are required to provide information on each major investment’s cost, schedule, and performance.", "In June 2004, we reported that OMB, individual federal agencies, and cross-government committees and initiatives, such as the FGDC and the Geospatial One-Stop project, had taken actions to coordinate the government’s geospatial investments across agencies and with state and local governments. However, we noted that these efforts had not been fully successful in reducing duplication in geospatial investments for several reasons: a complete and up-to-date strategic plan for doing so was not in agencies had not consistently complied with OMB guidance that seeks to identify and reduce duplication; and\nOMB’s oversight of federal geospatial activities had not been effective because its methods—the annual budget review process, the federal enterprise architecture effort, and the FGDC’s reporting process— were insufficiently developed and had not produced consistent and complete information.\nWe reported that, as a result of these shortcomings, federal agencies were still independently acquiring and maintaining potentially duplicative and costly datasets and systems. Accordingly, we recommended that the Director of OMB and the Secretary of the Interior direct the development of a national geospatial strategic plan, and recommended that the Director of OMB develop criteria for assessing interagency coordination on proposals for potential geospatial investments, and strengthen its oversight of geospatial projects. OMB and Interior generally agreed with our recommendations. In response, between 2004 and 2008, OMB, Interior, and the FGDC created a number of documents that addressed the development of a national geospatial strategic plan, including a strategic plan for NSDI development and a business case for the development of the Geospatial Line of Business. Furthermore, in 2004 and 2006, OMB issued guidance designed to increase the amount of budget information available on geospatial investments, and improve oversight of agencies’ implementation of geospatial-related requirements, policies, and activities.\nIn September 2011, we reported that OMB’s guidance to agencies for reporting their IT investments did not ensure complete reporting or facilitate the identification of duplicative investments. Specifically, agencies differed on what investments they included as an IT investment. We further reported that OMB’s guidance to federal agencies to categorize IT investments did not go far enough to allow for the identification of potentially duplicative investments. In particular, OMB’s guidance required that each investment be mapped to a single Federal Enterprise Architecture functional code; however, IT investments could fit into more than one functional code.\nAccordingly, we recommended that OMB clarify its guidance on reporting IT investments to specify whether certain types of systems—such as space systems—are to be included; allow agencies to place their IT investments into more than one Federal Enterprise Architecture functional code in order to reduce potentially duplicative investments; and direct agencies to report the overall steps that they take to ensure that their IT investments are not duplicative as part of their annual budget and IT investment submissions. OMB did not agree that further efforts were needed to clarify reporting in regard to the types of systems; but it agreed with our recommendations regarding the categorization of investments and reporting of steps taken to reduce duplication. OMB’s fiscal year 2014 budget formulation guidance allows agencies to identify up to five Federal Enterprise Architecture functional codes with each investment.", "While the President and OMB have established policies and procedures for managing and coordinating investments in geospatial data, the FGDC, federal departments and theme-lead agencies, and OMB itself have not effectively implemented them. This has resulted in uncoordinated and duplicative investments in areas of national interest, such as road and address data.\nWhile the FGDC has developed and endorsed several standards, it has not yet planned for or implemented an approach to manage data as related groups of themes and their associated key datasetsinvestments designed to allow agencies to more effectively plan geospatial data collection efforts and minimize duplicative investments. Additionally, planned geospatial data acquisitions are not identified in the clearinghouse and the FGDC does not have a current strategic plan to guide its efforts.\nNone of the three federal departments in our review have fully implemented important activities for coordinating geospatial data and assets, such as developing and implementing a strategy for advancing geospatial activities within the department.\nThe three theme-lead agencies in our review have implemented some but not all important activities to ensure the national coverage and stewardship of geospatial data themes.\nOMB’s annual budget reporting mechanisms have not provided complete and reliable information to identify duplicative geospatial investments.\nThe primary cause for why the FGDC, federal departments and theme- lead agencies, and OMB have not yet fully implemented established policies and procedures for coordinating geospatial investments is because, according to OMB staff members and agency officials, they have been focusing on other priorities. Because federal agencies have yet to fully implement important activities and practices for coordinating and managing geospatial data and facilitating the development of the NSDI, and OMB is limited in its ability to oversee agencies’ geospatial investments, agencies continue to acquire duplicative geospatial data.", "According to federal guidance,executive body charged with the leadership, development, implementation, and review of geospatial data standards. the FGDC is to serve as the lead federal To its credit, the FGDC has developed and endorsed several standards. In particular, it developed a metadata standard that includes descriptive information about a dataset—such as who created and published it, the related theme keyword, and the geographic coordinates that bound the dataset—and facilitates the identification and sharing of geospatial data. The FGDC has also developed standards associated with each of the framework themes and endorsed several other standards developed by external standards bodies, such as the International Organization for Standardization’s tracking and navigation standard for web services.\nFGDC, FGDC-STD-001-1998: Content Standard for Digital Geospatial Metadata, 1998.\nOMB, M-11-03, Issuance of OMB Circular A-16 Supplemental Guidance, Nov. 10, 2010.\nWhile the FGDC has initiated activities that Secretariat officials say are first needed to establish a portfolio of datasets, it has not yet fully planned for or implemented a portfolio management approach. Specifically, the FGDC evaluated the 34 data themes identified in OMB Circular A-16 to determine whether any changes were needed; in August 2011, the Steering Committee proposed consolidating the 34 data themes into 17 themes; Secretariat officials subsequently stated that the FGDC agencies are proposing to eliminate 1 more theme for a total of 16. (See app. II for a comparison of the 34 themes and the newly proposed 16 themes.) These officials further stated that, as of August 2012, lead agencies have been identified for each of the 16 themes and said that they plan to discuss the revised lists of themes and lead agencies at the Steering Committee’s September 2012 meeting. Once the Steering Committee approves the revised themes and lead agencies, the FGDC plans to send them to OMB for its approval. Additionally, the FGDC has identified 221 key datasets associated with the proposed data themes.\nHowever, the data themes, lead agencies, and datasets have neither been finalized nor approved, and the FGDC has yet to provide guidance to agencies about how to implement the portfolio management approach. While Secretariat officials stated that they had developed a draft implementation plan in November 2011, it has not been finalized or approved, and FGDC Secretariat officials were unable, on behalf of FGDC agencies, to provide a time frame for doing so.\nFGDC Secretariat officials stated that completion of the activities needed to fully implement the portfolio management approach has not been accomplished due to competing priorities, such as the Geospatial Platform. Until the implementation plan is completed; and the themes, lead agencies, and associated datasets are identified and approved, the agencies cannot effectively begin to implement a coordinated geospatial asset management capability that was, according to the OMB guidance, designed to provide a mechanism for agencies to plan more effectively in advance of data collection efforts to identify partnership opportunities, and to minimize duplicative investments.\nAccording to federal guidance, the FGDC is to develop a clearinghouse with the functionality to allow federal departments and agencies to (1) determine whether the geospatial data they are seeking already exist and (2) identify planned acquisitions of geospatial data and opportunities to jointly acquire the data in order to improve efficiencies in geospatial data collection and to reduce potential redundancies and duplication. Additionally, federal guidance requires agencies to identify their planned investments in the clearinghouse.\nThe FGDC has developed a clearinghouse that allows users to determine whether the data they are seeking exist. As noted previously, the clearinghouse consists of a centralized repository that contains geospatial metadata records from federal agencies, state and local governments, and academic and private-sector organizations; and multiple web-based portals from which the metadata can be searched. The two primary portals are geo.data.gov and the Geospatial Platform. As of August 2012, there were approximately 835,000 geospatial metadata records in the centralized repository, of which about 373,000 were from federal sources.\nAs previously noted, metadata are information about datasets, such as content, source, accuracy, method of collection, and point of contact. platform. This official acknowledged that until the guidance is completed and implemented, agencies are not likely to add their planned acquisitions to the platform and identify potential cooperative efforts to acquire geospatial data and minimize potential redundancies and duplicative efforts.\nAccording to Secretariat officials, they have not yet finalized the guidance for placing planned acquisitions on the platform because the primary focus of the FGDC has been on the development of the Geospatial Platform’s Business Plan and the initial release of the Geospatial Platform’s core capabilities, applications, and tools. However, without the ability to identify planned geospatial data acquisitions, agencies will likely miss opportunities to reuse or cooperatively acquire geospatial data, thus resulting in the acquisition of potentially duplicative geospatial data and needless expenditure of limited resources.\nOMB requires FGDC to prepare and maintain a strategic plan for the development and implementation of the NSDI. Foundational elements of strategic planning, as recognized by federal legislation and OMB guidance, include, among other things, (1) a vision statement; (2) outcome-oriented goals and objectives; (3) a description of how the goals and objectives are to be achieved—including the resources needed and a description of the working relationships with other agencies; (4) a description of how performance goals contribute to the general goals and objectives of the strategic plan; and (5) the identification of external factors that could significantly affect the achievement of the general goals and objectives. Such a plan could help to facilitate coordination among the many geospatial activities that are underway within the federal government and with other stakeholders, and provide a mechanism to measure progress in coordinating geospatial activities and reducing duplication.\nFGDC has prepared a strategic plan; however, it is missing key components and has not been kept up-to-date. FGDC’s current strategic plan was issued in 2004 and includes (1) a vision statement, (2) three outcome-oriented goals and 13 objectives to be accomplished between 2005 and 2008, and (3) a high-level description of how all but 1 of the 13 objectives are to be achieved. However, its high-level description of the objectives does not include a description of the resources needed to achieve the goals and objectives, or explicitly how the FGDC agencies are to work together to achieve the goals. In addition, the plan does not identify performance measures (such as the percent of the nation for which a given type and standard of data is available) for 9 of the 13 objectives and it does not describe external factors that could affect the achievement of the general goals and objectives, such as the risk of theme-lead agencies not meeting their NSDI development milestones, or limited funding for geospatial investments.\nMoreover, the plan does not reflect significant initiatives that the FGDC Steering Committee has engaged in—such as the Geospatial Platform, which did not exist in 2004—and the time frames for FGDC’s goals are outdated. For example, the latest time frame associated with the goals in the plan is the year 2007. According to the FGDC Office of the Secretariat Executive Director, the plan needs to be updated; however, he could not provide a time frame, on behalf of the FGDC agencies, for doing so.\nThe FGDC Office of the Secretariat Executive Director stated that the FGDC has created other strategic planning documents, such as a technical architecture document from 2006 and, more recently, Geospatial Platform planning documents from 2011 and 2012. Individually, these documents contain several foundational elements of strategic planning (e.g., a vision statement, goals and objectives, and discussion of external risks). However, cumulatively they do not represent a comprehensive strategic plan that addresses all aspects of the NSDI for the same unified future time frame.\nThe Executive Director attributed the lack of a comprehensive strategic plan to competing priorities set by OMB and the FGDC’s Steering Committee. Until a comprehensive strategic plan, with meaningful and measurable performance goals, is in place to guide the federal government’s geospatial efforts, it is more difficult to achieve the NSDI vision and to hold the FGDC and federal agencies accountable for its development.", "OMB has issued guidance, which was followed by an executive order, to federal departments and agencies for effectively coordinating and managing geospatial data to help ensure that they wisely use federal resources in developing the NSDI. According to OMB guidance and the executive order, federal departments and agencies that handle geospatial data are to: designate a senior agency official for geospatial information that has departmentwide responsibility, accountability, and authority for geospatial information issues; prepare, maintain, publish, and implement a strategy for advancing geographic information and related geospatial data activities appropriate to their mission, and in support of the NSDI strategy; develop a policy that requires them to make their geospatial metadata available on the clearinghouse; make all metadata associated with geospatial data available on the clearinghouse, and use the metadata standard; and adopt internal procedures to ensure that they access the NSDI clearinghouse before they expend funds to collect or produce new geospatial data to determine (1) whether the information has already been collected by others, or (2) whether cooperative efforts to obtain the data are possible.\nAs shown in table 1, none of the three federal departments in our review have fully implemented the important activities needed for effectively coordinating and managing geospatial activities within their respective departments.\nDesignate a senior official with departmentwide responsibility.\nOnly one department—Interior—has designated a senior official with departmentwide responsibility, accountability, and authority. Specifically, in a memo issued in August 2012, the Assistant Secretary for Policy, Management and Budget designated a senior official with departmentwide responsibility, accountability, and authority for geospatial information investments, and for overseeing, coordinating, and facilitating implementation of the department’s geospatial-related requirements, policies, activities, and issues. According to NOAA’s Chief Information Officer, he has been designated as Commerce’s senior official for geospatial information, but acknowledged that he does not have responsibility and authority for other Commerce geospatial investments, such as those of the Census Bureau. Finally, Transportation has designated a senior official for geospatial information, but this individual does not have departmentwide responsibility, accountability, or authority for geospatial information, as she does not have any insight into, or control over, geospatial activities conducted by the Federal Aviation Administration, one of Transportation’s major agencies.\nPrepare and implement a strategy. None of the departments have prepared and implemented a strategy for advancing geographic information and related geospatial data activities appropriate to their mission. According to Interior’s Deputy Assistant Secretary for Technology, Information, and Business Services, the Geospatial Modernization Blueprint Recommendations and Architectures from however, it 2007 is the department’s internal geospatial strategy;has not been approved or implemented.\nDevelop a policy for metadata. None of the departments in our review have established a departmentwide clearinghouse metadata policy. In lieu of a departmentwide policy, two of Commerce’s agencies, NOAA and the Census Bureau, have developed policies. Specifically, NOAA’s Data Documentation Procedural Directive requires metadata for NOAA environmental data, information, and services to be published to certain national and international clearinghouse portals, and references data.gov. Bureau’s metadata policy also mentions the importance of posting metadata to the clearinghouse.\nMake metadata available on the clearinghouse. All three departments have made their metadata available on the clearinghouse.\nMost metadata records in the clearinghouse are owned by three federal agencies. Specifically, our analysis of the 441,343 federal records in the centralized geospatial metadata repository, as of February 2012, showed that over 99 percent of these records were populated by three agencies: Census Bureau, USGS, and NOAA. See table 2 for the total number of geospatial metadata records by agency.\nNational Oceanic and Atmospheric Administration, Environmental Data Management Committee, Data Documentation Procedural Directive, Oct. 28, 2011.\nOur analysis of the 29 mandatory fieldsmetadata records shows that the metadata records from the three agencies with the majority of geospatial metadata records are largely complete, as shown in table 3. Specifically, nearly all of Census Bureau records had between 24 and 27 mandatory fields completed. In addition, over 95 percent of USGS’s and NOAA’s records had 28 or 29 of the mandatory fields completed. Finally, the small number of records associated with all other agencies had between 24 and 29 of the mandatory fields completed for virtually all of the records.\nAdopt procedures for accessing the clearinghouse. None of the departments have established procedures for searching the clearinghouse before expending funds to acquire or produce geospatial data. While Interior does not have procedures for accessing the clearinghouse, the department’s Deputy Assistant Secretary for Technology, Information, and Business Services said that it is commonly practiced and noted that the department usually confers internally with its committees on elevation and orthoimageryprior to acquiring geospatial data.\nDepartment officials attribute the lack of progress in implementing important coordination and management activities to a lack of priority, competing department resources, and in some cases, a lack of awareness. Until the departments implement these activities, they risk acquiring potentially duplicative and costly geospatial data, resulting in the inefficient use of already limited resources.\nAccording to OMB,provide the leadership necessary to ensure the national coverage and stewardship of specific geospatial data themes, NSDI-designated theme- lead agencies are to: in order to effectively manage geospatial data and designate a point of contact who is responsible for the development, maintenance, coordination, and dissemination of data using the clearinghouse; prepare goals relating to the theme that support the NSDI strategy, and as needed, collect and analyze information from user needs and include those needs in the theme-related goals; develop and implement a plan for the nationwide population of the data theme that includes (1) the development of partnership programs with states, tribes, academia, the private sector, other federal agencies, and localities that meet the needs of users; (2) human and financial resource needs; (3) standards, metadata, and the clearinghouse needs; and (4) a timetable for the development for the theme; and create a plan to develop and implement theme standards.\nAs shown in table 4, the three theme-lead agencies in our review have implemented some but not all important geospatial activities.\nDesignate a theme point of contact. All three agencies have designated a point of contact.\nPrepare goals and analyze user needs. One agency has developed goals that recognize and consider user needs for all key datasets in its theme and two agencies have developed goals based on user needs for the major datasets that comprise their themes. Specifically, NOAA’s National Geodetic Survey Ten-Year Plan includes goals for furthering all of the key datasets in the geodetic control theme. For example, the plan highlights the goals to modernize geometric (horizontal) datum and to modernize the geopotential (vertical) datum, and identifies user needs and why they are important. NOAA has also developed other short-term goals, such as continue education, outreach, development of transition tools and applications, and capacity-building activities to prepare users for the transition to new geometric and geopotential datum; and identify common objectives and find opportunities for cooperative projects and tasks related to standardization and updates to vertical datum. USGS has developed goals for the maintenance of the National Hydrography Dataset and for the Watershed Boundaries Dataset, such as ensuring that datasets continue to meet user needs; however, these two datasets do not include all datasets within the hydrography theme. Similarly, BTS has developed goals for the development of a comprehensive road centerlineaddress all other modes of transportation covered by the data theme, such as railroads, waterways, and virtual airways. The goals recognize differences in user needs for road centerline data, such as basic geometry and naming, support for addressing, and enhanced cartographic displays. dataset; however, the goals do not\nDevelop a plan for theme population. One agency has developed a plan that addresses all of the key elements for developing a nationwide plan; one has taken actions consistent with most of the key elements for some of the datasets associated with the theme, but has not integrated all the activities into a single plan that covers the entire theme; and one has developed a plan that addresses some of the key elements, but for only one of the major datasets in the theme. NOAA has developed a plan, its National Geodetic Survey Ten-Year Plan, which provides a strategy for how NOAA intends to modernize and populate its data theme. The plan includes the development of partnership programs with states, academia, federal agencies, and other stakeholders; identifies the need to address human and financial resource needs; identifies needs for standards, metadata, and the clearinghouse; and advances a timetable for the development of the theme. In contrast, USGS does not have a plan for the population of the hydrography theme; however, it has taken actions to (1) develop partnerships; (2) address human and financial resources; and (3) identify needs for standards, metadata, and the clearinghouse for the National Hydrography Dataset, which is one dataset within the hydrography theme. BTS has developed a strategic plan for the development of a nationwide road centerline dataset. However, this plan does not address all other modes of transportation covered by the data theme, such as railroads, waterways, and virtual airways. These officials stated that a strategic plan for connecting all of the transportation datasets in an intermodal manner is needed; however, there are no plans to create such a plan in the immediate future.\nDevelop a standards plan. None of the agencies have developed a plan to develop and implement standards; while NOAA recognized the need for a plan, both USGS and BTS stated that such a plan was not needed for their themes—USGS because of the maturity of their existing datasets, and BTS because they collect data from states and counties in various formats, and then standardize the data themselves. However, without a plan to maintain existing standards or anticipate new standards, these agencies risk potential future difficulties exchanging and sharing geospatial datasets.\nTheme-lead agency officials attribute the lack of progress in implementing these activities to competing priorities, limited resources, and the perceived lack of need for some plans. Until agencies implement these activities, they will be challenged to effectively manage important geospatial activities, wisely use limited resources, and risk engaging in potential duplicative geospatial acquisition efforts.", "OMB has oversight responsibilities for federal IT systems and acquisition activities—including GIS—to help ensure their efficient and effective use. According to OMB Office of E-Government staff members, OMB relies primarily on the annual budget process to identify potentially duplicative geospatial investments; specifically, the exhibit 53s and 300s.\nHowever, OMB’s Office of E-Government staff members acknowledged that these two sources may not in all cases provide the necessary information to allow OMB to identify potentially duplicative investments or accurately quantify the amount of federal dollars spent on geospatial datasets for three primary reasons. First, these staff members stated that some federal agencies may not classify investments in geospatial data as “information technology” (such as satellites), meaning that they would not be captured in exhibit 53s. OMB staff members stated that agencies are to determine what qualifies as an IT investment and stated that there are variations in the way that agencies interpret the definition of IT. Second, agencies do not always appropriately classify geospatial investments as “geospatial services” using the Federal Enterprise Architecture codes. Our analysis of the fiscal year 2013 exhibit 53s for the three departments that we reviewed showed that only 5 of their 24 key datasets—1 of NOAA’s 6 geodetic control datasets, and 4 of USGS’s 7 hydrography datasets—were included in the departments’ exhibit 53s. Further, only 1 of these investments was identified with the geospatial services code, as required by OMB’s fiscal year 2013 budget formulation guidance. Third, given that the geospatial data may be only one component of an IT investment or capital asset, even if it were included in the agencies’ exhibit 53s or 300s, OMB would have difficulties in identifying the geospatial component, and the associated dollars, without having a detailed discussion with individuals responsible for each investment.\nOMB staff members stated that they do not have a complete picture of how much money is being spent on geospatial investments across the federal government because, as noted above, what is being reported may not capture all geospatial spending, and the data have not been reliable. In 2006 and 2007, OMB made two data calls directly to federal agencies to determine federal agencies’ spending on geospatial investments. However, according to OMB, neither of these data calls provided the agency with complete and reliable information—largely because agencies either provided incomplete information, or did not respond at all. Although the data may not be complete, those agencies that did respond reported that they planned to spend about $1.89 billion in geospatial data and services between fiscal years 2007 and 2009, of which about $1.53 billion, or about 81 percent, was to be on geospatial data. OMB staff members stated that OMB has not made any additional data collections outside of the IT reporting process (i.e., exhibit 53s and 300s) for geospatial data investments since 2007, and as of September 2012, has no current plans for any new collections.\nOMB staff members stated that, although eliminating duplication in geospatial investments is important, OMB’s recent efforts have focused on other commodity IT areas with higher spending and cyber security ramifications, such as reducing the numbers of federal data centers and internet connections maintained by the government. However, without complete and reliable information on the federal government’s investments in geospatial data, including the amount of federal dollars spent, OMB does not have the necessary information to make a fact- based decision about the potential priority of geospatial information in relation to other activities.", "According to FGDC Secretariat officials, departments and agencies have taken steps to coordinate geospatial data related to their respective data themes.\nInterior participates in several efforts aimed at coordinating one of its themes, orthoimagery. For example, in conjunction with the U.S. Department of Agriculture, Interior participates in the National Agricultural Imagery Program, which was developed to obtain one- meter resolution, “leaf-on” imagery for the 48 continental states on a 3-year cycle. In addition, Interior, in conjunction with the Department of Defense, participates in the Urban Area Imagery Program. The goal of this program is to acquire one-foot resolution, “leaf-off” imagery for 133 of the nation’s largest or most important urban areas (such as state capitals) on a 2-to-4-year cycle. According to FGDC Secretariat officials, for both of these programs, members acquire the imagery, assure the quality of the imagery, and distribute it to the participants in the program. Each participant in these programs benefits from the imagery acquired, as do all other federal, state, and local agencies, the private sector (such as companies that provide mapping services on the Internet), nonprofit organizations, and members of the public interested in this type of imagery.\nInterior also participates in a program for another theme, elevation. Specifically, in conjunction with other departments, Interior participates in the National Digital Elevation Program, which is intended to acquire detailed elevation data using advanced technologies to support various programmatic needs, such as USGS’s Coastal and Marine Geology program, the U.S. Department of Agriculture’s Natural Resources Conservation Service (which supports precision farming), and the Department of Homeland Security’s Federal Emergency Management Agency’s Risk Mapping, Assessment, and Planning program. The participating agencies seek other federal agency and state and local government participation in elevation acquisition projects as part of their program design. According to Secretariat officials, agencies generally coordinate their plans and funding, and execute the projects independently. In addition, the data acquired by projects are available to others.\nUSGS further coordinated the elevation theme when, in conjunction with its partners, it sponsored the National Enhanced Elevation Assessment. According to USGS officials, the assessment was conducted to investigate the potential to obtain greater benefits and efficiencies from the growing interest in using data from advanced technologies, and concluded that moving to a coordinated national program has the potential to produce new benefits in excess of $1 billion annually. USGS and its federal partners intend to use the recommendations from the assessment to improve on the current coordination-based approach among federal agencies and nonfederal organizations.\nAs the theme-lead agency of the hydrography theme, USGS has led efforts to coordinate the population of the hydrography theme. According to USGS officials, it created a partnership for the development of two separate datasets associated with hydrography: the National Hydrography Dataset and the Watershed Boundaries Dataset. These datasets were created by pooling funding and resources from several federal, state, and local agencies into a single effort. This partnership supports the missions of several federal agencies: USGS and the U.S. Forest Service for mapping and analysis projects, the Environmental Protection Agency and the Department of Homeland Security for analysis projects, and the Census Bureau for mapping. Numerous state agencies also participate in order to meet reporting requirements of the Federal Water Pollution Control Act. This partnership also has data stewardship agreements in place between USGS and 35 states. This data stewardship activity is based on the input of local organizations knowledgeable about hydrography in their immediate area.\nWhile agencies have taken actions to coordinate geospatial data investments, recent reports, as well as officials from state and local associations and the FGDC Advisory Committee have all stated that duplicative geospatial data investments continue across all levels of government. For example, according to Transportation’s Transportation for the Nation Strategic Plan, dated May 2011, duplication exists in the acquisition of nationwide road centerline data across federal agencies and other levels of government, resulting in millions of wasted taxpayer dollars.independently acquiring road centerline data: The report identified several initiatives that are currently\nCensus Bureau’s Topologically Integrated Geographic Encoding and Referencing (TIGER) system, which uses data procured from local sources for census enumeration and demographic applications. These data were built and are maintained by the Census Bureau.\nUSGS’s National Map website, which uses licensed data from a commercial provider to create viewable maps on the National Map. These data are managed by USGS.\nThe Department of Defense’s Homeland Security Infrastructure Program, which uses licensed commercial data procured by the National Geospatial-Intelligence Agency for emergency management.\nIn addition, a subcommittee of the National Geospatial Advisory Committee has, at the request of the FGDC, been evaluating the need for a national address database, assessing potential concerns with such a database, and identifying possible approaches for its development. According to a National Geospatial Advisory Committee official, several federal agencies collect, purchase, or lease address information in a noncoordinated fashion. This subcommittee is in the process of finalizing a report for the full committee that would assess, among other things, the benefits, potential savings, and efficiencies that could be realized from the development of a national address database.\nFurther, in a report on land parcel data, the National Academy of Sciences stated that the lack of nationally integrated land parcel data has led to duplication of effort among various levels of government and between the public and private sector, such as the Department of Housing and Urban Development, the U. S. Forest Service, insurance companies, and private companies that list home values and sell parcel maps. In addition, a National Geospatial Advisory Committee representative stated that a commercial provider leases the same proprietary parcel data to six federal agencies: the Department of Housing and Urban Development, the Department of Homeland Security, the Federal Bureau of Investigation, the Small Business Administration, the Federal Deposit Insurance Corporation, and the Federal Reserve. In recent reports, the Congressional Research Service found that a coordinated approach to federally managed parcel data still did not exist and that the best method for obtaining an accurate tally of federal lands is to contact each land management agency directly.\nThe National States Geographic Information Council has two missions: (1) to promote the coordination of statewide geospatial activities in all states and (2) to advocate for the states in national geospatial policy initiatives to help enable the NSDI. Members of the council include senior state GIS managers and coordinators as well as others from all levels of government, academia, and the private sector. See http://www.nsgic.org/. be procured in such areas as imagery, elevation, road centerlines, and address points.", "The long-standing problem of effectively coordinating federal geospatial investments to reduce redundancies has yet to be resolved. In particular, the FGDC has not established a framework for governmentwide management of themes and datasets; provided geospatial information users with the means to identify planned data acquisitions; and developed and maintained a national strategy to guide the development of the NSDI, with associated metrics to measure progress and ensure accountability. Similarly, federal departments and agencies have not yet implemented long-standing OMB guidance intended to ensure the efficient use of limited federal resources and the effective stewardship of geospatial data themes, including developing and implementing a strategy for advancing geospatial activities related to their mission; and implementing policies, procedures, and plans for effectively coordinating and managing geospatial data, standards, and the clearinghouse. Moreover, OMB has not established an effective mechanism to identify the amount of the federal budget being spent on geospatial investments as well as potentially duplicative geospatial investments.\nThe FGDC, federal agencies, and OMB have each indicated that the lack of progress in implementing these important coordination activities is because they have been focusing on other priorities. However, while the extent of duplication in geospatial investments is unknown, it is estimated that billions of dollars are being spent across the federal government on geospatial investments. Further, many mission-critical applications, such as those used to respond to natural disasters—floods, hurricanes, and fires—depend on geospatial information to protect lives and property. Thus, it is important that the data acquired to support these critical functions be done in a timely and coordinated manner, with minimal duplication.\nUntil a comprehensive national strategy is in place, the FGDC develops and implements guidance and tools to effectively coordinate governmentwide geospatial activities, and federal agencies establish and implement the policies, procedures, and plans to coordinate their geospatial activities, the vision of the NSDI to improve the coordination and use of geospatial information will likely not be fully realized and duplicative investments will likely continue. Further, until OMB establishes a way to obtain reliable information about federal geospatial investments, OMB will not be able to identify potentially duplicative geospatial investments. Unless the FGDC, federal departments and agencies, and OMB decide that investments in geospatial information are a priority, these investments will remain uncoordinated, and although the extent of duplication is unknown, the federal government will continue to acquire duplicative geospatial information and waste taxpayer dollars.", "To better facilitate the coordination of—and accountability for—the estimated billions of dollars in federal geospatial investments, and to reduce duplication, we recommend that the Secretary of the Interior, as the FGDC Chair, direct the FGDC Steering Committee to take the following three actions.\nEstablish a time frame for completing a plan to facilitate the implementation of OMB’s portfolio management guidance, and develop and implement the plan within the established time frame. The plan, at a minimum, should include goals and performance measures, and the FGDC should report annually to OMB on the progress made on efforts to improve coordination and reduce duplication among themes.\nDevelop and implement guidance for identifying planned geospatial investments using the Geospatial Platform, and establish a time frame for doing so.\nEstablish a time frame for creating and updating a strategic plan to improve coordination and reduce duplication, and create and implement the plan within the established time frame. The plan, at a minimum, should include (1) a vision statement for the NSDI; (2) outcome-oriented goals and objectives that address all aspects of the NSDI; (3) a description of how the goals and objectives are to be achieved, including a description of the resources needed to achieve the goals and objectives and how the FGDC is to work with other agencies to achieve them; (4) performance measures for achieving the stated goals; and (5) external factors that could affect the achievement of the goals and objectives.\nTo help ensure the success of department’s efforts to improve geospatial coordination and reduce duplication, we recommend that the Secretary of Commerce designate a senior agency official who has departmentwide responsibility, accountability, and authority for geospatial information issues. We further recommend that the Secretary of Commerce direct the designated senior official for geospatial information to take the following three actions.\nPrepare, maintain, publish, and implement a strategy for advancing geographic information and related geospatial data activities appropriate to its mission.\nDevelop a policy that requires the department to make its geospatial metadata available on the clearinghouse.\nDevelop and implement internal procedures to ensure that it accesses the NSDI clearinghouse before it expends funds to collect or produce new geospatial data to determine (1) whether the information has already been collected by others and (2) whether cooperative efforts to obtain the data are possible.\nFurther, to improve the department’s management of its geodetic control theme, we recommend that the Secretary of Commerce direct the geodetic control theme point of contact to create and implement a plan to develop and implement geodetic control theme standards.\nWe recommend that the Secretary of the Interior direct the designated senior official for geospatial information to take the following three actions.\nPrepare, maintain, publish, and implement a strategy for advancing geographic information and related geospatial data activities appropriate to its mission.\nDevelop a policy that requires the department to make its geospatial metadata available on the clearinghouse.\nDevelop and implement internal procedures to ensure that it accesses the NSDI clearinghouse before it expends funds to collect or produce new geospatial data to determine (1) whether the information has already been collected by others and (2) whether cooperative efforts to obtain the data are possible.\nWe further recommend that the Secretary of the Interior direct the hydrography theme point of contact to take the following three actions.\nPrepare goals relating to all datasets within the hydrography theme that support the NSDI, and as needed, collect and analyze information from user needs and include those needs in the theme-related goals.\nDevelop and implement a plan for the nationwide population of the hydrography theme that addresses all datasets within the theme; and that includes (1) the development of partnership programs with states, tribes, academia, the private sector, other federal agencies, and localities that meet the needs of users; (2) human and financial resource needs; (3) standards, metadata, and the clearinghouse needs; and (4) a timetable for the development for the theme.\nCreate and implement a plan to develop and implement hydrography theme standards.\nWe recommend that the Secretary of Transportation designate a senior agency official who has departmentwide responsibility, accountability, and authority for geospatial information issues. We further recommend that the Secretary of Transportation direct the designated senior official for geospatial information to take the following three actions.\nPrepare, maintain, publish, and implement a strategy for advancing geographic information and related geospatial data activities appropriate to its mission.\nDevelop a policy that requires the department to make its geospatial metadata available on the clearinghouse.\nDevelop and implement internal procedures to ensure that it accesses the NSDI clearinghouse before it expends funds to collect or produce new geospatial data to determine (1) whether the information has already been collected by others and (2) whether cooperative efforts to obtain the data are possible.\nWe further recommend that the Secretary of Transportation direct the transportation theme point of contact to take the following three actions.\nPrepare goals relating to all datasets within the transportation theme that support the NSDI, and as needed, collect and analyze information from user needs and include those needs in the theme-related goals.\nDevelop and implement a plan for the nationwide population of the transportation theme that addresses all datasets within the theme; and that includes (1) the development of partnership programs with states, tribes, academia, the private sector, other federal agencies, and localities that meet the needs of users; (2) human and financial resource needs; (3) standards, metadata, and the clearinghouse needs; and (4) a timetable for the development for the theme.\nCreate and implement a plan to develop and implement transportation theme standards.\nFurther, to improve OMB oversight of geospatial information and assets, and minimize duplication of federal geospatial investments, we recommend that the Director of OMB develop a mechanism, or modify existing mechanisms, to identify and report annually on all geospatial- related investments, including dollars invested and the nature of the investment.", "We received written, e-mail, or oral responses on a draft of this report from Interior, Commerce, Transportation, as well as OMB and the General Services Administration. These responses are summarized below.\nIn written comments, signed by the Assistant Secretary for Policy, Management and Budget, and reprinted in appendix III, Interior generally agreed with our recommendations. The department stated that it recognizes the need to more fully implement the portfolio management requirements described in the OMB Circular A-16 supplemental guidance and is already actively working to develop tools that will help agencies identify planned geospatial investments in the Geospatial Platform. With respect to our recommendations aimed at improving Interior’s management of its geospatial investments, the department stated that it is beginning to take actions to implement our recommendations, including developing an Geospatial Advisory Committee for the department—which is intended to provide leadership and direction for the development of a comprehensive geospatial technical strategy for the department—as well as developing procedures for making metadata available on the clearinghouse. The department further stated that it is committed to working with OMB and its partner agencies to address our recommendations in a timely manner.\nIn addition, the department stated that its efforts to lead and coordinate activities of the FGDC and the Geospatial Platform continue to accrue great benefits to the federal community and U.S. citizens. In particular, Interior stated that through these efforts, it will be able to implement the supplemental guidance to OMB Circular A-16, and realize the tremendous potential of the Geospatial Platform. We support the department’s efforts as evidenced by our recommendations to the department aimed at furthering agencies’ implementation of the supplemental guidance and use of the Geospatial Platform to identify planned geospatial investments. Interior also provided technical comments, which we have incorporated in the report as appropriate.\nIn written comments, signed by the Acting Secretary of Commerce, and reprinted in appendix IV, Commerce stated that the department and NOAA agree with our recommendations, and described actions planned to implement them. Commerce also stated that it appreciates the work that we have done to improve coordination in managing geospatial investments.\nIn oral comments, Transportation officials, including the department’s Geospatial Information Officer/BTS Director of Geospatial Information Systems, neither agreed nor disagreed with our recommendations, and provided two comments on our draft report. First, Transportation officials stated that, as of October 2012, the department’s metadata files are available on the geoplatform.gov and the geo.data.gov sites, and provided supporting evidence. As a result, we revised our report to acknowledge that the department has made its metadata associated with geospatial data available on the clearinghouse, and removed the recommendation that it does so. Second, Transportation officials stated that they believed that the department should have received partial credit for having prepared, maintained, published, and implemented a strategy for advancing geographic information and related geospatial data activities appropriate to the department’s mission, and in support of the NSDI strategy. Specifically, Transportation officials stated that the department’s Transportation for the Nation Strategic Plan partially satisfies these criteria because it includes a strategy for collecting and maintaining road centerline data, which represents the vast majority of travel in terms of both passengers and freight. We agree that transportation by road is a major component of the transportation data theme. In fact, our assessment of this plan was the basis for the partial rating for two of the criteria related to BTS’s (the theme-lead agency) management of the transportation data theme: “prepared goals and analyzed user needs,” and “developed a plan for theme population.” However, the strategic plan does not include a strategy for advancing all the department’s geographic information and related geospatial data activities, nor does it describe how the department and its agencies are to coordinate their geospatial efforts to support the department’s mission. In particular, the plan does not address geospatial themes other than transportation—including elevation and imagery—in which Federal Aviation Administration officials stated that their agency also makes investments. Therefore, we believe that the department’s Transportation for the Nation Strategic Plan does not constitute a departmentwide geospatial plan. In addition, Transportation officials provided a technical comment, which we incorporated into the draft.\nIn comments provided via e-mail, a paralegal specialist in OMB’s Office of General Counsel, on behalf of OMB, stated that OMB concurs with the need for improved collection of geospatial-related investments, but believes that it should only be achieved through improvements to broader reporting mechanisms for IT investments and data assets, and not by developing new and separate mechanisms specifically for geospatial- related assets. OMB further noted that it would be helpful if we clarified our recommendation to acknowledge that a new process is not required or expected. The decision as to whether OMB should develop a new mechanism, or improve an existing mechanism, should be made based on whichever option will be most successful in collecting the necessary information. We modified our recommendation to reflect this. OMB also provided technical comments, which we incorporated as appropriate.\nIn e-mail comments provided by a Management and Program Analyst in the GAO/IG (Inspector General) Response Audit Division, the General Services Administration stated that it had no formal comments on the draft report.\nWe are sending copies of this report to interested congressional committees; the Chair and Vice-Chair of the Federal Geographic Data Committee; the Director of the Office of Management and Budget; the Secretaries of the Departments of Commerce, the Interior, and Transportation; and the Administrator of the General Services Administration. This report will also be available at no charge on our website at http://www.gao.gov.\nIf you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-9286 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "Our objective was to determine the extent to which the federal government has established and effectively implemented policies and procedures for coordinating its investments in geospatial data and avoiding duplication. To address this objective, we focused on governmentwide activities to implement the National Spatial Data Infrastructure (NSDI), including efforts of the Federal Geographic Data Committee (FGDC), as well as those within selected departments.\nTo evaluate federal departments’ efforts to implement the NSDI, we first identified the nine framework themes, as identified in Office of Management and Budget (OMB) Circular A-16. These framework themes are cadastral, cadastral (offshore), digital orthoimagery, elevation bathymetric, elevation terrestrial, geodetic control, government units, hydrography, and transportation; and are described in appendix II. From those nine themes, we then randomly selected three themes and identified the federal departments and agencies responsible for managing the themes. The three departments, theme-lead agencies, and selected themes are:\nDepartment of Commerce (Commerce)—National Oceanic and Atmospheric Administration (NOAA)—Geodetic Control;\nDepartment of the Interior (Interior)—U. S. Geological Survey (USGS)—Hydrography; and\nDepartment of Transportation (Transportation)—Bureau of Transportation Statistics (BTS)—Transportation.\nWe then reviewed FGDC and federal department documentation, such as policies, procedures, strategic plans, implementation plans, technical documentation of standards and metadata, committee charters and meeting minutes, and budget documentation. We assessed this information against responsibilities identified in Executive Order 12906, OMB Circular A-16, OMB M-06-07, and OMB M-11-03;discrepancies, and discussed them with the relevant agency officials.\nTo determine the completeness of the federal agency metadata records in the clearinghouse and to determine which agencies contributed records to geo.data.gov, we obtained an extract of the contents of geo.data.gov as of February 22, 2012. We then recreated a database of the metadata records. We reviewed FGDC guidancebe the mandatory data elements, which total 29. For each record in the database, we determined if the metadata value for each of the 29 mandatory data fields had information or was blank. In addition, we used the metadata records to determine what agencies contributed records by examining the data fields that indicated the origin and publisher of the data. to identify what are considered to In order to assess the reliability of the clearinghouse data that we analyzed, we reviewed FGDC documentation, the General Services Administration’s written responses to questions, and interviewed officials familiar with the clearinghouse data in order to gain an understanding of the controls around the creation and maintenance of the clearinghouse data. We determined that our recreation of the database had no material effect on our analysis and that the database, as recreated, was sufficiently reliable for our purposes.\nTo determine whether OMB had complete and reliable information to identify duplicative geospatial investments, we reviewed OMB’s most recent data calls for geospatial data from 2006 and 2007, OMB Circular and department budget submissions. We compared the list of key A-11,datasets for the themes in our sample to budget documentation available in OMB’s fiscal year 2013 exhibit 53 to determine the extent to which the agencies identified these datasets as investments in information technology (IT) and geospatial services. To determine the reliability of the data on the IT Dashboard, we reviewed recent GAO reports that identified issues with the accuracy and reliability of agency data on the IT Dashboard. We determined that the data were sufficiently reliable for the purpose of this report, which is to determine the extent to which departments’ key datasets were included as IT investments and coded as geospatial services in the departments’ respective exhibit 53s for fiscal year 2013.\nTo identify potential duplicative geospatial investments, we reviewed recent reports from the FGDC, Transportation, the Congressional Research Service, the National Geospatial Advisory Committee, and the National Academy of Sciences, and spoke with FGDC and the National States Geographic Information Council officials.\nWe also interviewed FGDC officials, including the Chair and Vice-Chair of the FGDC; the Executive Director of the FGDC Office of the Secretariat; the representative for the Managing Partner of the Geospatial Platform; OMB Office of E-Government staff members; department and agency officials responsible for coordinating geospatial investments within their respective agencies as well as theme-lead points of contact within those agencies; General Services Administration officials responsible for managing the geospatial clearinghouse; the Chair of the National Geospatial Advisory Committee; and the President and Washington Liaison of the National States Geographic Information Council.\nWe conducted this performance audit from November 2011 to November 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.", "FGDC proposed theme and description Biota—Biota pertain to, or describe the dynamic processes, interactions, distributions, and relationships between and among organisms and their environments.\nCadastre—This theme describes past, current, and future rights and interests in real property, including the spatial information necessary to describe geographic extents. Rights and interests are benefits or enjoyment in real property that can be conveyed, transferred, or otherwise allocated to another for economic remuneration. Rights and interests are recorded in land record documents. The spatial information necessary to describe geographic extents includes surveys and legal description frameworks, such as the Public Land Survey System, as well as parcel-by-parcel surveys and descriptions. This theme does not include federal government or military facilities.\nCorresponding A-16 existing theme and description Biological Resources—This dataset includes data pertaining to or descriptive of (nonhuman) biological resources and their distributions and habitats, including data at the suborganismal (genetics, physiology, anatomy, etc.), organismal (subspecies, species, systematics), and ecological (populations, communities, ecosystems, biomes, etc.) levels. Vegetation—Vegetation data describe a collection of plants or plant communities with distinguishable characteristics that occupy an area of interest. Cadastral—Cadastral data describe the geographic extent of past, current, and future rights, title, and interests in real property, and the framework to support the description of that geographic extent. The geographic extent includes survey and description frameworks, such as the Public Land Survey System, as well as parcel- by-parcel surveys and descriptions. Cadastral (Offshore)\nClimate and Weather—Climate and weather describes meteorological conditions, including temperature, precipitation, and wind, that characteristically prevail in a particular region over a long period of time. Weather is the state of the atmosphere at a given time and place, with respect to variables, such as temperature, moisture, wind velocity, and barometric pressure. Cultural Resources—This theme describes features and characteristics of a collection of places of significance in history, architecture, engineering, or society. It includes national monuments and icons.\nCultural Resources—The cultural resources theme includes historic places, such as districts, sites, buildings, and structures of significance in history, architecture, engineering, or culture. Cultural resources also encompass prehistoric features as well as historic landscapes. Geographic Names—This dataset contains data or information on geographic place names deemed official for federal use by the U.S. Board on Geographic Names as pursuant to 80 Cong. Ch. 330. Geographic Names information includes both the official place name (current, historical, and aliases) and direct (i.e., geographic coordinates) and indirect (i.e., state and county where place is located) geospatial identifiers. This information is categorized as populated places, schools, reservoirs, parks, streams, valleys, and ridges.\nFGDC proposed theme and description Elevation—Elevation is the measured vertical position of the Earth surface and other landscape or bathymetric features relative to a reference datum typically related to sea level. These points normally describe bare Earth positions but may also describe the top surface of buildings and other objects, vegetation structure, or submerged objects. Elevation data can be stored as a three- dimensional array or as a continuous surface, such as a raster, triangulated irregular network, or contours. Elevation data may also be represented in other derivative forms, such as slope, aspect, ridge and drainage lines, and shaded relief. Geodetic Control—This theme includes a collection of control points that provide a common reference system for establishing coordinates for geographic data.\nCorresponding A-16 existing theme and description Elevation Bathymetric—The bathymetric data for Inland and Intercoastal waterways is highly accurate bathymetric (i.e., the measurement of water depths) sounding information collected to ensure that federal navigation channels are maintained to their authorized depths. Bathymetric survey activities support the nation’s critical nautical charting program. These data are also used to create Electronic Navigational Charts. Elevation Terrestrial—These data contain georeferenced digital representations of terrestrial surfaces, natural or manmade, that describe vertical position above or below a datum surface.\nGeodetic Control—Geodetic control provides a common reference system for establishing coordinates for all geographic data. All NSDI framework data and users’ applications data require geodetic control to accurately register spatial data. The National Spatial Reference System is the fundamental geodetic control for the United States.\nGeology—Geology is geographically-referenced data pertaining to the origin, history, composition, structure, features, and processes of the solid Earth, both onshore and offshore. It includes geologic, geophysical, and geochemical maps, stratigraphy, paleontology, geochronology, mineral and energy resources, and natural hazards, such as earthquakes, volcanic eruptions, coastal erosion, and landslides. The theme does not include soils. Governmental Units—This theme includes data that describe political, governmental, and administrative (management) type boundaries that are used to manage people and resources. It includes geopolitical boundaries (county, parish, state, city, etc.), tribal boundaries, federal land boundaries, federal regions, international boundaries, and governmental administrative units, such as congressional districts, international lines of separation, limits, zones, enclaves, exclaves, special areas between states and dependencies, and all jurisdictional offshore limits within U.S. sovereignty. Boundaries associated with natural resources, demography, and cultural entities are excluded and can be found in the appropriate subject themes.\nGeologic—The geologic spatial data theme includes all geologic mapping information and related geoscience spatial data (including associated geophysical, geochemical, geochronologic, and paleontologic data) that can contribute to the National Geologic Map Database as pursuant to Public Law 106-148. Offshore Minerals—Offshore minerals include minerals occurring in submerged lands. Examples of marine minerals include oil, gas, sulfur, gold, sand and gravel, and manganese.\nGovernmental Units—These data describe, by a consistent set of rules and semantic definitions, the official boundaries of federal, state, local, and tribal governments as reported/certified to the U.S. Census Bureau by responsible officials of each government for purposes of reporting the nation’s official statistics. International Boundaries—International boundary data include both textual information to describe, and geographic information system (GIS) digital cartographic data to depict, both land and maritime international boundaries, other lines of separation, limits, zones, enclaves, exclaves, and special areas between states and dependencies. Marine Boundaries—Marine boundaries depict offshore waters and seabeds over which the United States has sovereignty and jurisdiction.\nFGDC proposed theme and description Imagery—The imagery theme includes georeferenced images of the Earth’s surface that have been collected using aerial photography or satellite data. Orthoimagery is prepared through a geometric correction process known as orthorectification to remove image displacements due to relief and sensor characteristics. This process allows for their use as base maps for digital mapping and analyses in a GIS. Specific imagery data sets created through image interpretation and classification, such as a land cover image, can be found under themes specific to the subject matter. This theme includes imagery, such as Landsat, National Agriculture Imagery Program, and Digital Orthophoto Quarter Quadrangle.\nCorresponding A-16 existing theme and description Digital Ortho Imagery—This dataset contains georeferenced images of the Earth’s surface where object displacement has been removed for sensor distortions and orientation, and terrain relief. Digital orthoimages have the geometric characteristics of a map and image qualities of a photograph.\nLand Use/Land Cover—This theme refers collectively to natural and man-made surface features that cover the land (Land Cover) and to the primary ways in which land cover is used by humans (Land Use). Examples of Land Cover may be grass, asphalt, trees, bare ground, and water. Examples of Land Use may be urban, agricultural, ranges, and forest areas. Real Property—The real property theme includes data that describes the spatial representation (location) of real property entities, typically consisting of one or more of the following: unimproved land, a building, a structure, site improvements, and the underlying land. Complex real property entities (i.e., facilities) are used for a broad spectrum of functions or missions. This theme focuses on spatial representation of real property assets only and does not seek to describe special purpose functions of real property, such as those found in the Cultural Resources, Transportation, or Utilities themes. Soils—This theme includes data that depict the geography and attributes of the many kinds of soils found in the landscape at both large and small map scales. A living dynamic resource providing a natural medium for plant growth and habitat for living organisms, soil recycles nutrients and wastes, stores carbon, and purifies water supplies. Soil has distinct layers (called “horizons”) that, in contrast to underlying geologic material, are altered by the interactions of climate, landscape features, and living organisms over time.\nEarth Cover—The Earth cover theme uses a hierarchical classification system based on observable form and structure, as opposed to function or use. This system transitions from generalized to more specific and detailed class divisions, and provides a framework within which multiple land cover and land use classification systems can be cross-referenced. This system is applicable everywhere on the surface of the Earth. This theme differs from the Vegetation and Wetlands themes, which provide additional detail.\nBuildings and Facilities—The facility theme includes federal sites or entities with a geospatial location deliberately established for designated activities; a facility database might describe a factory, military base, college, hospital, power plant, fishery, national park, office building, space command center, or prison. Housing—This theme includes geographic data on homeownership rates, including many attributes such as the Department of Housing and Urban Development’s revitalization zones, location of various forms of housing assistance, first-time homebuyers, underserved areas, and race.\nSoils—Soil data consist of georeferenced digital map data describing the spatial distribution of the various soils that cover the Earth’s surface, and attribute data describing the proportionate extent of the various soils as well as the physical and chemical characteristics of those soils. The physical and chemical properties are based on observed and measured values, as well as model-generated values. This theme also includes model-generated assessments of the suitability or limitations of the soils to various land uses.\nFGDC proposed theme and description Transportation—Transportation data describe means and aids for conveying persons and goods. The transportation system includes both physical and nonphysical components related to all modes of travel that allow the movement of goods and people between locations.\nCorresponding A-16 existing theme and description Transportation—Transportation data are used to model the geographic locations, interconnectedness, and characteristics of the transportation system within the United States. The transportation system includes both physical and nonphysical components representing all modes of travel that allow the movement of goods and people between locations. Transportation (Marine)—The Navigation Channel Framework consists of highly accurate dimensions (geographic coordinates for channel sides, centerlines, wideners, turning basins, and river mile markers) for every federal navigation channel maintained by the U.S. Army Corps of Engineers. The navigation framework will provide the basis for the marine transportation theme of the geospatial data framework.\nUtilities—This theme includes the means, aids, and usage of facilities for producing, conveying, distributing, processing, and disposing of public and private commodities, including power, energy, communications, natural gas, and water. It includes subthemes for Energy and Communications. Water—Inland—The Water—Inland theme describes interior hydrologic features and characteristics, including classification, measurements, location, and extent. It includes aquifers, watersheds, wetlands, navigation, water quality, water quantity, and groundwater information.\nThere are not any corresponding existing themes.\nWater—Oceans and Coasts—This theme includes datasets that describe features and characteristics of salt water bodies (tides, tidal waves, coastal information, reefs) and features and characteristics that represent the intersection of the land with the water surface (shorelines), the lines from which the territorial sea and other maritime zones are measured (baseline maritime), and lands covered by water at any stage of the tide (outer continental shelf), as distinguished from tidelands, which are attached to the mainland or an island and cover and uncover with the tide.\nHydrography—This data theme includes surface water features, such as lakes, ponds, streams and rivers, canals, oceans, and coastlines. Watershed Boundaries—This data theme encodes hydrologic, watershed boundaries into topographically defined sets of drainage areas that are organized in a nested hierarchy by size, and based on a standard hydrologic unit coding system. Flood Hazards/Flood Plain—This theme includes documentation of the boundaries and elevations of the 1 percent annual chance (100-year) flood for communities across the country. The National Flood Insurance Program has prepared flood hazard data for approximately 18,000 communities. The primary information prepared for these communities is for the 1 percent annual chance (100-year) flood, and includes documentation of the boundaries and elevations of that flood. Wetlands—The wetlands data layer provides the classification, location, and extent of wetlands and deepwater habitats. Baseline/Maritime Zones—Baseline represents the line from which maritime zones and limits are measured. Examples of these limits include the territorial sea, contiguous zone, and exclusive economic zone. Outer Continental Shelf Submerged Lands—These data include lands covered by water at any stage of the tide, as distinguished from tidelands, which are attached to the mainland or an island and cover and uncover with the tide. Tidelands presuppose a high-water line as the upper boundary, whereas submerged lands do not. Shoreline—Shorelines represent the intersection of the land with the water surface. The shoreline shown on NOAA’s charts represents the line of contact between the land and a selected water elevation.\nFGDC proposed theme and description These existing themes are proposed to be removed because, according to the FGDC, the data associated with them are primarily statistical.\nCorresponding A-16 existing theme and description Cultural and Demographic Statistics—These geospatially referenced data describe the characteristics of people, the nature of the structures in which they live and work; the economic and other activities they pursue; the facilities they use to support their health, recreational, and other needs; the environmental consequences of their presence; and the boundaries, names, and numeric codes of geographic entities used to report the information collected. Law Enforcement Statistics—Law enforcement statistics describe the occurrence of events (including incidences, offenses, and arrests) geospatially located, related to ordinance and statutory violations and the individuals involved in those occurrences. This theme also includes data related to deployment of law enforcement resources and performance measures. Public Health—Public health themes relate to the protection, improvement, and promotion of the health and safety of all people. For example, public health databases include spatial data on mortality and natality events, infectious and notifiable diseases, incident cancer cases, behavioral risk factor and tuberculosis surveillance, hazardous substance releases and health effects, hospital statistics, and other similar data.", "", "", "", "", "In addition to the contact name above, individuals making contributions to this report included Deborah A. Davis (Assistant Director), Shaun T. Byrnes, Eric Costello, Rebecca Eyler, Kaelin P. Kuhn, John Mingus, Jamelyn Payan, Scott Pettis, and Andrew Stavisky." ], "depth": [ 1, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "", "", "h0_full h2_full h1_full", "h0_full", "h1_full", "h1_full", "h2_full", "h3_full h2_full", "", "h3_full", "h3_full", "", "", "", "", "", "" ] }

{ "question": [ "Have government committees and federal departments and agencies implemented the policies and procedures established by the President and the OMB?", "What has the Federal Geographic Data Committee developed and endorsed?", "What does the FGDC have yet to address?", "How much progress have the three agencies made in coordinating national coverage of geospatial data?", "What plans have the agencies developed to coordinate coverage?", "What have OMB staff members acknowledged about OMB's ability to identify duplicative investments?", "Why have FGDC, federal departments and agencies, and OMB not yet implemented policies for coordinating geospatial investments?", "What has resulted from this lack of coordination?", "What is an example consequence of this lack of coordination?", "How long will this situation continue?", "Why does the federal government collect, maintain, and use geospatial information?", "What did the Department of the Interior find in 2012?", "What was GAO asked to do?", "How did the GAO go about determining the extent to which federal departments have implemented policies to coordinate geospatial investments?" ], "summary": [ "While the President and the Office of Management and Budget (OMB) have established policies and procedures for coordinating investments in geospatial data, governmentwide committees and federal departments and agencies have not effectively implemented them.", "The committee that was established to promote the coordination of geospatial data nationwide--the Federal Geographic Data Committee (FGDC)--has developed and endorsed key standards-- including a metadata standard that includes descriptive information about a particular set of geospatial data--and established a clearinghouse of metadata; however, the clearinghouse is not being used by agencies to identify planned geospatial investments to promote coordination and reduce duplication.", "The FGDC has not yet planned or implemented an approach to manage geospatial data as related groups of investments to allow agencies to more effectively plan geospatial data collection efforts and minimize duplicative investments; and its strategic plan is missing key elements, such as performance measures for many of its defined objectives. Further, none of the three federal departments in GAO's review have fully implemented important activities for coordinating geospatial data, such as preparing and implementing a strategy for advancing geospatial activities within their respective departments.", "Further, the three agencies in GAO's review responsible for governmentwide management of specific geospatial data have implemented some but not all important activities for coordinating the national coverage of specific geospatial data.", "For example, only one agency has developed a plan for the nationwide population of the datasets under its responsibility, and none of the agencies have developed a plan to develop standards that facilitate the collection and sharing of geospatial data.", "Finally, while OMB has oversight responsibilities for geospatial data, OMB staff members acknowledged that OMB does not have complete and reliable information to identify potentially duplicative geospatial investments.", "FGDC, federal departments and agencies, and OMB have not yet fully implemented policies and procedures for coordinating geospatial investments because these efforts have not been a priority.", "As a result, efforts to acquire data are uncoordinated and the federal government is acquiring duplicative geospatial data.", "For example, three agencies are independently acquiring road data, which is reported to have resulted in millions of wasted taxpayers' dollars.", "Unless OMB, the FGDC, and federal departments and agencies decide that coordinating geospatial investments is a priority, this situation will likely continue.", "The federal government collects, maintains, and uses geospatial information--information linked to specific geographic locations--to support many functions, including national security and disaster response.", "In 2012, the Department of the Interior (Interior) estimated that the federal government invests billions of dollars on geospatial data annually, and that duplication is common.", "GAO was asked to determine the extent to which the federal government has established and effectively implemented policies and procedures for coordinating its geospatial investments and avoiding duplication.", "To do so, GAO focused on FGDC coordination activities; efforts within the departments of Commerce, the Interior, and Transportation; and OMB oversight. GAO reviewed FGDC and department documentation, such as policies, procedures, and strategic plans; OMB guidance and an executive order; and reports concerning duplicative investments." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, 0, 1, 0, -1, -1, -1, 2 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 3, 3, 3, 3, 0, 0, 0, 0 ] }