Recovery Act: One Year Later, States' and Localities' Uses of Funds and Opportunities to Strengthen Accountability, March 3, 2010

This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the fifth in a series of reports since passage of the Recovery Act on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. It is also the second report in which GAO is required to comment on the jobs created or retained as reported by recipients of Recovery Act funds. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and spoke with officials at federal agencies overseeing Recovery Act programs. As of February 12, 2010, $88.7 billion, or a little more than 30 percent, of the approximately $282 billion of total Recovery Act funds for programs administered by states and localities had been paid out by the federal government. Of that amount, approximately $36 billion has been paid out since the start of federal fiscal year 2010. As of January 29, 2010, the 16 states and the District have drawn down about $30 billion in increased Federal Medical Assistance Percentage (FMAP) funds, representing nearly 100 percent of these states' grant awards for federal fiscal year 2009 and about 57 percent for the first and second quarters of federal fiscal year 2010. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Most states reported that the increased FMAP funds were integral to maintaining current eligibility levels, benefits, and services and to avoiding further program reductions. As of February 16, 2010, the Federal Highway Administration (FHWA) had obligated $25.1 billion and the Federal Transit Administration (FTA) had obligated about $7.5 billion--combined about $32.6 billion (over 93 percent) of the $35 billion that the Recovery Act provided for highway infrastructure projects and public transportation. Nationwide, Recovery Act funding has been obligated for over 11,000 eligible highway projects. However, some requirements, such as the Recovery Act's maintenance-of-effort requirement--which is designed to prevent states from substituting federal funds for state funds--have proven challenging. Many states have yet to complete a maintenance-of-effort certification that DOT finds fully acceptable, and this, coupled with states' fiscal challenges, raises questions as to whether this requirement will achieve its intended purpose. As of January 22, 2010, the 16 states and the District had drawn down, in total, about $13.3 billion (56 percent) from the State Fiscal Stabilization Fund (SFSF); $1.1 billion (17 percent) of Elementary and Secondary Education Act (ESEA) Title I, Part A funds; and $1.2 billion (17 percent) of Individuals with Disabilities Education Act (IDEA), Part B, Recovery Act funds available to them. Much of the Recovery Act education funds have been used to pay education staff, including teachers. Housing agencies are to obligate the $3 billion in Public Housing Capital Fund formula grant Recovery Act funds they received by March 17, 2010. As of January 30, 2010, about 31 percent of these funds had not been obligated. Over 200 agencies reported obligating no funds. Housing and Urban Development (HUD) has worked hard to implement the Recovery Act but has faced challenges in simultaneously carrying out public housing programs mandated by the Recovery Act, including designing and carrying out a $1 billion grant competition, while meeting its continuing responsibilities for the ongoing Public Housing Capital Fund program. As a result, HUD delayed obligating its fiscal year 2009 funds by 3 months. With regard to the Weatherization Assistance Program, as of December 31, 2009, the Department of Energy (DOE) had obligated about $4.73 billion to states for weatherization activities. On February 24, 2010, DOE reported that about 5 percent of the approximately 593,000 homes DOE originally planned to weatherize using Recovery Act funds had been weatherized as of December 31, 2009. Progress was achieved in addressing some data quality and reporting issues identified in the first round; however data errors, reporting inconsistencies, and decisions by some recipients not to use the new job reporting guidance for this round compromise data quality and the ability to aggregate the data.